What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-10 compared with 2025-02-19 · 111 added, 103 removed, 346 unchanged (38% of the section changed)

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We founded Klaviyo in 2012 to provide businesses of all sizes with powerful technology that captures, stores, analyzes, and predictively uses their own data to drive measurable, high-value outcomes.

Klaviyo enables businesses to drive revenue growth by making it easy to bring their first-party data together and use it to create and deliver highly personalized consumer experiences across digital channels.

Our platform combines our proprietary data and application layers into one vertically-integrated solution with advanced machine learning and artificial intelligence capabilities.

This enables business users of any skill level to harness their data in order to send the right message at the right time across email, SMS, and push notifications, more accurately measure and predict performance, and deploy the specific actions and campaigns that drive the highest impact.

Our reviews add-on allows our customers to collect product reviews within our platform to provide a seamless experience across the customer lifecycle, and our CDP offering gives customers user-friendly ways to track new types of data, transform and cleanse data, run more advanced reporting and predictive analysis to drive revenue growth, and sync data in to and out of Klaviyo at scale.

We focused on marketing automation within eCommerce as our first application use case, and we believe our software is highly extensible across a broad range of functions and verticals.

Today, Klaviyo enables over 193,000 businesses around the globe to efficiently drive revenue growth by making it easy to bring their first-party data together and use it to create and deliver highly personalized, omnichannel consumer experiences at scale.

Our platform combines our proprietary data, intelligence, and action layers into one vertically-integrated solution with advanced machine learning and AI capabilities and over 350 integrations, enabling businesses to create and store unified consumer profiles, derive new insights, and rapidly segment their consumers.

Klaviyo began as a database designed for speed, flexibility, and unlimited data storage.

The KDP generates unified, highly granular consumer profiles populated with data from customers’ own systems and over 350 third-party integrations, and provides customers user-friendly ways to track new types of data, sync data in and out of Klaviyo at scale, and drive revenue growth.

Building upon our robust data infrastructure, we developed tools, initially focusing on marketing automation, where we revolutionized email practices.

Our innovation shifted the industry paradigm away from batch and blast practices with a fast, data-rich marketing tool.

In addition to our email offering, we now incorporate text messaging and WhatsApp channels, Reviews, Marketing Agent, Klaviyo Service, Klaviyo Analytics, and others.

In February 2025, we announced Klaviyo B2C CRM, establishing Klaviyo as a unified CRM built for B2C brands and positioning Klaviyo to address a critical gap in the market:

providing consumer brands with a system designed for their unique, high-volume, fast-paced needs across marketing, service and analytics.

In September 2025, we launched Marketing Agent and Customer Agent, establishing Klaviyo as the AI-first B2C CRM.

This is a natural evolution of our journey – from a leading marketing automation platform to a comprehensive consumer engagement solution.

Powered by the KDP and AI, we combine marketing, service, analytics, and our data platform into a single solution designed to meet the high-volume, fast-paced needs of our customers.

Klaviyo Service is an AI-powered customer service offering that integrates with marketing and data to help businesses provide seamless customer support via Customer Hub, Customer Agent and Helpdesk.

Marketing Analytics gives brands real-time AI-powered insight into customer and purchase behavior so they can take action faster.

Our Advanced KDP offering unlocks advanced features for even more powerful ways to track, transform, cleanse, and analyze data as well as run more advanced reporting and predictive analytics to drive revenue growth for our customers.

These offerings leverage

Klaviyo’s unified platform to deliver an integrated, AI-first customer experience that enhances automation, personalization, and efficiency across channels.

Today, our customers primarily operate within the retail and eCommerce vertical.

Due to the flexibility and adaptability of our technology, we also see organic growth from customers in other verticals, such as education, events and entertainment, restaurants, and travel, as well as from B2B companies.

Due to the flexibility and adaptability of our technology, we have also seen organic growth from customers in other verticals, such as education, events and entertainment, restaurants, and travel, as well as from B2B companies.

As of December 31, 2025, our platform had efficiently scaled to over 193,000 customers.

See the section titled “Key Performance Metrics — Customers” for additional information on how we define customers.

We generate revenue through the sale of subscriptions to our customers for the use of our platform.

Our subscription plans are tiered based on the number of active consumer profiles stored on our platform and the number of emails and SMS messages sent.

