Loading summary
Transcript49 lines
- [00:01]
Amanda Whalen
So good, so good, so good.
- [00:03]
Anne Barry
New spring arrivals are at Nordstrom Rack stores now. Get ready to save big with up to 60% off rag and bone, Marc Jacobs, free people and more. How did I not know Rack has Adidas?
- [00:15]
Amanda Whalen
Cause there's always something new.
- [00:16]
Anne Barry
Join the Norty Club to unlock exclusive discounts. Shop new arrivals first and more. Plus buy online and pick up at your favorite Rack store for free. Great brands, great prices. That's why you rack. The kids are out of school on the east coast, so it's maybe a good day for pizza and a movie. We sled through earnings from Domino's and amc. AI fears keep fueling a sell off in software stocks. So what can executives say to get investors to keep the faith? We ask the CFO of Klaviyo, Amanda Whalen and if 2026 was meant to have put tariff uncertainty behind us, Friday's Supreme Court ruling brought it right on back. We break down the latest on trade policy and how the market's reacting for February 23, it's blue markets Daily and I'm Anne Barry. More market details to come. But first, in a David versus Goliath moment, one family run toy business has left the markets waiting to see where trade goes from here. Well, Learning Resources Inc. A 30 year old firm based in Illinois, imports most of the educational toys it sells from China. And it was one of the first small businesses to bring a lawsuit against President Trump's tariffs last April. Well, according to Reuters, citing a 2025 U.S. chamber of Commerce report, small businesses account for a whopping 97% of US importers. And this one took its case all the way to the Supreme Court, which ruled on Friday that the broad tariffs that the President had instigated, citing the International Emergency Economic Powers act, otherwise known affectionately as IEIPA and which represent about 60% of the tariffs the administration put in place are not legal. Well, before being struck down, these were placed on goods from a wide array of countries using a whole variety of justifications, from tying levies on China to fentanyl trafficking to tariffs penalties on India to just reciprocal tariffs on imports from the European Union, Japan, South Korea. In effect, IPA was invoked to cover tariffs on nearly every major US trading partner, while the Supreme Court voted 6, 3 that the 1977 law was meant to give the president powers to address national emergencies, but not to authorise the president to levy tariffs on imports. Under the Constitution, only Congress has the clear power to lay and collect taxes, duties, impasses and excises, and the court emphasized that such Significant economic policy decisions require explicit congressional authorization. But the administration has moved quickly to impose replacement tariffs since Friday's ruling. President Trump announced this weekend that he would set a 15% global tariff under section 122 of the Trade act of 1974. This allows the president to impose a surcharge for balance of payments concerns. That means trade deficit, but not for long, only around 150 days. And this has not yet faced full legal testing because no president has invoked section 122 before. Well beyond this, officials are pursuing other statutory mechanisms, including section 301 addressing unfair trade practices and section 232 addressing national security through investigations that could lead to more durable country specific tariffs going forward. While the U.S. commerce and treasury secretaries Howard Lutnick and Kevin Besant had warned that alternative tariffs would be found almost as soon as these lawsuits surfaced last year. And President Trump posted on Truth Social recently, quote, the court has also approved all other tariffs of which there are many, and they can all be used in a much more powerful and obnoxious way with legal certainty than the tariffs as initially used. Emphasis on the word obnoxious there. Well, the flurry of activity explains why the market reaction has been net somewhat muted. We did see volatility today, but the Supreme Court ruling had seemed likely. So while the market ticked up on Friday, gains basically were reversed over the course of today and in a roller coaster way because what has not been mapped out is the logistics of consumers and businesses seeking possible refunds for the estimated $130 billion generated by the now no go tariffs. The Supreme Court did not weigh in on refunds, so this is likely to end up in another court battle. So we're back to uncertainty on the tariffs front when it comes to what a long term policy may look like. But what does seem certain is that the Trump administration is not going to let this go and will keep pushing to keep its tariffs in place. We'll keep on watching. Well, coming up, we take a spin through the headlines that are moving the markets today and my conversation with Amanda Whalen, the chief financial officer of Klaviyo, about the company's position amidst a broad software sell off. But first, a word from our sponsor, Charles Schwab. Trading at Schwab is powered by Ameritrade, unlocking the power of thinkorswim, the award winning trading platforms loaded with features that let you dive deeper into the market. You can visualize your trades in a new light on think or swim desktop with robust charting and analysis as tools, all while you uncover new opportunities with up to the minute market news and insights.
