Klaviyo, Inc. (KVYO) Earnings Call Transcript & Summary

Welcome to our webcast. I'm blessed to have the team from Klaviyo, Amanda and Jack. We're trying something new. We are kind of in the same room. Like usually, you're used to a different background for me here. But in the office, new, which is why we also had a delay, work PC and work IT is not the same at home. Amanda, just to kind of kick us off like, if you think about -- oh, yes, maybe before I go there, guys, I'll start with a couple of questions. I don't have like the whole schedule. So if you have questions, either raise your hands on the open exchange here, and I can see it or e-mail or Bloomberg us, e-mail me and then I can do it from here. So that should kind of work as well.

But yes, let's start, Amanda, you just had like your first public quarter. Good few things happened since. So it's kind of like to refresh everyone just what were the highlights from your perspective?

Sure. Thank you so much, and thank you so much for hosting today. We really appreciate it. And thank you so much to everybody who is joining us today. So it was a very strong Q3 for us. And it was strong. We delivered on all 3 core elements of what we think of as our financial framework at Klaviyo. So that is delivering rapid growth at scale in an efficient manner. So rapid growth, 48% year-on-year growth at scale, $176 million in revenue for the quarter and in an efficient manner, doing that with 10% non-GAAP operating margins. And for us, the big driver of that and the highlights is it really all starts with our customers. So this quarter, we surpassed 135,000 customers, which is -- we are so appreciative of businesses of all sizes who are coming to Klaviyo to be a part of our customers. We are also excited about the expansion that we're seeing with those customers. So net revenue retention of over 119% this quarter. That is our eighth quarter (sic) [ 10th quarter ] in a row over 115%. And that's a testament to the trust that our customers put in us and our ability to grow with their businesses as they're growing. Another big highlight for us was our growth in the mid-market. So our customers over $50,000, we had 1,699 of those this quarter. That's up 89% year-on-year, so significant growth. And then from a product standpoint, a couple of things that we're really excited about this quarter. First is we launched our CDP, where we're, for the first time, offering a separate product that is based on our underlying database technology. And then we also continue to make progress on AI. So this quarter, we launched our segmentation AI engine letting people to use natural language to generate segments, which we saw a lot of our customers use over Black Friday, Cyber Monday.

Well, already. Okay. That's really amazing. Okay. And then I know because we are -- like a lot of people saw you on the roadshow, we had like the first quarter, but maybe remind us a little bit like before we go deeper into the more specific stuff like, on the revenue model, like -- I'm still getting quite a few questions like how does it work from a client perspective? And like, for example, does that -- how does Q4 work? It looks like a bigger quarter, like, but how does it feed into that revenue model and what's driven by it?

Sure. So we are primarily a monthly subscription business. And those subscriptions are set rate per month and that subscription is based on the e-mail side, the number of profiles you have and the number of messages that you send. And on the SMS side, it's based on the number of messages that you send. And so what that really is reflective of is the data that a customer is storing with us and then also the way that they're using that data to power that communication. Big revenue drivers for us -- if you think over the long term, big revenue drivers for us are some of what I just spoke about. Growing with new customers, expanding with those customers as they add new products into their Klaviyo offering, it's growing in the mid-market, and it's growing internationally. And then over the longer term, it would be expanding into new verticals and expanding into new products as well.

And how does pricing work then? Like if you think about like Q4 seems kind of bigger for you, like -- but if I do monthly contract like how does that works? The Uber Eats or how do you...

Yes, great question. Because it is month-to-month, our customers can right size their plans each month, depending on where their business is in that given month. So for an e-mail subscription, which is based on the number of profiles that they have, tends to be steady because once a customer is introduced into a brand, they tend to want to continue to communicate with that consumer. On the SMS side, we do see some seasonality in the business. So during Q4, let's say, if I were a brand, who is typically sending 1,000 messages per month, I might be on 1,000 message per month SMS plan. But maybe during the month of November, I decided I'm going to send 2,000 messages because it's Black Friday, Cyber Monday, I want to get my customers engaged. I will upgrade to a higher subscription plan. And then when I decide that the holiday season is done and I'm ready to go back now to my normal rate, I might downgrade into a -- my go forward rate going forward.