Our subscription plans are tiered based on the number of active consumer profiles stored on our platform and the number of emails, text messages and WhatsApp messages sent as well as tickets and conversations executed through Klaviyo Service.

We currently permit our customers to send unlimited push notifications, which are included as part of our email subscription plan.

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Our land-and-expand strategy aligns our success with that of our customers.

As our customers’ businesses grow, they utilize more active consumer profiles and send more emails and SMS messages, which naturally increases their usage of our platform.

Our revenue also expands when our customers add additional channels, such as SMS, and additional use cases, such as reviews and our CDP offering, or when their other brands, business units, and geographies start using our platform.

As our customers’ businesses grow, they utilize more active consumer profiles and send more emails, text messages and WhatsApp messages, which naturally increases their usage of our platform.

Our revenue also expands when our customers add additional marketing channels, such as text messaging, WhatsApp messaging, and mobile push and additional use cases, such as Customer Agent, Marketing Agent, Marketing Analytics, and Advanced KDP, or when their other companies, business units, and geographies start using our platform.

Factors Affecting Our Future Performance

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Attracting new customers to our platform is a key driver of our revenue growth strategy.

We have successfully grown our retail and eCommerce customer base and believe we have significant room to expand within this vertical as well as expand into other industries, including education, events and entertainment, restaurants, wellness, and travel as well as from B2B companies.

Our ability to attract new customers will depend on a number of factors, including our ability to innovate, the effectiveness and pricing of our new and existing products and capabilities, and the success of our selling and marketing efforts.

We have successfully grown our retail and eCommerce customer base and believe we have significant room to expand within this vertical as well as expand further into other industries, including education, events and entertainment, restaurants, wellness, and travel as well as from B2B companies.

Our ability to attract new customers will depend on a number of factors, including our ability to innovate, the effectiveness and pricing of our new and existing offerings and capabilities, and the success of our selling and marketing efforts.

Expansion of Revenue From Our Existing Customer Base

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We focus on expansion in three primary ways.

First, as our customers increase their usage of our platform through the number of active consumer profiles they store and email and SMS messages they send, they move to higher subscription tiers.

Second, we cross-sell additional communication channels, such as SMS to customers who started on our platform with our email offering, as well as add-ons, such as reviews and our CDP offering.

First, as our customers increase their usage of our platform through the number of active consumer profiles they store and email, text messages and WhatsApp messages they send, they move to higher subscription tiers.

Second, we cross-sell additional use cases (e.g.

Customer Agent, Marketing Analytics, etc.) and marketing channels (e.g.

text messaging and WhatsApp) to customers who started on our platform with our email offering.

Finally, we offer our platform to our customers’ other brands, business units, and geographies.

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In 2024, we expanded our presence in the European region by adding operations in Dublin, Ireland.

In 2025, we continued our expansion into the Asia Pacific and European regions by adding operations in Singapore and France, respectively.

We have already experienced significant growth with international sales outside of the Americas accounting for 35.1% of our revenue for the year ended December 31, 2025.

We also continue to expand our product offerings to better serve the international market.

As of the date of this Annual Report on Form 10-K, we offer SMS capabilities in more than 15 countries, and we offer our platform in English, French, German, Portuguese, Korean, Spanish and Italian.

We believe that the introduction of additional languages to our platform will increase our efficacy and ease of use in other regions.

As of the date of this Annual Report on Form 10-K, we offer text messaging capabilities in more than 20 countries, and we offer our platform in English, French, German, Portuguese, Korean, Spanish, Italian, Dutch, Swedish, Spanish (Mexico), and Polish.

We believe that the introduction of additional languages to our platform increases our efficacy and ease of use in other regions.

We also currently only bill in U.S.

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Since our inception, we have been focused on product innovation, seeking to create what we believe is the best software solution for our customers.

We originally launched our platform with email messaging as our first channel.

then, we have successfully added other channels, such as SMS and push notifications, as well additional use cases, such as reviews and our CDP offering.

In 2024, we also launched Klaviyo AI, a suite of features that provide customers with AI-powered tools to streamline data segmentation, create and orchestrate campaigns, and drive better engagement.

We originally launched our platform with email messaging as our first marketing channel.

