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

Good morning. Thank you for joining us, the Morgan Stanley TMT Conference. My name is Elizabeth Porter. I'm an analyst on the U.S. software team. And I'm really excited to have with us today Klaviyo's CEO and CFO, Andrew and Amanda. We are going to take audience Q&A. So at the end a mic will go around. And before we start, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And with that, thanks again for joining us.

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So we're really excited to have you guys here for the first time as a public company to our conference. So I think it's really helpful to start off for those that might be new to the story, just with an overview of the business. Andrew, what was really the problem you were trying to solve when you started Klaviyo?

Yes. Thanks for having us. So first off, a couple of consumer staff of our business, we did almost $698 million in revenue last year. We believe that high growth at scale, 48% year-on-year growth. And with great unit economics, I think 16% free cash flow. So we started Klaviyo because we felt like for consumer businesses, there was no equivalent to what the CRM stack was. If you're a B2B business, there were companies that were addressing that. But for consumer businesses, we have thousands, millions, tens of millions of consumers. You can't have somebody call each of them and deliver that experience via humans. You have to do it through software. And so when we started out, we actually started Klaviyo as a database company. This idea of, hey, what would it look like to build like this brain, the central data source that had everything about all your consumers? And then what would it mean if you could connect that up to every surface where consumers interacted with that business. So we actually started out building this database. And then after that, we quickly realized that marketing was the kind of first application, the first use case. And so we added marketing on top of our data store. And so what we help everybody from entrepreneurs growing up, SMBs, which is kind of our core customer today, all the way into mid-market enterprise brands, we help them understand our customers, consolidate all that data, understand who they are and then put it to work through marketing and messaging that critically acts as a revenue driver for those businesses. So it's not uncommon for our customers that 20%, 30%, 50% of their revenue is driven through our software. So a lot of software, you think of it is like it's kind of productivity makes help the business run faster. We really pride ourselves on a metric we measure called Klaviyo attributed value. That is the amount of revenue that we drive for businesses. And so we've talked about last week that last year, we drove over $50 billion in revenue and sales for the 143,000 customers we work with. So yes, that's what we're doing today. A lot of our customers, it's interesting start out very horizontal. We quickly found that retail and e-commerce were a great fit. And so we work with a lot of SMBs in retail and e-commerce today. But we find that that's rapidly expanding, both within that market, but also we're finding that there's a lot of pull from larger businesses and brands and even other consumer businesses that are outside of retail e-commerce, so that's just one part of their business. We're getting pulled by those companies to be the central database for their customer data and then the way that they reach those customers to monetize them.

Great. And I want to double-click on kind of the differentiation. The database piece is certainly a big aspect. In our customer calls, the Klaviyo attributed value was also a really unique metric. So can you just set the landscape a little bit? When you win a deal, kind of who are you competing against and really what differentiates you guys?

Yes, sure. So I mean roughly the status quo when we started 10 years ago was there were really 2 parts of the market. There were folks that were just starting out small businesses. And for them, the status quo was whether it was e-mail or text messaging, there's a phrase, dash and blast. You build up your list and you send everybody the same message. And you hope that it kind of resonated. Everybody knew that was kind of silly. What you needed was to understand those consumers that who is buying what? What were their affinities different categories? Were they loyal customers or first-time buyers? And so we made it really easy to aggregate all that data into our underlying data store. And then because it was connected to marketing, instead of using spreadsheets to do segmentation, all of a sudden, you could do it directly in the software. And so we found ourselves competing with a lot of the traditional kind of newsletter type products. And so we've taken a lot of share there. And then in the enterprise, what we found was it was just a fragmentation. One of our core beliefs when we started Klaviyo was the best software tends to be vertically integrated. It takes multiple parts of the software stack. And you build both components. And they work better together because you have that tight integration. And so for us, it was all about that underlying customer database. And then the way that you message and market it, those 2 pieces of software were really tightly integrated. It eliminates the need for a lot of larger businesses to spend time building data pipelines. All these expensive processes that were hard to set up. And you talk to marketing teams are like, yes, it's just hard to get things done. So we allow them to execute a lot more experiments faster. And so for a lot of our enterprise businesses, they're used to spending hundreds of different marketing campaigns a week and they used to do a lot of experimentation. We've helped them accelerate that because of this vertical integration.

