Klaviyo Inc (NYSE:KVYO) reported a strong Q4 with $270 million in revenue, marking a 34% year-over-year increase.
The company achieved a $1 billion revenue run rate and generated nearly $150 million in free cash flow for the full year.
Klaviyo Inc (NYSE:KVYO) expanded its platform capabilities with over 200 new features, enhancing customer success and market differentiation.
The company made significant progress in international expansion, with SMS coverage in 19 countries and platform availability in six additional languages.
Partnerships and integrations with companies like WooCommerce, Canva, and Pinterest are driving ecosystem-led growth and expanding market reach.
Negative Points
Non-GAAP gross margins decreased by approximately 5 points year-over-year in Q4 due to increased infrastructure costs and SMS product growth.
The company anticipates some incremental churn due to new pricing updates, which may impact customer counts in Q1.
Klaviyo Inc (NYSE:KVYO) expects Q1 free cash flow to be negative due to employee bonus payments and seasonal payroll-related expenses.
The company is cautiously optimistic about external small business sentiment and is not assuming meaningful improvement in guidance until sustained changes are observed.
Despite strong growth, the company faces challenges in maintaining high non-GAAP operating margins due to continued investments in growth drivers.
Q & A Highlights
Q: Can you provide more details on the growth and sustainability of your mid-market pipeline? A: Andrew Bialecki, CEO, explained that Klaviyo is seeing strong growth in the mid-market segment, with a clear value proposition for these customers. The company provides a data platform that integrates customer data across systems, supporting complex use cases. The growth in customers generating over $50,000 in ARR is promising, and the average revenue per customer increased by 15% year-over-year, indicating strong market depth.
Q: How is the upmarket opportunity progressing, and what is the role of product-led growth (PLG) in this strategy? A: Andrew Bialecki noted that the PLG approach is integral to Klaviyo's strategy, making the evaluation process smoother and faster for mid-market and enterprise customers. The company has been thoughtful about building sales capacity to match demand, especially in the US and internationally, where there is increased demand in Europe.
Q: Can you update us on the ARR overlap with the Shopify ecosystem and other B2C ecosystem opportunities? A: Andrew Bialecki highlighted a strong relationship with Shopify, with seamless data integration benefiting both companies. The partnership with WooCommerce offers a different customer profile, being more international and customizable. Klaviyo is also expanding into new verticals with integrations like Vonati, Olo, and OpenTable, enhancing its market fit.
Q: What progress have you made in international markets, and how does the WooCommerce partnership impact this? A: Andrew Bialecki reported that international revenue grew by 42% in 2024. Klaviyo expanded its language offerings and SMS coverage, supporting growth in Europe and parts of Asia. The company is hiring local language-speaking sales and support teams in key European markets and forming regional partnerships to drive growth.
Q: Can you discuss the stabilization in the Net Revenue Retention (NRR) and what factors are contributing to this? A: Amanda Whalen, CFO, mentioned that gross retention remains strong, and there is stabilization in expansion trends. The company is making progress in cross-selling efforts, particularly with SMS adoption. The stabilization is also aided by lapping the impact of 2022 pricing changes.
Q: What are the priorities for product evolution, and what should we expect in terms of new features? A: Andrew Bialecki outlined three focus areas: embedding AI across the Klaviyo stack, enhancing the data platform as a source of truth, and expanding applications beyond marketing. The company is integrating AI for predictive capabilities and building tools for cross-channel marketing, with new product releases expected soon.
Q: How do you view the impact of the new pricing changes on customer growth and churn? A: Amanda Whalen explained that the new pricing features, including auto downgrade and flexible sending options, aim to reduce friction for customers. While there may be a modest increase in churn, the changes are expected to have minimal overall revenue impact for the year and position Klaviyo well for future growth.
Q: How significant is the SMS expansion to 19 countries, and what is the expected impact on revenue? A: Andrew Bialecki stated that the SMS expansion addresses pent-up demand in European markets, with some immediate uptake expected. The expansion supports cross-border businesses and enhances Klaviyo's ability to serve international customers, contributing to long-term revenue growth.