Since then, we have successfully added other marketing channels, such as text messaging, mobile push, and WhatsApp messaging, and additional use cases, such as Customer Agent, Marketing Agent, Marketing Analytics, and Advanced KDP.

We have also introduced AI features that provide customers with AI-powered tools to streamline data segmentation, create and orchestrate campaigns, and drive better engagement, including our Marketing Agent and Customer Agent offerings as well as our MCP Server capability.

Our continued success depends on our ability to sustain product and technology innovation to continue delivering value to our customers.

As technology and consumer preferences change, we believe that our ability to drive continuous product innovation will be critical to attract and retain customers and drive revenue growth.

Increased Adoption of Our SMS Offering

We have seen notable success in the expansion of our platform with our SMS offering, which launched in 2021.

Once customers adopt our SMS offering, they typically grow their usage over time as they gain comfort and confidence in the new channel.

Our SMS offering has higher associated communication sending costs, and as the number of SMS messages sent by our customers increases, we expect our gross margin to decline modestly.

SMS messaging is particularly concentrated in the fourth quarter of each year due to the holiday shopping season, resulting in our gross margin being most heavily impacted in that quarter.

This gross margin impact could be partially offset by our continued work on data storage architecture and gaining further leverage on costs with our increased scale.

We believe we will see our overall gross profit dollars increase as customers send more SMS messages if our SMS offering continues to gain traction.

Increased Adoption of Our Text Messaging and WhatsApp Messaging Offerings

We have seen notable success in the expansion of our platform with our text messaging and WhatsApp messaging offerings.

Once customers adopt our text messaging and WhatsApp messaging offerings, they typically grow their usage over time as they gain comfort and confidence in the new channel.

Our text messaging and WhatsApp messaging offerings have higher associated communication sending costs, and as the number of text messages and WhatsApp messages sent by our customers increases, we expect our gross margin to decline modestly.

Text messaging and WhatsApp messaging are particularly concentrated in the fourth quarter of each year due to the holiday shopping season, and as a result, we expect our gross margin to be most heavily impacted in that quarter.

This gross margin impact could be partially offset by gaining further leverage on costs with our increased scale, increased usage of higher margin products by our customers, and ongoing efforts to drive infrastructure efficiency.

We believe we will see our overall gross profit dollars increase as

customers send more text messages and WhatsApp messages if our text messaging and WhatsApp messaging offerings continue to gain traction.

Expansion into New Industry Verticals and Use Cases

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We continue to explore ways to serve these new verticals more intentionally.

In the future, we intend to more actively invest in addressing new industry verticals and product use cases.

We intend to continue actively investing in addressing new industry verticals and product use cases.

Key Performance Metrics

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We calculate our Dollar-Based Net Revenue Retention rate (“NRR”) by first identifying the cohort of customers as of twelve months prior to the date of determination.

We then calculate the

Annualized Recurring Revenue (“ARR”) from this customer cohort as of twelve months prior to the date of determination (the “Prior Period ARR”) and the ARR from this customer cohort as of the date of determination (the “Current Period ARR”).

We then calculate the Annualized Recurring Revenue (“ARR”) from this customer cohort as of twelve months prior to the date of determination (the “Prior Period ARR”) and the ARR from this customer cohort as of the date of determination (the “Current Period ARR”).

ARR, for any date of determination, is the annualized value of existing paid subscriptions, which we calculate by taking the amount of revenue that we expect to receive in the next monthly period for our existing paid subscriptions, assuming no changes to such subscriptions in the next month, as of that date of determination, and multiplying that amount by twelve.

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We then calculate the weighted average point-in-time NRR as of the last day of each month in the current trailing twelve-month period to arrive at the NRR, with the weightings determined by the total ARR at the end of each period.

We believe NRR is a key performance metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents the expansion in usage of our platform by our existing customers, which is an important measure of the health of our business and future growth prospects.

important measure of the health of our business and future growth prospects.

We measure Dollar-Based Net Revenue Retention Rate to measure this growth.

As of December 31, 2025 and 2024, our NRR was 110% and 108%, respectively.

We implemented a price increase in September 2022, which positively increased revenue growth in 2023.

This price increase also impacted the various measures we use to assess our usage and subscription levels based on revenue, such as NRR and our revenue growth rate, and following its implementation, those measures experienced corresponding increases as a result.