And Amanda, investors often look at kind of ways companies price their products as an indicator for some of the key metrics that the company might be looking to drive. So how is Klaviyo priced? And once you land with a customer, what are some of those primary vectors to really accelerate spend?

Yes. I can start and Amanda happy to add on. So when we -- the idea for us was we're going to manage all of your consumer relationships for business. So our primary pricing access is the number of, we call them profile, so they are a contact, a number of relationships a business has. And so you can think over time, that business is aggregating more and more of those relationships. So our kind of the core metric for us was the number of people kind of in the orbit of that business. We help you monetize them and that's what we charge for. And the ROI can be extremely high. I mean, for some of our smaller customers, it might be 10 to 1. Some of our larger customers, it could be 100 to 1. It could be 200 to 1. So it's a really efficient way to reach those customers and make them valuable. So that was primary pricing action #1 was you're growing the number of consumers and we help -- we index on that. Over the last couple of years, Amanda joined. We've now expanded from being a single product company to a multiproduct company. So our first set of products were all in the marketing space. We believe that there's strong trends our customers are asking for it around consolidating various marketing channels. So while we started with e-mail it was the most ubiquitous. Folks have asked us, can you do SMS marketing? Can you do mobile marketing? Can you pull it all into one place? We love your underlying data store, your targeting engine. Can we apply that to all of these channels and use one set of software? So we've introduced products for each of those. And so we're [indiscernible] that increases customer spend. And now we're starting to branch out even beyond that. So our CDP product is really all about the analytics. And now we're starting to close the loop between businesses and how they do analysis and then action that analysis. So in the past, what was you'd have some data analysts working in one corner, they do a bunch of work and then they have to export or pipeline their data over to the marketing team. Now all of that sits in the same ecosystem, the same kind of data enclosure. And so we're starting to expand the number of products to cross-sell there.

Okay. And I want to go back to the main product kind of on the e-mail side and a recent kind of debate in the community has been the impact of Google and Yahoo e-mail changes. It was really encouraging to hear on your last earnings call that you guys aren't expecting any disruption from these e-mail changes. But can you just dig a level deeper kind of what are you hearing and seeing from your customers that really gives you the confidence that this is not going to be -- this change isn't going to drive any sort of headwind to growth going forward?

Yes, sure. So for folks that are not familiar with what's happening, a very positive change we believe in e-mail ecosystem. So a lot of the major e-mail providers kind of led by Google and Yahoo and I think the others will follow along, they're doing 2 things. One, they're saying, hey, our benchmark for what is spam is going up. Okay, that's good. It was pretty low to start. And 2 is when it comes to e-mail security, I mean, we've talked a lot about security, it's actually been relatively lax. And so in both cases, they're saying, you know what, we're going to bring those up to par with other web standards. So we're very supportive of both these changes. In fact, we've been kind of helping customers adopt these, not just since Google and Yahoo announced these changes 6, 12 months ago, but frankly, over the last couple of years. And especially on the like, how do you send more relevant messaging and content. So we haven't seen a really material impact. One fact we'd like to share was, we measure kind of the consumer engagement with the e-mail of the channel. And so while they've asked while things like, hey, you need to include -- I mean, basic things, you need to include an unsubscribe link in every message you send. I mean it sounds like where we are already supposed to be doing that. Now that those rules have gone into place, we've seen literally like, what is it, 7/1000 of 1% increase in on subscriber rate. So we've seen very little change in terms of consumer engagement, both across unsubscribes and then where we can measure it in standpoint. And so for our customers, the reason we think that's true is because, well, Klaviyo was founded on this idea of don't just do one-size-fits-all messaging. The whole point is to be more targeted, more personalized. So our customers have been doing that for years. And so there really wasn't much of a change for them there. Some of the security procedures like, for instance, identifying signing e-mails, we've made either automatic through our products or we've streamlined the process of, say, modifying various configurations, DNS records and the like. So we've seen good uptake on that. We think our customers are going to spot. And as you think about the long term, I think it's very positive for e-mail as a medium. We love -- if you think about social media, the expectation there is, well, of course, my feed is personalized for me. It actually has surprisingly not really been that way. We're very, very proponent that it should be. We want consumers and businesses and brands to connect in the best way possible. And so we think with these changes, they're actually going to usher in an age where the most relevant messages rise to the top. Those are ones get prioritized. They get more engagement. And that's great for our customers. And we actually think that will be a tailwind for businesses that say, I've actually been kind of kicking the can down the road, waiting to do more targeting personalization, okay, now is actually the time and clearly the best place to do it.

