5 Takeaways from Klaviyo's 3Q 2023 Results: Klaviyo-Sized Bullseye Painted on SMS Providers

Klaviyo continues to grow at a great clip and I think still has some steps to take to find its profitability footing, but overall is in a solid position as it moves into the mid-market.

Klaviyo could be a big beneficiary of Shopify taking share in the mid-market going forward, and something we probably don't talk about enough as an industry. In other words, what happens to application vendors as platforms gain and lose share.

I listened to Klaviyo's earnings call and here are a few things I took away from it:

1 - Klaviyo's revenue $175.8M, up 48% y/y, solid. 89% increase in customers generating > $50k ARR, indicating solid mid-market progress.

Still solid gross margins of 67%, but this is a decline from previous quarters and last year (73%).

2 - CDP represents Klaviyo's "first data infrastructure product" which I thought was a super-interesting comment. Indicates to me there is a roadmap of data infrastructure products to release in upcoming years.

This is a smart component of the mid-market penetration strategy.

3 - Klaviyo's Net Revenue Retention NRR is 119% which is huge, and driven primarily due to customers using multiple Klaviyo products -- in particular e-mail and SMS. They hope this is going to apply to CDP and reviews in the future.

This means that Klaviyo has drawn a clear bullseye on top of folks like Attentive and Postscript, who I think have a lot to fear from Klaviyo in this segment as the business moves forward. Backward-looking, Klaviyo has not been a player here, but forward-looking, it's something they are hyper-focused on.

4 - Klaviyo goal of adding reviews is to setup a positive flywheel between data, marketing and reviews. Customer can use marketing channels to collect reviews, and they can use reviews to personalize their marketing.

There are definitely synergies here.

5 - As a new company, they are reporting a lot of non-GAAP earnings for the moment, particularly with the $300M in stock-based compensation in the quarter as part of the IPO. I expect they still have some profitability work left to do here.

Finally, Klaviyo feels it is still very early in its Shopify partnership. Klaviyo has a very similar ethos to Shopify, and a lot of growth within existing Shopify accounts.