Good afternoon, and welcome to Klaviyo's Third Quarter of Fiscal 2023 Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. With that, I'd like to turn the call over to Jack Grant, Senior Director of Investor Relations and Strategic Finance.

Thanks, operator. I'm excited to welcome you to Klaviyo’s third quarter 2023 earnings call. We will be discussing the results announced in our press release issued after the market closed today. Please refer to our Investor Relations website at investors.klaviyo.com for more information and a supplemental presentation related to today's earnings announcement. With me on the call today are Andrew Bialecki, Co-Founder and Chief Executive Officer; and Amanda Whalen, Chief Financial Officer. During today's presentation, we will make statements regarding our business that may be considered forward-looking under applicable securities laws and the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended, including statements concerning our outlook for the fourth quarter of fiscal year 2023 and the full fiscal year ending December 31, 2023. These forward-looking statements reflect management's current beliefs, expectations, and assumptions about future events, which are inherently subject to uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. These risks include, among others, our ability to achieve future growth and sustain our growth rate, our ability to successfully execute our business and growth strategy, our relationships with third parties, our ability to attract new customers, retain revenue from existing customers, and increase sales both from new and existing customers, success of our marketing and sales strategies and business outlook, including our financial guidance for the fourth quarter and full fiscal year of 2023. For a discussion of the material risks and uncertainties that could affect our actual results, please refer to the risks identified in today's press release and our SEC filings, both available on our Investor Relations website. In addition, today's call includes a presentation of certain non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release, supplemental materials distributed after the market closed today and posted on our Investor Relations website, and our SEC filings, which are also available on our Investor Relations website. With that, I'll now turn it over to Andrew.

Thanks, Jack. Thank you for joining us today on our first earnings call as a public company. We are excited to share our third quarter results as well as an overview of our business. We delivered a strong quarter on both the top and bottom line. I'd like to start by thanking all of our customers, partners as well as both our long-term and new shareholders for supporting our mission. I also want to extend a special thank you to all the Klaviyos out there. That's what we call Klaviyo employees who work hard to deliver for our customers every day. We believe the best businesses are built by teams who get in the weeds with customers and deliver products and experience their customers raise up. As this is our first quarterly earnings announcement as a public company, in case you are new to our story, I'll spend a few minutes introducing Klaviyo and then I'll provide some of the highlights from the quarter. Later, I'll turn the call over to Amanda Whalen, our Chief Financial Officer, to cover our financial results in greater detail. She'll also be providing you with our fourth quarter and full fiscal year 2023 outlook before we open the call for Q&A. Klaviyo is a platform that powers smarter digital relationships for businesses. Klaviyo gives our customers the tools they need to activate their first-party data and connect with customers through personalized experiences across email, SMS, and mobile apps. We are able to measure the revenue driven by those messages, and we use artificial intelligence and machine learning to guide our customers on how to improve their marketing. We're giving businesses a scalable brain and voice to connect with each of their end consumers personally and treat them like they're the most important person in…

Thanks, Andrew. Today, I will provide a brief overview of our third quarter financial results and discuss guidance for our fourth quarter and full 2023 fiscal year. As a quick reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables in our earnings release for a reconciliation of GAAP to the most directly comparable non-GAAP financial measures. As Andrew noted, we are pleased with our solid Q3 financial performance. Consistent with our financial framework, we again saw rapid growth at scale in an efficient manner. Before I go into the details of our third quarter, let me walk you through our business model. We generate revenue through tiered subscription plans that are based on the number of active consumer profiles that customers store on our platform, which reflects the amount of data they're storing with us, and the number of email and SMS messages that they send. We also currently allow for unlimited push notifications as part of our email subscription plans. Today, the vast majority of our subscriptions are monthly. As a result, metrics such as calculated billings, deferred revenue, and remaining performance obligations are less relevant to our business model. Once we land a customer, there are several levers to expand our relationship with them. Our business model was designed to align our success with our customers' success. As our customers' businesses grow, expanding the number of active consumers they're serving and the number of messages they're sending them, we've made it easy to expand their usage of our platform in a self-serve manner. Our revenue also expands when customers add additional channels to their subscriptions such as our SMS offering or when new brands or business units within their overall portfolio start using our platform. The success of our land and expand strategy is evident…

Thanks, Amanda. A few final comments before we open it up for Q&A. I want to again thank the entire Klaviyo team. I'm proud of their work and their dedicated focus on delivering for our customers. We are executing against our mission of empowering creators to own their destiny. And that concludes our prepared remarks. Operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Gabriela Borges with Goldman Sachs.

