Q4 2024 Earnings Summary
- Strong customer growth with Klaviyo adding over 10,000 net new customers in Q4, leading to 17% year-over-year customer growth, and showing strength across all customer cohorts, including a near-record high number of new customers in the >$50,000 ARR segment. Additionally, average revenue per customer increased by 15% year-over-year in Q4, indicating successful expansion into the mid-market and enterprise segments. ,
- International expansion driving growth, with full-year international revenue growing 42% year-over-year, particularly strong in regions like France, Germany, and the Nordics. Klaviyo expanded platform availability to 7 languages and SMS coverage to 19 countries, and is building localized teams in key markets, laying the foundation for accelerated international growth in 2025. ,
- Growing SMS adoption, with attach rates reaching 26% among SMB and mid-market customers in Q4. Customers who added SMS experienced a 20% increase in e-commerce revenue during Black Friday Cyber Monday, demonstrating the effectiveness of cross-selling SMS and the significant value it brings to customers.
- Expected increase in customer churn due to new pricing enforcement. The company anticipates a modest increase in churn as a result of enforcing pricing based on active profiles, which may impact total customer counts in Q1. Additionally, Q1 typically sees lighter customer adds due to seasonality.
- Potential indirect impact from tariffs on customers. While Klaviyo does not expect tariffs to impact the company directly, it acknowledges that some customers may be affected, which could indirectly impact Klaviyo's business if customers face disruptions.
- SMS adoption not growing as fast as desired. The company expressed a desire to grow SMS adoption faster. The SMS attach rate increased from 16% to 18.2%, but they aim for higher growth, especially among smaller businesses where SMS adoption is less prevalent.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | no prior guidance | $265 million to $269 million, representing YoY growth of 26% to 28% | no prior guidance |
Non-GAAP Operating Income | Q1 2025 | no prior guidance | $25.5 million to $28.5 million, with a non-GAAP operating margin of 10% to 11% | no prior guidance |
Gross Margin | Q1 2025 | no prior guidance | Slightly below the 2024 gross margin of 77% | no prior guidance |
Free Cash Flow | Q1 2025 | no prior guidance | Expected to be negative due to the payment of the employee bonus program and seasonal payroll items | no prior guidance |
Revenue | FY 2025 | no prior guidance | $1.156 billion to $1.164 billion, representing YoY growth of 23% to 24% | no prior guidance |
Non-GAAP Operating Income | FY 2025 | no prior guidance | $130 million to $136 million, with a non-GAAP operating margin of 11% to 12% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
International Expansion and Localization | Discussed extensively in Q1–Q3 2024 with growing language support, expanding SMS coverage, and building localized teams | Continued emphasis in Q4 2024 with further expansion of language availability, additional localized websites, and strong international revenue growth in EMEA | Consistent focus with incremental improvements as the strategy evolves into deeper regional localization and revenue gains. |
SMS Adoption Growth and Channel Challenges | Q1–Q3 showcased robust adoption, with metrics around customer usage and country coverage evolving from 9–18 countries, alongside noted channel challenges and cost pressures | Q4 reported further expansion to 19 countries, higher adoption metrics (e.g., increased attach rate), and renewed mention of potential future RCS opportunities while still addressing cost and migration issues | Steady growth with evolving challenges; the theme remains positive overall with additional international reach and innovative outlook despite ongoing cost and operational challenges. |
Mid-Market and Enterprise Customer Expansion | Across Q1–Q3 there was strong momentum with record high additions in the high ARR segments and emphasis on upmarket and international growth | Q4 maintained the focus by highlighting key new customer wins, a 15% increase in revenue per customer, and further expansion in international mid-market/enterprise segments | Consistent and bullish growth with continued strategic upmarket expansion and deeper product adoption in larger accounts. |
SMB Segment Softness and Declining New Customer Additions | Q1–Q3 reported persistent softness in the SMB segment and lower new customer additions, with trends driven by macroeconomic factors and shifting focus toward higher-quality customers | Q4 acknowledged ongoing SMB softness but noted an improved quarterly trend (exceeding 10,000 new customers added) due to holiday season demand | Persistent challenges but slight improvement in the most recent period, signaling cautious optimism for SMB stabilization amid external pressures. |
Declining Net Revenue Retention (NRR) and Limited Expansion Opportunities | Q1–Q3 discussed NRR figures in the low 110–114% range, with declining expansion opportunities due to larger initial deals and macroeconomic pressure on SMBs | Q4 saw a stabilization in NRR from Q3 levels, with management cautiously optimistic while still facing headwinds on expansion | Stabilizing after a period of decline; the sentiment is cautiously positive as retention has improved slightly despite ongoing challenges in expansion. |
Operating Margin Pressure and Profitability Concerns | Q1–Q3 highlighted healthy margins (14% in Q1, 15% in Q2) but noted seasonal pressures and investment-related declines in Q3, with growing awareness of cost implications from bonus programs and marketing spending | Q4 reported a non-GAAP operating margin of 5.6% for the quarter alongside full-year margins around 12% and planned investments for growth, with short-term pressure offset by positive long-term profitability guidance | Margins remain under pressure due to seasonal and investment factors, yet full-year profitability targets remain consistent, reflecting a balanced long-term view with short-term challenges. |
New Product Offerings and AI Integration | Q1–Q3 saw the introduction of innovations including CDP, Reviews, Portfolio, and early AI tools (e.g., Email AI, Segments AI) with initial customer successes and integration across channels | Q4 deepened its narrative with extensive AI integration (Text AI, Email AI, advanced analytics tools) and product enhancements spanning SMS, omnichannel automation, and further CDP improvements | Consistent innovation with an accelerated emphasis on AI; continuous product expansion is highlighted as a key growth driver with an increasing impact on customer engagement. |
Pricing Enforcement Impact and Potential Customer Churn | Q1 mentioned pricing changes impacting NRR via lapping of a previous price increase, with strong gross retention cushioning churn risk | Q4 provided a renewed focus on pricing enforcement with details on auto downgrade and capped increases, expecting modest churn while aiming for long-term customer alignment | Reemerging focus on pricing enforcement—this topic was notably less discussed in Q2/Q3 but is revisited in Q4 with proactive measures that balance revenue impact with customer retention. |
Tariff Impact Considerations on Customers | Not mentioned in Q1–Q3 discussions | Q4 introduced tariff considerations, noting no direct impact on Klaviyo but acknowledging potential downstream effects for some customers | Newly introduced topic in Q4; while not a major immediate concern, it is highlighted as a potential risk factor affecting customers and warrants monitoring. |
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Net Revenue Retention Stabilization
Q: Is net revenue retention (NRR) stabilizing?
