Klaviyo, Inc.

Hello and welcome to the Klaviyo Q1 2026 earnings call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. With that, I would now like to turn the call over to Ryan Flame, Director of Investor Relations. Ryan, you may begin.

Welcome, everyone. We appreciate you joining us. Joining me today are Klaviyo co-founder and co-CEO Andrew Bialecki, co-CEO Chano Fernandez, and CFO Amanda Whalen. Andrew, Chano, and Amanda will first share their views on the quarter, and then we'll open up the line for your questions. 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 prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risk factors, uncertainties, and assumptions, and other factors that could affect our financial results are included in our filings with the SEC. We do not undertake any responsibility to update these forward-looking statements except as required by law. Andrew, that concludes my introduction. We're ready to begin.

Thanks, everyone, and welcome. We've entered the era of agents and infrastructure, at least so far as software is concerned, and our first quarter showed what that means for Klaviyo. Before I cover our results and highlight a few specific observations, I'd like to take a few minutes to remind everyone of the opportunity AI presents and how we're taking advantage of it. Our strategy is centered on helping businesses grow by maximizing their most important asset, their relationships with their consumers. The businesses that win are the ones that deliver stunning personalized experiences at scale. That's been the goal of everything we've built at Klaviyo for the last decade. And the reality is that creating those experiences through deep personalization, engaging media, meeting customers where they want to be met, and optimizing those experiences automatically is still not easy. Our work over the last decade has been building the infrastructure to make that possible, what we call the B2C CRM. As we built it, we felt a growing gap between what our infrastructure is capable of and how businesses are actually using it. This capability overhang means businesses are missing opportunities with their consumers, and in turn, leaving real dollars and greater success on the table. AI agents are allowing us to close that gap and revealing enormous latent demand for intelligence to design, deliver, and optimize consumer experiences. Our agents are going further, finding new opportunities for the businesses we serve and contributing back to product direction. They're already among our most advanced users of our data and experience infrastructure, pushing the limits of what's possible and giving feedback for what to build next. We're entering a positive loop where agents use our infrastructure to build stunning consumer experiences that generates data and feedback that improves the infrastructure, which in turn makes agents smarter and more capable. And the cycle repeats. Together, agents and the infrastructure we provide are the autonomous B2C CRM. We believe every consumer business will run on it and every consumer experience will be driven by it. And our agents and infrastructure get better with increased data scale and usage. Our infrastructure sees almost 4 billion daily events and signals across 8 billion consumer profiles. Ingesting, storing, and indexing these signals in real time gives every business running on Klaviyo a real-time data feed on how consumers and businesses are interacting with each other and, critically, gives businesses and the agents they run context on what will delight consumers. The laws of consumer behavior shift in real time. Our customers and the agents they deploy use our real-time view of consumers as context to deliver stunning, highly performing experiences. And agents make it even easier to infuse this context into experiences for the benefit of consumers and businesses alike. Let's look at our first quarter results to show what this looks like in practice. Revenue increased 28% year over year to $358 million, with strong momentum across enterprise, international, and our B2C CRM platform. Non-GAAP operating margin increased to over 16%, the highest in our history. More than 196,000 brands are on our platform. We closed the largest number of multi-million dollar ARR deals ever, and our largest customers once again grew their revenue, known as GMV, roughly two times faster than the broader market. Our investments in AI are not limited to the agents and infrastructure we build, but extend to how we operate and deliver Klaviyo. Annualized revenue per full-time employee in Q1 was over $600,000, up more than 25% year over year. As an example, we're committing and shipping code at nearly double the rate per engineer from a year ago. As a result, we shipped more than 75 features in the first quarter, including a private preview of our next-generation marketing analytics agent, Composer. increased intelligence and channel capabilities for customer agent, and deeper partnerships and product integrations with Google, Anthropic, Shopify, and Canva. I'd like to share a bit more on our agent products and how we're seeing customers use them, starting with Composer. Composer is our next-generation agent for marketing and analysis and is an entirely redesigned agent harness. It builds from the learnings of how customers are using our first-generation marketing agent. Marketing agent's functionality was more narrowly scoped to content marketing and campaign creation. Composer takes advantage of the advances in underlying LLM's abilities to reason and use tools. Composer's scope is dramatically expanded. It can reason over your data, take actions across consumer experiences, and learn from those experiments. The private preview we introduced in March includes the ability to autonomously query and analyze consumer and marketing data and create marketing campaigns and automations across all surfaces with support for creating and optimizing customer agent coming soon. On top of this, we built Composer to be extensible, so customers and partners can build sub-agents and system connectors it can use. It makes them available wherever users work, not just the Klaviyo interface. Because this is such a significant step forward, we're being deliberate about quality, both in Composer's analysis and its creative decision-making. The bar is high, and we're committed to meeting it. Similar to how vibe coding represented a shift from engineers focusing on how software is created to what software to create, we've seen a similar trend with Composer where users are vibe marketing by focusing on what they want to achieve and create, letting Composer do the research and initial creation, and then iterating with Composer on the insights and perfecting its