Welcome to the public market. Amanda, you made a comment on the overall health of your customer base being strong. There's a fair amount of debate in the investor community about the health of the SMB ecosystem right now and the consumer spending environment overall. I'd love to hear about any nuances that you're seeing in the data, any color about geography or customer vertical or size that underpins the commentary on the overall health of the ecosystem.

So I'll touch on some of what we're hearing and seeing from customers. Generally speaking, we work with a variety of diverse set of businesses, right, like you said, across geographies, across business stages and across -- increasingly across, verticals. Overall, our customers are very healthy and their usage of Klaviyo is growing. We obviously spend a lot of time looking at net retention trends and drivers of that. We shared that NRR was 119% for the quarter and we're happy with that. There are a couple of key drivers out there that I would point to that are the reason that that's so strong. The first is our customers are growing the number of digital relationships that they have with consumers. And because that tends to just increase over time, and we price our email product based on that number of customer profiles, as that increases, they tend to spend more. And then second is a lot of the businesses I talk with; they're looking to consolidate. This is one of the most consistent themes I hear talking to customers. They don't like the proliferation of software tools out there. So we're also seeing a lot of those folks choose to consolidate down to us. That simplifies their life. And so typically, what that means is they may start with email, then they'll add SMS, and then increasingly, we're starting to see customers are experimenting with our reviews and CDP products adopting those. So one of the things actually we're trying to do for those folks is as they're moving more of their spend to Klaviyo, it's making it easier for them to start with any of our products. So not just necessarily just email. So I think those are 2 big drivers of what we're seeing amongst our customers.

Your next question comes from the line of Keith Weiss with Morgan Stanley.

Congratulations on a really solid quarter. I wanted to dig into it kind of one metric that really is -- or 2 metrics actually that stuck out as really strong. One of them being the customer additions above $50,000. It really is kind of indicative of that, that move up market. By my math, you added like 291 new customers in that cohort and that's the biggest increase we've seen in sort of the history that we've been following you guys. And up a lot from what you've seen historically. So I was wondering if you could dig into a little bit of what drove that. It seems a little bit early for like CDP to be driving it but perhaps the consolidation is really starting to have a more positive impact on the overall results. So question #1 is can you dig in a little bit about what's driving there. Question #2, the other outstanding metric was gross margins of 7 percentage points. With SMS becoming a bigger part of the mix, I thought those were going to be going the other way. Can you talk to us a little bit about how durable that gain in gross margin is? Should we still be expecting incremental pressures from SMS, particularly as we go into Q4 which to be a heavier messaging quarter.

I'll talk a little bit about our growth in the mid-market and then we'll talk about gross margins. On the mid-market side, yes, the reason we share that number, number of customers spending over $50,000 a year with us, we're really proud of that number. Almost 90%. We're very happy with that. And there's a couple of things driving it. I think you've got it right. There are some smaller businesses that are consolidating more spend with us. So we're just getting a greater share of wallet. But also a big part of that is we're just -- we're landing with larger and larger enterprises. And I think the reason we're seeing larger companies choose Klaviyo is first and foremost, we've built a product that's flexible and scales. We're processing more than 2 billion events a day for those customers, even higher during peak periods. They're using that then to run lots of queries. We're updating tens of billions of updates to the various analyses that folks have built on top of Klaviyo every single day. And they're obviously actioning that data, right? They're using -- they're sending over 150 million messages, so think emails, SMS, and mobile notifications. 150 million. Sometimes just during peak hours. So we definitely scale that combined with the underlying customer data store that we built, that's very flexible. I mean we can cut for these larger businesses. We can cover pretty much any idea they have on how they want to treat their customers; we can do it. So scale and flexibility really matters. We're seeing a lot of larger folks; they really like this idea of the integration of the data layer and the marketing layer. That's critical in the enterprise. It means that your entire tech stack is working together which means you can do more personalization, you can measure what's happening better and you can actually get more out of the artificial intelligence algorithms that we've designed to help point you in the direction of like, hey, what's the next best action. So anyway, those are some of the things we're seeing in the market for why that number is so good and we're very proud of that.