The decrease in these measures from December 31, 2023 to December 31, 2024 was largely driven by lapping the one year anniversary of this price increase in September 2023.

The increase in this metric from December 31, 2024 to December 31, 2025 was largely driven by expansion of existing customer plans and cross-selling additional offerings.

Klaviyo Attributed Value.

We define Klaviyo Attributed Value (“KAV”) as the amount of revenue our customers generated through orders placed by consumers within a specified period of time after a message is sent using our platform, which in the case of email is five days from when the message is sent, and in the case of SMS is twenty-four hours from when the message is sent.

We define Klaviyo Attributed Value (“KAV”) as the amount of revenue our customers generated through orders placed by consumers within a specified period of time after a message is sent using our platform, which in the case of email is five days from when the message is sent, and in the case of text messages and WhatsApp messages is twenty-four hours from when the message is sent.

For email, the message also needs to be opened or clicked in order for the transaction to fall within our definition.

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Given our revenue model allows our customers to scale usage as needed, our sequential revenue growth has been historically stronger in the fourth quarter of each year compared to the revenue growth we see in other quarters.

Our customers utilize the SMS offering in particular during the holidays;

as such, to the extent that the SMS offering grows in proportion to our other channels, we expect that we would see further seasonality.

We believe seasonality may continue to impact our quarterly results going forward.

Our customers utilize the text messaging offering in particular during the holidays;

as such, to the extent that the text messaging offering grows in proportion to our other channels, we expect that we would see further seasonality.

While our profile-based pricing structure helps reduce the impact of seasonality on our revenue, we believe seasonality may continue to impact our quarterly results.

Components of Results of Operations

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We expect our gross profit to increase over time due to an increase in revenue.

We expect our gross margin to decline modestly in the near term as the volume of SMS messages sent through our platform increases, and it could fluctuate in the long term due to timing of investments and expected increases in our cloud-based infrastructure costs and outbound communication sending costs, including email and SMS, as our customers increase usage of our platform and capabilities.

We expect to continue to optimize inputs to our cost of revenue through continued work on data storage architecture and gaining further leverage on costs with our increased scale.

We expect our gross margin to decline modestly in the near term as the volume of text messages and WhatsApp messages sent through our platform increases and as our cloud-based infrastructure costs and outbound communication sending costs increase as our customers increase usage of our platform and capabilities.

This gross margin impact could be partially offset by gaining further leverage on costs with our increased scale, increased usage of higher margin offerings by our customers, and ongoing efforts to drive infrastructure efficiency.

Selling and Marketing

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General and Administrative

Our general and administrative expenses consist of employee-related costs including payroll, benefits, bonuses, and stock-based compensation in general corporate functions, such as procurement, accounting and finance, tax, legal, project management, and human resources, as well as allocated overhead costs, including rent, facilities, depreciation, and costs related to information technology.

management, and human resources, as well as allocated overhead costs, including rent, facilities, depreciation, and costs related to information technology.

Credit card processing fees are also part of general and administrative expenses.

We expect general and administrative expenses to increase in the near term as a result of operating as a public company, including expenses associated with compliance with the rules and regulations governing public companies, such as Section 404 of the Sarbanes-Oxley Act, and an increase in legal, audit, insurance, investor relations, professional services and other administrative expenses.

We incur expenses as a result of operating as a public company, including expenses to comply with the rules and regulations governing public companies, such as Section 404 of the Sarbanes-Oxley Act, and expenses for legal, audit, insurance, investor relations, and related professional services.

Further, we expect an increase in dollar amount of credit card processing fees in line with the expected increase in revenue for the foreseeable future.

As a result, we expect our general and administrative expenses to increase in dollar amount for the foreseeable future but to generally decrease as a percentage of our revenue over the longer term as we scale our business.

This percentage may fluctuate from period to period depending on the timing and amount of our general and administrative expenses, including in the short term due to heightened compliance requirements associated with operating as a public company.

These expenses include increased professional service costs, the increased cost of directors’ and officers’ liability insurance, and costs associated with increasing our employee headcount in certain departments, such as accounting, internal audit, and investor relations.

This percentage may fluctuate from period to period depending on the timing and amount of our general and administrative expenses.