Yes. Okay. And then like does that mean like, for example, you would shut someone off like if they want to -- if the message is over by 1,000, then it doesn't work anymore? Like how the...

Yes, it's a great question. And actually, the way that it works is it's a seamless upgrade from our customer standpoint. And that was in response to questions that we got from our customers because what they said was, if I have 1,000 messages and I decide to send out a campaign that has 1,100 messages, the last thing I want to do is get a note from Klaviyo saying, by the way, we didn't send those last 100 notes, let's have a conversation about your plan. So we actually make it -- able to upgrade in an automatic no-touch way. We automatically upgrade them to the plan that they want. Once they've set the campaign, then they can look at is this the right plan level for me.

And -- but would they have manually to bring it down again?

They would then manually bring it down if they decide....

To do that, Yes.

Yes, to do that. For the most part, as I said, on the e-mail side, once a consumer profile is in someone's database, they're going to want to continue communicating with one of our databases.

Yes. Yes. Okay. Makes sense. And then the -- like let's talk a little bit about on the go-to-market side, like, so Shopify kind of they still get a lot of questions about that in terms of like, okay, remind us of the relationship and they -- like how does it play out for you?

Yes. So Shopify is an incredibly important partner for us. We love working with them. I think our founders are very like-minded. They are very close. We're both very customer-focused. We're both very product-led, and we've developed a really strong partnership over the years. They made an investment in us last year and we cemented a partnership agreement with them. And what that partnership agreement is, is that we are the preferred e-mail provider for Shopify Plus. And we also have joint go-to-market agreements where we participate in co-product development together. We go out and we speak to customers together, we do some marketing and development together.

And then how does the -- is there a revenue profit split? Like how do you do that?

Yes. So on the Shopify Plus side, there is a revenue sharing for every customer who we share in common where we have a per month fee that's part of the agreement. And then on the Shopify core side, we have a set percentage for every customer who they refer to us. So if you look at our numbers for last year, in Q4, that number -- the total fees that were associated with that was about $5.6 million in Q4, year-to-date is about [ $16 million ]. So it's an important part of our customer acquisition costs, but also we're investing behind the whole ecosystem, which for us is really important, not only in relationship with Shopify but also with the partners who we work with in the form of marketing agencies, our own outbound sales force is communicating with customers and our marketing as well.

And the -- there are also like -- that's the other more technicality is like around the warrants, like, so how do they play in?

Yes. So as part of the partnership agreement, Shopify made a cash investment in the business, and they also received warrants, which are exchange for some of the co-marketing agreements that we have with them and the work that we're doing for them.

And do they go away at some point?

The warrants vest over a 7-year time period, which is the 7-year -- or sorry, that is time period of the agreement.

P Yes. Okay. Perfect.

One quick clarification. Yes. The $5.6 million was in Q3 of the revenue sharing fees as well.

Okay. Yes. Yes. Yes. Okay. Yes, makes sense. Okay. Helpful. And then the other being, point that comes up a lot in customer -- sorry, in investor conversation is around the price increases. So remind us what you did here and then I'll talk next then about the implications.

Yes. So our pricing philosophy is that we are a premium product, and the reason we're able to provide premium services is because we deliver on two things that are really hard to do at once. One is we are incredibly easy to use. And the second is we're very sophisticated in the use cases that we let customers do in the product because we have the database integrated. And so because we're a premium product, we charge a premium price for it. The price increase last year was that we found that in certain segments of the market, our pricing was not necessarily aligned to that philosophy. There were certain parts of the market where we were actually priced at a discount relative to competitors. And so we wanted to make sure that we were priced aligned to the value that we were charging. So the price was increased primarily at that higher end of the market. And that's -- and then it happened in Q3 of last year, right, at the end of Q3. So you primarily saw the price impact roll through in Q4 of last year.