Yes. And it's a really interesting point that with all these changes, you could actually see more customers move to the smart platform. This dumb kind of spray e-mails just aren't going to be lasting much longer. I wanted to expand into some of the other capabilities. You mentioned SMS, push mobile. And kind of what gives Klaviyo kind of the right to win in some of these new markets, especially as you've seen the kind of the overall landscape, many vendors start in SMS, kind of go to e-mail, kind of why are you guys so well-positioned to win in these other channels?

Yes. And the short answer is because we build great products, our customers love them. I mean, when I talk to our customers and partners, we earn -- we talked about we've earned that right to win in these other markets because we've proven ourselves with the products that we've delivered so far. And so we're very big believers that I mentioned this kind of the CRM for consumer is like an undefined space. It's fragmented today. And the foundation of that is going to be this really smart customer database. It knows everything about your consumers. And then you want to plug that into every surface, every place that -- a business interaction consumer. So we started with marketing. And within marketing, we think about the consolidation of the various messaging channels, so e-mail marketing, SMS marketing, mobile marketing. And then we're rounding that out with products like reviews that help you collect more data for personalization and to better understand what products are working. So there's marketing, then there's customer service. So you can use our data and plug that into customer service experience to either automate that through AI or enrich it. And then we think about plugging that onto your website or into your mobile app so that that experience of when somebody goes and is browsing through your store, that's also highly tailored to them. And then obviously, reporting and analytics, which is our CDP. So we think about those 4 buckets that make up the consumer CRM stack. And they all have to be built on top of one consistent view of the customer that's at scale because you have a lot of consumer data and it's available in real time. And yes, we just think we have an unfair advantage because we've built that and now we're building out the rest of those applications. So our focus for today is really let's consolidate down those marketing channels. There's a lot of pull from customers to do that. So we're focusing there. But over the next couple of years, the plan is we want to be that entire CRM stack for these businesses.

And going on the data piece. Klaviyo has a really unique strategy, also go-to-market partnership with Shopify. And that has allowed you to have really financially efficient kind of go-to-market motions. So can you just kind of walk through with investors what this partnership entails in terms of both the product and the joint go-to-market? And how should we think about it from a contribution to ARR perspective?