outputs. The proof points are very exciting. Take one beauty brand in our preview. Composer audited their marketing, found automations that had been broken for years, fixed them live, and surfaced half a dozen other opportunities their team had never gotten to across creative, discounting strategy, and personalization. That pattern is repeating across our enterprise users in the preview. Teams are using Composer to audit, source opportunities, and implement in a single session. One of the most recognized apparel brands in the U.S. saw a 40% plus increase in top performing flow revenue following a single session. Hydroflask used Composer to find misconfigured targeting that had been preventing a campaign to send, and Composer fixed it with them live. A prominent personal finance company mapped and prioritized more than 1,000 flows across 13 business units in a single session, giving their team a clear picture of where to focus first. This is why global brands are telling us that Composer solves the biggest pain point they have and is the best agentic marketing solution they've seen on the market in the past year. And because Composer runs securely inside Klaviyo's data perimeter, it already addresses the data privacy concerns that typically slow enterprise AI adoption. For one enterprise fashion brand, it was the first marketing AI tool to clear their security team's review because Composer runs inside Klaviyo's trusted environment. Composer is the future of how businesses will use Klaviyo to understand their consumers and create stunning experiences for them. We're very excited to open up to more of our customers and partners in the coming weeks. Turning to customer agent, and similar to Composer, we've taken advantage of the improvements in underlying LLM intelligence and tool use to allow businesses to create more tailored, highly performing agents their consumers can interact with. The experience and abilities of Customer Agent built on Klaviyo can now be entirely customized with our custom skills launch last week. Customer Agent now runs across text, WhatsApp, email, RCS, and web chat, and we're adding voice and multilingual support. Adoption continues to grow month over month, and the experiences Customer Agent delivers are showing real results. digitally native fashion brand Naked Wardrobe resolved 84% of conversations through customer agent and AI and saw a 28% increase in average order value, helping consumers own their style and buy on their time, including many instances of consumers shopping and chatting at 2 a.m. when customer support would have otherwise been offline. Finally, underneath our agents is our data infrastructure, capable of training, serving, and optimizing personalization, machine learning, and AI models. These models don't require direct tuning from users. They learn from usage and they improve the platform automatically. What this unlocks is true one-to-one personalization. The right content for every consumer at every interaction delivered across every channel and agent we operate. These models and the features that leverage them were used by nearly two-thirds of our customers in the first quarter. And usage is driving outcomes. As an example, customers using our personalized send time models saw a 35% lift in click-through rates. More engaged consumers and higher revenue driven by infrastructure that gets smarter the more it's used. We believe this is the year marketing and analysis agents like Composer and always-on agents like Customer Agent become standard and ubiquitous. And we've built for that deliberately, meeting customers in the tools they already use, an open garden, not a walled one. And to accelerate that, we've deepened integrations and expanded partnerships across the AI ecosystem. In February, we deepened our integration with Google by launching RCS to all customers, and we opened up beta access to Google search and ads products that connect discovery directly to customer agent experiences over RCS. The consumer can now see an ad, tap it, and then immediately have an immersive conversation with a brand powered by customer agent. Google delivers the reach, Klaviyo stores the consumer relationship, and delivers the personalized experience. We've extended access to our infrastructure and agents via expanded MCP connectors and applications with Claude, ChatGPT, and Canva. MCP usage of Klaviyo continues to expand rapidly, increasing more than 10% week over week in Q1. The top users of MCP are querying more consumer data and building more marketing campaigns than their peers. with 16% more platform usage relative to those who don't use MCP. Businesses are connecting more data to Klaviyo, centralizing it and taking advantage of the increased accessibility. Consumer event volume from the hundreds of apps in our marketplace is up 44% year on year. As an example, AS Beauty, home to Laura Geller and other brands, and one of our largest customers, runs a complete omni-channel program on Klaviyo, including greatly expanding their text messaging program this quarter. Their team queries Klaviyo data and cloud to model campaign performance and make faster decisions. Their KAV, or Klaviyo Attributed Value, is up 20% over the past two years. A senior leader there recently described Klaviyo as an indispensable pillar of their business, infrastructure that they and their brands rely upon. None of this happens without our customers and partners pushing us and Klaviyo's delivering. We're grateful for both. I'd like to finish by providing an update on our leadership team. First, Q1 was Chano and I's first full quarter together as co-CEOs, and it's been a terrific partnership where we have so much in common, including a relentless drive to deliver and highly complimentary skills. Second, as we announced in a press release earlier today, after almost four years as our CFO, Amanda has made the personal decision to step down from her role at Klaviyo in the coming months, spend more time with her family before pursuing the next phase of her career. I want to take a moment to recognize what Amanda has meant to Klaviyo. She was instrumental in building the team that took us through IPO and helped us scale into a multi-products global AI native business. Amanda will continue to lead our finance organization through August 21st and will remain in an advisory capacity through November to support a smooth transition. We've initiated a search for our next CFO who will build on our strong financial foundation and momentum. Beyond what she's helped us build, she's been a terrific strategic partner and a trusted advisor to me and many others across Klaviyo. We wish her the absolute best. Amanda, on behalf of the entire Klaviyo team, thank you. And with that, John O.

