Summary
Klaviyo's first quarterly report as a public company showed rapid top-line growth and a large GAAP loss tied to IPO-related stock compensation. Revenue rose 47.5% year over year to $175.8 million in the third quarter. Gross profit increased 35.2% to $117.0 million. Gross margin fell 6.1 percentage points to 66.5%. The GAAP operating loss widened to $302.2 million, and the net loss widened to $297.1 million. Diluted loss per share widened to $1.24. Operating margin was negative 171.9%, down 150.4 percentage points. Those GAAP results reflect significant IPO-related stock compensation and related costs. On a non-GAAP basis, operating income was $17.8 million, a 10% operating margin, and non-GAAP gross profit was $140.3 million, an 80% gross margin. The gap between GAAP and non-GAAP results is unusually wide this quarter because of equity awards that vested when the company went public.
Operational metrics point to healthy expansion. Klaviyo ended the quarter with over 135,000 customers, up from over 109,000 a year earlier. Customers generating more than $50,000 of ARR reached 1,699, compared with 899 a year earlier, an increase of 89%. Dollar-based net revenue retention was 119%, marking the 10th straight quarter at or above 115%. The company launched Klaviyo CDP, a customer data platform, and hired Jamie Domenici as chief marketing officer. Management said sales to existing customers accounted for approximately 49% of the third-quarter revenue increase, while new customers contributed about 51%. A September 2022 price increase represented a mid-teen percentage of incremental revenue dollars in the quarter. International sales outside the Americas were 30.8% of revenue for the nine months ended September 30, 2023. The mix of growth shows the land-and-expand model still works, but the company also faces the law of large numbers as revenue scales.
Cash generation improved. Operating cash flow was $23.7 million in the third quarter. For the nine months ended September 30, 2023, operating cash flow was $80.7 million, up 281.5% from the prior-year period. Free cash flow was $21.9 million in the quarter, a 12% free cash flow margin. Capital expenditures were $54,000 in the quarter. Deferred revenue rose 53.5% to $32.9 million. Remaining performance obligations were $62.5 million. The company ended the quarter with a stronger balance sheet after its IPO, though it continues to carry significant noncancellable obligations. The low capital spending and positive free cash flow suggest the business can fund itself.
Guidance calls for continued growth but slower expansion. For the fourth quarter, Klaviyo expects revenue of $195.0 million to $197.0 million, or 34% to 36% year-over-year growth. For the full fiscal year 2023, revenue guidance is $691.5 million to $693.5 million, or 46% to 47% growth. Fourth-quarter non-GAAP operating income is guided to $14.0 million to $17.0 million, a 7% to 9% non-GAAP operating margin. Full-year non-GAAP operating income is guided to $75.9 million to $78.9 million, an 11% non-GAAP operating margin. Risks include gross margin pressure from the mix shift toward SMS, which management expects to be most pronounced in the fourth quarter due to holiday seasonality. The one-year anniversary of the September 2022 price increase may weigh on NRR. Klaviyo also faces competition, the need to attract new customers, and higher public company costs. The company expects selling and marketing expense to remain its largest operating expense in dollar terms.
