KVYO earnings call transcript, November 4, 2026

Thanks, Remo.

Yeah, we're really excited about the use cases we've seen so far. So on ROI, you know, we look at Composer. First, I mean, just the marketing and customer experiences customers build through Playbio are incredibly ROI. I mean, we share numbers about, you know, Playbio attributed value, and we typically will see ROIs anywhere from, you know, 10 to 100x. The way I would think about Composer and the sort of like the credit usage, the token burn, so to speak, is it's just a way to, you know, amplify or go find more results that have a similar ROI. So just as an example, like what are people using Composer to do? They're sending more marketing messages to their customers. They're able to better personalize those messages. They're using Composer to then... Go back and review and audit the different campaigns and automations they're building. One, sometimes for like compliance reasons, things that they just otherwise would be expensive. They'd have somebody to need to go manually check, right? Or for better peace of mind, but also then to go find opportunities where they can do them even better. And so when we look at the, you know, what's happening as a result, they're doing more messaging. It's better, right? It's getting, it's, you know, it's self-improving. All of that is amplifying that ROI they're already getting. You know, one thing we'd like to say is is that with Composer, we think there's this big, almost like agent overhang. Like Composer as an agent is so good at doing marketing and customer analysis. The problem isn't really ROI. It's more just helping more of our customers know what's a prompt. We talked a little bit about setting up recurring workflows. And I think that's the phase that we're entering. The technology is there. Our product is there, right? We're going to continue to improve it. But really, it's about driving large scale adoption with both like current KVYO customers,

and then also just other businesses that need to do marketing. So yeah, we're really, really excited about that. Then Erica? Yeah, absolutely. So I wanted to touch on your question about NRR. So I think absolutely profile enforcement continues to be an overhang. And our expectations are is that'll roll into the first quarter of next year. I think the one thing we wanted to point out when we were talking about customers landing with more products is that as you look ahead, we anticipate that that will be increasingly the case, that customers will continue to land with more and more of our product portfolio. And so that as you look ahead will be an area where we do think will also be another headwind. But I think the really important thing to focus on is that our gross retention rates have been incredibly strong. Those have been consistent all the way along. The other thing is that we are seeing nice expansion across our product portfolio when you think about text messaging and personalization. The other piece of it is, is that when you think about things like agents, those will often be more consumption based. So when you're thinking about NRR, that also further down the road, just won't be the primary metric for you to evaluate whether or not customers are expanding. So I think what we really want to encourage you to do is look at not just NRR, but NRR plus the growth of those other larger cohorts of customers.

And it just gets. And does it, you know, on brand in a way that they say, wow, it's actually this is very close and there's only a couple of edits. So for those growth plays, yeah, we're doing a lot around like showing prompts. And one of the things we've done as an example is depending on where you are inside of the KVYO application, you know, we'll we'll we'll provide different prompts, different suggestions based on what you're looking at. We also are learning from our customers as they as they're prompt, you know, as they're prompting or asking for things so that we can. Come back and kind of recall those, you know, those kind of use cases. And obviously we can pattern match across users. So if we see users that are similar, we can recommend other prompts that, you know, kind of a little bit like users like you, marketers like you have been doing the following. And we plan on publishing, you know, some a little bit like kind of, you know, benchmarks and, you know, top, you know, top prompts and use cases that others can learn from that. But beyond that, like, you know, for our entrepreneurs and SMB customers, we're also working to embed. Those are in a lot more surfaces. So I talked a little bit of that in our prepared remarks. You know, we partnered up with obviously our good friends at Shopify and Wix, and we're doing more to embed Klaviyo inside of other products. And this includes not just Klaviyo's, you know, functionality or infrastructure around analytics and marketing, but also Composer as well. And we have a lot more coming there where, you know, we want to make marketing intelligence ubiquitous. So actually, it doesn't matter. You don't have to log into our, you know, Klaviyo app, you know, our dot