Thanks, Andrew. I want to echo your words on Amanda and the impact she has had across Klaviyo. We have confidence in the team and transition plan, and we're grateful Amanda will continue to provide leadership and support in the months ahead. Turning to the quarter, the core business is strong, and the opportunity in front of us is large. Enterprise, international, and platform consolidation each have real momentum right now. AI accelerates all three. Let me walk you through what we are seeing and how we are executing. Starting with enterprise, the new customers in the 50K plus ARR cohort were notably higher than Q1 2025. We closed one of our largest deals ever, an expansion bringing a single customer's contract to over 6 million ARR. The problem I hear consistently in enterprise is fragmentation. Customer data, marketing execution, and service are spread across too many systems. Fragmentation costs revenue. What resonates is consolidation onto one data model, one execution layer, with AI that operates with full customer context across the entire lifecycle. That's what Klaviyo does. The wins in Q1 reflect that. Alice and Olivia is migrating to Klaviyo to unify online behavior, purchase history, and store-associated interactions in one system. Weber Grills replaced a legacy platform with Klaviyo globally across the US, APAC, and EMEA. Expansion activity was also strong as customers standardized more of their workflows on our platform. Take Patagonia, a long-time email customers that came to us with two things on their mind. Improving the customer experience and migrating off of fermenting text messaging setup, creating redundant messaging across channels. We showed them a clear technical plan and a credible commercial case. But the reason they choose Klaviyo was anchored in where we're going together. RCS, omni-channel journeys that support both commerce and advocacy. Patagonia is not a brand that wants to send more messages. They want to send the right ones. Finally, we were proud that this quarter, the Forrester Wave named Clevio a strong performer and recognized us with the highest customer satisfaction score among all vendors evaluated. We have enterprise credibility validated by a name, Enterprise Trust, alongside proof the pipeline is converting. International revenue outside the Americas grew 39% year over year in Q1, and five of our top 10 largest new customers are from EMEA. What we're seeing in MAI isn't just growth. It's the same platform priorities driving our largest US enterprise deals, unification, real-time data, and AI across channels. AllSaints is a great example. The flagship UK fashion retailer replaced legacy technology in a multi-year deal with both the global digital director and chief technology and transformation officers as champions of the move. They chose Klaviyo for speed to execution, the ability to unlock WhatsApp as a new audience channel, and the future opportunity to consolidate email and other channels on a single platform. They shared that this move reflects their desire to move toward a more agile way of working that will significantly reduce the hours spent on day-to-day CRM activities. We also welcome Hobby, a fast-growing Nordic yarn retailer selling across multiple international markets, winning a competitive deal that came down to speed, flexibility, and the strength of our native integrations with platforms like Shopify. We continue to deepen the product capabilities our international customers want. Local aware catalogs is a good example. Shopify merchants with country-specific catalogs can now run fully synchronized multi-market data automatically across every region they operate in. For many global brands, that's a requirement. Now Klaviyo delivers it. That same pattern, complex multi-market operations consolidating onto Clavijo is showing up in categories well beyond our e-commerce foods. Legends Global is a flagship wing in ticketing and live events. They're bringing their global portfolio of more than 260 venues and attractions onto Claibillo, integrating ticketing and venue systems, thinking data through our warehouse capabilities, and giving the US and UK teams a single platform to activate and execute across every market they operate in. Our partner ecosystem is deepening that reach farther. In hospitality, the thanks integration brings restaurants loyalty into a single workflow. And with our integration objects feature now GA, operators on cloud beds, guesty, and meals can trigger a pre-estate reminder the moment a reservation is made. We're building the go-to-market foundation to match the opportunity, consistency in how we sell, how we deploy, and how we support customers at a scale. The data is clear. When customers unify Enclave.io across email, text, analytics, and service, outcomes compound. And our cross-sell motion is executing against that. One thing worth calling out on text messaging because it speaks directly to how we approach the market. Career fees have risen meaningfully across the industry over the past 12 months, and most platforms passed those costs through immediately. we chose to absorb it, a decision that reflects our commitment to customers' fairs. This also gave us a real pricing advantage this quarter, and we leaned into it. But our competitive position is more durable than price. Techs on Klaviyo runs on the same unified profile as email, WhatsApp, and every other channel, and that's what drives long-term share gains. Going forward, we'll be thoughtful and intentional about any future costs, pass-throughs, while continuing to negotiate the most competitive test messaging race. In closing, Q1 showed a business with strong fundamentals, growing enterprise relevance, and international momentum that is structural. We're investing where the opportunity is biggest, improving the execution foundation to capture it, and staying focused on delivering outcomes for customers. The road ahead is significant, and we're ready for it. With that, I'll turn it over to Amanda.

