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Klaviyo, Inc. (KVYO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue of $270.2M grew 34% YoY and exceeded prior Q4 guidance, driven by strong holiday demand and modest pricing benefits; non-GAAP operating margin was 6% and free cash flow rose 57% YoY to $54.5M .
  • FY25 guidance initiated at $1.156–$1.164B revenue (+23–24% YoY) and non-GAAP operating income of $130–$136M (11–12% margin), while Q1 revenue is guided to $265–$269M with a 10–11% non-GAAP operating margin; Q1 free cash flow expected negative and gross margin slightly below FY24 levels .
  • KPIs showed customer momentum: >10,000 net adds in Q4 to >167,000 total; 2,850 customers >$50k ARR (+46% YoY); NRR stabilized sequentially at 108%, with SMS attach rate at 18.2% overall and 26% in SMB+mid-market .
  • Strategic catalysts: expanding AI features across the stack, WooCommerce preferred partnership, and strong EMEA growth (+49% YoY), offset by pricing enforcement (possible Q1 churn) and infrastructure investments that pressure near-term margins .

What Went Well and What Went Wrong

  • What Went Well
    • Strong holiday-driven revenue and operational execution: “In the fourth quarter, revenue grew 34% year-over-year to $270 million…free cash flow was $54 million, up 57% year-over-year” .
    • Upmarket and international expansion: 2,850 customers >$50k ARR (+46% YoY); EMEA revenue growth accelerated to 49% YoY; WooCommerce partnership broadens reach .
    • AI and product velocity: >200 features in 2024; expanded Text AI and Email AI; “embedding artificial intelligence across the different layers of the Klaviyo stack” .
  • What Went Wrong
    • Gross margin compression: Q4 non-GAAP GM 74%, down ~5 pts YoY, due to holiday infrastructure costs and SMS mix; Q1 gross margin expected slightly below FY24’s 77% .
    • Pricing enforcement friction: Auto-downgrade and active-profile enforcement may drive incremental churn in Q1; revenue benefit expected minimal for FY25 .
    • Near-term cash flow/margin headwinds: Q1 free cash flow expected negative due to bonus payments and payroll resets; non-GAAP operating margin down mid-single digits YoY for first three quarters before improving in Q4 .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$222.2 $235.1 $270.2
GAAP Diluted EPS ($)$(0.02) $(0.01) $(0.10)
Non-GAAP Diluted EPS ($)$0.15 $0.15 $0.07
Non-GAAP Gross Margin (%)79% 78% 74%
Non-GAAP Operating Income ($USD Millions)$34.3 $33.7 $15.1
Non-GAAP Operating Margin (%)15% 14% 6%
Free Cash Flow ($USD Millions)$37.1 $34.2 $54.5

Segment/Geography Indicators:

MetricQ2 2024Q3 2024Q4 2024
EMEA Revenue Growth YoY (%)45% 45% 49%
International Revenue Growth YoY (%)41% 41% 42%

KPIs:

KPIQ2 2024Q3 2024Q4 2024
Total Customers>151,000 >157,000 >167,000
Customers >$50k ARR2,386 2,619 2,850
Dollar-Based NRR (%)112% 110% 108%
SMS Attach Rate (Total)——18.2%
SMS Attach Rate (SMB+Mid-Market)—~25% 26%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 FY25n/a$265–$269 Initiated
Non-GAAP Operating Income ($USD Millions)Q1 FY25n/a$25.5–$28.5 Initiated
Non-GAAP Operating Margin (%)Q1 FY25n/a10–11% Initiated
Gross Margin (%)Q1 FY25n/aSlightly below FY24 77% Indicated lower
Free Cash FlowQ1 FY25n/aNegative Indicated lower
Revenue ($USD Millions)FY25n/a$1,156–$1,164 Initiated
Non-GAAP Operating Income ($USD Millions)FY25n/a$130–$136 Initiated
Non-GAAP Operating Margin (%)FY25n/a11–12% Initiated
Operating Margin LinearityFY25n/aDown mid-single digits YoY in Q1–Q3, up in Q4 Indicated

Notes:

  • Q3 had guided Q4 revenue to $256–$258M; the Q4 actual revenue was $270.2M, a clear upside versus guidance .
  • Pricing enforcement changes expected to cause modest Q1 churn; benefit to FY revenue minimal .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/Technology InitiativesLaunched Flows AI, Personalized Campaigns, Review Sentiment AI; 61% increase in gen-AI usage . Enhanced e-mail AI; analytics including RFM Action Center and product analysis .Embedding AI across data platform and apps; Text AI and Email AI expansions; AI to guide cross-channel orchestration .Expanding scope and embed depth.
International ExpansionSMS in 12 countries; French localization drove growth; EMEA +45% YoY . Languages expanded to 7; SMS in 18 countries; EMEA +45% YoY .SMS coverage in 19 countries; EMEA +49% YoY; new Dublin office; strong partner-led motion .Accelerating in EMEA; broader infrastructure and teams.
Upmarket/Mid-Market>$50k ARR customers 2,386 (+64% YoY); record lands; strengthened sales capacity .2,619 (+54% YoY); continued strong lands and multiproduct deals .2,850 (+46% YoY); pipeline solid; ARPC up 15% YoY in mid-market .
Pricing & MonetizationNo major enforcement changes discussed.Q3 noted bonus accrual impacting margins .Auto-downgrade, flexible sending; enforce active profiles; cap price increases at 25%; modest Q1 churn; minimal FY benefit .
Macro/TariffsSMB softness; value-based purchasing; diversification benefits .Continued SMB softness; stable macro; platform is must-have .Tariffs not direct impact; monitoring downstream effects; cautious on SMB sentiment .

Management Commentary

  • Strategy and vision: “We empower more than 167,000 brands…Our data-first approach puts Klaviyo in an exceptional position to redefine the next era of consumer engagement” .
  • AI roadmap: “Embedding artificial intelligence across the different layers of the Klaviyo stack…predictive capabilities…what kinds of marketing campaigns should you run next” .
  • Upmarket traction: “We ended Q4 with 2,850 customers generating over $50,000 in ARR, up 46% year-over-year” .
  • International execution: “EMEA revenue growth accelerated to 49% year-over-year…combined international revenue grew 42% year-over-year” .
  • Pricing update rationale: “Customers…have been asking for [auto downgrade and flexible sending]…enforce pricing based on active profiles…limiting price increases to a maximum of 25%” .

Q&A Highlights

  • Mid-market pipeline and sustainability: Management highlighted clear value prop (data platform + marketing apps; API-first flexibility), ARPC up 15% YoY in Q4; durable growth expected into 2025 .
  • PLG vs outbound and sales capacity: PLG reduces acquisition cost; sales capacity built behind demand, expanding more in Europe for mid-market/enterprise .
  • Ecosystem leverage (Shopify/WooCommerce): Strong Shopify co-selling; WooCommerce opens more international and varied use cases; typical revenue-share partnership without equity .
  • NRR dynamics: Sequential stabilization (Q3→Q4); gross retention strong; expansion pressured in SMB; cross-sell traction in SMS; lapping 2022 pricing change helps stabilization .
  • SMS expansion: Coverage to 19 countries unlocks near-term demand and longer-term migrations; expectation of richer RCS standard driving engagement and adoption .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS and revenue was unavailable at time of request due to SPGI daily limit. Accordingly, we cannot compare to Wall Street consensus today. We will update when available.
  • Relative to company guidance, Q4 revenue of $270.2M exceeded the prior Q4 guidance range of $256–$258M; non-GAAP operating income of $15.1M surpassed the Q3 guide of $7–$9M for Q4, reflecting holiday strength and pricing-related benefits .

Key Takeaways for Investors

  • Q4 beat vs internal guidance on both revenue and non-GAAP operating income, driven by strong holiday demand and modest pricing benefits; non-GAAP operating margin at 6% despite bonus accrual .
  • FY25 framework: 23–24% revenue growth with 11–12% non-GAAP operating margin; near-term margin/cash flow headwinds expected due to infrastructure investments and bonus accrual timing .
  • Structural growth levers intact: net adds >10k in Q4, >167k customers, upmarket cohort to 2,850 (+46% YoY), and EMEA acceleration (+49% YoY) underpin durable growth .
  • Product differentiation via AI and unified data platform positions Klaviyo to extend beyond marketing, supporting premium consolidation wins and multiproduct adoption (e-mail, SMS, mobile, CDP, Reviews) .
  • Pricing enforcement is a near-term friction point (modest Q1 churn, minimal FY revenue uplift) but reduces customer friction and aligns pricing to value (active profiles), potentially aiding long-term monetization clarity .
  • Expect Q1 gross margin to be slightly below FY24 and negative free cash flow due to bonus payments and payroll resets; model seasonality and margin linearity (down YoY in Q1–Q3, up in Q4) .
  • Partnership strategy (Shopify/WooCommerce) and regional localization (languages, SMS coverage) are key to international scale; watch for continued ecosystem-led growth and enterprise wins .