Q2 2025 Klaviyo Inc Earnings Call

Good afternoon and welcome to klaviyo second quarter, fiscal 20 2025 earnings conference. Call all lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again,

We ask that you please limit your questions to 1.

With that, I would like to turn the call over to Andrew zilly vice president of investor relations.

Good afternoon, and thanks for joining Klaviyo's second quarter 2025 earnings call.

Action SEC filings and a replay of today's call can be found on our IR website at investors.com.

With me on the call today our Andrew bleki. Co-founder and CEO and Amanda whan CFO.

As a reminder.

Our commentary today will include non-gaap measures.

Reconciliations to the most directly comparable, gaap measures can be found in today's earnings, press release or earnings release supplemental materials, which can be found on our investor relations website.

Additionally, some of our comments today, contain forward-looking statements that are subject to risks, uncertainties and assumptions, which could change.

Should any of these risks materialize? Or should our assumptions? Proved to be incorrect. Actual company results could differ materially from these, forward-looking statements,

A description of these risks, uncertainties, and assumptions, as well as other factors that could affect our financial results, is included in our SEC filings, including our most recent annual report on Form 10-K.

In subsequent quarterly reports on form 10q except as required. By law, we do not undertake any responsibility to update these forward-looking statements with that. I'll now turn it over to Andrew.

Thanks, Ellie, and thank you all for joining us today. The video has been delivered, showcasing another fantastic quarter demonstrating our continued momentum and critical value to consumer businesses worldwide as the only CRM built for B2C.

In the second quarter, we delivered revenue of 293 million up 32% year-on-year.

we now Empower over 176,000 customers from Individual entrepreneurs to Global Enterprises to build smarter digital relationships that drive revenue and grow their business,

Our performance is quarter. Once again, validated the 3 defining things for klaviyo, which continue to guide our strategy and execution.

First we are a growth company and continue to execute on our strategic priorities to deliver sustainable efficient long-term growth.

We are expanding internationally and we're investing in making progress, with our move up Market.

Second have your remains, well differentiated with our vertically, integrated data first approach driven by fully embedded Ai and powered by the klaviyo data platform.

The klaviyo data platforms capacity process billions of events and profiles is fundamental to our real-time capabilities which drives faster more intelligent segmentation and personalization at scale.

And third, we're making incredible progress, bringing our multi-product b2c CRM Vision to life with early momentum in service and analytics and continued innovation in multi-channel marketing automation.

Many companies today are dealing with disconnected systems often bolt-ons or stitch together. Frankenstein, not designed for fluid consumer interactions.

Our platform addresses, a critical Market Gap by providing consumer brands with a single integrated data platform designed for their unique, high volume, theft days needs.

We unify the pre- and post-buying experience across marketing and customer service, driven by insights from analytics, delivering inherent speed, simplicity, and flexibility.

In fact, IDC noted that Clayo clearly addresses a set of needs often overlooked by other vendors and is bridging the gap between commerce and customer service.

Our product and engineering team. Continues to innovate fast, delivering incredible, new features in the second quarter.

our Focus here is 2 Folds

first, we want to support the channels that matter to our customers and be great at these channels individually.

To support real-time conversational Journeys. Through rich, interactive messages, we released native support for RCS, which is the future of tech, messaging and WhatsApp.

And second, we are focused on making our platform, even better at supporting multiple channel channel, Affinity marketing.

On that note, we announced our Omni Channel campaign Builder, a new canvas to plan launched and measure complex multi-day campaigns across channels.

We now have Omni Channel across all major areas of our marketing platform and with

built-in insights and AI optimized delivery teams can execute faster reduce costs and increase Roi without switching tools or duplicating work.

We also announced Channel Affinity, powered by Klaviyo AI. This intelligent new capability leverages predictive attributes to automatically discern each customer's preferred communication channels and optimal engagement times.

But understanding these key predictive signals Channel, Affinity ensures messages are delivered precisely where. And when they're most likely to convert

finally, we launched multi-touch attribution providing real-time visibility into Revenue drivers Beyond last, click,

To our service products.

The Paradigm of customer service is Shifting at an unprecedented pace.

Moving Far Beyond Simple exchanges and returns in the near future. It's our belief that consumers will expect highly personalized experiences with every brand they interact with facilitated by their own personal AI agents.

We are building the technology that will Empower every brand to make this a reality.

Just a few weeks ago, we expanded our service offering with the launch of two private-based solutions: one for help desk and another for our conversational agents.

Our AI-first help desk brings customer support into the same platform as marketing, giving service and marketing teams a shared real-time view of every customer order interaction and conversation.

Our conversational agent, leverages a Brand's klaviyo data catalog, content, shopping behavior, and other Integrations offer, tailored product recommendations, facilitate product Discovery surface coupons and assist with orders.

This goes beyond customer service and cost, reduction efforts.

Instead, we view this as the consumer's personal assistant.

Which today happens via chat. But over time, this agent can assist across every touch point of consumer has with a brand.

Messaging channels, mobile push, emails voice and more.

This is not just for traditional customer service issues, like returning an item. For example, the agent answers questions like, which shirt pairs best with the pants I'm looking at, and it can quickly, provide product recommendations directly to the consumer, which ultimately drives more Revenue.

Our goal is to democratize this technology, making it possible for Consumer brands of all sizes and across Industries to provide this level of personalized experience to all of their consumers.

These products build upon our multi-product strategy, which we launched earlier this year, with customer hubs.

Importantly, we View Customer Hub as much more than just customer service. It's really jumping off point for the future of personalization and bridges. The gap between marketing and service to bring them closer together.

