John Croteau (5:21)

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Anne Barry (5:33)

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.

John Croteau (5:55)

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.

Anne Barry (6:22)

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.

John Croteau (7:04)

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.

Anne Barry (7:29)

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?

Amanda Whalen (9:21)

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.

Anne Barry (10:47)

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?

Amanda Whalen (10:59)

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.

Anne Barry (12:22)

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

Amanda Whalen (13:12)

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.

Anne Barry (14:58)

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

Amanda Whalen (15:44)

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.

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Amanda Whalen (18:27)

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Anne Barry (18:28)

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Anne Barry (18:34)

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.

Amanda Whalen (19:06)

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.

Anne Barry (20:17)

And what percent of your of your shares does Shopify own today, Amanda they

Amanda Whalen (20:24)

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.

Anne Barry (20:37)

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.

Amanda Whalen (21:02)

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.

Anne Barry (22:53)

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?

Amanda Whalen (23:06)

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.

Anne Barry (24:39)

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?

Amanda Whalen (25:44)

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.

Anne Barry (27:28)

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.

Amanda Whalen (27:38)

Thank you so much.

Anne Barry (27:39)

That's all for today's Brew Markets Daily.

John Croteau (27:41)

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.

Anne Barry (27:59)

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.