Thanks, John and AB. Q1 was proof not just of what Klaviyo can do, but of how our business model works when each part reinforces the others. The growth engines we've been building, multi-product adoption, enterprise momentum, and international expansion reinforced each other this quarter. AI accelerated all of them, and the results showed up exactly where we expected to see them, in revenue, in margin, in customer retention, and in the expanding values customers are generating from our platform. Revenue grew 28% year over year to $358 million, ahead of our expectations. We delivered our strongest non-gap operating margin and our first quarter of positive gap operating margin since going public. NRR was 110%, up two points year over year, meaning our customers aren't just staying, they're growing with us. Customers are also earning more from every message, with KAV, or the revenue that customers generate from Klaviyo, per message up approximately 8% year over year. That's how our model is designed to work, and tangible evidence of how we are building more valuable customer relationships that help our customers, and in turn, our business, grow. Turning to our growth engines. First, multi-product adoption grew as more brands sought out the strategic advantage of consolidating onto a single platform. Service remains on the steepest adoption curve in our company's history. And all of this matters for future growth because multi-product customers retain better and generate more value per profile over time. Second, enterprise momentum continued in Q1 with our $50,000 plus ARR customers growing 38% year over year to 4,175 customers. This is reflective of a broader structural shift as leading brands modernize and consolidate their tech stacks. These are complex multi-channel relationships choosing Klaviyo as their long-term platform because we unified data, intelligence, and action in one place. Third, international was again a highlight with revenue outside of the Americas up 39% year over year. Notably, revenue for EMEA outside of the UK was up 51%, marking the sixth consecutive quarter of growth above 50% in that region. Let's now turn to AI. Across each of our growth engines, AI is increasing both velocity and yield, helping customers do more, faster, and with better results. Automated flows generate 10 times more revenue per message than campaign. And that acceleration is important because it flows directly into our model. As customers generate more value, we grow as well. Agents also represent a net new revenue opportunity. Customer agent is already contributing and we expect that to grow as we expand channels and capabilities. Composer is early, but the value signals so far are strong. Higher intelligence drives higher value and higher value drives revenue. Turning to the P&L. Non-GAAP operating income was $59 million in Q1, representing a 16% non-GAAP operating margin. That's nearly 500 basis points of expansion year-over-year, and our strongest margin since going public. GAAP profitability was driven by improved non-GAAP operating margin, as well as a 2% point reduction in stock-based compensation year-over-year. Non-GAAP gross margin was 76%. This reflects our continued success with text messaging cross-sell, offset in part by infrastructure efficiencies. Non-GAAP operating expenses were 59% of revenue, down 560 basis points year-on-year. Sales and marketing in particular saw meaningful leverage. This reflects two things. First, operational efficiencies enabled by AI that we're building into the business. And second, the absence of the B2C CRM marketing investment that we made in Q1 last year. Free cash flow was $19 million, a 5% margin. This reflects normal seasonality and the timing of annual bonus payments, consistent with what we saw in Q1 last year. Our trailing 12-month free cash flow margin was 16%, spotlighting the strong cash generation potential of the business. In March, our board authorized a $500 million share repurchase program. This authorization reflects our board's and management's confidence in the durability of our strategy, the scale of the opportunity ahead, and our conviction that Klaviyo reflects an attractive long-term investment. As a component of that program, we immediately entered into a $100 million accelerated share repurchase, which was completed in April. we continue to execute on the remaining authorization. Our model is efficient enough that we can invest aggressively in growing the platform, in AI and agents, in international, in enterprise, and simultaneously return capital to shareholders. Turning to guidance, we're confident in the trajectory and setup for the remainder of the year. We outperformed Q1 expectations by approximately $10 million. Based on that performance and the broad momentum we're seeing, we are raising our full year 2026 revenue guidance by $13 million at the midpoint. This reflects our conviction in what's ahead. We now project revenue between $1.514 billion and $1.522 billion, representing 23% year-on-year growth. We're also raising our full year 2026 non-GAAP operating income guidance to a range of $222 to $228 million, a non-GAAP operating margin of approximately 14.5 to 15%. The model continues to support reinvestment and growth while delivering expanded profitability. This guidance assumes that we continue to absorb the majority of carrier fee increases. As Chana described, thus far, we've made the strategic decision to absorb these fees rather than passing them directly to customers. Over the course of the year, we'll continue to be intentional in our approach, striking a balance that's strong and smart for both our business and our customers. For Q2, we expect revenue of $359 to $363 million, representing growth of approximately 23 to 24%, and non-GAAP operating income of $47.5 to $50.5 million, or a non-GAAP operating margin of 13 to 14%. As you're building your models for the balance of the year, I would like to call out a few items with regards to revenue, we expect our sequential step up in revenue from Q3 to Q4 to be similar to last year. We also expect higher operating margins in our fourth quarter this year compared to Q2 and Q3 driven by timing of investments, as well as compounding effects of AI efficiencies. As we said last quarter, with scale, we have improved our forecasting visibility, which means we are guiding with greater precision. Our guidance philosophy remains consistent. Our goal is to share the best visibility we have and numbers that we're confident in delivering. Our guidance reflects both that increased precision and our confidence in the business. Before we open the line to questions, I want to say a few words about the transition that we announced today. Klaviyo has never been stronger than where we are today. There is significant opportunity ahead for us, strong momentum across the business, and a clear path to continue growing rapidly while expanding profitability. We also have an exceptional team in place, and I've always believed the right moment to take the next step is when the work is in great hands. A.B. and Chano, thank you for your partnership. Importantly, I'm not going anywhere just yet. I will remain CFO through August before transitioning into an advisory role through November. It has been a privilege to be a part of Klaviyo, and I'll be cheering this team on every step of the way. In closing, here's what we hope you will take away from Q1. We beat and raised. We expanded operating margin to the strongest level since our IPO. We returned $100 million to shareholders while continuing to invest in the platform. The businesses we serve grew, and their engagement with Klaviyo is deepening. This is exactly what our model is built to do, and AI is making all of it faster. We're confident in our trajectory. The platform is getting stronger and the results are following. And with that, we'll open the lineup for questions.