We're very pleased with the success. We've seen to date and customers. Love the ability to unify consumer experiences across marketing and service. Using the data they have in klaviyo.

The company successfully creates seamless consumer experiences across touchpoints. It helps build more loyal customer relationships, which also drives more lifetime revenue.

In fact, in just 5 months, since we launched customer Hub, we've generated millions in additional incremental attributable revenue for our customers.

Finally, the third product category of the b2c CRM Analytics.

Our marketing analytics products, which we launched earlier this year is also gaining strong momentum. It already has nearly 2,000 customers. This powerful tool, ensures that critical efforts, like win back, emails and abandon card. Flows are precisely targeted in timed for maximum Effectiveness in Roi.

For example, Kibby a women's apparel brand harnessed marketing, analytics, rfm segmentation and catalog insights to fuel. Post delivery automations that are driving. Significant incremental Revenue the combination of marketing analytics and SMS to complement their email strategy. Resulted in a 100x Roi for kitty in the past year.

Across all of our products that make up the b2c CRM stack or taking an AI first approach.

In addition to the many new AI powered Solutions across marketing service and analytics we are solidifying clio's leadership as 1 of the next-gen technology Stacks with new features like our mCP server.

Brand can now access or integrate klaviyo data directly into the llms they're using and this is more than just a technical achievement. It's an important step in empowering our customers to supercharge workflows in cementing klaviyo as the indispensable single source of Truth for Consumer businesses.

Customers are already using our mCP server or things like planning out their campaign calendar, finding changes that can be made to flows or campaigns to drive better performance on a daily and weekly basis and other use cases.

this is just 1 way, we're empowering our customers to leverage their data for better consumer engagement,

We're also proud to share that klaviyo has been recognized as a leader in the 2025, IDC marketscape, or AI enabled marketing platforms, which evaluates and ranks based on current capabilities and future strategies.

As businesses grapple with fragmented tech stacks, the secular shift towards unified data-powered platforms that are AI-first, like Klaviyo, is clear.

Legacy technology is a significant pain point for mid-market and enterprise companies, and we continue to see success with our efforts to displace incumbents.

And gift company.

They were facing ongoing issues with their legacy marketing Cloud, particularly concerning its usability and Agility for their small marketing team.

They chose klaviyo for our ease of use faster, time to Market and strong multi-channel capabilities.

We also signed a deal with a premium coffee brand. Who is finding it difficult to execute, even basic marketing functions. Like a Banning card flows, despite significant investment in their legacy marketing cloud.

They chose klaviyo because they needed a solution that would deliver immediate results and provide a more intuitive and effective platform for their marketing efforts.

We're pleased with the success. We've seen in the mid-market and Enterprise, and you've heard about many of the notable large customers who have joined us over the last couple of years.

But we know there's more we can do to support the higher end of the market, and we are continuing to evolve our product and go to market efforts as a result.

On the go to market side, we're adding additional Enterprise experience to our team and increasing strategic partner collaboration. Enabling us to drive deeper engagement with complex. Customers on the product side, we continue to add features and functionality to the platform that are important to large Enterprises including custom objects, mobile in-app messaging Channel, affinity and more. We are also continuing to expand the scalability of our platform to serve the largest consumer Brands, and the diversity of use cases. They have

These features are key to winning and supporting mid-market and Enterprise customers going forward and will continue our rapid pace of innovation to make our platform, the leading solution for their evolving needs.

We continue to see companies, choose klaviyo to consolidate their marketing text to acts from the fragmented tools. They have been dealing with

In the second quarter, we expanded our relationship with Princess Polly. A leading digital fashion brand with a growing physical presence.

Princess Polly has been using klaviyo email. It was 1 of the largest SMS customers of another vendor. They Consolidated SMS with klaviyo to Leverage The Power of our Omni Channel platform for more effective consumer engagement across channels.

We also signed a deal with loop ear plugs to rapidly growing company. That creates stylish high-quality ear protection.

Loop was struggling with a fragmented marketing strategy, relying on multiple vendors that led to a lot of inefficiencies.

They chose klaviyo for our comprehensive platform, that will enable them to consolidate email, and SMS to drive growth and streamline their customer engagement.

International expansion continues to be a significant growth opportunity for klaviyo in addition to the WhatsApp launch. We've simplified multilingual email campaigns and play video and launched our website in German Spanish and Italian

These Investments are yielding results. In the second quarter, we grew International Revenue over 42% year on year adding Brands like nothing a uk-based. Fast growing Challenger in the smartphones and audio category.

Nothing was grappling with a fragmented CRM strategy with their legacy tool, which made it difficult to drive repeat business and loyalty a selected klaviyo to unify their CRM strategy and leverage, our powerful automations to boost direct to Consumer Revenue.

Our thriving partner, ecosystem is a force multiplier, expanding our reach and functionality.

We're thrilled to announce two new integrations that further expand our reach into the hospitality and entertainment sectors.

Our partnership with guesty, a leader in property management will transform how Property Owners harness, first party data to boost direct. Bookings and cultivate lasting guest relationships.

Our integration with venue a global leader in event ticketing will Empower entertainment Brands to leverage attendee data for unparalleled personalization and engagement at scale as exemplified. By their work, with Partners like the Grammy Awards,

These Integrations underscore our commitment to Vertical expansion and delivering transformative Solutions across Industries.

Our vision is to empower every consumer oriented business to standardize on klaviyo from marketing to service to analytics. Enabling them to build strong personalized relationships with each of their consumers.