com. We mentioned that we're now shipping, you know, a mobile app that's agentic first. But you can access Composer, you know, through our MCP connector. We just want to make it readily available so that even if you're using your own personal agent, you know, when that personal agent says, hey, I kind of need to do this marketing task, who do I ask for advice that that marketing agent can even find Composer and introduce customers. The last thing I'll say is for our larger customers, you know, some of the larger enterprise customers, I think. I think we're about to cross this chasm from, you know, marketers, you know, when I talk to them, they're still kind of in this era of, they're used to kind of prompting AI, asking a question, waiting for it to do work, come back, prompt a little bit more. It's kind of like where coding was, you know, maybe 18 or 24 months ago. I think we're about to enter the era where people really, you know, most of the entrepreneurs, small businesses, even enterprise I talked to, they kind of want to know AI can take some bigger workloads for them. And so this is, you know, Shano and I've spent a lot of time in the Klaviyo team. Getting close to our customers, helping them map out those marketing workflows and actually encode them into things like skills and tasks within Composer. And I think that's still very new, but I think that's the future. You know, you're not going to buy marketing software and you're going to sit, you know, somebody's going to log in every day and kind of point click their way around to say build campaigns. In the future, you're going to log in and say, hey, these are the outcomes that I'm after. Here's kind of how, here's my process. Here's where I want to be involved.

You're going to explain that to an agent or an AI, and it's going to encode that. And then it's going to go off and do that work. And it's going to have kind of like a little bit of an inbox or it'll, it'll, you know, call out to you. It'll chat with you when it has something that's ready for review. So that's going to be the new pattern. We've already seen this happen in other domains. And we're excited because this is, we've had seen some real, a lot of customers that are very leaned into this. And yet the adoption, you know, we shared some of the stats. We want to show the adoption rate is still, it's still very nascent. And for us, we look at that. It's just because a lot of people haven't, they're not used to the patterns of how to use an agent. And that's something that we look at as our responsibility to help teach that, you know, to marketers and entrepreneurs and businesses around the world.

So, hello. How to build a campaign, how to build a segment, how to interpret marketing results. A lot of that, the trust factor is still being built up. So, when we worked with customers, we told them, it's like, look, we ultimately, we have our MCP. So, you can access, you know, all of our infrastructure as well as Composer through our MCP. So, we're actually a little bit agnostic. If you want to use, you know, Flawed, ChatGPT, or, you know, some other agent harness, you can. And we think of Composer as kind of. This, like, super smart marketer that obviously knows all your data, but has also been trained, so it just knows all of, you know, kind of what's going on with marketing and consumer behavior generally. That's, like, the data set that we mentioned that's, you know, harder to get, but we have a good lens on that. So, we're finding, actually, from a lot of our large customers, some want to, you know, build other workflows through, you know, some of the, you know, frontier agents. But a lot of them, because they like this kind of human, you know, in the loop, and I kind of want to edit this. And I want to be able to visualize and see the campaigns and the automations I'm building as I go. We're finding a lot of them are very comfortable and maybe more comfortable working inside of KVYO or inside of our services. And then that's one of the reasons why inside of Composer, we basically all the same functionality that you get, you know, with the kind of a, you know, a general purpose agent, we built all that same functionality in. So when you think about things like connectors, pool, gill, even things like we just, we just released, you know, a week or two ago,

I don't know. The concept of artifacts, you know, you can have live dashboards and applications inside of Klaviyo that are powered by, you know, an agent that built that, you know, built that and then, you know, you can auto refresh. So we want to basically give people a lot of choice. That's our goal is flexibility and choice. But I do ultimately think that like for the workflows, whether those kind of getting coded inside of Composer or outside of Composer, right, in another agent, there's going to be some marketing work where you really want a very smart marketer, you know, a really very good marketing. And that's the feedback we've gotten from customers so far is they trust us, they trust Composer to be an expert at marketing. And we've talked a little bit about ROI, because the return on investment is so good. And we're not just talking about process automation. We're talking about driving a business. We're talking about customer experiences. You know, our customers and brands, they have a very high bar for correctness. And then they obviously want incremental growth. So we think with Composer, we can deliver most importantly, better results. We actually also think. We can probably deliver it more cheaply, more efficiently when it comes to like token usage and things like that. Just because, you know, we know our own systems. We know kind of best practice in marketing, how to do those analysis. But when I talk to customers, the thing that matters to most of them is they want the incremental growth. They know there's a lot of opportunities with their customers that they're not getting to, that they can't see, they can't find, they don't have the time to act on. And we look at it as our responsibility to help them discover those so they can delight their customers and then grow faster.