Yes. I mean -- like -- in theory, if the customer -- like the customer from a customer engagement perspective, like be cheap. Clearly, the customer says like, "oh, we're great. I'll take it." Or like how does that impact the conversation with customers?

Yes. What's interesting was that it actually had a little bit of a credibility impact of customers who say, well, if you're a premium product, you should be premium price to the market." If you're at a discount to the market, are you really that strong? And so it actually helped us in our conversations with customers because we could then say, yes, we have a product that is really high quality and is priced appropriately for the quality that we're providing.

So there's also like too good to be true, like -- kind of like -- and then it kind of created new discussions and yes.

That's right.

And then -- so that's only on the high end. So what -- did anything happen on the low end of the market?

In the lowest tier of the market, the plan prices stayed the same. There was a little bit of a price increase in the middle tier of market as well.

Yes. And then how did you -- if you think about it, that's the follow-on question that you obviously get is then -- so how do we think about future price increases now? Is that like -- is that keyed in? How you'd think about that?

Yes. The way we think about price increases is the price increases in the future will be linked to improvements in the product. We have, in this case, not changed prices in 8 years, but we have made significant changes and improvements in the product over that 8 years. In the future, what we're looking to do is make sure that we have that tighter alignment between the investments that we're making in the product, the increased ROI that it's driving for our customers and then the way that we're able to monetize that ROI.

Yes. Okay. Yes. Okay. Makes sense. And then -- and guys, just to -- for the webcast, like, I have a couple of basic questions. And so you can see I'm hitting a lot of points already. But like I want to make sure that you know like the questions will come for you like very soon. The other thing is like if you think about the set up now, and I apologize for the questions already -- for the question already is like you're profitable and you're cash flow generative. And, I guess, a year ago would have been like what's wrong with you. Now, it's kind of like a positive thing. Talk a little bit about that, is that a philosophy question from senior management? It's just the business model is very strong? Like how do you think about that?

Yes. It's one of the beauties as a CFO working with Andrew and Ed, who are Co-Founders, is that this is very much part of the DNA of the company. Andrew and Ed have always believed that you don't have to make a choice between having best-in-class growth rates and best-in-class efficiency that we can grow really quickly and to do it in an efficient manner, both at the same time as we're thoughtful and choiceful about the business model choices that we make. And so that has been always part of how we operate. So we're going to be a business who's going to grow rapidly, but do it in an efficient manner that there doesn't have to be an either or.

And I mean, you have a very decent profitability. How do you guys think about the trajectory from here?

Yes. The way we think about it from here, we've shown a tremendous increase in profitability over the last 12 months as we rightsized some of our marketing spend. We doubled down on the investments that we're working. We've pulled back on some things where we weren't seeing the unit economics that we wanted. Now as we go forward, we're in the early days of going after a massive TAM. And so we want to make sure that we're investing appropriately, go out and capture that growth and capture that market share that's ahead of us. I would anticipate, as we said on our Q3 call, that our margins over the next year will be more stable compared to where they are this year. And then over the longer term, as I think we said in our IPO road show, we would expect to then start to see more leverage in the business over time.

Yes. Okay. And then the -- and that's the last question I have on my one and then I can hand it over to the audience like maybe 1.5 question, sorry, Jack. If you think about guidance, like, obviously, you had obviously first public quarter and then the question that always comes from investors is like, so you beat by around 5%, like, how do I think about guidance philosophy? Is there -- we don't have a path and we only have 1 data point. So for you as the CFO, and you and I talked about it before the IPO, even like you need to kind of understand who you are and what you want to do. How do I think about that? And so where did you come out here?

Yes. And I appreciate that, and I appreciate the conversations we've had about it since the beginning of getting to know each other. Our goal is that we are trying to build trust and credibility in the public market. And we have a guidance philosophy that is aligned to where we are in our stage and evolution as a business, right? If you think about us compared to maybe some companies who went public in 2020 or 2021, as a reminder, we're a scale business. We're well north of $600 million of revenue in the trailing 12 months. We are a business who is profitable. We have over 130,000 customers, which makes the business predictable. And so our philosophy is, therefore, not to drive outsized fees, is to have consistency in a way that's aligned to our position as a predictable scale software company.

