Klaviyo, Inc.

1. Organization and Business Description

Klaviyo, Inc. (the “Company”) is a technology company that provides a modern, vertically integrated software-as-a-service (“SaaS”) platform to enable consumer-focused businesses to capture, store, analyze, and predictively use their own data to drive measurable, high-value outcomes. Klaviyo's platform combines proprietary data and application layers into one solution with machine learning, artificial intelligence capabilities, and integrations. The Klaviyo Data Platform (“KDP”) is the foundation of the platform unifying customer data for a single view of the customer and enabling real-time activation of data across a range of applications. The Company focused on marketing automation within eCommerce with Klaviyo Marketing as its first application use case and has since expanded its suite of applications to include customer Klaviyo Service, Klaviyo Analytics, and advanced data management through its Advanced KDP. The Company’s marketing automation solution allows customers to orchestrate campaigns across multiple marketing channels including email, short message service (“SMS”) and Mobile Push and collect product reviews within its platform through the Company’s Reviews add-on.

The Company generates revenue through the sale of subscriptions to its customers for the use of its platform. Subscription plans are tiered based on the number of consumer profiles stored on the Company’s platform and the number of emails and SMS messages sent.

The Company is headquartered in Boston, Massachusetts and was incorporated in the state of Delaware on September 14, 2012. The Company has several wholly-owned subsidiaries in the United States and international jurisdictions.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, the Condensed Consolidated Statements of Operations and Comprehensive Loss, the Condensed Consolidated Statements of Changes in Stockholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024, and the related notes to such interim condensed consolidated financial statements are unaudited.

These unaudited condensed consolidated financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 19, 2025. In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position for the periods presented. The results for the interim periods presented are not necessarily indicative of future results or results for the full fiscal year or for any other period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the allowance for doubtful accounts, determination of revenue recognition under ASC 606, Revenue from Contracts with Customers (“ASC 606”), estimated benefit period of deferred contract acquisition costs, estimated life of prepaid marketing expense, and historical valuation of common stock and stock-based compensation.

The Company evaluates estimates based on historical and anticipated results, trends, and various other assumptions. The Company assesses these estimates on a regular basis; however, actual results could differ from these estimates.

Significant Accounting Policies

Our significant accounting policies are detailed in Note 2. Summary of Significant Accounting Policies of the audited annual consolidated financial statements for the fiscal year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 19, 2025. There have been no material changes to our significant accounting policies since the fiscal year ended December 31, 2024.

Shopify Collaboration Agreement

On July 28, 2022, the Company entered into a collaboration agreement with Shopify Inc. and certain of its affiliates (collectively, “Shopify”) to form a strategic relationship for the purposes of creating greater interoperability between the Klaviyo and Shopify platforms and forming a strategic product, distribution, and marketing relationship. Shopify became a related party upon execution of this agreement.

The Company determined that Shopify is a vendor and not a customer, as the collaboration agreement is a services contract under which the Company is receiving marketing services from Shopify in exchange for payments under the revenue sharing agreement. The revenue sharing agreement is a mechanism for Shopify to be compensated for the customer acquisition and marketing services Shopify is providing to the Company. Shopify is not a reseller or distributor of our platform, nor does Shopify provide any services on the Company’s behalf. Fees paid under the revenue share agreement are recognized as a component of selling and marketing expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss. During the three months ended March 31, 2025, the Company incurred $7.9 million related to fees paid under the revenue sharing agreement. During the three months ended March 31, 2024, the Company incurred $6.4 million related to fees paid under the revenue sharing agreement. As of March 31, 2025 and December 31, 2024, the Company had$5.3 million and$2.6 million in accrued expenses owed to Shopify for fees payable under the revenue sharing agreement, respectively.

During the three months ended March 31, 2025 and March 31, 2024, the Company capitalized prepaid marketing expense of $8.1 million and $8.1 million related to the vested warrants issued as consideration for the collaboration agreement, respectively. For the three months ended March 31, 2025 and 2024, the Company recorded marketing expense of $13.2 million in the Condensed Consolidated Statements of Operations and Comprehensive Loss as a component of selling and marketing expense related to the amortization of the prepaid marketing expense. As of March 31, 2025 and December 31, 2024, the Company’s prepaid marketing expense was $148.2 million and $153.3 million, respectively. As of March 31, 2025, there was $229.2 million of unrecognized marketing expense related to the warrants that will be recognized over 4.3 years. See Note 10. Common Stock and Stockholders’ Equity for further discussion of the warrants.