And to your question on gross margin. The 2 biggest drivers of gross margin during the quarter were ongoing system optimization efforts and negotiating volume-based discounts with some of our infrastructure providers. So we finished the project in Q3, that finished moving the last of our segmentation data over onto an updated infrastructure. And we really did that to increase segmentation speeds in the product. It also helped our cost of goods sold. The other thing happening is that as we have grown, we've additionally been able to negotiate volume-based discounts with our infrastructure providers both in cloud hosting and in sending costs. And this was our first full quarter where we saw the benefit of those recent renegotiations. As you mentioned, the counter to that is that SMS as a channel continues to grow in mix and there are higher costs associated with SMS as a channel. So we're cognizant of that both in Q4 where we tend to see higher SMS usage so we have built it into our guidance for Q4 as well as over the long term. So the long-term model that we provided at the IPO assumed continued penetration of SMS. That being said, we're going to continue as we grow to be really disciplined about unit economics. We can and do walk away from business in that channel if we don't like the margin profile or the unit economics that it comes with. So over the long term, we're just going to continue making sure that we are solving for customers, helping them to consolidate channels and growing businesses where we're really happy with the economics of them.

Your next question comes from the line of Tyler Radke with Citi.

Checking on some of the new products. Obviously, CDP has been out there, probably one of the more recent products. But if you look out over the next 12 months, I was wondering if you could kind of stack rank or rank order the key drivers that you see is driving that net retention rate which I think held in here at 119%.

So on the product front, I think expansion -- customers are adopting more of our products and then using more of them. Those are going to continue to be big drivers of net retention. And we're very focused. I'll get to -- I'll talk about CDP in a second but we're still very focused on improving our email, SMS and mobile notifications products. We think there's a big trend of businesses consolidating all those channels down to one marketing software provider. So we're very focused on that. Now, I'm really excited about CDP and Reviews. So I'll start a little bit with CDP. I mentioned during the opening remarks, there are 3 things folks are excited about. They want to govern data with us. They want to publish that data out to other systems. For example, we have customers that are using the data inside of Klaviyo. They're publishing it out to advertising networks, to their customer service software, all to provide a better experience for end consumers. And then finally, they're using it to explore and analyze their data. And the last one, this idea of like exploring and analyzing your data within Klaviyo, within kind of the same ecosystem. I'm really excited about that. I mentioned an example of figuring out how often customers buy, who is lapsed, and then critically, being able to create a marketing campaign or automation right away. We're very big believers that our marketing stack plus our CDP, this is going to break down those walls that exist between inside of a business, the folks that do analysis and then how you action that. And that's huge. It's huge for small businesses and for large enterprises. So we're working on, with our CDP, really tightening that cycle from insight to action. And then for reviews, it's again, it's one of those things where it works really well with our marketing products. It's an opportunity. Reviews are an opportunity for a business to learn more about their consumers and then use that data. So what's really great is you can use Klaviyo's marketing software platform to then collect reviews. And then that review data can be used to personalize marketing. So there's this real like kind of viral loop that's there. So as you think about it, like we went from just email, we added SMS, we've added mobile and push notifications. We've now added reviews, which we kind of think was another marketing product that folks buy. And now our first data infrastructure product, CDP. I mean, we're building out the set of products that we think any retail consumer business can build and grow on top of. So we think that's going to be a tailwind for NRR for a long time to come.

Your next question comes from the line of Raimo Lenschow with Barclays.