We are proud of the progress we've made and are driven every day by the massive amount of white space that still exists for Cleveland.

We're excited to welcome, our customers partners, and all consumer businesses to play the Obi. Boston, the preeminent event for Consumer businesses focused on growth taking place in Boston, September 25th, and 26th,

Following the success of klaviyo London and klaviyo Sydney klaviyo. Boston will serve as another opportunity for sharing our strategic vision and showcasing our latest advancements for our growing ecosystems of customers, Champions and partners.

We will also be hosting our first investor Day live from klaviyo Boston, on September 25th, and virtual registration is open on our investor relations website.

Before I turn over to Amanda, I'd like to cover a couple of changes in our leadership team.

Experience. Helping high growth tech companies, scale and we'll play a key role in shaping how we use AI internally.

To drive smarter faster, decisions and how we scale our systems to help us serve our customers better to deliver more value to the companies that rely on.

We also announced that our President, Be Rollins, is retiring.

You'll be staying on through the end of the first quarter of next year.

Since joining in 2023, Steve has been instrumental in implementing our mid-market and Enterprise sales motion. Expanding our growth internationally growing, our partner ecosystems and building an incredibly strong go-to market organization

During Steve's tenure, we have driven remarkable growth with our Revenue run rate growing from 660 million to more than 1.1 billion today.

Incredibly grateful for his contributions and Leadership at klaviyo.

And with that, I'd like to turn it over to Amanda.

Thanks Andrew.

our second quarter results for

32% year-over-year to 293 million non-gaap operating margin was 14% And free. Cash flow was 59 million.

These results. Demonstrate another quarter of strong, consistent hop and bottom line performance.

Our vertically integrated, AI-driven data platform is the only CRM built for consumer businesses. We are expanding the functionality as we add features across marketing services and analytics.

Customers are responding well to this Vision which drove strength in the second quarter. As we added new customers expanded with our existing customers grew internationally and expanded up Market

We ended Q2 with more than 176,000 customers, up 17% year-over-year and up 7,000 from Q1.

This strength was driven by momentum and entrepreneur customers with support from SMB, mid-market and Enterprise affirming klaviyo value in every Market.

We delivered a Q2 nrr of 108% in line with the last 2, quarters driven by consistent gross, revenue, retention Improvement in email expansion and more a smaller contributor returned from our newer product offerings.

we are advancing our cross sell motion as evidenced by more of our larger customers adopting multiple products and the growing SMS penetration in our SMB and mid-market cohorts

we are also very pleased with the early adoption of our marketing analytics product and the success of our klaviyo service beta

Our success in serving larger. Customers is evident. As we ended the quarter with 3,291 customers with over 50,000 dollars in ARR up 38% year-over-year.

And to this cohort, as we drove strength in both new, customers to klaviyo Landing in this cohort and existing customers who are growing their businesses with klaviyo.

As you heard from Andrew our investments towards expanding internationally on both the go to market and product, fronts are delivering returns as our outstanding International growth continued in the second quarter.

And Mia Revenue grew, 47% year-over-year and APAC, Revenue growth accelerated for the second quarter in a row as our International expansion. Strategy is driving strong results.

This broad-based strength drove the revenue outperformance in Q2 as we execute on our growth priorities.

As we mentioned last quarter, we incorporated some additional Prudence in our guidance, due to the uncertain macro environment.

However, we continue to hear from customers that Klaviyo is more critical than ever to driving their growth. And we did not see an impact from the macro during the quarter.

Our results against guidance therefore were slightly higher than they would have been in a normal environment.

Thing on.

A quarter. Non-gaap gross, margin was 76% down. Approximately 2.0 year-over-year primarily due to increase infrastructure costs and the continued growth of our SMS products.

We are beginning to see from these infrastructure Investments and our non-gaap gross margin was flat to q1 due to infrastructure optimizations offset by our growing SMS. Mix

Turning to non-gaap operating expenses, we saw leverage in R&D and GNA.

For the second quarter, our non-gaap operating income was 41. Million representing a non-gaap operating margin of 14%

This came in better than our guidance primarily. As a result of the revenue upside, we saw in the quarter and to a lesser extent due to operating expense Leverage.

We generated strong free cash flow of $59 million during the quarter due to higher collections and the timing of payments.

This resulted the impact from Andrews option exercise and the related share sale for tax payments which took place during the quarter.

Before I turn to guidance, let me quickly touch on our revenue seasonality.

As a result of the profile enforcement changes we made in February, we expect our Revenue to be less volatile quarter to quarter as profiles, tend to grow consistently throughout the year compared to the seasonal increases that can happen from sending volumes.

As a result, we expect that our fourth quarter Revenue will experience less of a quarter over quarter spike in growth than it has in Prior years.

Additionally, with the strength and Q2, we are reducing the amount of incremental prudence incorporated into our guidance for Q3 and the full year. So, we are not removing it completely, as the environment remains dynamic.

Turning now to guidance for Q3 we expect revenue of 297 to 301 million representing year-over-year growth of 26 to 28% driven by continued strengths across the business.

We expect third quarter non-gaap, operating income of 32.5 to 35.5 million. Representing a non-gaap operating margin of 11 to 12%.

As a result of our strong first half performance and robust customer demand signals. We are raising our full year guidance by 24 million at the midpoint from 1.195 billion to 1.203 billion for year-over-year growth of 27 to 28%.

We expect non-gaap operating income of 144 to 150 million. Representing a non-gaap operating margin of 12%.