Sure. So when we think about great unit economics, I think companies have great economics in what drives the demand for us. We talk about like the 3 drivers are: one, customers; so customers recommending to each other word of mouth, like the best marketing channel of all time. Partners, we work with thousands of marketing agencies and SIs that recommend Klaviyo and offer services around us. And we've helped them build out their practices. And then third, the [indiscernible] with platforms. We love working with platforms that are that transactional system of record. They're the place that the order is consummated. That's where payments happen, that's a great data source to use for marketing. So I got to know the Shopify team, gosh, probably more than a decade ago. And we love partnering up with platforms that are very product-first, very customer-first, very developer-first. They focus on exposing APIs. We build really tight product integration. So that was actually the core of our relationship. We for years just worked on this kind of symbiotic relationship of Shopify would facilitate this awesome experience on the website, great checkout experience, would handle payments, orders. And then we would facilitate like the messaging side. What happens after somebody buys or what do they sign up? And maybe how do you convince to make that first purchase? We have lots of customers and businesses being successful. So over time that became a close and closer relationship. And a couple of years ago, we sort of consummated that with a commercial arrangement. And now not only are we doing more on the product side, but we started to do more on the go-to-market side together. So that includes co-marketing, doing trade shows and events together and even co-selling together as we mutually move up, address more enterprise customers. So we love that as a model. So for Shopify, well, we've got a lot of overlap with them. They're a leader in the e-commerce and retail space. It's also -- it's a model that we think we can take into other sectors of retail and e-commerce whether that's geographically around the world. But also then we can expand and use that model to enter other consumer verticals. So there are other platforms that are similar to Shopify, but just to address other types of consumer businesses. And so we started to develop some partnerships in those spaces as well. So for instance, last year, we talked about a bunch of -- we announced a bunch of integrations with wellness providers, the [ power GMs ] and [ spas ]. So very excited about what we're doing with Shopify. And I think there's a lot more to do with them. And there's also a lot of other platforms that we think we can use to help accelerate growth.

Awesome. And one of the other ways that you guys are looking to accelerate growth is really to move upmarket, addressing some of those larger customers. And one of the metrics that stood out in your Q4 results is just the strength within your customer spending greater than $50 hat grew about 80% year-over-year to over $2,000. So does that go-to-market motion need to evolve at all as you've expanded kind of beyond this core SMB to some of the larger customers? Is there any sort of incremental kind of sales and marketing or product investments you need to make to better address the segments?

Yes. So one of the reasons that we're seeing that growth, which we're very excited about, is we have this thesis that if you provide -- if you offer these -- this database, these targeting personalization tools, a great marketing software, what works for SMBs, so the more sophisticated SMBs was also going to scale into the mid-market and enterprise. That's been very true. So we've seen lots of organic demand there pull from folks saying, I grew up with Klaviyo. I want to use it even as my business 10xs and a lot of traditional retailers. Folks like Mattel, Stanley 1913, that have come to Klaviyo and said, hey, we want to standardize on your stack as well. So we've made -- we think we've got a good product market fit there. And both my co-founder and I actually come from an enterprise background. So we started to build out our team, both from the sales, post-sale side, marketing side that can address these markets where we recognized that some of the -- the way we go to market with SMBs, while the product market fit is great, like the way you go to market to attract larger enterprises is a little different. Now that said, one thing that Amanda and I are both mindful of is we're a business founded on great unit economics. And as we move up market, collectively as a team, we're doing that thoughtfully. And what's great is, I mentioned these kind of like these 3 Ps of how we grow peers, word-of-mouth, partners, platforms, where you think we can take that exact same model and apply that upmarket as well in addition to our more enterprise upmarket sales team. So we're pleased with like the unit economics we're seeing there and the organic growth, the NRR we're seeing from that segment. But we're going to be thoughtful as we invest.

And on the CDP product, I usually think of CDP is a little bit more of a sophisticated solution. Is that being adopted kind of across the spectrum? Is it concentrated in any sort of customer segment smaller or larger? And when you do your CDP sale, is it -- are you replacing something? Or is a lot of it a greenfield opportunity you're going after?

