Yahoo Finance Klaviyo Inc (KVYO) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Revenue: $210 million, up 35% year-over-year.
Non-GAAP Operating Margin: 14%.
Free Cash Flow: $23 million.
Customers with over $50,000 in ARR: 2,157, up 59% year-over-year.
ARR Contribution from Customers: Over 30% from customers generating over $50,000.
International Revenue Growth: 43% year-over-year.
EMEA and A-Pac Revenue: Over 30% of total revenue.
Gross Margin: 80%, improved by 2.5 points from Q1 2023.
Operating Income: $29.3 million.
Cash and Equivalents: $756.9 million, no debt.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Klaviyo Inc (NYSE:KVYO) reported a strong revenue growth of 35% year-over-year, reaching $210 million in the first quarter.
The company achieved a non-GAAP operating margin of 14% and generated $23 million of free cash flow.
Klaviyo Inc (NYSE:KVYO) has expanded its customer base significantly, now serving over 146,000 customers, which is a 17% increase year-over-year.
The company's dollar-based net revenue retention rate (NRR) stands at 114%, indicating strong customer expansion and retention.
Klaviyo Inc (NYSE:KVYO) has made significant advancements in AI integration into their products, enhancing customer engagement and marketing effectiveness.
Negative Points
Despite overall growth, there was a noted softness in new logo additions, particularly among the smallest entrepreneur customers.
The company anticipates a few points decline in NRR over the coming quarters due to the lapping of a previous price increase and ongoing customer spending trends.
Klaviyo Inc (NYSE:KVYO) faces increased costs associated with the SMS channel, which are expected to impact gross margins negatively in the upcoming quarters.
There is a sequential step down in operating margin expected in Q2 due to timing of investments made in Q1, particularly in engineering and go-to-market efforts.
The company's Chief Technology Officer, Alan Chavez, has decided to step down at the end of the year, which could lead to transitional challenges in the tech leadership.
Q & A Highlights
Q: Arjun Bhatia at William Blair asked about the targeting of go-to-market resources, especially for larger customers, and the upper bound of Klaviyo's target market as it moves further into the mid-market. A: Andrew Bialecki, CEO of Klaviyo, responded that there is no strong upper bound on the size of businesses that can use Klaviyo. The integration of customer databases with marketing across multiple channels provides better access to data and more personalization, which is appealing to businesses of all sizes. He highlighted that Klaviyo is ramping up sales capacity intentionally, focusing on the mid-market and expanding coverage internationally.
Q: Rob Oliver at Baird inquired about the seasonality in the SMS portion of the business and sought an updated view on the macro environment and its impact on Klaviyo's investments. A: Amanda Whalen, CFO of Klaviyo, explained that the seasonality of SMS is consistent with previous patterns, peaking during major shopping periods. Regarding the macro environment, she noted it as steady, neither improving nor worsening, and emphasized that Klaviyo's platform is essential for customers' revenue growth, making it a critical tool despite economic fluctuations.
Q: Elizabeth Porter from Morgan Stanley asked for more visibility into the expansion behavior of customers and the trends in Net Revenue Retention (NRR) over the coming quarters. A: Amanda Whalen mentioned that the NRR at 114% is a strong trend, although it is expected to decline slightly due to lapping a price increase and ongoing customer behavior trends. She emphasized the stickiness of Klaviyo's product due to its high ROI and foundational role in customers' tech stacks.
Q: Gabriela Borges from Goldman Sachs asked about the main drivers behind the revenue upside observed in the quarter. A: Jack Grant, Senior Director of Investor Relations, attributed the revenue growth to strong adoption across SMBs and mid-market, increased adoption of SMS and other products, and significant international growth, particularly through new product launches and partnerships.
Q: Brent Bracelin at Piper Sandler asked why Klaviyo's customer database, coupled with marketing, appears more insulated from broader SMB software category growth slowdowns. A: Andrew Bialecki explained that Klaviyo positions itself as a must-have by driving revenue and providing a central source of truth for customer data, which is integrated with marketing channels. This centrality and the ability to measure direct ROI make Klaviyo essential, especially when budgets tighten.
Q: Derrick Wood from Cowen inquired about the impact of macro conditions on new customer generation levels in 2024, noting a decrease in new customer additions. A: Amanda Whalen acknowledged a softness in new logo adds at the lower end of the market, attributing it to macro conditions and strategic shifts in go-to-market investments towards SMBs and mid-market. She expects moderated growth in new logos with a focus on higher Average Selling Prices (ASPs) within each customer segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
