Klaviyo Stock

All right. We're going to go ahead and get started. Very grateful to have Chano from Klaviyo here to present today. Thank you so much for coming.

Thank you so much for having me.

Yes. So let's get started. Foundation models are improving very quickly. External agents keep kind of increasingly querying enterprise systems. How do you think about the winning architecture? Keeping an agent may be more inside the Klaviyo's ecosystem versus where it makes sense for Klaviyo to kind of interact behind someone else's interface if that makes sense?

Yes. That's a great question. Clearly, one of Klaviyo's differentiators is the architecture and the infrastructure that we've been working on for the last 14 years. And clearly that was really the ability to storage and index real-time data in very high volumes, like today, we're managing over 100 million in 20 minutes personalized ones is quite impressive. So as philosophy we're completely open. So we really want to meet the customer where they are. So we're being -- I think we're the ones having the most MCPs out there in terms of connectors, potentially not just in our industry, but I would say even broader. And we're going to continue to remain kind of that open philosophy.

So obviously, we will keep working. It doesn't matter if it is with the general models or the Shopifies this world as a partner in order to make it easier for you to interact with Klaviyo wherever you are. Clearly, and obviously, we understand that the opportunity that, that opens in terms of top of the funnel, but at the same time, the data that we capture in terms of the profile enrichment that we bring back through those interactions is quite high value added for us. And we make it easier for our customers to deliver more ROI and more Klaviyo attributed value. So that's what we're focused on.

And then you joined Klaviyo after scaling other kind of enterprise software go-to-market motions. What's kind of been that biggest gap between where you see Klaviyo today and where they traditionally been focused on that like SMB segment and kind of more enterprise company you believe that you can become over time?

Yes. I mean I have no doubt we are becoming and we will become. Today, if you ask me what is the biggest gap is mind share because when I look at our company, I talk a little bit about our infrastructure and our differentiation there in terms of the volumes and what we can manage. We certainly have a good value proposition point of view for enterprise, especially in the case of enterprise customers are looking today for that consolidation and bringing many different and separate stitching systems into just single one in terms of managing the whole CRM process, and we're the autonomous B2C CRM company.

So clearly, it's the mind share. How do you overcome that mind share is more a question of winning more customers and making those referenceable. And we're in that process. But if you look in terms of the progress we've done, when you look at it from a pipeline perspective and resource perspective, many more customers, over $500,000 and $1 million, that is -- those are really outpacing the rest of the business. We clearly have the people in terms from a go-to-market perspective that know how to do enterprise. We're making good progress with the typical things that you need to do beyond product kind of analyst relations and partners and so on and so forth. It's clearly going to be a journey, but I like what I see in terms of outcomes, which are tangible today. And certainly, Klaviyo will be a much more enterprise company during the course of the next few months and next year.

And do you think AI has acted maybe as a bit of an accelerate to kind of make enterprise customers want to rethink their tech stacks in some degree and kind of helped you win more share there? Or is it more just sound like efforts you've made over the past couple of years kind of compounding?

That definitely has accelerated, but I think it has accelerated because, again, the enterprise companies have seen that in order to provide consistent personalized experiences at scale, they need one single system that is able to manage through their marketing and their service, but at the same time, connect to kind of their data platform and the CDP and kind of understanding those profiles on how you deliver fully personalized experiences. Like if someone is having a problem with service, you're sending a promo 10 minutes after in terms of a campaign because that's not a good experience for our customers. And clearly, we are tremendously well positioned to do that.

So I think the teams are doing a much better job in terms of combining the message, but at the same time, showing referenceable customers. So that's accelerating, right? Today, we're still publishing more and talking about customers over $50,000 that's basically growing our business at a clip of 36%. So that is definitely growth accretive to the rest of the business today. That is overall growing at 26%. But obviously, I'm expecting you will hear us talking much larger customers kind of segments and so during the course of the next few months.

And then you've said 2/3 of customers are using your AI model or you're using models in some form, but that agent adoption is still pretty early within the platform. What's kind of that factor between broad model usage and kind of getting that paid agent usage up?

Yes, it's a great question. We -- what we're focusing right now is on usage and adoption, right? And we communicated that we have 2 main agents, right, for -- I think most of the people here are familiar, but just in case, right? One is what we call Composer, which is more a customer -- basically a marketing agent. So we've done mainly 2 things, right? One is, it creates campaigns from scratch. So it's overcome some of the challenges that customers have either among ideas constraints or resource constraint, right? I mean it doesn't matter if you are kind of a smaller company or a large company. And the second one is more the service agent, where we call it the Customer Agent. And clearly, these 2 have been more launched during the last few months, and we're very much focused right now on adoption, right?

So how that adoption is going? As I said, on the Composer side, 1 month after releasing it, we have 95,000 users testing it, 25% of those repeatable. On the Customer Agent side, we've been seeing -- it's kind of a couple of quarters now, and we've been seeing increase on 40% quarter-on-quarter kind of that usage, and we are now in resolution rate of 80% at a customer that went -- very large [indiscernible] customer that went from a 52% resolution rate to 79%. We call it resolution rate because that's the way kind of we measure it and it's the ability to basically resolve your case when you're interacting. Think about a Customer Agent as the customer self representative of the business.

And then I think a lot of times in software, we'll see a new product start in that SMB segment and kind of go up market from there. So I think one of the more surprising comments you've made about Composer Agent is that maybe some adoption has started out stronger in those enterprise customers. So curious like why are you seeing that agent provide more valuable as marketing organizations get larger, more sophisticated?

Yes. Good question. We said that, again, on the initial data that we released, and we will be releasing much more as we keep making progress and of course, just moving forward. I mean we talk like 27% of our Composer users are enterprise customers. If you think about those customers are more complex. So for example, when it comes when they state flows, think about flows kind of automated triggers in terms of actions. Just the ability to audit those flows and compare what you set up towards kind of best benchmarks in terms of producing ROI and what those look like, that is really handy. Even if I'm -- I don't know, a beauty customer today, I'm thinking about one of our enterprise customers want to go to the U.K., want to set up what should be the right segment for kind of my audience here and I want to do it through WhatsApp. I have never done that before, which should be the right way to set those flows? Then Composer becomes pretty handy in terms of the ones that should be more producing. So that is one of the main things.

The second thing is, as I said before, even large companies that they have their campaign kind of calendars and that they want to sent out there, they run out of ideas sometimes in terms of where they should be sending, to whom and what should be the right channel and the right personalization and what should I be expecting on performance. So Composer will be helping up with that as well in terms of helping them to generate and create new ideas.

And then historically, customer service software is focused very much on resolving tickets. And it seems like with Customer Agent, it is increasingly being positioned as something that is both kind of a service and a sales asset in some ways. So what side of that equation do you think will ultimately become more important over time? And how do you think about that almost like use case consolidation?

Yes. What a great question. I think both of them are going to be relevant. So let me -- for example, we have a customer, Boston Proper out of Boston. And they saw kind of while they were deflecting 50% of their cases, they were getting 3x more ROI after basically a month of Customer Agent because, again, marketing and service becomes a little bit more coming together. So we are -- the understanding that we are getting in terms of what you're asking about and the challenges you're having or you're facing if you're facing challenges, proactively giving an intel on where should we be targeting to you on kind of marketing. So I think both are going to be tremendously relevant.

I think that clearly, the service use cases in terms of how this and supporting and resolving tickets is a much more established use case. It's a much more one that customers are very easy to measure and very easy to understand. And I think when it comes to the revenue generation, it is the ones that we are working with them in terms of seeing some of the use cases where there might be opportunities. So I think both are going to be relevant. I believe the support, ticketing, customer service one is going to be the one that is going to be landing first. But clearly, the revenue generation side because our main kind of stakeholder is marketing is a very interesting one to them.

And then a bit of a bigger picture question. But if AI kind of works out the way that you and the company expect, how do you think about the role of the market kind of changing over the next 5 years? And what skills become more important, less important, and how that translates to how they're using the Klaviyo product?

Yes. I think marketers are going to become more strategies and they're going to become more editors. When I say that is you're going to be getting some of these precooked campaigns or prebuilt campaigns. And you know what good looks like is like you see that campaign as a CMO or someone that has to send it out and say this really understand my brand voice, understand my message and understand my segments and my audiences and is almost ready to go with little fine-tunings that we should make. But of course, there will always be done kind of -- this buying is kind of this emotional experience sometimes and this creativity one, where you're going to have to put some of that on top of, and that is where I believe you are an editor, right? And the strategy is clearly the way that many of us are interacting today more with general models in a different way, kind of working on a symbiotic and collaboration way. That's how we're going to be seeing kind of working with the Composer and the creation of these campaigns going forward, editors and strategies.

And then you've made several changes to the leadership team, have had talked about kind of refining qualification, pipeline management and kind of the enterprise execution of the company in general. At this point, like what do you think is different about the go-to-market organization versus where you guys were at 2 years ago? And what does that mean for the company going forward?

We have much more discipline. We have much more rigor. We have higher win rates. We have better pipeline than we have before, especially all that is more impacting the enterprise, to be honest. Than our PLG motion. But again, it's just general insurance. So we have kind of the talent that is ready to win and is already proving that. So I feel much more comfortable than I felt 6 months ago. I am quite confident. I feel much more comfortable 6 months [ today ] than I felt today. And the main reason for that is because we're going to continue on the journey of winning and making more customer referenceables into the enterprise, and that will create the flywheel, right? I've seen that before. And again, you can call me an old enterprise guy, I can tell you that works, and it will keep working.

So historically, you talked about this before, Klaviyo has been viewed as a more SMB platform. But is there a point in that sales kind of process where you see a customer kind of flip in their head to viewing you more as an enterprise platform? And where you kind of go from having to maybe vigorously prove yourself in that conversation to them kind of being more receptive to adopting the Klaviyo products?

I'll tell you, when I talk to enterprise customers, what they're looking for, right, more than if there is a turning point or many of the challenges when I said I talked a little bit before is like they have a disjointed view of the -- well, first to know, I want to understand Callie much better. I have a disjointed view of Callie because it's -- they do many different kind of data sources and different profiles. So it's hard for me to apply intel, and we should be proposing Callie or creating a better relationship and a higher engagement with her. So kind of those are the typical use cases. Of course, it goes beyond later on with the personalization.

But then when you get into the personalization, how do I get from there kind of more automation and optimization, which I think what brands are going to be moving to once I had a good understanding of how to establish a very healthy relationship with you. So that usually requires a one single kind of source system that is able to manage through the different use cases.

We're very embedded on those use cases and on those workflows. And again, we have the ability to bring it back to our infrastructure and keep enriching kind of that experiencing and creating better experiences that if that all becomes true, it is reflected on higher ROI, on higher Klaviyo attributed value. And we have a good measurement to track that basically to the social data in terms of what are the things that we should be fine-tuning and changing in terms of producing better outcomes for you, right? So that's -- yes, that's a beautiful platform to work out to. Those are the difficult discussions that we have with enterprise customers.

And so you're highlighting the value of Klaviyo's real-time infrastructure, those unified customer profiles. When you do have an enterprise customer that chooses a competitor instead or just chooses to stick with their existing stack, what's the kind of argument that they're kind of going to most that resonates most with those buyers? And how do you kind of work on changing that over time?

Yes. That's a great question. I mean, well, first of all, I love this market because it's very dynamic, right? Meaning like when -- I've been talking about this publicly, but where I come from, where I mean that dynamic is like many of these enterprise customers are going to market every 2 to 3 years, so presentation ratios are 40%, maybe 35% high. So that's great when you are the underdog and you don't have basically anything to lose, right? But when that happens and you don't win, [indiscernible] you may not win, sometimes it's again, you are not yet there on their mind share like, oh, you are not yet a truly enterprise player. And of course, sometimes perception becomes reality, but you don't need to underestimate that perception because again, it's what you usually overcome in terms of before you kind of get there.

So -- but many times, it's like it's comfort, like I've been working with this basically player before. And even if it is -- maybe it's not great, but maybe it's good enough. And I know that I'd rather stay with devil I have to devil I don't know yet, whatever you want to say it that way, right? So sometimes it's comfort, sometimes it's basically some personal relationships. Usually, when we win, we win, as I said before, on the value of the real-time kind of unified platform, the value of the infrastructure. We win on kind of ease of use. We win on scale, and we win as well in terms of making it very easy without any kind of technical resources and implementations and TCO, and clearly, attribution, right?

We -- when I say attribution, it's basically, again, because we had the CDP, because we had the full engagement management platform, the ability to track kind of you did this with us in terms of this segmentation, this campaign, this promotion, and this is the value that you derive in terms of GMV and ROI, that is powerful, right? So that's usually the one we're winning.

Yes. When customers usually start with e-mail, maybe add SMS and then adopt maybe analytics service after that, where does that kind of expansion sequence breakdown today? And what are you kind of changing to make multiproduct adoption more repeatable and potentially drive NRR kind of up going forward?

Yes. Good question. First thing is, one -- when you look at one of our nice growth levers today, and we see it going forward is this multiproduct adoption because we've been launching -- I mean, for many years, we've been more an e-mail company, then we came with text and now lately either because of the agents or KSocial or some of other products or analytics products and some more things that we'll be announcing, we're becoming much more of a multiproduct customer -- sorry, a player. So that is a very, very healthy clip with us, right? As you go more into the enterprise, I think you're going to be -- we will be landing a little bit with more than one just single product, maybe 2 to 3 products to start with, right? If we get into better motion and better repeatability and the customers understand the value of why more, we will go on a larger land. But I think that will take a little bit of timing, right?

So I believe, yes, over time, you're going to see us landing larger, especially for the enterprise customers, but you're going to see us kind of going back to our PLG motion that many times we will start with e-mail and kind of upgrade with text as a typical follow-up. And again, that has great unit economics for us because it's very easy, kind of the customer acquisition costs are very low over there and the kind of the business dynamics are pretty good. And then we said like when we have these multiproduct customers, they stay with us longer, starting with, of course, 6 points more on ARR that we've been commenting on multiproduct customers. Of course, that impacts as well the NRR at the end of the day.

And then you said service spend could be maybe as large of a market opportunity as marketing spend for some of your customers. What kind of has to change in that product maturity and go-to-market execution for that to be more visible in the model? And you kind of spoke about this earlier when you talked about marketing being kind of that main buyer right now still. Do you think there's a future where you would -- there's actually multiple personas, maybe service is one of them that are kind of reflective of your main buyer?

Yes. We're starting going more to the service buyer, but of course, marketing is our natural landing spot and where we definitely have the trust. How do you build that trust with them more of the service buyers, again, proving yourself, right? So the first thing that needs to start changing and easy start changing is kind of you have a much more product maturity as we've been saying when we launch customer service, it becomes, I'd say, a much more mature product not that long ago, a couple of months ago when we have things like multi-language and we have things like customers and skills, and we became really helpless in terms of having many more APIs and we became profile enrichment in terms of the things that we were learning from customers' interactions we were bringing in the profile with marketing.

And of course, we keep improving that product. So that was at the point that I considered a couple of months ago that this product is becoming more mature. That is at the point as well we've been having to start, always start to have more conversations with large customers in terms of agreeing on some proof of concepts and some use cases and see if we can perform better kind of their solution that they already have in-house, things like, again, in a simple way, I would say like let me prove you with the conversations that you're having that we can get higher resolutions. You let us work a couple of weeks on it. And kind of -- those are some of the motions that were going on.

So I think that product maturity, that product improvement, call it, at the end of the day, getting to a much better product market fit and as well proving ourselves a little bit more up at scale in terms of the market is some of the things that needs to happen for service becoming a significant business as large as marketing or who knows, even larger? I don't know. Time will tell.

And then as you guys look at expanding your product portfolio, other kind of verticals within horizontal software, they are kind of doing the same thing. And so as you're seeing enterprise customers within that backdrop increasingly talk about reducing the number of systems they have to manage, do you see AI as an accelerant for consolidation because that context becomes more important? Or does it create more room for specialized tools? And how do you think about the ultimate winners in that scenario when everyone kind of is trying to expand their footprint?

Yes. Frankly, I see the ultimate winners in that scenario, the ones that have the right infrastructure to the right data understanding in terms of managing not just the scale, but being able to get much better understanding of who are the customers I am liaising with and being able to provide better experiences. I believe we are really well basically placed there, and we're proving that one.

I like -- what we're seeing in terms of the AI and the LLMs, we're seeing, and we've said it, right, like the highest user of NCPs, they use our platform more. We're saying like 16% more. But as we also look into a world where we're ourselves are going to have much more agents interacting on our behalf in terms of either looking for opportunities, promos or options for us in terms -- and comparing, e-mail is a phenomenal channel because it's the cheapest one. When you have kind of agents interesting on your behalf, you can consume many more e-mails because you are not bothered like I need to read this other one. But if you can explore many more places to look for much more offerings and give me the better deal, why not?

So what we see is that is going to produce a tailwind of interactions. And again, with channels like e-mail being the most efficient and cheapest one and me not being back as a human kind of the one to going through all of those, but being my agents doing on my behalf potentially for finding me the best answer and the best outcome on the other end, why not, right? So that's what we see.

And we will be opening it up for maybe a couple of questions at some point, so if anyone wants to start thinking about potential questions to ask, please do. Wanted to ask, so KSocial kind of bring social conversations and identity signals into your consumer profiles. Do you view this as more of a just larger opportunity with another outbound channel? Or do you think that you could use social engagement to kind of improve Klaviyo's data and view of consumers in general for your customers?

Yes. Great question. As we do -- what we see social is -- so what KSocial does is helping customers to increase their profile space, so reaching out to more people. And the other way that I see, it's helping them to create much more targeted content. Again, if I can understand where my user base, not only as a profile kind of keep me consent and starting to engage with them, sometimes the social channels well understand what are they talking about or what are they -- their preferred content and how I can fine-tune that one for later on kind of flows or automated campaigns, that is great for me, right?

So right now, mostly, we're seeing it more in some of our more PLG motion and some of our SMB customers, again because they are much more focused on increasing kind of their number of profiles, right? It is much more basically an upsell motion today, but we're starting to see some of the large customers as well, both on profile, but especially on content start to taking on to KSocial.

Anyone in the audience have any questions?

What do you think -- how do you see smaller brands emerging in the next year or so of what they are not able to do today and what they could be achieving in a year, especially with your company's help? Do you have any vision for that?

Yes, what a great question. Yes. Well, the first thing is like if you see we've been adding a lot of new logos is because, I mean, we've never seen so many entrepreneurs like today, right? And what we are expecting to see is like many of those will grow with us, of course, some others potentially will not make it that successfully, right? Even though Klaviyo has traditionally been very easy to use, things like, again, Composer kind of think about the ability to create campaigns. So if I'm going to be a small brand, if you're giving me the opportunity, a, to even onboard much easier because it's just almost like just interacting with the solution even very soon with voice in the way of setting up my flows or setting on my forms or my campaigns, that makes the first barrier to make it even easier, right?

The second thing is if I'm constrained because I cannot have marketing people supporting on doing more campaigns per week, I would like to do 2, but maybe I can do because those are my constrained resources, then I can see that they would benefit from things like Composer, right? And then they leave and the constraint or I don't have enough ideas on what to do. And again, Composer will be helping out there, right? So I think we're going to help smaller brands to become some of them really big brands in a very efficient way from a cost perspective and kind of overall kind of human force perspective, if you want to think it that way, right? And then, of course, with things like KSocial that I just mentioned then helping me as a small brand to acquire profiles because that is, again, I want to grow my business, start by me thinking what are healthy profiles that could be acquired. And if you can help me out to make that, right?

So I think we -- again, that's why I say like -- and thinking about all this, we talk a lot about this personalization in terms of, a, sending the right message to the right audience at the right time by the right channel, and that matters a lot. But I think as well then the optimization and automation that may come with some of these tools for smaller brands, yes, we're going to see really big businesses with real people, right? And we see some of those today, right? We see some of those today.

The question I have, thank you for those comments, but it's actually related to that. Can you just talk about the competitive landscape, like who else is out there? With -- especially now with AI coming through, can people actually do this on their own and just your thoughts on that?

Yes. Depending on what we call people could do on their own. I mean the whole kind of -- I don't think like the commodity of the deliverability, but they can have kind of infrastructure in real time. And when I talk about the data mode and the ability at which we ingest and store data at scale, and I even mentioned this 100 million messages in 20 minutes, no, you can't, right? You can't. I mean that will -- it not requires a huge investment, but will require -- it took us like 14 years to build, I don't know, but it's definitely not something that you can, right?

In terms of the competitive landscape, we've not seen much change in the last year, right? Clearly, as we go more into the enterprise, like before, we will be seeing players like Braze much more than we used to see before. But that is more a motion of us going into areas that -- or parties that we were not invited before or we were not part of. So that's most likely just if anything will accelerate and will accentuate more than any other thing. But no other kind of callouts in terms of significant competitive dynamics change.

Other than maybe the one you see at the more of the smaller of the market in terms of the Intuit Mailchimp, right? And some of those basically customers that will be looking potentially for more product innovation. And moving forward into the future, as many of those kind of look for other new solutions during the course of the next few months or right now, yes, that is happening. Can Klaviyo be a beneficiary of those? Yes, it is already potentially being and certainly will be and there will be others as well.

Right. I'll take the reins back then. So 2 things are kind of -- 2 dynamics you guys have talked about more recently are, one, like newer products like Composer are not kind of fully reflected in guidance at this point. Management has also talked about growth deceleration hopefully stabilizing over the next couple of quarters. And I think that's baked into guidance at this point as well. What kind of evidence would give you confidence that some of the newer product S curves could maybe drive reacceleration rather than simply acting as an offset to the maturity of your core spacing?

Yes. Great question. Well, if you think about our business and we think about different growth curves and foundation that we do have over there, clearly enterprise, and we'll talk a little bit about that one, but that part growing kind of 35%, 36%, so growth accretive, international kind of growing 36% right now. And I don't think there is anything differently we have to do in international to kind of keep that sort of clip of foundation growth, meaning like even new countries or whatever just because even some of the new products are just getting ready for international in terms of language and some other localizations that were required and were not before. So that gives us a little bit more potential penetration in the countries we are today present, right? And then kind of the upsell and cross-sell motion. So we see those like good levers for us in terms of the growth foundation and how we look at the business in terms of growth levers going forward.

In terms of agents, the hard part to call where we -- what we like is some of the metrics that I talked because right now, we're focused on adoption. And before, of course, thinking to much what's going to be the monetization, right, is make those customers happy and great to -- get to a great product market fit. And that's what we're working right now, to be honest, both on the Composer on the Customer Agent, create a phenomenal outstanding product market fit, right? So clearly, it's hard to call. If you see all these products, once they are adopted and when customers see value and when the customers start to repeat, what exactly kind of when that milestone happening in terms of the hockey stick of the revenue curve, right? That's why we decided like we're going to focus on adoption. We're going to focus on repeatability. We're going to focus on customer side before we think about monetization. And of course, that is we're incentivizing our customers for right now at the same time that we're engaging more with them and we understand what product market fit looks like in terms of great product market fit.

And that's why we decided not to put anything on guidance on Composer, right? Certainly, they should be -- there is money in customer service in our guidance, right? Again, certainly, yes, do I believe that those products are going to be growth accelerants? No doubt about it. If you ask me how much exactly [indiscernible], I'll tell you, I have -- or will have a much better idea by the end of the year because, again, of all what we are improving into those products and kind of how we are interacting now with our customers in understanding what the potential is, but also what are the use cases that are kind of most relevant and most valuable to them and we are building for.

I feel like I have to ask 1 about agentic commerce. So we've heard a lot about agentic commerce acting as a new discovery channel for a lot of brands. But if consumers kind of increasingly delegate product discovery and purchase decisions to AI assistants, like where do brands still create differentiation? And how does that kind of change the role that Klaviyo could play in that consumer relationship?

Yes. I talk a little bit about that one, Callie, but it's a great question. It's something that not only kind of the early data that we do have, like people that use more kind of NCPs and people use more of the connection, use more of the platform. But I talk a little bit about my belief that if all of us will have agents and those agents kind of interacting, there's just going to be more activity. There's going to be more interaction. Some of the cheapest channels, they're going to even benefit much more in terms of increased usage. That's definitely the most efficient one today that we all know is e-mail. Of course, text and [indiscernible] will benefit, but we have to prove much more continuous with the ROI because customers, they invest more in text, they're usually much more sensitive to I want to understand predictability, I want to understand ROI in order to keep investing because that is a much higher one.

So if you have the infrastructure ready to do these interactions on those in CPM, all those agents interacting, and we believe we do have, that is going to basically increase activity. It's going to increase the number of interactions. It's going to increase the number of cents and consumption and that benefit us, right, in terms of how do we monetize.

And one last one for me. I feel like you guys have so many different new products out in market, kind of new opportunities in service, the agentic side of things. We didn't even talk too much about the Klaviyo's CDP products and things like that, plus international is growing really healthily. You have downmarket versus upmarket. How you kind of segment between all those different priorities at any given time? And given it feels like there's a lot of like call options on growth over the next 12 months, how would you kind of prioritize those different...

Yes, it's a great question. We -- when you look at us internally, we're pretty focused on agents and enterprise overall, right? So clearly, international is there, and we'll continue [indiscernible], but again, making -- there is still room to keep that foundation even without not doing much because, again, it's a question of penetration, is a question of what we see in the referenceability that we're having in some of those markets. We talk about, beyond retail, we've become a little bit more prominent, and we talk about we have a very healthy clip on net new logos last quarter, 9,000 or so.

Many of those came to hospitality and other verticals where we keep a steady pace in terms of growth. But again, it's not at the same level of priority like enterprise and agents. So we're going to continue basically focusing on enterprise and agents. Clearly, again, tomorrow is our customer conference. So you'll hear more from us around data and infrastructure, around personalization, around agents. So there will be more things there. So stay tuned. They are going to be very interesting. So yes, it's very exciting because we have a customer base. We have more to upsell and cross-sell. Clearly, multiproduct will continue to be a good growth lever for us.

Thank you so much, Chano. Really looking forward to hearing all the product innovation out of K:BOS during the rest of the week and good rest of your day.

Thank you, Callie, for having me. And thank you all of you for making the time. Okay. Thank you. Thank you so much for coming. Thank you. Good bye.

[Audio Gap] the software track with Klaviyo. We have Ed Hallen, who's the Co-Founder and Chief Strategy Officer. Ed, thank you for joining us. I know, obviously, it's a busy week for you with K:BOS coming up in Boston, your big user conference. So thanks for coming down. Maybe just for folks a little less familiar with you and the Klaviyo story, just give us an overview of your background and where you focus on in your role at Klaviyo.

Yes, totally. So we started Klaviyo in 2012. Before Klaviyo, we were working for a start-up building kind of large-scale business intelligence software. So think of folks like Bank of America, Walmart, Starbucks. And one of the key problems that my co-founder, Andrew and I were focused on there was how do we unify all the data sets that exist across these large orgs.

And so if you think about a large coffee chain, the system that knew what the sales were in a given day was totally separate than the system that knew what inventory in the store was, was certainly different than the system that knew what would had actually -- like who actually was working in the store that day, and it was different than the real estate system that we could use to look up whether or not it was a college store or whether or not it was raining near that store.

So that was the problem we've been focused on. And we had this belief that, hey, businesses in the future will need a single consistent data store that unifies all this different data and can be accessible at scale and with very low latency. And so we went through a few different ideas, but built that data layer and then went saying, okay, we knew we wanted to bootstrap the business. Who -- where can we use this system to drive revenue? And eventually focused on the SMB because we could have very tight feedback cycles and focused on revenue generation. And so we early on said, let's take this data layer and attach marketing to it. And at the time, specifically e-mail.

And so what we did is of our first 10 customers, a variety of SMBs of parking lot and software companies and e-commerce, 3 of the 10 were e-commerce companies, and we said, okay, if we're going to bootstrap, have to lean into these, leaned in heavily and said, okay, we are going to be the revenue generation platform, the marketing automation platform behind these. But the difference is that we started with this data layer. That's really where our expertise is and bolted this data layer atop.

And so fast forward 12 years, it's sort of the same at the time. We were always agnostic to what the channel was. We picked e-mail because that was primarily what our initial customer is using to drive revenue. But over time, it's -- we think about SMS the same way, WhatsApp the same way, honestly, APIs, the website, really anything that can be used off this common data layer to drive -- to power the business forward but specifically the revenue.

So in terms of myself and my role have done kind of everything over the course of it from initially co-CEO to Chief Product Officer to Chief Marketing Officer. And then now I spend most of my time kind of across the business, but mostly on product and AI and things like that as the Chief Strategy Officer.

No, that's great. And Ed, I always enjoy having practitioners like yourself speak and you're probably iterating and testing out these new AI products as it relates to improving your product development and everything. So I think it would be great just to give the audience a kind of firsthand account of like how has AI impacted your process? I mean you founded the company. So when you were building software at the early days, what does that difference look like now? How would you sort of quantify what AI has been able to do in terms of improved lines of code or shipping products faster?

Yes, it's really -- it's wild. I mean, I think we've always thought of software as like you build software to drive outcomes. And so when we thought about in the early days, it's like, okay, we could spend some amount of time building software ourselves and like you always want to have something where you can measure the impact of what you're doing. So for us, that was always the revenue of our customers. We still use this as a metric we call KAV, so Klaviyo Attributed Value.

And then over time, obviously, the company got a lot bigger, many more engineers. And we used to much more think, okay, hey, there's efficiencies we can drive with how we let people work so we could build common engineering infrastructure. We can train people, mentor and guide them. We can control kind of how senior people we hire are. But I think what we've seen over the last few years is dramatic improvements to just how fast we can ship things. And so it's really speed.

And so we've seen 2x kind of like changes in how fast we're shipping things of like common things that match consistently. And we really think there's just radical more -- this will just keep improving over time. And it's not just in engineering, it's related, it's product design, but it's also across the org. We've seen kind of like internal tools we built and just complete changes in like processes that we can almost entirely eliminate internally using different AI tools and kind of every few months, it's -- the pace just quickens.

Got it. And example of those processes is kind of like review documentation type stuff or...

Yes, review and documentation, but also things like, hey, how do we process expense reports internally? How do we process certain types of customer requests? How do we -- where can we automate certain types of support queries that come in. But then all the way down to like, okay, just like literally how do we design product and which pieces are humans doing? And there's things where we can now spend more human time figuring out the customer needs and exactly what we're trying to build and less human time on, okay, the actual building or like writing of documents or doing things like that, where we can actually shortcut a lot of steps that are now done by -- primarily by AI.

Got it. And shifting to kind of the products in more detail, right? There's been a lot of interesting releases with customer agent. You have K:Social, Composer, et cetera. And then you recently acquired Agency, too. So give us a sense for where is the product road map heading? What makes sense to build versus potentially acquire inorganically?

Yes, totally. So we started -- we built this data layer and then we layered the marketing on top. And so we always thought, hey, there's a natural expansion that will be channels. And so like what are the channels people are using. And that we were heavy on e-mail. We've since been much heavier on the full suite of kind of outbound, think about it as like SMS and WhatsApp and things like that.

More and more on the -- just what are all the services people interact in. So not just those, the messaging, but also like the website. And then we've always thought of this as like, hey, we started with the SMB and then for a long time, we've been stretching that up to much larger and larger enterprises. So there's a piece of the road map, which is just that continuance of the vision.

A second is, a couple of years ago, started to say, hey, really, you want the common data and contextual layer, not just beneath marketing, but also against kind of any customer interaction. So this led to the help desk and customer agent and kind of like any products that help answer customer queries as they come in or have those dialogues, active dialogues with customers. And so that's kind of the second bucket.

I think the third, though, is we've always thought of Klaviyo is like the reason people use Klaviyo is, again, to kind of like drive a customer outcome. What's possible now with AI tools is some of that usage is going to be a human, but a lot of that usage are also going to be agents and that some of that happens internally, some of that happens externally. And these are things like, hey, look at my strategy and figure out what are the gaps where I could be generating more revenue. Look at my strategy and figure out if I've done anything wrong, where I've made a mistake and set things up differently. Hey, my designer built this copy. Can you tweak the content to make it more effective? Can you design new content, but just really the full suite of how do we have an agent sit side-by-side with a human and make the results coming out of Klaviyo more effective.

And so the key iteration of this is our Composer product, which we released a couple of months ago. We've already had 138,000 customers use it, so kind of like tremendous adoption. And we'll continue really to be focused on this, which is just given the common data layer, given the tooling we have then to make use of that, how do we leverage AI basically to let our customers grow faster or accomplish more of their internal outcomes. And that will be our -- I think that's a durable focus for the next many years.

Yes. And you touched on customer agent. I think going back to the last earnings call, you talked about 40% sequential growth and just adoption and huge increases in weekly resolution rates. Like where are we at in that adoption curve? Because look, I think there's a lot of excitement around agents and certainly with a huge customer base and the hundreds of thousands of customers of yourselves. Like when should we think about that being a meaningful driver of the overall growth of the business?

Yes. I mean, currently, I think you know the numbers we reported, none of the Composer customer agent numbers are baked in. We're seeing tremendous progress on customer agents. So the 40% quarter-over-quarter remains our fastest-growing product in the company's history. And so I think it's -- Composer kind of on week-to-week, like here's the day-by-day iterations. You'll keep hearing a lot from us on the customer agent growth because it really is something -- it's like a perfect fit for the data layer and the growth has been tremendous.

And so I think we're also tremendously excited. So the Agency acquisition who brought in Elias, we've known him for a very, very long time as the Chief Product Officer. He's very focused very specifically on agents. So my co-founder, Andrew, remains focused across product, but also deepen agents, but also with Elias kind of a very known trusted partner. And we'll just keep leaning in to accelerate that product over time.

And with the Agency acquisition, like how does that -- how should we think about sort of the path that agent was on pre-acquisition now with Agency? Is it going to kind of be like a new unified product in a few months down the road? Or are there going to be kind of separate strategies?

Yes. I really think of it as a speed thing. So it's like it's getting great people to come in and just continue to accelerate the velocity and kind of at all levels. So it's like engineering depth on the problem, coupled with kind of like the already -- the momentum we already had, a strong leader focused on the same area. And so it's really same vision, same data contextual layer, how do we do more faster? And that's generally how we think about acquisitions. And so we certainly think about where we can accelerate the core vision. And then over time, things like on K:Social, we bought a very small social company to just to add functionality that we could add much more quickly if we kind of did it inorganically versus organically.

Right. And just to kind of put it in plain terms, like when your customers are using customer agent, what is that -- is it primarily just used for like a returns use case for e-commerce? Like what are kind of the most effective -- where are you seeing those biggest jumps in resolution?

Yes. So I mean there's a set which are like highly predictable, exactly what you expect. It's like, hey, I've got a return. I put in the wrong shipping address, like the product arrived and it was broken, just kind of this like set of things that, hey, are very predictable. They're very true across e-commerce. Those are common, but at the flip side is I think more and more we see that people get really, really excited about where they can actually drive revenue through these conversations.

And so once you have a combination of kind of AI and humans, it's much easier to think of like it as just a customer interaction. And it's not just, hey, I have a problem, like I want to resolve this thing and make it go away as quickly as possible. But hey, actually, I have a relationship with this brand. We know what you bought. We know what you're probably going to buy in the future. We know that you just had a shipment arrive. We can actually make that a productive mutually beneficial conversation of like, hey, actually, you probably want this suit jacket versus this one.

And like we'll return this one, but we think you're going to be really excited by these products over here. And I think those are the ones that are maybe a little less -- it's like less -- down the pike of like where people expect, but it's the things that actually people are much more excited about and where we've seen a growth in resolution over time.

Right, right. Yes. I mean, certainly upsell opportunity if you have all that information. And on the broader AI journey, talk to us a little bit just the Shopify partnership, obviously, a long-standing partnership. Where do they sort of fit in with all this? Like who kind of owns the customer from that perspective?

Yes. I mean it's a partnership we're super excited about, have been for a long time. So like the origin of that partnership was rewind 12 years ago, we knew that if we were building the data layer, you have to bring in the key data sources. We integrated quickly with Shopify, Magento at the time, Salesforce, like all the different platforms that had the bulk of the data. The belief was always that like, hey, there's a transaction that they're managing, but then there's a -- we're going to pull in not just their data, we're going to get -- have the full complete view of the customer.

And so there's a -- if we think about the end customer, like sure, like Shopify is managing a key piece of that. For our customers and their mutual customers, it's really a very symbiotic relationship of like, yes, they're running the platform, the transaction layer, the e-commerce online experience. We're the data source of record running with the complete customer view and log and we'll plug into their experience to make that even more personal and driving. So that basically remains true.

And so it's like we -- it's still a very strong partnership. We're very excited by things where we can make that very mutual. So we recently plugged in a Sidekick app, so kind of like into their AI where we can continue to personalize their experience using all the data that those merchants have in Klaviyo. And so that's really how we think about -- it's everything about Shopify, but more and more how we think about kind of like any business we work with, e-commerce or not, which is you're going to have these fundamental platforms driving part of the business. That data is very important to us. That relationship is very important to us.

But at the same time, if you think about, hey, for a given end customer, I want to understand the returns data. I want to understand the inventory situation of what they look at. I want to understand the website data. I want to understand kind of any of the long-tail system, any long-term system data, where that customer came from. And that is where we think of Klaviyo really as the data source of record.

Got it. Got it. And I did want to ask you about the K:BOS conference coming up. Just what should investors be expecting in terms of product announcements? I know you're probably saving a lot for the actual conference, but just give us a sense of what we should expect out of that event later this week?

Yes. I mean I think we remain -- the things we're excited about, I think, remain very true, which is the data source of record, we have ways to drive revenue atop that. And then in the age of AI, we can do more and more to move even faster, and that's marketing, that's service. And so I think you'll just continue to see a lot of momentum there. I think the things we get really excited about are, it's a great time to talk to lots of customers. More and more of those customers truly do range from the biggest brands in the world to the smallest, like the year -- we're a year or 2 into our journey.

And so to say that it's like we see actually now like a very strong community of those customers talking and then certainly a way to launch more products. And -- but I think those very much fit in this direction of where we can really have that deep customer understanding and use that to drive results for brands. And I think that is marketing, that is service, that is, hey, how do we build AI to supercharge both those?

Got it. And this idea of, obviously, Klaviyo being this powerful data layer. I mean you talked about the founding of the company being in the BI space as opposed to e-mail or whatever, right? Like one of the things we've seen recently is traditional SaaS companies are partnering with the big LLMs to kind of activate that data layer and maybe charge a consumption or premium rate on that. How do you sort of think about those partnerships with the Anthropics OpenAIs of the world is -- I mean maybe we hear something later this week, but just philosophically, how do you think about that compared to some of the big announcements we've heard?

Yes. I mean, philosophically, we think of it as -- look, people use software to drive outcomes. And so -- and when they do that, more and more, it's people using software and it's AI using software. And that happens kind of like independent of your approach. And in fact, it's -- the incentive for us or what we believe is most important for our customers is make it possible to use Klaviyo any way you want to do that. And that might mean AI using Klaviyo directly. It might mean you're using these other tools and leveraging them in Klaviyo. It might mean you're using our Composer tool or other tools where we're actually like under the hood, highly leveraging these models.

But the key thing is like, hey, what's the outcome you're trying to drive and how do we let you do that as fast as possible. And that is what makes Klaviyo durable. And so I think as we think about partnerships, it's all about finding ways to accelerate those -- that customer value in ways that are mutually beneficial on both sides. And so I think we're tremendously excited by what's possible.

And it's really just the shape and flavor of how people are using these tools in conjunction that changes, like there's not a world where people are using tools in silos. We also believe there's not a world where people are saying are not leveraging any like deep data context layer, which is kind of like fundamental to how you treat people personally and how you actually drive the outcomes you want and that are good for those customers on the other side.

Got it. And you touched on some of the larger customers earlier, which I think that's been a really impressive growth area for the company, the growth in 50,000 type customers. Can you talk about just the progress there? What -- I guess, what sort of verticals are you seeing success with? And then what sort of products from a multiproduct perspective are the larger customers taking up most?

Yes. I mean we've continued to see great progress on the multiproduct front, and it's people start with e-mail or e-mail and SMS. People leverage a lot of our marketing analytics and analytics tools adopt that. That's a very common progression. And then we're in the early stages of starting to see people unifying their journey, so kind of consolidating across the service realms as well.

And so it really is -- in some ways, it's not inconsistent with what we see on the -- with smaller customers, but it is a -- very much for large customers, they think of this as a pure consolidation and what oftentimes for many tools, how do we -- how can we do the same things better, but with actually even fewer tools. And so we continue to see that. But yes, the most common are e-mail, SMS, often including WhatsApp and marketing analytics and kind of more data tooling adopt those.

I see. I see. And the sort of consolidation motion that you talked about, where do you find the larger customers are often consolidating from? Like who is getting displaced in that?

Yes. I mean, numerically, it's what you'd expect. It's a lot of the legacy platforms, kind of pure marketing platforms that exist independent of data. And so think of the Salesforce Marketing Clouds of the world, but kind of like that grouping. We also see people coming as we've reached parity on all channels. So for a long time, we hadn't invested really at all in mobile channels. And as we've invested in push notifications and those other mobile channels, we also see that people potentially coming from like other newer age platforms, but still kind of like platforms that don't have the data layer underneath.

I see. I see. Okay. So you are starting to see kind of some Salesforce Marketing Cloud type migrations...

We see a lot of. And that's always been kind of the story on the top end, which is either you're a Klaviyo customer who grows very quickly and then we end up serving you on the high end and then you don't move off of it. You consider these other platforms, we don't move or those legacy platforms have always been the big incumbents of then people moving to Klaviyo from those legacy platforms.

I see. I see. And then as we think about the low end of your customer base, kind of more of the entrepreneurs and maybe, obviously, the low end for Shopify is not where you play. But one of the things many software companies have called out in this most recent quarter was weakness in top of funnel, particularly the SMB-focused names. Now obviously, Shopify did not see that. They had a great quarter kind of on all fronts. But what are you seeing there? And how are you sort of managing that top of funnel dynamic just given all these headwinds and changes to traditional search?

Yes. I mean we -- so our customer base, when we think of the low end, we're particularly focused on kind of like those low-end entrepreneurs who you think have kind of found product market fit. And so I may be a new brand, but I like I know how to make the things I'm making. I've figured out how to get my first 100 customers. So in some ways, these are not truly day 1 businesses, but they're just a little more established.

And I think very similarly probably to what others have reported in Shopify or specifically [indiscernible], we've seen those businesses are -- have remained good businesses and some of the dynamics of where the demand comes from have changed. But a lot of it is very similar. And we haven't seen that there's a massive shift in those businesses or kind of like that set of our customer base. It remains largely consistent with what it's been.

Right. And just in terms of how you're approaching that top of funnel search discovery, whether it's AEO, like what are some of the -- because again, I think the net adds have been very healthy for Klaviyo. Maybe this is a dynamic of B2C versus B2B, but what are some of the things you guys are doing to like make sure that you're still staying in front of customers, whether it's on an AI search versus traditional search?

Yes. I mean I think -- so one is like we've always thought of growth as being excellent at providing tremendous customer value. What that means is, one, you -- is highly getting into partnerships. So kind of like where we can lean into folks like Shopify or others to actually drive tremendous value for their merchants. It's not that they're actually sending us demand. It's not like the most -- we have very little -- it's like the Shopify App store is driving the business. It's more like as we become the platform that merchants know drives value for those -- for their businesses across that platform, we find that it's a very strong word-of-mouth dynamic. And so it's very consistent demand if we can truly own platforms. That's remained true.

I think second is we've seen just the marketing is changing. So to your point, there's like all sorts of -- it's -- whether it's a rise in AEO or other things, it's leaning into everything, but we've seen that that's purely really additive. So it's just the same, how do we do the things we've been doing, most of those still work? What are the things we can add that continue to work. It's not a fundamental shift in the environment. It really is continuing to lean into the things that work well and add the things that are adding value to all of them.

Got it. Got it. Okay. I wanted to ask you about some of the growing but earlier on channels like SMS and obviously, even WhatsApp and some of those things and not to make the question about gross margins because I know that's not your world, but it certainly comes up just given the nature of those products. But I guess the question for you is like as we think about those channels, clearly critical to how those customers kind of do business. Like what is the -- I guess, the strategy from like a pricing perspective? I know there's been different approaches as it relates to passing on the carrier surcharges and not. But then like once you get them to SMS, is there another like higher-margin service or platform that you're hoping to upsell them with? So a couple of questions.

Yes, yes. So I think first, what we see large with channels is for any given brand, the channel mix will be different. And so there are some brands that can be more SMS heavy, some of that are less SMS heavy. For any given consumer within a brand, those channels are also different as well. And so I might -- for one brand, I visit the website a lot to get personalized there. I receive a certain amount of e-mail. And I only want to receive SMS is when a product is delivered. For a different brand, I may -- every time there's a new product, I actually want to see the new pair of [indiscernible] or whatever on via SMS.

And so that mix will shift. And to some extent, like we will provide a lot of intelligence to drive what those channels are, but consumers also have deeply ingrained preferences there. And so as we think about margins, it's true that kind of as we own all channels, we've historically on SMS specifically, when we kind of launched the product back in 2018 or 2019, made the decision to make that buying process for a very new channel, very simple. So we said we're going to layer all the carrier fees into that as a single price point, makes this channel very easy to adopt.

As we've gotten larger and people are much more familiar with the channel, much more we say, okay, people understand the channel now, we can disentangle these -- the carrier fees from the buying process. And so we can actually change how we're charging for this. And so we continue to think of these channels in the same way where we actually have control of how consumers buy, how our customers buy, and we'll continue to do that.

Now more and more what we see though is like, yes, there's the charges for the core platform, like the data layer and a lot of that pricing manifests through the messaging used atop it. But more and more, we're seeing customers buy multiproduct, and we expect to see that to be a much greater trend. So buying not just multichannel, but buying marketing analytics, buying things like K:Social, buying things like customer agent atop those and then more and more usage of tools like Composer.

And so it really has become a, hey, we've got control of how we make money and how we charge for the marketing layers, and that is evolving, particularly for SMS, but we're seeing SMS adoption rising very quickly. So we'll see some margin impact, but like generally changes. But like the real thing is very strong multiproduct growth over time. And people -- like the consolidation story remains very real for Klaviyo.

Got it. Got it. Okay. I did want to pause to see if there's any quick questions in the audience in the last few minutes here. Okay. We'll keep going. I guess just as you think about the topic of agentic commerce, right, there's -- I think a lot of hype, but there's also the reality on the ground of like people still want to buy products and have a relationship with brands. So like where do you think we are now? What are you seeing in your customer base? And then how is Klaviyo's strategy? How does that tie in with where you see it going?

