• Q4 Revenue: $270 million, up 34% year-over-year.
• Full-Year Revenue: $937 million, up 34% year-over-year.
• Q4 Free Cash Flow: $54 million, up 57% year-over-year.
• Full-Year Free Cash Flow: $149 million, up 35% from the prior year.
• Q4 Non-GAAP Operating Margin: 6%.
• Full-Year Non-GAAP Operating Margin: 12%.
• Customer Growth: Over 10,000 new customers added in Q4, totaling more than 167,000 customers, up 17% year-over-year.
• Q4 Dollar-Based Net Revenue Retention Rate (NRR): 108%.
• Q4 Non-GAAP Gross Margin: 74%.
• Q1 2025 Revenue Guidance: $265 million to $269 million, representing 26% to 28% year-over-year growth.
• Full-Year 2025 Revenue Guidance: $1.156 billion to $1.164 billion, representing 23% to 24% year-over-year growth.
• Full-Year 2025 Non-GAAP Operating Margin Guidance: 11% to 12%.

• Warning! GuruFocus has detected 4 Warning Sign with KVYO.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• 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.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.