Interest Income

Interest income consists of income earned from our cash deposits held in interest-bearing accounts and money market funds.

Interest income consists of income and dividends earned from our cash deposits held in interest-bearing accounts and money market funds.

Provision for Income Taxes

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Other income (expense):

Other income (expense), net

Other (expense) income, net

(2,162) 816 (470)

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39,402 39,582 24,051

Total other income (expense), net

Total other income, net

37,240 40,398 23,581

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80.1 85.3 121.9

Operating income (loss)

Operating loss

(5.4) (8.9) (47.4)

Other income (expense):

Other income (expense), net

Other (expense) income, net

(0.2) 0.1 (0.1)

Interest income

Total other income (expense), net 4.3 3.3 1.3

Total other income, net

Income (loss) before income taxes

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Revenue for the year ended December 31, 2025 increased by $296.6 million or 31.6%, to $1,234.0 million compared to $937.5 million for the year ended December 31, 2024.

The increase was primarily due to expansion with existing customers driven by expanded usage of our platform as well as our SMS channel.

For the year ended December 31, 2024, sales to existing customers accounted for approximately 54% of the increase in revenue while approximately 46% of the increase in revenue was related to new customers, particularly in the mid-market and outside of the Americas.

The increase was primarily due to new business, including new customers, geographic expansion, expanded usage of our platform, including our text messaging and WhatsApp messaging channels, and new offerings.

For the year ended December 31, 2025, sales to existing customers accounted for approximately 42% of the increase in revenue while approximately 58% of the increase in revenue was related to new customers.

Sales to new customers represent the revenue recognized from new customers acquired in the 12 months prior to the period end.

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Cost of revenue for the year ended December 31, 2025 increased by $91.2 million or 41.2%, to $312.5 million compared to $221.3 million for the year ended December 31, 2024.

This increase was primarily due to an increase of $24.5 million in cloud-based infrastructure costs, $24.2 million in outbound communication sending costs on behalf of our customers, $8.6 million in salaries and personnel expenses as a result of increases in headcount, and $2.8 million in

amortization related to capitalized software development costs.

The increase was offset by a decrease of approximately $16.1 million in stock-based compensation expense related to the vesting of restricted stock units (“RSUs”) in connection with our IPO in September 2023.

This increase was primarily due to increases of approximately $42.4 million in outbound communication sending costs on behalf of our customers, driven by increased

text message and WhatsApp usage, $31.0 million in cloud-based infrastructure costs, $8.6 million in salaries and personnel expenses resulting from increased headcount, $5.2 million in amortization from capitalized software costs, and $4.5 million in technology expenses.

Year Ended December 31,

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Gross profit for the year ended December 31, 2025 increased by $205.3 million or 28.7%, to $921.5 million compared to $716.2 million for the year ended December 31, 2024.

This increase was primarily due to revenue growth and a decrease in stock-based compensation expense.

This increase was primarily due to revenue growth, partially offset by higher cost of revenue driven by increased usage.

Selling and Marketing

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Selling and marketing expenses for the year ended December 31, 2025 increased by $102.0 million or 25.2%, to $506.2 million compared to $404.2 million for the year ended December 31, 2024.

This increase was primarily due to an increase of approximately $51.7 million in salaries and personnel expenses as a result of increases in headcount and the introduction of a company-wide bonus program, $12.7 million in marketing related services, $10.2 million in partnership-related expenses across our ecosystem, and $3.7 million in technology expenses.

The increase was offset by a decrease of approximately $67.0 million in stock-based compensation expense related to the vesting of RSUs in connection with our IPO in September 2023 and $2.1 million in restructuring expenses.

This increase was primarily due to increases of approximately $55.2 million in salaries and personnel expenses as a result of increased headcount, $14.5 million in marketing expenses associated with our advertising campaigns across multiple channels of media, $10.2 million in partnership-related expenses across our ecosystem, $8.8 million in stock-based compensation from the vesting of RSUs, $8.5 million in professional services, and $4.4 million in technology expenses.

Research and Development

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Research and development $ 291,209 $ 238,459 $ 52,750 22.1 %

Research and development costs for the year ended December 31, 2024 decreased by $23.7 million or 9.0%, to $238.5 million compared to $262.2 million for the year ended December 31, 2023.