Yes. Yes. When we started Klaviyo, like very consistently -- one of the reason we decided we ultimately bootstrap is like we got this very consistent message that was like, hey, retail is done. No one is going to buy anything in person anymore. No one's going to buy anything from a brand. Everyone is going to buy everything from Amazon. They have one, they will -- like there will be a single point of all transaction, and that is the way the world worked.

But what we realized is like what is just lately not true, which is there are products that are highly commoditized where this is absolutely true, where people are -- almost all their purchases occur in some segments of the economy, there are people who like everything occurs in Amazon for these commoditized products. There are some segments where people are absolutely walking into retail every day, and there are segments where people are building these like very strong digital relationships with brands. We've seen a tremendous rise in that part of -- in those businesses and those merchants.

And so as we think of agentic commerce, we firmly believe that we'll continue to see similar dynamics where there will be a strong rise of tools that let people buy in different ways. And we'll continue to see that consumers for some brands, want to build deep relationships. For some brands, don't want any relationship at all. But that consumer preference and how they act on those may be through an agentic tool. But from the brand's perspective, they want to -- brands want to understand their customers, provide those customers a great experience and personalize those.

And that there might be another layer in the middle for some consumers for some types of brands, and we fully expect that. But it doesn't change that from the brand's perspective, you want to understand those customers and provide a very deeply personalized experience. We're not going to let go of all consumption to a model and have that model drive all purchases. So I think it will be a huge change in how we think about it. We can -- it's very hard to predict. But the idea of personalized consumer experiences and consumers' desire to be individual and make choice will manifest in how they build those relationships with brands.

Yes. No, that's super helpful. And we -- my colleagues and I hosted a bunch of meetings out at the [indiscernible] Cannes Festival this year. And one of the dynamics and key themes we heard was just this idea that people may have underinvested in brand spending and brands, it's going to be that much more important to distinguish from kind of all the AI-created slop out there, right? Like how do you see that? Yes, I guess, is that something you're seeing? And then how does Klaviyo potentially benefit from that?

Yes. I mean we're definitely seeing it -- like the example we would have gone to at one point was like, hey, people like toilet paper were total commodity. But then we see there's like these very rapidly growing toilet paper retailers where people have relationships with brands and think of it very much as like the choices they make drive their identity. I'm making the environmentally conscious choice. I'm making where this is manufactured, like those are just very real.

Klaviyo wise, I mean, when we think of our reason for being, it's providing that deep customer understanding across those brands and then the intelligence atop. And more and more, it's the like then next step agents on top of that to actually drive the strategy and implementation to actually drive it to atop that. So for us, it's really our sweet spot of like, hey, when we started 12 years ago, we thought it was very obvious that you had to have all of that data in one place to build a strong digital relationship to drive the impact of a brand.

We thought within 2, 3 years, like Salesforce, Mailchimp, all these companies would like build the same stuff and start from the data layer up. What we realized is like that actually is a very hard problem that we just happened to have been working on for a long amount of time. But it's still true today, and it's even more true because you have the AI tools on the other side, which is you have to have the data and the customer understanding to be able to drive the customer outcomes that you actually want to drive. So I think we're just excited. We have this saying internally that we're 1% done. And like in the age of AI, it's like you can build more faster and you can do more for customers to drive value. And like the core data underneath is just kind of more important than it's ever been.

Awesome. Well, I think that's a great place to end. We're right at time. Ed, thanks so much for joining us. I know it's a busy week, and appreciate everyone coming to the conference this morning. Thank you.

Thank you for having me.

Hello, and welcome to the Klaviyo, Q2 2026 Earnings Call. [Operator Instructions] Also as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. With that, I would like to turn the call over to Brad Sills, Vice President, Investor Relations. Brad, you may begin.

Welcome, everybody. We appreciate you joining us. Joining me today are Clay via Co-Founder and Co-CEO, Andrew Bilecki, co-CEO, Chano Fernandez; and CFO, Amanda Whalen. Andrew Chano and Amanda -- we'll first share their views in the quarter, and then we'll open up the line for your questions. 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.

As a reminder, 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, our 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 introductions, we're ready to begin.

Thanks, Brad, and welcome, everyone. Let's start with the headlines. Play deal has scaled to nearly $1.5 billion in annualized revenue run rate, growing quarterly revenue 26% year-on-year. We signed our largest deal ever last quarter, an 8-figure multiproduct contract with 1 of the fastest-growing brands in e-commerce.

More than 205,000 brands now rely on Klaviyo. We offer our customers an autonomous B2C CRM. We vertically integrated the data infrastructure, experience infrastructure and the AI and agents to decide which experiences to deliver each consumer to drive better engagement, revenue and growth.

Our customers are proving that the right infrastructure -- with all of your customer context and the right agents can deliver stunning consumer experiences that stand out and turn visitors into customers and keep them coming back. We're continuing to bet on being the source of truth for businesses, consumer context and embedding that real time into agents and end consumer experiences. Using the scale and volume of our consumer data points, we have to tune and guide AI models and agents, and building all of this faster and with more tailored guidance to each of our customers for our internal use of LOMs and agents.

Every business will have an agent that decides, delivers and autonomously optimizes the experiences their customers have. That's the promise of an autonomous B2C CRM. I'd like to take a few minutes to share some updates on both the infrastructure and agentic layers of our products.

Our data infrastructure now stores more than 9 billion consumer profiles and ingests and indexes more than 0.25 trillion data points every quarter. We know contact is the key for high-performing agents and experiences. We spent the past few months improving the scalability and burst ability of Kadeos infrastructure to handle data and messaging workloads that require personalizing and powering up to 100 million marketing messages and experiences in less than 20 minutes.

This helps our largest enterprise customers with massive audiences as well as AI agents that want to ask more questions and do greater personalization. Having clean data in context is important, too. And we've taken out a step further by using machine learning and AI to train models to predict consumer behavior, and this powers features like personalized send times, channel preference, audience optimization and personalized product and content recommendations.

Many of these features are included as part of our data and analytics products, which includes marketing analytics, and those products are collectively growing ARR more than 100% year-on-year. Our customers are finding there is real demonstrable ROI and growth from using AI to improve the marketing and experiences they deliver to consumers.

Our marketing platform and infrastructure continue to deliver. While our messaging volume continues to scale into the hundreds of billions of messages per quarter, our compliance and deliverability infrastructure are continuing to improve.

Delivery and engagement rates improved year-on-year, while unsubscribed, SPAM and bounce rates decreased. We're also seeing the flexibility and scalability of our marketing platform being leveraged by enterprises and advanced users, both human and AI. Multichannel campaigns have increased nearly 50% quarter-over-quarter and marketing flows have seen a 48% increase in the number of messages and decision point actions added to those automations.

Our B2C CRM platform sets the table for agents. One is our customers have built outside of Klaviyo and those we built for our customers. In June, we launched our composer agent to all of our customers, and the response has been very exciting.

As a reminder, Composer is our purpose-built agent harness that's trained to excel at analyzing your customers and past marketing and taking those learnings to create and optimize marketing campaigns and automations. In the first month since launch, Composer already has over 95,000 users.

And very encouragingly, nearly 1/4 have turned into recurring weekly composer users. We've given all of our customers 10,000 credits to experiment and use with Composer, and the feedback has been overwhelming.

We're shipping updates multiple times a day to improve Composers performance, breadth and usability. And as recently as last week, credit consumption grew 30% week-over-week. Usage is broad from entrepreneurs to enterprise, including 27% of our mid-market and enterprise customers, being composed users and exhibiting strong repeat usage.

To share 2 examples: a fashion brand use Composer to design and send 2 marketing campaigns about shoes that were back in stock -- they use Composer to select the audiences and consumers those would go to, ask composer to calculate the best time to send those campaigns, had Composer run in a loop to review, audit and optimize their campaigns ran a test end and then scheduled both campaigns, all from our Agentic interface.

Another enterprise U.S. retailer use Composer to audit the performance and logic of marketing flows and made adjustments that increased performance by tens of thousands of dollars, all in a matter of hours. This is real agent ROI. I want to comment here on some of the reasons Composer is gaining traction. First, we built the ability to understand the structure of data, the ontology and Symantecs into Composer to improve our agents' reasoning abilities.

Second, Composer understands the style of brands, what we call their taste because it has the direct context of marketing and business decisions they've made in the past. Third, composer is available where and how users want to work and fourth, it has access to aggregated knowledge we've curated about what makes marketing and consumer experiences convert.

Focusing on these areas, we believe there is a long runway in front of us to improve agent performance and grow usage. As an example, in just the past few weeks post launch, we improved the percentage of generated campaigns users ended up using as part of their marketing to 46%, up from 35% just a few weeks ago.

As a result of improvements to taste, alignment and validation. We have a long list of these types of gains in front of us. Finally, customer agent, which gives every business and always on agent for their customers, covering both support and sales conversations, has seen adoption grow 40% quarter-over-quarter and weekly resolution volumes grow nearly 80% since early June. Boston Proper launched their customer agent and within 2 weeks, had generated 3x ROI in incremental revenue by being embedded on their website, while also resolving autonomously more than half of their support tickets.

Earlier this year, we built out an AI agent, which we've embedded into Composer to help brands automate the setup and ongoing optimization of their customer agent. We believe customer agents are going to be ubiquitous. But many businesses aren't burst in how to configure or improve an agent and how to measure its performance in quality. For businesses of all sizes from entrepreneurs and SMBs to enterprises were leading in building agents to train the agents. That understand your business and can automatically configure experiment and optimize agents you deploy to customers that not only handle support cases but also delight customers and drive revenue and growth.

All of this has resulted in our customers generating nearly $50 billion in attributed revenue for Klaviyo attributed value KV in the first 6 months of the year, and we've done this while building agents for ourselves, allowing us to increase ARR per Klaviyo by 28% year-over-year. We're finding ways to increase our capacity and with that, our ambition is increasing as well.

The opportunity to give every business an agent to help them grow their business and delight customers is clear. And as we announced earlier today, I'm excited to build on our results so far with the acquisition of the agency team. I've known the founder of Agency, Elias Torres for over a decade, and he's been on the forefront of AI agents for customer experiences, and as a technologist and a builder, I deeply respect.

He'll be joining Klaviyo as our Chief Product Officer, and together will build on the momentum of Composer, customer agent and the entire B2C CRM. Before I hand it over to Chano, I'm excited to welcome Erica Smith as our next CFO. I'd also like to say a big thank you to Amanda for her leadership over the last 4-plus years, growing and scaling Klaviyo, championing our customers and furthering our mission of empowering businesses and creators to own their destiny. And with that, over to you, John.

Thanks, Andrew. I'm about 2 quarters into this role, and the go-to-market changes we've made are showing up in the numbers. We strengthened sales leadership and brought up more rigor to our process. And in Q2, we saw gains in sales efficiency, both in the Americas and globally. B2C is $160 billion-plus market opportunity, and we're capturing more of it every quarter, moving up market expanding internationally, cross-selling and pushing beyond retail represents a great long-term growth opportunity for us.

Agents open up an entirely new layer on top of that. Let me go through where growth is coming from and what's next. Enterprise momentum is where these changes are showing up first. Many of the enterprise conversations we are having start with the same problem, a business looking to replace a legacy system because it can no longer keep up. In Q2, our larger customers, those with $50,000 plus ARR grew 36% year-over-year to $4,477. This group now represents approximately 40% of total ARR. Our $1 million-plus ARR customers continue to outpace growth of the overall customer base.

This quarter, we were thrilled to welcome Warner Music Group, 1 of our most significant new contracts to date. They have over 1,400 artists and millions of funds and every artist needs to reach their audience in their own voice. Our platform mix that possible by consolidating everything a business knows about its customers in one place so that every relevant team can act on it real time. The head of e-commerce and merchandising recently shared that Clavis tools are second to know and will be integral to supercharge the e-commerce business they are building.

We also won players replacing 2 legacy vendors in a competitive bid across e-mail, text and analytics. That's our enterprise motion working as designed. We're building champions inside the brand, educating executives on the value of consolidation and clearing procurement and CIO approval. We're also selling deeper into the existing customer base. with a strong expansion led by text messaging.

We're also winning down market as can be seen with strong net adds, which were up 29% year-on-year. and we're seeing more multiyear commitments and more products being sold across our base as our 205,000 plus customers increasingly use Klaviyo as a full complete platform. which brings me to our second growth lever, multiproduct adoption.

In Q2, nearly 20% of ARR came from customers using 3 or more products. This is important because of our multiproduct customers retain more than 6 points better on gross retention than single product customers. Our largest ever omnichannel deal closed this quarter and each figure 2-year agreement with 1 of the fastest-growing brands in e-commerce and a top seller on Tik tok shop. The wind their entire program on Clio e-mail, text and marketing analytics because of the value of unifying 1 data-powered platform.

We're also extending Klaviyo's relevance beyond traditional e-commerce. This quarter brought our first NFL franchise, the San Francisco 49 years plus hospitality names like wet Host. Every business that wants a direct personalized relationship with its customers is a business we can serve, and that keeps widening the market in front of us. That brings me to our third growth lever, international.

Revenues side the Americas was up 35% year-on-year, with the go-to-market and product investments we've made to internationalize Klaviyo, the runaway ahead remains significant. EMEA revenue side the U.K. was up 41% year-on-year, and we move into Q3 with our strongest large deal pipeline in EMEA yet. Kondo drew more than 1,000 attendees. And our Paris and Berlin events were at capacity. We are backing that momentum with the new France office and an EU data center coming in the second half of the year.

In EMEA, the Body Shop expanded from the U.K. into EMA, Wassa and marketing analytics across Germany, Switzerland, Belgium, Austria and the Netherlands. And in APAC, we closed one of our largest new logos deal ever in the region. With Country Road Group, I was in the region and met with their team, so I heard firsthand with choosing Klaviyo meant for them. It was a competitive multistage RFP win that consolidated 5 brands fragmented stack onto 1 platform sourced through our first global AWS Marketplace deal.

The focus is to get the same big deal motion on country-by-country expansion, moving at the pace, EMEA is moving up today. In the Americas, we're focusing resources where we see the biggest opportunities. Enterprise, a stronger cross-sell motion and new verticals. We're also investing in product specialist roles, so our teams can go deeper with customers that they adopt more of the platform. Before I close, Echoing Andrew's note, Amanda, thank you for everything you built here. We are grateful to our stay an advisor role through November, and we're thrilled to welcome Erica's me as our next CFO on September 1.

She brings dip solver experience at the scale we are hitting into and the handoff is going to be seamless. With that, I'll turn it over to Amanda.

Thanks, Chan and -- the growth we're building for the long term is broad-based as we expand across enterprise, international and multiproduct and make advancements with our Agentics solutions. Q2 was a strong quarter with revenue of $370.6 million, up 26% year-over-year and ahead of our guidance, driven by notable strength in text messaging, WhatsApp, and growth in marketing analytics. It was a strong quarter for new business, driven by sizable enterprise deals and cross-sell momentum across the base.

This is proof that customers of all sizes are increasingly valuing Klaviyo as their B2C CRM platform. As Chano mentioned, in the enterprise, we're winning new customers from larger legacy vendors. The pipeline in this segment is growing, and we have the team and the platform to serve this market at scale. The value that customers realize from our platform continues to expand. Our attributed revenue or KV per message continues to grow, driven by increasing personalization powered by automation.

Our customers continue to shift their messaging volumes towards automated flows, which generate 10x more revenue per message compared to static campaigns. Because our usage-based model is directly aligned with customer success, as customers realize more value, they grow and expand, and we grow alongside them. Net revenue retention was 109% in Q2, reflecting strengthening gross retention, increasing text messaging expansion and our strongest quarter of cross-sell since our IPO.

These were offset by the lapping of last year's profile enforcement, which will continue to impact NRR through Q1. It's important to remember that NRR is a trailing 12-month metric, and the leading indicators of our business are strong. Customers are staying with us, expanding with us and buying more products from us.

Turning to the P&L. Non-GAAP gross margin was 73.4%, down 3 points year-over-year, driven by strong growth in text messaging, along with higher carrier fees, which we chose to fully absorb in prior quarters. In Q3, we updated our mobile pricing to pass the higher carrier views on to customers going forward, along with other changes to reduce friction in our mobile pricing mechanics. The new pricing will start to flow through gradually as we cycle through renewals.

Due to timing and various puts and takes, this will be neutral to 2026 revenue and gross margin, but an overall positive impact for our customers and for the business. While growth in the text business impacts gross margin, it's an important channel for Klaviyo. Text has strong unit economics, driven by its lower cost of acquisition and higher rates of expansion. It also positions us as our customers' omnichannel platform of choice, driving higher retention and enabling a long runway to cross-sell other products with higher margins over time.

Non-GAAP operating expenses were approximately 60% of revenue, down roughly 3 points year-on-year. Relative to last year, we saw leverage in sales and marketing and G&A, while R&D as a percentage of revenue increased slightly from investments we're making behind product innovation to drive our next phase of growth. The results of these investments can be seen in our increased pace of product launches in the quarter, including the important advances with composer and customer agents.

Non-GAAP operating income was $50.9 million in Q2, representing a 13.7% non-GAAP operating margin. We continue to drive efficient growth at scale with another quarter of operating at the rule of 40. Turning to the balance sheet. We generated $83 million of cash and ended the quarter with a total cash balance of $833 million. We used approximately $240 million in cash to repurchase shares during the quarter, leaving us with $160 million in capacity under the $500 million buyback authorization we announced in March.

We've remained active in the market and expect to continue repurchasing our stock under this program. As we believe our current valuation represents an attractive opportunity. Our strong cash position provides us with the flexibility to also continue investing in growth and pursuing M&A that accelerates our road map as Andrew noted earlier, with our acquisition of Agency. Turning to our outlook. Based on the Q2 outperformance and the broad momentum we're seeing, we are raising our full year 2026 revenue guidance by $12 million at the midpoint, higher than our beat this quarter.

We now project 2026 revenue between $1.526 billion and $1.534 billion, representing 24% year-over-year growth. We are revising our full year 2026 non-GAAP operating income guidance down to a range of $212 million to $218 million, with non-GAAP operating margin of approximately 14%. This amounts to a $10 million reduction from the midpoint of our prior outlook and includes $10 million to $12 million in costs associated with our agency acquisition. As well as continued investment behind product innovation.

For Q3, we expect revenue in the range of $377 million to $381 million, representing growth of approximately 21.5% to 22.5%. We expect non-GAAP operating income of $40 million to $43 million or a non-GAAP operating margin of 10.5% to 11%. We expect non-GAAP gross margin to be down slightly in Q3 versus Q2, followed by a greater-than-normal seasonal step down in Q4 as we continue to see tax growth outpace total company.

To close, this was a strong quarter as customers increasingly lean into Klaviyo as a platform solution. Our business model is built for the long term with compounding growth across enterprise, international and multiproduct adoption. With Agents, we're at the very start of our next S-curve. The B2C CRM market is large, and the opportunity ahead for Klaviyo is significant.

On a personal note, this is my last earnings call as CFO of Klaviyo I still remember my first whiteboarding session with Andrew. I left that conversation convinced of the power of the model, the size of the opportunity and the strength of the team. Everything since has reinforced it. It's been a privilege to build this business alongside you, Andrew and Chano and his entire team. I'm grateful to all of you on the line as well.

I leave with confidence in the business and confidence knowing it is in strong hands with Eric as she steps in. Thank you. And with that, we'll open the call for questions.

[Operator Instructions]

Our first question comes from Elizabeth Porter from Morgan Stanley.

Great. Thank you so much for the question. And Amanda, I just want to say it's been great to work with you and wishing you the best of luck in the next chapter. My first question, I wanted to dig in a bit on Composer. It was really great to hear about some of the adoption metrics historically, we think about the number of campaigns a brand could run really being constrained by just that available marketing head count and production capacity.

So as Composer removes some of that bottleneck, what have you seen from the early adopters in terms of that campaign creation velocity and how that's translating into potentially higher customer contract volumes and incremental platform usage?

Yes. Thanks, Elizabeth. So we brought obviously a month out from launch, and the results have been, I think, really great. So like you said, let me frame it up for folks. The way we think about Composer is -- it helps with really like, let's say, 3 different things. One is doing the research that sort of comes before actually building a marketing campaign or automation, actually then generating that campaign or marketing flow.

And then the third is actually helping like verify, make sure that it's right that it's optimized and ongoing optimization. So we actually spent a lot of time on those first 2 categories of helping customers do the research figure out which customers Mike interested in, which products or services, where there are opportunities and then also with the actual like creative generation.

And we've been very excited to see the number of campaigns you are building. We talked about some examples, some of that's become pretty common for these weekly active users, is people coming in building either prompts with Composer to try to figure out what they want to do or bringing problems that they've integrated from other places, maybe from another document or another chat that they've had.

And then generating that. And what's great is oftentimes those briefs, they've got an idea of what they want to do. But like I shared in the example, they may say things like, well, I'm not actually sure what the right time to send this is or who exactly is the right audience. And what's great is they can use all of the information they have storing radio, all of the historical data to basically allow composer to kick that.

And then when you think a little bit of question on like how does that flow through into incremental usage One thing we've definitely seen is that customers they're rate limited by the ideas they have and then how fast they can execute. So we are seeing folks that use Composer they actually do -- they're using more of Klaviyo. Now because our core pricing access is that is the profile, we're finding is that's driving more engagement for profile and therefore, more clado-attributed value, more attributed revenue. And that's why we're going to -- we're watching that.

That's why we're seeing a lot of folks use Composer. We think some of that will flow through and help for instance, we see some folks saying more text messages because composers creating those campaigns. But we actually think a lot of the value is going to come from that increased attributed revenue and also people are going to spend on composer credits to help them do that ideation and generation, knowing that it's going to drive that incremental revenue sales.

Our next question is from Raimo Lenschow from Barclays. Okay. We can go ahead to the next one. Our next question comes from Arjan Batie from William Blair & Co.

Alright. Thank you very much. I'm curious maybe a 2-parter just on SMS, it seems like that's seeing a lot of solid traction. I'm curious if there's been an inflection there? Or it's just maybe a factor of clearly moving further up market and seeing enterprise success? And then the follow-up for Amanda, I'm curious on the gross margin front, what the pass-through of the carrier fees, how much of that is weighing on gross margin this quarter, if there's any way we can quantify that, just help us with our models, that would be super helpful.

Thanks for the question. So I'll take the first part on text. And yes, that's the right read. We've definitely seen really great growth from text and now also WhatsApp as a channel. And we've seen those messing channels grow in the basic -- what customers are telling us what I'm hearing them is, hey, we want to put all these investment channels in 1 platform. We know Klaviyo has that centralized profile I can use all the same personalization.

I can use it across channels. I can cordacross channels. But I am sure the staff that we're actually seeing a pretty dramatic increase. I think it's 50% quarter-on-quarter of people building multichannel campaigns. So this idea from maybe a couple of years ago that like you run these channels independently, we're seeing a lot of our customers say that, that doesn't work for them.

And as part of our vision around like what is the B2C, the consumer -- and then, yes, we are definitely seeing a lot of larger enterprises also choose to consolidate. They might start with Clavo for e-mail, but now they're switching over -- moving over text messaging and WhatsApp -- they're then using our marketing Lantus product for personalization and then obviously using like Composer to stitch all of that together. That's a very common pattern we're seeing comes to people consolidating a marketing tech stack.

Yes. And to your question on gross margin, Arjin, the way that I would think about that is that there were 3 primary drivers that were happening during the quarter. Those were carrier fee impact investments we are making in infrastructure and the increasing presence of text in our business. On carrier fees, as we mentioned, we made a change in Q3, and we are now pricing our T-Mobile business to pass through the carrier fee increases that we have seen to our customers.

As you look out over the balance of the year, we would expect that to be neutral both to gross margin and to revenue just due to the timing of how it flows through renewals as contracts come up for renewal. On infrastructure, we're making investments to drive product innovation and to drive growth. And I think the track record that you have seen from us over time is that we make these investments from time to time.

And then we've got a strong track record of having them deliver leverage as we continue to grow. And the team is very focused on that going forward. And then the last is text and the increasing portion of tax that that's making up of our business. As Andrew just said, we're seeing tremendous success there. And that is a strategic choice that we're making text for us is a really strong business, because it's got good stand-alone unit economics, and it plays an important strategic role in the broader portfolio.

So on a stand-alone basis, it comes with a lower CAC because it's primarily cross sold and it comes with higher expansion because as customers get accustomed to using it, they continue to grow their expansion and grow their usage at a pretty rapid pace. And then strategically, having a multiproduct customer really positions us as those customers broader B2C CRM platform, their omnichannel platform and partner of choice.

That drives stronger retention, as Chano mentioned, over 6 points higher for customers who are multiproduct, and it drives the runway and the potential for us to cross-sell more higher-margin products in there over time. So bottom line is that gross margin was driven by this combination of different strategic choices. Carrier fees are now being passed through. and the strategic choices that we're making with the growth in tax drives positive benefits for the business over the long term.

Our next question is from Tyler Radke from Citi.

There. Sorry for the delay. I had to find the mute button. Amanda, again, echoing the pleasure in working with you. Can you just dive in a little bit more on the op margin side of the equation and I understand there's some dynamics with mix and SMS. But strategically, how are you thinking about the right framework for investing in growth? And anything we should read into that in terms of margin expansion beyond 2026?

Yes. Thanks so much, Tyler, and thank you so much for the kind words. It's been wonderful working with you as well. On operating margin, the way that I think about operating margin this year is that we are making some very deliberate choices to make investments behind our acquisition of agencies, so driving strategic growth and importantly, behind product innovation and building the capabilities that are really going to drive growth over the long term.

In the back half of the year, what you see is that investment product innovation, it shows up in this infrastructure investment that we just made, showing up in our R&D and it is driving great results. We're really pleased with the pace of innovation, the way that it's picking up the results that Andrew talked about on the call with customer agent adoption up 40% quarter-on-quarter.

Over 1/4 of our mid-market and enterprise customers using Composer and the great traction that we're seeing in enterprise with some of the big strong lands like Warner Music Group and flares into the 49ers, all of which are enabled by the investments that we've made in our scale and burst stability just as Andrew referred to earlier.

And so those investments are really showing strong early results and helping us drive this potential growth over the long term. Now agency did impact, as we mentioned on the call, about $10 million to $12 million of P&L impact this year. That's included in the outlook that we shared. And as you think about leverage over the long term, I would focus on the fact that if you exclude that from our numbers this year, we're still driving over 1 percentage point of leverage year-on-year. So this is a business that can continue to grow strong, make these investments in innovation and drive leverage over time.

Our next question is from Samad Samana from Jefferies.

Maybe let's dig into the agency acquisition, especially given that Elias will be the Chief Product Officer going forward as well. especially as I think about that in the context of AB, with the CoC model focusing more on the product side. So maybe help us understand what agency brings more specifically and the decision to add a Chief Product Officer with AB's focus as well, just because we think that, obviously, there's a lot going on with AI.

So it's great to bolster the bench, but help us think about what the divisional labor will look like.

Yes, that's great. Yes. I mean that was kind of a headline for us when I talked with Elias about this. It really is not like, hey, how do we attack on -- or build on more dimensions at once. So first, I mean, at least somebody I've known for over 10 years, we've built and scaled companies together. So somebody I know well, we work really well together.

And what was interesting was we got to talking about what we believe about the future about agents, and we both are strong believers that every business is going to have an agent, an agent that can both help them grow and run their business, make great decisions and also an agent that can personalize and deliver experiences to every single 1 of those customers. We think this is just -- is this going to be ubiquitous, as I said in the opening. The question is just how do we get there faster.

So that was the entire intent. And then when it comes to dividing things up, we work really well together. We're both engineers. We both love working with customers. I mean 1 of the things that Chano and I have talked a lot about is as we as we continue to do more in enterprise, I'm spending a lot of time with customers, helping figure out what we need to build for them, make sure that we can serve a lot of something like very high scale, the very unique needs they have.

But when it comes to agents, I think both across composer customer agent, we have a lot of service area, a lot of ambition, and this is going to help us just go faster.

Our next question is from Rama Lenshaw from Barclays.

And it's more bringing channel in as well. If you think about the in a way the setup is much broader with -- if you have customer agent composed agents because it's just more a full set CRM. How does it help you in your conversation on the enterprise? You mentioned some legacy replacements as well. Just talk a little bit about how that broader vision from Klaviyo is just helping you engaging with larger customers. And all the best for Amanda.

Thank you, Ramon, for your question. Well, the trend that we're seeing in Enterprise is a consolidation -- that is 1 area. The second area is an innovation play, and that comes all together with a better together story. So the enterprise companies are looking for someone that brings kind of the innovative play on 1 single platform.

They understand much more the value of the 1 single data in terms of the context and what that provides for the outcomes that the agents will provide. So we bring in that value altogether is definitely a significant plus in terms of the conversations we're happening in terms of how many platforms we can replace you take someone like Cares, we replace 2 legacy platforms to a somewhere like Warner Music, it was even more.

You turn someone like country roads. It was kind of a few number of platforms and legacy as well that we're taking over. And clearly, what we want to see is we do have a vision as well in terms of how AI is going to be basically helping them to drive much more Klaviyo-attributed value and much more revenue -- so compulsion and customer agents are definitely 2 very strategic components, right? I mean, in most of the cases, it is a rebound replaced most on the enterprise, and they are looking for someone that can bring the strategic issue and can bring basically the full power of the better together story because it provides a much better TCO with great outcomes in terms of value. So is of tremendous help.

I think it's a very key reason why we win join it with the architecture and the infrastructure and certainly, improvements that we've done and investments that we're doing, the stack around 100 million messages in less than 20 minutes is quite staggering and quite significant for many of our enterprise customers in terms of their reliability and basically the volume at which we can operate and as they grow, that giving as well piece of mind that we can support on the journey going forward.

Yes. Let me give you just 1 example of what we're seeing. Actually, composer adoption we've seen is actually faster with our larger customers in enterprise. And the reason for that is not only are they using it to create net new marketing campaigns and content because they just have such a large volume -- but also, we found that like for larger enterprises, they have such a complexity in terms of the automations they want to run, the number of campaigns they use.

They have more data, so they're doing more personalization. So they're using our marketing analytics, AI models to better personalize content. So a very common pattern for composer, we've seen is folks will use that and run it on some cadence, weekly or every couple of weeks to understand, first of all, like, what do they have builds actually, I've talked to some customers where somebody's new to the business, like they said it just got hired, and they use Composer to actually explore how that brand is doing marketing and ramp up -- and then they can make changes with more confidence from Composer because we talked about now does it create, it also validates the work.

So we've seen a lot of these kind of review and audit use cases, -- so it's early, only been -- I'd say like 2 things we're seeing with composers in the enterprise, there's already a lot of usage and adoption because it takes away a lot of -- to help people wrangle the complexity and allows them to do more -- and also, we're also seeing like a lot of new customers were brand-new using Composer to just get started. They really don't know anything about market. That's obviously for our ores.

Maybe, Ramon, to give you 1 concrete example, right, I was with Country Road that I mentioned in the script and I asked the CIO, why do we win, right? And we were competing with the typical suspects in terms of large markets, right? .

And his answer was like, you won, we decided for you because of your AI vision and openings. -- during teroparability, especially as well with some of the 4 players like the tropics I'm opening the eyes and the connections that you bring and because of the robustness of your infrastructure, those were the reasons why you guys won't.

Thank you. Our next question is from Matt Van Gillette from Cantor.

Good afternoon, I guess when you look at the rate of adoption you're seeing on the various agents and Composer that you have now -- how should we think about the monetization of that over the next year or 2? How much uplift getting at existing customers as they use the platform more?

And any customers you've had land with those products? How is the average ARR for those customers trending versus similar cohorts without agents fully deployed?

Yes, sure. So let me first -- I'll speak a little bit to the monetization. I mean I can explain what that's built in or how that's ending up with the guidance. So for comps we think it was like it's intelligence to help you run and grow your business. So it's a credit-based model. And actually, when we released Composer, we gave everybody about $100, 10,000 a credits to use over 90 days to start to experiment. And we think that's a very good model.

Klaviyo always been focused on how do we help our customers, our businesses grow faster -- we measure that through cleattributed value attributed revenue. And 1 of the things we're able to do is show folks that like, "Hey, if you use more of our composer intelligence and models, literally, you'll get better results. either because we're helping them generate net new marketing or customer experiences that they didn't have time to they couldn't think of, right? They didn't know about it, they don't have it great, or we're helping make their existing marketing better.

So there's real ROI. So we've already seen a number of customers start to pay per composer, even though we're still in this kind of this 90-day trial period. And I expect we'll see that grow over time. And our ultimate ball is we want to be the intelligence that our customers rely on and then obviously tightly coupled and integrated into our marketing and data infrastructure, but it's what they use to understand who your customers are decide what marketing, what experiences to deliver and then constantly optimize those.

And we think that's a very, very large market. When I talk to our customers, they constantly feel like they don't have enough time to understand and execute various analyses or build new marketing. And if they had AI to help them do this and it's revenue accretive, that's something that they want to use. Then for customer agent, the pricing model is a little different.

That is outcome-based and resolution based so for our customer agent, our customers pay every time our AI resolve a conversation on its own. If it proxies back to another contact center or help desk software like our customers don't pay for that. And what's driving growth there is really 2 things. The first is, as John mentioned, we're doing a lot of we're doing a lot of building on our pipeline with enterprise, and that's both for marketing but as well for service and for customer agent.

And what's really cool is we're starting to see a lot of use cases for customer agent where people want to use them together. They're using customers collect information that they're going to leverage in marketing and vice versa. So those tend to -- one thing we really believe in is just how do we automate and make a great customer experience. So we've done a lot of work to build out only an agent builder to make it easier to build agents.

A lot of folks don't have experience with that. But even we've invested the last 4 months in an agent that will train other agents. And we think this is the future of how customer agents are going to be built and deployed, not only in the first time that you kind of configure them in to them up, but also how you ongoing optimize them or teach them new things. And what that led to is a big increase in what we measure resolution rates. So we've seen since we deployed that.

We've had 1 customer, a large enterprise business went from a 52% resolution rate to a 79% resolution rate in 7 days. And that didn't require extra engineering effort. It's because of our agent that's helping them understand where the gaps are, allowing them to input, share the information, connect the tools and data sets they need and gets more and faster. So as we drive up that resolution rate, that drives up more volume. It also means that it's easy for us to run these kind of proof of concepts and pilots with enterprise customers.

And the last thing I'd say is that we're also aiming for we want everybody to have a customer agent. We know even smaller businesses, they still get a lot of customer questions that they don't have the time and the bandwidth to answer, and they need a customer agent to represent them. And so with that, because we have now this agent that can help you build an agent, even if you're not a technical or aren't up speed on all the ladies and greatest on agent tech and nomenclature because you can do that we're seeing a lot more customers deploy agents as a result when they start to use our agent trainer.

So it's still -- it's still growing. Composers only 30 days out. But I think we're all very excited about the progress we've seen even in the last couple of weeks for both of those products, and we do think there'll be large revenue drivers over time. Let me add a little bit of color, for example, on customer agent, what we're doing with some of our enterprise customers. And as I mentioned, there were significant improvements that were brought on customer agents, make it -- the customer agent making certainly a much more robust and buyable product for our enterprise customers. And we went and discussed with our top 40 enterprise customers to start with.

In terms of let us prove you that we have a great agent that can provide much better results than the ones that you're using today. So we engaged in conversations with them. We then follow up with a proof of concept, and we're now in the high single digits on some of those kind of conversations with that journey. And that certainly will keep increasing during the course of the next few weeks.

They are testing it. We're helping them to fine-tune during a month or so. And then why this is the outcome, we -- expectation is that some of those customers will start converting -- of course, I don't want to make here any forecast. But clearly, some of those customers are very large in the numbers of millions of conversations on a yearly basis. And certainly, we believe that solution is ready, and we can drive that value.

And then to your question on the we want to say just quickly on the uplift. -- manul -- It's a meaningful uplift to their total average ARR for customers. And as normal for products like this, there's a wide variety depending on the adoption because it's outcome-based, and it depends on how frequently customers are using it and how much they're relying on it. But we are definitely seeing a meaningful contribution there in terms of the customers who have adopted it.

Our next question is from Terry Tillman from Truist.

So Amanda and Ryan, and welcome aboard, Brad and Erica and Amanda, -- good luck with whatever you do next. That's been great working with you. My question is going to be on the enterprise business. I'd like to double-click on that. It's good hearing about an 8 figure. I think it was a 2-year deal. I think last quarter, you had like a mid-7-figure transaction. So those are sizable. I think, Chano, you said that you've got some newer sales leadership there.

What about actually the sales capacity? Do you have all the right people on the field? Are you still building out that sales team? And also I think last year in Boston, when you had the customer conference, I think you had a it was a division of a sensor that was actually going to start partnering with you all like maybe agencies are helping you. And just lastly, on the enterprise side, is there anything missing product market fit? Or do you feel like you have everything at this point?

Great questions, Terry. Thank you so much. So first, let me start with sales leadership. As you know, we brought in a new CRO, a new Head of Americas, these guys have worked with me before and there really no enterprise business quite well. They'll be helping out with attracting and bringing in great talent on board as well in terms of sales leaders and across the board. .

As you rightly say, yes, we -- last quarter, we have a really very large still. I mean, this quarter, we have our first ever 8-figure deal that is a 2-year -- we also have inside basically our largest transaction ever in EMEA, our large pipeline ever year-to-date as well that we are looking, especially in our international business. So those are all good early indicators.

Let me remind you that, as I always say, this enterprise business is going to be a journey, right? We are moving our sales basically go-to-market motion from being very transactional to a client of being much more consultative -- we're moving from a single stakeholder to a multi-stakeholder relationship. We're moving them from less senior people to much more senior people that they need to lease with much more kind of business case driving and that takes time, right?

So all early signals and all the progress that we're making when I look at the number of deals that we do have -- it doesn't matter how you're cutting over $500,000, $1 million, again, which is outpacing our regular business in terms of growth. All is looking great, even in terms of the pipeline or is looking good in terms of the journey, but it will be a journey, right? So in terms of the sales capacity, we do have the sales capacity we need. I am not someone that like to just be on the street with our productivity.

So I can also tell you that we remain flat but definitely, our productivity per head is much higher than it was kind of a year ago. And that is how likely to be and how when it to be. because what I want the sales teams to do is make sure that they do qualify deals properly. And a good outcome is we win 3 out of 4, which we participate because these cycles are expensive, right? So we're going through that process where we're training, we're educating, we are learning, but we do have the right leadership in place.

We do have the right sales capacity in place. Certainly, we're a growth company are.So when we feel like we are producing are the right deals and we have to get to the productivities per head that are maximum. As we see more territories and more opportunities for expansion and that we come, we will have to invest. And we will invest in order to gain and win those opportunities. But overall, we do have the pieces on the passes in place, right?

We're also working with new agency partners. I mean you heard our partnership. It doesn't matter without Centre, but there are also some the agencies in the marketing business that are working with much larger customers that we didn't have relationship with. So we're also expanding, obviously, our ecosystem.

And at the same time, we're doing our investments in infrastructure, right? Those are some of the volume investments that we talked before. That is our EU data center in EMEA and a much better garages in terms giving of security, safety, compliance, especially in terms of some of the requests that come more from some of the largest companies. So it is a journey as well there. it would take a bit of time. Early signals and early data and early facts are good and are solid.

But if you think about it, these opportunity is massive for us. And we're just in the early innings. So I can only be excited for the long-term opportunity that this provides to play, and I like how the thing is performing, but I expect that we will get getting much better over time as we really engage in many more sale cycles, I understand by how we win.

Thank you. Our next question is from DJ Hynes from Canacol Ingenuity.

Amanda, I wanted to ask about net revenue retention. Look, I realize it's early for composer customer agent to contribute. But everything else I'm hearing, right, improving gross retention, SMS strength, multiproduct customers would make me think that could start to gradually inflect up. So I guess the questions are, like, a, how much is profile enforcement overhanging on that metric. B, does the intra-quarter picture, tell us something different than the trailing 12-month metric. And C, I know it's not a metric you guide to, but like is it right to think that growth -- that net revenue retention should go up from here?

Yes. Thanks, JJ, and it's a great question. On NRR, just as you said, we're seeing strength, and we're seeing strong performance and improvement in the metrics that for us are the ones that matter for the long-term health of the business. That's improving gross retention, strength in text expansion and customers' usage of tax and cross-sell, which has been particularly strong and increasing over time.

This quarter, those benefits were offset by the lapping of profile enforcement. And as you think about NRR going forward, I would think about that impact of profile enforcement, gradually winding out of the metric since its trailing 12 months through Q1 of next year. But as we think about the business going forward and back to how do we think about long-term outlook here, what we feel very positive on is the fact that customers are staying with us, they are expanding their business with us and their usage of our product, and they are buying more products for us.

And I think those are the ones that are really going to drive NRR over the longer term.

Our next question is from Derek Burt from TD Cowen.

Great. I guess this is for AB mean international continues to be a really bright spot. And over the last couple of years, we've heard from you about your journey with expanding languages and local support and sales teams in various countries. Can you just talk about what the next phases are on the international front, just as we're thinking about both the product and the go-to-market side to sustain this momentum?

Yes, absolutely. So that's 1 big area where we see there's a lot of market share out there, and our share is relatively small. So international continues to grow really nicely, about 35% year-on-year. And a couple of things. I'll talk a little bit on the product side and a little bit of what we're doing on the go-to-market side.

On the product side, we've been very invested in -- 1 of the things we find with a lot of international businesses is not only are we helping them transact in different cuts but also the working across many markets. So we've done a lot of work to help businesses that are working across multiple markets, multiple regions, manage things like -- there are product catalogs across those regions. Oftentimes, they have different rules or different strategies and sometimes even different teams that manage those different businesses.

So for instance, we recently with Klaviyo organizations, we went further in allowing folks to understand whether you're multi-brand or multimarket, understand all of your customers, even leverage that data across region, to understand how different reasons are performing. Some of the things you've done around scale, we're expanding our footprint of our data centers or where we house data and run our software, expanding that into Europe.

Chano mentioned some of the great marketing, and we've always loved putting on user conferences, both for our existing customers and partners and users but also for folks that are thinking about lado -- we expanded that this year to cover all of Europe. We've added some sales head count some clavos that are now in France and Germany.

And I'd say like internationally, our main focus right now is probably more in Europe than it is in Asia, although we see opportunities all over the world. And maybe the last thing I'll mention that just has kind of been another maybe bright spot, is when we launched WhatsApp, we knew that, that was going to have a lot of pull in Europe, but we found that, that has even opened up some new markets.

I was just talking with the team last week and we closed a major deal that has a big WhatsApp component down in Brazil. So that's opened up more of the Americas to us as well. So I think there's a lot of room to go there. And obviously, when Chano and I joined up. One of the thing we both believe in is we believe we should be able to get Klaviyo to a point where the majority of our revenue comes ex North America.

And I think we're very much on that track.

Yes. I would add that, again, the opportunity in international is very exciting. I think it's the very early innings as well. There are some large markets like Germany, even in Spain and Italy, where we're doing well. But when you look at the market share because we didn't have any teams in the ground, in some places like Germany, we do have now. The opportunity is significantly larger -- when you go in APAC, definitely Australia is a great market for us.

Outside of Australia, where we're making some leadership changes that I think they will pay down the road in terms of producing much more growth in places like Southeast Asia and Singapore and potentially other places like Japan that have been recently visiting. So that's very exciting. So while it's great to see kind of the growth that internationally is producing.

And when I think about long term, the opportunity that international represents is definitely much larger than what we're seeing today.

Our final question is from Brett Huff from Stephens Inc. China and Welcmerica, and good luck, Amanda. And I'm asking another the AI question from a little bit different angle as the market, as you all know, continues to litigate the potential for disruption, especially within the SMB and maybe just medium-sized customers. The stats you gave on composer adoption being really good in enterprise was interesting.

But we still get a lot of questions just more philosophically on are we seeing any compelling data points anecdotal or more systematic about how your smaller customers are choosing AI from you versus another vendor, be it an LM or et cetera. So any update on that?

Yes, absolutely. So I'll give you kind of a stat or some data on that. Look, we've been watching in the last month, customers -- new sign-ups, right? Folks that are trying out click for the first time, a lot of those are smaller businesses, right, entrepreneurs that are just getting started. And probably not surprisingly, those that are using Composer are the ones that end up being more successful literally in the first few weeks and end up converting to paid customers.

So this is still early and we're weaving Composer into more of the UI and Platia. But intuitively, we think this makes a lot of sense. What we found when I talked to some of these entrepreneur SMB customers, A lot of them like -- they're not even sure they know they need to do marketing or they need to set up customer agent or customer support, but they're not sure what to do or where to start.

And we talked about some of the benefits that Composer has over a general purpose model the fact that we organized a business is data, so we understand the products or services they sell, we understand who their customers are. We have all of this data about like task orders, transactions, customer preferences and our model has organized that in reason about that. The fact that we have an understanding of what that business likes from past marketing they've done.

And obviously, if somebody is brand new, we also can help them define what their brand looks like. And then finally, like we've actually even only recently in the last 2 weeks, we've upgraded the system behind the scenes that provides kind of the Klaviyo proprietary knowledge about what works in marketing. And we're finding a lot of customers -- they're clearing into that to understand from Composer.

I mentioned things like what's the best time to send, who should I send to all these things that maybe questions they didn't know to ask or they don't know the answers to, and we just have a better data set. So we're actually -- I think 1 of the things we're quite bullish on is that for SMBs and these like small business, they're actually going to look for more domain or task-specific -- and obviously, we want to offer that with composer and embedding in Klaviyo is great because it means that they get a software interface that kind of fuels both agentic but also has that kind of point-and-click elements if they want to drag and drop and design.

While we've also opened up composer where it integrates into other agents and other systems that they use -- and we think there, it's just now we're going to drive composer usage just because we're just in our agent is the expert at understanding your customers and the expert in marketing. And so that's 1 of the things you said. It doesn't really matter where you want to work you're still going to be able to get value out of composer.

So I think I'm also very excited about what we're seeing from our entrepreneurs and SMBs. I think for them, a lot of it is just educating them on even what's possible with AI. But I think we have an advantage there because they're -- a lot of them are actually used to using our interface, and we've kind of merged to our agents and our kind of more traditional interface together.

That was our final question. I will now hand back to management for closing remarks.

All right. Thanks, everybody, for joining us today. Amanda, thank you for helping us continue to grow Klaviyo. And as we'd like to say, we're 1% done. Look forward to seeing everybody next quarter.

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

Hello, and welcome to the Klaviyo Q1 2026 Earnings Call. [Operator Instructions] 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 Flaim, 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 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 multimillion dollar ARR deals ever, and our largest customers once again grew their revenue, known as GMV, roughly 2x faster than the broader market.

