Klaviyo, Inc.

Additionally, some of our comments today may 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 prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions, and other factors that could affect our financial results are included in our SEC filings, including our most recent report on Form 10-K and subsequent reports on Form 10-Q. 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, Billy, and thanks to everyone for joining us today. Klaviyo delivered very strong results in the second quarter, with revenue of $222 million growing 35% year-over-year. We believe we are a must-have platform for more than 151,000 customers around the world as we help them easily and quickly transform their data into more valuable connections across every touchpoint. Our customers are at the heart of everything we do. We work to earn their trust every day, and our model is built for joint success. So as our customers grow, Klaviyo grows. We power smarter digital relationships. Our vertically integrated platform enables customers to use real-time, first-party data to create segments, orchestrate personalized on-the-channel campaigns, and measure every interaction. Most importantly, we've made it incredibly easy. Marketers no longer have to hire a developer to build and manage an API to connect to a new data source or write code to create a consumer segment. With Klaviyo, complex tasks are made simple, allowing marketers to be more efficient and focus more time on their consumer engagement. From entrepreneurs just starting their businesses to established, internationally known brands, Klaviyo is a revenue engine for our customers. Our unified platform across the data and marketing layer, our omni-channel orchestration, our fast, flexible functionality, and our more than 350 integrations drive companies to choose Klaviyo. Then they stay and grow with us, adding products like SMS, CDP, and reviews, and take advantage of our new AI features and advanced analytics across their entire consumer data set. As customers leverage all of these tools, we can show the actual value of our platform is driving with Klaviyo Attributed Value, or KAV, which measures the revenue generated through consumer transactions after engagement with any of our channels. When customers sign in to Klaviyo, KAV is one of the first things they see, so they know how much revenue our platform is driving for them. Our ease of use and the direct correlation to revenue is a key reason why companies choose Klaviyo. A great example is our new relationship with a Fortune 1000 global company. They wanted to build out their direct-to-consumer offering, engaging consumers with new content. They were previously using a legacy platform, but selected Klaviyo for our ease of use and the ability to integrate their data across all their core marketing channels. They also selected our SMS solution, a channel they'll be using for the very first time to execute their omni-channel strategy to fuel additional revenue growth. We also closed a deal with a multibillion-dollar revenue national chain of grocery stores. They were using a homegrown solution to batch and blast communications. Each email had to be created from scratch, and they couldn't do any segmentation. The CIO demoed Klaviyo and quickly realized the team would see big productivity gains from our out-of-the-box segmentation, data orchestration, and the flexibility of our campaign and flow creation. Companies of all sizes are building omni-channel marketing strategies using email, SMS, and push notifications to build personalized consumer relationships. But many use multiple point solutions, leaving them with disjointed consumer data, an incomplete view of their consumers, and a fragmented communication experience. If you've ever received an email from a brand asking you to review a product that you returned weeks ago and you've seen this breakdown in action, That's why we've integrated all of those channels on one platform, ingesting data from every touchpoint, and giving our customers powerful insights that enable them to execute a differentiated omni-channel strategy. Stantonite, the world's largest travel luggage company, chose Klaviyo this quarter because we could bring all of their data into one place. Stantonite was using multiple point solutions for email and SMS. They had fragmented data, and after eight years email provider that had only built four automated workflows due to the difficulty of customizing the solution. They were impressed with the number of easy-to-build options that Klaviyo provides across our templates, forms, and flows. Stantonite selected Klaviyo over a large legacy provider to unify all seven of their North American brands, bringing email and SMS together onto our platform. SMS continues to be a key driver of growth for us as companies look to consolidate SMS capabilities with Klaviyo to better leverage our data platform for multi-channel flows and campaigns. This quarter, we expanded our relationship with R-School Sports, the sports digital media company with over 65 content franchises and 198 million social followers. They've been a Klaviyo email customer for eight years and have seen tremendous success selling their merchandise and expanding their influence in the sports and entertainment communities. As their contract with a point solution SMS provider came to an end, they opted to consolidate with Klaviyo so that all of their consumer data will be housed on our platform, allowing them to better segment and orchestrate the data for more personalized communications across channels. We also started a new relationship with Boston Proper. a legacy fashion and apparel brand that historically has relied on selling via catalogs. The company's technology infrastructure was fragmented, hindering its ability to provide a seamless and personalized shopping experience for its consumers. They chose to consolidate from multiple point solutions to Klaviyo, centralizing all online and offline consumer data into our data platform. Austin Proper is leveraging our email, SMS, and CDP solutions to build stronger relationships and to help grow their top line. The more first-party consumer data you have on one platform, the stronger your campaigns will be. With help from our growing ecosystem, we've built out an incredible third-party integration library so our customers can pull in their data from anywhere. These integrations are both inbound and outbound, allowing customers to bring all of their data onto our platform as well as leverage Klaviyo data on other platforms, like Google and Meta. This quarter, we added Toast and Bizarre Voice, new inbound integrations, and TikTok and Pinterest, outbound integrations, which allow customers to connect their Klaviyo profiles to the ad audiences, improving return on ad spend. We also announced a new integration framework that significantly reduces time to build on Klaviyo by up to 43%. We plan to open up this framework to third-party