On June 24, 2022, the Company entered into a stock purchase agreement with Shopify. On the closing date of July 28, 2022, Shopify purchased 2,951,846 shares of common stock for $33.88 per share. The stock purchase agreement gives Shopify the right to purchase 15,743,174 additional shares of common stock for $88.93 per share (the “Investment Option”). The common stock and Investment Option were determined to be freestanding financial instruments purchased at fair value and were accounted for separately from the collaboration agreement, revenue sharing agreement, and common stock warrant.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. The new guidance requires additional disclosure related to the disaggregation of income statement expense categories. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 on its consolidated financial statements.

There are no other new accounting pronouncements that have been issued that could have a material impact on the Company’s financial position or results of operations.

3. Revenue Recognition

Deferred Revenue

The change in deferred revenue reflects billings during the period for which the performance obligation was not satisfied prior to the end of the period, partially offset by revenues recognized during the period. The following table summarizes the changes in the balance of deferred revenue during the periods presented (in thousands):

For the three months ended March 31, 2025 and March 31, 2024, revenue recognized from amounts included in deferred revenue at the beginning of the period was $56.9 million and $36.7 million, respectively.

Remaining Performance Obligations

Remaining performance obligations represents the amount of contracted future revenue that has not yet been recognized, including deferred revenue. As of March 31, 2025, the Company’s remaining performance obligations are $173.1 million, of which $163.7 million is expected to be recognized within the next twelve months and $9.4 million is expected to be recognized during a period greater than twelve months.

Accounts Receivable

Accounts receivable are shown net of an allowance for doubtful accounts of $2.3 million and $1.0 million as of March 31, 2025 and December 31, 2024, respectively.

4. Fair Value Measurements

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis at the periods indicated below, by level within the fair value hierarchy (in thousands):

As of March 31, 2025 and December 31, 2024, certain of the Company’s cash equivalents were held in money market funds. The Company’s investments in money market funds are classified within Level 1 of the fair value hierarchy as they are valued using quoted market prices in active markets.

As of March 31, 2025 and December 31, 2024, the Company’s carrying amounts of financial instruments, including cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to their short-term maturities.

5. Property and Equipment, Net

Property and equipment consist of the following (in thousands):

Depreciation and amortization expense related to property and equipment was approximately $4.8 million and $4.0 million for the three months ended March 31, 2025 and 2024, respectively. On January 31, 2025, the Company amended the lease agreement for its corporate headquarters located in Boston, Massachusetts which, among other things, extended the term of the lease to March 2033. Under the Company’s accounting policy, the useful life of leasehold improvements is the lesser of the lease term and the useful life of the asset. As such, the extension of the lease represents a change in estimate of the useful life of the leasehold improvements within the corporate headquarters. The Company accounted for this change in the useful lives as a change in accounting estimate under ASC 250 Accounting Changes and Error Corrections, which were recorded prospectively upon execution of the lease amendment. This change in estimate resulted in a reduction of $0.6 million in depreciation expense for the three months ended March 31, 2025 and an immaterial impact on basic and diluted net loss per share attributable to Series A and Series B common stockholders.

During the three months ended March 31, 2025 and 2024, the Company capitalized $6.1 million and $2.1 million of internal-use software development costs, respectively. The Company recorded amortization expense associated with its capitalized internal-use software development costs of $1.7 million and $0.8 million for the three months ended March 31, 2025 and 2024, respectively. Amortization expense is included in cost of revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

During fiscal year 2020, on the commencement date of the lease for the Company's headquarters in Boston, Massachusetts, the Company established an asset retirement obligation based on the present value of contractually required estimated future costs to remove long-lived assets at the termination or expiration of a lease and to return the space to its original condition. As of December 31, 2024, the asset retirement obligation is included in other non-current liabilities on the Condensed Consolidated Balance Sheets. On January 31, 2025, the Company amended the lease agreement for its Boston headquarters and, under the terms of the amendment, the Company is relieved of the obligation to return the space to its original condition. During the three months ended March 31, 2025, the Company derecognized the asset retirement obligation and recorded an immaterial gain for the difference between the Company's estimate of the asset retirement obligation and the carrying value of the asset retirement cost which is included in general and administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Asset retirement obligation activity for the periods presented is as follows (in thousands):

6. Accrued Expenses

The following table presents components of accrued expenses (in thousands):

7. Commitments and Contingencies

Contractual Obligations and Commitments

The Company has material long-term non-cancelable contractual obligations outstanding with various service providers. Future minimum payments under the Company’s non-cancelable purchase commitments as of March 31, 2025 and December 31, 2024, were $196.1 million and $225.5 million, respectively.