At the moment, congrats from me as well. Great first quarter. The -- at the moment, you have a quite a bit of kind of overlap on the -- with this Shopify customer base. But obviously you talked about moving mid-market is one of the options that you have here. Can you talk a little bit about the how do you think that move higher in terms of how high can you go? What are the natural limits? Obviously on the prepared remarks, you mentioned some very large customers. Like how should we think about that and what's potentially still needed on the product to kind of achieve that or is it more marketing setup? But yes, that would be great because it seems like a very interesting opportunity at longer term.

Yes, sure. So as I mentioned, when we talked about mid-market, so on the product side, we feel like we've got a product that is competitive. And the fact that we're combining these 2 things, larger enterprises really want to work together. That back-end data platform with marketing software with their front of office applications, we think that's a winning combination. And so now, as we move up market, with Shopify, I mean, first I got to say, thanks, they've been an amazing partner as we've grown Klaviyo. We've worked with them since we started to move up into the mid-market. We've also found like other partners, other agencies. We started to do more work with system integrators. All folks that are using Klaviyo can help connect us to customers. So I think that both with Shopify and with others, we love this ecosystem-led model of growth. That's been a big reason why we've been able to be so efficient as we've grown. And we're going to carry that over as we move up into the mid-market and then into the enterprise. And while we're really focused on the mid-market today, there's no -- I mean, we definitely have the ambition to stairstep our way up into the enterprise.

Your next question comes from the line of Siti Panigrahi at Mizuho.

As you are heading into your strong -- seasonally strong quarter and holiday season, what sort of visibility you have? What sort of trends you are seeing right now? Amanda, you talked about price lap and that's what the guidance implies, deceleration. But how much conservatism is also baked into your guidance and what sort of visibility you have heading to this holiday trend?

So as I mentioned, I'll give you kind of the quality of what I'm hearing from customers. And Amanda will speak a little bit about our guidance. We work with a diverse set of businesses. And so obviously, there's some variation in how businesses are doing across those various variables, geographies, stage, and even industry. Since so many of our customers are in retail and e-commerce, what we're hearing is they're very focused on the holiday season. This is a very important quarter for them. And we're working hard to support them and be that revenue engine for the months that matter most. We're feeling good about our ability to help them grow and have a great holiday. And then on the backs of that, we are still very big believers in these 2 long-term trends. Businesses, consumer businesses wanting to get closer to customers, build direct relationships with them. And then also this consolidation, this merging of their data stacks and their marketing stacks. So that's what we're seeing on the field. And Amanda, do you want to talk a little bit about that?

And as regards to our guidance, I would think about a few things. The first is that, just as you mentioned, it's important when looking at our Q4 to remember that we're lapping the price increase from last year, which contributed, as we said, high single-digit millions of dollars in each of the last 4 quarters. So as you see in our guide, it reflects the natural headwinds that lapping of that price increase creates when you look at our year-on-year top-line growth. Also on the top-line, exactly as you mentioned, Q4 is a really important quarter for our customers. It's absolutely critical for their business. It is also a big quarter for us, and it's very important for our business. And we are still a few weeks away from Black Friday and Cyber Monday, which is the big holiday for the quarter. But based on the trends that we're seeing in the business right now, we are comfortable with where our guidance is. And then on the bottom line, we're mindful, as we said, of the higher costs associated with increased usage on the platform. We have some of the sales and marketing costs and the investments that we're making in Q4, and all of those are reflected in the guidance as well.

Your next question comes from the line of Arjun Bhatia with William Blair.

Congrats on a strong first quarter here. Andrew, if I can go back to just the CDP product and how you envision that playing out but also maybe more near term, the go-to-market for that? Do you see that replacing an existing solution that your customers have or is that more of a greenfield opportunity? And when you're looking across your customer base, what type of profile are you targeting in terms of customer to really drive initial adoption of the CDP solution?