This guidance reflects our confidence in the resilience of our business and the value that we provide to our customers who continue to rely on our platform to drive results, even in uncertain times.

In Dynamic environments, our business is more relevant than ever.

In closing, our performance in the first half of the year reinforces that we are executing well on our growth strategies.

we are delivering on our goal of achieving sustainable efficient, long-term growth through adding new customers expanding, with existing customers International expansion, and moving up Market,

Our single unified platform for marketing service and analytics positions as well to deliver unmatched value to our customers and establishes, a solid foundation for continued, Innovation and growth in the future.

I look forward to discussing more about our business at our upcoming investor day in September.

And with that, I'll open up the call for Q&A. Operator?

At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad,

we ask that you limit yourself to 1 question. We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Gabriela Borges with Goldman Sachs.

Hi, good afternoon, and congratulations on the quarter and Drew and Matt. I wanted to ask you a little bit about your purpose in the mid-market, in particular Amanda. I remember it was a handful of quarters ago, where you talked about seeing the pipeline, be really good and stepping up the level of investment to go after that opportunity. And now if I look at your Unity economics and I L to get a tax standpoint, you're seeing really nice Improvement on LCD attack. So my question for the birth of you is give us the quality qualitative overlay of what you're seeing in the mid Market in particular. And if there's anything else you can add to quantitatively on what you're seeing with sales productivity and higher thinking about sales investment in the mid Market in particular, that would be great as well. Thank you.

Is about to go autonomous.

And every Enterprise is looking at, hey, who is their partner are they going to work with over the next, you know, 5 10 years on making C customer experience, really an autonomous Auto optimizing, um, thing. So I think that that story is really resonating, the fact that we have the data platform at the core and the only 1 to do that. Um, that's what's setting us apart. Um, now on the your economics. Uh, yeah. We've been investing in, you know, building out our um, mid-market Enterprise, uh, demand gen, um, and sales motions and we continue to refine those. Um, I think we still have, you know, work to do as we always do. Um, but we're very excited about the uh, the trend in the internet economics.

Yeah, and just a couple of examples to bring that quantitatively to life. Um, you know, you saw the growth in the 50k cohort.

14% year-over-year growth, this quarter and average revenue per customer and we're continuing to see strong growth in the average revenue that we generate from our top 10 customers. So, all of them are really demonstrating that that progress and 1 of the examples that I, you know, really appreciated this quarter in the mid-market was majority, who is a prominent jewelry brand? Um, they chose us because of our robust Integrations, our ease of use and the reliability of the platform. Especially after last year, they had some issues with their prior provider and heading into Black Friday Cyber Monday. They wanted to know, they had a brand who can scale with them and support their business. And klaviyo is that partner.

Your next question comes from Terry Tillman with Truist.

Yeah. Good afternoon. Congrats on the results. Hi Abby. Amanda and Dilly. Uh, my question relates to the service we have products and and I know that they're not actually generally available, I believe, but you're talking about releasing or, uh, putting into access help desk in the conversation agents. I'm just curious. If you take a step back and I think investors care about this is, how do you size this opportunity around your service Suite versus some of the other products? Whether it's mobile, email or marketing analytics? And the second part of this is, would it be a similar Playbook where maybe it starts with traction, more down Market, or would this be more potentially actionable across all customer segments? Thank you.

Yeah, great sorry. So happy to talk about what we're doing in service and I'll start with this is I think as you know when we traditionally thought of as customer service as it gets more automated more autonomous you know our belief is every business is going to offer up to every 1 of their consumers. Their own personal AI, their own agents, their own concierge, that's there, across all modalities. So we're starting with web and chat. We think it'll be voice, we think it'll be on your, you know, mobile mobile app, it'll be everywhere. At any time that you have a question, whether it's with something we traditionally think of about is customer service or something. Proactive, you need some advice. You know, we already are seeing, um, you know, in our, uh, in our beta questions are people are writing

In and asking about things like, hey, you know, I'm, I'm shopping, and I'm wondering, what is this outfit will work for this, you know, this event that I have to go to?

And that's not what we.

For service request. It's more. It's almost Blends between service and marketing.

So this conversational piece I think is going to be critical. Um, and to the, you know, the question on, hey, how big is this Market? Um, I look at the marketing, uh, you know, application, the market automation, um, category. This this conversational category I think is of an equal size.

Uh now we're early into this um we're doing a great job of building out the products and uh you know working with customers to refine it and planning to launch it soon. But I think it's going to be a, you know, major accelerant. And you know we look at for a lot of businesses. I don't know why you wouldn't want marketing and then the conversations you have with customers all be driven off the same data set. So I think this is I mean this is this is where the Market's going and it's going to get a lot more automated um because of that you know we obviously when click was starting out

Um, we focused, uh, more on smbs and, you know, in recent years, have started to shift our Focus from more of our Focus up Market as well. Uh, I think there's a moment right now.

where you know, for service, uh, for conversations, you know, whether you're an SMB or an Enterprise, you're looking and saying, who's going to provide that personal agent, that personal, you know, concierge every single 1 of my customers and we want to be that

So, we're already working with some larger uh, businesses on uh, using and adopting our conversational agent and our other products. Um, you know, the customer Hub, um, and student help desk. Uh, so I think here, we're not going to wait nearly as long, um, to bring this into the midmarket Enterprise because we're already seeing, um, a lot of interest.

Your next question comes from Brent Braceland with Piper Sandler.

Here. Um, AB talking about the moment you're in right now and and and was hoping maybe you could help quantify. The the opportunity, you have a good base of of 50,000 K customer cohort mostly using marketing today.