Management outlined several expense and margin trends. Gross margin is expected to decline modestly in the near term as SMS messages grow as a share of usage, with the largest impact in the fourth quarter because of holiday seasonality. Selling and marketing expense should remain the largest operating expense in dollar terms but decline as a percentage of revenue over the longer term. Research and development costs are expected to increase in dollar amount but remain consistent as a percentage of revenue. General and administrative costs are expected to rise in dollar amount because of public company requirements, then decline as a percentage of revenue as the business scales. These trends matter because the company is balancing growth investment with non-GAAP profitability.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $175.8M | — | — | — | — |
| Gross profit | $117.0M | — | — | — | — |
| Gross margin | 66.5% | — | — | — | — |
| Research & development | $141.5M | — | — | — | — |
| Sales & marketing | $167.9M | — | — | — | — |
| General & administrative | $109.9M | — | — | — | — |
| Total operating expenses | $419.2M | — | — | — | — |
| Operating income (loss) | -$302.2M | — | — | — | — |
| Operating margin | -171.9% | — | — | — | — |
| Net income (loss) | -$297.1M | — | — | — | — |
| Net margin | -169.0% | — | — | — | — |
| Diluted EPS | -$1.24 | — | — | — | — |
| Customers | 135,000 | — | — | — | — |
| Net retention rate | 119.0% | — | — | — | — |
Risks
As of December 31, 2022, approximately 77.5% of ARR was derived from customers who also use Shopify's platform, while only approximately 10.6% of new ARR came through the Shopify app store. The Shopify agreement expires in 2029, and any disruption to the integration or failure to renew could materially harm demand for Klaviyo's platform.
Revenue for the three months ended September 30, 2023 increased 47.5% to $175.8 million, but the company warns that its rapid historical growth is not indicative of future growth. The September 2022 price increase positively affected 2022 revenue and ARR/NRR, and Klaviyo may see a decline in these measures now that the one-year anniversary has passed.
Gross margin for the three months ended September 30, 2023 was 66.5%, down 6.1 percentage points from 72.6% in the prior-year quarter. Klaviyo expects gross margin to decline modestly as SMS usage grows, with the largest impact expected in the fourth quarter due to holiday season SMS concentration.
Net loss widened to $297.1 million for the three months ended September 30, 2023 from $23.9 million in the prior-year quarter, and operating loss widened to $302.2 million from $25.7 million. The company recorded $299.3 million of cumulative stock-based compensation expense for Double-Trigger RSUs upon its IPO, and expects continued stock-based compensation expense as RSUs vest.
Klaviyo faces competition from Adobe, Salesforce, Mailchimp, and Braze, and notes that machine learning and artificial intelligence are becoming increasingly prevalent in its industry. If it cannot efficiently integrate AI features of the quality sought by customers or offered by competitors, demand for its platform may decline.
As Klaviyo moves up-market, it expects enterprise sales cycles to be longer than with small-and-mid size businesses, requiring more sales and support investment. For deals closed in the year ended December 31, 2022 and the nine months ended September 30, 2023, median sales cycle was approximately 8 weeks, excluding self-serve channels.
Klaviyo's results depend on demand from retail and eCommerce customers, and a significant portion of revenue comes from small businesses that may reduce marketing spending during economic downturns. Weak or volatile conditions, inflation, geopolitical developments, and financial services industry liquidity concerns could reduce customer usage and delay adoption.
For the three and nine months ended September 30, 2023, Klaviyo derived 36.3% and 36.2% of revenue from customer accounts outside the United States. International operations expose it to regulatory, economic, political, labor, tax, and currency risks, and its platform is currently only available in English and US Dollars.
Klaviyo depends on co-founder and CEO Andrew Bialecki and other key employees, and competition for experienced software engineers and senior sales executives is intense. It has a large remote workforce and does not maintain key person life insurance on any employees.
The dual series common stock structure concentrates voting control with pre-IPO stockholders, including directors, executive officers, and affiliates. This limits other stockholders' ability to influence corporate matters such as director elections, charter amendments, and major transactions.
A significant portion of outstanding securities is subject to lock-up and market standoff agreements that will release 180 days after the Final Prospectus, subject to earlier release. Sales of substantial amounts of Series A common stock after lock-up expiration, or the perception of such sales, could cause the trading price to decline.
SaaS KPIs
All quarters →Customers Generating Over $50,000 of ARR
Free Cash Flow
Free Cash Flow Margin
Non-GAAP Operating Margin
Total customers
Net Revenue Retention
Non-GAAP Gross Margin
Summary, forecast, risks and KPIs are extracted from Klaviyo, Inc.'s SEC filings for Q3 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.