Our investments in ARR 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 and 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 through reason and use tools. Composer 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 services 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 subagents and system connectors it can use and 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 focused on how software is created to what software to create, we've seen a similar trend with Composer where users are live 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 have 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. Hydro Flask 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 masked and prioritized more than 1,000 flows across 13 business units in a single session, giving the 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 teams 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, e-mail, 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 2:00 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 serve across every channel and agent we operate. These models and the features that leverage them were used by nearly 2/3 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 get smarter, the more it's used. We believe this is a year marketing and analysis agents like Composer and always-on agents like Customer Agent become standard and ubiquitous. And we 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 a 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. And 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 omnichannel program on Klaviyo, including greatly expanding their text messaging program this quarter. Their team queries Klaviyo data and Claude, 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 is 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 complementary 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 multiproduct, global AI-native business. Amanda will continue to lead our finance organization through August 21 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 adviser 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, Chano.

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 3. Let me walk you through what we are seeing and how we are executing. Starting with enterprise, new customers in the 50,000-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 program here 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 life cycle. That's what Klaviyo does. The wins in Q1 reflect that. [Ellis And Olivia] is migrating to Klaviyo to unify online behavior, purchase history and in store associate interactions in one system.

Weber Grills replaced a legacy platform with Klaviyo globally across the U.S., APAC and EMEA. Expansion activity was also strong as customers standardize more on their workflows on our platform. Take Patagonia, a long-time e-mail customers that came to us with two things on their mind, improving the customer experience and migrating off a fragmenting text messaging setup, creating redundant messaging across channels. We showed a clear technical plan and a credible commercial case. But the reason they choose Klaviyo was anchored in where we're going together. RCS, omnichannel 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 Klaviyo 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 AI is just growth is the same platform priorities driving our largest U.S. enterprise deals, unification, real-time data and AI across channels.

All Saints is a great example. The flagship U.K. fashion retailer replaced legacy technology in a multiyear deal with both the Global Digital Director and Chief Technology and Transformation Officers as champions of the move. They choose Klaviyo for speed to execution, the ability to unlock WhatsApp as a new audience channel and the future opportunity to consolidate e-mail 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 Hobbii, 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. Locale 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 Klaviyo is showing up in categories well beyond our e-commerce goods. 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 Klaviyo, integrating ticketing and venue systems, thinking data through our warehouse capabilities and giving the U.S. and U.K. teams a single platform to activate and execute across every market they operate in.

Our partner ecosystem is deepening that reach further. In hospitality, the Thanx integration brings restaurants loyalty into a single workflow. And with our integration of this feature now GA, operators on Cloudbeds, Guesty, and Mews can trigger a pre-stay 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 unifying Klaviyo across e-mail, 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. Current fees have risen meaningfully across the industry over the past 12 months, and most platforms pass those costs through immediately. We chose to absorb them, a decision that reflects our commitment to customers first. This also gave us a real pricing advantage this quarter, and we leaned into it. But our competitive position is more durable than price. Text on Klaviyo runs on the same unified profile as e-mail, 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 cost pass-throughs while continuing to negotiate the most competitive text messaging rates. 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, Chano 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, multiproduct 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-GAAP operating margin and our first quarter of positive GAAP operating margin since going public. NRR was 110%, up 2.0 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, multiproduct 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 multiproduct 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 multichannel relationships choosing Klaviyo as their long-term platform because we unify 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 U.K. 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 10x 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 two percentage 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 set up 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 million to $228 million, and non-GAAP operating margin of approximately 14.5% to 15%. The model continues to support reinvestment in growth while delivering expanded profitability. This guidance assumes that we continue to absorb the majority of carrier fee increases.

As Chano 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 million to $363 million, representing growth of approximately 23% to 24% and non-GAAP operating income of $47.5 million 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 the timing of investments as well as the 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 the 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 a 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. AB 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 line up for questions.

[Operator Instructions] Our first question is from Samad Samana from Jefferies.

So I'm going to pack a 2-parter into this. So first, maybe on the product side, just as I think about Composer adoption, what are you seeing in 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 I continue to look forward to working with you until the transition. But I just wanted to touch on that comment about guiding with more precision. And just does that mean that the 2Q guide should be closer to the pin? We had a slightly smaller beat in 1Q. Was that already a philosophy that started when guided for 1Q? Just help us, maybe get a better context in that statement as well.

[p id="310160143" name="Andrew Bialecki" type="E" /> Awesome. Thanks for the question. I'll give the Composer one, and I'll pass it over to Amanda for guidance. So yes, we launched this private preview in March, and we're very excited about the results we've seen so far. And again, for context, our Composer agent really combines a combination of a bunch of subagents that do various tasks.

But you can think about the two big groupings as, one, it will actually do marketing creation, so we can create marketing campaigns, automations, templates, and creative content. And then two is it will do the analysis. It will 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.

So what's great is, yes, we've introduced kind of a range of customers. Some are more power users. Some of them are more entrepreneurs who are just starting out, so we can get a feel for their usage patterns. And I'll tell you, kind of universally, the feedback has been very, very positive. We talked about our next-generation agents building off the success of our marketing agent last fall. And what we've done, and we talked about in past quarters, we've dramatically expanded its scope.

So you can think of this as really like kind of, I don't know, version 2 or N+1 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 some of the underlying technology improving, as well as just like technology that we've built at Klaviyo to harness those agents and keep them in the direction that brands want them, right?

So actually, 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 -- that actually makes it better at maintaining a kind of brand in the field that you want. And then on the analytics side, I mean, we've seen just some like 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 like 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, they'll be able to automatically take action. And in some cases, we expect our agent will just actually automatically decide to run new campaigns or make modifications to do -- for optimizations.

And so we're very excited about that. I think the path is also to hey, the value is very clear because obviously, as we run incremental marketing campaigns where 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 the intelligence and really the agent capabilities that we're able to build on top of the infrastructure that is Klaviyo's marketing and data platform. And then 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 of guidance, we are closer to the pin 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 a 28% revenue growth. We saw our highest operating margin since the time of the IPO. We had our first quarter of GAAP 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 50,000 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 in the momentum that we've got in the business.

Our next question is from DJ Hynes from Canaccord Genuity. [Operator Instructions]

AB, 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?

Yes. I mentioned in our opening remarks, this kind of this capability overhang of like basically what you can do with Klaviyo and the infrastructure that we've built is actually, there's a lot more there that our customers and businesses are not taking advantage of. And 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 how you understand your customers and marketing and then customer agent, which is more consumer-facing, agencies are accelerating the adoption of both. So you talked about Composer, I think it makes it easier to take advantage of everything you can do with Klaviyo with all the data and marketing and messaging primitives that we're giving you. 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 Composer.

So I've had many conversations where folks have said that they're actually changing their ratios of the kinds of products they can take on because of, I mean, Klaviyo is a product and it's just ease of use, but especially now because of like some of the agentic capabilities that 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 game.

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 -- it can do much better than more generic AI agents at like actually matching up to what a consumer is trying to -- looking for. And you'll see that show up in some of the stats that we talked about around like product recommendations.

Now the reality is, as we talk about driving adoption to that, like it's still what's growing very fast, service is our fastest-growing product line. The reality is that setting up agents is something that just not a lot of customers have expertise around. So we're both building products around that, where actually we've built a whole number of agents that will train up agents. But the reality is like when we go talk to businesses, they'll say, okay, 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 -- 200,000 customers.

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

Our next question is from Rob Oliver from Baird.

Can you hear me okay? First of all, Amanda, I 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 upmarket, legacy replacements. You guys called out, I think, some really -- 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 installed base? How are sales cycles? How is 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 so much, Rob, for your question. I mean, first, maybe the data, right? I mean we called, we doubled the number of customers over $1 million ARR basically last year, also end of Q1. Clearly, Amanda commented on the number of customers over $50,000, obviously, that's becoming now 38% year-on-year. And we talk to them on an expansion of customers doing with us more than $6 million ARR. And we talk with other customers, examples like Patagonia, that's been a long-term e-mail customer from us now adding text just because they see that fragmentation that have been falling 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 even with this growth rates beginning of the year is very exciting because, of course, as we're playing more into the enterprise, you know, Rob, that this will be playing more towards largest quarters, especially end of the year and Q4 being much bigger and much larger. And of course, where I think the team is doing a very good job is to put the focus and 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 the discipline is about clearly how we are building the pipeline and how we're doing, especially qualification on deals getting much more meaningful in terms of the enterprise cadences, right?

So if you would say, how do you feel about the opportunity this is we will talk back in the autumn, I would say I feel even much more excited than I was in the autumn because I can see that tangible. Of course, I will tell you, yes, we are 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 Klaviyo, 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 two quarters, but we will see kind of these growth levels, I would say if I would be on your shoes kind of from a modeling perspective that will have significant impact down the road, and that is not too far away, right? And clearly, if we are 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 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 have already announced, there has been support from some of these partners, either because they influence the deal or they source the deal either/or is 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 our core bread and butter 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 logos overall and the dynamics that we have in that segment.

Our next question is from Raimo Lenschow from Barclays.

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

Sure. Thanks so much, Raimo. So what these 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 Chano 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.

Our next question is from Terrell Tillman from Truist Securities....

Terry if you want to hop back in the que we can move on to the next question, we will pull you up again if you are able to login.

Our next question is from Nicholas Altmann from BTIG.

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 stand-alone SKU perspective versus Composer allowing customers to accelerate their e-mail 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?

[p id="310160143" name="Andrew Bialecki" type="E" /> So when we think about Composer, I mean, we're ultimately, selling or we're providing is intelligence. And obviously, that's the form factor of like 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 us to review who their customers are, the state of their marketing and then using that to figure out like what to do next. And we're finding that those like sessions, right, those kinds of reviews they're doing are incredibly valuable. I mean they're generating 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 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 like through tokens and obviously, it's just much more efficient. And we can go much deeper because our agents have access to some internal benchmarks and like kind of best practices that aren't publicly available. So what that's doing is that intelligence, we look at it is an entirely new revenue stream. We think about the activities that people are doing in and around Klaviyo, like so obviously, we're storing information, people log in 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, like the impact that's having on just overall platform usage, like actual usage of our infrastructure, yes, we're seeing that drive incremental use. One stat for us is as we've opened up the underlying infrastructure of Klaviyo to third-party agents or LLM clients like ChatGPT and Claude and Gemini, we're finding the folks that have integrated MCP and our best users. I mean, they're doing 16% more marketing, more campaigns, more automations, querying into their data more frequently. So, we think this is actually like this is kind of like the easy version of that trend because it still requires people to use those tools and prompt on their own.

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 synchronous mode where you're chatting with it or having a conversation with it, it's on Klaviyo or other platforms. But you can also just set it on sort of this like, hey, run every day, right, asynchronous or recurring mode. And we think that will drive even more usage. So I 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 this as like, okay, that's very valuable and they're willing to pay for it.

And I do think it will have this halo effect of really in two dimensions. One is, I think it will increase messaging volume because messaging will be just better, right? The creative, the content, the personalization will be better. And then two is 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 they're higher quality. And obviously, like if a marketer or a business owner or somebody that owns the customer experience is strapped for time, like we see this.

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, their own like human time to work on that. Agents don't have that problem. I mean they can tirelessly work for 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 think about like in the worst case, it's like, say, unwanted, right, marketing messaging or just marketing messaging that doesn't resonate, 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 beyond just directly monetizing Composer.

And I would think of, to the second half of your question, 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 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. As we committed to you at the beginning of the year, we're committed to increasing our operating margins by at least one point this year. And should 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 not passing through the carrier fees is basically, 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, and what will be intentional and what 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 -- the full unified basically data platform that we offer. And certainly, we are going to be value-based pricing down the road. It's not the aim of this team to be competing on pricing. I thought that decision was important, particularly now to provide some stability on pricing to our customers and, potentially reflects as well the highest customer satisfaction that we've been highlighted as a strong performer of the Forrester Wave. And I think we all know that happy customers basically renew and buy more from you.

Our next question is from Siti Panigrahi from Mizuho.

Amanda, it's a pleasure working with you. I wish you good luck. And then I want to dig into the NRR. That's 110%, up two points year-over-year, but flat sequentially. In prior calls, you talked about key drivers like core e-mail, SMS and then cross-sell and profile enforcement. And as the profile enforcement benefit already laps, so what keeps NRR at this or above this level? Is there -- what are the next driver you think that will push NRR higher in the back half of this year?

Thank you, Siti. 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 10x more revenue per message compared to a static campaign. And as customers see that value, they're leaning in and they're using Klaviyo. So 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 -- 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.

Our next question is from Callie Valenti from Goldman Sachs.

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?

I think, Callie, it's maybe a little bit actually inverse, we're seeing because we have gone to profile enforcement, we still do see seasonality because Q4 is our customers' 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 e-mail. I will say that in Q1, what we saw was just strength across many different parts of the business. We saw strength in our international business, where it's growing 39% year-on-year. We're seeing increasing momentum in our enterprise business. And those enterprise businesses, again, tend to be steadier multiyear contracts.

A great example of a multiyear 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 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.

Our final question is from Scott Berg from Needham & Company.

Nice quarter here. I want to ask just a question about the state of marketing budgets overall and from what you're seeing 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. 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.

I'm happy to take that, and Chano will add some color on to the specific customer examples. But I'll 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. We're finding that people want to merge those budgets together. And it's not actually for like -- 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 then 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 greater profitability and increase revenues.

Yes. I would only add that personalization as well and 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 attributed revenue. Again, we more than doubled than the rest of the market in terms of our customer revenues through GMV. 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, have those customer agents that can communicate and put a great face to their business with their customers is terrific capabilities that they're leveraging on. So I think it's the increased revenue impact on ROI that they're seeing plus this technology shift that we are seeing and where Klaviyo is certainly at the center of and that is what is driving it.

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

All right. Excellent. Thank you, everyone, for joining us. Keith Weiss, I run the U.S. software franchise here at Morgan Stanley, filling in for Elizabeth Porter, who had a beautiful baby girl. So excuse the substitution. But really pleased to be able to talk about a really exciting story, one that's been putting up really good fundamentals, not getting appreciated enough for it. I'll just tell you guys, in Klaviyo.

And we have the full cast. We have Andrew Bialecki, Co-Founder and CEO; we have Amanda Whalen, CFO; and Chano Fernandez, co-CEO. So thank you all for joining us.

So 2.5 years since going public. And I think -- thus far, Klaviyo has just proven some of the initial bear cases in terms of too limited of the scope, too limited market opportunity. And maybe to phrase it as a question rather than just a statement. How have you done that? Like how have you guys been able to really sustain the durability of growth through an environment that's been mixed at best.

Yes. thanks Keith. Look, we -- since we're is now 14 years old, I think. And since we started, we just had this thesis that if you think about businesses and organizations on 1 side, and then end consumers, customers on the other. We're just going through this massive shift of, hey, it's not humans in the middle, sales reps, customer service reps, other folks. It's going to be all software and increasingly, we think, just powered by intelligent software. Thus AI and agents. And yes, we've been just following that trajectory for the last 14 years. And so that's what's on us over 190,000 customers $1.2 billion in revenue last year, growing really nicely.

But I think what's exciting for us now as we think about what -- if you look at like AI and LLMs and what those have capabilities have unlocked, we've kind of thought about clearly the first 14 years, we built all this infrastructure to basically allow businesses to program the rules, store all their customer data, communicate with customers across a wide variety of channels, for marketing use cases, for service use cases, all of it. But the big unlock was like making that not just things that humans could program the rules, but that AI could write the rules and then optimize it, that's what we wanted to get to. And this is like, I think now -- I think it sounds like it's gets another 14 years. I think use the next couple of years, maybe the next 14 quarters are like the most interesting because I think every business now is going to say, hey, when it comes to how I treat my customers across all services, marketing, sales, service, et cetera, and we're focused on consumer businesses.

I think everybody is looking at what is the agentic way or we say the autonomous way to deliver those customer experiences, to have AI that can define the rules of how I treat folks and then deliver those experiences and then learn from them and optimize. So that's what we've been after. And obviously, we've increased the breadth of our products, and we think about like kind of the infrastructure that's underneath it. And then back in September, we launched our 2 agents for marketing and for customer service. We've seen really good adoption there. And yes, we're excited to -- the future is autonomous customer experiences, and we're excited to usher that into partners of the business today and hopefully millions in the near future.

Excellent. I mean 1 of the things that's always been impressive and compelling about the story from the get-go is that closed-loop nature, right, that it's not just automating a process for customers is automating a process for customers, letting them understand the results feeding that back into the system to further automate the process. And when we think about that in context of AI and these learning systems, it seems to be a really ripe opportunity for exactly the system that you put together. That's actually a question for Chano. So Chano, you've had a really impressive career. Co-CEO at Workday, leading April to AI through a lot of AI-driven growth. You're on the Klaviyo fBoard. I'm sure there's something that you saw of how you can make the story better. You're not going to join the company unless you see an opportunity to make it better. What was it that you saw on Klaviyo? And how are you going to take what's already a good story that's operating really well, how are you going to make it better?

Yes. Thank you, Keith, and thank you for having us and everyone for joining. I mean, well, first and foremost, I would say, because I had to put it in to be as part of the Board, and I clearly saw that there is a shift coming. And I think I don't need to tell all of you what is the shift about. I really thought that Klaviyo was really built for that future and for the shift, particularly for that infrastructure and that real-time customer engagement opportunities that it provides. And then that was the time to do it, for sure, right? Obviously, it's about people. And I think the world of Andrew is has a really great vision for the future and quite of a unique founder. And I think we can do amazing things together. So it's very exciting about that.

And last but not least, Keith, I spend my career mostly working with large enterprise companies -- we are ready. We know how the infrastructure, we have the foundation to move towards the enterprise and building that market opportunity, which is certainly even larger than the 1 we've been navigating all. So that's really exciting.

Got it. So it's really the intersection of, one, an expansion in sort of the solution portfolio and what you're focusing on. So going from more of just a focus on marketing lens to being the autonomous B2C CRM. And at the same time, expanding out the customer focus of it's not an SMB solution. It's 1 that's now ready to move upmarket into the mid-market and into the enterprise. And those 2 axes enabling a very nice scaling function.

Maybe to start on the TAM and the opportunity side of the equation, what is autonomous B2C CRM mean right? Can you walk us through kind of the vision and how the agentic layer is going to further that vision and enable it to really work for the end customer.

Yes. Well, so here's how we look at our product portfolio. I think there's -- when we think about like traditionally pre this wave of AI, how we thought about software, it's either like infrastructure, we thought about that as primarily stuff you sell to developers and developers used to build applications. There's applications and then the applications kind of get muddled because they're like, wow, some of it's kind of like domain specific infrastructure and some of it is just like a nice polished -- what's great about LLM is I think they've expanded the scope of what software can be. And now it's like, hey, look, all these like human users that are running around using software as tools like that now -- that can be done by artifical intelligence. And that's just a huge new opportunity.

So for us, we look at that and say, hey, for every dollar that's spent on Klaviyo, there's like between $5 and $10 businesses they're spending on like human capital to go run it. And not -- I mean, frankly, particularly efficiently, right? We talked a lot of folks are like, hey, do you think you really know -- do you have a good sense of like what's your customer experience, like whether it's on customer service or marketing should be. No, I don't you guys have best practices. Can you help coaching that, hey, you feel like you're getting to all of your ideas. The answer is like, wow, I'm getting more done, but no, I mean still there's stuff that I don't know or I can't get to.

So we look at that and think, man, so you've got a whole lot field are doing things. It's actually not optimized. They actually could be driving more customer engagement. Well, great. We're going to build agents to go do that. So that's 1 big opportunity. So we have a whole product group that is effectively what we call our autonomy group that is just focused on building these agents that will sit on top of software as infrastructure. And then underneath that, we think about like, hey, what is the best infrastructure these platforms, that software that agents are going to prefer in use when it comes to storing all of their customer data, indexing it, allowing being acquirable in real time than actually using that to communicate so messaging, but not in, not just for marketing, but having conversations with customers, whether it's over webchat or voice or through text messaging, and then what -- how are they going to define the rules and running experiments.

One of the really cool things we've seen now with our customer agent product is now that people have this always an agent that is like good at adhering to the rules of the business, the policy of the business, we're seeing these like CX teams and operational teams. They're starting to experiment with the policies they use to run their business. Like how do they treat customers. For instance, who gets a refund and when. And all of a sudden, we see something made it's so hard to get adherence with that across like a customer experience organization. Well, agents don't have that problem.

And now we can start to experiment and say, hey, 10% of the time when we try something different. And let's see how that impacts things like NPS and retention. So we look at these 2 different layers. It's a autonomy layer, we have a whole product group that just focuses on agents that will play the game of marketing and service and really design and deliver customer experiences for businesses. And then we think about the infrastructure needs to run on. And since that's the thing we were founded on, we built -- we started Klaviyo as a database company that is very good at story indexing consumer data at scale, but making it available in real time or whether it's an agent chatting with a customer or rendering a web page or sending a message. Yes, those are the 2 big opportunities. And we think about that -- that agent layer, I mean, that we think is going to be a bigger business than our current really like software infrastructure business.

And then we also think that agents because they're better users, one of the things we talk about is like a typical software user base has this distribution where you like have a couple of power users that are really advanced. And then you have a bunch of intermediate users and you have a long tail of kind of more novice users. And so you do a lot of work to try to move people up the curve. But the nice part about agents is they just go straight to advanced mode. In fact, they actually beat our advanced users. They're kind of like PhDs at whatever the discipline in and once we train them up. So we also find that they push the infrastructure and they use more of it. So just as an example, like a typical business for us, we don't have a fee-based model, like we charge based on like the size of the business in terms of the number of profiles or contacts or customers it has.

We find that our agents because they're better at delivering customer experiences to those individual consumers, they actually retain more customers. So you end up -- with the infrastructure getting used more. So we look at both of those opportunities. One, we have like a whole business that's going to be even larger than our business today and the acceleration you get from agentic usage. It's most -- I've been because we started Klaviyo -- I think both those things are very big opportunities.

Outstanding. So we've expanded into service, right, and expanded the scope a really competitive environment out there. There's a lot of people who are focusing on the customer service opportunity. There is some really big incumbents, whether it's a sales force or the like. And there's a lot of start-ups who see this agentic opportunity as well. How do you look to differentiate the Klaviyo solution from both the incumbents and like the startups coming into the marketplace?

Yes. Well, we're very good builders. So I mean, no surprise, we kind of put our heads together and think like, okay, well, what does it take to build agents and build kind of a good agent building platform? Like I think that's become table stakes, right? Can you -- how do you train up an agent and evaluate it, deploy it, et cetera, across all the various canes. There's 2 things that we're adding to our customer agent that we think are quite differentiated. The first is we built a set of algorithms, you can think of almost like agents on top of the agents that are good at training up customer agents. And let me explain why this matters so much. Like we've got about 193,000 businesses. I'll tell you like there's probably 1,000 that know what it means to build an agent.

If you gave them the tools, they would know how to train that thing up. And one of the patterns we've seen is there's a lot of this like, well, we'll deploy engineer, well forward deploy engineers or we'll sell services around train these agents up. The problem is like for a lot of businesses, that just immediately price them out of the market. mean I can't afford hundreds of thousands of dollars to train this thing up. One, let alone ongoing cost, right? They're just not at that scale. We actually think there's an enormous amount of latent demand amongst SMBs for customer agents because those are also the businesses that are the least optimized when it comes to customer service. Because who is it? It's the founder of the business, the owner of the business or somebody on the team that's handling these conversations one by one. These are not organizations that are like, yes, we've employed a lot of automation, like we've done about BPO. So we need to help them train up these agents.

And so what we started was we started this program where we're building agents, you back in a coach a trainer, right? You can imagine like your fitness trainer that like basically gets that customer agent for that business into shape. So what does it do? It goes and takes all the information we can find about that business, right, on the Internet -- on the publicly available Internet plus all the connectors that people already have embedded in Klaviyo. It then goes creates basically -- spend the fine example here for a bit, workout routine to put it through its paces and figure out how like strong it is, right? How good is it at delivering customer experience, grades it figures out where it's weak and then tells either goes and fixes those problems on its own or goes back to the user and say, hey, you know what, you're a restaurant, I can't handle all your reservation request because you haven't hooked me into your back end here. So go connect, toast or whatever it is that you're using to manage reservations.

And like -- and now I can answer the -- so literally, almost we have this like video game style interface where you're training up this customer agent who represents your business, and it just gets smarter and better. Like as you give it more information as it learns on its own. And what's really important about this is we think this is important -- this matters just for SMBs. It's also really important for enterprise because enterprises need the agents that are going to be sitting on top of their agent kind of like the boxing trainer that's get whipping it in shape as the business evolves, right? A large enterprise might launch a new product line, a new set of services. they might acquire a company. Something changes and they need to like constantly evolve that agent. That's not a job for human developers to do the way we're doing it today.

So we're running -- I mean, we're sort of a little bit existential for us. We want to serve all 190,000 businesses. So therefore, we have to build these agents that can train up these customer agents. And we think this technology is going to become table stakes and the differentiator in enterprise as well. So that's one.

The second thing is, because we already have our customer database, right, which is -- you think it's like a data warehouse to just optimize not just for analytical queries but also real-time usage, right? You can connect it to it a customer agents, it's not going to go think for 10 minutes. It can respond in milliseconds. Because we already have that, every time you talk to our customer agent, if we have context on you, you can think about, we talk about like memory files when it comes to live ChatGPT or Cloud. We basically have a memory file on that consumer, and we can inject it into the context into that conversation and optimize it. And just like you see, like if you play with these personal AIs, like man, it starts to feel like it knows you, we can do the exact same thing.

So now you can imagine you're getting these signals from our marketing use cases, what are you browsing on a website, looking at it on a mobile app? How are you using those products and services, interaction with our marketing. We then plumb all of that into the customer agent and it produces a way better experience. Simple example, like we have folks that will come back, come to websites where we've enabled web chat through our customer agent, people just stop browsing the site, they'll just ask for recommendations and get spit out things based on their past purchase history because they're already off through our customers agent, our customer can handle that. it's intently a better experience. So I think we're going to find personalization on the customer side, not just generic handling, but personalization is going to be another big differentiator. .

Got it. And then Chano, in terms of taking this platform and 1 of the things that has always been impressive about Klaviyo is it brings the customer a solution. It doesn't bring them a set of technologies, right? And that's I think a necessity for operating in SMB, SMB customers, they don't care about technology. They don't want to deal with technology. They just want a solution to their problem. Does that resonate in the same way as you go into the enterprise? Or does the go-to-market have to change the presentation of the solution have to change to make this amenable and make it attractive to a larger enterprise customer.

Yes, great question, Keith. What we're seeing with the enterprise customers is they're looking for 1 single unified platform that really powers that entire customer relationship because otherwise, they have too many different flows and architectures and they don't provide that much efficiency and they are costly. Let me give you a couple of examples, right? When they have that kind of retrofitting into generative flightwheel effect and understanding of the market -- of the customers as a whole with that kind of memory file and understanding the consumer that Andrew was talking about and we help them out provide real-time information with some of our automated flows. Those produce 10x more revenue per customer that basically static customer campaigns will produce, right?

So that talks a little bit to the power of the -- clearly, on the infrastructure, right? It resonates, obviously, in the enterprise, I think we commented that we doubled the number of customers to 1 million ARR plus in Q4 last year, and we have our largest enterprise pipeline ever. So really, we are confident that we can solve for that problem.

Excellent. And then, Amanda, to bring you into the conversation, in early 2025, you guys implemented some pricing changes, billing based on total active profiles and auto downgrade feature, flexible sending options. As we go more into the agenetic opportunity, are there more pricing changes that need to take place? Or are you comfortable that you will positioning to accrue the value of what edges bring into the equation here?

The beauty of our business model is that we do not price based on seats. We have never priced based on seats. We price based on the value that we provide to our customers. So our mission has always been that we are going to help you take your most valuable asset, which is your customer relationship and make that even more valuable because we're going to help you with technology, make it feel like every single customer is the only customer that, that business has. And by personalizing those experiences by as Chano said, making them more automated, we increase the value of those profiles. And by making each messaging and each communication and every experience more valuable, we increased the demand for it.

So the pricing going forward will continue to align to that point of view, which is as we help customers generate more revenue and more value, we all align to that. So in the case of marketing agent, which Andrew spoke about, it will be priced based on the number, roughly the usage that you have and how are we able to drive really great outcomes with that usage. So it will be -- think about it as roughly equivalent to tokens. But the most important thing is that, again, if that usage is driving better consumer experiences, customers are very, very willing to pay for it.

Got it. And if we think about that and take it up 1 level into the 2026 revenue guidance, you talked about a minimal contribution from the newest slate of the AI products and the service products. Can you help us better understand the adoption curve -- like what should be our expectation for the adoption curve? Klaviyo service was only went into GA back in September 2025. The agents now coming into the marketplace. How should we think about that adoption curve?

The way to think about that adoption curve is off to an incredibly strong start. So service, for instance, is our fastest-growing product in our company history, even going back to looking at text, which has been a really significant product for us over time. And today, almost 30% of our SMB customers are using that tax product. Service is off to an even faster start what's driving customers to adopt it is that as they get exposed to the product, they're seeing the revenue that it drives and they're seeing the benefit and really ingraining it at its workflow. So one of the things we're really excited about on the marketing agent side is many of the customers who are adopting marketing agent, it's become their default. It's become the primary way that they're building campaigns because they see that it drives back to better outcomes.

One of our customers, Adelson is seeing 50% higher revenue per campaign from the campaigns that they're generating with marketing agents. And then similarly, on the customer agent side, the customers who are really adopting it into their workflow is becoming the majority of the way that they interact with their consumers. And so as it becomes more embedded and customers are seeing this revenue from them, we're really seeing adoption pick up.

Got it. So we started to already see kind of the benefits of multiproduct adoption. I think you guys talked about ARR now coming from multiproduct customers, 15% from customers adopting at least 3 products. Any kind of view on where that's going to go over the next 2 to 3 years? And Chano, how could you kind of further accelerate that sort of platformization, if you will, of getting these customers to buy into the broader capabilities of what Klaviyo able to bring.

Yes. Obviously, as I said before, I believe on the power a unified platform, and we're going to be setting up things that will be much more at hog in terms of really focusing on upfront on those problems for those largest customers in terms of upselling and cross-selling motions, clearly, thinking much more in advance in terms of pipeline and qualification of those opportunities and what are the ones that we should be participating on. But as Andrew said, the opportunity for some of these products is potentially 5x to 10x what we have today in terms of the current opportunity.

So typical customers may start more on e-mail and text, but we're seeing much more adoption moving more rapidly, and we're going to have some cross especially things that are going to be supporting some of those motions going forward. And we're closing the loop much better between the value proposition that is coming from product marketing and sales that we were doing before as the teams are getting more how do we drive dynamics that work in the enterprise market.

And a big part of what makes that sale so possible is the value that our customers see from it. Just a couple of examples to help bring that to life, we have 1 brand we work with who's in the DTC space who unified their e-mail, their text messaging and their analytics on Klaviyo and they saw their time to generate campaigns decreased by 60%, and they saw their total cost of ownership decreased by 30%. So they're really seeing the benefit of having everything on one platform. But even more importantly, it's the uplift that it helps to drive from them.

Customers who have more than one product with us are seeing much higher revenue coming from it, even higher than just adding 1 plus 1. It's almost a 1 plus 1 equals 3 situation here. And a great example of that is a makeup brand who we work with, who again, unified e-mail, text messaging, analytics and in their case, service on it. In service, they're seeing high 70s resolution rate, and they saw a doubling in their AI-assisted revenue. So we love it when unifying the platform higher revenue for our customers.

Got it. So -- and given sort of the -- given the environment that we're in, I mean, software has been under pressure through most of 2025, 2026, it probably even accelerated. And a lot of it is on concerns about cloud work in terms of tool use is about the ability to DIY, the Amazon CTO tweets that he developed the CRM system over the weekend. I'd like to ask him if he wants to support that CRM system every week and for the rest of his life, but that's another question. But all of this has weighed on multiples in software and multiples for Klaviyo as well despite no degradation in terms of the fundamentals, which is frustrating for us, and I'm sure even more frustrating for you guys. But Andrew, where are investors getting it wrong, right? Like why is DIY not a risk? Why should we not head more signal from what the Amazon CTO is tweeting out about what you can do with these vibe coating tools?

Yes. Well, look, first of all, we've always taken a very long-term view like, hey, what do customers care about like where is technology really going? So I go back to 2 things, like 2 things we think are like very persistent teams. One, is, hey, we now have the technology that you can build agents that can do the work the teams are doing for. Like that's just a whole new category of software that is going to be won or defined, right? Literally, I mean, if not certainly years like certainly in probably the next couple of months, right? And I think we're going to find out also what -- I think one of the things that's tough is, hey, what software is actually like differentiated infrastructure? And what's like a nice code of pain on top an Excel spreadsheet.

And I think we're that's focusing you had to kind of figure that out. But like I think that's something that we feel very confident. It's like, oh no, no, what we build in terms of our customer database, what we do around messaging is like, hey, you couldn't just go replace that. So your comments on like yourself actually experiment that we run internally to kind of prove this out actually, I think in the future, very near future, you're going to get a lot of agents that are actually making the decisions about what software to use. It's not going to be humans doing eval. It's going to be agents -- tell me what you think is the right stack. So 1 thing we do is we actually set up some agents, some coding agents and others. So like, hey, your business, and we do this different sizes, you're just starting out or you're a larger enterprise. And hey, you want to set up like you want to build your software stack so that software defines the entire customer experience.

So you're going to want something that is this always on agent, API, voice, text, et cetera, that is our customer agent or something that looks like that. You want something that's going to handle marketing, proactive messaging, something that personalize and customizes mobile applications, the website, even maybe in store experiences. And you want some underlying database that kind of makes all that consumer data acceptable, right? And store this, you have sort of central source truth, right? We tell us to go out and go build that. And we say, like, and by the way, I want to use as much open source as you can right? I mean do the best high-quality job, but dump down stack as much as you possibly can. And what we find consistently when you send now coding agents can code for hours and hours, what they go out to do is they basically try to go replicate our data platform and they quickly recognize they're like, oh, so -- why can't use a data warehouse or data lake, it's actually too slow. I can't use it off-the-shelf database, like it's not flexible enough in terms of the query.

Okay, you know what I'll do is I'll build this hybrid stack that basically rebuild what we try to do, right? Now it doesn't have the insights like the query patterns that we've seen, right, and that we have these routing systems that can optimize for that. So I think there's a little bit of an experiment that folks need to run like that of, hey, how really like trivial or nontrivial is that underlying infrastructure. And so we feel really good that what we've done on the database side in terms of real-time access to customer data and it's like attribution lube built in, plus than what we've done with messaging around identity and compliance really matters.

So on top of that, we're actually -- we're trying -- we're now -- we're giving a lot of work to expose that agent so they could pick us from the start or I think a lot of RFPs now will be done agentically. And then also, we have our agent that we're running that we'll do marketing, right? It's our marketing agent. We'll just go define the marketing strategy for a new business or audit the market strategy of some of our largest customers. And again, it's kind of reasons at a PhD level because we expose it to all the marketing data we have here is what works best. And then we tell it pick whatever underlying technology you want in terms of like how would you access customer data, how would you build marketing in these customer experiences tell us what requirements you need for that system.

We're actually using those agents not only plumbing back into obviously our infrastructure, but we're telling us like where are there gaps in what we built that you would want as an agent, if you could have it. And it's actually pressing like hard. So I'll give you an example. Just e-mail at the medium actually allows for a lot of interactivity. We're not used to this because very few companies actually expose it. But you might have bumped into like a Google spreadsheet or Google Doc and last were commenting in line and things like that. It's actually any business can do that because most people don't have the time to be with you. Our marketing agents will happily build interactive tests and they convert way better, right? But don't call back to our system and say, hey, it'd be really nice if you could add support for these different content types and maybe some components like this, so the user can do a last mile editing. And so that's now become part of our road map for our infrastructure.

So we're actually using agents almost as like a customer advisory panel to feed back into the road map for our core marketing and now customer service infrastructure teams. So I think -- I would look for companies that are having kind of loops of like they're trying to build both the infrastructure layer and the agent layer and getting them kind of work together to make both parts better.

Got it. So Amanda, it sounds really cool, but it sounds like a lot of tokens, right. And in FY '25, you saw operating margins come under -- gross margins come under some pressure. How should we think about that gross margin line on a go-forward basis? Is this a fundamentally kind of different COGS equation going forward as we get more and more of agentic layer on top of the infrastructure layer?

Sure. I would think about 2 things when it comes to gross margin. The first is that we have a lot of levers to play with. We have different products in the portfolio as we expand the product portfolio and we're offering new products that enables us to mix out the customer relationship in a way that overall is profitable. And the second is that as we scale, we are getting increasing benefits from our own scale and our own infrastructure, which helps a lot. But if you take a step back on gross margin, the way that we really think about it within our business as we think about almost miniature unit economics for each product line and each 1 that we're offering. So it's not just about the gross margin, it's also about what's the right R&D model to support that. What's the right customer acquisition model to support that. And does each product that we're selling have strong unit economics.

So in certain ones, you may have higher -- or sorry, lower gross margin but they also come with lower customer acquisition costs because as Chano said, they're being sold into the existing customer base. And they come with huge expansion potential because they're driving those better outcomes and that higher revenue. And our customers almost see our business as a revenue optimization engine for them. So if we can show them those better outcomes, they continue to expand to the point where they're seeing great ROI. So we think about that gross margin not in isolation, but really for each product, making sure that it's delivering the right economics for the long term.

So then if we abstract back, we see the results of that. Operating margin is up 170 basis points. You're guiding to another 100 basis points of margin expansion in the year ahead.

So we're running short on time here. There's a lot more to talk about. So maybe just as a sort of wrap-up question, there's so much innovation taking place at Klaviyo right now. There's expansion of the kind of the market opportunity. As a fundamental analyst, I always want to focus on the fundamentals and the stock price will take care of itself. If we're looking for the key indicators, the key performance indicators that is working, that this is really taking off, what should we be looking for in your results? What should we be looking for in terms of the KPIs to show us that, hey, listen, the fundamentals are following through on the opportunity?

Yes. Well, I'll give you a couple that we look at internally. So -- and we'll start to share more of this as we go. One is we think this agent opportunity is very real. And what we've seen in some disciplines, coding, et cetera, is like is coming to all parts of human labor, but let's say, digital human work. So you mentioned like, hey, multiple products. I mean we actually think about like, yes, multiple products, but like today, it's all multiple products or primarily multiple products through our infrastructure, right? I mean we have a lot of adopters of our customer agent.

We actually think it's like by this year, this is the year that every business, small business and enterprise will adopt a marketing agent that helps augment what they're doing, right? The PhD that sits in the room and helps the whole team be better. And then two, this is the year that everybody adopts like a customer agent for their business. So last year was the year of personal AI. This is the year that like every business doesn't just have a website. It actually needs an agent that represents them that's always on.

I think both of those are going to grow quite quickly. And so we actually look at like the multiproduct adoption, but really focused on like how many agents of ours have customers adopted. So yes, stay tuned. We've seen some good growth so far, and I think there's -- this is going to be the year that really takes off.

Amazing. Great story going on at Klaviyo. Congratulations on the success, and thank you for coming and sharing with us.

Thank you.

Thank you.

Thank you.

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the Klaviyo's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Ryan Slane, Director of Investor Relations. Ryan, please go ahead.

Thank you, and welcome, everyone. We appreciate you joining us. Joining me today are Klaviyo Co-Founder and Co-CEO, Andrew Bialecki; CFO, Amanda Whalen; and joining us for the first time, Co-CEO, Chano Fernandez. Welcome, Chano. Andrew, Chano and Amanda will share their views on the quarter and fiscal year, 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 those 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 intro. We're ready to begin. Over to you.

Thanks, Ryan, and thank you all for joining us today. 2025 was a breakout year for Klaviyo. We grew revenue by 32% to $1.2 billion and delivered 14% non-GAAP operating margin. We're now serving more than 193,000 customers in over 100 countries, and we saw strong momentum across every part of the business, especially in our enterprise customer base and internationally.

The future is autonomous customer experiences, where every interaction between a business or organization and its consumers will be defined and delivered by AI. Every marketing message, every customer service request, every web visitor, mobile session and even in-person experiences will be designed for the individual consumer and delivered autonomously.

To allow any business to deliver autonomous customer experiences, we've built the autonomous B2C CRM. Our technology marries the customer database we founded Klaviyo on and our robust marketing messaging infrastructure with agents for marketing and customer service that will autonomously create, deliver and optimize customer experiences on behalf of a business. And this agent layer that is designing and delivering experiences to billions of consumers is trained from our deep expertise and the trillions of experiences we've delivered for businesses already.

Because of these 2 things, proven infrastructure for real-time customer data and personalized experiences and now agents trained to execute marketing and customer service autonomously, we are powering the era of autonomous customer experiences and our results are showing it. In a year defined by rapid transformation, we drove 32% revenue growth for Klaviyo, with every quarter growing 30% or more year-over-year. Klaviyo customers are growing, too.

And in Q4, our 10,000 largest customers grew their revenue, also known as GMV, by 11% year-on-year, which was roughly twice as much as the broader market's growth.

Before I go deeper, 3 points to keep in mind. First, AI is making it easier to deliver high-quality experiences consumers want, not generic experiences, but ones that delight and convert, and we'll share a few examples of this today.

Second, AI is improving the quality of experiences via personalization and training on past performance to meet the ever-increasing bar to wow consumers. We've hit a point where content and experiences generated by humans alone are not enough. Using AI is required to keep consumers engaged.

Third, AI is making experiences more accessible. AI has introduced new modalities like the chat and soon to be available voice capabilities of our customer agent that offer new services for consumers and businesses to meet. The upshot is that AI is an accelerant and opportunity for our customers and for us.

Our customers and our incentives are well aligned. We're an engagement and revenue engine for them, and we sell Klaviyo based on engaged consumer relationships and outcomes, not on feeds. AI continues to improve the speed, quality and places consumers and businesses meet. This means as our customers around the world look to use AI to meet that moment, we are scaling with them.

Our ability to be the agent and the platform of choice finds its roots in how our platform was built. This is our durable advantage. At the core is the database and data infrastructure, specifically built to handle the scale of consumer data and indexing and richging through machine learning and serving hundreds of thousands of requests per second with millisecond latencies.

It allows Klaviyo to ingest, aggregate and govern first-party data in real time, so every consumer behavior, transaction, preference and consent is available to our users and now to our agents to deliver the best possible consumer experience. That foundation is coupled with our marketing platform, which not only provides high throughput, scalable systems to render messages, deliver them with excellent deliverability and enforce compliance, but also integrates with our customer data infrastructure to make last mile personalization decisions on content, incentives, timing and channels at the moment we deliver a message or experience to an end consumer. Speed and scale matter.

By keeping consumer profiles continuously updated and querable, Klaviyo turns real-time consumer activities into tailored messages and experiences delivered instantly. This architecture enables a fundamentally different consumer experience. Here's how it works in practice. When say a consumer browses their favorite restaurant website, books a reservation, uses our chat agent to make a modification to that reservation, buy a gift card for a friend while they're there and then lays a review, Klaviyo is compiling richer context with every interaction, who they are, what they browse, products and services they consume and how they prefer to be contacted.

All of this is stored in a single profile. We also expose that progressively built profile at each step, and our system uses that context to deliver the optimal experience. That live context is immediately available to the system, allowing an agentic customer representative to answer the question, recommend the right product and follow up with a personalized message on any channel, all in real time and all without switching systems or losing context. This means the system is compounding its learning. The more our customers use our system, the smarter it gets for them and the smarter it gets for the entire ecosystem of customers. Last year, Klaviyo processed 0.5 trillion customer interactions across 8 billion consumer profiles, translating into 3.7 billion daily signals, all feeding decisions and actions that help our customers engage more precisely and drive stronger outcomes. That same foundation fuels the agent layer.

We have launched agents, including our marketing agent and customer agents. We've also designed the platform to be open, meaning that customers can use the agents Klaviyo builds or bring their own, whether it's external models like Claude interacting through an MCP server or ChatGPT through the Klaviyo app, any agent, any model with all the context from one platform.

Our own agents are deeply grounded in domain expertise earned from hundreds of thousands of customers and trillions of data points that generate highly specific revenue-driving output. That combination ensures they don't generate generic output, they make impactful decisions that are trained from relevant compliant and effective customer experiences. Bringing this all together, Klaviyo's autonomous B2C CRM is like the central nervous system for AI-driven consumer engagement, connecting reasoning to real customer context and turning it into actions across channels. The result is clear customer impact.

Consumer interactions running through Klaviyo generate measurable revenue for our customers, what we call Klaviyo attributed value for KAV. In Q4, KAV continued to outpace business revenue, underscoring the value of running consumer engagement on one unified platform. Customers around the world are already putting the autonomous capabilities built into Klaviyo to work. Marketing agent is a clear example. More than half of the campaigns created by customers using marketing agent are now generated by AI, with many of our customers' agent-generated campaigns performing as well as and often better than campaigns created manually while taking significantly less time to launch. A great example is Adelon.

They're an online skin care and beauty store where growth depends on frequent, relevant communication. Using marketing agent, a small team can create and send fully on-brand campaigns in minutes instead of hours. The results have been remarkable. Open rates increased by 50% and revenue per campaign grew by 40%, while allowing the team to run more campaigns without adding additional headcount. We see the same positive pattern in service.

Customer agent is live and handling real customer conversations, answering questions, resolving issues, recommending products and increasingly supporting transactions, all using the same integrated data model as marketing. Since launch, resolution rates have increased by 20 points with monthly resolution volume increasing by more than 50% since Black Friday, Cyber Monday. [ LifSestraw ] is a great example. Using customer agent to resolve customer queries with real-time customer and product data, LifSestraw achieved a 111% increase in AI-generated sales from agent recommendations and an over 100% increase in average order value and a 75% resolution rate over the last 90 days.

Many of these interactions involve technical questions that can't be handled with scripted responses and require deep contextual understanding of their product catalog. Next, we're expanding what these agents can do and where they operate, adding more channels with e-mail and WhatsApp and beta and voice coming soon, along with more skills and more control while keeping everything grounded in the same data, delivery and measurement infrastructure. Marketing agent and customer agent reinforce one another.

Service interactions improve marketing decisions and marketing activity improves service outcomes. As usage grows, that feedback loop is strengthened. This is the foundation we're building on, a system that scales globally, improves with use and delivers measurable outcomes for our customers.

When people think about AI at Klaviyo, they should think about it in 3 ways. First, AI is embedded directly into our infrastructure. It uses first-party customer data like behaviors, purchases and engagement to predict how customers are likely to act and makes those insights immediately usable across marketing, service and other customer interactions.