So we've launched our CDP. It's in market. I'm very excited about the traction we're seeing from customers and the conversations we're having. And so we're really -- and we're working on really building out and broadening out the CDP feature set. In terms of customers, I think it's both. There's both greenfield fields in terms of some of our smaller businesses that, working with Klaviyo, we might be the first time they're really thinking about, well, gosh, what does it mean to have all my data in one place? And how many different systems, if I have that data in one spot, can I improve -- I can improve the customer experience. So a very common thing we see is folks coming to us, they may start with our marketing products. As they adopt CDP, they realize, gosh, I can use this to centralize all my data. I can do more analysis with it. And then, like I mentioned, they're very eager to publish it out to other systems. And like I mentioned, some of the integrations we're seeing, being able to use that data, not just with marketing inside Klaviyo, but say marketing on other platforms. And then also using it for other phases of the customer experience. So for instance, like when somebody reaches out for support. So in that case, we're really -- it's maybe the first time somebody's really thought about this and we're able to educate them. So we think that's a real opportunity. And then I think about, for some of our larger customers, honestly, it's less about replacing existing data warehouse spend. And it's more about making that data that may be there, you may be copying it over into our CDP, but making it faster to action. And so there, what we're finding is a lot of folks want to -- they want to bring data sets they have from various data sources into Klaviyo. And the fact that we can tighten up this loop between analysis and then doing something about it, that's really like the killer feature. So in that case, I think it's more an augmentation of the rest of their data spend.

Your next question comes from the line of Brent Bracelin with Piper Sandler.

I wanted to go back to the demand drivers. We're clearly seeing a more challenging environment in SMB software. So far, in September and into October, it feels a little more challenging in B2B than the B2C retail vertical based on your strong numbers here and strong numbers from Shopify. I was hoping you could walk us through the business model sensitivity as we go into the holiday selling season. We're going to get numbers in the next month around Black Friday and Cyber Monday sell through. How much of -- how much should investors read into? Whether those are strong or weak and how that might impact your business? I know you're less tied to GMV and more tied to subscription bundles and volumes of messages, but just remind us visibility into business model and how we should interpret the holiday selling season here sell through when we get that data here in the next few weeks.

Yes. As I said before, we're closely looking at these trends and watching them every day. And based on the trends that we are seeing in our business as of today, we feel really comfortable with where we're coming in with the guidance. Black Friday, Cyber Monday for many of our customers is one of the most important times of the year. We have some of our customers who send up to half of their customer communications during this Q4 period. So it's really, really important to them. But as you think about the impact that this has in our business, as Andrew mentioned earlier, we index not to GMV. We index to digital relationships and the digital relationships that our customers are building with their consumers. So when we think about the quarter, we think about how many customer relationships are they building and the frequency of communication with them. So certainly, very focused on that. And for our team right now, we are entirely focused on making sure that we are there to deliver for our customers during this really important time for them.

Your next question comes from the line of Terrell Tillman with Truist Securities.

Congrats on the first quarter post the IPO. I will keep it to one question, Jack, but it may ramble and it might have a couple of parts. So that's just a heads up. You guys have this history and success with inbound and self-service motions. You brought in Steve Rowland who definitely has a lot of enterprise selling experience. I guess I'd be curious I'm sure it's still early days, but what are some of those early kind of outbound motions or anything you could share in terms of maybe investments in sales capacity or just any anything else you can share about kind of starting to evolve this as a new-go-to-market motion. And the second part of this is as we start to see some hopefully traction in up market with some of these outbound motions, would we see it in $50,000 customer adds? Just overall greater productivity in new customers, maybe CDP attached? Just how would we also see it manifest in the numbers?