Yes, it's a good question. So we actually thought it would be more of a mid-market enterprise product. We've actually been pleasantly surprised at how many of our even larger SMBs have adopted our CDP as well. So as we've been learning about the CDP, it was very muddled when we started. We kind of think about it as 2 core use cases. The first is reporting analytics like we talked about. Folks want one place to visualize, build dashboards about customer behavior. So you can think of the products they were using before that basic dashboarding. But now it's all integrated. And it's built off the same data sets they're using for marketing. The magic there really is tightening this loop from somebody doing analysis, discovering a segment of customers that, gosh, isn't behaving quite the way we wanted to or maybe there's an opportunity and immediately being able to flip that over to the marketing team to take action. So marketers love that because now they have the tools to both do the analysis and action in one place. They can self-serve. And data teams love this because now they don't have to wait around and say, like, hey, do something interesting. It doesn't take days or weeks or months to get actions. So the core of our CDP product today, the first part of it, a lot of the features are around these advanced analytical capabilities. And we're seeing really good adoption of that. Beyond that, the other part of what we think about as CDP is this underlying customer database. And so we're also building out the APIs and the sequel interfaces. So we can give those directly to our larger customers and allow them to program against the internals of Klaviyo on their own. And folks are really excited about that. And just to give you a small example. I was talking with a large cosmetics company that uses Klaviyo for marketing for e-mail and SMS. And they were excited by this, because, hey, look, we're actually -- we're kind of already finding a way to pull the data out of Klaviyo to use that to do things like website personalization. And even if you guys don't have a product there, if you can just give us access to the data, our development team can build against that. And that makes -- not only to make that clear stickier. We think in the future, there's an opportunity to monetize that is thinking about our core database as infrastructure. So I think what you're going to see from this CDP market is it's really these 2 core use cases of analytics for data analysts or even practitioners like our marketers. And then separately, it's going to be this infrastructure product that allows people to take -- to extend Klaviyo out into these other parts of their business, both customer-facing, consumer-facing and internal where they need access to this reliable source of truth about consumers. So very excited about the progress there, but a lot more to come.

Yes. Great. And then I want to make sure to hit on the SMS side. About 16% of customers have adopted your SMS product today. So you are starting to see that trend nicely. Where do you think this mix could go over time? And can you just help us round out the puts and takes for investors on kind of the revenue and margin side as this piece of the business scales?

Yes, sure. So let me talk to the margin side. So I mean we -- all of our customers I talk to say, I hate point solutions. I don't want to use something for e-mail, something for SMS, something for mobile. I want to consolidate those down. So we are helping deliver on that promise. And the 16% is great adoption. We think that can go much higher. When we survey our customers internally, we're finding that a large percentage of, the majority of them, they're starting to experiment with SMS. Some of them have SMS programs that are at scale. Some of them are still experimenting with that channel. But they want to do it in one place. And they're eager to use our -- not just for ease of use, to understand -- they have to learn one product. But also they want to use our artificial intelligence and machine learning to load bounce across those channels. But to figure out, for instance, what kind of content is better delivered via text message, because it's more intimated in somebody's -- it's in somebody's messages app versus what should go into their e-mail inbox. And does that vary by type of content? Does that vary by type of consumer? Those are the kinds of things we can do because we've got the complete data set. So we're excited about 16%. But we think the ceiling is much, much, much higher on that. Amanda, the margins?

Yes. In terms of SMS, we like that it helps our customers. It helps them with how they communicate with their customers. It does come with a different margin profile than e-mail. And the way that we manage that is by looking at the total customer relationship and how is this contributing incremental gross profit dollars to that relationship. And then the other thing that we do is we manage across the total business is we have some fantastic work that has been happening in our engineering team, where they are continually engineering and reengineering the way that we process and store data so that we can get more and more efficient on our cost of goods sold and our compute costs. And so that's how we balance out that impact that comes from SMS.

And then I want to ask a little bit more on financials. From an NRR kind of perspective, it did tick down sequentially in Q4 as you guys are lapping some of the impacts from pricing. But how do you think about the longer term trajectory of NRR and kind of when that can pick back up as you're expanding the portfolio, more people are adopting SMS, still early days of CDP?