Thank you. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. We ask that you limit yourself to one question. When it is your turn, you will receive a message on your screen from the host allowing you to talk and then you will hear your name called. Please accept, unmute your audio and ask your question. We will wait one moment for the queue to form. Our first question is from Samad Samana from Jefferies. Please unmute your line and ask your question.

uh good evening and thanks for taking my question so i'm going to pack a two-parter into this so first maybe on the product side just as i think about composer adoption what are you seeing on customers that typically lead in new product adoption and maybe how do you expect that product to accelerate the ai adoption flywheel and just in case you mute me amanda great to work with you and continue to look forward to work with you until the transition but just i wanted to touch on that comment about guiding with more precision and just does that mean that the two cue guide should be closer to the pin we had a slightly smaller beat in one cue was that already a philosophy that started when you guided for one cue just help us maybe get better context in that statement as well thank you so much

Awesome, thanks for the question. I'll obviously take the composer one and I'll pass over to Matt on guidance. So yeah, we launched this private preview in March and we're very excited about the results we've seen so far. Then again, for context, our composer agent really combines the combination of a bunch of sub-agents that do various tasks. But you can think about the two big groupings as one, it'll actually do marketing creation. So it can create marketing campaigns, automations, templates, creative contents. And then two is it'll do analysis. It'll actually look at your customers, who they are, help you do cohorting, understand behaviors, as well as look back over previous marketing campaign performance to help you figure out what to do next. Um, so what's great is, uh, yeah, we've introduced it to kind of a range of customers. You know, some are more power users. Um, some of them are, you know, more, um, uh, you know, entrepreneurs that are just starting out so we can get a feel for their usage patterns. And, uh, I'll tell you like kind of universally, the feedback has been very, very positive. Um, you know, I talked about this as our, we talked about as our next generation agents building off of, uh, you know, the success of our marketing agent last fall, um, And what we've done, and we've talked about this in past quarters, we've dramatically expanded its scope. So you can think of this as really like, you know, kind of, I don't know, version two or N plus one of our agent. And the thing that I'll call out is we're getting very, very good at building marketing, creative and content that is on brand. This is both a function of what we've seen from the LLMs and, you know, some of the underlying technology improving, as well as just like technology that we've built, you know, at Klaviyo to better harness those agents and keep them in the direction that brands want them, right? So it actually, and we're at an unfair advantage, frankly, because we can teach our agent to pattern match off of past campaigns. So it's a little bit, so that actually makes it better at maintaining kind of brand in the field that you want. And then on the analytics side, I mean, we've seen just some incredible results. I think we have customers that are now running these kinds of daily or weekly reviews of the marketing they're doing or how their customers are behaving. And so far, we've only given them the ability to kind of run that ad hoc. So they have to log in and execute those kinds of queries. In the near future, it's not very hard to see that customers are just going to schedule these to run on demand to alert them of issues and then couple that with the creation or the creative part of our agents. you know, they'll be able to automatically take action. And in some cases, we expect our agent will just actually automatically, you know, decide to run new campaigns or make modifications for optimizations. And so we're very excited about that. I think, you know, the path also to hey, the value is very clear because obviously as we run incremental marketing campaigns, we make improvements, we can measure those results. Customers see it, they feel it, they're seeing the value. And I think the path to then like, hey, the pricing and packaging and monetization is also very clear. And that's something else that we're using this private preview to really work through. So never been more excited about like the intelligence and really the agent capabilities that we're gonna be able to build on top of the infrastructure that is Collegiate Marketing and Data platform. Amanda, I'll turn it over to you for guidance.

Thanks, Samad. And I'm going to look forward to staying in touch with you as well. On the question on guidance, we are closer to the pen this quarter by design. As we committed to you last quarter on the call, we spoke about guiding with greater precision and greater accuracy that comes with the benefits of that greater precision and greater accuracy that we see from scale. And so the tighter beat reflects that improved ability to forecast the business. If you take a step back and look at Q1, it was incredibly strong. We saw 28% revenue growth. We saw our highest operating margin since the time of the IPO. We had our first quarter of gap profitability as well. And we saw real strength in some of the core metrics of the business, like an NRR of 110%. and greater than 50K customers up 38%. So overall, an incredibly strong Q1 that gives us confidence looking forward and gave us confidence to raise that outlook for the rest of the year by 13 million, which is even greater than the beat that we had for Q1. So what you see in the guidance for the rest of the year reflects both of those. It reflects both our increased precision and it reflects the confidence and the momentum that we've got in the business.

Thank you. Our next question is from DJ Hines from Canaccord Genuity. Please unmute your line and ask your question.

Hey, thank you, guys. Amy, I'd love to hear how your agency partners are embracing the innovation that Klaviyo is delivering, right? I mean, on the one hand, you're giving them incredible, powerful tools to do their jobs better. On the other hand, if the autonomous vision takes shape, you're kind of putting them out of work. So how do you balance that dynamic and what are you hearing from those folks?

Yeah, well, I mentioned in our opening remarks, this kind of, you know, this capability, you know, overhang of like basically, you know, what you can do with Klaviyo and the infrastructure that we built is actually, there's a lot more there that our customers and businesses are not taking advantage of. And, you know, I think our agencies have always helped close that gap. I think now with our agents, and I'll touch on both Composer, which is sort of for optimizing, you know, how you understand your customers and marketing and the customer agent, which is, you know, more consumer facing. Agencies are accelerating the adoption of both. So as you talk about with Composer, I think it makes it easier to take advantage of everything you can do, you know, with Klaviyo, with all of the, you know, with the data and marketing and messaging, you know, primitives that we're giving you. um and agencies are actually able to take on more clients as a result because they're able to get more leverage as a result of composers so i've had many conversations where folks have said that they're they're actually changing their ratios of the kinds of products they can take on because of uh you know i mean clear as a product and it's just ease of use but especially now um because of like some of the uh you know agentic capabilities we're offering And then what's been great is I've talked to dozens of agencies where they're really establishing new practices around our customer agent. So just as a reminder, our customer agent is a whole new surface. We think about this as this is the digital representative for your business. It can do not just customer support, but can also help with sales conversations, marketing conversations. it can run the gamut. And because it's connected back to our data platform, it has a real-time view of who that end consumer is, that profile. It can do much better than more generic AI agents at actually matching up to what a consumer's looking for. And you'll see that show up in some of the stats that we talk about around product recommendations. Now, the reality is, as we talk about driving adoption to that, well, it's growing very fast. Services are our fastest-growing product line. The reality is, is that setting up agents is something that just not a lot of customers have expertise around. So we're both building product around that. We're actually we've built a whole number of agents that will train up agents. But the reality is, is like when we go talk to businesses, they'll say, OK, well, there's some nuance to maybe like how I want to solve some of these or how I want these experiences to work or how I operate my business. those agencies are helping us bridge the gap and drive adoption. And so we're actually very excited. We've done a bunch of work to help them set up their own practices so that they can set up customer agents for our customers and help drive adoption. So I think our agency network is in great shape. And I think they're excited to help usher in both of our agents to our almost 200,000 customers. Yep.