So, yes, I'm really excited for both Steve and Jamie to join. And like we do with everybody, Terrell, I mean, they're spending a lot of time right now with our customers and partners. And I mention that because their mandate is really to invest across segments. So they're focused very much on continuing to grow our market share within smaller businesses as well as larger enterprises. So we're going to continue to invest in both. And then, as Amanda mentioned, we're also going to continue -- we're really philosophically aligned. We're going to continue to invest with discipline around strong unit economics. Now, as we can -- as we start thinking about that larger, that mid-market enterprise segment, there's a couple of things that I'm really excited about that we're working on. The first is we're rolling out new messaging and starting to run some marketing campaigns geared towards letting our customers, but also others in the market that aren't customers yet, know that Klaviyo is way more than just marketing. The customers that I talked to, Steve and Jamie have talked to, they're really excited about that. And we're educating them both on the products that we have today, but also the products that we're adding and growing. So specifically, you think about CDP, you think about reviews, and some of the things we may build in the future. So working on the messaging. And then as we're growing sales capacity. That is part of our strategy. But we're also very invested in this ecosystem-led model. And that means getting deeper relationships with the software platforms we work with, deeper relationships with the agencies and system integration partners that we have. And we think that's going to be a big part of how we move up market. And I think it's going to be one of those things that helps keep our unit economics really good. What's worked for us with smaller businesses, we think is going to work equally well with larger enterprises. We understand there's more of a sales-driven motion there, but there's this big tailwind we get when we talk to customers or prospects. And they've already heard about us from the other software that they're using. They've heard us about from partners they trust. So that's really -- that's a big part of how we're going to think about that. And in terms of how you can watch that in our numbers, yes, we really like this $50,000 adds. And continuing, like, to grow that. Amanda, anything you'd add?

Yes. I would. Building on what Andrew said, I think the $50,000 adds is a great metric to look at. That reflects both the new lands that we have in that $50,000 group. It also reflects expansion, just like Andrew was speaking about, as we are out increasingly telling the story of the full Klaviyo suite of products. And as we add new products starting with SMS, now adding CDP and adding reviews, expanding that into the mid-market, I think you'll see growth in average revenue per customer. So those are the 2 main metrics that I would look at.

Your next question comes from the line of Rob Oliver with Baird.

A.B., my question is for you. Just you mentioned kind of looking beyond the core retail e-commerce environment and the history of the company which you articulated at the beginning of the call, I think was helpful for maybe for those who don't know. But that San Francisco Marathon deal is a pretty interesting one. Can you maybe talk about what the opportunities are there, what verticals might excite you most, and then how do you go about prioritizing and resourcing those opportunities?

Yes, sure. Yes, so we shared that. We shared San Francisco Marathon as an example. We're seeing really good momentum expanding beyond retail. It's still a small percentage of customers and revenue, but we really like the way it's growing. And actually, one of the really interesting things, we're finding that a lot of service businesses, they tend to also have a retail component. So for example, an events business may sell tickets, but they also may sell merchandise. So they're actually using Klaviyo across multiple business models. And that's really interesting. So actually, we're finding that we're expanding beyond retail, in part because some of our retail customers are raising their hand and saying, oh, gosh, I can use Klaviyo for the parts of my business that are not pure retail, as well as then just landing straight up with businesses that have a heavier service component. And then in terms of the verticals we're interested in, because we've worked with smaller businesses, we're trying to use a lot of the same strategy that we've used with retail of, okay, well, what industries have this long tail of smaller businesses, and then how can we have this partner ecosystem-led motion? So I'm really excited about that. There's some partnerships that we're working on that should expand our footprint with other software platforms that power businesses that are outside of retail in the service sector. And then, frankly, just as we move up into the mid-market enterprise, we're just finding a lot of folks come to us saying, they're looking for this combined data and marketing platform that they can standardize on. And they're actually really good at recognizing that even though we work with a lot of retailers, our software is totally applicable to their business. So we just see a lot of our mid-market pipeline, it actually skews more outside of retail. And so I'm excited about those customers as well.

Your next question comes from the line of DJ Hynes with Canaccord.

Congrats on a nice start here. Maybe to dovetail off of Terrell's question, I'm curious, as direct sales investments are set to increase, can you talk a little bit about how the unit economics of a direct sales engagement compared to that of a customer that comes directly to Klaviyo through PLG? I mean, I would guess that the sales-led relationships are probably bigger and stickier, but they also cost more. So we'd love to get some color on kind of how the economics compare.