developers in the future to enable them to create both inbound and outbound integrations with Klaviyo more efficiently. Personal Supply Company, the global travel lifestyle brand, chose Klaviyo and Q2 in part because of our third-party integration. They were frustrated with their prior point solution due to lack of innovation, poor integration, and reporting challenges. Following a competitive RFP process, Across Point Solutions and legacy providers, they chose Klaviyo because they felt that our massive integration library and functionality and AI features would give them the right edge for growth. Speaking to AI, we continue to enhance our AI suite. As I've mentioned previously, we think about AI three ways. Productivity, optimization, and creation of new marketing strategies. Marketers need artificial intelligence to be practical, effective, and easy to use. But AI is only as good as the underlying data. Because our platform can ingest up to the second first-party consumer data, Playdo can provide more accurate benchmarks and drive actionable insights through our artificial intelligence tools. A few weeks ago, we announced several new features. Flows AI allows marketers to build a flow in seconds with a simple prompt. ultimately drive more revenue. Personalized campaigns take A-B testing to the next level by determining the winning version of a campaign for each individual subscriber based on their likelihood to engage. And review sentiment AI quickly analyzes product reviews at scale so brands can get insights and take action faster than ever. We also want our AI features to easily provide guidance So we recently introduced a feature that gives recommended actions and tailored next steps powered by artificial intelligence as soon as customers log into their Klaviyo homepage. Our customers are increasingly adopting our AI products as we've seen a 61% increase in accounts using one of our generative AI features. We're excited by Klaviyo AI's ability to help marketers move beyond what was previously possible, unlocking new growth strategies. As a customer-first organization, we are focused on investing in areas that will help us support our customers and make them more successful across sales, product, and support. We have been investing in our go-to-market efforts over the last few quarters with a focus on growing our sales capacity to address mid-market and international opportunities. Additionally, we continue to invest in training for new sales hires and expanding our partner ecosystem to ensure we have the right agencies system integrators, and technology partners to help our customers succeed. Internationally, we are investing to expand our presence and platform offering. During the quarter, we continue to enhance our localization and internationalization with the expansion of our SMS capabilities into Austria, Switzerland, and Spain, as well as adding MMS in Australia. We now provide SMS coverage in 12 countries more than double the five countries we had coverage for this time last year. And we plan to continue to expand our international footprint going forward. This quarter, we launched our product in French, and we saw a large increase in new customers and usage as a result. For example, we signed a new deal with Le Petit Ballon, a French wine subscription company. And we're looking for a new solution to help them generate more revenue through email and to improve overall consumer retention. They chose Klaviyo because of our data platform and plan to start testing SMS in addition to their use of email. We are dedicated to continually improving our platform and product offering for our customers. Customers tell us that our product roadmap is a key differentiator. In Q2, we released a number of new features, including a bulk profile suppression tool, which helps our customers keep their active profiles clean by suppressing profiles that may have stopped engaging with their brands. Companies can now suppress those profiles with one click, so they can market to the right consumer and ensure good deliverability. Today, we also released Reputation Repair AI, which will determine when an account has poor deliverability, identify and segment out those accounts to create a clean list, and ensure brands are setting to the highest quality profiles, leading to stronger deliverability and email performance. Deliverability is hugely important. You may have the best content in the world, but it only works if it gets delivered. We've been investing heavily in our deliverability infrastructure and systems, and I want to thank our team, who is focused day and night on ensuring the highest quality deliverability and sender reputations. Equally important is compliance. Our team is focused on preventing abuse of these channels, whether malicious or accidental. We're able to maintain strong compliance because we have insight into an enormous amount of data that allows us to see what's going on and how to stop it. As a result of these efforts, we've navigated the changes from the email service providers extremely well, and we're seeing the benefits from those efforts as companies turn to Klaviyo after negative experiences with other providers. A great example of this is Olive and June, a leading provider of at-home manicure and pedicure products. They were using a lower cost provider, but were facing severe deliverability issues. They came to Klaviyo because of our strong reputation in the market, the power of our platform, our deliverability strength, and our integrations with their other systems that will help them build better relationships with their end consumers. As we continue to add more features and functionality to the platform, we are committed to empowering our customers to get the most out of Klaviyo by making it easy to find answers about best practices, partners to work with, and a community to engage with. To provide excellent customer support across all segments, we recently launched Klaviyo PowerUp, our new centralized customer resource center designed to bring all of these assets together in one place. PowerUp will help customers easily discover self-service resources and deliver curated content throughout their journey with Klaviyo. We will continue to enhance PowerUp as part of our dedication to support our customers' long-term success. I'm extremely happy with our second quarter results and the strong first half of the year. We have a tremendous long-term opportunity ahead of us as we help our customers power smarter digital relationships around the world. And we have even bigger plans for the future to unlock use cases beyond marketing for our customers. Before I hand it over to Amanda, I'm very proud to announce that Klaviyo was named an Inc. Best Support Place for the sixth year in a row And Newsweek listed us as one of America's greatest workplaces for 2024. Thanks to all the Klaviyos for keeping up the energy of our culture. And with that, I'll turn it over to Amanda.