Legal Matters

From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the course of its business, including but not limited to claims brought by its customers in connection with commercial disputes and litigation arising from employee and ex-employee related matters. The Company is not presently subject to any pending or threatened litigation, individually or taken together, for which it is reasonably possible to have a material effect on its consolidated financial position or results of operations.

Guarantees and Indemnification Obligations

In the ordinary course of business, the Company enters into agreements with its customers that include commercial provisions with respect to licensing, infringement, indemnification, and other common provisions. The Company does not, in the ordinary course of business, agree to indemnification obligations for the Company under its contracts with customers except for intellectual property infringement claims related to the Company’s services. Based on historical experience and information known at March 31, 2025 and December 31, 2024, the Company has not incurred any costs for guarantees or indemnities.

8. Leases

The components of lease expense are as follows (in thousands):

Supplemental balance sheet information related to the Company’s operating leases is as follows (in thousands):

Supplemental cash flow information and non-cash activity related to the Company’s leases are as follows (in thousands):

Other information related to leases is as follows:

Future undiscounted annual cash flows for the Company’s operating leases as of March 31, 2025 are as follows (in thousands):

The table above does not include options to extend lease terms that are not reasonably certain of being exercised or leases signed but not yet commenced as of March 31, 2025.

On January 31, 2025, the Company amended the lease agreement for its corporate headquarters located in Boston, Massachusetts. The amendment (i) modified the lease term and payment terms for the existing leased premises and (ii) expanded the leased premises under the lease. The newly leased premises have phased lease commencement dates ranging from February 2025 to June 2026. The lease term for the existing and newly leased premises ends in March 2033. As of March 31, 2025, the gross aggregate payments for leases that have not yet commenced are $30.9 million.

9. Income Taxes

The Company computes its provision for interim periods by applying its estimated annual effective tax rate to its anticipated net (loss) income and adjustments for discrete items in the period. The Company’s effective tax rates for the three months ended March 31, 2025 and 2024, are less than the U.S. federal statutory income tax rate of 21% primarily due to the valuation allowance in the U.S. The Company’s effective tax rate was 7.0% and (3.2)% for the three months ended March 31, 2025 and 2024, respectively. The current period tax expense reflects the impact of the capitalization of research and development expenditures in accordance with Internal Revenue Code (“IRC”) Section 174, partially offset by excess tax benefits related to stock-based compensation.

Deferred income taxes reflect the impact of carryforwards and temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The carryforwards and temporary differences give rise to a significant portion of the Company’s deferred tax assets and liabilities. The Company continues to maintain a valuation allowance against its deferred tax assets in the U.S.

The Company hasnot recognized any liabilities for uncertain tax positions or unrecognized benefits as of March 31, 2025 and December 31, 2024. The unrecognized tax benefits as of March 31, 2025, if recognized, would not affect the effective income tax rate due to the valuation allowance that currently offsets the deferred tax assets. The Company doesnot expect any material change in uncertain tax benefits within the next 12 months.

As of March 31, 2025, the Company has had an immaterial amount of earnings from its wholly-owned non-U.S. subsidiaries indefinitely reinvested outside the U.S. The Company does not intend to repatriate these earnings or realize the outside basis differences in its foreign subsidiaries and, accordingly, the Company hasnot provided any taxes for those amounts, given the indefinite reinvestment, and it is not practicable to estimate the amount of deferred tax liability that would be incurred.

10. Common Stock and Stockholders’ Equity

Common Stock Warrants

On July 28, 2022, the Company granted warrants to purchase up to 15,743,174 shares of Series B common stock in connection with the collaboration agreement and strategic partnership with Shopify as compensation for marketing services.

The following table summarizes the warrants activity during the three months ended March 31, 2025:

During the three months ended March 31, 2025,344,382 warrants vested. The Company has no vested but not exercised warrants outstanding as of March 31, 2025. During the three months ended March 31, 2024,344,382 warrants vested.

