Declining NRR Impact
Q: Why is NRR declining and affecting future growth?
A: Amanda explained that Net Revenue Retention (NRR) is expected to continue declining due to softer expansion among existing products, particularly in the SMB segment where customers are cautious with spending. " While gross retention remains strong, customers are value-focused, and as Klaviyo moves upmarket, larger customers are landing with multiple products from the start, leaving less room for expansion. " Cross-sell efforts with products like SMS, CDP, and Reviews are progressing well, but the decline in expansion impacts NRR. "

Next $1B ARR Vision
Q: How will you achieve the next $1B in ARR?
A: Andrew stated that Klaviyo aims to reach the next $1B in ARR faster by focusing on four areas: acquiring more SMBs, international expansion, moving into mid-market and enterprise, and growing the product portfolio. " The company invests in best-in-class products, expanding into messaging channels beyond email, like SMS, mobile, and social platforms. " They're exploring M&A opportunities but remain committed to being the source of truth for customer data and powering experiences that drive revenue. "

Upmarket Traction and Competition
Q: How is upmarket movement affecting competition and growth?
A: Andrew noted that as Klaviyo moves into the mid-market and enterprise segments, they compete with products lacking a robust database foundation. " Their ability to cover all channels—email, text messaging, mobile—is a competitive advantage. " Customers are adopting more of Klaviyo's product set upfront, which strengthens their position but leaves less room for expansion. " There's opportunity to expand within enterprises across business units and geographies. "

Macroeconomic Impact
Q: Is the macro environment affecting your business?
A: Amanda mentioned that the macro environment remains consistent, with some softness in new customer acquisition and expansion, particularly among SMBs. " Customers are value-focused, scrutinizing their software spend. " However, Klaviyo is pleased with strong results as they are considered a must-have for driving customer revenue and growth. " Strength was seen in both entrepreneurs and the high end of the market this quarter. "

International Expansion Progress
Q: How is international expansion progressing?
A: Amanda expressed excitement about international progress, highlighting 45% revenue growth in EMEA. " New language support—including German, Portuguese, Korean, Spanish, and Italian—has been well received. " There's notable strength in new business across France, Germany, Spain, and Finland. " Klaviyo is adding local language-speaking sales reps and leveraging a strong partner network to support growth outside the U.S.. "

Q4 Margin Outlook
Q: Why will operating margins compress in Q4?
A: Amanda explained that operating margin guidance includes a catch-up accrual for a new cash bonus program, impacting margins. " Excluding this, the margin outlook aligns with typical seasonality. " Q4 usually sees gross margin pressure due to increased sending volumes and higher marketing expenses as Klaviyo invests more to support customers during the critical holiday season. "

Q4 Seasonality and SMS Volumes
Q: What are expectations for Q4 customer adds and SMS volumes?
A: Amanda stated that Q4 is historically strong for customer additions, especially among lower-end market customers preparing for the holiday season. " As Klaviyo moves upmarket, they may add fewer but higher-quality customers. " SMS volumes are expected to be seasonally strong due to the holiday period, with brands using SMS for time-sensitive marketing during Black Friday and Cyber Monday. "

Growth in Reviews and CDP Products
Q: How are Reviews and CDP products performing?
A: Andrew discussed that Klaviyo is transitioning to a multi-product company. " For SMS, 80% of the top 50 customers are using it, indicating strong demand. " The CDP product addresses analytics and data governance, allowing customers to turn insights into marketing actions easily. " The CDP product pays for itself quickly and is expected to be a significant growth driver. "

Impact of Shopify's Enterprise Expansion
Q: Is Shopify's enterprise success affecting Klaviyo?
A: Andrew confirmed that as Shopify expands into the enterprise level, Klaviyo benefits. " The partnership allows both companies to go to market together effectively. " The tight integration between commerce and marketing platforms provides customers with seamless data flow and enhances customer experiences. "

New CTO and CPO Hires
Q: How will new CTO and CPO impact technology?
A: Andrew expressed excitement about the new hires, Surabhi and Adil, who bring humility and experience at scale. " Adil was previously a Klaviyo customer and understands the space well. " Both have experience building scalable, reliable, and secure systems, which will help Klaviyo as it becomes the system of record for consumer data. "

Connecting to Ad Audiences
Q: How is Klaviyo helping connect to ad audiences?
A: Andrew explained that Klaviyo integrates tightly with ad platforms like Google, Meta, TikTok, and Pinterest " " . Klaviyo aids in customer acquisition by capturing data and building relationships with website visitors, reducing the need for retargeting. " It also allows businesses to pass curated customer lists back to ad platforms to improve targeting. "

Customer Acquisition Channels Update
Q: Update on customer acquisition channels?
A: Andrew outlined that Klaviyo uses inbound marketing, a freemium model, partners like digital agencies and Shopify, and a sales-driven approach for mid-market and enterprise acquisition. " Strength is seen across all channels, with growth in the entrepreneur segment driven by Shopify and digital marketing efforts. " The sales team and larger partners are driving demand in the mid-market and enterprise segments. "

Macro Assumptions into 2025
Q: Are you being conservative about macro assumptions?
A: Amanda agreed that they are assuming the current macro environment will continue into 2025. " Since the trend has been consistent all year, they believe it's prudent to expect similar conditions next year. " If the macro environment changes, they may see a shift, but they're maintaining stable assumptions. "

Upmarket Pipeline Seasonality
Q: Will upmarket strength come in Q4?
A: Andrew mentioned that enterprise customers typically don't make buying decisions in Q4 due to the holiday season. " While some might switch before holidays, most wait until after. " Therefore, the company focuses on building relationships and pipeline in Q4, expecting conversions post-holiday. "