Rob, when it comes to the new metrics that we disclose in the enterprise and the balance between a new business and customer base, well, let me first say that we always kind of share with you that the enterprise is going to be a journey. We're pretty happy with the progress that the team is making. I'm pretty proud of how quick it's going, definitely. I mean, it shows some of these metrics like 57% growth in customers over 500k RR and 49% year-on-year growth in customers over 200k RR. I would say today is a little bit more balanced towards customer base, clearly, but obviously we have some great activity in the next new logos, like customers like Fraser that I mentioned today, our larger customers today in EMEA is a new logo. And going forward, what you're going to be seeing us is now that we have A, the product readiness, B, we're overcoming the impression like how we're ready for this enterprise with a lot of customer references that are happy customers of KVYO. KVYO being large enterprise customers, the partners and also the analysts like Gartner and IDC recognizing us, you're going to see us investing much more into new logos, you know, going forward because we believe that, you know, there is a great opportunity in this enterprise market for us and it's going to be a great acceleration for the company.

We're very encouraged by what we're seeing. around Composer, what AB talked about. I think when you think about that monetization, you know, we want to make sure we're watching those trends as we move and march through that quarter. But we are very excited about that as a growth opportunity as well into next year. So I think that that would be kind of the stack rank in terms of what we see today and what we're executing on absolutely in the fourth quarter. And then as we roll into the first part of the 2027.

Imagine things where, you know, now when you sign up, right, rather than you having to know what to do or pick from a, say, a default set of, you know, templates, every part of the Klaviyo experience can be tailored to you. What marketing, you know, campaigns and strategies you should have. Obviously, we can look up some things like, you know, for instance, from your website or mobile app, various brand assets, we can tailor things to you directly. And we're finding what's happening is, is that's driving a much higher activation rate. That's, that's the term we use for how long does it take and what percentage of users actually get to like real material repeat usage of Klaviyo in terms of sending messages or running queries or importing data. So we do think that will be a nice halo effect. And these, you know, when composer in our core, you know, our core marketing infrastructure, core products, those two things will go together. And then obviously on the retention side, you know, we find a lot of, you know, it's probably no surprise, but we find a lot of customers, one of the things, especially smaller customers, you know, one, one thing that curtails usage is either A, they don't know how to do something, they run out of time. And so they just, you know, they kind of fail to activate, even though they may be paying customers or two is they're using Klaviyo, but they have this perception that they could be doing more and Composer solves for both of those. So, you know, the initiative I mentioned around proactivity, I think is going to help amplify both of those, you know, and as we're seeing, you know, you know, this data come in, we're actually, we're thinking about Composer more as even potentially like, you know, a landing point for our customers,

we actually have a fair number of customers who are on a free Klaviyo plan, where maybe they only have a couple hundred, you know, subscribers or customers to their business, but they're buying Composer immediately because they like the idea of having that expert marketer, you know, at their side that they can reach out to, you know, to help them grow. So we see that as that could even be in the future, the first product that our customers are buying. And then on overall monetization, you know, around Composer, you know, we try to share some stats around like usage, usage of credits, and then overall adoption. So you can start to think about, you know, what the overall opportunity size is. The only thing, you know, obviously for us, the two main levers are how many users, how many businesses, accounts are using Composer, and then the same will be true for customer agent. And then what does that usage look like? You know, we've mentioned ROI is clear. The one thing I would call out, though, is I go back to this comment I made of, I feel like we're, you know, 18 to 20%. 24 months, time shifted from where, you know, coding agents and engineering is. So a lot of the usage of Composer today, even still today, is this kind of prompt, wait for something to finish, right? Prompt again. And if you see the, you know, kind of what really drove a lot of adoption and a lot of the value around like coding agents was when they became more autonomous. People got used to this concept of, I'm going to run, you know, this agent on a recurring basis. It'll wake up every day or it'll

run in a loop. I start to build in more of my workflows and that's something we're, we've launched that. We're starting to see, we talked about the growth of some of those key capabilities, but I think we're very early there. So I think obviously there's a large number of businesses that could be using Composer in customer agent, but also the usage rate, like sort of per capita, we think is, is only going to grow from here. So we have a lot of work to do. And then, you know, the last thing I'll say on customer agent is, you know, Chad and I, we spent a lot of time, we're seeing, we're seeing. Good adoption. We mentioned the number of like 60%, you know, quarter on quarter growth of our larger customers, the 50K ARR and above. We're finally seeing good adoption of customer agent across the board, both among SMBs and even some of our very largest customers. We have a number of our, you know, top 10 customers that are actively, you know, piloting and using customer agent with their business. That's another spot where we've done some really great engineering and we're seeing some like great, great results. We'll see you next time. One of the things we found with customer agent though, is that like there is a little bit more of understanding, you know, the business and getting hands on. So, well, you know, for a lot of our users, they're very used to marketing. They get the idea of using Composer to automate that. You know, in some cases we're spending time getting to know the, you know, support side of the, you know, the business and the organization, especially for larger businesses and then map out some of the, you know, their internal policies. So I expect we'll see growth from Composer more quickly than we will from customer agent, but we're excited about the growth trajectories of both products.