11. Stock-Based Compensation

Equity Incentive Plans

The Company has outstanding awards issued under its 2015 Stock Incentive Plan (as amended, the “2015 Plan”) and its 2023 Stock Option and Incentive Plan (the “2023 Plan”). Both plans provide for the grant of various types of stock-based compensation awards including, but not limited to, RSUs, ISOs, NSOs, and RSAs. During the three months ended March 31, 2025 and 2024, the Company solely granted RSUs under the 2023 Plan. As of March 31, 2025, the Company’s authorized common stock includes 73,808,108 shares of Series A common stock reserved for issuance of equity awards under the 2023 Plan, of which 55,417,716 shares are available for future grants.

Restricted Stock Units

During the three months ended March 31, 2025, the Company granted RSUs to employees under the 2023 Plan. RSUs granted under the 2023 Plan vest upon the satisfaction of service-based vesting conditions only. Generally, the service-based vesting condition requires the grantee to remain an eligible participant, as that term is defined in the 2023 Plan, for a period of 3 years or 4 years. Generally, RSUs vest quarterly over a 3 year period or vest 25% after 1 year, with the remainder vesting quarterly over the following 3 years.

Employee Stock Purchase Plan

On August 24, 2023, the Company’s board of directors adopted the Company’s 2023 Employee Stock Purchase Plan (“ESPP”). As of March 31, 2025, the Company reserved 11,133,461 shares of Series A common stock for issuance pursuant to purchase rights granted to the Company’s eligible employees under the ESPP. During the three months ended March 31, 2025 and 2024, the Company recognized stock-based compensation expense related to the ESPP of $1.4 million and $1.0 million, respectively. As of March 31, 2025, $1.9 million of unrecognized stock-based compensation expense related to the ESPP is expected to be recognized on a straight-line basis over the subsequent 0.75 years.

There wereno shares of Series A common stock issued under the ESPP during the three months ended March 31, 2025 and 2024.

Modifications

During the three months ended March 31, 2025, the Company provided nine terminated employees with accelerated vesting on the service-based vesting condition of 24,134 RSUs. The Company recorded incremental stock-based compensation expense of $0.8 million resulting from the modifications. During the three months ended March 31, 2024, there were no material modifications related to share based awards.

Stock-Based Compensation Expense

Stock-based compensation included in the Condensed Consolidated Statements of Operations and Comprehensive Loss is as follows (in thousands):

12. Loss Per Share

Basic net loss per share attributable to Series A and Series B common stockholders is computed by dividing the net loss by the number of weighted-average outstanding common shares. Diluted net loss income per share attributable to Series A and Series B common stockholders is determined by giving effect to all potential common equivalents during the reporting period, unless including them yields an antidilutive result, and is calculated using the treasury stock method. The Company considers its warrants, Investment Option, RSUs, stock options, and ESPP shares as potential common equivalents, but excluded them from the computation of diluted earnings per share attributable to common stockholders in the period presented, as their effect was antidilutive for the three months ended March 31, 2025 and 2024.

The rights, including the liquidation and dividend rights, of the holders of Series A and Series B common stock are identical, except with respect to voting and conversion. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each series of common stock and the resulting basic and diluted net loss per share attributable to common stockholders are, therefore, the same for both Series A and Series B common stock on both an individual and combined basis.

The following table presents the calculation of basic and diluted net loss per share attributable to Series A and Series B common stockholders for the three months ended March 31, 2025 and 2024 (in thousands, except share and per share data):

The following table summarizes the potential common shares excluded from the computation of diluted net loss per share (in thousands):

13. Segment Information and Geographic Data

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates inone operating segment andone reportable segment as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

The key measure of segment profit or loss that the CODM uses to make operating decisions, allocate resources and evaluate financial performance is the Company’s consolidated net income, as reported in the Consolidated Statements of

Operations and Comprehensive Loss. Net income is used to plan and forecast for future periods, design and implement key marketing strategies, expand into new markets, and launch new products. Significant expense categories regularly provided to the CODM are those disclosed in the Consolidated Statements of Operations and Comprehensive Loss.

Disaggregation of Revenue

Revenue by geographic area, based on the location of the Company’s customers, was as follows (in thousands):

(1) Other than the United States, no other individual country accounted for 10% or more of total revenue for any of the periods presented.

(2) Asia-Pacific

(3) Europe, the Middle East and Africa

Disaggregation of Long-lived Assets

Long-lived assets consist of property and equipment and ROU assets. Long-lived assets by geographical region are as follows (in thousands):

(1) Asia-Pacific

(2) Europe, the Middle East and Africa