Hey, DJ, this is Chano speaking. Hope you're well. Just to give you an example, I talked to one of our agency partners that is building a custom order editing scale connected via an API that is handling the full post-purchase experience without a human agent, you know, without a human basically in the loop. So, you know, that's all created, you know, significant automation and increased productivity for them. So we're all very excited.

Thank you. Our next question is from Rob Oliver from Baird. Please unmute your line and ask your question.

Great. Thank you. Can you guys hear me okay? We got you. Okay, great. Thanks. First of all, Amanda, wish you all the best and it's been a pleasure working with you. My question is for Chano. Chano, just I guess coming into this year, a lot of excitement around the enterprise opportunity, moving up market, legacy replacements. You guys called out, I think, at least one really large win in the quarter. I would love to hear some color from you on what you're seeing within that install base situation. How are sales cycles? How was the legacy replacement opportunity relative to kind of where it was when we all gathered last fall in Boston? And then any update on partner contribution would also be helpful. Thank you all very much.

Thank you so much, Rob, for your question. I mean, first, maybe the data, right? I mean, we called, you know, we doubled the number of customers over 1 million ARR, basically that last year, also the end of Q1. Truly, you know, Amanda commented on the number of customers over 50K. Obviously, you know, they're becoming now 38% year on year. You know, we talked to them on the expansion of, you know, customers doing with us more than 6 million ARR. And we talked with other customers, examples like Patagonia, you know, that has been a long-term email customer from us now adding ARR. Just because they see that fragmentation that I've been pulling and they see the value of that unified platform in terms of bringing customer experiences together. So I think that all presents a really terrific opportunity for us. I would say that we, you know, even with this growth race beginning of the year is very exciting because of course, we're playing more into the enterprise. You know, Rob, that this will be playing more towards largest quarters, especially, you know, end of the year and Q4 being much bigger and much larger. And of course, what I think, you know, the team is doing a very good job is to put the focus on the discipline, right? The focus is around what we're doing on product and the investments that we're doing on go-to-market and in terms of bringing the results. I think that the discipline is about clearly how we are building the pipeline and how we're doing especially qualification on deals. I'm getting much more meaningful in terms of the enterprise cadences, right? So if you would say, how do you feel about the opportunity basis? We will talk back in the autumn. I would say I still even more, much more excited that I was in the autumn because I can see that tangible. Of course, I will tell you, yes, we're on the on the early innings of that opportunity, and we have a lot of work to do ahead of us, but the opportunity is just massive, right? So this can be by itself a really significant reacceleration engine for Claibillo, and that's how I see it. It's not going to pan out in one quarter. I don't think it's going to pan out in the in, you know, in two quarters. But we were seeking seeing kind of these growth levels. I would say that would be on your shoes kind of from a modeling perspective that will have significant impact on the road. And that is not too far away. Right. And clearly, as we're creating those customer cases and experiences, again, that brings much more confidence that we're a player. In terms of the partners, as you know, we announced Accenture, and we are working with them pretty closely, of course, with other partners as well, but on a clear target list, you know, with clear activities and clear progress. So I'm expecting that we will see some of those wins coming during the course of the next few months, clearly on some of the wins that I have already announced. there has been support from some of these partners, either because they influenced the deal or they sourced the deal either or, you know, it's good for us. So very excited about the enterprise being a game changer for this company. Of course, we want to keep the healthy business of, you know, our core bread and butter, you know, in terms of the entrepreneur and SMB and lower business that is doing very well. If you look kind of the increase in net new levels overall and the dynamics that we have in that segment.

Thank you. Our next question is from Reimer Lenschau from Barclays. Please unmute your line and ask your question.

Thank you. All the best from me as well, Amanda. The question I had, like, I had a good few people asking me about the fee that you mentioned. I think some of your competitors kind of altered that. Did that happen? Can you talk a little bit about the impact it would have on potential revenue but also profitability? Thank you.

Sure. Thanks so much, Raimo. So what these are are carrier fees. And when you are in the text messaging business, there are carrier fees that come to you from the big telco carriers that get charged that generally for many of our competitors are a pass-through. Now, our primary operating principle is we are trying to operate with our customers with consistency and transparency and trust. And we're helping to make their business more predictable. And so thus far, we have taken the strategic choice not to pass through those carrier fees. Now, some of them, they vary by carrier, so it's been building over the course of, I'd say, the last year or so, with some of these announcements coming even as recently as last week. But we wanted to, again, have that predictability for our customers. Now, it certainly helps in price, and Shano is leaning in, as he said, and the team on how we show our customers that value. But as we've said before, the reason that we win is not only because of price, it's primarily because of the value that we create for customers and the benefits that come to them from consolidation. Now, as these grow, we're going to keep making thoughtful choices there over time. So I won't say that we'll continue to pass them on forever, but we're going to be really strong and choiceful and intentional about how and when and in what manner we do that. And that intention is built into the outlook for the back half of the year, both the increasing penetration of the text messaging business, as well as this choice that we're making on carrier fees.

Thank you, our next question is from Terry Tillman from tourist securities please unmute your line and ask your question. Harry if you can hear us please unmute your line and ask your question.