What is that cohort? Look like, when they layer in service when they layer in marketing, when they layer in the AI first help desk. When they layer in this AI for convers, conversational agent any sort of

Sense of of what the revenue capture for kind of cross. Sell could look like as you think about the full bundle.

Yeah, sure. Um, you know, I'll start

I'll begin with, like, where I answer the last question we think the opportunity in, you know, service and all the products we're building. There is large. And it's, you know, sort of equivalent size. Um, you know, pretty much for some business potentially larger than marketing because it's not just responding to customer service requests. It also has an element of helping customers and generating um, incremental LTV. So, you know, the way the way we look at it is like every business is going to have to buy you know the entire CRM stack they're going to they're going to want all those products to work together on 1 data platform, but that's marketing. All of the various marketing channels, uh, then service and conversation and then analytics. And then they expect all of that software to become more automated. You know, we're really obsessed with this idea of what is the atomic

Autonomous CRM look like and I think that's going to start with b2c businesses with consumer where every, you know, every experience is already at scale. You need more automation, more personalization, more optimization there,

Um, and I think if we can deliver better, you know, LTV to our customers, you know, if they engage their consumers better, those consumers are spending more and that gives us, you know, the ability to, um, share, you know, in that upside. So, uh, you know, we're not putting numbers on it yet, but I say like compared to some of the products that we've launched around marketing, that fit in that marketing category, services are real expansion. And I think we're going to find that, you know with AI and this ability to do more and generate better results automatically, that's a further. Um you know, um uh you know, Revenue per uh customer expansion as well.

Your next question comes from DJ Hines with canaccord.

Hey, thank you guys. Uh, congrats on the next quarter. Um, so a look you you've always had this interface for brands for marketing and our service and analytics use cases. But if I understand right? It it now. Sounds like you also have more of a consumer-facing interface, right with these personalized, conversational, AI conversations, you, you kind of talked about your long-term vision and why that's important. But does it create any conflict with e-commerce partners that I suspect maybe trying to do something similar on the, on their own? Like, how do do those agents work together? Like, how many help me, understand how all the pieces kind of fit together?

For sure. No, I don't think it creates any real comp competition. And in fact, we're collaborating with a lot of the, uh, you know, uh, platforms and partners that we have to help develop this technology and then help help put it to work. So frankly, we're in a rush right now, where we feel like every single 1 of our customers ought to be delivering to their customers, their own, you know, their own personal agents and right now that doesn't really exist, you know, if you go to the major e-commerce players then like, yes, that technology is there. But for everybody else, it hasn't really been adopted yet. And when I talked to our customers about, what's slowing them down, a lot of it is, it's technically challenging, we're not sure what to do. We're not sure how to train these models, how to put them to work. It's actually, in that case, I think we've got a great team working on that, we're working with customers. And I actually think our partners are an accelerant there. We've actually worked with a lot of, um, you know, a lot of our agency partners on what you know, how they can build up and stay in a practices and services around. Helping take conversational to all of our consumer businesses. So uh I look at our our partners

The other, you know, in the platforms, we work with, we all have the same shared Mission which is help. Our mutual customers, be more successful, own their Destiny. Um, and um, I'm excited to work on it with them.

Thank you.

Your next question comes from Jackson AER with keybanc Capital Market.

Thanks guys. Um,

Thank you.

Yeah, great question, thanks so much Jackson. Um, in thinking about gross margin, I would probably think about 3 keys. There 1 is what's happening with growth in SMS, and we've spoken about that over time. The second is the Investments that we've been making in infrastructure and The Leverage that we're getting from those, and then the third is new products. Now, new products we are really excited about them but I would not at this point build in meaningful Revenue into this year's outlook for it. Um, at least not to the extent that it would meaning, please shift gross margin now over time, it is exactly what you spoke about which is uh, we see some positive gross margin impacts coming from those products, particularly marketing analytics, which leverages largely the same infrastructure as our existing email Plus data product. And then, um, service, which is early days and we're still working through the pricing. But again, have a, uh, have a positive view on the margins there, um, in terms of the infrastructure Investments,

Which is a big benefit. We talked about in Q1 some of the investments that we had made and that we expected to get leverage for them over time as we continue to grow and scale with our customers. And sure enough, if you look at our gross margin in Q2, it was flat quarter over quarter. What was going on within there? As we talked about in the prepared remarks, it was the fact that we were getting leverage from those infrastructure investments, which offset some of the headwinds from SMS.

So again, um, you know, feeling good about where we're looking in terms of gross margin based on those trade-offs across the 2, um, regarding the seasonality. I would not anticipate too much of a change because while email Revenue, uh, does tend, or, you know, will be less seasonal with the profile enforcement and the fact that those grow more steadily SMS is still a subscription, that is based on an ascending volume. Um, and we tend to see a higher portion of SMS and Q4 and that tends to be the biggest driver there.

Your next question comes from, Derek wood with TD Cowen.

Right. Thanks congrats, uh, on a great quarter. Amanda. Um, you had a nice seasonal Rebound in both net, new Total customers and net new 50k. Plus customers just hoping you could double, click on this. Um, or are you seeing more seasonality on on the new customer side? Or did you see some sequential Improvement or was there the the change in pricing? Um, somehow Factor? Just what? What would you chalk up to the sequential numbers being so strong? And, um, you know what, that kind of means for seasonality looking into the second half on the customer side?