Thanks, Andrew. Klaviyo delivered another quarter of strong financial performance in Q2 as we continue to drive efficient growth at scale. Revenue grew 35% year-over-year to $222 million, and we reported a 15% non-GAAP operating margin. both exceeding our expectations. We're very pleased to deliver well above the Rule of 40 with this performance. We continue to deliver across our four primary growth factors, adding new customers, expanding with those customers, expanding internationally, and growing in the mid-market. In Q2, we added over 5,000 new customers and now have more than 151,000 customers, up 16% year-over-year. We saw strength in entrepreneurs and in the high end of the market. However, we are seeing some of the softness in the SMB market that has been widely discussed across the industry over the last several months. Despite this, we delivered a strong quarter due to the diversity of our customer base across customer size and geography. Existing customers continue to expand with us by growing their existing usage and adding new products. as can be seen in our dollar-based net revenue retention rate, or NRR, which was 112% for the quarter, an expected decline due to the lapping of our September 2022 price increase, as well as the customer trends we spoke about earlier this year. We continue hearing from customers about macro pressures, and they remain focused on the value they're deriving from their software. As a result, our expectations for continued decline in NRR in the near term haven't changed. It's important to note that despite this, we continue to see strength and stability in our gross retention rates, which confirms our belief that Klaviyo is a must-have platform for our customers. Internationally, we continue to grow our global business. You'll recall that we announced the launch of our French language product in Q2, And we have seen extremely strong trends there as a result. France was our fastest growing country in new business in the quarter, up more than 65% Q1. We also saw strength in the UK, Ireland, Italy, and Germany. In fact, our year-over-year revenue growth in EMEA accelerated to 45% in Q2 from 43% in Q1. In aggregate, our international revenue grew 41% year-over-year. Finally, the go-to-market initiatives we implemented last year are delivering great results. At the end of Q2, we had 2,386 customers generating over $50,000 in ARR, which was up 64% year over year. We're also seeing a healthy trend of landing new customers in this cohort from the start, adding the largest quarterly number in our history, evidence that our strategy is working and of the growing importance of our platform to our customers. Non-GAAP gross profit for the quarter was $175 million, representing a non-GAAP gross margin of 79%, up 140 basis points year over year. This came in slightly better than expected as we continue to absorb next shift pressure from our growing SMS business through operational efficiencies across our infrastructure and support organizations. For the full year, we expect non-GAAP gross margin to be down slightly from last year. Turning to non-GAAP operating expenses. Sales and marketing expense was 32% of revenue for the quarter, up 140 basis points over last year, as a result of our investments in sales headcount and marketing programs that we've discussed the last few quarters. R&D expense was 19% of revenue, down 100 basis points year over year, primarily driven by an increase in capitalized software as a result of more development work on customer-facing features that we'll be rolling out. Finally, G&A expense was 13% of revenue, down 170 basis points year over year, primarily as the result of the release of some international tax-related reserves. We do expect more of these releases over the next few quarters, which may drive some fluctuation in G&A expenses. For the second quarter, our non-GAAP operating income was $34 million, representing a non-GAAP operating margin of 15%. This was stronger than our guidance as a result of the revenue strength, the items I discussed earlier, as well as headcount coming in a bit lighter than expected for the quarter. We generated free cash flow of $37 million during the quarter, down slightly from the prior year due to payroll and other operational expenses, as well as the timing of collections. Moving to guidance, for the third quarter, we expect revenue to be $225 to $227 million, representing growth of 28 to 29% year over year. We expect non-GAAP operating income to be $21.5 to $24.5 million, representing non-GAAP operating margin of 10 to 11%. This is a bit better than we had suggested last quarter due to a shift in the timing of some investments. as well as the lower OPEX related to slower than anticipated headcount growth in Q2. For the third quarter, we expect fully diluted shares outstanding to be approximately 300 million. For the full year, we are increasing our revenue guidance by $11 million to 910 to 918 million, representing growth of 30 to 31% year over year. We are also raising our non-GAAP operating income guidance by $6 million, to 103 to 111 million, representing a non-GAAP operating margin of 11 to 12%. We continue to make incremental investments across go-to-market and product opportunistically and expect those investments to be spread across Q3 and Q4 as we set Klaviyo up for long-term growth. Finally, for the full year, we expect fully diluted share count to be approximately 301 million. In closing, these strong results are a clear indication that Klaviyo's platform is driving success for our customers. We are excited about the remainder of 2024 and the coming years as we continue to build the foundation for durable and efficient growth going forward.