Second, AI sits on top of that infrastructure in the form of agents that do the work of marketing and customer service, creating campaigns, answering questions, resolving issues and driving transactions using the same underlying data and execution system.

Third, Klaviyo is an open platform embedded in the broader AI ecosystem, providing the real-time customer context and infrastructure LLMs require. Taken together, this gives us a clear view of where customer engagement is headed. Businesses are moving towards more autonomous experiences. As they do, interaction volume and complexity increase, driving demand for infrastructure that can unify, execute decisions and measure outcomes in one place. That's the role that Klaviyo plays.

We've built a platform that coordinates data, decisions and execution across the entire customer life cycle, making autonomous engagement practical, measurable and scalable for businesses of all sizes. The next era of customer experience will be autonomous, powered by unified data and real-time action. We are making that future accessible to the world's leading consumer brands. I want to thank our customers and our partners for their trust, and I want to thank Klaviyo's around the world for their dedication to our customers. We're excited to continue building, investing and leading as we bring our autonomous B2C CRM platform to businesses of every size.

And with that, I'll turn it over to Chano.

Thanks, AB. I'm excited to join you, and thank you all for being with us today. One month into the role, it is clear to me that Klaviyo is built for where the market is going, real-time data, intelligence that learns from outcomes and actions across marketing and service that's increasingly autonomous. I've spent my career scaling enterprise technology businesses, and I joined Klaviyo video because I see a B2C CRM category transition happening and a team that knows how to win it.

Let me start with enterprise. Enterprises are rethinking how they run customer engagement because their own customers' expectations have changed. They want personalization immediacy and experiences that feel seamless as they move across channels. When I talk to these companies, I hear a consistent need. They want one platform that can power the entire customer relationship. What they have instead are separate databases, separate customer-facing tools and separate decision engines that weren't designed to work together.

The result is slower decisions in consistency and personalization that breaks down as their customers move across channels. The real cause of that fragmentation is yield. When data decisions and executions are disconnected, companies leave revenue on the table. This is a massive opportunity for Klaviyo, one we're already capturing and are laser-focused on expanding by proving that consolidation produces results.

A great example is Symbiotica, a natural supplement brand. They leverage segmentation tools during the holiday season to focus on their most engaged audiences. Using Klaviyo, they reduced their e-mail volume by 31% year-over-year, while increasing total revenue by 44%. This strategy nearly doubled the revenue per recipient.

Another great example is Proper Hotels, which selected Klaviyo as it scaled its luxury hospitality portfolio to gain deeper visibility into its guest database, a stronger attribution across channels and more robust reporting than traditional hospitality CRMs could provide.

Since migrating to Klaviyo in October, Proper has seen overall CRM revenue grown by more than 200% year-on-year. Stories like this illustrate why momentum is building and why large consumer businesses are relying on Klaviyo data, intelligence and action. Klaviyo's continued investment in AI-driven capabilities, our MCP server and integrations with LLM further reinforce our role as a long-term infrastructure partner, enabling more dynamic segmentation, faster experimentation and increasingly personalized life cycle messaging.

We have our largest enterprise pipeline ever and it's across verticals and geographies. Importantly, we are seeing this pipeline convert to a more repeatable motion, clearer stage gate, tighter product alignment and faster time to value proof. In fact, the number of customers generating at least $1 million of ARR doubled last year.

Inside Klaviyo, our team is ready for this demand. Over the last several months, we have put more structure into how we work larger opportunities. We're aligning product, sales and engineering earlier in the process. This approach is allowing us to scale our motion in a repeatable way. We're also continuing to expand our partner network. This includes an exciting new partnership with Accenture, where we are combining Klaviyo Autonomous B2C CRM with their services to drive faster and more integrated customer outcomes for some of the largest brands in the world like Stanley 1913.

We're also strengthening leadership across our go-to-market team. We hired a new global Chief Revenue Officer, Eric Fearday, who I know well and who brings significant experience in enterprise deals. Several key sales roles are also now held by sales leadership with deep enterprise experience.

At the same time, we are preserving what makes Klaviyo unique, which is a product-led culture and an engineering mindset that moves fast and solves customer problems. We tell prospective customers, you can dream it, you can build it own Klaviyo. International is another area where we're seeing increased momentum.

Revenue outside the Americas now represents more than 1/3 of the business at the end of Q4. During the last quarter, Klaviyo partnered with [ Kicoilano, ] Italy's #1 makeup brand, operating more than 1,300 retail stores across over 70 markets worldwide. Service is becoming a meaningful contributor in these markets as well. All of this ties to where customer engagement is going.

The shift towards autonomous, conversational and agent-driven experiences is happening faster than we could have anticipated just a few years ago and the opportunity that lies ahead is large and exciting. Everything I've seen since joining reinforces my belief that the opportunity ahead is great and that we're still in the early stages. We are building to win.

Now I'll turn over to Amanda to walk through our financial performance.

Thank you, Chano and AB. 2025 was a defining year for Klaviyo and a clear reinforcement of our position as the autonomous B2C CRM that powers more valuable customer experiences. We delivered strong growth, expanding profitability and record free cash flow.

Our peak season performance demonstrates that businesses rely on Klaviyo to understand their customers in real time and act instantly across channels. For the full year, revenue reached $1.234 billion, up 32% year-over-year. International revenue growth accelerated to 42%. Our largest customers, those contributing more than $50,000 of ARR, grew over 37%.

Our new service category is the fastest-growing product launch in our history. And this broad-based strength drove NRR to 110%, a year-over-year expansion of more than 200 basis points. Q4 was a standout quarter. We delivered revenue of $350 million, up 30% year-over-year, driving our annualized revenue run rate to $1.4 billion. Q4 was defined by the shift toward autonomy and the validation of our model.

Customers increased spend with us because we are the engine of their growth. Customers are leveraging data and AI to move from broad-based volume to precision targeting, focusing on smaller, higher intent audiences. This shift drove superior outcomes for our customers because an automated flow drives on average over 10x more revenue per message than a static campaign.

We saw particular momentum in mobile with over 29% of SMB+ customers now utilizing text and WhatsApp. Let's look at our growth engines. We are successfully delivering on our growth strategy by adding more products and channels, more countries and larger customers. AI acts as a multiplier, accelerating our momentum. In Q4, each of our growth engines delivered meaningful progress. This dynamic accelerated our NRR to 110%. NRR strength was driven by expanded usage of our e-mail and text products, cross-sell of text messaging and WhatsApp and the scaling of marketing analytics and service.

There was also contribution from the profile enforcement change we made in February. Service is on the steepest adoption curve in our company's history. From $1 million businesses to $100 million enterprises, high ROI personalization and real-time action resonates at every scale.

The data confirms the success of our multiproduct strategy. 60% of our ARR now comes from multiproduct customers. With consolidation accelerating, over 15% of our ARR now comes from customers adopting at least 3 products. This mix continues to shift upwards as brands recognize the strategic value of unifying on a single platform. Half magic demonstrates this value. By consolidating marketing, service and analytics on Klaviyo, this fast-growing beauty brand drove a 5x increase in repeat purchasers and 110% growth in automation revenue over 12 months, plus 2x higher average order value from orders attributed to our customer.

We are aggressively expanding our addressable market. Q4 was a standout period for mid-market and enterprise momentum, highlighted by wins, including Kico Milano and Bayer and expansions like Taylormade and Nine West. Our customers with greater than $50,000 in ARR increased by 37% year-on-year to 3,912. We added 349 new -- net new 50,000 customers in the cohort, beating our previous record by over 25%. International is strong with revenue outside the Americas growing 41% year-over-year in Q4, led by strength in Italy, Spain and Portugal, alongside traction with global brands like Beer and Kico Milano.

Our business model is fundamentally aligned with customer success. Because we price based on the number of active profiles and usage rather than seats, our revenue scales naturally as customers use more data, adopt more tools and drive more value. As customers integrate AI-driven workflows, interaction volume increases flowing through our platform and deepening the alignment between customer value creation and our long-term growth.

Turning to our financial performance. Non-GAAP operating income for the quarter was $51 million, representing a 15% non-GAAP operating margin. This reflects a 900 basis point expansion year-over-year or 400 basis points, excluding the impact of last year's bonus implementation. We delivered a non-GAAP gross margin of 73% in the fourth quarter, consistent with the anticipated seasonal mix shift toward higher text messaging and WhatsApp volumes.

Our underlying infrastructure efficiency is providing increasing leverage. This operational scale significantly mitigated the margin impact of text messaging and WhatsApp, resulting in a sequential improvement in the year-over-year gross margin trajectory throughout the fiscal year. Operating discipline remains a priority. Non-GAAP operating expenses were 58% of revenue, our lowest level since the IPO. AI is driving meaningful internal productivity, enabling faster development cycles without commensurate headcount growth.

Free cash flow surged 61% year-over-year to $87 million. This was driven by strong flow-through from operating income and record collections, highlighting the high quality of our earnings. For the full year, the strength of our business model is clear. Non-GAAP operating income was $169 million, a 14% non-GAAP operating margin, which was up 170 basis points year-over-year. We delivered a free cash flow margin of 16%, continuing to outpace operating margins. And we surpassed $1 billion in cash on hand for the first time. Momentum heading into 2026 is strong, and we are raising our full year 2026 guidance.

We now project revenue between $1.501 billion and $1.509 billion, representing 21.5% to 22.5% year-on-year growth. This is driven by high-quality expansion within our installed base and the continued scaling of new products. Importantly, our 2026 outlook is derisked. It assumes minimal revenue contribution from our newest AI and service products. We view these innovations as embedded upside that reinforce the durability of our growth runway.

We expect continued operating margin expansion. For 2026, we project non-GAAP operating income of $218 million to $224 million, and non-GAAP operating margin of approximately 14.5% to 15%. Our business model enables us to reinvest in growth while simultaneously delivering profitability. We are a growth company who remains disciplined in striking the right balance, leveraging our operational rigor to fuel reinvestment, ensuring we capture the opportunity ahead and deliver growth over the long term.

For Q1, we expect revenue of $346 million to $350 million, representing growth of 23.5% to 25% and non-GAAP operating income of $50 million to $53 million or a non-GAAP operating margin of 14.5% to 15%.

On linearity, we expect revenue similar to 2025, weighted towards the second half due to seasonality and product ramps. Operating income will also follow a similar first half and second half cadence as 2025. As our business continues to grow and our scale increases, our visibility into the core has sharpened. Our outlook reflects high confidence in the baseline while maintaining a prudent approach regarding the timing of upside from new initiatives.

In summary, Klaviyo is ushering in the era of autonomous consumer experiences with our market-leading B2C CRM. We are the engine helping businesses turn real-time data into intelligence and action. Customer experience is already becoming autonomous, unified and real time, and Klaviyo is the actionable infrastructure powering that shift at scale.

Before I open it up to questions, I want to leave you with 3 key takeaways. First, AI increases the speed, quality and reach of consumer engagement, and customers are relying on Klaviyo to deliver that engagement. Second, our advantage is structural. Our infrastructure is what allows agents and AI tools to operate consistently as volume and complexity increase. And third, our model is built for this moment. Klaviyo is a revenue yield engine. As AI increases, the volume and sophistication of consumer engagement, value creation and our growth scale together.

With that, we'll open up the call for questions.

[Operator Instructions]. And your first question comes from Ryan MacWilliams with Wells Fargo.

This is Cyrus on for Ryan. What was the impact from the portfolio enforcement change in the quarter? And I just have one quick follow-up on SMS.

Sure. Amanda, can you ask the question of portfolio change?

The portfolio enforcement change, yes.

Yes. In NRR, if we take a step back, there's 3 big impacts or 3 big drivers of NRR. The first and largest is the impact of growing usage of our platform across our e-mail and SMS products. The second is increasing cross-sell of our text messaging and newer products, including marketing analytics and service.

And then we did have impact on -- or contribution from portfolio or the profile enforcement that happened in February. But that was the smallest of the 3. What we're really proudest of this quarter is the way that our customers are using Klaviyo to drive higher quality outcomes. they're seeing increases in their returns that they're seeing on each message because they're doubling down on automation and doubling down on high-value messages that drive with those automated flows up to 10x more revenue per message compared to a more static campaign.

We're also seeing strong success in that cross-sell with over 29% now of our customers in the SMB Plus category using SMS and our text messaging products. And service, as we've said, is off to a really strong start. So multiple levers contributing there to NRR over the coming year.

Perfect. And on SMS, how did SMS perform in the quarter versus expectations? I know the Black Friday, Cyber Monday statistics you guys put out were very strong. So how did that compare with your internal expectations? And how can we think about that going into 2026?

Yes, I can take that. So as Amanda said, people are getting more out of the profiles. They're building better relationships. So that's causing the store more. But SMS is very strong, some of the things you cited. One thing that's happening with text messaging is we're undergoing a real transition here from SMS to RCS, which allows for much better experiences. So you can think about branded accounts, the ability to embed richer media, carousels, even take actions directly from within a text message. So we look at that as there's a lot of upside there.

One thing I'm very proud of our team is we've gotten close to customers, and we've really designed some really compelling experiences where text messaging, I mean, not only can you now even say, browse entire almost website, a whole catalog we're getting close to where you even almost say buying decisions directly from RCS and text messaging.

So I think there's a lot of upside to that channel. And in parallel, we launched WhatsApp generally in the last few months. And similarly, while WhatsApp is used more internationally, we're seeing a very similar pattern. The types of experiences that you can build, again, with richer media, allowing people to browse more of, say, products and services directly from a message or from a thread, that's working really well.

And then the last thing, we talked about customer agent and this idea of having this helpful assistant that's always on that's powered by Klaviyo. Those now integrate directly into text messaging and WhatsApp. So we're also seeing a lot of consumers are asking follow-up questions and that's driving usage of both our customer agents as well as more adoption of those channels.

And obviously, consumers are going to go where they can get the best experience. So we're kind of normalizing this idea that you can have a conversation with the business not just over a chat interface, but also in your text messages or inside of WhatsApp.

Your next question comes from the line of Elizabeth Porter with Morgan Stanley.

Awesome. This is Katie Keyser on for Elizabeth. AB, maybe on the service opportunity, can you give us a little bit more visibility into adoption and engagement trends by cohort, specifically when we're thinking SMB versus mid-market versus enterprise? Is adoption there skewing more towards the agent side relative to the help desk in any of those cohorts?

And then maybe just translating that into the model. Amanda, definitely heard you that the guidance is derisked, but just any color you can provide on what level of service contribution is actually embedded within the '26 guide would be great.

Okay. So I'll take you a little bit of what I'm hearing from customers, and I'll Amanda comment on the embedding into our model.

So the first with service, we talked about customer agent. Our belief is that every business is going to have this digital representative, this customer agent. And we think Klaviyo is very well positioned to offer that because of the data set that we have around who your customers are for the businesses that we work with and our ability to store that data and access in real time, and also just the broad set of customer experiences that we've already powered and using that to train and make our customer agent better for each of the businesses that we serve.

So we mentioned some examples of businesses that are already adopting customer agent. We're seeing adoption from our entrepreneurs and SMB customers all the way up into our mid-market enterprise customers. Just as an example, I was talking with a customer the other day, the high-end fashion brand, and they were telling a story about how their customer agent closed the sale for $800 dress without anybody -- any interaction from anybody on their team.

And they're starting to see that as the new normal. So we're very excited about this. I think adoption, when I talk to customers, there's really 2 rate limiters, and we're working on both of these. The first is they say, hey, they're not sure how to train up an agent. So when you think of a lot of companies that are understanding how to do that. We're actually building technology that, one, will teach you how to do that, but also will automatically do it. So out of the box, our agents are already really, really good. That's especially important if you think about for entrepreneur SMB customers and gives us a good platform for our mid-market enterprise customers where they can get a really high-quality agent in a very short amount of time.

And the second one is that they're nervous about like, hey, the quality of the response. So again, product that we're building in is the ability to, frankly, generate a bunch of simulated conversations and show those to our customers so they can get comfortable that the quality is really high. So as we continue to push on the product and our ability to deliver that, I think we're going to find that everybody is going to have a customer agent and obviously, we want it to run on top of Playbook. Amanda, do you want to comment on the guide?

Yes. In terms of the guide, there is minimal contribution from service built in. The way that we think about it is it's embedded upside in the model. We're seeing the strong traction and the strong customer response that AB just talked about. But we'll build that in over the course of the year as we see the results there continue to build and grow.

We're just early in that product adoption cycle. So if you take a step back and think about our guide for next year, we're going into fiscal 2026 from a position of strength. Our guide is a strong baseline that reflects the momentum that we're seeing across our core business in international, in mid-market and enterprise and with new products that we're continuing to introduce. And that has the opportunity to only continue to accelerate as we gain momentum from not only our new service products, but also the new AI products that we're introducing as well.

Your next question comes from the line of Gabriela Borges with Goldman Sachs.

AB, I noticed throughout your prepared remarks, there's this theme about context and some of the proprietary context that Klaviyo has. My question for you is, what is the limiting factor to an LLM or an AI native company spinning up alongside of you and somehow replicating or otherwise accessing that context through API such that it diminishes your motor barrier over time. Maybe just a little bit on the limiting factor to someone else abstracting your context.

Yes. Thanks for the question, Gabriel. So I get this a lot of, hey, how easy is it to rebuild Klaviyo or what gives you that advantage? So let me say this, like we've looked at -- we designed Klaviyo to be ready for this agentic era or as we talk about this, everybody is building agents and this autonomy that's going to sit on top of the infrastructure that exists. There's 2 things that give us a lot of confidence here. The first is we already have this great data set. We talked about 0.5 trillion data points just last year, trillions over the course of Klavio's history and obviously, it's expanding every single day. We said almost 4 billion new signals that we get every single day. And the signals for us are really -- it's not just data points about what customers are doing, but it's also how they're interacting with the experiences that Klaviyo powers.

So you can think about every message, whether it's an e-mail, a text message, a WhatsApp, a mobile notification, every experience is our customer agent. Not only do we have AI that's designing that and tuning it, but it's also learning from that data set about what works best and then using reinforcement learning and other techniques to improve itself. So first is the data.

The second is, frankly, our infrastructure. When you think about our database, we designed it specifically for these real-time use cases. it's very hard not only to store data, but to index it and serve it such that every time a page loads, every time a message needs to be sent, you can query specific attributes about a person or specific things that they've done and make decisions in real time in milliseconds and integrate that into the experience. That combined that data infrastructure, combined with our messaging infrastructure, its ability to make sure you're compliant, pick the right channel, embed that personalization all in real time. I think those 2 bits, the data plus the infrastructure are really what set us apart.

Your next question comes from the line of [ Raimo Lenschow ] with Barclays.

Perfect. I'll stick to the one question. It's good to connect again. The one question I got from investors though was that we all know you as kind of co-CEO, Workday, et cetera, which is kind of more upmarket enterprise. Can you talk a little bit about how that fits in here at Klaviyo, which is kind of more slightly lower end, not low end, but you know what I mean like more SMB space. Like how is the skill set that you bring kind of help here?

Thank you, Raimo. It's great talking to you again and connecting again, right? I guess there would be 2 dimensions, right? One is, obviously, my background is more scaling up enterprise businesses. The second one, I would say, is operational strength and how we're bringing some better operational cadence in terms of scaling up more predictable the business as a whole, right? So I would say my focus is on both, right? We commented that on the enterprise, we are really excited about the opportunity. We talk about our best pipeline ever.

And also last year, we doubled the number of customers over $1 million ARR, and we are putting the experience in terms of the go-to-market leadership. We're investing on the compliance and the governance to serve. And I believe the momentum is very clear, right? In terms more on the experience itself on the operational side, I would say, first, we're focusing on using AI internally as much as we use externally, and there is some amazing productivity gains that are already seen in some of our numbers.

We are focusing on creating much better operational alignment across product engineering and go-to-market. So we keep decisions going fast and execution going at speed of light at these days, right? And as just mentioned as well, getting up to that enterprise readiness. So all that, hopefully, that contributes, saying as my previous co-CEO experience. I'm clearly very excited to be part of the journey here and a company that I've been familiar with now from the Board for the last few years as well.

Your next question comes from the line of DJ Hynes with Canaccord.

Congrats on the really strong results...

Could you just mute your line? I think there's some echo. Go ahead.

Okay. I'll try. So with Accenture and how we're thinking about partners generally, look, this AI era and this building out customer experiences that are designed and delivered by AI, we think it's going to require a whole bunch of new skills and new services that tens of millions of businesses around the world. And certainly, the largest enterprises in the world are going to need help adopt it. So I'm very excited with the work that the conversations I've had with Accenture about what these new practices will be.

And I think when it comes to our marketing agent and designing subagents within that, that will help look through your marketing, define gaps help surface those then create the right creative all the way to our customer agent, helping that tune various experiences maybe based on what's worked in the past. We think there's a ton of new work for all of our agencies and SI partners. But Jonath been working closely with Accenture. Chano, anything you want to add?

Yes, Vijay, great talking to you again. So I would say, clearly, Accenture is starting to provide services around marketing reinvention and service reinvention. Some of those services, they need a good powering on AI solutions, and they see us as a great partner to bring that to market. They see a great opportunity for companies that are looking to solve more for fragmentation. I was talking on my script in terms of closing the loop for the entire customer relationship experience, and they see Klaviyo as a great solution to provide that one. And clearly, as I mentioned before, we're moving up more towards the enterprise, though to be clear, we still are fully convinced that it's going to be our core business and our more SMB business is a great cornerstone for us, and it's going to keep thriving.

But obviously, enterprise opening us complete new opportunity. We're partnering with the likes of Accenture is going to be instrumental for both of us. So yes, tons of timing, stay tuned, I guess, we'll have much more to share over the coming months.

Your next question comes from the line of Samad Samana with Jefferies.

I guess, Amy, I want to maybe revisit Gabriela's question a little bit because I think part of what we're all trying to figure out is if the marketer starts increasingly interfacing with Klaviyo via ChatGPT or another interfaces maybe making a tool call and just how the value will still ultimately being provided by Klaviyo. But I guess the perceived value question of what the marketer thinks is creating the value for them, how do you contend with that and make sure that the user knows that it's actually Klaviyo and that you make sure that the economic benefit also accrues to you? And then I have one follow-up.

Yes, sure. So an analogy that we've been using internally and trying and using is when we think about our infrastructure, it's kind of like how good is the engine underneath that is both understanding who your customers are and actually provide those experiences, whether it's messaging or some of the conversational architecture that we have now with our customer agents and obviously marrying those 2 together. And I think we look at our infrastructure, I mentioned how tuned it is for the scale and really the real-time nature of consumer interactions. We just look at like we have the engine of like an F1 car, and you can't just go -- you can't just take any old engine and like plug it into something, make it look shiny and have it work. So with -- on top of that -- and the other thing I did share with Gabriel is, look, we talk to customers and say, would you want to swap out Klaviyo system for something that was maybe cheaper to run. And the answer for all of them is no.

And the reason is because the ROI for Klaviyo is so good people don't want to miss out on stunning customer experiences -- end consumer experiences, and they don't want to miss out on the increased engagement and increased revenue that, that comes with. That's been a very durable pattern, durable thing I've seen when I talk to our customers. So if you flip it back then, like I put this in the prepared remarks, but we actually look at AI as if it's sort of the driver of that car, well, gosh, I mean, how do we get our agents and potentially other agents using more of Klaviyo's underlying engine and infrastructure. And that's where we come back to what we found with AI is and our agents is it's making it cheaper to execute.

We're finding a lot of customers who now because of AI, they have the time where they didn't have the time in the space. Now they can get to things so they can take an idea and turn it into marketing much faster. And it's also increasing the quality. I mentioned how our -- because our database, our underlying customer data infrastructure is married with the marketing messaging and we can see what's working. we're able to hint back to agents, both Klaviyo's agents and then in the future, potentially other agents, what's going to work best for each consumer. So we're able to inject that personalization, that context in at the last moment. And that's having -- we're seeing that have tremendous uplift. I mean we talked about these results.

The fact that we're seeing open rates increase not by a little bit by 50%, revenue increasing by a similar amount. This is, I think, the future. I think the idea that you would run either marketing or customer service agents and you wouldn't run them on the best possible infrastructure just doesn't make sense because at the end of the day, like we're trying to help drive great customer experiences that translate directly into dollars and revenue for the businesses we serve.

Very helpful. And then maybe, Amanda, just a follow-up for you. On the OpEx growth, it slowed quite a bit. I was just -- especially R&D. Is that mostly like internal efficiencies? Was there anything timing related in terms of the timing of hiring? Just how should we think about that both in the quarter, what led to that slowdown? And then how we should think about it going forward?

Yes. Let me take that just to start qualitatively. So -- and Amanda will get to the numbers. Look, we've had an initiative internally about working AI first since last fall. I'll tell you like I myself like just building product coding. I mean, the amount that you can do now with AI on 2 fronts. The first is the thing we -- NI in the early days, we moved very fast. We were great builders, but we're able to go much faster and not 20% faster. I'm talking 5, 10, 20x faster than the early days. It's fun. I can sit down now and build whole features, whole prototypes in an evening that used to take us weeks. And that's an advantage that our entire product and engineering team is embracing. And the second thing I'd say is everybody now gets to act as a developer.

We have a number of internal systems that thousands of Klaviyo's rely upon that weren't built by engineers. or they were built by engineers, but maybe not in the traditional sense. There are other folks at Klaviyo that are now doing engineering, thanks to the progress that we've seen with some of the coding agents. So look, we just said that, hey, all of that is stuff that we're really going to push on.

And Amanda knows, like our roots were -- we were a small handful of folks that had great unit economics, great efficiencies in our early days. And now we're benchmarking ourselves against what the best AI companies are doing and looking at that as the new normal. But Amanda, anything else you want to add?

Yes. The only thing that I would add there, as we look forward into next year, we're really pleased with the trajectory that we're seeing on our overall operating margin. And I think that is because we are a high-growth company who's delivering expanding profitability while making high-return investments. And the great thing about where we are right now as an era and as an industry is, as AB said, we can make those high-return investments and be so much more efficient in how we're building and how we're scaling. So we are bullish about the ability that we have to continue to drive that profitability while continuing to expand our margins 100 basis points or more over the coming year.

Your next question comes from the line of Tyler Radke with Citi.

Chano, congrats on the co-CEO role. Nice to see you again. A question on go-to-market. Just given some of the leadership changes and go-to-market changes, how are you structuring and incentivizing go-to-market this year? Any other changes we should be thinking about? And I guess, Amanda, are you building in any conservatism just given the moving pieces on that front?

Yes. Thank you, Tyler. Great catching up. I mean, well, first of all, I'm lucky I found a great foundation here, both in terms of product innovation, customer satisfaction and I would say, talent. Obviously, as in any place, there are usually opportunities for improvement. And I think we saw an opportunity for improving in terms of the go-to-market, mainly across tidying up execution and rigor and discipline. And at the same time, potentially, as we say, there are many disjointed experiences that don't provide that full overview in CRM legacy systems that I think are ready to be ripped out, and we want to capture that opportunity, and we're greatly positioned to doing so.

So that's why we're doing some of these changes from a go-to-market perspective. Me being right, that should show up over the next few quarters in terms of increased win ratios and clearly a reacceleration. And that is my expectation that's yet to be proved, right? Clearly, in terms of how we are aligning on incentives, I mean, at the end of the day, we try to align to what it makes sense for how our customers are seeing the benefits that we're bringing.

So obviously, as we've said before, we are more a consumption and we're more an outcome-based. So that is as well how our teams are incentivized. So we're very focused on this Klaviyo's attributed value, Klaviyo's attributed revenue that last year came up to close to $80 billion that we are driving to our customers and very focused on producing those outcomes. That is what matters, right? Clearly, that as well should manifest if we're doing our homework that even the ratios being okay today in terms of having 60% of our ARR becoming multiproduct. In that case, it is 2 or more products. I believe that the opportunity for upsell and cross-sell, we're doing our homework is much better than that one. And I think we are having the right team to execute on it.

Thanks. And Tyler, as it regards to the model, we have the benefit that Chano has been involved in the business, both on the Board side as well as getting ramped up to speed as supporting us on an interim basis last fall. So he is coming in as a strong leader with clear plans, and we have strong visibility into the places where we're going to be making those changes and continuing to improve over the course of the coming year.

So the main thing that I would point to as you think about the investments that we're making in go-to-market over the coming year is that they're going to be -- continue to be with a strong focus on unit economics that we've always had as a business. right? It goes back to AB and Edge. We tend to look at our CAC payback. Now as we're expanding into the mid-market and enterprise, we look at the LTV to CAC. But we see great opportunities ahead, and we see strong returns from those investments that we're making, and they're baked into the outlook that we have for the year of continuing to expand our operating margins.

Your next question comes from the line of Matthew VanVliet with Cantor Fitzgerald.

I guess as we look towards what the customer and marketing agents that you're offering could feed into the model, whether it's this year or into the next several years. Curious if you can share any sort of metrics around adoption by your customers? Just how many are using it in any capacity? Where do you expect that sort of percentage of your customers to at least be piloting and testing it out to be over the next several quarters?

Awesome, I can take that. So while we're not sharing the percentage of customers yet, I can tell you it's growing rapidly. And I mentioned some of the things that we're solving, especially for our entrepreneur and SMB customers to help them adopt faster. In a lot of cases, it boils down to, hey, how do I train a model and how do I trust it. But again, these are things we're really, really good at. If you go back to Pliyo's early days, we had to teach people how to do more personalized messaging, marketing and make that almost out of the box.

And now we're doing the same thing with Agenta capabilities. I'll reference back to a data point that we watch a lot, which is like for people that are adopting our agent products, whether it's our marketing agent or our customer agent, how often are they coming back? And I'll go back to the data point we shared around our marketing agent, where for folks that try it and adopt it, we're finding that they're using it repeatedly. And in fact, it's starting to really eat into their share of how they generate and create marketing overall. So that very much leads me to believe that like in the near future, we're going to have a large percentage of our customers who aren't going through and pointing and clicking and sort of doing creative design all on their own, they're going to do it in large part with AI.

Just an example from just this week, I was talking to a customer that's playing with our marketing agent product. And he was telling me about how he was designing a campaign and his brand has a big Spanish-speaking audience. And the marketing agent actually understood that and generated versions that were not just in English, but in other languages as well. I mean these are the kinds of things that are now happening with agents that are running on top of our platform. And because we have the customer context to say what geography or locale somebody is in, their preferences, maybe things that they told us, in this case, about language, we're able to just automatically inject those and our agents are able to pick up on that.

So I think you're going to see an increasing percentage of our customers are starting to really rely even for the majority of their usage of Klaviyo on our agents. And then also, we're going to see just a growing percentage, even give it a shot and become full-time adopters.

Yes. I think just to add on that one, we provided a couple of data points like customers that have taken or adopted marketing agent, 50% of their campaigns, they're already doing it. with the marketing agent and seeing better results. Some examples back on the autonomous resolutions on service for customers like [ Lifeestro, ] 74% of those coming up for Harvey and Sons like 77% of autonomous resolutions within 60 days of adopting service agents. So there are already some great data points that, of course, as product keeps maturing and our go-to-market teams keep cranking on it, very exciting what's coming ahead.

We have time for one more question, and that question comes from Derrick Wood with TD Cowen.

This is [ Cole ] on for Derek. The large customer adds was super strong. Can you just talk a little bit more about the strength there? And then specifically, how much of this is cross-sell versus actually going and landing new customers of this size?

Yes. Great question. Most of those customers tend to be net new lands in terms of the large-sized customers. And clearly, they expand over time, but it's more on the net new logo. I think it comes to 2 points, right? It's clearly how we're changing some of the practices in terms of focus more on the leading indicators like pipeline, qualification and strength of that pipeline. Then as I said before, how we're tightening up those cadences as well with beyond sales themselves with articulating the value proposition with product and engineering teams altogether, getting on to it. And clearly, I would say it's the teams that know and to understand how to liaise and these customers in terms of the complexity of the sales cycles.

But I think, as I said before, qualifying the cycles it's very important, I think that we are on the right opportunities, and we understand those that we are into and we are winning, and we're just creating the sales place, increasing the activity and certainly as well as starting to come with partners like we mentioned before, Accenture and some others, which are great, right? I think it's important to highlight as well that, that is becoming across multi-verticals, and we're seeing customers now in Europe like Bayer or Lindt. So it's very international as well, Tailor-made and some others that are tremendous marquee names that are starting to trust in us.

And I think that will create -- hopefully create a flywheel effect in terms of we're building our brand as we are ready now for enterprise and with the investments we're doing in compliance and governance plus some data centers for some of the international customers feel very strong about the value proposition and where we are going. So yes.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Thanks for joining us for our next session. Really happy to have AB and Amanda here. Before we kick off, I think that's your first time at our conference here. So maybe start a little bit like ground us on Klaviyo, and then I'll kick it off from here.

Awesome. Yes. So for folks that don't know Klaviyo, we provide a now autonomous or you can say agentic AI, a self-driving consumer CRM. So our customers are 183,000-plus businesses around the world that are nominally consumer-focused. You think of businesses that have lots and lots of end customers themselves, end consumers, where they need to deliver stunning customer experiences across marketing, service, their website, mobile apps that's highly tailored and personalized to every single consumer to drive incremental engagement and monetization.

But they need to do that all through software. There are no account managers or sales reps or anybody that's going to help solve their customer experience problems. So you can think of us as that CRM really serving the underserved market of consumer businesses. And we do that for businesses big and small, so everybody that's just starting out to small businesses to some of the world's leading iconic brands, brands like Mattel, Unilever and their portfolio of brands, Reebok, and yes, in the last couple of months, we went from -- a lot of us folks know us for marketing.

Really, the secret sauce of Klaviyo is the underlying data platform. We think of this like scalable brain for a business towards everything you know about your customers. And now through some of the machine learning and now some of the modern AI techniques of LLMs, we're able to create a logic layer on top that allows our marketing to self-optimize. In the last couple of months, we've released some new products around that, our marketing agent we can get at. And then also on the customer service side, we recently released a set of 3 products there. So now you can think about Klaviyo as covering for any business, the entire spectrum of the customer experience. And then, yes, 180,000 customers. I don't know, Amanda, you want to cover the kind of financial rundown?

Yes, 180,000 customers plus. We are north of $1 billion in run rate, growing north of 30% per year this year and doing it while delivering consistently ever since we went public above the Rule of 40.

And you've been one of the few companies that has been showing revenue growth over 30%, like all these times. So like congratulations, by the way, like that's kind of an amazing feature.

Yes. When we look out there at the public software universe, we see fewer than 10 companies who are over $1 billion in revenue run rate, growing north of 30% and doing it while delivering Rule of 40.

Yes. No, that's amazing. Yes, exactly. The 2 topical questions. One is we just had Black Friday, Cyber Monday. How has that played out for you and any trends you've seen there?

Yes. So we work with consumer businesses around the world, a lot of -- certainly a lot of retail and e-commerce. And obviously, Black Friday, Cyber Monday, Thanksgiving weekend is a big one, start of the holiday season. So this year was an awesome year. I'll give you like 2 trends, first, some results and then a couple of trends that we noticed. We help businesses generate -- send over 22 billion messages, process over 10 billion data points on their consumers. They can now add to these like very rich consumer profiles that they have.

And then critically, with our software, you can actually measure the revenue impact. And over the 5-day weekend from Thanksgiving through Monday, our businesses generated over $3.8 billion in sales directly tied back to the marketing they were doing through Klaviyo. So that's why all of our customers think of us very much as a revenue engine, that $3.8 billion, by the way, that represented 42% of all of the revenue that those businesses generate over the weekend -- over that holiday weekend. So not only are we generating revenue, but we're generating almost half of the revenue that these businesses rely on in the busiest time of the year.

And then trends-wise, I'll say 2 things. The first is, this is the first real year you saw kind of AI applied out in the wild. So 2 things. With our marketing agent release, that's an autonomy layer on top of our marketing platform that you can think of like we'll design marketing campaigns, marketing strategy for you. We saw a lot more adoption from our customers. We recently launched in September of folks who are now generating marketing campaigns entirely through AI, right, either through prompts they're -- or literally our system saying, hey, here's what we think the best strategy for you is, at this critical time here.

Customers can then review that, send that. That's generating now millions of dollars in incremental KAV on top of that. So it's very early, like the adoption is still -- the adoption rates are very low for the customers that have leaned into that. We're already seeing them using AI to define their marketing strategy. And then on the customer service side, we launched our customer agent platform, which allowed businesses to basically create their digital representative that can be on their website or connect to text messaging or WhatsApp or e-mail, other messaging channels.

And we saw great engagement from that. Just to give you an example, we have customers now swimwear brands of ours actually down in Sydney, down in Australia. They're using our customer agent not just to do kind of product research, like explain what swimwear they offer, but they've actually given it a personality and set of skills where that agent can actually help people plan -- almost plan a vacation. So they'll get questions from their customers like, hey, I'm going on a trip for 10 days. And one, I'm wondering like what suits to get that fit my budget. But also, if I'm going on a 10-day vacation, how many swim suits should I buy?

What would you recommend? And even they're even now thinking about things like, hey, as part of that, hey, if we know where you're going, that agent can be value-add and say, hey, here's some of the things we would suggest, by the way, we know that you're going to the beaches, you're on the Gold Coast, hey, here's some beaches that you should go stop at. So our customer agent will see a lot. We saw obviously it's our first holiday with that, but these agents are really becoming a core part of the shopping experience, not just in ChatGPT, but like literally on people's sites. And then we talked about the 42% loyalty, that 42% just keeps ticking up year-on-year. This importance of digital relationships to businesses, knowing who their customers are, being able to action that data through AI and seeing that generate results.

We're seeing increasingly businesses when it comes to holidays going back to customers that either have pre-existing relationships with from the previous years or customers that maybe aren't customers yet, but somehow they built a relationship with them over the course of the year. They're going back to those customers to convert and make their holiday numbers versus, say, advertising to get new demands.

Yes, yes, yes. Okay. Perfect. That's really exciting. And if you think about it, like how do I -- how do you productize that? Does that come like as part of the offering? Do I have to buy a different SKU? Like how do you deliver that?

Yes, sure. So look, we -- just the moment really is now when it comes to the CRM, the customer experience space, becoming more autonomous. And what we mean autonomy in 2 ways, right? The first is the delivery of the experience. Like we -- obviously, we serve consumer businesses. There are no sales reps. There are no account managers in a reach out field. The delivery has to be through software. And now autonomy is also coming to the design side of that, defining what is the marketing actually be doing, how should my customer agent behave.

Increasingly, we have AI that's actually doing that as well. We're monetizing this in 2 ways. On the customer agent side, on the customer service side, this is all a usage-based or even an outcome-based product. So quick example, every time a consumer has a conversation, with an end consumer that the consumer says like, yes, I just solve my problem, we monetize that. There's a small fee for that. And on top of that, we're finding our customers will say, hey, if that conversation results in a transaction, I'll even pay you a commission on the sales that are generated.

So that's how we think about monetization there. We're almost like a surrogate like sales function for these businesses that don't have a sales team. And then our marketing agent, we found that while we're not -- we're so far have bundled most of that functionality, some of that functionality bundled into our core marketing platform. The other part, we have in a marketing analytics and autonomy SKU, where it does advanced personalization, you maybe think things like product recommendations, knowing what the right -- what's the best channel for each customer.

We use that in 2 ways. Our customers -- one, it helps them personalize marketing campaigns down to the person that drives incremental lift. And so there's an additional tier if they want that capability. And then secondarily, that product will also identify other marketing opportunities. So we talked about like building this marketing calendar. We have a set of algorithms and agents that will literally go through some of these data, both inside of Klaviyo and outside of it to help them find pockets of either customers or maybe it's inventory that's new and they need to clear and we'll generate marketing campaigns off of that, things that their team could do, but now that just happens autonomously.

I mean -- so I don't know if you thought about it when you started the company, but like having the data and now the AI to go with the data, actually, your value proposition must kind of go on steroids now then in theory.

Yes. I think there's -- I get a lot of questions of like, hey, how do you think about your software, your tech your infrastructure in the age of AI. And I think the key thing for us is like you need to think about every software product is like, hey, how much of it is true infrastructure where there's something behind the scenes that really makes it magical versus it's like, hey, it's just a really shiny UI layer, right? And for us, we started Klaviyo as a database, data infrastructure company.

So we are excellent at storing these kind of -- these billions of consumer events in real time, indexing them and then serving them so either the end application, so say, a chat application or a marketing automation layer. But now increasingly, LLMs can interpret and have access to that data and can use it as sort of additional context, right, when they're generating content. We've built the data infrastructure. We then built the message infrastructure and now it's like real-time chat and conversational infrastructure.

That's really the magic of what we've done. And so with AI, we look at that and like it is really useful in 2 ways. One is it gives us kind of like thinking and logic engine. So now instead of having to rely on our users, are they having to do all the work to figure out how to program it and configure it. We can actually just use LLMs to do that. That's what we're doing with our marketing agent, customer agent. The second thing is like LLMs is this kind of like mapping or interpretation layer. We're finding that it's making it easier. So rather than having to use our interfaces, right, to say, design a marketing campaign, instead, you could actually just through natural language, describe the kind of marketing campaign that you want.

And then whether it's through Klaviyo's interfaces or say, it's your internal chats, right, Slack or Teams or some other LLM or really any text-based system, you now can just send that prompt to us and we can convert it, right, into fully fledged marketing. So I think this is really -- for us, it's like it's actually almost an easier way to get at the infrastructure that underlies Klaviyo. At the end of the day, if that results in better customer engagement, right, happier consumers, then that's ultimately, like that's what our businesses want, right? And that's what we can monetize.

Yes. And Amanda, like to get you a little bit involved here as well. How do you think customers -- what's customers' propensity to pay for some of that? Like because the big debate in the industry is that's really nice, but it's table stakes. I expect that for no money because we're going to AI, off you go.

Yes. The propensity is quite high. And we know that, and we have great confidence in that because of what we've seen already in the business. So we launched our marketing analytics product last February. And what marketing analytics does is basically advanced analytics, some of which are AI-driven and AI-driven personalization that makes a consumer or a business' relationships with its consumers that much more valuable because they have better insights into who those consumers are and they're better able to directly target that. So we have a customer of ours, for instance, who is in the apparel space, and they implemented marketing analytics earlier this year.

Their revenue year-on-year that they're generating through Klaviyo, that KAV that Andrew spoke about, is up close to 40% year-on-year. And so what we've seen, and that's coming not just from the analytics piece of it, but they're also using some of the earlier stage AI personalization like AI gender-based prediction that helps them sort their customers without needing to ask questions into who are those who are going to be interested in buying women's clothing versus who are those who are going to be interested in buying men's clothing.

And so what we've seen through that is that where customers are seeing increased value, where they're seeing that we can use AI in this last mile personalization to make those relationships more value and generate more revenue per customer for their consumers, they're definitely able to -- and willing to pay for that. So we're incredibly bullish on the ability to continue to increase monetization of that as we launch even more and better.

Yes. And then moving on a little bit from the AI theme because we are -- half of our time we spent now on that. Talk a little bit about the channels as well, like that we think about like historically with e-mail, but now it's kind of broader, like how do you think the channels will evolve, especially then -- and I don't know how AI even plays into that. I don't know if it does.

Sure. Yes, I talked about like the importance of Klaviyo, maybe 2 things here. The first is the importance of what we talk about messaging infrastructure that we have and like we think this channel excellence. When it comes to like consumers and how they communicate with businesses, right, whether it's like a business communicating to the consumer or vice versa, our basic strategy is like we're going to play the field. Wherever consumers are, we want to match up to that.

So that's actually the reason we started with e-mails. We asked a lot of business, hey, what do your consumers prefer to say, e-mail is the thing. A couple of years ago, we branched that out into text messaging, right? And text messaging actually the standards there, having increased, right, some of the flexibility, some of the [ brich ] media you can do. And just recently, like probably last year, we added mobile app functionality. So you think of like, hey, if you have a mobile app, you want to communicate with somebody either through a push notification or some in-app experience, you do that.

And just a few months ago, we added WhatsApp as a channel, and now we're branching more into social. We actually just acquired a company that will help integrate with Instagram. And so now that folks that are maybe chatting with the business or direct messaging with the business over Instagram can now like also -- they can also do that through Klaviyo. So we generally -- we look at it as like, look, there's probably half a dozen channels, which are very popular and like some of these are region dependent globally.

But across all those channels, we, one, are excellent at the media that's supported and the communication kind of norms on those channels. We're great at working with the providers there. So with e-mail, we do a lot around deliverability, maybe deliverability in messaging is a little bit similar to fraud and payments, like you just have to be good at it in order to support those channels. And then also, we're very good at like stitching them all together.

So one of the things our customers typically ask us and say, hey, I know you guys support 5 or 6 channels, but like can you tell me which ones my consumers prefer? Can you help me message them on the channels that they each individually want? And that's something that obviously like, yes, we have all this data, right, across our ecosystem and then for individual brands. The last thing I'll say is like as it relates to channels is there are obviously channels which we have historically focused on channels that provide a direct line of communication to a business.

So somewhere where it's like, hey, you get somebody's e-mail address, phone number, it could be on WhatsApp, et cetera. Increasingly, we're finding businesses -- we're expanding our marketing capabilities to handle channels that maybe sit outside of that, they're not owned and operated, right, or they have full control over. So let's take like what's happened with consumer LLMs, ChatGPT, et cetera. We integrate with those LLMs so that things like when there's now commerce happening outside, right, of a business' website, those transactions flow back into Klaviyo .

So when somebody, for instance, like if somebody transact on a website, all of that metadata about that consumer comes into our data platform and we index it for real-time usage. The same exact thing happens when somebody buys now on ChatGPT. And we find -- I mean we've actually integrated into all of these platforms such that all of that data flows through to us and then that business has the ability to then use that on all of the channels we support.

Yes. And I think one more thing on channels is that what we see and hear from customers is that they want to communicate consistently across all of these channels. And so they don't like point solutions because point solutions create an inconsistent customer experience. They want to use that same -- you mentioned earlier, the power of our data platform. They want to use that same data, everything that they know about a consumer and use it to power it, whether it is e-mail or SMS or any of the other channels.

And so by unifying on Klaviyo, they get a better customer experience. They spend less time stitching information together across systems and more time personalizing that interaction, which drives their revenue.

And the -- so that's a question for Amanda now. The like number question. So if you think about it, like how do we have to think about the impacts for you on the money side, like in terms of you pay for e-mail, but then if you do SMS, you pay more. If you do like some other stuff, you pay more. Like how does this kind of translate into numbers for you?