Okay, great if Terry if you want to hop back in the queue, we can move on to the next question will pull you up and you're able to log in.

Thank you. Our next question is from Nick Altman from BDIG. Please unmute your line and ask your question.

Hey, awesome. Thank you so much. AB, one of the value propositions of Composer is just around the velocity of campaigns. And so how should we think about the monetization of Composer from a standalone SKU perspective versus Composer allowing customers to accelerate their email and messaging volumes. And then the follow-up question to that is, does that sort of play into your decision to not pass through the SMS carrier fees? Thank you.

Sure. Great. Thanks. So when we think about Composer, I mean, ultimately we're selling or we're providing is intelligence. And obviously that's in the form factor of tokens. So what we're finding is that customers, to go back to some of the examples that we've had, is customers are, for instance, using this to review who their customers are, the state of their marketing, and then using that to figure out what to do next. And we're finding that those like sessions, right, you know, those kinds of reviews they're doing are incredibly valuable. I mean, they're generating, you know, thousands, hundreds of thousands of dollars in incremental revenue and sales. And so the pricing that people get is it's actually pretty similar to, you know, if you were to hire somebody. or how you value your own time. And we're just able to do that. We're able to provide that intelligence through tokens, obviously, and it's just much more efficient. And we can go much deeper because our agents have access to some internal benchmarks and best practices that aren't publicly available. So what that's doing is that intelligence, we look at it as an entirely new revenue stream. We think about the activities that people are doing in and around Klaviyo. So obviously, we're storing information. People log into Klaviyo to understand, who their customers are, different cohorts, behavioral trends. They're using it to actually create marketing. They're using it to then review that marketing. So we think that's just an entirely new revenue stream. In terms of the impact that's having on just overall platform usage, like the actual usage of our infrastructure, Yeah, we're seeing that drive incremental use. One stat for us is we've opened up the underlying infrastructure that is Klaviyo to third-party agents or LLM clients like Chachapiti and Claude and Gemini. We're finding the folks that have integrated MCP and are our best users, I mean, they're doing 16% more marketing, more campaigns, more automations, querying into their data more frequently. And we think this is actually kind of like the easy version of that trend because it still requires people to use those tools and prompt on their own. You know, what we think is going to happen with our agent is you're going to be able to set it either in like sort of, you know, synchronous mode where you're chatting with it or having a conversation with it. You know, it's on Klaviyo or other platforms, but you can also just set it, you know, on sort of this like, hey, run every day, right? Asynchronous or recurring mode. And we think that will drive even more usage. So go back to this, like, there's just a lot of latent opportunity out there to do better marketing, deliver better customer experiences. And Composer is literally the conduit by which we're going to do that. And I think people see that it's like, okay, that's very valuable, you know, and they're willing to pay for it. And I do think it'll have this halo effect of really in two dimensions. One is I think it'll increase messaging volume because messaging will be just better, right? The creative, the content, the personalization will be better. And then two is, you know, Klaviyo is always indexed on the number of consumer relationships a business has. And one of the things that we look at is, well, how do you help a business grow more of those relationships and make sure that they're higher quality? And obviously, like, you know, if a marketer or a business owner or somebody that owns the customer experience is strapped for time, like there's there we've seen it. There are cohorts of consumers that they're just not able to deliver the right experience to because they just run out of capacity, right, of their own, like human time to, you know, to work on that. You know, agents don't have that problem. I mean, they can tirelessly work towards that to optimize for every single one of those consumers. So we actually think that the number of consumer relationships business has are also going to grow as a result. You'll get less churn. So, you know, you think about like in the worst case, it's like, you know, say unwanted, right? Marketing messaging or just marketing messaging that doesn't resonate and people unsubscribe. We actually think that will go down because the quality will go up. So those are some of the halo effects that we think we'll see, you know, beyond just directly monetizing Composer.

And I would think of, you know, to the second half of your question of carrier fees is very distinct from this. As we just talked about before, carrier fees are about this choice and the balance that we're making between the two priorities of customer predictability and trust and maintaining our overall margins. And if you look at our gross margins for Q1, you can see that compared to last year, we absorbed the carrier fees. We saw significant growth in our text messaging business and And we were able to hold our gross margins relatively steady, which I think shows our ability to deliver on both of those priorities at once. As we think about the priorities for the back half of the year, it's about growing our gross profit dollars and continuing to grow that revenue and gross profit dollars while expanding our operating margin. And that is exactly what we're doing. You know, as we committed to at the beginning of the year, we're committed to increasing our operating margins by at least a point this year. And we not only raised our operating income dollars, but also our operating margin in our guidance this year on the reflection of that strength that we're seeing in the business.

And I wouldn't take that the not passing through the carrier fees is basically, you know, as we say, it's an intentional decision on being customer first, but I wouldn't take it like if and when we decide to do that and what will be intentional and when is the right moment. that we're basically winning because we are not doing that, because clearly we are winning because of the value of our offering and they comply, you know, the full unified basically data platform that we offer. And certainly we are going to be value-based pricing down the road. the aim of this team to be competing on pricing. But I thought that the vision, you know, was important, particularly now to provide some stability on pricing to our customers. You know, potentially reflects as well, you know, the highest customer satisfaction that we've been highlighted as a strong performing of the Forrester Wave. And I think we all know that happy customers basically, you know, renew and buy more from you.

Thank you. Our next question is from Suti Panigrahi from Mizuho. Please unmute your line and ask your question.