- [05:22]
John Croteau
ThinkOrSwim is available on desktop, web and mobile to meet you where you are so you never miss a thing. It's built by the trading obsessed to help you trade brilliantly. Learn more@schwab.com trading but it's not just
- [05:34]
Anne Barry
tariffs that have sent the markets back into choppy territory. Software stocks continue to be rocked by AI fears, which is why we asked one public company software executive to talk to us about how they're trying to persuade investors that it will all be okay in the end. We'll get to that conversation in just a moment, but first wanted to focus on a few more names that caught our eye today.
- [05:56]
John Croteau
That's right, earnings came out this morning for theater chain AMC Entertainment ticker AMC. The company reported revenue of $1.3 billion for the fourth quarter, a decline year over year blamed on theater attendance, down nearly 10%. Looking ahead, AMC CEO Adam Aaron expressed optimism for 2026 with a strong slate of upcoming films including Brand New day and Christopher Nolan's the Odyssey. AMC shares were down about a percent today.
- [06:22]
Anne Barry
And then on to PayPal, where shares actually saw trading halted because of volatility. Ticker PYPL this one shot up over 5 1/2% today after Bloomberg reported that the OG digital payments platform is attracting more possibly takeover interest. Potential buyers may be circling after a long term stock decline down more than 80% over the past five years. And the report timing wise comes right in at the midst of executive turmoil with the current board chair Enrique Lores taking up the roles of president and CEO on March 1st. That's after the board ousted later CEO Alex Chris as his turnaround plan was falling short in terms of depth and timing.
- [07:04]
John Croteau
And finally, shares of Domino's Pizza Ticker DPZ were up nearly 3% on positive earnings today. The company reported revenue of $1.5 billion, up 6.4% year over year, which beat estimates and highlights. Same store sales were up 3.7% in the United States last year. Of course, Domino's initiated its newest rebrand in more than a decade, rolling out its first stuffed crust pizza and a partnership with DoorDash.
- [07:30]
Anne Barry
Well, the great software sell off continues. The sector saw declines again today on renewed fears about the existential risk that AI could pose to segments of tech. Some big name software companies, Salesforce, Adobe and ServiceNow were all down around 5% today. AppLovin, Datadog and Workday were among the worst performers, dropping at least 7%. And then IBM, that one tanked 11% this afternoon after Anthropic outlined a new use case for its Claude code product. That goes after IBM's core business data processing offering. And even cybersecurity, which has seen big names like Palo Alto Networks argue vociferously that AI will help, not harm. The sector, saw further drops today, too, with CrowdStrike down over 9%. Well, we wanted an inside look on what is happening in the sector, so I invited Amanda Whelan onto the show. She is the chief Financial Officer of Klaviyo, the email and SMS marketing platform. Amanda takes us through the company's recent quarter, the billions of consumer data points the company ingests every day, and why Klaviyo argues that AI should be considered an accelerant more than a threat to its business. It's a very, very timely conversation, so let's get into it. Amanda, thank you so much for joining this morning. So much going on in the software world and I just want you to get frankly straight to the tough stuff, and that is talking about the market's reaction to the threat from AI. Your share price at Klaviyo is down over 40% year to date. Nevertheless, you just had fabulous earnings for full year 2025. So just talk to me a little bit in your shoes as a top executive, how are you motivating your teams? How are you thinking about what the market is saying on the one hand and what your fundamentals are saying on the other side?
- [09:21]
Amanda Whalen
Thanks, Anne. Great to be here. And that is a great question. Let me take a step back and start for your listeners with a little bit about who Klaviyo is and who we are. And then I can talk about what we're seeing both in our business and in the market. Klaviyo is a platform that helps nearly 200,000 consumer businesses understand who their consumers are and act on that understanding instantly across email, text, their website and customer service experiences. And we bring together the data, the intelligence and the action to be able to make all of that happen and to drive great consumer experiences that drive, most importantly, high revenue and high returns for our customers. And increasingly, those experiences are powered autonomously through AI. Now, in terms of what we're seeing in our business right now, business is incredibly strong. You saw we had a standout year last year. It was an incredibly strong quarter for Klaviyo in Q4 with 30% revenue growth. We're seeing expanding margins, and importantly, we're seeing that because we're driving great returns for our customers. During Q4, they sent messages to a smaller but much more highly engaged group of customers. They sent them autonomously based on the actions that those customers were doing, which triggered higher revenue per message. And that high return for our customers translated into really strong growth for Klaviyo.
- [10:48]
Anne Barry
And Amanda, you said something almost in passing, which was to a smaller group of customers, talk to us about that dynamic. Why was the customer group shrinking and then why was the remaining customer group more engaged?
