Klaviyo files S-1 🗳

Author

Rohit Bhadange
August 27, 2023

Hello trash fam!

It’s the week of the final fantasy football drafts, back-to-school shopping with the kids, and summer goodbyes marked by the Labor Day long weekend.

As the summer comes to a close, the 2023 IPO line is heating up. There was a lot of noise last week with Klaviyo, Instacart and ARM all filing their S-1’s. The filings were proof these were high quality companies with strong economics.

Given the audience here, there’s one in particular I want to dive into… Klaviyo. Before diving in, let’s see what’s been piling in the trash:

  • Klaviyo files S-1 🗳

  • Big logos like Airbnb on defensive ⚔️

  • Crack down on lemonade stands 🍋 

  • Meme of the week 🤡

  • Q from you - “Can I get a sales tax extension?” 🙋‍♀️

 Klaviyo files S-1 🗳

This isn’t a topic that’s normally par for the course, but… given the magnitude of impact, let’s go over what you need to know:

📈 Financial Performance:

LTM June 2023

  • $585 million revenue (+57% YoY)

  • $9.5 million net loss (-2% margin)

1H 2023

  • $321 million (+54% YoY)

  • $15 million net profit (5% margin, up from -12% 1H 2022)

  • 75% gross margin

  • Major focus on profitability this year 🔑 

🤝 Customer Base and Engagement:

  • ~130,000 clients with $5K ACV

  • “Land-and-expand strategy” has resulted in 119% Net Retention, but only 1,458 customers w/ $50K ARR (+94% YoY)… potentially limited enterprise solution

  • 77% ARR from Shopify users - high dependency on Shopify ecosystem

 🚀 Ops Efficiency and Growth:

  • CAC payback is 14 months in Q2 2023.

  • 42% revenue spent on S&M, normally considered crazy…

  • But Rule of 40 = 65% (i.e., revenue growth + profit margin) so there’s a healthy balance

  • Revenue / Employee = ~$390K

📊 Data-Driven Approach and Scale:

  • Klaviyo’s built on a foundation of data, ML / AI

  • ~6.9 billion consumer profiles

  • ~695 billion events processed over LTM period

👨‍💼 Founder's Influence and Funding:

  • CEO Andrew Bialecki retains 38.1% ownership of Class B shares, maintaining substantial influence

  • Investors include Summit Partners (PE) and Shopify (11% ownership).

  • Klaviyo's bootstrapping origins and unique funding history have contributed to its financial structure.

Klaviyo is a high-quality company that aligns with market mood and expectations.

The Klaviyo IPO will not only open the flood gates for other generational companies to IPO (e.g., Stripe) but will also open the window for more consumer-oriented businesses with cash flow efficiency “potential”… finance teams beware.

States playing offense 👊🏼

Airbnb is litigating a $415K rental tax against City of Boulder on guest fees in Colorado, which it believes are not taxable.

Flexport needs to be careful with its shiny new aircraft. Virginia denied an air carrier a tax exemption that provided on-demand services. Other states have done the same.

In Illinois, the definition of physical nexus can be stretched. If you are an out-of-state vendor selling equipment, delivering product and installing it at the customer location, repeatedly… this will establish physical nexus.

Crack-down on lemonade stands 🍋  

They may be gone sooner than you expected.

Here's what's happening to these nostalgic businesses...

Children running neighborhood lemonade stands have been approached (and even shut down) by the police…

It's happening in Texas, Georgia, Colorado and many other states.

But why?

For not having the proper licenses to collect & remit sales tax.

Tax officials visiting neighborhood lemonade stands described this debacle as an “educational” experience for children violating revenue laws.

There's been an uproar and some have started taking it easier.

But even then you have to be under a certain age, selling non-alcoholic beverages to avoid taxation...

AKA Adult lemonade stands are a no-go.

Meme of the week

Send us a meme - best one will be featured next week

🌟 Partner Spotlight 🌟

Entreprenista is a media company, podcast network and membership community dedicated to celebrating the stories of women founders & leaders, and sharing lessons learned from founders who are paving the way forward.

Interested in joining? Just reply to this email and I can make a direct intro.

🙋‍♀️ You ask, we answer 🙋‍♂️

Q (Yasmin): Can I get a sales tax extension if I can’t file on time?

A: Typically, no.

The Commissioner of Revenue is authorized to provide an extension of time to file the return for good cause (e.g., natural disaster creates a hardship for filing the return on time). In these cases, the tax remains due and interest may apply for late payment.​

Understand your sales tax exposure

A team of sales tax experts can run a sample audit & nexus analysis to help you understand your liability exposure. Free for Trash Talk subscribers.

Thank you for reading along. I’ll be back next Sunday with more sales tax shenanigans.

If you enjoyed this one, please share it with your network. 🤝

If you caught a laugh, reply back and let me know. I live for the people.

If you have any feedback, suggestions or questions, please let me know by responding to this email or DM me on Twitter or LinkedIn.

Until next week’s 🗑 …

Rohit