Sure. If you take e-mail as a starter and generally, our customers have to start with e-mail because our e-mail product is unified with our data. So you buy data -- or sorry, e-mail sends plus profiles and the profile is where all of this information that you know about your consumer lives. Then you add on SMS, you can also add on marketing analytics or our analytics products, which include marketing analytics and our advanced data platform. And then now with the launch of service, you can also expand into service, right?

So that it's not just unification across your proactive marketing channels, but it's also unifying your reactive inbound service channels as well. When you total up across all of those, it can be in the neighborhood of triple the revenue that you generate from just that e-mail subscription alone. So the power for our business is quite high in terms of the incremental revenue that we can generate and the potential size of these customer relationships as we expand across, not just marketing channels, but also importantly, analytics and service as well. And that doesn't even begin to include some of the uplift that we just talked about from AI.

Yes, exactly, yes. So you're not that worried about growth. And like, I mean, you still have to deliver, but like it's not an opportunity or problem, yes.

We are very bullish on our growth.

On the last one on growth and talk a little bit about international, like because like that's the other thing that is probably a vector here.

Yes. International is -- just has fantastic growth. So international has accelerated its growth for 6 quarters in a row now. The rate of growth internationally has actually been increasing. And our EMEA region grew 48% last quarter. And what's driving that is that we're making the product in the whole customer experience more and more accessible to companies around the globe. So what we've seen is this need and this demand for personalizing the customer experience is universal.

That is not limited to merchants and to brands in the U.S. Brands around the world want to be able to offer personalized interactions at scale. And so as we've made it easier for them to do so, the demand has -- and the latent demand and the interest that we're seeing is just incredibly high. The ways that we've made that easier are, one, launching new languages. So when we went public a few years ago, we were only in English and only in U.S. dollars, and we were in a handful of markets for SMS.

Today, we are in 11 languages, and we're in 22 markets for SMS. And so as we've made it easier for customers to buy in their native language and to use the product, that's just really accelerated demand. And then what drives that going forward is we're continuing to innovate. So we're launching new locally relevant channels like WhatsApp. And then importantly, we are customizing the whole journey, not just having product, but also local language marketing, local language partner networks of the folks who are really relevant in each of those geographies local language sellers. And as you add on each of those in a given market, the effect is compounding and drives that growth.

And where are we on international as a percent of revenue now, like just to give us an idea about perspective, give us some specific.

Roughly 1/3 of our revenue right now is from international, and that has been steadily increasing over the past years just as we've continued to grow.

Yes, yes. Okay. Perfect. Makes sense. And then see, I found another vector of growth. What about going -- like one of the things that we've noticed is like you're going slightly higher up in the market as well. Like can you speak to that in terms of, is that just product got mature, you got more scalable? Is it more effort that you finally put in there? Like how should we have to think about that? And where are we on that journey?

Yes. So it's interesting. My co-founder and I came from true enterprise software before we started Klaviyo. And we decided that it's like, hey, we're going to build this really scalable platform, data platform and then now marketing and service on top of it. we really aimed our go-to-market towards SMBs. That was intentional in the early days because you said, hey, we think we can just -- we can grow more efficiently there and we thought was a very underserved market.

What we found over the years is that an increasing number of enterprise businesses are saying like, hey, Klaviyo seems to be like the right tech stack. That's the right concept. It comes with this like data platform built in, right, or I can buy that's deeply integrated with marketing service. And that for us is the killer differentiator as we move up into the enterprise. A lot of folks say like I don't want to try to stitch together a data warehouse or data lake and get us to talk to these applications and do it in real time and then try to figure out how we can do attribution, reinforcement learning.

I want all of that to work tightly together. So you can see as we report out on our number of customers above $50,000 in ARR, $50,000 ACVs. And that number just keeps continues to increase. And it's actually something we've really pressed on this year. We've made a lot of good progress, is deliberately going after more enterprise businesses. And I'll go back to this thing of like the moment is kind of now, I think, for this customer experience and CRM category in terms of, hey, it's getting more autonomous. Like these systems are starting to like self-reinforce, figure out how to define experiences on their on that are self-optimizing. And that's -- obviously, the scale of enterprise means that there's a lot more utility there.

Our point of view now is if you talked to us when we went public a couple of years ago, we said, yes, we're working on like this kind of mid-market segment. We'll get to the enterprise. We're now -- my opinion is in the next 2 years, every single enterprise is going to reevaluate and make decisions about what the future of their customer experience and CRM stack is. And since we're focused on these consumer businesses where like automation and autonomy is the thing, we feel really good about what we're doing with AI and then just the strength of our platform writ large, we're going after these enterprise businesses now and seen a lot of success.

Yes. Is that -- let me weave in a question there that I had -- wanted to ask earlier, actually, you just kind of had an announcement around the co-CEO situation or like not situation, but like co-CEO structure. Like can you speak to that? And does that fit into kind of actually that kind of slightly moving upmarket as well?

Yes. I mean, it's definitely a benefit. So yes, on -- gosh, Wednesday. Yesterday morning, time flies. Yes, we announced that one of our Board members who I've been working with for the past few months and really developed this like the killer relationship over the last couple of years, Chano Fernandez, who's the CEO, Co-CEO at Workday is going to be joining as co-CEO with myself.

And I'm really excited about this because I've been talking with him for a while. Really about how we've been working on AI and really its applications and kind of like building this agentic autonomous CRM. And we had this big product launch in September, where we really unveiled the first time our marketing agents. We can do marketing autonomously, our customer agent, they can deliver customers. And we've been watching the early results from that.

And I'm convinced from the numbers we're seeing, even though the actual penetration is relatively small, the quality of the experiences we're able to deliver now through AI with the customers that have adopted and what I can see is like the road map ahead of us, the next 2 years, the entire CRM category is just like everybody is going to default to their agentic version of that. So there will be a leader there. And obviously, we intend to lead that. So I've been talking with Chano, my Co-Founder, Ed, and I said, I really want to spend the next 24 months and go very deep on this.

And I could use a partner to help me really just abstract or take off my plate as much of the rest of the business as I can. So anyway, I've known Chano for a long time. He and I -- CEO, I really admired for his intellect and his just raw intensity. And obviously, has a lot of experience doing businesses at scale. Workday is a wonderful business. International, he's from Europe, gets -- constantly pressing me on like, hey, how is Klaviyo growing outside of ex U.S., North America and obviously understands large enterprise.

And so we looked at this and said, like, hey, he's an excellent operator, somebody I deeply trust and he has these expertise. And so, yes. I mean I'm very excited because like now I'm able to ramp up some of the time I'm spending with our product engineering teams and customers as we're ushering in this kind of agentic future. And I think also he's excited like, hey, look, I can help us really unlock some doors, right, and execute on both international like we talked about in our enterprise. So my hope is that -- or my belief is we can actually do all of those because there is going to be a category-defining CRM business that does in the AI era. And obviously, we believe that should be helpful.

Yes. Okay. No, good luck. That sounds like really exciting. Amanda, and I mean this was maybe part of that, like -- but the one surprise from the Analyst Day was kind of the margin guidance, which was probably -- we were all kind of going top right and straight away. But listening now on the opportunity side, there's kind of a lot like how do the discussions go about like, okay, maybe we want to spend more money now because this is important for us. Like can you speak to that?

Yes. I mean we're a growth company, and we're going to continue to drive growth. And there is so much growth and so much market opportunity ahead of us, and that is only continuing to increase and open up even more market with everything that's happening in AI. So we're incredibly excited about the growth that is ahead of us. And we can deliver on that growth, while expanding margins at the same time, and you saw that in our numbers.

And it's one of the great things about working with Andrew and also working with Ed as Co-Founder is that there is this long-time belief that it doesn't have to be an either/or between growth and continuing to deliver strong margins. And so they've always believed that it takes some extra creativity that you have to push people a little bit harder, but that with the right creativity and now increasingly with the way that AI is changing our business, you can keep driving that strength.

And it's not so much about efficiency, it's about actually making the product and the outcome better because you're thinking about things from an entirely different point of view. So the way that we think about the business going forward is that we're going to continue to invest behind these great growth opportunities that we have. We're going to lean in on it, and we're going to do it with the same creativity and focus that we've always had. And I think you can see it in our results as a company. Over the last several years, we've been consistently above Rule of 40, and we've got really strong confidence that going forward, we can continue to be as well.

Yes. Good. Actually, I'll leave that as a good closing statement. That was really good. I really enjoyed our conversation. It looks really exciting. I'm looking forward to observing you on that journey. Thank you.

Great. Thank you.

Awesome.

[Operator Instructions] Good afternoon, everyone, and welcome to the Klaviyo Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Also, today's call is being recorded. With that, I would like to turn the call over to Andrew Zilli, 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.klaviyo.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, Zilli, 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 TailorMade, Mattel, Unilever and Reebok.

A few highlights from the last quarter. We delivered another quarter of record net adds 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 6 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 3 vertically integrated components: a highly scalable, fast database, restoring 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 this intelligence layer in 3 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 for Klaviyo attributed value per campaign compared to campaigns they created on their own.

Another customer saw a 50% better open rate compared to campaigns they create on their own and 40% lift on KAV per campaign. These results show the real revenue impact agents can have, and we're quite early in what agents are capable of.

Today, 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, e-mail, 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 favorative products and tailored recommendations with Customer Hub, ThirdLove has driven more than $200,000 in incremental revenue so far this year and enables 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 MTP 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 find campaigns that over underperform 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 1,400 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 and bring this AI-powered future to businesses of all sizes around the world. And with that, I'll turn it over to Amanda.

Thanks, Andrew. Q3 was another outstanding quarter for Klaviyo. Demand is strong across every growth engine. AI is amplifying our impact, and we are driving innovation for our customers as the definitive CRM for B2C businesses.

Revenue grew 32% year-over-year to $311 million, reflecting robust demand from new customers and continued multiproduct expansion from our existing ones. International revenue growth accelerated for the sixth straight quarter. We had record net adds into our $50,000-plus customer cohort.

NRR accelerated to 109% and adoption of our new service product is already outpacing what we saw from SMS at this same stage just 6 weeks after launch.

The results are clear. Our growth engines are delivering and AI is a force multiplier. We're investing for high growth while maintaining strong unit economics. Non-GAAP operating margin this quarter was 14.5%, meaning our Rule of 40 performance was nearly 47%, our highest in 4 quarters.

There are fewer than 10 public software companies who are growing more than 30%, over $1 billion in revenue run rate and achieving the Rule of 40. We're proud to be among that top-performing group.

At our Investor Day, we outlined 3 engines driving Klaviyo's long-term growth: multiproduct expansion, international acceleration and mid-market and enterprise momentum, all fueled by AI, which creates tailwinds for our business and positions Klaviyo to be the platform of choice for brands everywhere.

In Q3, each of these engines delivered meaningful progress, which underscores the power of our model.

Starting with our multiproduct platform. The foundation of our growth is our large and growing customer base.

In the third quarter, we added 7,000 new customers, bringing us to more than 183,000 customers, up 17% year-over-year.

Companies are choosing Klaviyo as their B2C CRM because we help them grow their businesses by unifying their customer data, marketing, service and analytics applications and now by bringing Agentic AI into that same connected platform.

And as we drive success for our customers, they in turn are growing their business with us.

NRR rose to 109% in the third quarter, driven by e-mail expansion, strong text messaging cross-sell and momentum from newer products, including marketing analytics.

At Klaviyo Boston in September, we accelerated innovation across the platform.

In addition to the marketing and customer agents Andrew talked about, we enhanced Klaviyo marketing with new omnichannel capabilities and new channels, including WhatsApp.

We also released to general availability our new product line, Klaviyo Service with Customer Hub, customer agent and help desk.

Our product velocity is accelerating, thanks in part to internal AI efforts, and we're now deploying product updates 270 times a day and have over 50 AI models in production that are predicting customer behavior, surfacing insights and marketing analytics and helping personalize experiences across Klaviyo Marketing and Klaviyo Service.

Our new Klaviyo service products are off to a fast start, increasing penetration faster than SMS did at the same point in its launch. Adoption is strong across all sizes of customers, from entrepreneurs all the way up to the mid-market and enterprise.

In fact, last week, one of our customers, a large fashion business, signed a 7-figure renewal with us that included adding customer agent and customer hub across 6 of their portfolio brands.

We view Klaviyo service as a long-term revenue engine with the potential to rival and exceed our marketing products as it scales. These launches further expand our multiproduct platform, making Klaviyo even more powerful for our customers. We consistently hear from customers about the importance of having one unified platform for engagement, and that's driving continued growth across the entire platform, including text messaging, WhatsApp and marketing analytics as well.

Because our pricing model scales with the value we deliver, not with seats, our success grows directly alongside our customers. We price on a per profile, message and resolution basis, which lines up perfectly with the outcome-oriented business models AI is enabling.

Today, more than half of our ARR comes from multiproduct customers, which is clear proof that customers want to have everything running off of one platform. This deepens our relationships with customers, improves retention and drives long-term growth.

Turning now to international. Growth continues to accelerate. Revenue outside the Americas grew 43% year-over-year, our sixth consecutive quarter of faster international growth, with EMEA up 48% and gaining momentum from Q2.

In Q3, we added 4 new languages to the platform, expanded text messaging coverage to 22 countries and introduced WhatsApp, which was a highly anticipated channel for our global customers.

EMEA and APAC now represent more than 35% of total revenue, reflecting the strength of our international strategy. Our focused investments abroad are doing exactly what we intended. They're driving strong growth and expanding Klaviyo's global opportunity.

Momentum in the mid-market and enterprise continues to build. We now serve 3,563 customers with over $50,000 in ARR. That's up 36% year-over-year, including a record 272 net adds this quarter. This was driven by a record number of new lands directly into the cohort.

We're proud to welcome and expand with iconic mid-market and enterprise brands such as Bissell, Rhone, Books and Proper Hotels, brands that trust Klaviyo to deepen customer relationships and drive growth.

Another global brand that exemplifies the power of what we're building is Meshki, an Australian-founded women's fashion brand now selling in over 190 countries. Meshki has embraced Klaviyo as its system of action, recently adding marketing analytics to power their omnichannel marketing.

With Klaviyo, they're personalizing every touch point from product recommendations and campaigns to customer journeys and interactions, all powered by their own first-party data. Meshki also relies on Klaviyo as a central source of truth. As they scaled their U.S. presence, the team used Klaviyo to guide where to invest in infrastructure, shipping and local distribution, transforming customer data into operational decisions. It's a great example of what Klaviyo's B2C CRM is built to do, help brands grow faster and turn every interaction into long-term loyalty at global scale.

Turning to the P&L. Non-GAAP gross margin was steady at 76%, in line with Q2 as benefits from scaling infrastructure balanced out the continued growth of text messaging. Importantly, non-GAAP gross profit growth accelerated, underscoring how we drive operating leverage as we scale. Non-GAAP operating expenses also saw broad-based leverage this quarter, improving 170 basis points year-over-year as a percentage of revenue, reflecting the power in our operating model and our ability to deliver strong growth while investing to capture an even larger AI-driven opportunity.

Non-GAAP operating income for the quarter was $45 million with a 14.5% margin, up slightly year-over-year. This performance exceeded our guidance, driven by strong top line outperformance and disciplined execution.

We generated $47 million in free cash flow for a 15% free cash flow margin, which was also up year-over-year.

Turning now to guidance. We are entering the peak holiday season from a position of strength, supported by robust customer demand.

For the fourth quarter, we are increasing our revenue expectations to $331 million to $335 million, representing 23% to 24% year-over-year growth. We expect fourth quarter non-GAAP operating income of $43.5 million to $46.5 million, representing a non-GAAP operating margin of 13% to 14%.

As a reminder, we implemented profile enforcement earlier this year, which reduces seasonality in our Q4 and Q1 revenue, making quarter-on-quarter growth steadier over the course of the year.

We do expect our fourth quarter non-GAAP gross margin to experience typical seasonal impact from increased text messaging volumes.

Based on our strong third quarter and our momentum heading into Q4, we are raising revenue guidance for the full year by $18 million at the midpoint to $1.215 billion to $1.219 billion for year-over-year growth of 30%.

We expect non-GAAP operating income of $161.8 million to $164.8 million, representing a non-GAAP operating margin of 13% to 14%. This will be another year of delivering results above Rule of 40.

Rule of 40 is an important metric for us because it represents our commitment to strong growth with good unit economics. We will continue to invest to be the definitive CRM for B2C businesses, and we strive to deliver Rule of 40 as we do so.

Looking ahead to 2026, we're confident in our growth trajectory and in the results we are seeing from our AI-powered growth engines.

Based on that progress, we expect to deliver at least 21% to 22% revenue growth next year.

Our core marketing products continue to deliver a strong foundation for growth.

We expect to drive further adoption and expansion, particularly in mid-market, enterprise and international. And we're seeing meaningful early traction from our new AI-powered products.

Our 2026 outlook currently assumes limited near-term revenue from these launches. That said, given the pace of adoption, the upside ahead of us is significant and creates clear long-term runway as these products scale.

From a profitability standpoint, we expect to increase our 2026 non-GAAP operating margin by at least 1 percentage point from our updated 2025 guidance.

To close, Q3 demonstrated Klaviyo's strength, high growth, strong unit economics and continued progress across our 3 growth engines: multiproduct expansion, international growth and mid-market and enterprise momentum.

AI is accelerating our business. It is unlocking new possibilities for customers to use Klaviyo to connect with their consumers in smarter, more personalized ways. It amplifies our growth, and it strengthens our foundation for sustained leadership. We believe this is just the beginning. With our unique combination of first-party data, relentless product velocity and Agentic AI as a force multiplier, Klaviyo is positioned to be the definitive winner in the next era of consumer engagement.

With that, we'll open up the call for questions. Operator?

[Operator Instructions] And our first question comes from Derrick Wood from TD Cowen.

AB, this is for you. I guess, at your conference, Accenture talked about fatigue in the legacy MarTech market, and there's a lot of desire to change out legacy tech and leverage new AI tech. You talked about seeing a robust replatforming cycle over the next 2 years to 3 years. I know your new products in AI and CRM are still early. But now that you do have these agents in market, are your conversations or pipelines evolving more around replatforming and AI adoption? And I mean, do you see 2026 as a step function and these type of engagements? Or how do you view this cycle playing out?

Yes, sure. So in the mid-market and enterprise segments, we're obviously seeing some really good numbers. We added the most 50,000-plus customers in this past quarter. And I think there's really -- there's 2 things going on that are forcing these conversations.

So yes, I do see there's a real acceleration there for 2 reasons. The first is a traditional reason, which is what we're doing by combining the underlying data infrastructure with then the marketing service analysis, application stack and infrastructure, handling things like deliverability on the messaging side, creative design and on the service side, providing that real-time infrastructure can have conversations with consumers wherever they are. I think what's happening on top of that is then when you layer in agents and really here, we mean agents and agentic workflows, we're finding a lot of large enterprises say, look, there's opportunities I can't get to. I can't do this data analysis. There's creative and design that I wish could get checks by agents so we can do more of it.

Can you help me find more opportunities to execute against those. And then obviously, on the customer service side, I think a lot of people look at customer service is not just a, hey, when customers have issues, how do I help them? But also how can I proactively give them guidance and look at that as a growth engine. So there was this traditional reason of like, look, my software isn't really talk to each other very well. And now you layer on what LLMs give us in terms of a better logic engine, a better -- smarter way to use the tech that we've built. I think this is the future of how CRM is going to work for consumer companies. It's going to be agentic at its core, which means that instead of the operators of that software having to decide, make every decision, drive the software all on its own, -- it's going to be done in part by agents.

And I think increasingly, some of the work they can't get to or don't want to do is going to get handed off. And the fact that Klaviyo provides us like closed loop where, hey, it's not just that we store the data, hey, it's not just that we help you find the ideas and execute them. It's then we can then tell you what's working so you can use machine learning and AI to improve, to optimize over time. That's where this is all going. But I have those conversations with our enterprise customers today and then folks that we're talking to that are in our pipeline, they're very excited about this future. And I think we're in the driver's seat to go deliver for.

Our next question today comes from Samad Samana from Jefferies.

So I wanted to stick on the AI theme. And I know that you guys talked about the Shopify relationship. But I was wondering if you could dig deeper into how the large platforms like OpenAI working more closely with Shopify and giving them access to maybe millions of consumers and how that ultimately benefits Klaviyo as you think about how those could potentially become -- empower the merchants that you're helping and become more profiles, especially given how embedded you are in the Shopify ecosystem. How are you thinking about that in particular?

Yes, for sure. So let's talk -- let me touch on a little bit on the AI ecosystem. Klaviyo, since we started, has been very partner-oriented. We've looked at the ecosystem and how do we plug in, how do we work together to build a better experience for the businesses that we serve, ultimately drive better outcomes for them.

So let me touch on a couple of things. First, let's talk about as it relates to commerce and acquiring and building more consumer relationships. Obviously, that's a big part of our business model is we want more businesses connected to more consumers. We think that's an asset that's very important to the businesses we serve. And obviously, that's one of our core monetization axes.

So we look at things like the ability to do commerce through products like ChatGPT is great. It's a way for more consumers to find more businesses. It's a more streamlined experience. And ultimately, like we said in the prepared remarks, it results in this like medium- and long-term growth for them because they now have another connection to another consumer.

In fact, we're so excited about the idea of like commerce through conversations through chat. It's something we're also working to embed inside of our customer agent.

We look at the future, we think that every business is going to have its own customer agent, its own digital, like the best most knowledgeable person about your products, who has all the answers in real time 24/7.

We want to build that technology. And obviously, once we answer a question, like, for instance, product [ recommendations ] built in, we want to let consumers then buy directly from that experience. I think in the future, you'll see these agents rather than browse a website, you could just chat with an agent provided by a business and then it could help you consummate that transaction.

And the last thing I'll say is when we think about the platforms that are out there, both in terms of end users, like each of us using chat interfaces, we look at that as another way to interact with Klaviyo. We're very excited about that. In fact, we've already seen and we talked a little bit about in some of the remarks upfront, our customers, partners using some of these AI clients to interact with Klaviyo. It might be -- to date, it's been largely to do data analysis. But in the very near future, we think that's going to be actually designing marketing campaigns and getting going on that.

And one of the things I talked to a lot of our customers about, they feel rate limited mostly by their time and how quickly they can scaffold and build and do marketing and service and analysis inside of Klaviyo. We think these new chatter base are a great way to speed up that loop, allow them to use more of Klaviyo. We benefit when businesses have more connections and also when they're doing more marketing, delivering more experiences to customers. And that's why we're going to build into those.

And finally, I think it's early, but a lot of the platforms are now building out these agent builder type experiences. And we look at that, that's great. That's another way we imagine there's going to be workflows in the very near term where folks are building Klaviyo campaigns, optimizing them through some of these workflows and agents that they're building both inside of Klaviyo, but also outside of Klaviyo. And again, that's great. We think if businesses are able to do more marketing, build more customer experiences, understand who their customers are better, wherever they do that, that's valuable to them and that's valuable to us.

The next question is Matt VanVliet from Cantor Fitzgerald.

I wonder if you could help us think about the attachment of service already and the fact that it's tracking so far ahead of even some of your best products in history. Are these customers that are replacing something on kind of the legacy marketing stack? Were they doing things sort of haphazardly and this brings it all together?

And then maybe more importantly, how is the new product like service helping the conversation of multiproduct expansion, knowing that you can bring it all on a single platform and have that single source of truth?

Yes. I've been really impressed by what our product engineering teams have done for all 3 of our K service, Klaviyo service products in that product line.

So let's talk through a little bit about each of them. And just so everybody knows, we put the general availability -- we released the general availability just over a month ago. So we're watching the tracking literally week over week. And like I said, the trajectory is awesome. In terms of what they're replacing or augmenting, let me take it product by product.

So for our Customer Hub and customer agent products, those were finding a lot more greenfields. Our Customer Hub product now takes a lot of the personalization that you could do with Klaviyo and messaging on various session channels and now brings it directly into a business's website or even in the future, maybe even their mobile application. It gives consumers a way when they go visit website that the entire web experience is now personalized to them. It's generating incremental revenue, as we talked about.

And so it's actually a fairly easy conversation with customers who say, look, we can take the same goodness that you've seen from us in messaging, you can now bring it to your website. It's accretive to your growth. Why wouldn't you do that? A lot of these businesses, they just -- there was no product there before.

Integrated into Customer Hub is our customer agents. So if a consumer has a question and they want to chat, both to get help, but also critically to get advice. We're seeing some really amazing conversations inside of our dataset where consumers are coming and having long conversations about what products would be best, best fit for them and offering them recommendations. So really service is no longer this sort of like, hey, if you have an issue, talk to me, it's now more even presales -- and that's, again, that's a bit different. People weren't thinking that way before. So we're finding a lot of businesses wanting to add that in because, again, it becomes a revenue engine. It helps offload some of the support volume, but it's also a revenue engine for the business.

And then the third product is we've also built a customer service help desk product, which also has AI natively integrated. So we have some great features in there, things where if a conversation happens with our AI agent, maybe does some tool calls to pull in product recommendations and associate information, that all gets passed back to whoever that support rep is that then decides that handles the conversation if it makes its way to a human. That's a really great integration, speeding up response times and resolution rates. That is a more traditional like first time small businesses, they might be the first time, but that's more we're replacing some of the customer service software that's out there that might just only have traditionally solved that like, hey, we help your support team manage the support workload.

So I think it's -- we're very excited about the trajectory in the first 40 days. We're obviously talking a lot about the impact of artificial intelligence. I think one of the things we want people to take away is we're expanding where we can use and leverage AI to not just marketing, but also include what happens on your website and what happens in customer service and as part of our building out the entire consumer CRM as part of our strategy there.

Siti Panigrahi from Mizuho is up next...

That's great. Congrats on a great quarter. And AB, thanks for all that commentary on AI. That's helpful. Amanda, I want to ask you about your '26 guidance of that 21% to 22% growth. So you have a lot of products announcement there and also there are pricing model changes as well. But what gives you that confidence for next year growth? What is embedded into that guidance?

Yes. And the way that I think about it is we are incredibly confident in our growth trajectory. And that preliminary '26 outlook that we gave is a strong baseline for growth next year with clear upside ahead. So we have just launched some very exciting new products in AI and expansion into new products and new service categories. We are very excited about the traction that we're seeing. As AB mentioned, you have service off to an even faster start than SMS was at this stage, but we're really early in the journey.

And so at this point, we're not factoring significant revenue in there for next year. So there's even more upside to that number as those products continue to grow. And I think the other thing that gives us incredible confidence heading into next year is that our existing growth engines are really delivering. They have strong momentum as we head into the international or into next year.

In international, we saw our sixth straight quarter of increasing revenue growth rates outside of the Americas, which shows that we are really growing and increasing that global opportunity that we have to build the business.

In mid-market this quarter, we had a record high number of adds into the 50,000 customer cohort, which really shows what we talked about at Investor Day, which is that customers are pulling us up into that mid-market and enterprise space because as we just talked about earlier with AB, they want to replace those legacy tech stacks and have a more modern AI-driven way for interacting with their consumers.

And then in multiproduct, over half of our ARR is coming today from customers who are multiproduct, which shows us that those customers really want to consolidate their platforms and they really want to consolidate their platforms with Klaviyo.

So we have a huge opportunity ahead of us there with service. We think service could be as big, if not bigger, than our marketing products are today.

And then, of course, AI accelerates all of that. AI makes it faster and easier for our customers to use the product. It opens up new surfaces and new places where we can generate demand and interactions with the product. And importantly, it drives even better results.

You heard some of the examples that Andrew shared around marketing agent and the uplift that it's driving in open rates and in KAV or the revenue that our customers drive. So again, those products are early in market. We're already monetizing customer agent today. We're going to start pricing pilots for marketing agent in the next few months. And as they continue to grow and expand in adoption and usage, again, we see upside there.

So bottom line is that what gives us confidence is that our growth engines are firing on all cylinders, and we're in the early innings of massive AI and multiproduct opportunities that are ahead of us.

The next question is from Tyler Radke, Citi.

A lot of great discussions around AI and Service Hub. I wanted to double-click on international, pretty impressive subsequent consecutive quarters of accelerating growth. Do you think that acceleration could continue going forward? And could you just help us understand like what we're going to -- what we should expect in terms of future unlocks in that? I know you talked about adding new languages to the platform, expanding text message capability, but sort of what inning of sort of those product unlocks are we? And any view on sort of the durability of that acceleration?

That's great. I'll give you some commentary on some of the things we're doing, and I'll let Amanda speak to -- the numbers. But 43% year-on-year growth. We're very proud of that, and we believe that we can continue to have that grow at very high rates over the next several years. And let me give you a little color on why.

What we found is we're still relatively early in working in both Europe, and I'd say Europe is even a little bit further ahead than where we are in Asia. There's a lot that we've done in the last 12 months, 24 months to get us ready for that.

We've expanded our presence in Europe and in Asia and continue to do so, especially in like key markets. From a product side, we've done a lot of work. You did mentioned internationalization -- very proud of the work that we've done there, both for our products, but also then to just make the various channels that we're in more available.

So having SMS now in so many languages obviously helps a lot.

We just rolled out WhatsApp globally, and that's obviously very, very important in the European and Asian markets. And we have some more channels now that will be coming online following that, that are more region-specific. So it addresses more of the places that where consumers and businesses meet.

And then finally, we're expanding our presence, not just for our customer teams and go-to-market teams, but also just our infrastructure. We already have infrastructure all the way around the world. We're setting up new data centers and planning those out in both Europe and in Asia. And I think that will also help, especially for some of our larger customers. So will overlap with some of our enterprise strategy. So just very excited. We've got a great set of customers. We're also expanding the weight of the partners that we have there in key markets. So I think we've got a long way to go. We're nowhere near saturated.

Yes. And in terms of what helps drive that consistency in growth going forward and our outlook in international, it's the product expansion that AB talked about. And it's also the progress that we have on the go-to-market side around building out all of the surround sound around those product innovations. It's getting the local partner network set up, both agency partners and the platform partners as well, great platform partners, not only Shopify, who we have an incredibly strong relationship with, but partners like PrestaShop in France and Shopware in Germany and then also continuing to build out the customer experience, including the website, the local customer case studies. And so all of that contributes to making this a really strong, consistent growth platform for us going forward.

The next question comes from Rob Oliver from Baird.

I think at the Analyst Day, you guys called out, I think it was over 600 legacy replacements in the last couple of years. And there's been a few questions, [ Garek's ], and one other that have tried to touch on, I think, this opportunity, which is, I think, so exciting for many of us, which is that this combination of service, marketing and commerce has actually been tried before and there's buying there. And so maybe you can talk about as we look into the next year and the next couple of years, the pipeline you have building right now, some of the customer examples you called out, the fashion brand, 7-figure renewal, how should we think about that opportunity increasing over that kind of 600 number over the last couple of years?

Great. We don't have any numbers to share today, but the momentum is awesome. And similar to international, I think there's things we're doing now that have -- that we'll finish doing that will now bear even more fruit.

So as an example, we've only recently spun off our Analyst Relations program. We're now starting to work with more SIs and global system integrators, which is introducing us to more large enterprises. I think, obviously, enterprise and international go hand in hand. We've already worked with a number of large multinationals, but that will get only better as we do some of the work that we talked about on the international side.

And look, the bedrock of this for us is, I think, really the 2 things I said. The first is since the beginning, this idea of your data infrastructure should have a tight linkage to how you do marketing messaging, the infrastructure there and then now what we're doing with service, customers love the idea -- the enterprise actually love this idea of one database now with -- that's getting more intelligent via LLMs and AI that is then distributing that experience to all possible channels. This really, really matters to them that they want this one unified experience.

So this idea that like you can use the data you have at scale to generate things like recommendations and then make those available on all services, websites, mobile apps, messaging inside of a chat or in a voice conversation with the customer, all delivered via AI. That's a really enticing value prop.

And so I think that there's just -- there's a lot we're doing now that the results we're seeing are a little bit of the actions that we've taken in the last 12 months, 24 months. But I think there's even more that we can do. And frankly, like there's even an element of social proof to all of this. I talked to businesses that said, hey, 12 months, 24 months ago, they didn't think of Klaviyo as an enterprise brand that we are quickly changing that perception, and I expect to see that snowball.

Ryan MacWilliams from Wells Fargo has the next question.

Great to see continued strong new customer additions. This question is more in regards to your customers. So we're hearing SEO struggles come up more for SMB. And I was wondering, are you seeing customers look to Klaviyo as a way to support new market activities to combat SEO efficiency getting more challenging? Or are you seeing existing customers look to add new use cases as a result?

Yes, it's a great question. So I'll say 2 things. We look at Klaviyo as really as the bedrock of how a business operates and works with maintains and grows its engagement with its most important asset, its customers. those end consumers. So we're noticing actually like 2 trends. The first is for some businesses, they're seeing a lot of growth through AEO and effectively like getting discovered through some of the AI applications that are out there. And so that's driving more consumer relationships.

For other businesses, we find them -- they're actually -- when it's uncertain what their strategy is, they're coming back to Klaviyo to say, "Hey, how can I do more with my existing consumer relationships? How can I nurture those harder? And this is where AI really plays in. I mean one of the things we want to deliver them is like, look, we automatically, agentically give every single business for every single one of their consumers a path on like what is the absolute best experience they can deliver to that consumer.

So when they do acquire them that those consumer relationships are more valuable, more durable, higher LTV. So it's a bit bifurcated, but I think when there's uncertainty and revenue is really on the blind, we find people come back to us. Just as an example of that, we're about to enter the holiday season. We find that for most of our businesses we work with, especially in retail, this is when they see the highest percentage of return consumers coming to their business. They know the consumers when they're shopping for the holidays come back to businesses they already know. And that's why you see so much more incremental usage of Klaviyo.

And we're excited actually to have all these -- some of the AI functionality we've delivered now help them do a better job connecting those customers to the exact right product or the exact right service in the most critical time of the year for them.

The next question is from Scott Berg, Needham & Company.

Really nice quarter here. I guess one question for me is we've been to a lot of sales and marketing conferences in the last month or 2. And we're seeing a ton of customer interest in the space, but budgets tend to be just a little bit light right now. And your commentary suggests that there should be a lot of expansion of budgets on some of this newer AI functionality as we get into the new calendar year. Does that track with what you all are seeing today? Or are you seeing customers more emphatically kind of spend on some of this functionality here even in the third or fourth quarters?

Yes. Let me make 2 comments on that because I think it's probably a bit of a clarification too, like how we think about our role in the awareness buying process, what we think of like the marketing and sales cycle. So the first is every product that Klaviyo builds -- at its core, we make sure that like it needs to show its ROI, there needs to be revenue directly attributable back to that product. I think that's the case that not a lot of sales and marketing products can make.

Oftentimes, there are tools that you might have a sales team use or a marketing team use. And it's not only like its productivity to that person, but you can't -- you might be able to measure the hours saved, but you can't see the dollars that, that product is generating. And I guess the second point is like, so what's the difference between how we build products for marketing, for sales for revenue generation versus a lot of what's out there in the market. And this is why we started to attach to this word agentic.

I think there's a big difference between AI products that sort of assist a person doing a job. That's great, and we should want those products. But ultimately, they're just kind of -- they're not doing the work for you. They're just helping you do the work. What we found with a lot of the AI applications inside of Klaviyo. And if you look at what, for instance, our marketing agent is doing, the goal is to help -- assist a little bit, but it's really doing the job that we find the business we work with, they don't have the time or maybe the skills to get done or maybe they just don't want to do it. And so we've now changed this paradigm where instead of using software as a tool to help somebody do their job, but still ultimately, it's the person who you're really measuring the ROI on, we're now literally building algorithms agents that can do a big chunk of the process and a human can review the results.

So an example we talked about with marketing agent, we're now generating not just creative or content, but entire campaigns, who you should send to, what's the purpose. We're giving that to our customers to then review. And then they're telling us, hey, whether that's good enough, maybe making some small tweaks and then they're deploying it. That's a totally different way of doing marketing than having a tool that helps somebody ultimately have to do all the different steps.

And then we're learning from that and seeing what the results are and automatically optimizing the content that we show them next, right, or the next campaigns that we generate. This is just a different way about thinking about leveraging AI. I think it's even more ROI driving.

And so the conversations, I've talked about, you are the normal things of, hey, how do we make sure that the quality meets a certain bar that you can trust that AI is actually doing the right thing. So we've built so many checks into our marketing agent. We have a whole quality agent that runs that vets everything. People actually are so excited about that. They want to apply it to their human created content as well. They want to put on everything they're doing inside of Klaviyo. So I think that's the big difference there is there's a difference between driving actual revenue and actually doing the work versus just being a tool that's part of the process.

Up next is Arjun Bhatia from William Blair.

I just had a couple of quick ones. First, Amanda, I think you mentioned you're going to start running sort of pricing pilots for marketing agent coming up here. Can you just maybe touch a little bit on what that might look like and what you're starting to experiment with? And then second, we're heading into Q4, important holiday season, as you pointed out, just would love to get your sense on how you think that's shaping up relative to last year?

Sure. So on marketing agent, we're seeing great results. We talked about on the call some of the outstanding results that our customers are seeing in terms of improvements in open rates, improvements in the KAV that they're generating per campaign. It's really helping amplify the work that they were doing and enable them to do more work at higher quality in less time. So there's a lot of excitement about it and generating a lot of value.

And so we're going to start experimenting over the next couple of months with what does that look like in terms of a pricing pilot of how do we monetize it. Some of it, we're going to continue to build into the product natively, the things that we think are really important for all brands to have access to.

And a great example of that is some of the image work that we talked about on our last quarterly call. But again, in those places where customers are really seeing that incremental value, we're working on how do we charge it. And we've got great confidence in that because of the results that we're seeing from some of our other areas where we're already using AI in the product, right?

So we're live right now with customer agents and customers are seeing great results from that, and it's driving paid revenue. And then we're also seeing great results from marketing analytics, which incorporates a lot of AI-driven insights and analytics into helping our customers better target.

So examples we've had recently are customers -- one customer who's using marketing analytics and its predictive gender feature, which is an AI-enabled feature to predict the gender of a given consumer and better target the campaigns that get sent to them, which is helping them generate higher KAV.

So again, seeing great traction there, which gives us real optimism about our ability to monetize it.

And then as it turns to outlook and how we're thinking about holiday, the way that we think about holiday is this is the most important time for our customers. This is where many of them generate a huge portion of their revenue over the course of the year. And so they're hyper focused on what will it take to make those -- make that holiday successful. Tough to predict exactly how the holiday is going to unfold.

We've seen a lot of news out there recently. But what we can say with confidence is what we've seen over the last couple of years, which is during this holiday season, consumers go back to the brands that they know and love.

And so as our brands and the customers we work with are thinking about getting ready for the holiday, they're thinking about how do I strengthen those relationships with the loyal consumers who I've already got so that I can make my holiday as successful as possible.

And the great news is that is exactly what Klaviyo helps these brands do. It's historically been and how do we help them with marketing to them. But importantly, we're becoming even more critical to their businesses as they also add in service as well and really create this end-to-end consumer experience.

So as we look forward to the holiday, what we believe is we've got confidence in how customers are going to turn to us across whatever, however the holiday unfolds.

And our final question today comes from Terry Tillman, Truist Securities.

This is Connor Passarella on for Terry. I want to follow up on the previous commentary on the holiday season and specifically how that relates to service product adoption. Just for the 3 service products, there's introductory promotional pricing through December 31. Is there typically interest from the customer base to committing to these new -- or to new products during the holiday period of Q4? Or do you kind of often have customers that just want to focus on executing into the end of the year?

Yes. It's a good question. So among the 3 Klaviyo service products in that product line, it's a little -- we're seeing some differential in behavior. So let me just walk through them.

So the first is for our Customer Hub product. We've made the integration onto our customers' websites, into their stack so seamless, like literally just a few clicks, and it's already leveraging and trained on all of the data inside of a Klaviyo account.

We're finding a lot of customers want to adopt that even up leading into the holiday season because they know it will drive incremental revenue. So we're seeing really good uptake there. I think similarly, where you find where customers that have not used a customer agent and AI that can automatically resolve conversations or help guide consumers. There are some folks that want to test that out and have larger deployments, but we're also seeing really good uptake there. And I'd say maybe for larger -- and then finally, for our help desk, that sometimes depending on the size of the team can be more of a bigger build of, hey, I up the learning new system.

We've already -- we had a lot of conversations with folks say like, "Hey, this is great. Just talk to me later in December, early January, once I get through the holiday rush. So that product might be a little bit -- that may be delayed a few months.

But in general, actually, one of the things I'm really excited about is if you think about we launched all these products at the end of September, there's a lot of companies that would say, hey, our technology stack is set for the end of the year. And already, we're seeing really good growth in a time when you might not expect it.

And then just to wrap up the call, look, we've been a public company now for 2 years, and I just want to reflect a little bit on some of the accomplishments we've had. Amanda touched on these. We've been growing logos. We've now expanded our product portfolio from beyond e-mail and text messaging to now incorporate a lot of marketing channels, customer service, analytics, our Klaviyo data platform products. We truly are building out the CRM stack. We've done a lot of growing in international and with larger accounts in the enterprise. These are all things we said we'd set out to do when we went public. I think we're executing really well against those.

And we also believe that we want to be one of the highest growth software companies at scale and prove you can do it profitably. And I think we're doing a great job of that.

And then finally, when we think about AI, we look at that as a total unlock for our business and for our customers. When you give our software, a logic engine, a brain that it can work on top of, customers, our businesses, they're going to do better marketing, build better experiences that is going to drive LTV with consumers. And that's ultimately what we index for our customers -- when our customers win, that's how we win.

So anyway, thank you, everybody, for taking the time, and we're going to get back to building.

Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.

All right. We're going to go ahead and get started. Good morning. Welcome to Klaviyo's first Investor Day. We're really excited to have you all here. Thanks to everybody who made the trip in to Boston or for those that are local, walked down the street. And for everybody joining us on the live stream, I'm excited to have you all here. We got a really good day ahead of us. Hopefully, a lot of you were able to listen to AB's keynote this morning and listened all the great product innovation we announced today, really exciting stuff going on here at Klaviyo.

For those who don't know me, my name is Andrew Zilli, I'm part of the Investor Relations team here, along with Piyushi and Ryan.

As always, I'm going to start with the best slide of an Investor Day. Everybody's favorite forward-looking statements. As you know, we may make some forward-looking statements. Those are subject to some risks. Take a look at this. It will be on our website. This entire deck will be posted on our website this afternoon. So you will have access to all of the slides a little bit later today.

We have a really exciting day ahead for you. In just a minute, I'll be bringing up Andrew to kind of talk through our overall strategy and vision, talk a little bit about what he announced this morning in the keynote. Then we're going to have our Chief Product Officer Adil come up and talk more about what we're doing on the product side and all the innovation on that front.

He's going to introduce Steve Rowland, our President, who's going to talk about our go-to-market motions and the great success we're seeing there. Then we're going to have our Chief Customer Officer, Emily McEvily, come up and host a customer and partner panel discussion. So it gives you a little bit of insight from a few of our customers and one of our partners. Then we'll close the formal presentations with our CFO, Amanda Whalen. And following that, we'll have an executive Q&A session with the presenters.

So full day, very exciting. We'll go ahead and get started. So with that, let me invite up, Andrew Bialecki, our CEO.

All right, everybody. Great to see some old faces and great to see some new faces. Hopefully, everybody got a chance to look at what we just shared with our customers and partners an hour ago. I want to spend a few minutes and hit the highlights of where we're taking our product and where we see the opportunity.

Let's start with our mission statement. So this has been very durable for Ed and I since we started. We believe in empowering creators to own their destiny. And I want to talk about two of these words. The first is creator and second is ownership. When we think about creators, we're not just talking about content creators, you know, TikTok stars, we mean about creators, builders, doers, the people that are actually putting product services, et cetera, out into the world. And when we talk about ownership, ownership for us means the ability to be successful. And then owning also tracks, right? You can do it independent of the large platforms or with the large platforms. So you can build a durable, scalable business all into yourself. I frankly think the world, especially with AI, I think we're going to find that we're mostly rate limited by the number of people that can create and think and build and Klaviyo is very committed to helping more of those businesses to be successful.

Our strategy there revolves around the second line here of being yourself at Internet scale. Ed and I both had the experience of having family members, friends that ran small businesses. We were part of some startups. And one of the things that always struck me was, man, people can build some really compelling products and services, but it's just hard to distribute and deliver amazing customer experiences every single time at scale. It's easy to do if you can show up live with somebody and you know the products and you know your customers well. But it's hard to scale that to hundreds, thousands, millions, tens of millions of consumers. And we wanted to solve that problem. And I'll tell you actually, we'll get to this in a second, like we believed in that in 2012. And I would tell you, as we watch some of the advancements we've seen with language models and their ability to think and reason and replicate some of what we as humans do, we are more bullish than ever that, that set of technology, that software will exist. This ability for anybody, a business to say, this is how we want to interoperate with all of our customers. And "Hey, software, just go take care of that. And by the way, don't just do it, get better as you go." So that is our strategy.

Klaviyo right now, we talked about this before, over 176,000 customers around the globe. I think it's over 100 countries. We started out with more with smaller businesses, but we have been moving rapidly upmarket into the mid-market and now into the enterprise. We're doing that by building tremendous products that have great word of mouth that customers take with them to their next job, but also with a great ecosystem of partners and agencies, spending a bunch of time with them on Wednesday night. They are very excited about how to evolve their practices in the age of AI and how Klaviyo is going to -- and how to do that with Klaviyo. And obviously, not just agencies providing services, but also other developers. We built out a really broad developer ecosystem. That's the 350-plus developers, businesses that have integrated into Klaviyo, either push data in so we can deliver a more personalized experience through Klaviyo or are leveraging Klaviyo's database, data platform and our messaging capabilities in their own applications. So we're really excited about where we are.

As we built this, I want to touch on a couple of product principles we just have, growth principles. We really believe in building software that is fast, scalable and flexible. So both for our human users and now increasingly for our AI agents or AI users. We believe in building software that meets consumers wherever they are. So while we started with e-mail, we've expanded to text messaging, WhatsApp, mobile, your website, now customer service. We believe in, whatever consumer touch point somebody has with a business, we want to be the ones powering it. We believe that, hey, while we're going to do a lot of that, we should do it through an ecosystem. And then we believe that in order to be smart and be fast, you have to invest in vertical integration.

One of the key things we do at Klaviyo is we think about building a database, a brain for a business that stores all of the information you know about your customers, your relationships and puts that data to work. We think when those 2 things get segmented, the latency gets slow, its ability to think and reason gets worse. I think this is only going to be exacerbated in the age of AI. Who are we trying to take this to? When Ed and I started, I remember sitting there and saying like, "Well, we should just do it all, right"? And of course, Ed was the smarter of the 2 of us, and he said, well, "Hang on, we've got to start somewhere." So we decided to pick our first application was marketing automation. And even there, we picked -- we sort of focused a lot of our marketing on one vertical, which is a lot of retail and commerce. But we think the opportunity is obviously much, much, much larger than that. Even before we get to the opportunity that what opens up with AI, Klaviyo really today, the vast majority, almost all of our revenue comes from marketing automation. But as we've expanded this year into the other CRM applications and agents, we think there's a much larger TAM.

