Klaviyo Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brent Bracelin - Piper Sandler - Analyst : Thank you. Good afternoon. I guess I wanted to start out here with the durability of growth. Clearly, the macro is pretty challenged out there, remains challenging for many. But looks like growth for you was actually stronger this June quarter than it was a year ago. Growth accelerated a little bit on top line. You're guiding up for the year. Can you just double click into the demand drivers that's giving you optimism and underpinning the strength here? It is surprising and just love to hear a little bit more around what's driving the optimism in the business and momentum? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 8:30PM, KVYO.N - Q2 2024 Klaviyo Inc Earnings Call

Question: Brent Bracelin - Piper Sandler - Analyst : Helpful color. Thank you.

Question: Keith Weiss - Morgan Stanley - Analyst : Hi. Thanks for taking the question and congratulations on a really solid quarter in a uneven macro backdrop, if you will. I wanted to focus, maybe one question on the top line, one question on the bottom line. On the top line, new customer adds were definitely highlighted. It picked up a lot from last quarter. What's enabling that? Is it some of the like partner initiatives? Is it the expansion of products into international companies? Can you give us a little bit of color on what's enabling you to sort of pick up that customer adds, even with the weaker SMBs and the weaker backdrop? And then on the, like the bottom line side of the equation, really good operating margin performance this quarter, but it does seem like our Q4 numbers are coming down a lot if we take the Q3 guide and the full year guide. Anything in particular that's going to be pulling down that Q4? Or any like different timing in investments or a ramp-up in investments that explains that? Thank you.

Question: Keith Weiss - Morgan Stanley - Analyst : (inaudible) Super helpful. Thank you, guys.

Question: Siti Panigrahi - Mizuho - Analyst : Thanks for taking my question and congratulation on a strong quarter. And just my question about your new products. You guys talked about AI, even some of the integration as well and reviews, some of that don't have the direct pricing. How do you monetize that to your base? And then as you're seeing large customers using your product, how does that influence your product strategy? How should we think about the upcoming products in the next few years?

Question: Siti Panigrahi - Mizuho - Analyst : Thanks for the color.

Question: Hynes, David - Canaccord Genuity - Analyst : Hey, guys. Congrats on a really nice quarter. Thanks for taking the question. So Shopify obviously reported this morning. I'm sure you saw that really strong merchant ads. Interestingly, they said about half of their new merchant ads in Q2 came from outside of core English-speaking markets. So two questions there. A, do you see the same demand characteristics in those markets? And then B, how quickly can you guys move to localize the platform for those merchants?

Question: Hynes, David - Canaccord Genuity - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 8:30PM, KVYO.N - Q2 2024 Klaviyo Inc Earnings Call

Question: Arjun Bhatia - William Blair & Company - Analyst : Perfect. And I'll have my congrats on a nice quarter here. Andrew, maybe one for you. Just one of the things that we didn't touch on thus far is your push, mobile push capabilities. I'm curious how progress is going there. And when you think about some of these upmarket, some of the upmarket momentum that we're seeing, especially with new customers landing in that [$50,000] cohort, how much is that, the mobile capabilities contributing to where customers might be buying all of your channels upfront as they look for a platform that they can scale on?

Question: Arjun Bhatia - William Blair & Company - Analyst : All right. Perfect. Thank you.

Question: Derrick Wood - TD Cowen - Analyst : Great. Thanks and congrats on a great quarter. Andrew, there seems to be talk that the AI wave is starting to drive more companies to invest in personalization, in the marketing and customer engagement space. And certainly, that sounds like what you're seeing with, talking about AI, driving new marketing strategies. But given that you've got this vertically oriented stack with a rich data layer to really help with personalization, how are you seeing, how would you characterize demand and competitive positioning for Klaviyo today versus a few quarters ago now that there's been a lot more focus on AI-related initiatives? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 8:30PM, KVYO.N - Q2 2024 Klaviyo Inc Earnings Call

Question: Derrick Wood - TD Cowen - Analyst : Awesome. Thank you.

Question: Terry Tillman - Truist Securities - Analyst : Yes, thanks for taking my question. I guess I should say bonjour with the ramp you're seeing in the French market. It's a single question. It's got two parts though. First, I know you all have been evolving and kind of testing and learning with CDP, but what are you seeing after you've done some kind of packaging updates? Is that helping incrementally with adoption? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 8:30PM, KVYO.N - Q2 2024 Klaviyo Inc Earnings Call And then the second part of this question is, I heard a lot in your prepared remarks around deliverability. As you're getting more of these kind of bigger customers than initially and kind of this world around TCO and maybe with bulk tender changes, is deliverability creating kind of a new almost replacement cycle? Thank you.