Yes, great question. So as we think about NRR, we think about a few drivers in our business. One is maintaining -- having a great product that customers love, that's incredibly sticky. So they stick with us with strong gross retention. And then as we expand with our customers, we expand in 3 ways. We expand as their businesses grow, just as Andrew was talking about, is they add more digital relationships into their business and their business grows, they expand their subscriptions with us. The second way that we expand with them is adding new products, adding SMS, now adding CDP and adding reviews. And then the third way that we expand with them is landing with one brand and expanding across multiple brands and more -- multiple geographies within the portfolio. Historically, the majority of our expansion has come from that first motion, growing with our customers as they grow. I think over time, as we're growing more up into the mid-market, that we'll see more coming from expanding across products and expanding across brands within the portfolio. And I think a great example may be to bring our land and expand motion to life is [ Marine Layer ]. So Marine Layer started with us several years ago when they were a pretty small business. They now are a fantastic brand, not only online, they have stores across the country, great loyal customer following. And they have grown with Klaviyo as they have grown their business. And then recently have integrated Klaviyo not only into point of sale in the store, but also added the SMS product. So a great example of how we have helped to fuel their growth and how with that has fueled their expansion with Klaviyo.

Great. And then when we think about the revenue growth drivers overall, you have the adding new customers, clearly growing with existing customers, also the move up market. So help us stack rank what are some of the most important drivers? How would you rank those guys? And then is there any one specific leg that you would want us to be more focused on within that mix?

Yes. It's a great question. So the 4 primary growth drivers in our business, adding new logos, expanding with those logos, growing internationally and growing in the mid-market, all 4 of them are going to continue to be really important drivers in our business. But as you think about how things are going to unfold over the next few years, you'll probably see more of an emphasis start to come from expansion with customers and landing at larger and larger price points as we continue to land those customers in the mid-market.

And then I'm going to open it up for audience Q&A in just a bit. But before I do, haven't hit on AI yet, everyone's favorite subject. You guys recently announced Klaviyo AI. So what's some of the new capabilities that were introduced with that product? And then how do you expect to monetize those? Is it going to be kind of through separate SKUs? Or is it more just attraction to the platform as you have these features?

Yes. Yes, I think we're very excited about, it's interesting. We've been working on -- when I first started, AI was data mining. There was machine learning and now we're back to artificial intelligence again. So we've had a group internally that's been working on [indiscernible] machine learning and artificial intelligence for the last 5 years. And they basically -- they were given one mission, which was, we believe the future of software is not software just as productivity. Today, if you use Klaviyo to drive revenue for your business, you buy Klaviyo. But you have to point and click and define the campaigns you want to run. And we have wonderful interfaces to do that, but still require some human thinking through it. Beyond even generative AI, we think about a future -- we've been working on a future where, well, what happens if you just plug your business in a Klaviyo and we do everything for you. It's what we've done kind of autonomous -- what will be autonomous CRM, but we're focusing first on autonomous marketing. And so we will launch with Klaviyo AI is a toolkit, a set of features that start to automate away more of the tasks that are in the decisions that a marketer needs to make day-to-day. So just to give you a couple of examples. When you're designing a marketing campaign, one of the things you have to do is you have to define the content. Well, with generative AI, we can actually do a lot of that for you. We can take your brand style-guide, what we know about you, the way you like to present to the world. We can pattern match that across a database of hundreds of thousands of customers, millions, tens of millions of marketing campaigns and allow you to guide us with some natural language with the prompt and then design content for you. So now instead of having -- you needing a designer on staff and deploy and click your way to content, we can do that for you and optimize it. So we're taking features like that. And then actually, even when at same time, we can do things like we have a feature around smart sending, so send time AI. And that's around a lot of marketers, they obsess over, gosh, what's the right time to send this? Is it 9:00 a.m.? Is it 10 a.m.? Actually it turns out, we can just test and experiment and figure that out for you based on who your consumers are. So to give you an idea of the impact this is going to have on marketing, we have a customer, Willow Tree, that used some of our AI features to figure out new groups of customers to target with campaigns, figure out pools of customers and the content that was relevant to them. And as a result of taking those suggestions that came out of our engine, they were able to increase the revenue they drove through Klaviyo, this KV metric that we talked about, by over 50% in the back half of last year. So well, I don't think -- we don't know if like everybody -- there's 50% lift out there for everybody. We do think there's substantial lift over what a human intuitively would decide to do with marketing. And so that's what that group, our machine learning and artificial intelligence group has been working on. So right now we're in the phase where we are proving to our users, to our customers that, hey, if you turn on the autonomous features, the AI features within Klaviyo that, oh, yes, the revenue that you're driving for Klaviyo will go up. One of the beautiful parts about our business is we have this great metric where we're very close to the transaction. So I think about for artificial intelligence products that are very close to the end value, it's going to be easier for them to attribute to demonstrate that value and therefore, easier to show that value and then monetize it. So that's what we're focused on doing right now is very rapidly releasing more features, more suggestions into our suggestion engine for Klaviyo AI, improving the customers that if you turn this on, it's like a speed boost to your business. Now as we do that, we think there is an opportunity to monetize that. It's not something that we've built into our short-term plans. But I do think over the long term that whether it's an add-on to Klaviyo, so you can think of -- you can buy base Klaviyo and use it yourself. And then if you want Klaviyo to drive itself autonomously, great. You can buy that as an add-on. Either will be something that we offer as a separate product or we may just build it into our base product. And I think this is going to have both advantages around customer retention. I think this is going to become the standard for consumer marketing in the very near future and we are going to lead that. So both on stickiness and then also I do think it's just a lot more valuable and customers are very much willing to take that.