And then as you think about increasing both international growth, moving into the enterprise, other verticals, other consumer verticals, there's just -- there's a huge opportunity here. And so while we know that we have some real wins in some segments of the market, there's many where we're very -- we're just scratching the surface of what's possible, and that's that less than 1% penetrated. But this AI -- I look at AI for us, I want to touch on this for a second. I think it's going to be an accelerant for all -- for adopting that because there's just this tectonic shift in terms of the way we think about software. If there's one thing you took away for folks that got to see the keynote this morning, it's that I think we are moving towards a world where the software really is autonomous. It will run itself.

And what we're finding with our customers is they want this, and they want this badly because they're rate limited amount the time and resources that they have. You heard our friends from away talk about that today, how there's so much to do, but the reality is like their team is constrained. I think in the future, you'll notice some small things. I think software is less about all of these endless like button clicking and drop-downs and all these things that a human needs to configure and instead, the future interfaces are going to look more like what we've got on the right, where you're basically giving the finished product back to the user for them to say, yes, this is right, review, edit, confirm. I actually think we're going to get pretty quickly to a world where people will be auto accepting that. They'll say the work is always good. I don't -- it's not even worth me spending time on. This is how we're going to abstract away and make things like marketing, delivering the customer experience, our customer agent, how we're going to make that more autonomous. I think every business is going to adopt those 2 paradigms in the next couple of years, and our plan is to lead those.

Now we already mentioned this, speed and data matter. Obviously, like if you don't have the context, as we now all say, if you don't know who the end consumer is or you don't have all of the business' data, you can't be as productive. This is where the fact that we started out as a database and then added marketing on top with tight vertical integration. It's -- I think AI is just accelerating that advantage. And the speed here, like this really matters for us, both in terms of like how our products work, but also our speed. I mentioned like in the age of AI, speed -- the teams that move the fastest are the ones that are rewarded. So I'm really proud of the way that we -- the culture that we built, Adil will talk a little bit about this on the product engineering side, where, hey, as models advanced, we're not waiting weeks and months to get those integrated. We're doing those in days, which means we're learning faster than everybody else's and also building up the credibility that we're going to have the best products out there.

All right. We talked about -- I want to double-click on the data platform that we built. I mentioned like, hey, we have applications on top of that. In the past, we started this, we want people to think about Klaviyo, your mental model is we're going to be the brain for your business. Therefore, we have to know everything we need to know about your customers. And frankly, our software today, you heard this again on stage, our customers love this because they can manipulate the data. They can add some of their own thinking. They can do run their own queries, segmentation, their own analytics. What I'm really excited for here is we've already built some things with our marketing analytics products where more of the thinking is happening autonomously. It's happening due to algorithms.

So for example, things like, "Hey, I have a business, I have a SKU catalog of 1,000 products, but I'm trying to figure out what commonly goes together in the same basket or what is the lineage of various consumers." All of that is stuff that we can compute. But it's built on this bedrock of being the data platform and the low latency data platform for both analytics as well as we think of the transactional side, being able to integrate that into the end applications. When we're -- you see some of the customizations, the personalizations that we talked about doing for marketing. If those can't be delivered in a matter of milliseconds, then they sort of don't work. At our scale, if we're sending an e-mail campaign for [ wave ] that's going to millions or tens of millions of consumers, and we need to do that personalization. That kind of inference of merging the profile data together with the actual content, the point of the campaign, if that can't happen with very, very low latency, there's no way we can send it to that whole audience in a reasonable amount of time.

Similarly, when you look at things like what we're building with Customer Hub that's actually embedded on people's websites or in their application or in their mobile apps, if the latency there is an instant, folks will tune out. So really excited about what we've done on the data platform side. That obviously underpins the whole thing. We've talked about the B2C CRM for us is all about marketing. I look at that as the proactive side. "Hey, if I'm a business, I need to -- not everybody is coming to my website every day or into my store. I need to remind them about what matters."

We think about service as the reactive side. We want brands, as I talked about this morning. We want them to be more than just pitching their products and services. Yes, they should do that, but they should be value-add all the time. I think with what we're building with our customer agent, there's an opportunity where if you need advice that's maybe adjacent to the products and services you offer, we showed the example of the fragrance company. If somebody need some tips or advice on interior design, home decor, there's no reason why our customer agent can't be that really helpful expert that, that company we talked about, Preston Lane is offering. So that their customers keep coming back to them when they have questions. And oh, by the way, yes, here's all the great products that we have. All of this is underpinned by the data platform we have, the integrations, the intelligence layer, and then it's delivered through these applications.

Already touched on this, but I'll hit this one more time because I think it's just so important for us. The era of software as tools that you log into and we expect humans to use is over. We've talked a lot about this internally and like how we use AI. And one thing I think is very important is there's a lot of advantages to be in Klaviyo. We have customers that love us. We have a great partner ecosystem. We've got a tremendously talented team. We've got a great business model, great cash flows. But there's some baggage potentially that comes with that. And I think the risk for a lot of SaaS companies is thinking that it's like, yes, the future is really about tools where we kind of sprinkle a little bit of AI on top. I get a little more efficient, but I still sell the seat license. I just want to be very clear for Klaviyo, we believe those days are numbered.

Now the reality is not all businesses are ready to adopt this today because the products need to get better, but we are very focused on building for that future. That's why what you saw with our marketing agent, our customer agent, you can then see they're anticipating a future where a lot -- the review still happens through humans. There's still a human in the loop, but a lot more of the work is done by artificial intelligence. I think the companies that think that way, they're thinking about the future of jobs being done, not as like we're offering tools, but really we're doing the work. It's more autonomous, as we say internally. That really matters. And that's the same thing that we're actually embedding inside of Klaviyo's culture, where the way we work, if we're asking our customers to think that way, we need to do the same thing. So this impacts the way that we thought about like building teams, building software, interacting with customers, recruiting the kinds of talent we want. I think SaaS has like -- it's hit its peak. And now really what we should be focused on is products and services that can deliver -- can actually do the things for us.

As we move on that, like we're moving towards this autonomous era. You'll see in our products, also the way that we operate with customers, we've kind of moved like if you want kind of a bit of a sliding scale, hey, what are the stepping stones as we get there? What we started out with was actually a bunch of like do some of the machine learning for our customers, so what we call predictive ML and AI. So things like, hey, if I have a bunch of consumers, can you compute so can you enrich basically their profile? Can you tell me what products they're likely to purchase next or what's their propensity to churn or what kinds of content they like. We produced these kind of this metadata that then we were still relying on our customers to leverage, and they love it, right? It's great. But they still have to do all the work of actually configuring it and using it. We then got to more assistive. You saw some of things that we launched around like, hey, image editing, that's getting easier. Hey, we'll show you some optimizations that you should be running.

But again, I just want to emphasize that for us, it really is all about this, like how do we build towards a future where I believe any business should be able to plug themselves into Klaviyo. We should be truthful to their business and brands, and they should be able to scale infinitely. They should only be rate limited by the quality of the products and services that they can offer, and we even have some tools to help them there. Awesome.

So that's why as we think about AI, the 2 main things we're focused on is our marketing agent we launched today, our service agent, our customer agent that we launched in June that's now available to all of our customers, like we said before, all powered by the Klaviyo data platform, that one brain for business delivers one unified experience to all of the end consumers. This is what we hear all of our customers saying that they want. That's what we're going to deliver.

Let's see. Marketing agent, I think we've talked about this a bunch. I mentioned this. The one thing I'll share here that I already shared on stage, I think this is the new user experience. We talked about like for us, it's about this feed. It's an inbox of ideas of things that you need to go -- that you will audit, that you will do, you will review, but the AI is doing the real work. The days of these big editors complex, I do a lot of the tuning myself, right, write the copy, edit the padding, figure out the subject line, all of that, I think, is going away. I actually say this idea of like if you think about a lot of SaaS applications, as they grow and they want to expand some more use cases, a lot of them end up building these like libraries of content, right, templates, they'll say. That to me feels archaic. It feels a little bit like a search engine result where there's 10 links, you have to guess and check which one is probably the one you want, but it's actually a combination of all of them. What we've done with our marketing agents and say like that shouldn't be the case. You shouldn't be guessing from, well, here's 10 examples, pick the one you like the most and customize it for you. Instead, we'll just do that out of the box, all right?

On top of that, like I showed the example of like, hey, away travel, hey, they should be doing more than just luggage, but they should also be helping people plan maybe their next trip, be value add. One of the things that's really cool, I don't know if we touched on this on stage. We showed an example of our AI generating content for a traveler about a trip to Portugal. That's great. But obviously, not everybody is going to go to Portugal, right? It's like it's maybe not whereby wants to go. It's obvious that like through our AI, through the content agents we're building, plus mixing that in with the context we have about profiles, about each consumer. When you merge those 2 things together, we can do little things like, hey, timing, channel. But really, what I'm most excited about is this idea that we can personalize the content one-to-one. So way, as an example, in the future, I believe that they'll be able to say, "Yes, yes, we're -- we'll help you plan your next trip," but also it doesn't matter whether it's somewhere in the U.S., it's Europe, it's Asia, we can help everybody regardless of who that traveler is and all of that personalization can be driven by Klaviyo while still consistent with away's brand and the guidelines they have.

Our customer agent I just think every business is going to have their own concierge they deliver to their customers. Every business I talk to does not want to be relegated to an answer inside of an LLM. They want to have their own experience, their own style. And that's what we're doing with our customer agent. What's really -- let me go back to this. What's really cool about this is we think it's much broader than customer service. That's why the way that we price this to start actually goes a lot further. It's not just about break/fix kinds of issues. Hey, I have an issue with my order, I need to return something. It's actually asking people, it can help with the marketing and sales process, hey, what should I be thinking about?

In the case of a way, it's, hey, I'm going on this trip. I have -- my family is coming, like, tell me, can I fit it all in one large-sized suit case or should I get a couple of carryouts? This is the kind of stuff that our customer agent is able to do today. And then we talked about, hey, broadening out the skill development, that's actually something we're going to be opening up to developers so that they themselves can then like build their own skills. Our developers are very excited, partners are very excited to help us contribute to that. So I believe every business is going to have this multimodal text today. In the future, there will be other modalities, assistant that they offer to their customers. So marketing agent, customer agent, if we can deliver those to every customer, I think we're in great shape.

All right. And then with all of that, we talked about like marketing automation to just the CRM stack is great. But as we make this more automated, what we've heard loud and clear from our customers is this drives more results, and they're willing to pay for that. It also saves them a lot of time. It expands what their team can do, but actually at a fraction of the cost. And so that's why we believe that if you look at the B2C CRM TAM, the salmon color in the middle, that's actually understating what the ultimate market will be because we won't be just building tools anymore. Now we're doing things. We're actually executing on that already. I've had customers talk to the last couple of days about our marketing agents like, wow, if you can do this, I don't think about Klaviyo as this tool I buy from my team. I think you as like a part of my team. That's the mentality that we have.

All right. Excellent. Now a deep dive on the products, Adil Wali, our Chief Product Officer.

So I'm Adil. I'm a Chief Product Officer here at Klaviyo, and I think a lot of you are new faces for me, so I'm excited to get to know this group. And I think AB spent a lot of time talking about the massive opportunity here. And I think it's important maybe just to step back quickly and talk about my story because that's what brought me here, right? So I have this unique opportunity to have been a very early customer of Klaviyo more than 10 years ago, actually. I've been a founder for a lot of my adult life. I started a company called ModCloth, which was an early digitally native retailer. We're one of Klaviyo's first customers. I was a technical youth, sort of like Microsoft certified at 14, wrote a lot of code starting then. And so I have a pretty deep connection to the problem that our customer community, right? The sort of like fragmented data story is very real.

The fragmented set of tooling is a very real problem. And so I sort of moved on from ModCloth. I led the fintech organization at Meta, so I ran all of checkouts, payments, commerce, fraud at Meta. And even though that was a big job and a great job, coming to Klaviyo was just a clear and obvious choice for me because of this opportunity, something that I saw very personally and sort of realized, hey, this company is on the cusp of something really, really special. And so what I want to talk about today, AB talked about AI, both in the keynote, which I hope most of you saw. I want to talk about sort of like the underlying pieces of innovation beyond just the headline features, which are meaningful, but there's a lot more we're doing.

So we're going to cover 3 things. The first is our high velocity sort of like product innovation engine. The second is thinking about data as our durable advantage. And the third is the sort of autonomous CRM and all of the pieces that sit underneath that. So on high-velocity product innovation, I think this is really important because we -- AB and Jamie talked a lot about AI and how it's sort of manifesting from a headline feature perspective. But I think it's also important to talk about how we're using AI to accelerate internally, which is not a new thing for us at Klaviyo. We've been accelerating over the last couple of years using AI. And I think like the velocity is very real, right? We deploy more than 270 times a day. 18% of our revenue is invested in R&D. I don't think I need to share the comps with this group. You probably all know what everybody else is investing in R&D. And I think we have more than 50 ML models in production today, right?

So I think what's interesting about this is not just sort of the speed at which we're moving, but that combined with the scale, right? Because we're doing all of that, not just like -- I mean, these are the sort of metrics of a start-up, right? We're not moving at start-up speed -- at start-up scale. We're actually -- we have more than 8 billion profiles in the system, more than 1.4 billion e-mails sent daily, 3.4 billion events processed, which, by the way, is about 6 million on average in terms of events process per profile per hour for our customers, right? So there's a lot happening in the Klaviyo platform. And I think the reason that we have this combination of scale and speed really comes down to the decisions that AB and Ed made in founding the company as a data company, first and foremost, right? I think when others were sort of like zigging, we were zagging, right? Other companies were focused on e-mail and marketing as the first use case. We were focused on building a data platform, right? And knowing that everything was grounded in the data.

And then we thought of retention marketing as like the first thing that sat on top of that data platform. And we thought of e-mail as the first channel within retention marketing. And of course, SMS followed and these other features around what we call the B2C CRM today followed. And I think in 2025, it's really now about sort of accelerating all of that with AI, right? So that innovation velocity played out in the features that AB talked about today in the keynote, but it's also manifesting across the entire stack, right? We're accelerating development. We've shipped more than 200 features in 2025 alone, and these are meaningful in terms of size, right? So I want to show you sort of what that velocity looks like in practice. AB mentioned this earlier, and this is, I think, a great example of this. I think everybody here is probably familiar with Gemini's 2.5 Flash model. This is like the game changer in terms of photo editing.

Within 72 hours of this model shipping, we had it live in Klaviyo, right? So this is the speed that we're moving at is ensuring that whatever is happening out in the world, however fast the world is moving, like we need to be moving faster at Klaviyo. And I think it's that foundation of data that makes this all possible, right? So coming back to data first as our durable advantage, I think what's important to talk about here is that most systems kind of force a trade-off between speed and scale, right? So you have some fast system that you're using for your daily transactions and you have some really slow data warehouse system that you're using to actually make your decisions. And what we're doing is we're bringing those things together with a system that actually delivers both. And I think there's 3 key design elements that make that possible. The first is there's no schema for us, right? So we want this to be instantly configurable by any user, like you don't have to be a DBA to use Klaviyo, right?

The second piece is that we want to make sure that there are no limits, and that means 2 things, right? It's the ecosystem doesn't have limits because you can connect virtually any data source into Klaviyo. But the other piece is there are not limits or silos across the actual connectivity within our own products, right? So whether you're in service or you're using it for marketing or analytics, it's all that same data source under the hood, and it's all seamlessly connected, right? And -- the final thing on limits, I think, is really important because I think this really does set us apart. We don't put limits on the number of profiles or on the number of events for our customers, which allows them to have a really rich history in our system and to make really powerful decisions based on that data, right? And all of this is made possible because everything flows through KDP, which is why we're able to move faster from a product perspective than our competitors.

In terms of the data platform, I think Jamie did a good job today of talking about sort of like, "Hey, here's where we're going. Here's sort of the vision." I think what's important to talk about, I want to step back and just spend a minute on this because I think the state-of-the-art is sort of changing in real time, right? What we have led with in terms of segments, right, and I think this is a area that clearly Klaviyo has led, allowing people to say, "Hey, I have this big audience, let me sort of break it down into these buckets and figure out, okay, how do I deliver different messages to different buckets." If you think about where this is going, and I think we -- this was like the holy grail for us at ModCloth many years ago, was getting to a segment of one, right? How can I deliver literally to the individual something different? And that's something that's actually possible now with AI. It wasn't possible. I mean it wasn't possible like 2 years ago, right? It's possible today, and I think that's really exciting.

And that's not just like if you look at the left visual here, okay, that's content, but it's really about the journey, right? It's what content am I getting, where am I getting it, right? In what modality, when am I getting it? All of it coming together in a bespoke journey. And then I think the next piece pretty clearly for us is like, hey, the on-site experience is really part of that journey when you think about it, it's really just another channel. And so for us, we're able to use AI to -- the future for us is very much this personalization at scale across your entire I think, which is really pretty exciting. And again, it's that data foundation that sets us apart and that allows us to build really the autonomous CRM.

So talking about sort of how we're getting there. I think it's important just to sort of take a second to think about, okay, what is like a B2C CRM mean? I mean we showed this visual a lot. And I think for me, the thing that's powerful about this visual is that we're showing the Klaviyo data platform as the core foundation. And then we're showing AI sitting directly on top of that, but underneath everything else, right, underneath the core sort of 3 suites of products that we're offering. And I think if there's anything I want this group to take away from today, it's that we're innovating across this entire stack, right? We're moving quickly in all 3 of these areas. And I think that breadth of innovation, I'm going to cover this later in our product keynote later today, but I want to quickly hit on a few of these innovations now.

So just talking about marketing, we sort of think about this in 3 core buckets, right? We have our omnichannel orchestration. We have analytics and insights, and then we have autonomous marketing. And if we dig into omnichannel, I think the story here is really important, right, which is like for us at Klaviyo, we need to show up wherever the customer is, right? And so that's a proliferation of channels, which is why, of course, I'm excited to say that today, we're GA-ing for WhatsApp, which is huge for us. We have RCS also live. And the acquisition of Gatsby adding social as a channel, I think, is really exciting, too, right? So all of this for us is ensuring that we're going to be wherever our customers' customers are, right, so that we can deliver the right sort of personalized experience across all the touch points. And I think all of these -- as channels proliferate, this is why our omnichannel builder, which is also GA-ing this week, is super important, right? Because the more channels you have, complexity scales nonlinearly, right? So it's important that we are allowing people to build against all of these on one canvas, right?

One unified canvas for an omnichannel campaign irrespective of however many channels you're messaging across, right? So I think that's what powers that sort of best-in-class messaging. And I think as you have more channels, that sort of creates the next important bottleneck, which is, okay, how do you then piece together the data across all those channels, right? And this is why we're innovating on marketing analytics, right? So features like RFM analysis, product and catalog insights, all of this is helping our marketers wherever the data is, right, wherever -- whichever channel they're engaging with their customers. And so we also launched omnichannel attribution. So customers have a full view of their ROI, not just on their owned channels, but also paid in organic channels, right?

So I think more channels leads to the need for better insights. And I think all of that insight data then leads to what AB talked about earlier, which is marketing agent. And I want to spend a second to just like make this real because of how important of a step change this is, right? I think this is the step of Klaviyo going from sort of like being software to being a partner that's actually doing the work with you, right? And I think that's really special. And so when you think about the steps, if you decompose, okay, hey, what is marketing agent doing today? I think the first step is building this brief, right? So understanding what your brand does, understanding what your brand voice is, right, and saying, okay, we've looked at your product catalog. We've looked at your brand context. We have a sense of your brand voice, okay, like here's what the marketing brief is, right? And that's one whole process. And then the second is saying, okay, we've got the brief. Now let's actually generate content that you can use.

And I think this part is really special. And there's a certain -- we could sort of have the videos on the screen, but there's a certain magic in the experience that you almost have to like use to believe in terms of like, oh, I actually just wrote it all for me, right? And it's like it's good. I can just use it, right? And if I don't like the image, I can remix the image, as AB showed in the keynote, right? So -- and I think the way I think about this is it's also important to have these guardrails, right? I liken this to like the levels of self-driving in a car. Some people are going to want to have their hands more on the wheels. Others are going to want to have more of that autopilot experience. And so it's important for us at Klaviyo to show up across that of do it with me to do it for me, and we're shipping across all of that, right? We're giving the user that capability and control whenever they want to parachute into the experience and sort of make edits or make changes or remix the experience before they put it live, right?

So I think the result here is ultimately building campaigns better, lower customer acquisition cost, right, faster iteration and maybe most importantly, allowing the brands to sort of do the things that they love, right, focusing on the strategy and letting sort of Klaviyo actually assist them in delivering the actual work that's driving both their marketing and their service. And so this is sort of the marketing agent. And I think it's important to say that like the customer agent, I think, is like equally interesting. And so if we just talk about service for a second, there's these 3 principles, right? So autonomous conversations, personalized on-site service and then smarter tools for support teams. And so in terms of how all this manifests, right, so on the other side of our AI experience on the customer agent side, the -- so coming back to that sort of example of the user taking control, right, this notion of autopilot, the customer agent is engaging directly with the customer, right?

So the idea here is the agent is smart enough to elevate to a human if it doesn't know the answer. But a lot of the times, it actually does know the answer, right? Because it sort of shows up as like a really effective in-store associate, right? Like it has the brand data. It knows about inventory. So it's like the smart associate that's able to interact with you, answer questions. And what's interesting is even in beta, we've found really good results, right? We had 75% success on recommendations in beta. We had 91% on order questions, right? So all of this being solved and deflected by the AI agent and not having to be escalated to a human to answer, right? So I think the win there is twofold, right? I think you have a better experience, right? You're going to have higher conversion on the site, but you're also going to tax your team less, right?

So you're going to have lower ticket volume because you're having faster and more accurate service, right? So I think -- and the exciting thing here is like if a human is needed, and this is why, by the way, we actually shipped 3 products in the service suite. We didn't just ship the customer agent. We could have stopped there. But if you need to elevate to a human, it made sense for us to rethink the help desk experience in an AI-native world, right, which is why we added Customer Hub and Help Desk, right? Because Customer Hub is this rethink on like, hey, what does the Help Desk look like in this AI native world, right? And what's powerful about Help Desk for us is we have all the very same context that crosscuts the experience, right? So if you were chatting with customer agent and then you send a message via Help Desk, we know about that. That's surfaced in the experience. If we marketed to you yesterday, that's in the Customer Hub experience, right? We -- all of that is connected across all the touch points.

So the agent knows it, the human agent knows it if they're actually going to get a ticket escalated to them to solve, right? So -- and that's why during beta, we saw Hub was deflecting 300,000-plus support interactions, I thought, which is a really exciting statistic with a small number of beta customers, right? So I think the idea here is across all 3 of these products coming together, we're delivering faster, more personal revenue-driving service, which I think is really, really powerful. And what underpins all of this is our data platform, right? So I mentioned earlier sort of like we think of data being founded as a data company, data is at the heart of what we do. And so there's 3 core buckets of investment for us here, right? So there's advanced data management, there's our apps and ecosystem and then there's global scale and readiness.

And I think what's important to talk about here is as we look at advanced data management, this is about, hey, extending our built-in CDP capabilities, whether you are a smaller company getting started and you have thousands of profiles or you're one of our larger customers with millions of profiles, the idea here is that we want to make sure your data is connected, it's organized, it's actionable and everything just works, right? Because we want to deliver the right data to the right user. And so having features like advanced identity resolution become really important in that world because you need to know if you have a single source of truth that you can trust it. And I think the other piece here is as we get pulled up into the enterprise, we're seeing a ton of demand there, and we're winning there. Security becomes more important, right? People are asking us for these more advanced features like custom user roles, having the ISO certification for PII. So we're shipping all of these capabilities that larger brands are asking us for. And the other piece here that maybe is just as important is this idea of global reach and internationalization because we're seeing -- again, we're seeing demand here, and we also have our existing customers that are operating across multiple countries, right?

So the messaging has to adapt to these different context, whether it's different regulations, different languages. And so today, we're announcing that we have smart translation for SMS, also 2-way SMS in all available markets. And of course, that's going to extend to WhatsApp and MobilePush, which I think is really exciting. And then maybe even more exciting is integration with Shopify Markets for location-aware catalogs, and that's coming in the next quarter. So all of this innovation across the stack, I think, delivers a tremendous amount of value to our customers from the data platform all the way out to internationalization. And so the question, though, is like, okay, yes, as a product person, I'm excited that we're delivering all these capabilities. But the question is why? And I think it's really about this. It's about the impact that we're shipping for our customer community, right?

I think what sets us apart is we are building the future of how businesses connect with their customers, and we're actually landing real value here, right? $220 billion in KAV, Klaviyo attributed value since 2021 across the customer base. And there's a meaningful lift here, right? So Fishwife had 67x ROI since adopting Klaviyo. Brodo has seen 293% year-over-year KAV growth and Samsonite has seen 38% quarter-over-quarter KAV growth since adopting Klaviyo. And so for us, this high-velocity innovation powered by the most sophisticated data platform in the space. And now with AI layered on top, I think, creates that autonomous CRM that's letting brands focus on what they do best while we handle the complexity.

So with that, I'm going to hand it over to Steve, who's going to talk about how we're taking all this innovation to market.

I don't know about you guys, but I'm like so stoked about all this innovation. We've talked a ton about product. And now I want to talk about how are we actually taking it to market. The 3 areas that I want to discuss is, one, how have we built a global diversified business. The second area is what are the growth engines that are going to now continue to help us drive long-term durable growth, really around multiproduct platform, continued international acceleration and then our momentum, continuing our momentum in mid-market and enterprise. And then I'll wrap up with our partner ecosystem because that continues to be an incredible force multiplier for us.

So let's talk a bit about the global diversified business that we've built. And I'm going to compare and contrast this since this is our first Investor Day to where we were when we went IPO. And if you recall, we were largely an SMB entrepreneur company, right, selling primarily one product with some ancillary products called SMS and a few other things. And we generally dealt with the Founder, the Marketing Director. Well, now when you fast forward today, we are truly a global business. The entrepreneur and the SMB remain incredibly important to us, and I'll talk about that in a moment. But now we're also serving the mid-market and enterprise, and now we're selling a multiproduct platform called the B2C CRM. And the buyer, the people we're interacting with, yes, still the Founder and the Marketing Director down market, but now we often see upmarket, the CMO, the CTO, the CIO and even occasionally the CEO. So our brand presence and the value that we bring to customers has changed very dramatically in the last 2 years.

So when you look at the segments across 176,000 customers, these customer groups, entrepreneur and SMB, still very focused on an efficient product-led, very low-touch motion. And then we have a very significant focus on the sales-led motion upmarket. And just in the last 18 months, we've added brands like Hershey's, Champion, Reebok, P&G. So this diversification across all of these different customer groups gives us the opportunity to build that very diversified business. Now demand sources remain very important to us. Efficiency is key to how we actually go to market. And you'll notice that 50% of our demand still comes through that product-led motion. And 25% is coming through a very focused sales motion, and we still get 25% through partners. So good demand sources, efficient demand sources as well as focused demand sources.

So this has led to a very diversified customer mix. If you look on the left-hand side, this is by customer count. So dark purple, lots of entrepreneurs. It makes sense, right, when you have 176,000 customers. But I want to point you to the right, which is the mix by ARR. And you'll notice that mid-market and enterprise now make up a nice portion of our ARR. And that customer group is actually growing faster than our total ARR. So a lot's changed in 2 years. We've built a global business that serves multiple products to multiple customer groups that now gives us the foundation to build upon with 3 major growth engines on top of this foundation. So I want to talk about each one of these.

So I'm going to discuss the multiproduct platform, the B2C CRM. How does that actually go to market? How do we capture more opportunities, cross-sell to existing customers. I'll talk about that continued international growth and acceleration, and then I'll wrap with our mid-market and enterprise momentum. So let's look at the multiproduct platform to start with. There are a lot of technology companies. I'm sure you follow a lot of technology companies that build great products, but they don't actually solve a real problem. And so let's start there. This is what our customers deal with before they use Klaviyo. A lot of point products. They're stitching them all together. They're trying to make sense of all the interactions. Then they're trying to take all that information and create these connections with their consumers, and it's really, really hard. And that's what they deal with every single day. And what we do is we simplify all of that. It starts with that data platform. It's the brain that AB talks about. That's our foundation that allows us to capture the entire experience of the customer to then take that insight, activate it, orchestrate it across all digital channels and marketing automation and now into that seamless service experience wrapped around with deep analytics and AI insights. And that takes all that complexity and we solve that.

So that's the biggest opportunity we have had in the market in solving those problems and creating value for our customers. And this manifests in really interesting ways. So if you look at all of the customers that are using just e-mail and SMS, when they start using Klaviyo e-mail and Klaviyo SMS, they see a 37% increase in KAV. When they consolidate across more of our technologies, like advanced analytics or advanced KDP, they see returns like Tibi saw, which was 100x return. And new products, this is the best part. When we launched Customer Hub in beta, we drove millions of dollars in incremental KAV for our customers. And the really cool part is that we had -- out of all of those beta customers, we had 30% that activated our customer agent in the product unassisted. So really good insights for what they want to see from us from an AI perspective. So very tangible value across all of our customers when they begin to use more of Klaviyo.

I'll give you a specific example of a personal care brand. This customer started 2 years ago with our data platform and e-mail and then the next year, they added SMS and the year after that, they added Advanced KDP. That customer's ARR with us grew 72% over that period of time. So it's good for us. It's this multiproduct solution coming to market. But it was also great for them because they saw over a 60% reduction in campaign setup time. And they saw over a 30% reduction in TCO. So this is very typical where customers start with us, maybe a smaller set of capabilities to get started. As they build out the B2C CRM capabilities, they spend more money with us and they gain more benefit for their businesses.

So 2 years ago, we had 4 products. Today, we have 8. This gives us an enormous opportunity to not only cross-sell, but allows us to win more deals because we're more competitive and it allows us to cross-sell. So more deals, bigger deals, cross-sell into the existing installed base. And today, we already have 30% of our mid-market and enterprise customers using more than one product. And 54% of our ARR comes from multiproduct customers. So we've already made a tremendous amount of progress. Now we have more technology products that we launched today. This gives us a long-term opportunity to continue to drive this as one of our growth engines. Okay. So now how do we take this internationally? And we've made a tremendous amount of progress with our international growth. In fact, since going public, we've sustained 40% on average, 40% growth every quarter. I know all of you are excited about that on our calls, asking us how we're going to do more of that? Well, let's talk about that.

It starts with the investments we've made today. So when we went public, we offered the product in one language called English. We now offer it in 11 languages. We offered SMS in 5 countries. We now offer it in 22 countries. We operated in 3 physical locations. We now operate in 6. So those investments that we've been making over the last 18 to 24 months now allow us to capture revenue in over 100 countries. And when you look at some of the specific markets like Germany and France, well, we've seen 3x growth in Germany and 2.5x growth in France. So it's already working. We know how to actually go do this effectively, but we're just getting started.

And one of the reasons we've been so effective is because we have a framework that allows us to expand internationally in a very cost-effective way in a very thoughtful way. So what do most software companies do when they want to go internationally? They put people in the country. Oh my gosh, we have to hire people in Japan. We have to hire people in Argentina. We play to our strengths, which starts with our product-led motion. So if you look at Phase 1, remember the 1 language to 11 languages, that was all about capturing through product-led growth to allow us to expand globally very quickly, very efficiently through the product. That gives us indicators of what markets are really beginning to pick up. So then we move to Phase 2, and we wrap the ecosystem around that, local knowledge, local language, local expertise to, again, begin to accelerate that growth. Then when we see more indicators, we move to Phase 3, which is our inside sales hub model. So Dublin is a perfect example of this. We opened Dublin in February. And now we cover all of Europe other than the U.K. for SMB out of Dublin. We have local language speakers for Germany. We have local language speakers for Spain and Italy and France and the Benelux in the Netherlands. So this gives us the chance now to get broader coverage but in a centralized location.

Then when it comes to beginning to service enterprise customers and mid-market customers in country, those countries that require face-to-face interaction for that business to actually be conducted, well, we moved to Phase 4. So this framework has allowed us to move very quickly in our global and international expansion, but do it in a thoughtful and efficient and an effective way. All right. So let's now talk about the third growth engine, which is mid-market and enterprise. And I have had several of you in the past, and everyone always asks me, why are you running to the enterprise? And I want to be really clear, we are being pulled to the enterprise. So why is that happening? Well, it starts with what's happening in the market. And I love this quote, [ Mike Yield ] is a Senior Managing Director at Accenture, a great partner and friend of mine. And he said, there's 2 things that have really happened. One is businesses are looking for reinvention in the enterprise, and they want to move fast. And they want to have agility, embedded AI, integrated capabilities, and they want outcomes. So why can't enterprises do that today? What's the reason that they're starting to come and talk to Klaviyo over the last 18 months?

Well, it starts with the technology that they have. So think about this, Legacy Technologies that were built in 2010, some were acquired and stitched together in 2010 and 2011 and 2012, what was the predominant use case? It was really B2B marketing, right? So this technology was used developers, and it took a long time to implement. And maybe you send a campaign once a month, maybe you send a campaign once a quarter. Well, things have changed. They started to adopt that B2B technology for B2C use cases. But B2C use cases are different. You're not doing a campaign once a month. You could be doing multiple campaigns in a week. You could actually be processing billions of events, not millions of events. You might have tens of millions of profiles, customer profiles, not billions of profiles. So the needs of what are required for B2C use cases is dramatically different than what those B2B legacy technologies were built to do. And I love this quote. I was meeting with a customer in Asia Pac about 6 weeks ago when I was across the world. They're on a legacy contract -- technology contract until 2027, but they purchased Klaviyo. And I said, okay, this doesn't make any sense to me. You have 15 brands. You're running this legacy technology. Why would you spend money on Klaviyo? And she said it best. She said, "Steve, literally, literally, when I have to go run a major campaign, I have to go to my development organization. Sometimes that can take months to do a major campaign. She said, the 3 brands we've already put on Klaviyo, I've taken that power of Klaviyo and I put it in the marketers' hands, and now we can do it in weeks, sometimes hours, sometimes minutes."

So they're making the decision to move to Klaviyo before they've moved off their legacy technology because they can't wait. They have to be in market. They have to be in front of those consumers to remain competitive and to drive their revenue. And this captures the essence of why we're winning in the enterprise and mid-market. So these are some new statistics we're going to show you to really make the point. Today, we have over 6,000 mid-market and enterprise customers. And this customer group has a 39% CAGR since going public. And our top 10 customers average over $2 million a year in ARR with us. And our largest customer is paying over $4 million in ARR per year. So we're already winning. We're already making huge success here. But it's early. It's early. This is why this is a big growth engine for us. The enterprises are just now beginning to modernize. So this has a very long tail for us and opportunity and is one of the biggest reasons it's one of our growth engines.

So now how do we take this partner ecosystem that remains incredibly important to us and wrap it around not only our international growth and our multiproduct strategy to continue to create that flywheel. So as AB mentioned, we have over 5,000 partners. This is agency partners. This is SIs, and this is GSIs. And there's a big shift that's happened as the market has changed as we've spread our wings across all of those different customer groups as you'll see Accenture up there as well. You'll see Domain. Domain has been buying up capabilities around the world to bring SI capabilities to market. Maze is another one, ehouse. So we still have a tremendous amount of partners and agencies, but the shift in the dynamic of what they look like is changing because they see the changing dynamic as well with the customer base.

And then technology partners, AB talked about this is how do we integrate into data. There's also a big shift when it comes to go-to-market that's happening. Customers are realizing and even our technology partners are realizing we do something really well. It's called B2C CRM. They do something really well, which might be commerce. And so our ability to integrate -- tightly integrate with all of these different platforms create unique value together for our customers. And that flywheel has only gotten bigger. So you'll see things like brands like TOAST here. You'll see Mindbody as we begin to get to all these other verticals. So this continues to be a competitive advantage for us with these large integrations, and it also is now becoming a competitive advantage for the technology partners that we integrate because of what we bring to market. So this collaboration is only getting stronger.

So when you think about the global diversified business we've built, I think we've made a lot of progress. But as we say, we're 1% done. We have the ability to have a strong foundation now to springboard off of with these 3 growth capture that multiproduct platform through the B2C CRM with more wins, bigger deals and more cross-sell, continuing our momentum with international growth, which is a very thoughtful and efficient approach and strategy and then increasing that momentum on mid-market and enterprise, capturing that early modernization that's starting to happen and making sure that we are the winner in that space, all wrapped around with our ecosystem at the foundation of our autonomous B2C CRM. So I'm very excited about what we've built, and I'm equally as excited about where we're headed and the engines that are going to continue to drive that efficient long-term durable growth.

So with that, I'll hand it back over to Andrew Zilli.

Thank you, Steve. One more round of applause for AB, Steve and Adil. Really excited to have them here, get you all some access. We're just going to take a quick minute and get some chairs set up here for our panelists. As I mentioned, we are going to have a customer panel. So give you a chance to hear directly from our customers. We can tell you a lot of things. We're really excited about we're doing, but it's way more impactful for you to hear from them.

So our Chief Customer Officer, Emily McEvily, will be up here momentarily. And she's going to have a great panel with customers, a.k.a., Happy Wax and Nestlé Health Science. So we're going to give her a chance to ask some questions, really get you all some direct feedback, what customers are hearing, what they like about us, what they wish we were doing differently, maybe new features, things like that.

So with that, I will go ahead and invite Emily up to the stage.

Okay. So I'm privileged to have 3 customers up here with us, and we thought we'd just share some of their experiences that they're having with Klaviyo. So we're going to kick it off and just do -- we're going to do a quick baseline of who you are, where you're working and what your role is. And then if you could also just ground the audience on what products you're using with us.

Yes. Hi, I'm Rachel Fagan. I'm with Happy Wax. I'm the VP of Marketing, and we are pretty much trying to use everything that Klaviyo offers. So e-mail, SMS, Reviews, service, which is Customer Hub and customer agent.

John Gonneville, Vice President of Strategy and M&A at a.k.a. Brands. We've got 4 e-commerce first brands, now omnichannel brands in our portfolio, Princess Polly, Petal and Pup, Culture Kings and mnml. All brands have now, as of last quarter, onboarded fully for SMS, e-mail and then the full data and analytics stack, Customer Hub and those sort of things as well.

Hi, everyone. Arben Azizi, I am with Nestlé Health Science. I am the IT application owner for Klaviyo for here in U.S. for the Nestlé Health Science. So my responsibilities include security compliance. So those are very big with us at Nestlé and then the others are data integrations, user management, road mapping contracts and then usage projections. I work with the marketing team very closely on that. And we have 25-plus brands that I basically manage. Nestlé Health Science, we develop nutritional products for consumers and patients as well. So far, we've been using e-mail and SMS.

Sorry, I'm doing a little adjustment here. It's not uncomfortable at all. So -- and Arben, just to clarify, you guys have brands both in the U.S. and EMEA, correct?

We do, yes. So we have 25-plus brands in U.S. and then about 25 or 6 in Europe as well. And I think we have another one in Japan or so.

Yes. Okay. Amazing. I really don't know which think I'm using so I'll try both. Okay. What I'd like to do is kind of start at the beginning of the journey that you have with Klaviyo. And I know you guys all kind of have really interesting entry points that you maybe inherited our stack or you may have made the decision to move on or to move on to us.

So Rachel, maybe we'll start with you just about how you were introduced to Klaviyo or how you brought Klaviyo into your organization and possibly like what other products you were using at the time?

Yes, for sure. So when I came on to Happy Wax, we were using it for e-mail only. I very quickly -- we were using postscript at the time for SMS. I very quickly moved from postscript to Klaviyo, really, we wanted to bring everything in-house, but we are in one place. But we were also having issues with attribution, customer service issues with postscript. So I always had really great experiences with Klaviyo customer support. So we really wanted to get all of that under one roof. We were also using stamped for Reviews and again, onboarded as quickly as possible to Klaviyo Reviews.

Awesome. And I think, Arben, you had a different experience, right? You inherited us as the solution, but then you also had a decision point later to bring other brands on.

Yes. So when I -- yes, so my team was using Klaviyo for a long time. So once I joined the team, so we just recently, actually, we decided to move 4 brands from another marketing automation platform to Klaviyo. And we are actually in the process of doing that right now. So -- and the main reason for that was the capabilities, basically. The other marker automation platform was easy to use as well, but not as capable as Klaviyo. We were missing data integrations that was big there. So with Klaviyo, we're able to have data integrations seamlessly with our e-commerce platform. So where we can get a ton of transactional data, we're able to do way more there. And then also the integration of social media, which we were not -- we could not get before. Integration with direct mail was another miss we didn't have before. So yes, the data integration was the big.

Integrations are key. Yes. And then, John, I think I want to talk about your story a little bit differently in that a.k.a Brands have had Klaviyo for long time. I want to kind of fast forward to last April, you and I met in San Francisco. And April was a really weird time for retailers, right? They had -- we had just announced or the administration just announced like all the tax changes, right? So there was so much stress in these brands about what am I going to do? Am I going to change distribution channels? And so we talked a lot about that at lunch. And in the meantime, we were trying to convince John to add another brand over into the Klaviyo family from a.k.a. And so it was a really stressful time. And so I'd like to kind of just talk a little bit about how you made that choice amidst like all of the economic uncertainty to kind of continue to standardize on Klaviyo.

Yes. I think we brought 2 of the brands on from -- we've had e-mail forever, but we brought 2 of the brands on for SMS. And that was a really different discussion when we did that at the beginning of 2024, because it was really focused on just price, like how cheap can I send an SMS, can we get there? We know it's better to be integrated. We know it's better for our customers. Klaviyo more reliable. Can we make it work? And this was a totally different discussion. We ran a super robust RFP process, as you know. The key core question of that is we gave you a list of 25 partners and like how many of these do you integrate with? And there was only 2 folks in that RFP process that got over 20. Klaviyo was one of them. They had 22 out of 25. The other 3 were in the works.

And then there was another partner and then it kind of came down to another group we were assessing. And then it came down to the question of like what's it actually look like to run this thing? We were going to have to bring on like twice as many people, maybe potentially it's going to be a huge drain to bring ourselves on. Klaviyo, we're actually going to be able to keep our headcount the same, maybe reduce it. And that was really huge for us in that moment in time because we needed to be able to hold our OpEx steady. We didn't -- we're dealing with a bunch of headaches in our gross margin line and our supply chain. So it was really right place, right time for us to bring on a totally scalable solution.

Yes, that's amazing. I think that's a good jumping off point into like the next stage is after you make the choice like implementing our solutions. I remember, John, that we told you we're like we can get you live in 30 days.

Yes, I didn't believe you at all. Yes, I thought that was just the sales team bs-ing us, and it was going to be a huge headache. And the greatest thing about it is that I do the contract, you do not do the marketing. I do not use the tool. The amazing thing is I negotiated a contract, I signed it, and I never heard anything again. And when the team starts talking about SLAs and headaches and what's in this for legal and how do we hold our partners accountable, like that's a big headache and it reflects poorly an organization. The fact that I haven't heard anything on the integration and that we were live when I checked in with our VP of Marketing, and it was all set and it was ahead of schedule, like amazing. And I actually think that you were quicker this time around sort of 15 months later, launching more products than when we did the move from e-mail and SMS with our 2 smaller men's brands. So it just kind of speaks to what you've done.

Yes. Yes, attribute to the product. And Rachel, you're like our tester of all new products, right? You're the innovator, and you've had experiences like similarly with Customer Hub and Customer Agent, right? Like can you talk about how you enable those and...

It was -- I mean, literally a button. It was a click. It took us minutes, and it saved customer -- our customer service team so much time. They were thinking it was going to be this big undertaking and same with our marketing department, and it was so fast, so easy, super impressive, and we've had nothing but really great experiences. Same with even SMS, it took us days.

Amazing. Arben, I think also you have a very complex environment, 28 brands that you're managing on Klaviyo.

Yes, 25-plus brands. But when you look at all the accounts, there's -- we have so many. Now we're bringing 4 over. So we're going to -- yes, we're just growing.

Yes. Can you talk a little bit to about like how you manage that within the system and because you are kind of the enabler of all these different lines of business, right?

Yes. So I work very closely with the marketing team. So I'm able to help them out with building brand-new solutions because we have some brands that are way ahead of the others. So sometimes we get some by from the marketing teams that have -- are doing something for the first time. So in many cases, we can go back to those bigger brands and clone the solution and just bring them over via the portfolio thing that Klaviyo has. It makes it very easy. It makes it super easy for even the marketing teams to handle such things. But the other things are, of course, because there's -- the integrations are easy to set up. We can get up to speed with other things as well. So we're able to do those as well.

Yes, that's great. One of my very favorite things about Klaviyo besides the fact that we can get customers live so easy. And I will tell you a personal story. I didn't -- I joined Klaviyo in my first 6 months, I didn't have a single escalation on an implementation. It was like I felt like maybe like my e-mail wasn't hooked up or my LinkedIn profile was enabled because I had nothing because the ease of getting live on our solutions is so vastly different than like typical legacy software solutions. But my other favorite thing about Klaviyo is that the power that it puts in the hands of the marketer, right, to be more agile as opposed to having to call IT to enable things or to connect things. And so I wonder if you guys could talk a little bit about that, about the freedom it gives you to be agile and...

100% Yes. So we're a very small team, small but mighty, I like to say. And so what's been great with Klaviyo is that we can move fast. And we feel like we're a bigger team because it's so quick, and we don't have to have a developer to help us with Customer Hub, for example. It looks like our website, it looks like our brand, and we didn't have to do that. I mean it was so easy to do. And really, it's made us feel more powerful because we can move so quick.

That's amazing.

We don't want to be in the business of hiring engineers. We [ make ] close. Engineers are really expensive and the best ones, the guys coming out of MAT, they don't want to work for clothing company. So I'm really happy we've got great data analytics folks and folks like that. But the fact that we still don't have outside of our data team, a single engineer is unbelievable. And it's because of Klaviyo that you can -- it would have been impossible to think that a brand could be $600 million, $700 million of revenue without that, like probably definitely 10 years ago, 5 years ago, it's all part of that.

And I think the other piece that's been really amazing for me is the adoption of the data analytics platform. We do have a robust internal platform ourselves that we use. Our team, by and large, uses the Klaviyo native metrics because it gives them exactly what they need and use it in real time. The adoption of that has been great. And it's something that, frankly, going in the negotiation, we didn't even really think we needed and didn't need to pay for, but it's been -- that's been kind of like the surprise winner [indiscernible] and team.