Yeah sure thing great question Derek and you know on the net new ads, overall, similar to what we've spoken about in the past the primary driver of that was in our entrepreneurs segment because they tend to be the highest number of customers. But we did see also strength and ads across SMB and mid-market and Enterprise. So really, it is further evidence that the value proposition is just resonating across customer sizes. And specifically, in terms of what's driving that growth and entrepreneur, I would point less to see seasonality and more to the changes that we've been making driven by both our marketing and our product teams thinking about how do we get increasingly dialed in, on how we attract those entrepreneur customers in a really efficient manner? And then also how we bring them through the product usage, curve, graduating them from free, customers to highly engaged, paying customers who are making great use of the platform.

I did in Q2 that helped to drive that 1. Um, we put in an earlier payment step into the process for new customers, just to reduce friction in the free to paid conversion process and that helped to improve that conversion rate. And we redesigned our klaviyo login page, which is 1 of our highest traffic Pages by testing out, various marketing messages, and improving um, product and feature Discovery. And as a result of that, login page change the new design. It's been really, really positive. Um, so really proud of the great work that the team has done.

It shows that as their businesses grow, we can grow with them and a great example in that 50k cohort, this quarter of expansion was a household electronics company. We work with who started with CLA view a few years ago with just email they've been growing their profile steadily ever since. And then in Q2 they added marketing analytics and the combination of the organic growth of their business. And the addition of the new products, moved them up into that 50k cohort. So we love it when our customers are successful and they expand their business with us.

Your next question comes from Elizabeth Porter with Morgan Stanley.

Great. Thank you so much as customers are standardizing on klaviyo and and you go with more of this 1 brain 1, Clyo data platform. How does the go to market motion? Need to evolve, is it still like the same buyer or do you need to Target kind of more decision a senior decision makers, um, it'd be great just to get some of your perspective on how to go to market motion evolve, just as the product portfolio. Expands if there's anything tactical, we should watch out for that can better unlock the opportunity and just overall where you are on the journey. Thank you.

Yeah, that's a great question. Thanks Elizabeth. Um, uh, so I look at the the portfolio expansion of product, the expansion of the product portfolio is really opening up more doors. More ways to, um, you know, work with, um, the businesses that were, uh, you know, that were want to partner with and especially in the Enterprise. So, to give you an example with marketing, um, you know, we've traditionally gone through, uh, you know, the CMO and the marketing organization, you know, now with, uh, the expanded portfolio B to ccrm. We're finding a lot of those conversations are getting up levels.

More increasingly. We're starting to talk to Chief digital officers uh cios heads of Technology, why? Because they see the shared data platform. You know, the brain as you said, and they say, hey, look, we can actually use this in a lot of ways and the fact that we're bringing multiple applications to the table across analytics and how the the different service products we're going to offer, um it starts to become more of a company-wide you know conversation and a lot of the cases we still say, Hey look it's it was great to be. Let's start in 1 area and often that's, you know, still marketing but we definitely anticipate over time, uh, that there, we're finding more customers who want to buy the entire collegial stack at once. Um, so we see that bit of that Trend and I think, with what we're doing with conversational, um, and our conversational agent, we actually think that's going to open up a whole new angle for us. Uh, that's such a new market, you know? It didn't exist a few years ago and, uh, we find, you know, we have, uh, some, you know, with great respect

Um, we've earned the trust of our customers and so when we say, hey we've got, we've got something for you, you know, to help you deepen your relationships with customers know that goes Way Beyond just customer service. A lot of those folks are saying, okay, well let me introduce you to our team because you know what we're actually trying to explore this category and understand um you know who we should be going with uh you know, looking forward. So uh our our kind of mental model is like now it's not just through marketing you know we might be going in some cases maybe a little more tops down. In other cases we may be going through other parts of the organization that own the customer experience. Um, it's given us now, you know, multiple um, uh, multiple vectors multiple ways to start the conversation.

Your next question.

Comes from Rob, Oliver with beard.

Great. Good afternoon. Thanks for taking my question. It's on the international strength. Uh, a really strong number is with the 42% year-over-year and I think Amanda you called out accelerating growth in APAC. Um, if you could just remind us, you know, I know you guys have been rolling out languages at a, at a really brisk pace and where are we? In terms of that language roll out, are there major GEOS that still need to be rolled out and then ABI just be curious to hear from you. I I'm sure mostly smbs and entrepreneurs early on, but, uh, I would love to get a sense from you of what kind of flavor of customer that could be. And if there's an opportunity for say multinational companies, that now see an opportunity within the clavia platform to do things, multilingual and globally for

You to really, uh, make a move up Market, uh, via that path. Thanks very much.

Sure. Thanks so much, Rob. Great to hear from you. Um, yeah, we're very pleased with the results that we're seeing.

National overall 42% year-over-year growth outside of North America, this quarter and in particular I would like to call out um strength in 3, countries, Norway, Germany, and Spain. Each of those countries the new ARR that we landed in them. The quarter group over 90% year-over-year And it we have rolled out new languages and we will

to roll out some new languages later this year.

Experience for international customers as well as rounding out the end-to-end customer journey across all of our go to market interactions with customers. So some examples of how that came to life in Q2, um, the release of WhatsApp, which was really important for our International customers. Were WhatsApp is much more prevalent as a, uh, mobile texting option. Um, simplifying, multilingual, email campaigns. Many of our customers in Europe, operate across multiple countries, and multiple languages. And so, we made it easier than ever for them. To leverage their content across multiple languages and then on the go to market side, um, we are rounding out the product offering in Languages by supplementing, it with things like the launch of new websites. So we rolled out, um, German Spanish and Italian websites and hosted. Our big Marquee Customer Events internationally, this quarter both K London and K Sydney. So you know, looking ahead, what you should expect is we're going to continue to invest in that.