Okay. And then the questions have started to come in here from the audience, and I'll take them here. But the one that comes a lot is basically any comments around -- we just had the Thanksgiving, Cyber Monday. How does this -- how do we have to think about this year so far, if you can comment?

Yes, we're in the middle of the quarter, and so we can't comment on the business in the middle of the quarter, but we did see some really interesting trends and patterns. One of the wonderful things about Klaviyo is, we have visibility across so much of the e-commerce and the retail space. And some of the interesting trends that we saw, one is that retailers were really focused this holiday period on how do they drive lifetime value for their customers and how do they drive repeat purchases. And this is consistent with a lot of what we're hearing from our customers right now, that customer acquisition is getting more and more expensive and they want to figure out how do I drive repeat purchases from the folks who are already engaged with my brand. So some of the interesting data points that we saw there across our customers' total revenue, a little less than half, 47%, to be precise, came from consumers who are repeat buyers of that brand. And of the revenue that was generated through Klaviyo-attributed messaging, Klaviyo attributed value is what we call that, almost 75% -- 74% was the number, came from repeat buyers. So brands are thinking about how do I engage with my customers and how do I engage to keep them [indiscernible].

Yes. Okay. Then -- and it goes deeper in here, so just to warn you. So the question is, someone said in the holiday season 2021, 2022, there was lower fidelity for Facebook and Google, and that means more people spend on e-mail and SMS. And then so now the question is now that there's better visibility, does that negatively impact like the current environment, for example? And how have customers think about like in that respect?

Yes. What we see and hear from our customers is that they still think about very, very strong ROI coming from the spending that they have with Klaviyo. It is not unusual for our customers to have 10x, 20x, even 50x return on the investment that they get in [ Klaviyo ] in the form of the revenue that they're generating through Klaviyo. And so what we see through the times when it is easier to acquire customers and through times when it is more challenging is that our customers really want to double down on mining and building those relationships with their existing customer base. One statistic that we see in our business that is really interesting to us is looking at the relative growth rates of Klaviyo attributed value compared to their total GMV, and we see an outsized growth rate in KAV, which says to us, they're increasingly relying on Klaviyo to help drive their revenue.

Yes. Okay. Perfect. Next question from the audience is like, can you talk about NRR? And there -- maybe we do it a little bit broader, talk about the NRR level that we have at the moment? And then what was the impact from pricing? And so hence, how do we have to think about NRR going forward?

Yes. So if I -- first, let me give an overview of what drives our NRR. So NRR is driven by, one, our customer retention. So are we providing value and working with customers in ways that are helping their businesses be successful and stick with Klaviyo and a big part of that for us is the value that we drive for them, which makes it sticky. The way that we drive expansion comes from 3 ways. We expand with our business as our customers' businesses grow. And that is the largest portion of our expansion because we align our success with their success as they add new customers into their business, as they send those customers more messages, their Klaviyo subscription grows, which grows their business with us because it's reflective of their business expanding. So that's the largest driver of expansion. The second is cross-selling multiple products. We started out originally with one offering, which is our data plus e-mail offering. We added a second offering 2 years ago in the form of SMS, which in started 2021. So, I guess, maybe almost 3 years ago now. And SMS, as of our last disclosure, is just shy of 15% of our customers have SMS. So there's a lot of room there to continue to expand and cross-sell multiple products. And then the third, which is much smaller that can increase in our business over time, is cross-selling to multiple brands within the same family. So an example of this would be the Unilever Prestige brand group. Dermalogica was an example [indiscernible] where we landed with one of the brands in the portfolio. They recommended us to another brand, they recommended us to another brand and we've now grown that relationship. That mid-market and up business is a smaller portion of our revenue right now. But as it grows, I think that...