Look at the business and be able to kind of quickly adjust. That's great.

For us as well, the marketer, they have a lot of power. They can do a lot of things on their own, but they don't need a lot of support from us [ tech ]. But even when they need support to make some sort of an integration like a few months ago, I helped them out doing data integration with our direct mail platform, which is popular that we use. So I was able to do that myself, train the marketing person who was not very technical. They were able to basically get up to speed really fast and then leverage that solution for the remainder of the brands, for the rest of the brands basically. So a little bit of training or no training, they're able to do a lot on their own.

Great. So you just mentioned like your direct mail. It kind of makes me think of like we talked about this morning in the keynote about the -- what we call the omni of curse, but basically omnichannel. And I think you all have kind of really interesting use cases about like a little bit of twist on how you use omnichannel.

I think, John, starting with you, just Princess Polly stores are like a new kind of flagship for you, right, to drive your consumers there. Can you talk a little bit how you integrate that with like in an omnichannel way?

Yes. We're still early days. So we've started rolling out really last year, opened up 7 stores. We'll have 14 open here by the end of the year, going into 2 geographies. And we -- it's a two-pronged approach. It's grabbing girls who do not like to shop online, like to go touch and feel the product. But it's also -- shopping is an activity for Princess Poly Girl. So if you like -- she is going to the mall, she's not buying 100% of her clothes online, no matter what, and we need that to grow our wallet and market share. We really want to see how we can create an effective customer journey that's seamless across those 2 platforms. And that was a really big part of bringing Klaviyo on as being able to see in one area, all the interactions that we have with our customer. If she comes in store, if she makes a return in store, if she makes a return online, if she reaches out to customer service, we can see that all together in the first -- for the first time, it's been really helpful to have it in one platform.

Yes. So the stores are viral. I've waited in line in New York for a long time with my girls to get in the store.

We're putting more dressing rooms in then.

And so Arben, talk a little bit more about how you're using it with the direct mail. I think you have like a pecking order of how you're...

Yes. So flows within Klaviyo are very powerful. So of course, we default -- we start with e-mail. So and then those that don't engage with e-mail, we go to SMS. And then after that, we have direct mail because of that easy integration. So -- and then with the direct mail, I was told that we get about 19% or so conversion rates, which otherwise we would have never gotten that if we didn't have that integration. And then also, we -- of course, we use social media as well. So sometimes we use that sort of at the end there as well or we're trying to find the right spot within the flow for the social media. But that's also another thing. But direct mail has been a huge success for us so far.

That's awesome. And I know, Rachel, you guys are really included in on social media, too, and you even used Gatsby, which we talked about a little bit this morning. Can you talk a little bit about that?

Yes. So we've used Gatsby for 2 years. I was so excited whenever I found out it was coming under Klaviyo, like game-changing for us. It grew our e-mail list so quickly, but also got us amazing ambassadors that we would not have had otherwise. So it sort of made us go viral in a way, which was amazing. So yes, I'm very excited to see it under the Klaviyo umbrella.

Awesome. And then, John, I know you guys are also really heavy on social as well, right, with Meta and Instagram.

We were an existing Gatspy customer. So that was really great. But I think the largest thing for us is we were -- when I was a private equity investor, we were investing in brands in like the Wild West in 2016, 2018, and those were like dream times to be advertising on Meta and in those platforms. And the rent charged on those eyeballs has steadily gone up and up and up and up. And so if we can take those folks that we bring in through those channels and turn them into folks that we can market with in our highest performing channel, which is SMS and e-mail, that is a massive win for us.

The other piece of this is having the data platform across all of our customers and being able to actually export that out to Meta and TikTok and things like that with more data points helps bring our CACs and CPMs down in those platforms. And that's been tremendous because like I said, rent on those eyeballs is only going up, and it's becoming much more difficult with the data privacy restrictions, iOS changes to get an accurate picture within those platforms. The fact that we can get our data in there in a right -- and I guess the other thing that I would add to that is we have total trust in the compliance organization at Klaviyo in order to do that because we've been pitched a bunch of these kind of similar solutions already, frankly, that are like 5 guys in a WeWork. And it sounds awesome until you start to ask ARCON, our data security driver about what's going on. And they're like, well, guys, please don't do that. It's the first time that we really feel confident and safe going into an experimenting with one of those things, and we're seeing the results already.

Yes, right. The regulation, the landscape is getting more and more complex, right? And so you need to trust in your vendor to do that work for you, right, to be compliant. Okay. How about the -- what are you most proud of? So you guys have been -- your teams have been using Klaviyo. Like what is something that you're like most proud of in terms of what you've been able to deliver to the business? And Arben, I'll start with you kind of.

For me, I guess it's being able to -- it's 2 things, being able to leverage existing solutions from the bigger brands and then just carrying them over to the smaller brands with ease super fast. But then also anything with any integration, like [ popular ], for example, we did that super fast. And then I was so happy to see that the marketing team was able to take that and run with it. So that was the most recent one, but there's -- a lot of it has to do with data integration. So I can go into more examples. I can stay here all day and talk about them, but we don't have too much time.

No. That's great. So unlocking the business. Okay, John, how about you?

Yes. Turning our business into a true omnichannel business has been awesome. We talked about the store openings, and that's been great. We've also done a great wholesale rollout. Nordstrom has picked up our 2 women's brands in all of their locations. And our Petal & Pup brand has been a top 2 brand for the entire year, which has been awesome. What I'm excited about is seeing what innovations, I mean, that come to Klaviyo. Is there things -- like right now, we have to train our sales associates to get the e-mail and actually put it in. I am stoked for the day that we don't have to do that because it's going to be a tremendous advantage for us, and I'm kind of speaking that into existence, although the Chief Product Officer is not in the front seat anymore.

Andrew is there.

But it's -- it's those sort of things like -- and I know they're coming, just the speed that Klaviyo is working. So I'm pumped to see how they're going to be able to support our omnichannel organization.

Amazing. Rachel?

Yes. So we actually had a really traumatic event. We had a fire in our warehouse last year. We were not sure if we were going to come back from that. But we bounced back, and I'm really proud of how our team bounced back from that. But really, Klaviyo powered that. We rethought how we connect with our customers and Klaviyo has helped us do that with Customer Hub, with Customers Agent. And really, it's built our community and strengthen trust with our customers. So I'm really excited to see how that continues with all of these new launches and announcements.

And I think it really helps you bounce back from a revenue perspective too and I think you guys were concerned about how...

Of course, I mean, we were -- operations was like nonexistent. It didn't happen. We couldn't produce. So we were able to segment and really target the products that we did have on hand and use segmentation for that and then later came Customer Hub and favorites even like customer being able to add favorites. So it was truly, Klaviyo was our partner through that, and it was incredible.

Yes. Again, something we're super proud of is how we're really enabling that growth of your businesses, all 3 of you, that's really great. Okay. So Zilli told me that one of the favorite questions would be like what -- if you had a wish for something for Klaviyo to do better and the Genie is in the front row. So like if you're -- if he's here to grant wishes, what would your wish be that we could do differently, better? You want to start, yes.

I'll start. Okay. For me, because security is very serious. We take that very seriously at Nestlé Health Science, and we're an enterprise client, of course. We have -- I manage so many brands. I would wish for something that -- for an easier way to manage data integrations into maybe at the like portfolio level or something, user management as well. We are required to review these things every few months or so or redo them and so on. So it's a little bit tedious for me to -- I have to go into every single account to do that. But yes, anything at the dashboard level to manage these accounts would be super helpful for me right now, of course.

Well, I'm sure you guys will get to it really. You get things done really fast. But yes, that's the one thing, I guess, one example for the moment.

I snuck mine in earlier because I want to make sure I got it in. But look, I...

You also want Reviews, right? Don't you want to...

So we have to move in -- the Reviews product is going, and I want loyalty, but I think it's all going to be one. Like in my vision of your product, AB, it's all one. So I want to know like when the customer comes in, if -- I don't want to have to have our sales associates type their e-mails in because that also implies that they have to make a checkout for us to know that they were in our store to begin with. And we have like an endless list. We have a really long list of product online. We can only fit so much in the store. We want to know if the customer is coming in. And if they left without converting and they went and online, like those sort of things are really, really important. But -- I mean, I also have to plug just in terms of like the innovations that you're doing just the reliability of this platform, which nobody has talked about, so I'm going to talk about it, is like has been table stakes because we were -- we've been burned by doing with old partners sending out an SMS for a 12-hour flash sale and having it arrive at hour 11. That does not happen with Klaviyo.

So like the amazing thing about this is like it sets a level of trust within our organization for us to be able to test and innovate. And then I run our FP&A org as well. It's part of the strategy. And one of the really nice things now is that I get to delete all the headcount asks that are coming to my inbox this year for marketing for the next year because it looks like we don't need any more people. So that's awesome.

Yes. So really, anything that I've asked for from Klaviyo, I've gotten. So there's probably nothing I think that's missing. And...

Ask for a car.

I want a car. And I mean, and if it hasn't come yet, I know they're working on it. And I just -- I feel like I matter and that Happy Wax matters. And so I think that's all we can ask for.

Amazing. Thank you.

I'm guessing I'll get my thing soon then. Tomorrow.

Okay. Please give a huge round of applause for our panel.

Okay. To close us out before the next session, I don't know, Zilli, do they have a break after us or no? No break. No break. No break. I'd like to welcome up Ami Palan. She is the CEO of Americas for Accenture Song. So we're going to talk a little bit. We're going to bring it up a few levels and talk about some trends that Accenture is seeing in the market. Ami, welcome.

Thank you.

So I thought what we'd do is just start out by letting people know like what Accenture Song is. And so let's start there.

Yes. Can you guys hear me? I think it's on. Yes. All right. So very happy to be here. Thanks, everyone. Accenture Song. So we -- Accenture launched the brand Song probably about 4 years ago now. And what it is, is essentially our customer business. So all things, marketing, sales, service, commerce as well as all of our digital and creative, so all the agencies that we've acquired over the years. And the intent was to really put all of these capabilities under one organization so that we can really help our customers who are going through any sort of front office transformation. So we've got consulting, strategy, technology and, of course, all the creative work sitting in that team.

Okay. Great. Okay. So I want to kind of take a theme that came out of the panel about agility, speed to market. And also in Steve's presentation, you guys saw the quote from [ Mike Yield ], your coworker that said, clients want us to move fast. They want agility, AI and integrated capabilities. So can you go a little bit deeper on that and talk about how you're seeing customer expectations evolve right now?

Yes. I mean I think the one thing I'll say, and I think we're all experiencing this is there is a lot of fatigue in the market right now. A lot of customers are going through a lot of change. They're making a lot of investments into these large transformation programs. And they're at a point where they want to see more results. They want to move faster and they want to see results much more quickly as well. And so for us, as a services provider for Klaviyo as a vendor, it's our responsibility to really help these customers sort of move across that spectrum and see some of that return, especially in this time of changing technology at the pace at which it is and AI playing such a significant role. And so what we're seeing emerge are a couple of different scenarios.

One is sort of this idea of a traditional scenario where clients and companies are experimenting with AI, and they're sort of testing and piloting, sort of seeing incremental outcome. Another scenario is the evolution scenario where you have AI and labor arbitrage coming together in a hybrid model. And so you're starting to see more efficiency and delivery and scale as a result of that. And the third is this reinvention scenario. And this is really where Accenture is focused. This is where we're really pushing the boundaries with our clients as well. And this is where AI is at the core to really fully redesign the operations, the operating model, the decision-making, the governance where AI is leading the way and everybody is sort of moving with that. And so you're moving at a much quicker pace. And so this concept of reinvention is certainly something that we're striving for internally and helping our clients to do as well.

The shifting of customer expectations, like you said, is shifting the way that we have to work, right, as vendors and partners. I think of my own personal experience from a legacy vendor perspective, a lot of my time was spent on, okay, how can we make these implementations of our software less than 12 months, less than 9 months that was always trying to like squeeze it down. And then I shift to my Klaviyo life, and we're getting customers live in 30 days. Our largest customer is live in 30 days or my relationship with product has significantly changed. In the past, I was always pushing on product, can you please develop these features for customers, right? And it's taking forever to develop them. With Klaviyo, we develop things so quickly, it really shifts. So our work needs to become more partners to our customers really to help them drive revenue, right, drive revenue in efficient and durable ways. And so I'm curious like how you're thinking about that, about the way that your organization is going to be shifting how you engage.

Yes. I mean it's also how we're shifting the way that we speak to our clients. And I think what you're describing is a very classic Ferrari example, right? We see a lot of clients spending a lot of money into technology and the new tools and putting a lot of investment into that and sort of building the Ferrari, if you will, right? And what's happening is their teams, the people aren't necessarily digitally fluent in that technology for the Ferrari to move at speed. And so there's other obstacles around organizational change around that, too, that are sort of preventing from the organization from moving at the pace at which it can, right? So the point is technology alone is not enough. We have to think about how do we support our clients in thinking through the organizational impact of what technology can do and making sure that the people are digitally fluent in that organization to really embrace and unleash the power of, in this case, the platform.

Yes. Great opportunity, right? And I know you feel very fortunate for Accenture, because you're leading this, you're leading these transformations. I feel really fortunate to be at Klaviyo because we're on the edge, the front end of it leading customers.

Well, it was incredible to hear from your customers and hear the pace at which some of this is moving. And so it's sort of like you're taking those obstacles out of the way and you're actually driving the outcomes much more quickly.

Yes. So yes, so let's talk about that. Like the most important thing, so you're kind of describing this dissonance between where customers want to go and where the market is kind of pulling them and their ability to really get there, right? So can we talk about just like key things that you think we need to consider as we're leading customers into the future?

Yes. I think a couple of takeaways or points I would summarize. The first is this idea of leading with outcomes rather than experiments. I think for the last couple of years, we've seen a lot of experimentation and people sort of dipping their toe into, "Oh, what can this technology do? What can AI do?" And so we want to make sure every investment is tied to revenue or customer experience and really move from idea to scale impact as quickly as possible.

The second thing I would say, and I touched on this, is empowering your employees at pace, making sure they are digitally fluent and savvy and understanding what the technology can actually do in order to move at a pace that allows them to uncover and seize those outcomes in a much more rapid fashion. And the last thing I would say is build agility into the core. Cloud native composable, resilient technology is what is going to allow any organization to pivot as any disruption comes along. In this case, the AI evolution that we're all facing.

All right. Thanks, Ami. Thanks, for closing this out on the customer and partner session, and I will hand it back to Zilli.

All right. Thank you, Emily, and to our customers and to Ami for joining us. Hopefully, that was helpful. We're going to just get a quick change over to get these chairs off the stage. And just in a second, we will invite Amanda up to give our financial presentation. So with that, welcome, Amanda Whalen, our CFO.

All right. Thanks, everyone, and welcome to our very first Investor Day as a public company. I hope you had a chance to be out there and have the chance this afternoon to spend some time at K:Boston with our customers. The energy is just incredible. It's so awesome to see all the new launches that we had today. You heard this morning about the innovation that we're driving in product and how our go-to-market engine is firing on all cylinders. And then importantly, you heard from our customers about how Klaviyo is helping them grow their businesses.

Now I'll bring it all together this afternoon with -- as you might expect, what does that mean for our numbers and the returns that we generate for you, our shareholders. But I'd like to start a little bit first with my journey and what brought me to Klaviyo. I joined Klaviyo from Walmart, where I was most recently the CFO of Walmart International, where we oversaw finance for 8 markets and over $90 billion in revenue around the world. Before that, I was in finance and strategy roles across multiple industries, and I started my career with a decade in strategy consulting at Bain & Company. But what brought me to Klaviyo was actually personal.

So during COVID, my family and I, as many families were, we're very into cooking. And we were trying to perfect this tie dish called Pad See Ew that requires a really specific type of wide flat noodle that at the time was not widely available in stores. And our favorite noodle company kept sending me these e-mails. They weren't just about sales or back in stocks. They were recipe suggestions for other ways that I might want to use wide flat noodles. And they were cooking tips for how do I get that perfect walk chart. They were the types of e-mails that I was really excited to get, and I realized that they were all powered by Klaviyo. That's when I recognize that this is a company who is doing something fundamentally different in the way that it helps businesses engage with their consumers.

I met Andrew. He is, as you heard today, incredibly compelling in his vision for the future, and I knew that I wanted to be a part of this story. And that was over 3 years ago, and it has exceeded every expectation since. Now 2 years ago, we reached a major milestone as a company when we went public and had our IPO. And in the time since then, we have shown remarkable progress. We've grown the top and the bottom line. Our revenue trailing 12 months today is over $1 billion. That's up 68% from the quarter when we went public. And our free cash flow is over $155 million. That's up 65%, but importantly, we've also done it by delivering on the growth levers that we told you that you should expect from Klaviyo. When we went public, we said there were going to be 4 things that would drive our growth in the near term, expanding our number of customers, expanding with those customers, growing in the mid-market and growing internationally. And that's exactly what we've done.

On our customer count, we now have over 176,000 customers, up 30%. Our average revenue per customer today is $6,700. That's up 29% and on our core growth areas in mid-market and international, we have nearly doubled in mid-market, the number of customers who are generating over $50,000 in ARR with us. And in international, in EMEA, where we've launched the bulk of our new languages and our new SMS markets, we have also nearly doubled our EMEA revenue. So in a short period of time, it's tremendous progress. We've shown that we can combine fast growth with smart growth while investing to drive growth in the future. And that momentum sets the stage for how we frame our financial journey and the growth engines that we have ahead.

So I'd like to cover 4 things with us today. First is the massive market opportunity that we're going after. Second, the track record that we have of execution and our ability to deliver durable, efficient growth. Third, the growth engines that are going to help us sustain that growth well into the future. And then finally, we'll bring it all together in terms of our financial framework and how we'll maintain that financial discipline that's been so core to Klaviyo's success. So let's start with the size of the market that we're going after. Andrew covered this a little bit earlier, but when we began in marketing automation, we were going after a large opportunity. Since then, as the B2C CRM, we have not only expanded into new geographies and new customer types as we've been pulled up into the enterprise, but most importantly, we've expanded into entirely new product categories with service and analytics, and that's grown our TAM to $160 billion.

The next horizon for us will be autonomous CRM, and that's going to open up even more market. So the key takeaway is the market we're pursuing is massive, and we are uniquely positioned to capture it. And we've proven that we can deliver on capturing that market while driving efficient growth. Let's start with revenue. Since we went public, our revenue has grown at a cumulative annual growth rate of 34%. The growth has been strong. It's been consistent, and it demonstrates the value that we create for our customers. And we've also delivered that strong top line growth while delivering a strong bottom line as well. I'll start with gross profits. Our gross profit dollars have grown strong and consistently since we went public. Our gross margins, as we expected, have come down a few percentage points, and that's due to the success that we've had in building our SMS business since we -- SMS comes with structurally lower gross margins. We've also made investments in our infrastructure, and those infrastructure investments are beginning to pay off in leverage and scale, which you can see in the stability in our gross margins over the last couple of quarters.

So overall, healthy gross margins, some pressure from our SMS success, but we do have levers where we're able to somewhat moderate that pressure and continue to deliver strong margins overall. Beyond gross profit, we've also driven leverage in our operating expenses. Our operating expenses since the time we went public are down 3 percentage points as a percentage of revenue. Let me walk through a little bit about how we get there. On G&A, we've made investments to help this company be able to operate with the future scale that we need. And as we've grown, we've been very disciplined about how we leverage and scale those. One important thing to note in G&A, just for those of you who are building models, is that there is a little bit of floor on how much leverage we can drive there just because our Stripe expenses, which are about 3% of our revenue, do sit in G&A. But again, tremendous progress and leverage there.

In R&D, we've made investments in our technology foundations, and we're scaling and getting leverage on those investments as we grow. But importantly, we're doing it while investing in the innovation that delivers the kind of excitement that you're seeing today, both in terms of new products and new features that we're launching, and we're committed to continuing to drive that innovation at an accelerating pace into the future. And then finally, in sales and marketing, we're investing to go after that massive market opportunity that we just talked about, but we're doing so behind strong unit economics. It's one of the fun things about coming into the business as a CFO. Andrew and I, I think at one point, spent a 2-hour car ride talking through each of the details of how we think about unit economics. Landon was with us. He can attest to that. It's something that's really important to us at Klaviyo and make sure that as we're making these investments, we're doing so with strong returns.

Key takeaway here is that we've scaled the business efficiently. We've driven leverage on operating expenses while making the investments that are going to continue to drive growth in the future. And that discipline shows up in the form of improved profitability and cash flow. So since we went public, our operating margins have improved by 1 percentage point, and our free cash flow continues to grow. So we have a track record of not only disciplined execution, but consistent top line growth while expanding our margins, which proves that this is a business model that can deliver efficient growth at scale. Compared to our peers, this puts us in the top tier of software companies who are out there.

If you take all the public software companies who are out there today and you narrow it down to the ones who are over $1 billion in trailing 12 months revenue run rate, and then you narrow it down further to those who are operating at the Rule of 40 and those who are doing it by driving really rapid growth, north of 30%. There's only 8 companies who fit that bill. Klaviyo is among them. That puts us in the top 7% of financial performance among software companies today, and we are incredibly proud of those results. That performance also gives us confidence in the levers and the growth engines that we have to continue to drive growth ahead of us. Now you heard about these from Steve a bit, but our model has 3 durable growth levers: multiproduct adoption, international expansion and mid-market and enterprise momentum. And I'll walk through each of these in turn with a focus on how it shows up in our financials.

Let's start with multiproduct platform. So for multiproduct platform, an important part of driving growth is going to be driving an increase in the number of customers we serve and our average revenue per customer with them. And as you can see, since we went public, we've increased our customer count by 30%, and we've increased our average revenue per customer by 29%. We're driving a balanced growth algorithm with contribution coming from both customer additions and expansion. And an important part of that expansion is the health of our customer cohorts. Our customer cohorts continue to grow with us over time. Customers stick with us and they expand their business with us because we deliver tangible value. You just heard about it from our customers today. Because we help them grow their business, they expand their business with us over time. And that expansion shows up in the form of our NRR.

Our NRR has been steady and consistent at 108% for the last few quarters. And if you break down the components of it, GRR remains steady and strong. Expansion of existing products, which is labeled on here as expansion, has historically been the largest driver of expansion for us. And we're really pleased with the trends that we've been seeing there, particularly in our e-mail product. And then finally, cross-sell. Historically, it's been a smaller driver of expansion for us, but it's one where we see huge upside opportunity ahead. So the product is sticky. Customers stay with us and expand, and we have even more NRR upside ahead as we expand the multiproduct platform. So let me dive into each of those.

Our GRR has been steady since the IPO at 88%. And I think there's a couple of important things to note here. First thing to note is that based on what we see and hear from our peers and see out there in the marketplace, we believe that 88% is among the very best-in-class for businesses who have a similar customer profile as we do, those who are primarily serving entrepreneurs and SMBs. Now there's certainly opportunity for that to increase over time because our mid-market customers, as you might imagine, have an even stronger gross retention. And as they grow as a portion of our customers, there's the opportunity for it to grow. But also, as you saw in Steve's presentation, they remain a relatively smaller portion of the business today. So there's more upside ahead.

Second thing to note on here is that is a very straight line. The world has been quite dynamic over the last couple of years. There's been a lot going on in the external environment and yet customers stay consistently with Klaviyo. The reason they stay consistently with us is what you just heard from them today. We make their lives easier, and we help their businesses grow. In an LTV to CAC equation where the CAC is going up, think of us as the driver of LTV. And the fact that we help them build stronger relationships with their loyal customers makes the product incredibly sticky. The other benefit from a business standpoint is that strong retention gives us the opportunity to expand with those customers over time in the form of cross-sell. Now over the last few years since we launched SMS, we have built our ability to cross-sell.

We launched SMS recently or a couple of years ago. Today, it is over $180 million in trailing 12 months revenue. And 27% of our SMB and mid-market and other customers today have SMS with us. That is terrific progress, and it shows that we have the capability to sell new products into our customer base. At the same time, it's 27%, and there's a lot more upside ahead. So we've shown the progress, and we've also shown that we have great room to grow. And an important part of driving that room to grow is going to be the uplift that comes from multiple products. With the B2C CRM, the cross-sell opportunity that we have is huge.

Now there's a lot on this page, so let me just orient you to what we're looking at. This slide shows the typical uplift for our customers when they add multiple products across the B2C CRM compared to their initial e-mail subscription. It represents roughly the middle 50% of customers from the 25th to 75th percentile. So if I take mobile as an example, which would include SMS and WhatsApp, if a customer starts with e-mail and adds mobile, that can drive anywhere from 10% to 50% uplift compared to their original e-mail subscription. There's a variety of ranges on there. And the reason there are ranges is because, one, it depends on which specific elements within each product category that they're adopting.

And then two, it also depends on how they're using that particular product and how core it is to their strategy. Some customers lean heavier into mobile, some into e-mail, you name it. But what you can see across the entire chart is just how big that opportunity is. When a customer starts with e-mail and adds the full suite of B2C CRM, including all of marketing automation and service and analytics, it can result in a total customer profile and revenue with us that's anywhere from 1.8 up to 3.3x the size of their e-mail subscription. That's huge. Second thing that's really important to note on this chart is on the right, we have the pricing axis and the way that these products are priced. We do not price based on seats. We price based on the value that we provide for our customers.

For e-mail and analytics, that's in the form of profiles and the number of consumers who they're engaging with in the business. For service and for mobile as well, that's priced based on usage, whether in the form of conversations and tickets or sends. But again, the consistent theme is we price based on the value that we provide and our incentives are aligned to our customers. So this opportunity for growth across the multiproduct platform is massive, and it's one of our core growth engines going forward. Alongside product expansion, international growth is also going to continue to be an important driver for us. Steve spoke about the new languages that we've added, the new SMS markets that we've entered. That has driven some significant revenue growth, 43% per year internationally since we went public. And that's driven an increase because it's faster than the rate the overall business is growing, it's driven an increase in international as a percentage of our revenue, which is now 35% today.

And importantly, we've laid the foundation for how we're going to continue to drive that international growth going forward. The #1 driver of it is going to be continuing to bring markets through the different phases that Steve spoke about, starting with local language, expanding into partners, inside sales and then finally, in select markets, boots on ground. But that's not all. We know how important data residency is for our international customers, and so we will be looking to expand our data footprint. And we also have seen with languages, the power of opening up the platform and making it easier to buy locally. So in the future, we'll add not only new languages, but new currencies as well. So in international, we've demonstrated the strong growth, and we have a path for durable growth ahead.

So now let's touch on mid-market and enterprise. In mid-market and enterprise, our 50,000 ARR and up customers have grown at a rate of 40% per year since we went public. But importantly, we have particular traction amongst our largest customers.

So our number of customers who are generating over $100,000 in ARR with us is now over 1,000. And our number of customers who are generating over $500,000 with us is now over 600. That's quadruple. I'll repeat that, quadruple the number that we had when we went public. We've been focused on growing this base of large customers, and it is working. And it's also showing up in our financial profile. Today, 36% of our ARR comes from customers who are generating $50,000 or more with us. That's up from 27% at the time of our IPO. And importantly, much of that growth, as you can see on the chart, is coming from the larger customers, those who are generating over $100,000 in ARR.

So the key takeaway in mid-market and enterprise is we've got momentum with those larger customers. It's showing up in our numbers. And with more and more customers looking to replace their legacy tech stack and modernize the way that they engage with their consumers, the opportunity ahead of us here is vast. And of course, underpinning all of this is the success that we have in AI and data. So as you heard about earlier this morning, I just love that sparkle there. As you heard about earlier this morning, when you combine our Klaviyo data platform or the brain behind the business with the exciting products that we launched this morning in AI, it gives us a unique opportunity to build the first and the best CRM for B2C businesses. That's an autonomous CRM for those B2C businesses. That autonomous CRM is going to underpin all of our success, and it's going to help us drive our durable growth into the future.

So on these levers for sustained growth, messages I would like to leave you with are, we're clear on what the growth engines are. We've demonstrated our ability to drive success in them. And together, they're going to help us drive durable growth in the future. So now with that context, let me turn to the moment we have all been waiting for. Let's talk about the multiple growth engines and how they'll translate into the financial model going forward. I'm going to start with our 3-year outlook. In the next 3 years, we're going to expand our operating margins from 12%, which is where they are today at the midpoint of our guidance for fiscal '25 to 15% to 17% by fiscal '28.

Let's talk through a little bit about how we're going to get there. Starting with gross margins. In gross margins, we do expect that we'll continue to see some pressure from the success that we're seeing in our mobile products in the future, not only SMS, but also WhatsApp. But we will be able to moderate that impact somewhat by continuing to get leverage from the infrastructure investments that we've made and then also importantly, from the new products that we've launched earlier this year and today, all of which come with margins that are higher than those SMS products. And then overall, we'll be able to more than offset that pressure on gross margins with leverage in operating expenses. In sales and marketing, we'll continue to invest behind strong unit economics while driving efficiencies across each of the unique go-to-market motions that are important to our different customer groups that we serve.

In R&D, we'll get leverage on those foundational technology investments while continuing to invest behind the innovation that helps drive our success and growth with customers. And in G&A, we'll continue to be disciplined in how we scale. And then importantly, underpinning all of this is AI, which is transforming the way we work. Every team across Klaviyo today is using AI to fundamentally rethink the way that we do our business, whether it's product teams who are using coding tools to build their initial mockups or our HR team who is using AI to transform the way that we recruit and hire. As we look forward into the future, we're no longer going to need to add headcount at the same pace that we have in the past in order to drive that growth into the future.

And then beyond P&L, we're going to continue to focus on being good stewards of capital for you, our shareholders. We're very mindful of stock-based compensation. And last year, as many of you know, we put in place a cash bonus program to start to shift that mix of compensation between cash and equity. And our target in the next 3 years is to have our dilution be less than 2.5%. And then we're on track as well based on all of this towards our longer-term target that we've spoken about in the past. Over the next few years, beyond fiscal '28, we'll continue to drive structural improvements driven by AI, efficiency in our go-to-market motions, leverage on our platform and R&D, all of which position us to achieve that longer-term margin target of 20%. So the bottom line is that over the last few years, we've demonstrated the ability to drive rapid growth in the business while expanding our margins, and that is what we will continue to do in the future. This is a financially disciplined business that can generate high levels of profit and cash flow as it grows. And then as we generate that cash, we're going to be equally as disciplined in the way that we allocate our capital. Here's how we think about capital allocation. There we go.

First, we're a growth company. So the primary place we think about putting our capital to use is driving growth in the business. And then more specifically than being just a growth company, we're also a product-led and engineering-led growth company who are big believers in the power of having products that work really, really well together because they create a great experience for our customers. So we tend to be builders more than buyers, and that will be our first place that we're putting capital to use is driving organic growth in the business. That being said, we'll consider opportunities for inorganic growth through M&A as well. You should think of it as typically small teams with outstanding talent who've got great technology and a great product that helps us accelerate our product road map faster than what we could achieve on our own.

And Gatsby, our recent acquisition, is a great example of that. Strong, small team, fantastic product. Our customers love it, and it accelerated our entry into social. Now over the longer term, we'll think about returning cash to shareholders. But again, given where we are in our growth trajectory as a company, I would think of that more as a longer-term consideration versus one that we will focus on in the near term for now. So we've covered a lot of ground. Here are the key things that I want to leave you with today. One, we've got a massive growth opportunity ahead. With the B2C CRM, we've expanded into entirely new product categories, and we're creating the future with the AI-driven autonomous CRM. So we are defining this market.

Two, our track record speaks for itself. Since we went public, our revenue run rate has grown 68%, and we've delivered that while expanding our operating margins. We've proven -- and importantly, I almost forgot, we've done it not only while delivering strong top and bottom line, but by demonstrating strong success in our core growth areas. We have nearly doubled our number of 50,000 customers and our revenue in EMEA, driving our growth in the mid-market and internationally. And we've proven that with discipline and some creativity, growth and profitability absolutely can go hand in hand.

And then three, we've got multiple engines for continuing that growth durably into the future. We're going to continue to grow internationally. We're going to continue to grow in the mid-market. We have a massive opportunity ahead of us in our multiproduct platform and underpinning it all is going to be K:AI and the autonomous CRM. So when I look at everything that Klaviyo has put into place, here's what I see. I see that every metric, every investment, every strategic decision that we make is built to compound on one another. We're building a business that gets stronger over time, where each success ladders upon the next and sets the ground for the future. As we like to say in Klaviyo, and it's actually one of our core values, we really are only 1% done. And that is why I am so excited about the journey that we have ahead of us.

So with that, I'll turn it back to Zilli, and we'll go into Q&A.

All right. Thank you, Amanda. Again, give us just 1 minute, and we're going to go ahead and get some chairs set up up here for our executives to come up. Ryan on the IR team and I will both be running mics in the audience. So if you have a question, please raise your hand. We will try to get to as many as possible. We do have a bit of a hard stop because this afternoon is our product keynote and encourage all of you to go attend that. It's going to be back in the main hall, starting around 1:15. We would also encourage as you're here throughout the day, you have free access to K:Boston.

So walk around, talk to customers, talk to partners, Go check out the expo hall, really get hands on with the product, so you can see the stuff in action. It's very, very exciting. So I encourage you to walk around and talk to as many folks as you can.

So with that, we'll go ahead and invite Andrew, Adil, Steve and Amanda back up on to stage, and we will start to come to the audience for Q&A.

Adil, what time do you have to be on stage?

I think 1:15.

1:15, alright.

Will be hard to start without me.

I know, yes, we gonna make sure you get there at time.

I might have to dip out early.

It's kind of a road map session.

Okay. This is Jackson Ader at KeyBanc Capital Markets. No time for a joke. I had one, but that's all right. Amanda, what revenue growth is assumed in that 15% to 17% operating margin target by the time you get out to 2028?

Yes. Great question, Jackson, and we appreciate that you guys are very focused on our longer-term revenue growth because as you can see, we are very focused on our longer-term revenue growth. And the way that we think about measuring success there and what we would encourage you guys to look at is the success that we're driving in each of those growth engines that we talked about and the progress that we're making in each one. So if you take our different metrics, starting with multiproduct platform, we've launched some amazing new products today. We're really excited about them. And we'll be looking at what is the adoption that those generate over time. The response in the beta has been fantastic. Customers are super interested in it. And what you saw in that expansion chart is that it can drive really significant uplift. So as we go through it, we'll be talking about what is the progress that we're making there on multiproduct.

On international, we're very excited about the progress that we have there. We're pleased with the revenue growth that we've seen, and we'll continue talking to you about the progress that we're making as we draw more countries through those phases and see it show up in our revenue and our international results. And then in mid-market, it's that $50,000 and up customer cohort. It's grown at 40% per year. And importantly, as we reach major milestones with other customer cohorts as well, we'll share those as well. So we're really excited about the revenue potential that we have ahead of us. We've got a strong track record of delivering, and we've got a clear path ahead.

Siti Panigrahi from Mizuho. Thanks for hosting us. It's great presentation. Great to see some of the product portfolio expansion. I want to go back, try another way to ask the revenue growth part. You talked about some of the product expansion. It's definitely above our expectation, what we saw during IPO time. You talked about mid-market is another growth driver in international. How do you rank order the growth opportunity in each of the area? And looking at your operating margin expansion, how do you see your mid-market enterprise as one of your growth drivers?

Yes. Let me start with that, Amanda. And obviously, feel free to -- on things I missed or want to add on. So yes, I think there's some sort of baseline growth that we're going to have from just the -- we think about the CRM and the applications where we still -- look, we have a lot of customers today that are -- they're logging in, they're using our products, right, across marketing, across service, et cetera. I think there's a baseline growth rate there. I really like the picture Amanda drew of NRR. We've not historically been a company that's had many products where that's been a big tailwind. But I think as Amanda said set up exactly right, like I think that's going to be a big tailwind for us going forward. So I put that up there. I also think the growth upmarket and internationally, those are both things where we know the market is there. And actually, my point was with AI, I think a lot of people are going to be kind of reevaluating their technology choices faster than they would have otherwise, right?

It's less of a game of, well, do I move to something that's maybe a little bit better, but there's now an even more compelling reason to buy. And then just on the revenue growth in general, I think there's -- any time you get these big technology shifts, there's real uncertainty into like how fast those take hold. I think it's obvious to all of us that, look, the future of the way customer experiences get delivered is going to happen autonomously. So we think of traditionally CRM as a stack. It's like, yes, it's the thing you give to your team and then they go deliver the customer experience, and that's how you do it, right? It's obviously going to move to AI. I think everybody is just the question is how fast.

Now I think based on the conversations that we've had with customers, we think that will be sooner than a lot of past technology shifts. And the one that we most index off of is maybe the shift from, say, like on-prem to cloud or Internet. I think it will happen faster than that. But it's hard to put hard boundaries on that, which is part of the reason why when we think about revenue growth, I think there's this baseline. There's really this -- I think this up-leveling that's going to happen as our agents take hold. The only question to us is how fast. And obviously, we're very committed to helping people adopt that sooner rather than later. I think it will happen quickly.

Yes. And to the second part of your question on mid-market and enterprise and the economics as we continue to move upmarket, it's built into the model that we shared with you. So we know that those markets come with different unit economics. Historically, we have a bias towards CAC payback because of our history as a bootstrapped company. In mid-market and enterprise, it's a little bit longer of a CAC payback, but still has a really nice healthy LTV to CAC. And we've been able to make the progress that we've made in mid-market and enterprise over the last couple of years while expanding our operating margins because we're really thoughtful about how do we continually increase the efficiency of each of our different customer groups and how we go to market for those specific groups.

DJ Hynes from Canaccord over here. Clearly, with the product expansion today, one of my takeaways was cross-sell is a tremendous opportunity. So Steve, for you and maybe Adil, it bleeds into product as well. As you think about that opportunity in the installed base, how much of that cross-sell motion can be product-led or driven by in-product messaging versus how much of that is kind of a direct sales effort and that bleeds into kind of efficiency in the model going forward?

Yes, I think, I'll start with the go-to-market motion because if you go back to the customer groups that I talked about of really having that diversity across entrepreneur SMB mid-market and enterprise. You'll remember in the slide, it was really about optimizing that product-led experience and entrepreneur. But that also transcends even into the mid-market and enterprise. If you look at our Customer Hub beta, I mentioned that we had 30% of those beta customers, they adopted the customer AI agent in product. So the product-led thread goes all the way across all segments, but we optimize very heavily for that digital experience in the entrepreneur and a big portion of our SMB. When it comes to the sales-led motion, it's very focused in how do you attach products at point of sale and cross-sell into the installed base, really centered around how do you bring marketing automation to life, how do you bring service to life.

So it's less about calling a customer and saying, "Hey, do you want our service product?" It's much more how do we expand the maturity and capabilities you need as a customer to achieve the B2C CRM capabilities. And our partners are doing the same thing now as well, positioning the broader set of capabilities. So there's been some shift in the market and how people think about point products, and they're really starting to take hold of, oh, this marketing automation and service and analytics under the foundation of the data platform is a B2C CRM, that makes a lot of sense to me. So it increases our ability to really cross-sell products and attach.

Yes. I think the thing I would add -- I think Steve covered it well, but maybe the thing I would add is it's a pretty big area of investment for us from a product perspective to drive that cross-sell and attach. And I think there's ripe fruit there to pick, right? So first, on the talent side, we recently brought in Chris Miller, who is the VP of Growth and AI from HubSpot, who's, I think, one of the top PLG leaders in Boston. He is excellent. He's here at the conference. And we're -- I think not just from a talent perspective, but we're also making investments in the product, which is how do we make it easier for people to get. As Steve was saying, without having to pick up the phone call somebody, how can you quickly sort of add a new product to the portfolio or at least try it? And then how do you move quickly from that sort of like free to paid if you're doing a trial, how do we do that? And I think one thing that ties this back to the AI investment is if you are sort of like free to paid on a new product, having the scaffolding that we're driving with the AI agents and some of our sort of essential flows, essential campaigns, these kinds of capabilities sort of like gets you value right away so that you might not need to be convinced, right, to just sort of like drive the paid upgrade. So we're sort of investing on it across multiple fronts on the product side, and I think there's a lot here in terms of value for us in the months to come.

It's Mark Zgutowicz with The Benchmark Company. I just wanted to maybe zero in on enterprise and specifically where your sales capacity is there today relative to where you want it to be over the next few years. And Aman, as you look at your OpEx targets, sort of thinking about S&M leverage there, how much of enterprise is maybe heavy on that line item specifically for the foreseeable future?

Sure. Yes. We're continuing -- I'll go back to the efficient growth that we've continued to drive. And I think a lot of times when companies try to push into the enterprise as opposed to being pulled in the enterprise. They just hire a bunch of salespeople. And we've shown an ability to demonstrate really thoughtful expansion as that market continues to mature. And as I said in my presentation, the enterprise is -- we're early innings of the modernization that's happening. So we'll add capacity, but we'll also add product capabilities within product to make sure that we're keeping pace of the market. And we won't get out ahead of it is really how we think about it, keeping those unit economics in check along the way.

Yes. And in terms of how it builds into the model, it's built into our operating margin expectations that we just went through today. We've assumed that we're going to continue to drive significant growth there in the enterprise. And the way that we can make it work within the overall model is we have multiple customer cohorts who we serve. There's not only enterprise, but also entrepreneurs and SMBs, and we're continually partnering with Steve and team to think about for each motion, how do we make that as efficient as it can be, which lets us invest behind growing in these new areas while continuing to drive strong returns.

Yes. I'll make one last comment. That leverage, and this is something that Steve and Adil and Surabhi, our CTO, have been working on. There's leverage kind of across the board. I think when you apply AI internally, we talked a little bit about at the top, like there's actually a lot there. If you think about our customer base, we have 175,000, 176,000 customers. They all -- I mean we want to deliver a customer agent to them. So we're obviously using our own tech, right, to deliver a great experience to them. And what you find out pretty quickly is across those folks, if you can answer their questions well or give them advice proactively, this is even outside of our product.

All of a sudden, you start to say we find our sales team, our customer team say, well, geez, if that works, like can I leverage that with larger and larger customers. So it both gives us leverage on the SMB part of our business, where all of a sudden folks, wow, I get a better experience because there's always on agent. That's obviously we're building our own, using our own there. And then enterprise go say, well, that's great. I actually don't have -- my questions aren't all that different. In some cases, they're a little more complex. So there's a little more we need to train the agent on. But we very much believe that's how this will work. So I think if you look at the unit economics when it comes to acquisition and cost to serve, et cetera, in enterprise, from the, let's say, the SaaS over the last 15 years, I think they're going to look different in the future because a lot more of that -- the experience is literally going to get better. I think the cost to serve or cost to acquire is literally going to change, right, reduce because of what we can do with AI. And that's something we're working very, very hard on internally. Obviously, it's something our customers want, but we need to be a customer of our own stuff.

Matt VanVliet from Cantor. I guess on that last element, it seems like you guys are taking a different approach to AI monetization rather than sort of nickel and diming your customers because you have to justify the amount of seats they're paying you yesterday to what they're going to pay tomorrow. So I guess as you think about that, how much can you leverage that getting into and replacing the legacy marketing stack by saying, we'll give all of it to you for just the cost of operating the value we give you. How much does that drive product development? How much does that drive go-to-market? Just love to hear kind of the bigger picture thought on monetizing what you've already built and is available today.

Yes, sure. So maybe I'll take the marketing agent and obviously, Adil, Steve, feel free to chime in on the customer side. So the marketing agent is really interesting. I think people tend to look at marketing as we can kind of overlay on a system, but you actually just want our marketing platform plus our AI on top. And the big thing that I'll double down on from earlier today is that I think there's a mistake a lot of companies are making where they're saying, like, look, I still -- I think we've had the right pricing model from the start, which is like index to the size of the business, not the number of people using the software, right? So you heard from our customers, a lot of very small but mighty teams are able to do a lot with millions or tens of millions of customers. They don't need a lot of seats. But they may have a lot of profiles, right? So we index off that.

I think with AI, what we're going to find there is as we can show -- as we don't just add more to the users, the real rate limit there is the team's time and size. As we can do more of the work, drafting creative, showing them that, finding optimizations, running experiments for them that generate incrementality, people are willing to spend more. So a model, we're obviously working this with our customers now. But as an example, I think folks will say, "Hey, if today, you charge me a certain rate per profile because that's the value of that relationship. If you can grow the value of that relationship through the channels and the experiences that Klaviyo offers, I'll pay you a different rate for that." And that may be even differential based on the value of that customer. So while some of what we baked in today, we're making available to all of our customers.

We already are anticipating something you can imagine a little bit like what Google and OpenAI are doing where it's like, yes, there's multiple tiers based on the types of the compute, right, and actually really the value that we're driving on top of that. And I think that's very natural to customers because they understand it's like, yes, yes, you're helping me with every one of these relationships. And as you make them more valuable, that's more valuable to me. I also like, hey, Klaviyo, you can share in that.

Customer Agent, I think, is actually -- is interesting because there, it's a little less of like everybody -- I think with us, this is going to be a reason to replace your marketing stack with us. Customer and I actually think there's an opportunity there. We're actually not trying to swap out folks call centers. I don't know, Adil, if you want to speak. But like, hey, there actually, I think we can overlay quite well, and that's a really interesting model for how they serve customers and the number of experience or conversations they can deliver.

Yes. I mean I can just quickly start there and see if you want to add. I mean I think I would say that, yes, on Customer Agent, we can really index to the solutions, right? Like so how many problems did we solve? How many -- so it doesn't -- there's lots of ways to sort of think through the metering there and directly tie that back to value. So I think in the end, both are ultimately accretive to our customer. And then I think as AB said, we think about it being accretive to the business, and so we have sort of an incrementality framework internally and think about all the vectors of value to us. I don't think it has to be a direct monetization, right? I think it can be depending on a customer agent, it makes sense for us to do that. But in other cases, if it's making our customers more successful, we know that, that's going to accrue back to us, I think is the headline.

Yes. I would just add 45 seconds addition to this because don't lose sight of why customers -- enterprise customers are replacing their legacy stack. I was meeting with this customer, very large retailer, and I was meeting with the Head of Salesforce Development, he asked for a meeting with me and the Head of Product. And we're going through this. He's grilling me. Can you do these use cases? Can you do these use cases? And finally, I said, listen, I apologize like you asked for this meeting, but why are you even talking to me? And he said, because 80% of what my marketing team wants to do, it takes too long in my legacy tech. And I said, "Okay, you're just trying to control your own destiny. And he said, "Yes, I've got to find a solution to figure out how I satisfy the business because they're starting to look at Klaviyo."