Great. Can you hear me? We've got you. Yes, please go ahead. OK, great. Amanda, it's a pleasure working with you. Wish you good luck. And then I want to dig into the NRR. That's 110% up 2.0 year-over-year, but flat sequentially. In prior calls, you talked about key drivers like core email, SMS usage, and then cross-sell and profile enforcement. And as the profile enforcement benefit already lapsed, So what keeps NRR at this or above this level? What are the next driver you think that will push NRR higher in the backup of this year?

Thank you, Siddy. It's a great question. And the largest driver of NRR is customer behavior and the way that customers are leaning into Klaviyo to automate more, to send more, to use increasingly our flows, which generate 10 times more revenue per message compared to a static campaign. And as customers see that value, they're leaning in and they're using Klaviyo more. So, you know, if you break down NRR into its pieces and take a step back, the first and largest driver is expansion of customers' usage of our existing products. And that's where when they see that strong ROI and that strong return, they increase their usage. And that, in fact, is contributing positively to NRR. The second driver is cross-sell, and we have increasing and strong momentum in our cross-sell as well. Customers see and understand the value of consolidating onto a single platform and the way it drives not only simplification from a business standpoint, but importantly, makes for a better customer journey and drives better relationships. And then there is a little bit in NRR on lapping of the price increase, the profile enforcement from last year. And so as you think about it over the course of this year, you'll see some impact from that lapping of profile enforcement, but then you'll also see contribution coming in a positive sense from the improvements that we're seeing in expansion and in cross-sell.

Thank you. Our next question is from Callie Valenti from Goldman Sachs. Please unmute your line and ask your question.

Hey, thank you for taking my question. I understand that the lighter beat was by design, but I think the sequential growth in the first quarter was still a bit lighter versus prior first quarter. So I wanted to ask, just given Klaviyo has outsized exposure to retail and e-commerce, is this potentially a result of the business becoming more seasonal over time as it scales, or is there a better way to think about that? Thank you.

I think, Callie, it's maybe a little bit actually the inverse. We're seeing because we have gone to profile enforcement, we still do see seasonality because Q4 is our customer's biggest time of the year, and we are there for them, and they are counting on us to drive their revenue. But with profile enforcement, we see a little bit less seasonality there than we have in the past. It's primarily coming from our text messaging business and then some expansion there in email. I will say that, you know, in Q1, what we saw was just, you know, strength across many different parts of the business. We saw strength in our international business where it's growing, you know, 39% year on year. We're seeing growth. increasing, you know, momentum in our enterprise business. And those enterprise businesses, again, tend to be steadier multi-year contracts. A great example of a multi-year contract that was a big win for us this quarter, for instance, is All Saints who signed a three-year contract. And those are going to tend to be less variable across the year. So, you know, it's all of these different areas of strength that we're seeing in the business that contribute to a great Q1 and then also a strong outlook for the year.

Thank you. Our final question is from Scott Berg from Needham and Company. Please unmute your line and ask your question.

Hi, everyone. Thanks for taking my question. Nice quarter here. I want to ask a question about the state of marketing budgets overall and from what you've seen with customers through an interesting lens since you sell to lots of different sized customers. Your results talk about a marketing space that seems to be on fire right now, at least from a demand perspective, especially relative to the rest of our enterprise software companies that are growing, we'll call it 40% or 50% slower than what Klaviyo is growing right now. You know, I guess the question is why, I guess what's in the environment that's actually driving the spend or what are you seeing that has customers standing up, raising their hands saying, I've got to do this now and I've got to do it in a pretty big way.

Yeah, thanks, Scott. I'm happy to take that. And Sean and I have some color on some specific customer examples. But I can give you three trends I think we're seeing. So the first is because, unlike most software, enterprise software, we're focused on revenue generation. I mean, there's sort of an insatiable appetite for if you can help grow top line, grow profits, people want to spend more. And we see that constantly. The second I'll say is just around consolidation. And that's both within marketing, but then across also marketing, our data and analytics products are now our service products, customer hub on the website. You know, we're finding that people want to merge those budgets together. And it's not actually for like, you know, I mean, there's probably some total cost of ownership arguments there, but it's not to reduce costs. It's because they're finding that when you combine the data that we have with those marketing channels, you can get better performance. And that's making a big difference. So I think those are the trends that I think we would think are very evergreen, very durable. And they're definitely, I mean, they're big contributors to our growth. And obviously we're going to overlay on top of that then. I think there's a lot of demand. I mean, just speaking from what we're seeing from Composer, there's a lot of demand for then intelligence applied to this combined B2C, CRM infrastructure that we offer. Because people get that there's a lot of ideas that they can't see or projects they can't execute on. And they then want to use that as a way to efficiently execute those and then obviously drive and create profitability and increase revenues.

Yeah, I would only add that, you know, personalization as well. And, you know, the basically breadth of understanding that we provide out of those customer profiles and communicating with them at the right time, through the right channel, with the right message is really powerful in our platform. And they're leveraging that and they're seeing the results through Klaviyo Tribute Revenue. Again, we've more than doubled than the rest of the market in terms of our customer revenues through GMB. And then I would say the other trend is this productivity increase that we are providing in terms of the opportunity to do much more with less, a bit less headcount driven, but clearly the opportunity to create those campaigns on targets and at the same time, you know, have those customer agents that can communicate and, you know, and put a great face to their business with their customers is, you know, terrific capabilities that they're leveraging on. So I think it's, you know, the increased revenue impact on ROI that they're seeing, plus this technology shift that we are seeing and where Cleville is certainly at the center of, that is what is driving it.

Excellent. Thanks for taking my question.

Thank you. This concludes today's call. Thank you for joining us. You may now disconnect.