On what we did well, what we did not do well. And then, hey, this year we plan to start marketing a couple of days earlier. You know, can you take that into account and then draft out what you think the right plan is and then go build those campaigns for us? And that's the kind of activity that we're seeing a lot more marketers do. So I think the usage, I don't think it'll be quite as seasonal as some of the sending patterns we see, but we definitely see a lot of people turning, you know, leaning on Composer. And certainly I think there's a lot of trust that folks have with our agent. So there's, you know, even in these most sensitive times, like they're using it to like review information, understand it, and make, you know, those kind of real-time decisions. Yeah. And then Terry, coming back to your question on guidance and guidance philosophy. So I started about, you know, two months ago. And I think my point of view was that the company had set their guidance philosophy at the beginning of the year. And maintaining that guidance philosophy as we walked into the fourth quarter felt like the right approach. So no change in the guidance philosophy around being closest to the pin. And that's kind of the. The way we approach this guidance model for the fourth quarter as well.

Thank you both for taking my questions. So I can start on some of the seasonal trends that we're seeing in the business. Take the pricing that we talked about and then Shano, if you want to add on to the seasonal trends, that would be perfect. I think so far, you know, we've seen a typical seasonal quarter when you're thinking about the October, the month of October, but we're only one month in and the big time kind of is when you come into the back half of this quarter as well. So I think when you're thinking about the pricing, though, yes. We absolutely did roll out the pricing. There hasn't been a major impact other than the fact that we are seeing customers when they come up for renewal, we are getting some of that benefit back. But I think we talked a lot about in that new pricing on SMS that there are a lot of puts and takes. So when you kind of take it holistically, we didn't see a major benefit on the gross margin coming from SMS this quarter because of those pricing changes. And when we look ahead. I think given the increase in the mix, you will still continue to see that gross margin kind of come into the areas that we've been talking about previously. So you shouldn't see that some sort of major improvement on the gross margin. I do think, though, that we're we're very happy to see those pricing upon renewal roll into the roll into the our our P&L as well. Nothing to call out in terms of any different seasonal trend at the beginning of the quarter.

Thank you for asking.

I mean, we definitely continue to invest heavily in our email and SMB and entrepreneur segments and making those stronger. I think we do have very mixed, diversified kind of model that we're driving there beyond kind of pet and AO and certainly not trusting just on those to drive our business. So clearly you see us doing more partnerships embedded with, we just mentioned today, Shopify and KVYO. Stay tuned there. More to come. We're definitely trying different types of promos. We're definitely, you know, even with some of the MCPs and some of the top of funnel diversity. We find beyond our retail and getting there earlier into getting from other segments. So we are, we, though we are doing the upscale and moving towards the enterprise, we're certainly not losing the eye out of the ball in terms of strengthening the core of our business. And it's something that we review very heavily, you know, activations, free to pay, a lot of customers that are getting to us as well, more potentially on free plans that, that again, we were expecting to see the value. Even opening new doors through Composer, like on the new mobile app, and that they will have some of those to convert and convert faster. So, so clearly it's a very diversified strategy there. The thing is acting with a lot of speed as well and trying a lot of new things and measuring very early and see what works and what doesn't work, but we are not, we're certainly expanding with more partners, more tribes, more channels, different promos in terms of what's working.

And yeah, we're exciting and we keep a significant focus on facturing and accelerating. new logos going forward. That is all the time we have for questions. I will now hand the call back over to Andrew Bialecki for closing remarks.

Fantastic. Thanks. I want to thank everybody for joining our call today. I'll leave you with two thoughts. The first is the era of marketing intelligence. These domains of intelligence is here. And we are excited to bring that to hundreds of thousands of customers today and many, many more to come. And the second is. As we talked about, we have a lot of confidence in all of the levers of our business, growing enterprise internationally, the entire KVYO product set. We think we have a lot of room for growth going forward. I want to thank all of our customers and partners around the world. And also all the KVYOs have put in a lot of hard work the last three months. And we will see everybody next quarter. Thanks.