I said, great, we can help you with that. And by the way, all those developers, you can deploy those on higher-value things. So everything that AB and Adil said, 100% right. In the near term, there's still this opportunity to monetize these customers we haven't had a chance to monetize yet because they just can't move fast enough for sure.

Elizabeth Porter from Morgan Stanley. Thanks so much for today. We've seen a lot of really interesting technology. And I'd love to just better understand the opportunity as it relates to Agentic commerce. So AB, I'd love to get your view on if agents could start to replace some of the customer-facing funnel, what opportunity does Klaviyo have to serve as that engagement layer between agents and merchants? And what are some of the unique assets you have between the first-party data and the integrations to really capitalize on the opportunity?

Yes. So we spent a lot of time today talking about the releases we have that we're launching this quarter. That is all about doing -- making the active marketing more automated. But really interesting is how do we literally make a better buying experience. So it can be 2 things that we're already starting to play with. The first is on the customer agent side. I think it's very likely going to happen. We're starting with obviously text and chats. I think we'll get into audio. I think in the future, there's a reason why it could be video as well. Like all these things are now becoming possible. And there's a real question here. We talked about skills and developing those for the agent, like what are they allowed to do? What can they do?

I think in the very near future, you're going to see from our customer agents say, hey, I need some product recommendations. Can you help me find the thing to buy? Okay, great. Can you just form that cart for me and allow me to check out? And there, whether it's integrating with our partners like Shopify and others or for folks that have more custom-built back ends, that's something we should be able to -- that's something we should be able to -- we're going to facilitate. And that's really interesting because I think the website just as an experience is about to go -- undergo a big overhaul. And one of the things we're considering is like, hey, how much is the website browsing experience. You heard from one of our customers, Princess Polly, like some people want browse around and that's a thing. So we'll facilitate. I'll talk about in a second, right? It's agenda conference.

But some people, "Hey, I know what I'm looking for. Just help me direct me there, don't force me to click through a bunch of pages to find the product I want." And we think our customer agent should be able to do that, and it should be directly integrated into that experience, right? So it's going to happen on the customer agent side. We're already thinking about what that would look like on the e-mail, the text messaging, the mobile side. I think you're going to find that messaging and commerce just we close the loop. So instead of it being message, website, buy, it could just be message buy. And that shorting of the cycle, I think, is going to increase conversion rates. The business we talk to brands, they're like, yes, yes, we very much want that. So that's one.

The other thing is when you think about the experience of, say, shopping or browsing, like what is the website, what's the future of the mobile app to look like? What's even the future of the in-store experience. We're already playing with some things of, hey, well, what does it look like if in your customer hub profile, we know a bit about you. I'll give you an example from my personal life. I do a lot of running and you go out and you buy running shorts and they all come in different lengths, right? And it's like it's not very helpful because 5, 7 -- I don't know how long my leg is, right? We're now building stuff in a Customer Hub where we know like things about you, like, say, your heights, and we can actually take that information and rewrite the web page so that we can show you or somebody like you as the model versus whatever the stock thing is for that apparel site. I think that's really, really interesting.

In the in-store experience, as we start to experiment more with audio, I think the future of walking into a store rather than having to wait for somebody, a store associate to get some help, why can't you just take the expertise of that business and put it in a headphone? I think that's going to happen in short order. So when you walk into a store and say, hey, I'm trying to actually figure out I'm going on a trip, I need to figure what to buy. Maybe you want that to be a more personal conversation or you just don't want to wait in line. That's the kind of thing you can just do, and it might even be multimodal. It might be a bit of audio. It could also at the same time on your phone, show you the products and where to find them in the store. So these are all things that we're anticipating. And what's cool is like as we've talked about, it's very much the merging of we see the marketing side with kind of this customer agent more conversational side. So more to come on that. We've got some things cooking, but to be talked about in the future.

Derrick Wood at TD Cowen. You guys have this advantage of having a clean slate when it comes to building this new service product with AI first principles I'd just be curious, what are the kind of key differentiating factors when you look at kind of legacy systems out there today like a Zendesk? And as you look at the opportunity, do you see more of a greenfield opportunity down market, more of a replacement opportunity in the mid-market? What's going to be the focus as you go to market with service.

Maybe I can start if I can. Yes, I would say that there's a couple of key pieces, right, in terms of the principles that I think are fundamentally differentiating. I think the first is actually the connectedness of the systems, right? Because when you think about service, I think the big trend that's happening in the industry is the lines between sort of like service and sales are blurring, right? I think it used to be like service is only a thing you engaged in when a customer had a problem, right? Like something was wrong, and so now I'm reaching out to service.

And I think you're seeing a lot more of the, hey, can you help me figure out what to buy right? Help me figure out this is my sort of lifestyle or these are the things about me, and I want some sort of guidance in the shopping experience, right? And I think that gets even further pushed by the question we heard earlier around AI and that sort of like if we're getting trained on this Agentic like, hey, I think I can actually talk to an agent to help me through the experience. And so I think as that point of contact comes earlier in the experience and not after a problem, then having that data in the profile across all of your marketing activity, all of the user's browsing and engagement activity becomes critically important. So I think that's principle number one.

And then I think principle #2 is really just being AI first, right? So ensuring that you're leading with the AI, and it's not sort of this afterthought, right? So like the default mechanism as you send an e-mail to support at. And then like if you like try hard to find the AI, right? In our case, right, we're actually working on the beta of like the e-mail can be replied to by an AI, right? So all these things sort of being baked in, in the first-class way from an AI perspective, I think, is the next major piece there. I think I would start there, and then feel free if you want to add to that, but I think that's the headline for us, I think, is those 2 key pieces.

I think the one thing I would add from a go-to-market perspective is it also allows us to enter a customer in a different vector now. So not replacing a help desk, every customer, particularly enterprise customers are talking about agents. And we believe we have one of the best, if not the best, customer agent. So instead of starting with marketing automation solely, we have another entry point into a customer not to talk about replacing their help desk because they're more interested in how do I do a case deflection? How do I have customer conversations? And we have an exceptionally good solution there that allows us now to have conversations with customers, maybe we wouldn't have had in the past.

One quick thing to add about, I think is important is also the trend towards self-service. I mean, I know speaking for myself, I don't want to like, call, wait on hold or sort of engage with -- if I can solve the thing myself, I think that's important, and that's what Customer Hub comes in. And so the thing to stress about Customer Hub, I think is really special getting to the second part of your question is that it's like -- it's a no-code solution. I mean, you can flip a toggle button on in Shopify and that customer -- that whole hub, that whole slide out panel is essentially enabled instantly, right?

And so that we have found even in beta to be incredibly powerful. We talked about this in a product keynote a little bit later. So, Grant, who leads our service product area, he's going to talk about Customer Hub in addition to the other two core service products. But I think what's really powerful about that is you can turn on Customer Hub and still have a third-party service tool. So for us, that's a pretty great sort of land-and-expand type motion of like, hey, you don't need to change anything. Like if you're on Zendesk or whatever else, that's fine, you can turn on Hub today. And you see the value of what Klaviyo is bringing you. And then you start to see the natural extension of like, okay, hey, maybe I should maybe try out Klaviyo help desk or Klaviyo agent.

Well, one color I'll make a little bit of historical context is we've thought for years about this customer service use case. And we're always -- I really want to build it because I was like me, like the hard part there is you have hundreds or thousands of people that are used to be workflow. And you could build something, you can obviously build something better. I mean there's always a level up. But everybody has to or wanting to adopt that new thing and you have to rebuild all of that functionality to point on the kind of the white space, the huge advantage we have there is, well, we don't have to solve for teams of hundreds of thousands. As far as we're concerned, there's just the Agentic layer. And that's incredibly powerful. One of the things that Adil and I and the team are working on, we actually thought about not even building a help desk products.

Like what's a point? Like this is -- it's obviously not the future, right? But Adil and the product like it convinced me that no, no, we should do this. But literally as like a lever to help people adopt the customer agents. So we think it was like, oh, okay, I need to help Jasmine run my call center with a side of Agentic. So like, no, no, we thought it would be entirely a different way, right? Look, we know at the end of the day, all of your volume, most of your volume, the vast majority of it is going to run through agents. What we found was customers like, hey, that don't make sense. But yes, okay, I can put on top of what I have, but guys, can I just run your whole stack. So we say, okay, fine, we're going to build some of that. But we're going to be very cautious because most of our investment is actually going towards this agent layer because that's ultimately where it's ended up.

Scott Berg with Needham here. And kind of a follow-up to the service question that you had there. And your Nestle customer kind of spurred this earlier because I think this is my fourth Sales and Marketing Service event in 3 weeks I attend to. Is there's a lot of talk up market about how some different vendors are starting to think about and use things like agent functionality to support the broader service environment. But, when you think of the service functionality that you've released today, what are you seeing in your beta customers that suggest that the product market fit upmarket is a really good fit today versus maybe some of your smaller to midsized customers? Would love to understand kind of how that fits today. And if it's like the Nestle customer, are there still gaps or feature functionality that you think you have to build in to meet that larger customer?

Yes, sure. Do you want to take that one?

Yes, I'm going to start. And I think we can layer on if you want. I think there's a couple of key things. So in terms of PMF, we're seeing a bunch of key sort of data points that are validating. The first is just the incremental lift that people are seeing with customer hub activation. So for example, you have the slide out panel I mentioned where you sort of -- you can go in very quickly, get what you need in terms of resolution if you're a customer, right? So that's, hey, I want to see where my product is, I want help. I shifted to the wrong address, whatever you need to do, there's a lot of things that we can sort of deflect there. The value that we're seeing as we look at upmarket to the bigger brands is, hey, the fact that this on right away.

I don't need to go talk to my IT team. I don't need to wait in backlog for them to get to this 6 months from now. I can move just turn it on and consider it myself in a no-code way seeing that really resonate. I think the second piece -- so that's sort of like time to value and just like getting it going. And what's exciting there is they -- like I said, they can -- even if they had a different -- hub is net new, right? So even if they have a third-party solution for service, they can turn on hub and see value right away. The other piece we're finding is incrementality just in their business because we have a recommended product block in Customer Hub that's personalized. So the nice thing about that is as soon as they turn that on, they're actually seeing lift, right? So they're seeing, hey, I'm actually -- I think Amazon is best in class at this, right, but they'll sell you products like in a return flow, right?

Like you go through the thing is like, hey, you want to buy this other thing, right, which ends up being really valuable. And that's a thing -- that's a pretty complex piece of functionality to build if you're a retailer trying to build it for yourself. We sort of turn it on for everybody, right? With customer hubs. So we're seeing that land, I think, really, really well. And then I think on the AI side, with agent, what we're seeing people lean in on is how quickly they can sort of get it going with the trading sort of already on all their customer data, right, on the profile data as well as the product catalog and the sort of FAQ and other health content. So they're sort of able to get value right away. I think those are we're really seeing that are pretty positive.

Arjun Bhatia with William Blair. I have two questions. Maybe if you kind of just zoom out and think about the business and what it might look like in 3 to 5 years, how does the customer profile change from what you have today? Like we're talking about mid-market cross-sell, service. I think a lot of these things can be more upmarket oriented, but do you think the shift is going to move meaningfully higher. And then for Amanda, what do you -- what might that mean for gross retention? Is there a potential for that to increase as more cross-sell and mid-market, upmarket traction starts to layer in?

Yes. So let's say let's divide the world into enterprise and entrepreneurs and SMBs. In enterprise, here's a state of play. We have a handful of the Fortune 500, the Global 2000, that have engaged with Klaviyo in some way at this point. I know for certainty every single one of them is going to move towards an autonomous CRM like stack in the next 2 to 3 years. When that contract is up for renewal, they're going to say like, what is the future. It's moving that fast. And the value it's driving, right, both in terms of consumer engagement, and therefore, revenue performance as well as the cost savings. It's just so massive. They're going to replatform or they're going to double down on whatever is the best products.

We believe all 4 of us, that is our opportunity. It's our opportunity to lose, right? We are the leaders there. We should go win all of those accounts. And I think you've heard it from all of our customers, they desperately want to unify the experience, one brain, I want marketing, all of those experiences, I want the customer side, service and all these is, as Bill said, the advice side, hey, tell me what's next. They want all of that integrated together. That's the future state. The only question to us is how fast can we get to that. And I think AI has accelerated that massively.

I know you can ask us, but I also say on the -- and we're going to obviously do that globally, we should get for all segments. That's why you've such this like we're going to go quite quickly on this. We also want to be the place that every business starts. I think the -- there are a lot of businesses that will be the future Fortune 500s, Global 2000, out there. And when they start, we want to be that CRM stack they start with, and I think there's a huge opportunity for us to do that for any consumer business, and we're also focused on that as well.

And in terms of where it shows up in our numbers, yes, you're exactly right. As we grow in the mid-market and enterprise and as we expand and sell more products across our customers, that has the opportunity to increase our GRR. GRR as you saw, is already very strong for the mix that we have, but the retention among those mid-market customers is even higher. They take these decisions very seriously. And then once they've made them, they are very sticky. And then what we see in our data today is that multiproduct customers have even stronger retention than single product customers. So you grow more in the mid-market and you expand the number of multiproduct customers, and that creates great opportunity ahead.

Terry Tillman, Truist Securities. The $180 million of SMS. That was a nice juicy data point. to me, there was a lot earlier about SMS in the sessions or in the keynote, a lot of innovation. In the past, I think AB, I asked, why don't I just get aggressive and just go after all of your mid-market and enterprise customers, they should be using that channel right away. It feels like maybe there's more unlocked now because of things like RCS, 2-way, Geo-fencing. Do you think there's an opportunity here to even accelerate the attach rate now of the SMS and the mobile products with just some of the new things you're all doubting.

Yes. To answer your question, you're not wearing any of swag today. But yes, we'll take the question. You want to answer that?

I think there's two things happening. One is remember the slide I showed with all of the point products and people trying to stitch it together. I think we were playing in that kind of environment a couple of years ago where we were trying to have those great point products and helping them stitch together. We're still building great channels. But the big shift that's happened is customers want to know how do I make -- how do I really orchestrate across every one of those channels. And WhatsApp in international markets is becoming a -- it's obviously a big thing. Mobile is a big thing. And so what you saw was people had e-mail and they're like, oh, I think I'll try SMS we've got a little more sophisticated than that.

And now they're looking at other channels. Now they're asking us, how do you orchestrate that better so that I know which channel, so channel preference, channel affinity for the profile instead of like stitching it together, how do I orchestrate it together. So that opens up all sorts of possibilities for us to sell all channels in the marketing automation suite because of the shift you're seeing in the market.

Yes. I think in customer conversations, just to reiterate quickly, like the thing that struck me is that the job to be done is very much retention marketing. People are not thinking about such specific channel anymore. They want to think about all of the channel at once because that's where the value is. So I think it's important to note that like -- I think that like the days of the point solutions are largely over.

That's why they're so excited about the omnichannel campaign builder because you can actually build a multi-week even a multi-month campaign, and we will orchestrate which channels at what point in time and show you how they're performing. So that you can make adjustments to that campaign along the way. They're not thinking any more e-mail SMS or thinking about what's the right campaign and the right channels to actually reach my consumers and you a unique and differentiated ways.

All right. Now our final question here.

Rob Oliver from Baird. Thanks for all the info today. Great stuff. My question is around Steve, I think you called out Accenture I think, on the slide, in particular, and there were a bunch of new enterprise logos up there, which is pretty impressive, and it was great to hear from Nestle 25 brands. So these are pretty impressive examples. But help us understand how ready from a partner perspective you guys are to really grow that number from the 600 competitive displacements with some of the SaaS legacy vendors that we know are vulnerable to a much higher number over the next few years. That's going to take security as Nestle called out, but it's also going to take a lot of real partner engagement. So where are we in that partner development, the ecosystems, the training that the practices. Help us understand that.

Yes, it's a great question. I think, first and foremost, remember what I said, we're in early innings on this modernization. My background is enterprise. I was at Okta as its Splunk. And when I got here, there was a big -- there's a lot of energy. Let's go to the enterprise, actually slowed us down because they said, look, we've got to build the portfolio out. Let's really nail our core market. And besides, the enterprise was not modernizing yet. So I think we've timed it really well in that we're getting pulled to the enterprise. We've got a really strong strategy now.

So you're starting to see not just the Accentures of the world because GSIs take time. I've built Accenture relationships for many companies. But there's that middle tier 2, what I would just call regional SIs that I also showed. So you have these partnerships that are expanding their capabilities to SI-like capabilities I mentioned domain and eHouse that are also being pulled into the enterprise, where maybe a big GSI exists because they're looking for innovation from that partner. So it's not about just the GSIs, it's also about building the mid-tier. And so we have a really strong strategy and activation on how do we ramp up those capabilities to address this modernization that's really starting to get underway.

Actually, one thing the same way we're talking about customers are reevaluating their technology choices. Something that Steve and our partner team's really done a great job. Every single one of the rethinking what their portfolio of services looks like. And so there's a massive moment here, and we've had these conversations with the Accenture. I've also had this with the 5,000-plus agencies. What I was maybe initially a little worried about was how much they were going to kind of stick to what they know. What's been fascinating is really in the last 12, 18 months is all correct, they said, hey, help us rethink our entire business in the services we should be offering and Steve's team has done a wonderful job of, great, let's write you the new playbook of what that should look like and how that interacts with Klaviyo. So there's a real moment here. I think Steve rightfully say that we can step into, to go build some of those ratios and actually help work with them to co-develop maybe what some of their future practices should look like.

All right. Thank you all so much for the time. Thanks to everybody for joining us today. Just for those in the room, there are lunches outside that you can grab the keynote with Adil starts in about 15 minutes in the main keynote room. It also be streamed over here where several of you were watching earlier. We will be around for the rest of the conference. But again, go enjoy yourself, check out the expo, talk to customers, talk to partners. And thanks, everybody, for joining.

All right. Fantastic. We will go ahead and kick it off with Klaviyo.

Good.

AB, thank you for joining us. We're really excited to have you.

Yes.

So I know that you've always had a really specific vision of what you think Klaviyo can look like longer term. And it feels like this year, we've really started to unlock the next levels of that vision beyond all the success you've already had on the marketing side. So paint off the picture a little bit. How do you think Klaviyo is evolving? Or in what ways do you think Klaviyo is evolving? And how does that fit into where you think the company can be 2, 5, 10 years from now?

Yes. So, when we started, the genesis of Klaviyo was I'm a big runner and I've built this website to help people find 5Ks and marathons and stuff like that. And I worked with all the little race organizers. I remember doing that thing manually like go to each one, hey, you should listen to my website, you should listen to what I say. And I was like, boy, this is really annoying. I wish I could clone myself and just like be it everywhere to all of these folks at once. And that is what the driving ethos of Klaviyo is. I really do think. We ought to be able to scale people like either individual humans or teams, companies and just make them infinitely accessible at scale all the time.

So we talked about empowering the world's businesses, the world's creators to own their destiny and the way to do that is to help them be themselves at Internet scale. So be authentically you one-on-one. In the early days of Klaviyo, our approach for that was we said, okay, well, if we're going to mimic the way that humans act and operate. We built like a really good brain for that. And so that became like the database that we built. And so stores indexes data in real time, makes available in real time and stores indexes all these interesting ways, the ways that like we actually think.

And then we layered on top of that a bunch of like tools that actually allow you to communicate. So it was like marketing and messaging. But the key thing that always kind of irritated me about that was you still needed somebody to log in and sort of set up all the rules and like modify them all the time. So somebody had to like build a marketing campaign or build a marketing automation and then come in and check on it a week later and make some edits and review the data.

I was like, that's not really -- I mean it's the one version of scaling ourselves. I mean you can deliver this experience to millions of people concurrently. That's kind of the lesser version, like wouldn't it be awesome if you could kind of just self-optimize. I think -- obviously, messaging is just one facet of like the customer experience, and that's great. It's very proactive or like we're sort of missing the other pieces of it.

The last year, we've said we want to attack -- we want to improve on 2 dimensions. The first is, I think this era of like SaaS software, really, we think of it like it's tools, you got to log in, you got to -- you need to set it up, configure it, be the person that's using it. I think it's just over. It will take a little bit of time for people to adapt. But -- we've already talked to a lot of our customers who are like, yes, I'm bandwidth constrained. Look, if you can do a good job, like, yes, I'll check it before it goes out, but like I can delegate that work to you.

That's why what we're doing on marketing is I think the future of that is really an autonomy layer on top. It's like, yes, we'll develop a marketing strategy for you. We'll figure out all the campaigns and automations you should be running. We'll draft them all out. We'll make them awesome. We'll set them up and all you have to do is go in and tick the box, tell us that you approve. And by the way, when you get tired of clicking all those boxes because we're already doing -- always doing a great job, we'll just turn on autopilot mode and off you go. Like that is going to happen. I think, to the marketing side of the customer experience. So we're solving for that there.

And then I think this autonomy layer, it's coming to like all different facets of the way that, say, a business interacts with its consumers. So messaging is one. It's the proactive side. Hey, everybody is not always -- they haven't always open up your app. They're not always on your website. You're not always top of mind. So how do you know when to reach out to folks so they don't have to come pull and look for you.

The flip side is like when somebody has a question, and it's not always like -- I think it's not just customer service. It's not just break fix. But when somebody needs some advice and they want to have a real-time conversation like a chat, and this could be over text, it could be over -- it could be audio, actually, in the future, I think it will be video as well. Any of these modalities, like what do you offer them? That's the customer agent products that we launched to our private beta program in June, and we'll soon be releasing more broadly.

And then finally, we've done some work on what does it mean to personalize the experience, maybe when you're not chatting with somebody, but you're like in somebody's store, so to speak, right? You're on their website. And that's our Customer Hub product. They basically say like, yes, tell us -- remind us who you are, like we probably know who you are, but just not send a case, we can show you all your important information.

And then when you're on somebody's website, like, yes, we're going to rewrite the whole thing for you so that it's tailored to you. And this could be a website, it could be a mobile app in the future, any other digital service. I think that's kind of it, right? I think this is how we take the ethos of what a business or a brand is and make it ever present. And I think that should be -- it should be self-configuring. It should be learning on the fly and improving. And we have metrics, whether it's engagement or revenue or LTV that we can optimize for and obviously, somebody can set, and this should be possible.

And I think this should exist certainly for every consumer business, where internally, we have been saying is like, look, if you're Boeing and you're selling airplanes, then yes, you probably shouldn't use Klaviyo. But if you're an airline and you have millions of passengers, then yes, you should definitely be using Klaviyo, right? So I think for consumer businesses, this is like -- this is obvious. So we need to bring it to all of those customers, large and small around the world.

By the way, one of the things that's been really interesting to me is enterprises love this idea because one of the things we've learned that was maybe a little surprising, but maybe not so much, a couple of Klaviyo scale might see some these patterns even internally and they're kind of fight against them. They love this idea of AI playing more of a role in the generation and delivery because they care so much about compliance and approval chains.

When I talked to -- such a major global retailer like a sports travel brand. And they were like, yes, this would be awesome if you guys could generate this stuff because we could plug in our brand guidelines and guardrails and make sure that everything that our hundreds of marketing teams are doing is consistent. So yes, how fast can you deliver this? This is like a major unlock for us. It will speed up that, right? We'll make sure we're maintaining compliance.

So I think all of that's going to exist. And I think this era of software, just purely as Software as a Service, just as you got to log in, you got to configure it, you got to do it all yourself. I think that era is over. And we're definitely building to be the CRM first for consumer businesses, and then we'll work on everything else that is really AI-driven, both on the generation and then the end customer experience delivery.

So let's start on this idea of the era of SaaS. I think since 2022, arguably, we started to see consolidation in the front office stack, where there's a lot of buying in 2021. So my question for you is, why do you think now is the time where you see an incremental shift in the landscape? And from a competition standpoint, this is a question that we've been debating all conference for the last several months now. There's incremental competition from the AI natives, potentially incremental competition from the frontier models. So a lot in there. Why now? And what about the extra competition?

Yes, yes. I think you got to kind of parse it apart. So like if you just -- if you go purely to this like, hey, we're going to use the software to deliver these experiences, there's many services, there's many different formats, different channels, et cetera. Look, this consolidation story there is rooted in a pretty basic thing, which is everybody wants the experience to be driven off the same brain, so to speak, same data set. And it's really frustrating when these different pieces of software, either one don't connect back, each have their disparate sort of data systems, which -- or they're just lacking of brain, they all have to connect back to something and then the latency gets really bad.

So I think this idea that like all of the different various marketing channels are going to converge. And then -- well, by the way, these basic things of like if I send somebody a message, send them a text message or an e-mail, and then they open up their phone or they open up the website and it's inconsistent. It's just a terrible experience. And it shouldn't be that way. And it's like, well, why is that? It's usually because there's not one back end. So we obviously solved that. I think that's why you see a lot of consolidation there, plus the normal things of like, look, people want to learn 5 different systems. They want -- one, they want it to be well designed, all this kind of stuff.

The AI native stuff has been very interesting. Like I do think there's -- I spend most of my time -- I'm most excited about the companies that are AI natives that are new. The same way that like when the web started out, it was very fun watching the companies that were like trying to figure out the web, but like it was hard and it was messy. I mean I remember going to a lot of like the developer conferences back in the early 2000s, where there's only 30 people in a room messing with the latest and greatest technology about how to build an interactive website and, wow, this is great.

It's not really there yet, but you can tell it's going to be. This has to be entirely the same feel. But it's fun hanging out with the AI native companies because they're thinking and dreaming that way. The challenge for a lot of the incumbents is that some of them are like, yes, we'll see if it happens, right? I don't know, give another 5 years, we'll see if the go. That's like that's born. I'd be like going and talking to people who are building software for CDs, right? So what's interesting, though, is I've actually been kind of frankly, unimpressed like in the marketing space.

The customer service is a lot more interesting. I mean a lot more interested there -- but I've been unimpressed by like people going for this, building better tools to do content creation. Like look, we've got a project internally as part of defining your marketing strategy. I think every modern brand should also be -- in part, should be a media company. Like, we're working with this outdoor retailer, and they sell all sorts of camping gear, hiking gear, climbing gear, all kind of stuff.

And like why aren't you also the go-to destination to go find great climbs or great camping sites. Why don't you both? And they're like, "Oh, we never really thought about it. We just don't have time to do it." I'm like, but you can. All that information is there now. You can provide more value to your customers than you're doing before. Like well, that's a great idea, which we did not execute. Like well, now you can do that. So that's the kind of stuff that I was hoping, you'd see more of, but I just frankly haven't seen that much of it.

So anyway, we're going to get deep in there. Hopefully -- I mean, hopefully, there will be more companies that are kind of focused on that in the next couple of years. The customer agent, the service side, I think it is more interesting. But that's where actually -- we're just very focused on this idea that I think you're thinking too narrow if it's purely about customer service. I think this is -- every business is going to provide some AI that is going to be like the concierge, the representative to that business, and it's going to solve all sorts of problems.

And we have these like fascinating stories when we turn our agent on for our customers. And you look at -- we have this whole classifier that will look at the kinds of conversations people are having. And it's like it's crazy. I mean there's basic things of, hey, I need to return this product or I have a question about sizing or whatever. We see people like I've seen conversations with some like high-end some fashion brands.

I've seen people like plan entire like, well, we're having a wedding, and I'm wondering what the bridesmaid should wear, but also I have questions about what my mother-in-law, like if it's holy stuff, this whole conversation going on, and they're just querying away at this like product catalyst to try to understand what's there. I mean these are kinds of conversations that I think are going to become the norm. You already see this happening with like the larger LLM.

So I think it's fascinating who's going to do that well. And obviously, we're benchmarking like crazy, our models, our end agent, how good is it at retrieving the right information and actually answering questions. And what we found is, at least in a retail and e-commerce context, because of the access to data we have, both about the business, product inventory, catalog as well as that consumer, their data set, we can just provide better answers, right?

So I think AI is the most interesting companies. We spend a lot of time there. And then yes, I know something -- often times people ask, hey, do you see this collapsing of the user interface where does everything devolve to like ChatGPT or Gemini? To give you a little bit of analogy, like I always felt like even in retail and commerce, it felt a little simplistic to me that the entire world was going to collapse down to like Walmart and Amazon. It just felt like that's possible, but like you're not really going to have -- there's no room for different experiences. I mean, in theory, it's possible. But in practice, it just doesn't seem likely.

So I do think for a lot of productivity-based things, and I think we probably find personally, I certainly do. I think a lot of the LLMs just for a wide variety of like personal productivity tasks. And so things that are more adjacent to that, yes, it makes sense. Those will get pulled in. I think as you get more domain-specific and you're getting deeper into it, I have a hard time -- I mean it's possible, maybe we'll have to see how it rolls out. But if you're thinking about like, say, we give you a marketing strategy and like -- and here's a campaign we think you should run and then we want you to review it. It's hard for me to believe that entire interface and then the editor and all kind of stuff will fit inside of that box.

So I think we're still a little bit like the explosion of web apps. I think we're going to find there's some patterns that will be discovered of like good ways to interact with LLMs. And I think we're going to find there's also some specific to each application or at least some of these high utility, high-value domain-specific applications where the UX needs to be a little different and we want to be really great about, too.

Yes, fantastic. All right. I want to talk a little bit about CRM, meaning Klaviyo's expansion from marketing to sales. And historically, we've seen a little bit of a nuance here between B2C and B2B. So talk to us a little bit about where you feel you're strong today from a sales feature and functionality standpoint and where you need to go to be best-in-class.

Yes. And so well -- so we built Klaviyo to focus on B2C use cases first, frankly, in large part because there will be less friction, right? I mean it was one thing, if I had to convince a salesperson, it's like, hey, so we actually believe the entire customer experience should be delivered through software. It's kind of a tough pitch, right, given the job they're in.

Now I think what's happened -- what we found is marketing, I think it often is just automated sales, just sales at scale. It's a pretty good analogy, right? So we found it's like, yes, Klaviyo is obvious in a B2C context. But then what happens is we're finding now is through AI, you get these like really high-value conversations, Hey, I have this one consumer, but they spend a lot. They're a very frequent customer. They're a VIP. And I really -- I almost want to provide them a more tailored experience.

I think what we're finding Klaviyo interoperates well with CRM. So we can escalate to an account manager or a person or a human for now. This is actually -- one of the things I think is interesting about the customer agent we're building. So we started out with text, so chat modality and then audio. I think in short order, probably over the next year, we'll have to see how some of the foundational models develop. I think we'll be able to offer video as a modality as well. And then you're sort of saying like what's the difference here?

I think a lot of businesses, we're going to find it's like, what's their value add. It's sort of like the data set that they have that an LLM can think and train off of. And then it's like what is the brand and personality that you want to provide? How do you want to interoperate with the world. Once we get down that path of providing, I think, the kind of modalities that people expect that are more sales modalities because we're already doing that with marketing. I mean you could have a sales conversation with our customer.

But if you think about more traditional sales where it's like, yes, I'm looking at somebody in the face. I think we're going to get to the point where, okay, we now can provide that kind of experience. And then it's going to boil down to the depth. How good is your agents at understanding context behind the scenes. And that's actually something we're using our customer agent on Klaviyo's own data set. So it's fairly complex, right? We have this fairly complex -- people ask very specific questions about, hey, I built this market automation, it's not functioning this way.

By the way, I have another question about this other feature over here that just came out, like should I use that or not, it's applicable to my business. And we need our agents to be able to handle that. So we're already getting into some of these more complex queries that we tend to think like, only humans can answer those. But I think in pretty short order, we're going to find that maybe we can't -- maybe it can't be an augmentation or a replacement for all of these, but I think we're going to find it, gets pretty good pretty quickly. And that's something we're very bullish on. So I think there's a natural progression for us from doing marketing at scale, service and then that starts to bleed into things that might look like more traditional sales use cases.

Yes, fantastic. Yes. And then we spoke a little bit about this at the beginning, but we've talked a lot about Klaviyo's infrastructure over the years, and you talk about the speed and also having the completeness as well. How do you do that? And how is that kind of different than how you see others in the space try and solve that problem?

Yes. So this concept of if you want to replicate a person, you'd better build some data structures that are as good and as fast as this guy, I think it's very important to us. Our approach has been this is we look at it as like, look, the way you store data, there's not one sort of database data format indexing scheme that works. Instead, what our data platform does is when you push data into it, structured data, unstructured data, we actually index it in a variety of different ways.

And we have a couple of routers that will look at the data and into it, how it's likely to get used downstream. So just as an example, like when you -- when a consumer takes an action, they buy something. They have a conversation with our customer agent. They browse a website. They go visit an event that you ran. We take that data and we store it in a bunch of different ways so that you can access facts about that exact information. Hey, what does this person buy in this transaction?

You can look that up like in milliseconds. We also then go aggregate that with other things that they did. Hey, help me understand the attribution of what kinds of things this person responds to. For instance, maybe they prefer getting messaging over e-mail versus text messaging or maybe, hey, it was a result of that customer agent query. So we index some of the attribution data. And then we aggregate it up with other data we have about that end consumer. Hey, how many transactions have they had recently? And can I query that also like in very low latency? And then obviously, larger across the entire business. Hey, how is this customer similar or different to other customers in my business?

So because we do this kind of multiplexing, what it means is then when it comes time to like query time, when it's time to think, right, and take an action, our database is very fast. And so that's our goal, is that behind the scenes, by the way, you could replicate what we're doing if you had a large, like, say, data infrastructure team. And I -- we pattern matched our data system, our data platform, the product we provide with a lot of the big at-scale consumer companies and their data infrastructure team they provide to themselves where they're their own customer.

And oftentimes, we swap notes and they're like, wow, this is really great, like we could use a lot of the stuff that you're doing. I think over time, if we build our data platform, right, people should opt to use this versus roll their own, right, set of data warehouses and databases together. And it's a little bit outside of scope. I know we're mostly talking about software applications because infrastructure is so core to what we do. I often -- the other thing I really like looking at is who are the data warehousing, data lake, data tech companies?

And how much are they thinking about this like multi-index sort of like multi-data backend future. There's some -- a couple of interesting projects there, but I think we're, if not the only company, one of the first companies to really try to commercialize that. And we haven't commercialized it directly. We do a little bit through our data platform, click the data platform SKU. We mostly just use it to power our applications.

But I do think over time, that's another really interesting one is can we just expose this brain to our customers? I used to think that was going to be more important. I actually think now it's more likely that, that's going to be a competitive advantage for our AI because it just has a fast link to look up a lot of information that otherwise you'd have to go invest a whole bunch of infrastructure to basically to get the same results to get the same latency.

And then as you embed more AI in your platform and you think about the potential for maybe commoditization in some of the AI functionality and your ability to charge for AI eventually, how do you see that playing out over time?

Yes. I'll give you an example, some of the things we're doing with marketing and embedding AI right now. We've taken kind of a dual approach. It's probably more biased towards bake things into our products to just to grow market share. I think there's such a moment here where you build these wow experiences that just so level up what people should come to expect. I mean we've got these interfaces inside Klaviyo now that like that we'll be sharing with all of our customers very soon. It's just dramatically different. It's very different when you log -- you can tell what SaaS software you log into, and there's no to-do list. It's just like choose your own adventure, you just click around everywhere because [indiscernible].

AI software is going to tell you, no, no, I need you to review these things because if you weren't here, I would just take these actions. So I think -- as we move towards like that -- yes, that new AI -- sorry, that new AI future, that's going to become default. We want to get that to everybody. We don't actually want to put that behind a paywall. Now what we are finding is there's some functionality that may be more applicable to our larger customers or we believe that some of the things that we're going to build, we actually have -- there's room and customers will understand price leverage over time.

For example, our customer agent, we're deliberately pricing at a price point that we want to encourage people to get it out in front of consumers. We don't want you to hide it on a page where it feels very hard to get to. But we also know there's different types of conversations. There's some that are cheaper, and there are some that like are actually higher -- they're cheaper compute, cheaper to serve, but also lower value. There's also some that are higher value. So I expect over time, we'll see some pricing discrimination even on the cost of those conversations.

And then on the consumer side of things, I think how consumers interact with technology could look different, very different potentially 5 to 10 years from now. So how do you think about investing in your product stack to prepare for that when there's probably -- it feels like a lot of unknowns right now.

Yes. It's all about like this is a very fun time for our product engineering team, myself or the whole company because things go very fast. So I'll just give you an example from like, I think it was a week or 2 ago. So the models are improving so quickly and it's so changing internal functionality, we'll talk about the consumer side. There were some new models that made it image editing much easier. Was it an Achilles heel of a lot of AI models?

Yes, yes, you'd say, hey, take this person and put them in a white shirt and it's like what totally changed for the person? Well, that problem is like they solved it. They almost solved it. It's like really, really good, right? You can imagine it has lots of applications for us where we're like, hey, we have these like staged product inventory where it's like, hey, here's -- we did this like photo shoot.

Well, so we've actually -- we codenamed a product internally in photo shoot. We're like, well, why can you take that product and put on anything, right? Put on a model of your choosing, right, or put in any kind of scene. And literally, we took that model, and I think it shipped on a Tuesday. By Friday, we put it into our product. We watched the traffic over the weekends. And already, we had thousands of customers, right, on the weekend working through these things using us.

So velocity, I think, is the key thing. And then I think as it relates to both -- I mean, consumers, whether it's our customers or end consumers. I think you have to iterate a lot on the types of experiences, like what that could look like. For instance, I'm very bullish on -- we have this new product we're shipping called Customer Hub. You go visit a website, not only we'll rewrite the web page, but it gives you kind of this pane of glass when you go visit a retailer that's not named Amazon, where you can see your entire experience with that customer.

We're iterating on the little modules you put in there like crazy. One of the things we added the other week was we put in the ability that if you're a customer and you come to a website and you like just remind us who you are, we'll show you all of the discounts and promotions that you're eligible for that you might have missed because you missed that e-mail or text message. We're finding already people are going in there just to hunt for deals because they think they might have missed it. And brands love this because the whole reason they ran that promotion in the first place was to drive engagement. Now we've just given them another surface. But that's the thing that we just -- we've had to play with and see what the data says.

Your comment on the data warehousing companies is really interesting. Maybe just contextualize for us. We know that Salesforce is Data Cloud. We know that Snowflake talks about marketing as an end-use application. We know there's a CDP layer in there somewhere. Where do you think the value accrues? And you're talking a little bit about there's some displacement opportunity there, it sounds like with your multi-infrastructure end...

For us, I think we think so much of the value is actually one of the reasons we got into marketing after building this kind of data platform first is I've always felt that like if you choose to be infrastructure, then you go wide, right, with probably lower margins, right? And that's a great business model, a lot of companies have done that. If you do applications, obviously, the more -- those tend to be higher margin, higher value because they're closer to the end outcome. And then it's just a question of how widely applicable are they. In general, we've looked at our brain, our data platform as a means to an end to power our applications.

Our belief is that we should build the core applications that we think are going to be ubiquitous, everybody needs, but also we want to open it up to third-party developers. So we've actually done a lot in the last 12 months to invest in our developer program. I think we now have -- I think there's like hundreds of applications in our version of our App Store, our app directory. And we're investing a lot in getting people to build more there. Why?

Because it's like, well, look, if we can't build it, we would love for somebody else to do it and at least do it on top of this shared data platform. And we know businesses want this because, look, I get requests all the time, part of the reason we got into our customer agent and customer service people say, why can't you unify this part of it? So we know we can't get to all of it, and we would -- actually would like people to build more applications. And this is also helping us as we branch out beyond retail and commerce. There's a lot of bespoke applications that we're finding in other industries or if I could just go do this with Klaviyo, this gives those folks access to do that.

Yes. Yes, makes sense. Okay. I want to ask you about the R&D headline from a couple of weeks ago. Tell us a little bit about what your framework was for doing the reduction in force and then how you're reinvesting those resources?

Sure. Yes. I mean -- I think it's -- we -- I have a lot of respect for everybody that signs up to put on, as we say, puts on the Klaviyo jersey. At the same time, we very much believe that we are -- drive very hard. I think we talked about careers at Klaviyo is a little bit like joining a professional sports franchise, like people don't spend 30 years in the NFL or the NBA or whatever.

And so I think it's fine if it's like not everybody is, but we respect the work that folks do. This for us is like kind of normal course of business. I will say the one thing that's maybe a little different or something to make sure that we're thinking a lot about right now that's not entirely related, but there's some overlap is this idea of like I mentioned the AI native company is the most interesting.

This idea of thinking AI first and LLM first is so important to us as we think about talent. I think in the SaaS era, you could get away with a little bit of like, yes, I've seen this before, let me take my playbook. I'm going to rerun it here. It will all be good. I think that's just totally broken. So we talk a lot about what are the advantages of scale and being a company where it's like, yes, you've got 100,000, 200,000 customers, partners, right? We've obviously built a business in size, cash flows. We have a ton of amazingly talented people, but there's some biases that come with that, too. And one of the big ones is, and I think about this every single day is what got us here probably is not right for the next era.

And so one of the things that we're checking for both folks that work at Klaviyo now and folks as they come in is, not just are you into AI. We use analogy of like if you were in the late 1990s and say you're at Amazon or Google and you're like, hey, you want to go work there. I mean if you showed up for [ interview ], cool tell me about how you entered the Internet? But it is like, well, I've Amazon before. You in like tens of millions of other people, oh, I tried Google, right? I'm like that doesn't mean anything, right?

What you want are the people that have these like side projects, like I built my own website. okay, now we're talking because that was hard and people figured it out. I think the exact -- you can imagine it's like all these things, if you were at Google and you're like, hey, I've run a data center, but I run -- I don't think Internet scale. It's like you're just totally the wrong fit for what we're doing. It might have been made a ton of sense in the '80s or the early '90s. It's just -- it doesn't make any sense anymore.

We think about the same thing for AI. It's like if you're not the kind of person that's going and coding against LLMs or my gosh, now with all the tools, you don't have to -- coding has taken on a whole new world. It's not semicolons and braces anymore. Now it's just about can you type in text and iterating on that. If you're not the kind of person that's just proactively going and doing that, I don't think you're the right fit. It's a little tough and feel got to go figure that out themselves. But thankfully, I think we have thousands of people that are very leaned into this. So if you're proactively in AI, that's great. So there's a little bit of that, that we're also to support for.

Yes. Fascinating. So the other thing that we wanted to spend a little bit of time on is we've talked about the different product modules. But at the same time, you're also going from being primarily mid-market focused to going further up market. And there are plenty of companies in the SaaS world that have really struggled with that. So tell us a little bit more about what you think the limiting factor to the type of customer or the size of customer that you can [indiscernible]. And how do you continue that kind of one-size-fits most approach while also layering some of the best-in-breed functionality that you need to go up market?

Yes. So I -- so the first is like it's my ambition, it's our ambition that I think we should be working with businesses of all sizes. I have a soft place in my heart for every entrepreneur. I know how hard that is to build from the bottom up. And so we really want to help amplify those businesses. I know there's a lot of other great companies out there that want to do the same. I actually started my career working with the Fortune 50. And it's very fun when you're working with brands like McDonald's and Starbucks and [ CVS ]. These are great companies, right, huge scale.

So we saw how those patterns look like, and I'm eager to bring those kind of like working with those businesses and some of like how to help them be successful at their scale with their complexity to Klaviyo. So we're very much invested in that. I remember a couple of years ago, I got this advice from somebody and I said like, well, how do you think we should go about it? Because like I have a little bit of experience here, but it's a couple of years old.

And I got 2 pieces of advice from somebody I really respect. The said, one, they go find some deals that are very, very curious but have seen this before. They'll help you with some of the patterns and help you pattern match on this. And the second is like, don't wait. Just go get your butt kicked, right? So like just dig in there, take the mentality under you have to dig in with customers and just get in with there and help them solve some problems.

I think in the enterprise, that's one of the things I learned back from my doing that before we started Klaviyo is you have to go in there and really understand what problems matter most, where are you going to start, how are you going to get in there and then you grow and expand from there. And so that's very much our mentality.

And so as we think about Klaviyo, we're finding there's opportunities with our marketing stack where we're starting out in some regions, some business units and then working our way across the organization. We've gotten a lot better at that. I think with our customer agent, we've now actually given ourselves another angle. We're getting introductions now into the operating teams that are thinking through, hey, what does this look like to have an agent present that represents us.

So anyway, there's a lot more to do there, but I think just like go idea, get your bucket. We've taken our bruises on that, and we continue to learn. But thankfully, I think if you go talk to our customers, we review every single one of them every month and make sure that they love us because everybody talks. And then on the building product side, look, I think about good engineering, I think, is like you build systems that can scale. You give people concepts that are abstract, they can work with.

So we thought about Klaviyo, this idea of like what is the customer? We thought about that deeply. What does it mean to like represent them in all of their actions? What does it mean to do marketing at scale when you have thousands or millions of marketing campaigns? We've designed our system from the ground up to think that way. And then honestly, we actually almost like with our smaller customers, our entrepreneurs and SMBs, we almost try to reduce all that complexity down. We hide it behind a ton of UX.

So it's actually -- it's all there, but they just can't see it. So it's great engineering, I think, and flexibility gives you what you need in the enterprise, give people the building blocks, the LEGO set and then we use the analogy of like, yes, then for the entrepreneurs and SMBs, either give them a book on how to build the pirate ship or whatever. And now with AI, I think we actually just build them to damn thing because a lot of them are like I don't even have time to build this thing, like just do it for me.

Yes. Yes. So I remember at the time of the IPO, you had this beautiful chart that had essentially a back-end infrastructure. And it was a bunch of different flavors of database technology. And the whole point on one of the points was you can swap in new technologies as they come down the curve to keep your back end best-in-class, dynamic, nimble, et cetera. Maybe share with us, is there one technical change you've made or one technical upgrade that you've made in the last 6 months that levels you up?

There certainly are new data stores. I mean people talked a lot about like vector database and things like that as it relates to AI. So I think that's very important for interest. Actually, one of the most interesting things with enterprise that we've learned is a lot of folks -- they're somewhat standardized at this point, like the kinds of different format. I think what's unique about Klaviyo is the fact that we can scale such a breadth of them, like ways to store data, and we're smart about how to sort things. What's actually more interesting is I've got a lot of enterprises, they're happy to put their data with you, but what they really want is a place where they can build models outside of Klaviyo because they look at the models themselves.

And I'm not talking about LLMs here. I see like models where they're clustering their customers, they look at that as a big competitive advantage. And so one of the things that we try to upgrade is the ability that people can train directly on data sets in Klaviyo and do that quickly without having to import and export data all the time. I think that's going to be very key for us is those data science teams, they don't actually really -- the data they want to clean and normalize, but they really want the ability to go build and train and put their own intelligence on top.

Fantastic. I think this is a good place to leave it. Please join me in thanking AB for his time. AB, thank you.