A: Amanda Whalen reported that NRR showed stabilization from Q3 to Q4, which is encouraging though they are cautious to draw conclusions from two data points. Gross retention remains consistent and strong, and they are seeing stabilization in expansion trends. This quarter was the first full quarter without any impact from the 2022 pricing changes that had affected NRR in prior periods. -
Customer Growth and Pricing Impact
Q: How will pricing changes affect customer growth and churn?
A: Amanda Whalen explained that they added over 10,000 net new customers in Q4, with strength across all customer cohorts. However, due to new pricing enforcement based on active profiles, they expect a modest increase in churn, particularly in Q1. The majority of customers are not expected to see a pricing change, but for those who do, any price increases are capped at a maximum of 25%. -
International Expansion Progress
Q: How is international expansion progressing?
A: Andrew Bialecki highlighted that 2024 was a great year for international growth, with full-year international revenue increasing by 42%. Klaviyo expanded from one language to seven and extended SMS products to 19 countries, covering much of Europe and parts of Asia. They are building localized teams in countries like Germany, France, Spain, and Italy, and see increased demand in the mid-market and enterprise segments internationally, especially in Europe. -
Mid-Market and Enterprise Growth Strategy
Q: What's the strategy for growth in mid-market and enterprise?
A: Andrew Bialecki expressed satisfaction with customer additions and revenue growth in the mid-market segment and an increasing presence in the enterprise segment. The mid-market pipeline is robust, and average revenue per customer in Q4 was up 15% year-over-year, indicating strong market depth. Amanda Whalen added that in their top 10 customers, the average annual recurring revenue is over $1.5 million, reflecting significant relationships with larger brands. -
Product Roadmap and AI Integration
Q: What are the priorities for the product roadmap and AI integration?
A: Andrew Bialecki outlined three focus areas: embedding artificial intelligence across the Klaviyo stack to enhance predictive capabilities and marketing automation ; doubling down on being the source of truth for customers by increasing data connectors and building tools for data manipulation ; and expanding applications on top of the data platform, including best-in-class email, SMS, and mobile tools with cross-channel capabilities. They are excited about upcoming product releases that will impact the entire customer experience. -
Partnerships with Shopify and WooCommerce
Q: How are partnerships with Shopify and WooCommerce contributing to growth?
A: Andrew Bialecki stated that the relationship with Shopify is strong, improving data flow and co-selling efforts, with many large enterprise customers like Reebok, Champion, and BarkBox using both platforms. Klaviyo has become the preferred marketing automation provider for WooCommerce, which serves over 4 million merchant brands globally. Amanda Whalen explained that this partnership is expected to open up substantial opportunities for international growth and new verticals. -
SMS Expansion and Adoption Rates
Q: What's the progress on SMS expansion and adoption?
A: Klaviyo expanded SMS support to 19 countries, enhancing its international appeal. The attach rate for SMS with SMB customers and above was 26% in Q4, indicating strong adoption in these segments. Andrew Bialecki mentioned that SMS as a channel is becoming more interesting with technological upgrades like RCS, which allow for richer customer experiences. Amanda Whalen noted that customers who added SMS experienced a 20% increase in e-commerce revenue year-over-year during Black Friday Cyber Monday. -
Pricing Changes and Revenue Impact
Q: What is the impact of recent pricing changes on revenue and customers?
A: Klaviyo introduced flexible spending for email and SMS and an auto-downgrade option to reduce friction and make purchasing easier for customers. They are enforcing pricing based on active profiles to align with the value customers derive from the data stored. While they expect a slight uptick in churn due to these changes, the overall revenue impact for the year is expected to be minimal. The majority of customers will not see a pricing change, and any increases are limited to a maximum of 25%.