[indiscernible]

Yes.

I mean what are you seeing here in terms of like, as you talk about demand like those mid-market guys will be more sticky? Like I mean, what are you seeing at the moment in terms of stickiness anyway?

Yes. Well, we do see with our mid-market customers that they tend to have a higher retention. So once those customers land with us, they tend to be very, very sticky over time.

Yes. Yes. Okay. And then next question I got from the audience is about on the CDP platform. Can you talk a little bit about how do you add value there? How does it fit into the existing products?

Yes. So what our CDP is and the way that it adds value is that our customers, we have over 300 native automatic integrations that customers can add into their Klaviyo account where they are linking different data sources into Klaviyo to bring all of their consumer data into one place and give them a full robust view of those consumers. Think of it almost like a CRM for a B2C business. What the CDP then allows them to do is to take that data and use it in more sophisticated in different ways. So it allows them to either take that data and place it into other systems. It allows them to do more recording on top of the data or it allows them to do some more advanced analytics that they might then feed into some of their marketing communications. So a very popular use case from our CDP customers is RFM or recency, frequency, monetary segmentation where customers are looking to segment their customers based on how engaged they are in the brand. And then as their customer moves either up or down in their engagement [indiscernible] targeted communications. So if you have been buying from my brand every month like clockwork and then all of a sudden, 2 or 3 months go by, and I don't hear from you, you can use RFM analysis to say it's time to engage right now again and how I get you back into the [indiscernible].

Okay. Yes, yes. Okay. And I mean, how broadly, do you think you can -- if you think about your client base, like, how broadly can this be sold into -- like, is it like for everyone? Like do you need to...

Yes. It will tend to skew to the larger brands within our customer base who have more customer data. But I would say even at the higher end of the small and medium business space, they have a lot of customer data they're looking to bring out to be able to use.

Is pricing on the data volume business? Or how do you do that?

Pricing is based on the number of profiles.

Number of profiles. Okay. Yes. Okay. And if -- like if you think about the customers that you're finding there, is it like all new customers? Or is that like where are those customers coming from?

So currently the product is for customers who are existing Klaviyo customers who want to add on and have the CDP capabilities added onto their existing Klaviyo subscription. Over time, it will become a product that becomes the tip of the spear is the initial sale. And we're seeing a mix of customers, some of whom are greenfields versus the first CDP they've ever bought. Some of whom are coming to Klaviyo from another CDP where they're finding that it was hard to implement, it may be tough to find the value to get the practical use cases out of and they love that Klaviyo is so simple to use and quick to drive value.

Yes. Okay. Then for the audience, the raise hand function doesn't really work so you need to e-mail me if you want to get the questions in. Next question I had was around competition, like, especially on the low -- below -- I think it's below your, like, [indiscernible] is making a lot of noise around [indiscernible], how do I think of -- well, maybe talk broader -- more broadly about competition, but then talk about what you see there if that extra investment is kind of making impact.

Yes. When I think about competition, I would think about two things that really differentiate Klaviyo, which is we are very easy to use and we offer a robust functionality and sophisticated functionality. So on the easy to use, you don't have to be able to code to use it. It's very simple to set up, quick term to value. But at the same time, you're able to offer those capabilities with advanced segmentation, with artificial intelligence and machine learning embedded in to do predictive analytics to make recommendations on products that you should use and with real-time actions. So that as you are identifying a customer on the site, you can immediately translate that into how do you communicate them. Many of the other offerings, it's an either/or. It either can be easy to use or it can be sophisticated and advanced capabilities and we let customers do both.

Yes. Okay. Good. Next question I got here is like can you talk about the expansion into other verticals and also like using partners for that?