Local language selling capability, continue to invest in growing our Dublin office and building out the partner Network. Because as we build on those, it helps um, drive better, you know, even better returns and results from the language Investments that we've made.

That's great. I'll add a little bit of color on the, you know, the question around like, hey is international unlocking, new Enterprise opportunities and the answer is absolutely yes.

Um, you know, I talked to a couple of customers in Europe and Asia, where we're already working with them, uh, you know, their business in the US and, you know, we're starting to have opportunities. They said, hey, you know, we've actually got a larger business outside of the US, um, can you help? And, uh, you know, we mentioned some of the, accelerant, some of the Investments that we're making in the Enterprise. There's a lot of stuff we're doing, man. I mentioned, you know what, that support multiple languages. Uh, we're also doing a lot with, you know, data residency and data, locality spinning up, new data centers outside of the US, um, to help address, uh, those needs. So, I actually think that the Enterprise growth we're seeing, you know, it's it's not just within the US, I think we're going to see that it's also um, you know, around the world and internationally as well.

Your next question comes from. Brett Huff with Stevens.

Good afternoon. Congrats on the nice results. Thanks for squeezing me in.

um early on when we picked you all up we thought the international was going to be kind of the Big Kahuna growth opportunity here in the near term what however we Define that but it seems like now International kind of is accompanied by the AI conversational uh

Interaction the service data and then continuing up market growth, how do you all you know, should we think about reshuffling?

How, uh, assiduously you you're going after each of those, or maybe can you rank them and kind of give us pros and cons and how you're approaching those? Thank you.

Yeah, sure. Um, you know, there's 1 takeaway here is that we are very much believe that the future of CRM and it's going to be led by consumer. Businesses is going to be AI driven, it's going to be AI first

Yeah, our belief is every company in the Enterprise, uh, and the FB in the next few years, they're going to adopt a CRM stack, that has AI is AI native from the start and this means not just our data platform and some of the Predictive Analytics, we do on top of that. But finding ways to make marketing, more autonomous, self-optimizing big customer service, something, where everybody gets their own agent. This I think, is the mass of opportunity. That's right there.

And it's, it's all market segments. Uh, we see an SMB. We see an Enterprise. It's Global. It's not just here in the states. Uh, it's it's around the world that is the number 1. Op that we see, um, and that's why I'm very excited about the work that we're doing with our service products. The work we continue to do with our marketing platform expanding channels making building on top of that, the autonomy layer. Um, so that's definitely number 1, and then, you know, after that, you know, I think we look at, uh, Enterprise is a great area of growth. You mentioned that's also Global, um, and international. I mean, we still have a lot of Runway there as well. Uh, so maybe that gives you a little bit of the stack rank. But, um,

Um, I'm very proud of what our team has done. Uh, you know, on the product side to really set the table for really being able to deliver this B to C CRM and 1, that is truly AI first and can automate a lot lot of way. A lot of the work personalization that end last mile personalization to Consumers.

Your next question comes from Parker Lane with staple.

Yeah, hey team, thanks for uh taking the question here. Uh a you've added a lot of a enhancements to core products this year, including things like automated campaign, follow-up, um, Automation and conversations and and SMS. How would you assess the adoption and utilization by, uh, different customer cohorts, the size of those customers. And, and how's that correlating with message? Volume growth today,

Sold out so far, um, you know, we track for each of them, this adoption rate. And I think what we're finding is our more advanced users, um, which tend to maybe skew a little bit more towards the Enterprise and SMB, uh, tend to be faster adopters. This is actually something we're working on. We find that a lot of the AI features were building, so imagine things we rolled out like Channel Infinity. A lot of questions I get from customers. Are, how should I go about using this? When is it appropriate? We actually think that's something. We can automate too. So, rather than just giving people tools, actually telling them exactly. When to do it, to use it recommending it so that they can just, you know, except those um, you know, accept those recommendations and automatically embedded in their marketing. Um, so that's what's happening on the uh, you know, on the adoption side and then what was the second part of the question?

Message, that's the volume growth. Yeah, yeah I think it's it's still early for that but I think what we're finding is the quality of the messages that folks are sending has increased quite a bit. We have a lot of stories from customers that are now, for instance, using the channel Affinity, uh, feature that we rolled out and it's helping them prioritize, email versus SMS versus other channels. And it's leading to better consumer interaction. And that's why the key thing for us is it's actually, you know, how much, you know, lifetime value. And we, you know, often talk about attributed Revenue back to klaviyo. How is that growing? That's ultimately the metric that our customers care the most about. So that's the metric that we measure as well.

your next question comes from City, panigrahi with meizuo

City. Uh, I just wanted to ask for all these new products like help desk conversational agents the customer Hub. How would you stack rank them in terms of Revenue potential over the medium term? And then on the mCP server, what's the early feedback bin and any initial thoughts on how you would price this thank you.