- [10:59]
Amanda Whalen
What our customers were doing and have been doing increasingly over time is moving away from broad based messaging to everybody, same message to everyone, all at the same time, and saying I'm going to speak to the customers who are really most engaged with my brand and then drives great results during the holiday period, which for many of our business, our businesses we serve are retailers and it's an incredibly critical time for them. Their revenue from their existing loyal customers grew faster than their revenue did from their new customers. In fact, our businesses who we serve grew almost twice as fast as the overall e commerce market in Q4. And that's because they're serving. They're saying, I'm not going to treat everybody the same. If you're not really as interested in my brand, I'm not going to communicate with you as often. But if you are, I will give the example of one of my very favorite clothing brands who's a Klaviyo customer. They send me an email almost every day and I open every single one because I always want to see what the Veronicas are recommending this season. You know, if it's a brand that's advertising, I don't know, something else. I'm not going to use Engaged and that wouldn't work really well. And so what brands and businesses are realizing is that it's really important, important to be thoughtful about who and how you engage with. But if you're really targeted in the right way, that drives some outstanding results.
- [12:23]
Anne Barry
Do you think that can be sustained though, Amanda? And let's just talk about the attention, the battle for attention, the battle for eyeballs. You described your own experience. You represent a very high click through rate for the retailer you just described. But we're all getting bombarded with more and more emails. We're now seeing SMF sms, which was supposed to be the next frontier, rife with stock spamming. We're seeing WhatsApp, that was supposed to be a somewhat sort of protected area of communication. Now having ads rolled out and your competitors have moved more aggressively. Mailchimp has moved into sms for example. Attentive has moved into that space. So from a Klaviyo perspective, how can you really differentiate yourself from others with, some would argue, commoditized offerings in terms of email and sms and at a time when there's so much else that consumers are having, facing demand for their
- [13:12]
Amanda Whalen
attention for it is an excellent question, Ann, and one that we think about a lot at Klaviyo. And the short answer is that in a world where there's increasing amounts of communication and consumers are trying to parse through the noise, it raises that bar for having a great customer experience to be even higher. You don't want to be bombarded with lots of messages. You want the ones that are targeted and timely and intended for you. You want the ones that understand that you like bright sweaters, maybe with a, you know, neutral colored jacket over it. But if you're going to have a, you know, loud pattern, that's probably not going to work for Ann because she's on camera. And having that personal understanding is really what makes the difference for a business between having a strong, loyal engagement with their consumers versus having one that's incredibly transactional. The reason Klaviyo is really uniquely positioned to do that is because of who we are and how we were built. We bring together, as I mentioned earlier, the data, the intelligence and the action. A communication or experience with customers is only as strong as the data that you bring to it and your understanding of who that person is and what really matters to them. And you can only really understand that data if you have an intelligence loop that brings it all together and is continually getting smarter about what works and what doesn't. So at Klaviyo, we, we actually ingest 3.7 billion data points per day about the way that consumers are interacting with brands. So we know what drives engagement, we know what doesn't. And we enable brands to focus on the people that matter most at the times that are most important for them. And we turn that into action and a message to the right person at the right time.
- [14:58]
Anne Barry
Well, let's, let's talk about a potential disintermediator of this with whom you have a partnership, and that's ChatGPT. And if we look back to the end of last year, Amanda, there was a lot of coverage around Chat GPT partnering directly with retailers so that we could go and frankly, you know, shop essentially from inside the app. And the question became, well, does this disintermediate, you know, the ability of retailers to get and build that relationship with their client? Because it's basically being handed over now to the next iteration iteration of search. How does Klaviyo play in that shifting of the landscape right now where it's not really clear who is ultimately going to own the customer relationship? And most importantly, the data, it actually
- [15:44]
Amanda Whalen
amplifies and increases our ability to have an impact. So an important part to understand, when a consumer buys something through ChatGPT or an LLM, because of the protocols that have been set up, they have access to who is that customer, what did they buy? And they can use that information to build an ongoing loyal relationship with these customers into the future. So the initial discovery and finding of the brand and the product might happen in an LLM just the same way that it might happen on Instagram, or it might happen on TikTok, or it might happen on Google Shopping. And then once that customer has made that initial purchase, then the brand says, okay, now you know who I am. Let's start an ongoing dialogue. Let's introduce you to the breadth of my product portfolio. You know, we have a client or a customer of ours who's in the makeup space. Their hero product is mascara and they have the best tubing mascara out there. If you search for it on an LLM, what do they recommend? They'll frequently recommend this brand and now more and more consumers are finding them and you can actually translate that into introducing them into the lipstick and the eyeshadow and all of the other offerings that are out there. So the way that we see it for our customers is that it levels the playing field. Many of the businesses we serve are small and medium businesses who might not be at the top of the search engine optimization game, but with LLM they now have more of an opportunity to be discovered, to be found, to get that initial first sale and then to turn that into an ongoing loyal repeat customer relationship.