Yes. So we are early days. And if you think about where our growth is going to come from, from the next few years, it's going to be those near-term drivers in our existing verticals over the longer term. We'll see growth coming from these new verticals as well. So an early foray that we have into new verticals was our launch over the summer of Klaviyo for Wellness. And in Wellness, we have partnered with Mindbody, Boulevard and Zenoti who are 3 commerce platforms in the management platforms in the Wellness space. And we are working together with them to -- part of their app stores, and we are working on joint go-to-market programs with them to serve customers there. I think back to speaking about us, there is almost a CRM for B2C business. What we find is that having all of the customer data in one place is incredibly powerful for all kinds of consumer businesses. And just like a retailer is looking to drive a repeat purchase of a pair of socks or coffee creamers or you name it, a wellness business is looking to drive repeat services. So it's a very similar concept that from a data structure and a product standpoint doesn't require much tweaking on our part to be able to serve these new customers in these new verticals.

Okay. The next question I had was -- that I got in here was, can you talk about -- you talked about Shopify and their partnership here. Like how -- is there an argument to think about penetration in there? Or can you speak to that in terms of like, obviously, they have about 2 million customers, something like that, like you're not quite there yet. Like, how do you -- is that kind of a number that we need -- that we can compare with each other? Just could you speak to that a little bit, yes?

Yes. So we have a really strong partnership with Shopify across the entire business. I would say that we have a strong partnership in the Shopify Plus ecosystem as a recommended e-mail provider. And there -- as we look at the market size there, we see ample room for growth both in increasing our penetration within that space and then also because Shopify is driving really strong growth of Shopify Plus. So that market continues to expand. Outside of Shopify Plus and Shopify Core, there are so many merchants in Shopify Core, and we think our penetration there is very, very low. There's probably a group of those who are less applicable to Klaviyo, the folks who are really literally just starting out and only have a small handful of customers. But once customers get to enough size and scale that they are trying to segment their consumers and be more personalized in a way that they need to automate at scale then Klaviyo starts to be a really good fit. And then I think the other wonderful thing about the Shopify partnership is that it's not only a strong partnership with Shopify, it also has become a model for how we build partnerships with other platforms as well. And so we've got partnerships across e-commerce with BigCommerce, Blue Commerce, with Wix, with PrestaShop over in Europe that are all modeled on this great relationship that we have over jointly thinking about products and how do we work together across the ecosystem.

Yes. I mean on that note, this question I just got is the next, if you think that international is still early on your journey, but like how do you think about that?

Yes. International is already a significant portion of our business. It's over 30% of our business. I think it's 31% in Q3. And that is increasing in penetration because it's growing faster than the overall business. But I think we're still early days. We opened our office in London about 4 years ago. We opened our office in Sydney last year. We currently openly operate in English, and we only operate in U.S. dollars. So as we make it easier for customers to come to us by localizing the customer journey in their native language, localizing the product over time, but I would say probably further out on the horizon, starting to look at multiple currencies as well. I think we will just continue to grow really rapidly internationally.

Yes. Okay. And I'm jumping a little bit on the questions, given how they come from the audience. But you talked about the guidance philosophy. But if you think Q4 has a lot of like moving parts of people moving up and down in their plans, like how do you get visibility or how do you get comfortable in your guidance there?

Yes. It's a great question. We spoke about this, I think, a little bit on the -- I think it was in the Q&A section of the earnings call that because the beauty of having 130,000 customers, is having a rich customer data set and a rich history of customer behavior over time And so we can watch the trends literally on a day-to-day basis of how is customer behavior trending over time, how does that compare to what we expect, how does that compare to early years, how does it vary by product, by customer size and so forth. And seeing all of that rich data and understanding from our history, what the patterns tend to be is what gives us comfort the guidance that we've achieved.

Okay. Good. Makes sense.

I will say on Q4 and some of the seasonality to one of the earlier questions that you asked because our customers ramp up so much communication in Q4, we tend to see a stronger seasonal quarter in Q4. And then as they normalize, particularly on the SMS side, their plans back to what a more typical run rate would be, we tend to see more level in Q1 without as much sequential growth as customers kind of rightsized to where they want to be in the next year and then they go from there.

