Klaviyo, Inc.

Good afternoon, everyone, and welcome to the Klaviyo Third Quarter Fiscal 2025 Earnings Conference Call. To ask a question today, please press star 1 on your telephone keypad. Also, today's call is being recorded. With that, I would like to turn the call over to Andrew Zille, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon, and thanks for joining Klaviyo's Third Quarter 2025 Earnings Call. Our earnings press release, investor presentation, SEC filings, And a replay of today's call can be found on our IR website at investors.clavio.com. With me on the call today are Andrew Bialecki, co-founder and CEO, and Amanda Whalen, CFO. As a reminder, our commentary today will include non-GAAP measures. Reconciliations to the most directly comparable GAAP measure 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 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 annual report on Form 10-K and subsequent quarterly 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 thank you all for joining us today. We had an outstanding third quarter. delivering revenue of $311 million, up 32% year over year. These results demonstrate our ability to build products that create more engaging relationships between consumers and businesses, get those products in the hands of businesses around the world, and build a high-growth software business at scale. We're now serving more than 183,000 customers in over 100 countries, including more than 6,000 enterprise and mid-market global brands, like TaylorMade, Mattel, Unilever, and Reebok. A few highlights from the last quarter. We delivered another quarter of record net ads in our $50,000-plus ARR customer cohort. We grew revenue in EMEA and APAC by 43%, and our Klaviyo service product line, which reached general availability six weeks ago, has the fastest adoption rate of any of our products, including text messaging. We're firing on all cylinders and see a lot of opportunity ahead, especially with the addition of agentic AI to our products. On this note, I'd like to take a few minutes to explain how AI fits in with the products we're building and how it's helping our customers grow faster. The B2C CRM we offer is made up of three vertically integrated components. A highly scalable, fast database for storing everything a business knows about its consumers and making that data available in real time. a set of applications and infrastructure to market, message, and serve consumers across every channel and modality, and an intelligence layer that finds opportunities to market or serve customers better and can automatically create, deliver, and optimize those marketing and service experiences, leveraging the consumer data we have for real-time personalization. AI and LLMs have fundamentally changed and leveled up what is possible in real-time personalization. the intelligence layer, and made the entire stack more effective at driving results for our customers. And we then share in that accelerating value creation with our customers. The more valuable we make each relationship between a business and an end consumer, the better for that business and the better for us. AI is improving its intelligence layer in three ways. First, it's making it faster and easier for our customers to leverage our integrated database and applications because AI can do the work businesses don't have the time or the bandwidth to do. We'll share a few examples of this in a minute. Second, AI is making the quality of the marketing and service experiences our customers are creating much better. This is a win-win for both businesses who see greater engagement and revenue and end consumers who get more relevant marketing and service experiences thanks to AI integrated into our stack. Third, as a result of AI, we're able to make Klaviyo more available to more businesses on more platforms because they can interact with Klaviyo through natural language and new applications like ChatGPT. Let me give some examples of products we've delivered and real customer use cases for each of these elements. And many of these are a direct result of products and features we've built in the last few months and released at our largest customer and partner event of the year, Klaviyo Boston, back in September. Let's start with making it faster and easier to do marketing and service. We've reimagined how marketing will happen in the agentic AI era and launched an entirely new workflow for our customers to do marketing. And we're calling it Marketing Agent. This agent, which is a team of task-specific agents, can augment or do the work our customers don't have the time to do. Klaviyo customers have access to an always on research, strategy, creative, execution, and brand safety team powered by AI agents running in the background that will suggest and build complete marketing campaigns for businesses to then review, edit, and run. We're progressively rolling out this new technology and experience to our customers. but we're already seeing customers adopting our recommended campaigns and executing them with minimal or no editing on behalf of our users. Now let's talk about making the quality of experiences better. We're already seeing the quality of campaigns our agent creates is surpassing what some businesses have time to create on their own. For example, a customer in the health industry using Marketing Agent saw a 41% better open rate and generated 24% higher average revenue, or Klaviyo-attributed value, per campaign compared to campaigns they created on their own. Another customer saw 50% better open rate compared to campaigns they created on their own and 40% lift on KAV per campaign. These results show the real revenue impact agents can have and were quite early in what agents are capable of. A marketing agent is like adding a solid marketing intern to your team. We're developing its skills to be at the level of a marketer with over a decade of experience and instant memory of all previous marketing campaigns and results. This is a paradigm shift in how marketing will happen, where businesses and teams can lean on agents to augment their work, and we are leading and excited to accelerate. We hear from our customers and partners. While they love our products, they want to do more with them. And with Agentic AI, we're delivering this. Agentic AI is also improving where businesses can connect with consumers. Our investments in building messaging and deliverability infrastructure and applications that support rich experiences across channels and modalities are paying off. Our customer hub and customer agent products, which are both part of our Klaviyo service product line, which we made generally available last month, now allow businesses to use AI to chat and message with their consumers across