- [17:23]
Anne Barry
John, what do you prefer? Mystery meat or meat from an organic farm that you know has high standards?
- [17:28]
John Croteau
Obviously the latter.
- [17:29]
Anne Barry
Well, do you hold your supplements to the same standards?
- [17:32]
John Croteau
I've never thought about it, but I guess not.
- [17:33]
Anne Barry
Well, you should. It's why IHerb buys direct from manufacturers and trusted distributors to ensure authenticity. No third party resellers allowed. You can finally 2000 brands and tens of thousands of products to choose from on iherb.com what you won't find hidden membership fees. They make wellness accessible globally, shipping to over 180 countries while accepting 80 plus currencies and more than 40 payment methods.
- [17:57]
John Croteau
Plus their eye tested products are continuously tested for purity and quality standards. Stock up on supplements from a trustworthy source Go to iherb@iherb.com that's iherb.com LifeLock
- [18:10]
Anne Barry
how can I help?
- [18:12]
Amanda Whalen
The IRS said I filed my return
- [18:13]
John Croteau
but I haven't 1 in 4 tax paying Americans has paid the price of identity fraud.
- [18:18]
Anne Barry
What do I do?
- [18:19]
Amanda Whalen
My refund though. I'm freaking out.
- [18:20]
Anne Barry
Don't worry, I can fix this.
- [18:22]
John Croteau
Lifelock fixes identity theft guaranteed and gets your money back with up to $3 million in coverage.
- [18:27]
Amanda Whalen
I'm so relieved.
- [18:28]
Anne Barry
No problem.
- [18:29]
Amanda Whalen
I'll be with you every step of the way.
- [18:31]
John Croteau
One in four was a fraud paying American. Not anymore.
- [18:34]
Anne Barry
Save up to 40% your first year. Visit lifelock.com podcast terms apply let's take a bit more if you don't mind Amanda, into your customer base. As of the end of last year, about 78% of Klaviyo's annualized run rate revenue was derived from customers who also use Shopify. Would you mind just explaining a little bit more the Shopify relationship, including how much Shopify owns of Klaviyo's stock and what the path looks like there? Because there are some milestones coming up in that partnership.
- [19:06]
Amanda Whalen
The history goes back over many, many years and it's because we are unified around a common mission which is to make merchants or businesses who we serve successful. We are both here to invest to drive their growth and we do so in a really complementary way. The role that Shopify plays is helping those merchants get started, helping them own their website, make that a great experience, and driving the world's best checkout to make those experiences turn into transactions that actually get closed. What Klaviyo helps businesses do is take their most valuable asset, which is their loyal customer relationships, and turn those even into better, more valuable relationships over time. One customer expressed to me, she said, amanda, my CAC keeps going up. You are the partner I count on to help drive my ltv. And if we're helping make businesses more successful by making their consumer relationships more valuable, that generates better business, stronger business, higher payments volume that shows up on Shopify. So the relationship is quite tight and quite complementary.
- [20:18]
Anne Barry
And what percent of your of your shares does Shopify own today, Amanda they
- [20:24]
Amanda Whalen
have two different portions of it. They had they made investment in our business before we went public and then also have some warrants that they that are part of our collaboration agreement where we are their recommended provider.
- [20:38]
Anne Barry
And in terms of that sort of concentration of 78% of your arrival, is there a plan to diversify aggressively away so that you can go to the market and Say we've expanded the sets of go to market partnerships. I saw that you're also aligned with Salesforce, Commerce Cloud, with Magento and others. Just talk a little bit about the strategy there and if that kind of concentration bothers you, because it does some investors.
- [21:03]
Amanda Whalen
That concentration for us we see as a strength in the market. It's something that we think will migrate over time. But it's a reflection of two things that are happening. One, we both have this strong bias, as I said, towards helping merchants be successful, which means that we tend to attract the same types of customers who are very interested in building really strong, growing businesses. As we've expanded upmarket, as we've expanded into new areas, more and more of our new business comes from outside of Shopify because as we expand internationally, as we expand into the enterprise space, more of those customers come over, not from Shopify, but. But what we also see is that Shopify is doing a great job of winning in the market. So regularly customers will join Klaviyo with one platform and shift over to Shopify as they think about what is that tech stack going to take them forward. So we love being aligned with Shopify because there's such a great strong business in the marketplace. And then importantly, because it also gives us the template of what a great partnership looks like that we've applied to other businesses who we partner with as well. So we have strong partnerships with WooCommerce where we are also their recommended marketing automation provider. We are not just the recommended automation provider, but actually the default pre install for prestashop, which is one of the leading commerce platforms in France. We have a similar relationship with Shopware in Germany. And what we've seen is that is the partnership with the platform is really important, but even more important is the power of the ecosystem around it. The agencies we work with, who work in this space, the customers who recommend this to each other. And that drives so much of our growth because customers see the results that Klaviyo drives and it makes them recommend us to their friends.