Yes. Okay. Yes. Makes sense. And then this is a good one, and I don't have an answer. Well, obviously, it shouldn't. That's why we're asking you. If you think about next year, like, there's a lot of like noise around Google. I think Yahoo as well cleaning up inboxes. There is kind of limit on like how much e-mails can be sent, et cetera. Like can you speak to that? And will that impact you guys?

I think that it improves and increases the value that Klaviyo provides because so much of what both on the e-mail side and we believe eventually will happen on the SMS side as well is that consumers and the companies who are helping them are looking for ways to sort through the noise and to really find who are the brands they want to engage with, who are the brands who are really personalized to me, where it's a targeted brand who I really want to be a part of and then how do I filter that out. So what we see from our customers is that the more personalized they can be in their communication to their consumers, the better their response rates are, the better their conversion rates are and then to some of those questions, even deliverability as well. From Black Friday, Cyber Monday, for instance, what we saw was that of the communications, the e-mails that were sent that were personalized in some way, the conversion rate is actually 40% higher. We think that the more noise that is out there, the more that it increases the premium and the importance of being able to personalize this data in a real scale way, which is what Klaviyo and most companies do.

Yes. Okay. Yes, that's really helpful. And then a quick question on there were signals in the market in Q3 [ etch ] more in the HR back office space but like more weakness in SMB. Like how should -- how do you think the customers react to your offering if the environment is a little bit tougher?

Yes, in a tougher environment, what's interesting is that -- we think that in a tougher environment, they actually come to rely on Klaviyo more. Because in a tougher environment, they're thinking about what is the most efficient and most effective way that I can have to drive my top line. And they're thinking about I really want to be making the smart investments through to keep the revenue coming in the door. And that's what Klaviyo does is we generate incredibly high ROI in the form of top line revenue. And so they may be thoughtful about how much am I spending on advertising, may be thoughtful about how much am I spending on back office. They certainly are thoughtful about making sure that they have the rightsized plan within Klaviyo. But the last thing they want to do is to be cutting off communications on their most valuable resources I have with my existing customer database.

Yes. So it's -- yes, it's selling. Yes, in this environment, you need to sell in.

Yes.

The next question is on your move up market a little bit. If you go mid-market or enterprise or whatever you define -- however you define it, how do you think about -- the question is how large the sales teams need to be? Is it like a big sales investments? Or like are we thinking here like a classic SAP enterprise, Salesforce? Like, can you speak to that a little bit?

Yes. For us, it is an evolution more than a revolution in our sales motion. So it started with an outbound sales motion a few years ago. We've been gradually building out the size of that team. And we are moving from small business into mid-market. I would say the real true enterprise, enterprise is for us starting to appear in our customer base, but for the most part, further out on the horizon for us. So we're making some targeted investments, which we spoke about on our Q3 call, in Q4 and into next year on building out our quota carrying sales force, but doing so in a way that it's really measured and thoughtful about what's the speed at which we can effectively hire and integrate people and doing it in a way that is really thoughtful about unit economics Wonderful thing about working with Andrew he always wants to understand what are the unit economics of this investment and is it a good investment to make.

Yes, yes. And then staying on sales a little bit, like, talk a little bit about how do you get the cross-selling for SMS done? And then maybe that's only a good segue into like more the other products as well a little bit terms of, like, how does cross-selling work for you guys?

Yes. So if cross-selling is part of the initial sale, it's handled through the new account rep who was going into a brand for the first time and selling them the data plus e-mail product and then hopefully attaching SMS at the start. For selling into our existing customer base, we have what we term a customer growth team who is going in and selling SMS across our existing customer bases. So they are looking at places where working with our customer success team, understanding where the opportunities are. In some cases, pull from customers who are saying, "Hey, I feel like I'm not as effective cross-channel as I could be because I have these 2 channels were separated." So one of the things that we have seen in SMS that's most powerful it is the power of better together and the power of the full Klaviyo story because customers don't want to be spending their time typing data back and forth between 2 systems. They don't want to be spending their time working out of more than working into another, and they don't want to spend their time trying to triangulate a single source of truth about a customer. They want one view of the customer, and they want to be able to communicate with that customer seamlessly, whether it's an e-mail or SMS. At Klaviyo, we help them be able to do that in a way that is easy and really clear.