the web, email, text messaging, and WhatsApp. And we plan to add more channels next year. This expansion of services is resulting in more consumer engagement and incremental sales for the businesses we serve. For example, by surfacing favorited products and tailored recommendations with Customer Hub, 3rdLove has driven more than $200,000 in incremental revenue so far this year and enabled over 40,000 self-serve interactions that offloaded work from their support team. Incredible results for ThirdLove. And finally, as a result of AI, we're able to make Klaviyo more available to more businesses on more platforms. The launch of our model context protocol or MCP server allows companies to seamlessly integrate Klaviyo into AI clients and applications. We launched this a few months ago, built on top of our comprehensive and integrated data marketing and service API infrastructure. And we are seeing a lot of engagement from customers who are using it on major AI platforms like ChatGPT and Cloud. This is transforming how our customers and partners use Klaviyo. For example, one of our agency partners built a reporting workflow using the Klaviyo MCP server to dramatically reduce the time their account managers needed to prepare for client updates. Instead of spending hours pulling data manually, they now have an AI application using our MCP server that reviews last month's performance, summarizes results, and finds campaigns that over or underperformed historical trends, diagnoses the probable causes, and suggests next best actions. This saves them hours of manual work for each client relationship and allows them to spend more time leveling up their conversations with clients. Another partner's creative team is using our MCP server to review past campaigns and identify creative assets that are high-performing and can be reused. They're then creating new campaigns with those assets and mapping specific creative to different consumer segments. This is not only saving an enormous amount of time, it's allowing them to do better marketing with their clients and produce better results. We're uniquely able to capitalize on these opportunities for a few reasons. First, vertical integration matters. And our bet on an architecture that allows for low latency coupling is paying off. The tight integration of our database and marketing service and analytics applications allows for rich personalization by using profile data as context in real time. And engagement and behavioral data from each application is automatically available to other applications. For example, product recommendations derived from marketing campaign engagement, service conversations, and browsing behaviors are richer by using all available inputs and instantly available across all of our products. On top of that, our ability to measure and calculate attribution natively creates a closed loop system AI can train on the outcomes of marketing campaigns and service experiences to improve its performance. And lastly, we have an incredible ecosystem of thousands of agencies, developers, and system integrators who are building agents around our products and agents that extend functionality and improve customer results, like the example we mentioned a minute ago. Klaviyo Boston, the anchor event of our worldwide tour for customers and partners, put this on full display with over 1400 attendees sharing how they're using our products and what they're building on top of them. As a result of all of the above, AI is providing tremendous tailwinds to our mission of bringing businesses and consumers closer together and huge opportunities for our growth. We're rapidly moving towards a world where every business will have access to the technology that can present their products and services in the best possible way, personalized to the individual consumer, and available wherever consumers are, and doing this autonomously through AI with human oversight and intervention where the business wants it, not because it's required. This is our vision for the B2C CRM and why we believe defining and delivering the customer experience will be autonomous, and we couldn't be more excited. I'd like to conclude by commenting on a few recent AI developments and why we see them as clear tailwinds for Klaviyo. Businesses win when the friction between a consumer finding them and buying from them is reduced. That's why we're very excited about agentic commerce and various protocols that are being developed, such as the agentic commerce protocol, or ACP, from OpenAI, and the agent payments protocol, AP2, from Google. It drives additional sales in the short run, and another consumer relationship businesses can build upon in the long run. One of our core metrics is the number of digital relationships that exist between businesses and consumers. And so any new channels that accelerate discovery bodes very positively for Klaviyo. Also, as brands prepare for the rise of GPT commerce, they need solutions for maintaining direct connection with their customers. Klaviyo protects that connection by unifying first party data in the Klaviyo data platform which allows brands to maintain visibility and turn engagement on agentic services into meaningful, measurable customer experiences across all channels. We also believe agentic commerce and commerce through natural language interfaces will become more common, and we're excited to integrate those protocols into our messaging infrastructure and marketing and customer agent products. We're offering consumers an alternative to browsing a website or a store and instead chatting or talking to an AI agent from a brand that can handle queries and transactions on its own across multiple channels. We're also excited to see more infrastructure built to create agents and agentic workflows where customers can use Klaviyo outside of our own user experience. While we'll provide customers with agents and algorithms within Klaviyo that are excellent at various aspects of marketing, service, and analysis, We're also building Klaviyo as an open platform so other developers and companies can build agents that integrate into ours. We're successful when our customers are successful. And we're excited to expand our already large partner ecosystem to include more AI-first developers and builders. To our customers and partners, thank you for the trust and support. We're very excited about what we'll build together. And to Klaviyos around the world, thank you for your hard work and dedication to supporting our customers. We're still only 1% done on our mission to empower creators to own their destiny. We're excited to build, invest, and lead in bringing this AI-powered future to businesses of all sizes around the world. With that, I'll turn it over to Amanda.