Question: Raimo Lenschow - Barclays - Analyst : Thank you. Could we, I'm trying to go back to the health of the SMB, Amanda, your comments as well. Question is, if you think about the behavior of an SMB, like clearly, you guys seem to be seen as more strategic for them because if you don't market, you can't sell, basically means you can't survive. But like how do you see the customers stacking up in terms of like fitting you in and seeing you as something that's kind of helps them versus something that is nice to be like we see at other solutions? Just help us understand as well like how that kind of slightly more uncertain SMB market is playing into your thinking. Thank you.

Question: Raimo Lenschow - Barclays - Analyst : Okay, perfect. Thank you.

Question: Scott Berg - Needham & Company LLC - Analyst : Hi, everyone. Really nice quarter here. I guess one question for me is on your go-to-market investments here kind of mid-year. SMB, as Amanda pointed out, still a little on the softer side at the moment, but you both called out a really good strength upmarket. Have you made any tweaks or changes to the investments that you're making across those different segments that might maybe favor some of those areas of strength upmarket that you're seeing today?

Question: Scott Berg - Needham & Company LLC - Analyst : Thanks, (inaudible), and thanks, congrats again.

Question: Rob Oliver - Robert W. Baird & Co Inc - Analyst : Great, thanks. Good afternoon, guys. I guess it's kind of a two part question about SMS traction. Maybe you talked about some of the consolidation wins you guys have seen, and I know that it sounds as if you're getting pretty solid traction quickly in some of your rollouts internationally with SMS. Just would love to hear, I know you don't break out on a quarterly basis what percentage of your customers are on SMS. But would love to get a flavor for how that's progressing broadly for you relative to your expectations. And then I guess, Amanda, a side part of that would be, we haven't seen the impact on gross margins that we might have expected with a commensurate ramp in SMS. I know there's other things driving that, but I just wanted to reconcile those two things. Thank you very much,

Question: Rob Oliver - Robert W. Baird & Co Inc - Analyst : Great. Thanks, Amanda. Andrew, thank you.

Question: Tyler Radke - Citi - Analyst : Thank you for taking the question. A follow-up question just on the SMB side. I wanted to ask it more just as we think about behavioral habits of some of your SMB customers. I'm curious what you observed in the quarter as it relates to utilization rates of e-mail volumes, message volumes and contacts list? Did that go up or down in relation to the SMB environment? Secondly, is it relates to, if those SMB customers are seeing weakness in their consumer purchasing, do you find that, that translates to higher e-mail and message volumes in order to backfill that demand? If you could just kind of help us understand behaviorally what you're seeing on the SMB side. Thank you.

Question: Tyler Radke - Citi - Analyst : Thank you.

Question: Nick Altmann - Scotiabank - Analyst : Awesome. Thanks, guys. I wanted to ask another question on the international side of the equation just given the strength there. But so you guys added three new countries on the SMS side. You spoke to the growth acceleration in EMEA and kind of building off of Rob's question earlier. But can you just talk about how much of an unlock some of these international additions have been on the SMS side and how much pent-up demand you're seeing from some of these geos as you look to add SMS in new countries? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 8:30PM, KVYO.N - Q2 2024 Klaviyo Inc Earnings Call And then just as a follow-up, just given the outside strength on the international side, how do you think about potentially accelerating those international efforts and investments just given the strength you're seeing? Thanks.

Question: Nick Altmann - Scotiabank - Analyst : Great. Thank you.

Question: Yun Kim - Loop Capital - Analyst : All right. Congrats on the strong quarter. Question around go-to-market motion, around new customer acquisitions for mid-market and enterprise customers, which I think you mentioned was a record quarter. So just curious on where is the biggest source of these new [$50,000]-plus customers. Is this still Shopify Plus merchants? Or are you specifically going after legacy displacement opportunities outside of the Shopify platform? And also, how much of your incremental sales and marketing investments are focused on going after these large customers outside of the Shopify platform? Thanks.

Question: Yun Kim - Loop Capital - Analyst : Okay, great. Thank you so much.