Durability of Growth
Q: How is growth holding up in this challenging macro environment?
A: Despite a challenging macro environment, we saw strong revenue growth in Q2, with growth accelerating from last year, and we are guiding up for the year. Strength came from multiple areas: the entrepreneur segment, driven by marketing efficiencies and product improvements increasing free-to-paid conversions; the upper end of the market, adding the highest number of customers over $50,000 ARR in our history; and international growth, with international revenue growing 41% year-over-year.

New Customer Adds
Q: What's driving the acceleration in new customer additions?
A: In Q2, we added 5,000 net new customers, bringing our total to over 151,000 customers. This acceleration is enabled by shifting our go-to-market resources towards SMB and mid-market, and investing in product-led growth for entrepreneurs. We saw strength in the entrepreneur segment due to marketing efficiency and improvements in free-to-paid conversion. Additionally, our investments in go-to-market for larger customers led to strength at the upper end of the market.

Operating Margin Guidance
Q: Why are Q4 operating margins expected to decline based on guidance?
A: As we outperform, we are reinvesting back into the business to drive durable growth. We are increasing investments in go-to-market and product, focusing on mid-market and international opportunities. In the back half of the year, we are ramping up marketing efforts ahead of Black Friday, Cyber Monday, and continuing to invest in our product team, including enhancements like new AI features launched this quarter. These investments may impact Q4 margins, but are made with a focus on strong unit economics and future growth.

International Expansion
Q: How is international growth contributing to overall performance?
A: International growth has been strong, with revenue in international markets growing 41% year-over-year in Q2. We have launched our product in French, along with local language marketing, which has gone very well. Investments in international sales and marketing are leading to strong growth in EMEA and APAC regions. We are localizing our platform and marketing efforts, adding SMS availability in new countries like Spain, Austria, and Switzerland, and investing in channels like WhatsApp to serve international customers.

Mid-Market and Enterprise Momentum
Q: What is driving momentum with mid-market and enterprise customers?
A: Our momentum with mid-market and enterprise customers is driven by our comprehensive product set, including CDP, Reviews, and AI functionalities. Customers are choosing Klaviyo for our data platform that stores all customer data and enables personalized interactions across channels. For example, an organic food and home goods company consolidated their multiple brands onto Klaviyo to optimize their strategy and gain unified multi-channel reporting.

AI Product Strategy
Q: How are you leveraging AI in your product strategy and monetization?
A: We view AI in three use cases: productivity, optimization, and expanding marketing strategies. Productivity tools like Email AI, Segments AI, and Flows AI help all businesses build marketing campaigns faster by leveraging their data. While we are not monetizing productivity features directly, they drive incremental usage. For optimization and new marketing strategies, we see opportunities to monetize over time, as these AI capabilities drive incremental revenue for our customers.

Go-To-Market Investments
Q: Are you adjusting investments towards areas of strength in go-to-market?
A: Yes, we are intentionally investing in areas where we see market pull and strong unit economics. We are increasing capacity in international and mid-market sales, where we are experiencing growth. On the marketing side, we are investing in programs that drive growth and building awareness for Klaviyo in various markets.

Health of SMB Market
Q: How is the uncertain SMB market affecting your business?
A: We are a must-have revenue engine for businesses, essential for their growth. Within SMBs, we saw strength in the entrepreneur segment, with many new businesses choosing Klaviyo as they start out. In the larger SMB segment, we've observed relatively fewer adds, partly due to slightly longer sales cycles, though still measured in days and weeks. Overall, customers remain focused on the value they get from Klaviyo in driving revenue.

SMS Traction and Gross Margins
Q: How is SMS adoption progressing, and is it impacting gross margins?
A: SMS adoption is progressing well, with international expansion adding SMS availability in countries like Spain, Austria, and Switzerland, and launching MMS in Australia. While SMS growth could create some pressure on gross margins, we have offset this through infrastructure efficiencies, such as our Klaviyo Mail Transfer Agent (KMTA). As a result, gross margins remain strong and are considered best-in-class given our product and customer mix.

CDP Adoption
Q: Is the updated packaging of CDP helping with adoption?
A: Yes, we are seeing progress with our Customer Data Platform (CDP) as we experiment with different packaging. The CDP serves two core use cases: storing data and enabling analytics on top of it. We have enhanced data tooling to improve data ingestion and output, and launched features like product analytics within the CDP. We are learning more about use cases and may consider packaging changes to drive further adoption.

Deliverability as Differentiator
Q: Is deliverability creating a new replacement cycle?
A: Deliverability has been central to Klaviyo since the beginning, ensuring personalization and getting the right content to the right person. As changes occur with email service providers, we haven't seen a material impact on us. In fact, customers are choosing Klaviyo for our dedication to email and SMS deliverability, making it a key differentiator and driving some customers to switch to us.

Mobile Push Capabilities
Q: How are mobile push capabilities contributing to upmarket momentum?
A: As we serve more mid-market and enterprise customers, they are seeking integrated marketing channels, including mobile push. We have several customers using our mobile push functionality at high volumes. While it's early, including mobile capabilities strengthens our offering for larger customers who require comprehensive multi-channel solutions.

Shopify Partnership
Q: How is the Shopify partnership influencing your customer base?
A: We have a great partnership with Shopify, with many mutual customers, especially in the mid-market and enterprise segments. We are also winning customers who use other platforms or have homegrown solutions, due to our tight integration capabilities and strong product offering. The Shopify partnership continues to be excellent, but we are also expanding beyond it.

Headcount and Hiring Plans
Q: How are you approaching headcount and hiring amid growth?
A: We have been intentional about hiring, ensuring headcount aligns with demand and our product roadmap. Headcount grew slightly from Q1 to Q2. We believe we have the right sales capacity and are prepared to scale as needed. For the upcoming holiday season, we are well-staffed to support increased usage from existing and new customers.

Additional AI and Deliverability Investments
Q: How are investments in AI and deliverability affecting your positioning?
A: Investments in AI are enhancing our product capabilities, enabling customers to automate and optimize their marketing efforts, which in turn drives incremental revenue. Deliverability remains a key focus and differentiator for us, attracting customers who value our ability to ensure their communications reach their audience effectively.