Yeah, terrific. So, uh, you know, out of the 3, I think it's, it's, it's early. Um, so I'll just I'll give you some rough thinking on this. We're very bullish on this idea of every business being able to offer their consumers, a personal AI, a personal agent. Um, and that's going to be driven, we think, primarily by our conversational agent technology. Um, so I expect that, that that's there's going to be an enormous amount of value there. Uh, you know, we're also very excited about what we're doing with customer Hub, but the customer Hub actually has the conversational a agent embedded in it. So sometimes you can think of those 2 working together. So we see that as additional, you know, an additional Revenue opportunity, um, and then the help desk piece, you know. Frankly, we've talked to customers that have said, look, you know, when we think about, uh, the customer experience and customer service, you know, they're we know that. Hey, they're still going to be moments where our conversational agent needs to, you know, it's a 2 challenging question for us as it exists today. And so that's what our help desk helps solve for. But the thing I'm most excited,

I think you know, consumers are most excited about our customers are most excited about is the idea of extending customer service Beyond just questions about, you know, uh, where where, where are my products, where are my orders? Very tactical thing and into more forward-looking use cases, things that feel more like marketing. They feel more value. Add to the End customer.

Oh, and then mCP on that, that actually we're not, we're not intending to price and package that right now. You know, what's, what's really cool about that is, I talked to customers, they're, they're using that with, you know, the llms um, you know, their personal LMS and we're fine people. It's just another way for people to ask questions about the data inside of klaviyo and it's actually it's been really interesting. We're learning a lot about the patterns of the kind of questions that people want to ask.

And that's you know, we're using some of that feedback loop in terms of how we build, you know, kind of agentic Technology inside of klaviyo. So for instance, we're seeing people use it to hey, analyze my recent campaigns. Tell me which performed best and why we love making that data accessible to our customers. It's also giving us great, you know, um, examples of things that we can build into our analytics products or into our recommendations, you know, and this will all help power, you know, the recommendations that will ultimately make things like marketing more autonomous, or help improve automatically, you know, those conversations that our conversational agent is having with customers,

Your next question comes from Arjun Bhatia with William Blair.

All right. Um, thank you so much. Um, maybe maybe for for you. You started off. I think in your

opportunities like mostly larger Enterprises or do you still see um a lot of room to go on the kind of you know, longer tale of entrepreneurs and smbs

Yeah, that's a great question. So I I see a lot of room in both areas, um, and I I'll I'll I'll kind of say that there's a little bit of a difference in the opportunity, so among

entrepreneur and SMB customers. You know, we still think there, there's always a ton of businesses starting up in the retail in Commerce category, but we see even bigger opportunities outside of, uh, Commerce. That's why some of the, you know, the, um, the Partnerships and Integrations. That we shipped this quarter uh around guesty. Uh, the venue, I think those are real. Those are going to open up new markets for us. So we see a lot of opportunity, even outside of pure retail or pure e-commerce.

And then, in the Enterprise, you know, we we've made a lot of progress in the last couple of quarters, but the more we look at it, you know, we're just getting into really that Enterprise segment. We see a lot of opportunity there. And, you know, the things I mentioned, you know, in man has talked about of Investments that we're making both on the sales and marketing and product engineering side. So I think, like, we talked about custom objects allowing for, you know, uh, more bespoke or more.

Uh, custom Enterprise data, models, allowing that data to be inside. Play video, really matters, you know. It's the work that we're doing to better support mobile applications and mobile experiences. You know in rounding out the true. You know all of your marketing channels in 1 place. That's a really good about the progress, we're making there as we do that. What we're finding is is that customers say

Okay, great. You know, you're meeting my requirements, you know, obviously you've got the klaviyo data platform. You have everything you're doing around Ai and then obviously the ease of use, um, every day usability that comes with klaviyo. That is turning into more social proof points. That's helping, you know, Drive our growth, um, you know, in the Enterprise set in the Enterprise segment and an example, recently of a customer who

gives you technology what they were finding was that it was really cumbersome and whenever they wanted to execute on, even just very basic marketing tasks, they needed developer support in order for the marketers to put their ideas into action. And the other thing that they were dealing with was that they had a totally separate data warehouse. And maintaining the data Integrations was a big burden on them. So, um, they came over to klaviyo, they actually replaced 4 different products and moved on to klaviyo. Not only, um, for email, but also for our CDP, the Advanced klaviyo Data platform. And, as a result 2 things happen 1 is they saved over 50 developer hours per month. Because the clavia system is just so much easier and self enabled to use and 2, more importantly, it empowered their marketers. So now they can move faster and generate more revenue, and that's where we hear consistently from customers. Is that they want to reduce their Reliance on development teams and increase their ability.

To move with speed and engage their customers.

Your final question comes from Scott, Berg with nem and Company.

Hi. This is Rob really on for scoper. Thanks for taking my question and congrats on the quarter. Excited to see the addition of support for new channels like RCS and WhatsApp. I know it's still might be early days but can you touch on customer feedback and interest so far? Is interest giving more a market or is it relatively broad-based? And then additionally, apologies, if this was touched on earlier but any insight you can provide on the potential impact of gross margins with increase adoption of these channels. Thanks.

Yeah, that's great. I'm happy to cover that. So, with RCS, if you think about it as SMS 2.0, it is the future of text messaging and WhatsApp. WhatsApp is actually opening up a whole new communication channel that's especially popular outside of the U.S. But for both, it's really allowing for a lot more enrichment of the end experience that a brand can deliver to a customer. Um, so we're very excited about both. We're seeing adoption among SMBs and our larger mid-market and enterprise customers. Everybody's interested in that.

Um, and so I'm very, very happy about the work that we've done to support those channels and some of the New Media types um experiences offer and then uh in terms of the growth margin impact, you know, it's still early but I think the growth Market profile is going to end up looking somewhat similar to what we see for FMS but RCS. I think it was almost like a well, eventually be like a direct replacement for SMS in most places and we think of what app is apparently a messaging Channel that's comparable to SMS. But is more of the default, um, in certain markets,

There are no further questions at this time. This concludes today's conference call, you may now disconnect