Unit economics across both channels are still strong. And we certainly, as we're looking at it, we're looking at unit economics. And when we look at them, we look at a couple of things. We look at the CAC payback period, which would include for the ones who are coming direct, more of a focus on marketing and other investments. And for folks who are coming through direct sales, it includes the cost of that sales channel. But both of them still have really strong economics. As we move more up market, the CAC payback period maybe gets a little bit longer, but that LTV to CAC is quite attractive in that mid-market segment. So as we think about investments, we're certainly thinking about those.

Your next question comes from the line of Scott Berg with Needham & Company.

Congrats on the great first start here. I wanted to ask a little bit more about the Shopify partnership, because it's a perpetual question that I've been receiving over the last couple of weeks. But where are we in the opportunity cycle? How early or late do we think that you are, or how early or late do you think you are in the opportunity cycle knowing that this is still a 6-plus year agreement from today? And then how do we measure your success through that channel given the investment that Shopify made in the company? Is it purely because larger customers will see more of that larger customer cohort grow or is there some other characteristics we should be paying attention to?

I would say it's still very early. What I've enjoyed working out with Shopify and our more product-focused and customer-obsessed partners is we have -- Shopify and Klaviyo, we've got a very similar ethos. So I think on both fronts, as we release more product, build more products, I think there's a big opportunity to expand within the Shopify customers we have as well as there's just a lot of growth to be had, in terms of customers, merchants that are already building their business on Shopify, and ones that aren't yet. So I think the key metric that we look at is, how much revenue are we helping those businesses drive? So that's what we measure around KAV. As that increases, we think the value of Klaviyo increases. It increases to our customers, it increases to Shopify, it increases to us. And that's largely how we can better monetize -- how we monetize those customers, right? As we increase the value of the revenue we're driving, we may sell them more products, or they may just grow their usage of our core products today, right? Email and SMS. So, that -- I would look at that metric, and then maybe look at, like, customer count. Those are kind of the key ones.

We have time for one more question, and that comes from the line of Derrick Wood with TD Cowen.

And I'll echo my congratulations. Andrew, I wanted to ask about SMS adoption trends. You guys had this sharp curve of adoption out of the gate starting a couple of years ago. Over the last couple of quarters, that's moderated a bit. So can you just talk about what demand levels look like today? How do you see adoption trends shaping over the next 12 to 18 months? And are there any kind of key feature functionality milestones you're looking to hit that may re-accelerate the adoption curve?

Sure. Yes. I mean, I fully expect that this belief that customers want to consolidate. Certainly there are marketing channels all down to one platform. I hear that time and time again from customers. For instance, we referenced a customer this quarter that consolidated their SMS onto Klaviyo. It was a creator-founded coffee company. And they've seen amazing growth with email. That's what attracted them about SMS. But then, actually, the 2 combined performed even better. So it's examples like that where we're seeing customers that that's what they want to do. Now, there's a couple of things that we're hard at work on. We always believe our SMS product can be better. In this case, we're always adding new functionality. We believe our SMS product needs to be best-in-class all by itself. And then, obviously, it's even better when you combine it with our email and other messaging products. But on top of that, I mentioned expanding coverage to Ireland. So as we think about internationally, one of the common reasons folks can't move their SMS spend to us today, and we see it's a big opportunity, is literally just coverage around the world. So that's a major focus for our team, it's expanding that coverage within North America, especially within Europe, and then into Asia. So I think you're going to see customers want to move it all into one place. They want to manage it from one place. They want all the reporting to be combined. They want to be able to personalize content based on what's the right channel and you have Klaviyo, you have our artificial intelligence help them figure out what that is. That's the big macro trend. And then, we're hard at work making sure our product is awesome, and we're providing a great experience.

Those are all the questions I have for today's call. With that, I will turn the call over to Andrew Bialecki for closing remarks.

Great. Well, thank you all for joining us on our first earnings call. And to Klaviyos around the world, thank you for all your hard work. We're looking forward to speaking with everyone again next quarter. Thanks.

Thank you. That does conclude today's call. You may now disconnect.