- [22:53]
Anne Barry
And just in terms of the composition of your brand customer base, Amanda, you've got about nearly 200,000 brands globally. What proportion of those would fall in the small or medium sized business bucket?
- [23:06]
Amanda Whalen
From a count perspective, it is the smaller or, sorry, it's the larger portion of our business. But from an ARR perspective and a portion of the business, the revenue that we generate, that medium and large enterprise business has been growing significantly. And if you look at our data when we went public a few years ago, Our average revenue per customer was in the neighborhood of about 5,000. Today it's up to $7,300. And the size of our average customer in our top 10 again a few years ago was in the mid six figures. Today it's well north of $2 million per. So we serve brands from smallest entrepreneurs just starting out to big iconic enterprises like Hershey and Mattel and TaylorMade. Because what's universal is this desire to build a strong relationship with your loyal customers. Think of Klaviyo for a business like that, almost like a revenue optimization or a yield optimization engine for their loyal customer relationships. The same way that in an ad business, as you're spending money, so long as you're seeing that high return on ad spending, you're going to keep investing behind growing your advertising spend in Klaviyo's space. So long as you're seeing high ROI from these communications and experiences with your consumers, you're going to keep investing behind building that because that customer retention, loyalty and revenue is what drives your business and makes it powerful.
- [24:39]
Anne Barry
In terms of that size, that smaller to medium sized business, though, Amanda, and this sort of goes full circle to how we started. There is a hypothesis at the moment that it's precisely that customer demographic, that brand demographic, that presents perhaps the greater risk of leaving software providers like Klaviyo and instead using the most advanced versions of Claude suites of projects by Anthropic because the cost is lower and the capabilities of the free LLMs are just getting better and better by the day. And marketing and CRMs in particular have been highlighted as one of the highest risk areas at risk of being displaced. So to go back again, your share price is down over 40% year to date. Even off the back of great earnings, you personally, your teams are motivated by the share price. You're compensated in part based on the share price. What do you say as a CFO to your teams and what do you say to investors to try to persuade them that the market is wrong and your share price should see a reversal and go back to where it's been trading?
- [25:44]
Amanda Whalen
As I said, excellent question and there's a lot going on in the market out there. The key message for our teams internally and for investors is that AI is an accelerant to our business. It creates more opportunities for brands to be discovered. It creates more opportunities for great consumer experiences to be developed and delivered autonomously through marketing and importantly through service. Now to your question about SMBs, we see it vary across different parts of our segment. Interestingly, in the small and medium business space, our customers are really time starved. They're trying to run a business. It's a hard job and you have a limited team size and you want to be able to execute really, really quickly in a high quality way. And so that's where the quality of our agents, our marketing agent in particular comes in. Our marketing agent for one of the brands who we work with, which is Adelson's, they have now started to rely on it for their campaigns and they're seeing 50% higher open rates and 40% higher average revenue per campaign with the campaigns that the agent is able to deliver. So the fact that we can deliver really high quality results and make it incredibly easy for a brand end to end is just massively powerful. And then in the upper mid market and enterprise, as companies are thinking about how do I meet these increasing expectations, they want to have one continuous customer journey so that I have the same interaction with you, whether it is across marketing, across service, or whether it is analytics that are helping to power how I think about my consumer base. So again for Klaviyo, AI is accelerating our business and we are very uniquely positioned here to win.
- [27:28]
Anne Barry
Amanda Whalen, Chief Financial Officer of Klaviyo, thank you very much for joining from San Antonio. Congratulations again on a strong quarter. And come back, we'd love to hear how things are progressing.
- [27:39]
Amanda Whalen
Thank you so much.
- [27:40]
Anne Barry
That's all for today's Brew Markets Daily.
- [27:42]
John Croteau
Brew Markets Daily is hosted by Anne Barry and produced by John Croteau, Tarkab Delatieff and Emily Miller. Our technical director is Uchenwa Ogu. Jim Orizo is our audio engineer and the president of Morning Brew Inc. Is Devin Emery. If you have any feedback or a company you'd like us to COVID leave a comment or send an email to brewmarketshow@morningbrew.com.
- [27:59]
Anne Barry
wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow. Same time, same place, not the same snow.