Yes. Okay. Perfect. Jumping a little bit, but like it's a question I got through quizzes quite a bit. So Shopify before they work with you guys, they had a partnership with Mailchimp and then something happened whatever. And that partnership didn't really work anymore. And like now you are the big partner there. With Mailchimp, like is there like a risk that they come back together? Like how do you see that kind of playing out for you guys?

I think Shopify announced about their support and partnership with Klaviyo in multiple forms. I think we have a written agreement that is in place for a specific period of time. But I think more important even than that, we have 2 companies who are very philosophically aligned, right? I was actually communicating with Shopify's CFO [indiscernible] doesn't usually do videos. But [indiscernible] is such supporters of Klaviyo that was an important thing for us is to support [indiscernible] that does bring you guys through the IPO. And I think it's because we're so philosophically aligned on always being customer-centric and developing products that our customers love. And the fact that we are economically aligned because they are monetizing a lot based on GMV and what did we help our customers do? We help our customers grow GMV. So it's a win-win for us.

Yes. It's the last question I have so far. Guys, if you want more questions, you need to kind of hurry it up because our time is slowly running out. It's a good, more broad-based question. It's more like a philosophical question, I think, I would call it. Amanda, for you, like, you have been kind of CFO within Walmart, but it was like -- it wasn't not a public company, like now you're kind of a CFO of a public company. What's been your learning so far?

Yes. It's just so much fun. I will say what really drew me to Klaviyo was three things, and all three things of those have absolutely turned out to be true. I wanted to be part of a company that had a product that customers loved that -- when you spoke to customers, one of the things I love about Klaviyo, you asked the question about pricing, you will go online sometimes and read reviews and customers will write, Klaviyo is a premium priced product and it is worth every penny, you should buy that. And I believe that having an amazing product that customers love is the foundation of any good business, and you can build a great go-to-market motion around that. So that was the first thing that drew me here. The second was being part of the company where we have some secular tailwinds at our back. And the question that I think someone asked earlier about what's happening obviously on tracking on its regulation. And I think it's only going to get harder and harder for businesses who are trying to operate based on third-party data, the businesses who ran and they be those make great use of their first-party data, and that's what we help companies do. And the third was I wanted to be a part of great team. Andrew, Ed, now Steve, who has joined the business, it's just a great group of people. And as a CFO, selfishly, it's great to be aligned with great group of people who are wildly ambitious and building a great company, but also very passionate about doing it in an efficient manner which makes my job nice and easy. And so yes, it's just been a tough one.

And then -- I mean there's another question I got, I might speak in because it fits right in here. It's like if a software company goes public, one of the reasons why you go public is, you to get more publicity or you're more in the media, et cetera. Have you seen that boost already? Do you note it in your customer conversation and it comes up more, et cetera? Or is it too early?

Yes, I think it's early days. We did say that on the day of the IPO, we saw a record number of -- record website traffic. But I think as we thought about going public, for us, it was for a few reasons. One, we aspire to be an amazing software success story over many, not just years or decades, and all of those great software companies out there are public. So we knew that was going to be important to us at some point in the future. And then it does help with brand credibility, particularly as we expand into the mid-market and eventually up into the enterprise, those brands want to know they're partnering with someone who's going to be there for them for the long term and having that public market credibility really helps for them to have the confidence in us as strong partners.

Perfect. [indiscernible] Guys, no more questions here, actually. So I'll kind of hand it back. Thanks -- I'll not hand it back. That sounds like [indiscernible]. Hey, guys, thanks for joining us. If you have any more questions, please e-mail me and I can kind of forward it to Jack, and then we can get back to you guys. But -- thanks for joining here. I really enjoyed it. So thank you.

Thank you. I appreciate it.

Thank you.