Do we have any audience questions? I did want to hit on the macro kind of demand environment for a minute because you do have such a wide base of over 140,000 kind of customers. So what are you seeing in terms of the health in your customer base? And is there any differences between that core SMB that you guys are serving and then also some of the larger markets?

Yes, so a couple of things to hit on. The first is, over the last couple of years, well, we've seen some fluctuations in different business performing differently in terms of their revenue. Klaviyo ultimately monetizes indexes to the number of, as Amanda said, the number of digital relationships that a business has. And so while the revenue over time, consumer demand for various product categories, fluctuate, actually the number of relationships you found it to be pretty much monotonically increasing. So we believe that's a very durable trend. If you look at the number of like relationships between businesses, organizations, retailers and consumers, so many of those are still analog. They're in the physical world. And there's still a long way to go to digitizing all of those. So in that sense, we've seen very -- that's a very durable growth vector for us. There's not a business I talk to on the small side that will say, yes, yes, it's very important that I build out my own customer database relationships. And then for traditional retailers, they all have initiatives around how do we grow that consumer database, the number of people that we have direct relationships with to 10 million, 20 million, 50 million. And so they're looking to us to power that. So that's one. And then 2, I'd say is a lot of businesses, when customer acquisition is harder, they look to us. They look at Klaviyo as an accelerant to customer acquisition. But then also they look to offset that with more demand, more revenue driven through existing customer relationships. The reality is, is that it's much easier to get somebody that's already a happy customer to come back than it is to acquire a new customer. We like to think of Klaviyo, we help with both. We maintain those relationships with customers that already know. And if somebody visits your website, we give them an alternative. So rather than having to buy right then and there or go away forever, but actually give them an on-ramp and say, well, why don't you learn about this business? Maybe it's an offer, maybe some educational content and you can convert them down the line. So in both cases, I think -- we think Klaviyo as kind of an all-weather company for folks who want to drive revenue. When it's all up into the right, great, we help accelerate that. When it gets harder, we actually help you go back to the customers that are the most loyal to help you convert the folks that are maybe new to the business.

A customer summarized it well for me the other day. She said, Amanda, my CAC is increasing. You guys are the key partner I count on to increase my LTV.

Great. I think there's a lot of really interesting things to look forward to you guys. You're so ingrained in kind of the customer relationship, seeing you add kind of just the new customer side, but also moving upmarket, the expanding of the portfolio are all really interesting things we'll be watching for this year. So thank you so much for joining us today.

Well, thanks.