This decrease was primarily due to a decrease of approximately $69.5 million in stock-based compensation expense related to the vesting of RSUs in connection with our IPO in September 2023 and $2.6 million in restructuring expenses.

The decrease was offset by an increase of approximately $42.2 million in salaries and related personnel expenses as a result of increases in headcount and the introduction of a company-wide bonus program, $4.5 million in technology expenses, and $1.2 million in professional services.

Research and development costs for the year ended December 31, 2025 increased by $52.8 million or 22.1%, to $291.2 million compared to $238.5 million for the year ended December 31, 2024.

This increase was primarily due to increases of approximately $22.6 million in salaries and related personnel expenses as a result of increased headcount, $17.5 million in stock-based compensation expense from the vesting of RSUs, $8.8 million in technology expenses, and $4.8 million in severance expense primarily related to restructuring costs.

General and Administrative

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General and administrative $ 191,804 $ 157,569 $ 34,235 21.7 %

General and administrative expenses for the year ended December 31, 2024 decreased by $36.7 million or 18.9%, to $157.6 million compared to $194.3 million for the year ended December 31, 2023.

This decrease was primarily due to a decrease of approximately $53.0 million in stock-based compensation expense related to the vesting of RSUs in connection with our IPO in September 2023 and a $6.1 million release in reserves due to tax filings in international jurisdictions.

The decrease was offset by an increase of approximately $10.4 million in salaries and personnel expenses as a result of increases in headcount and the introduction of a company-wide bonus program, $6.6 million in payment processing fees, $3.6 million in professional expenses, primarily attributed to expenses incurred to operate as a public company, and $2.2 million in technology expenses, primarily attributed to an increase in licenses as a result of the aforementioned increases in headcount.

General and administrative expenses for the year ended December 31, 2025 increased by $34.2 million or 21.7%, to $191.8 million compared to $157.6 million for the year ended December 31, 2024.

This increase was primarily due to increases of approximately $10.8 million in salaries and personnel expenses as a result of payroll taxes from increased

option exercises, $9.1 million in payment processing fees related to increased volume of customer transactions, $6.4 million related to tax obligations in multiple jurisdictions, $4.3 million in technology expenses, and $1.5 million in stock-based compensation expense from vesting of RSUs.

Year Ended December 31,

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($ in thousands)

Other income (expense), net $ 816 $ (470) $ 1,286 (273.6) %

Other income for the year ended December 31, 2024 increased by $1.3 million or 273.6%, to $0.8 million compared to $(0.5) million for the year ended December 31, 2023.

This increase was primarily due to favorable foreign exchange fluctuations.

Other (expense) income, net

$ (2,162) $ 816 $ (2,978) (365.0) %

Other (expense) income, net for the year ended December 31, 2025 decreased by $3.0 million or 365.0%, to $(2.2) million compared to $0.8 million for the year ended December 31, 2024.

This decrease was primarily due to unfavorable foreign exchange fluctuations.

Interest Income

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Interest income $ 39,402 $ 39,582 $ (180) (0.5) %

Interest income for the year ended December 31, 2024 increased by $15.5 million or 64.6%, to $39.6 million compared to $24.1 million for the year ended December 31, 2023.

This increase was primarily due to an increase in interest rates, greater cash balances due to our IPO, and the volume of newly opened interest-bearing accounts, including money market funds, as part of our diversified cash management strategy.

Interest income for the year ended December 31, 2025 decreased by an immaterial amount compared to the year ended December 31, 2024.

Provision for Income Taxes

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Provision for income taxes $ 1,250 $ 2,462 $ (1,212) (49.2) %

Income tax expense for the year ended December 31, 2024 increased by $1.3 million or 106.5% to $2.5 million compared to $1.2 million for the year ended December 31, 2023.

The increase was primarily due to the increase in profits before taxes in our international entities and an increase in our U.S.

taxable income.

Income tax expense for the year ended December 31, 2025 decreased by $1.2 million or 49.2% to $1.2 million compared to $2.5 million for the year ended December 31, 2024.

This decrease was primarily due to excess tax deductions related to stock-based compensation.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities.

In doing so, we review and analyze our primary sources and uses of liquidity to include cash balances on hand and cash flows from operations.

Since our inception through December 31, 2024, we have financed our operations primarily through sales of equity securities and payments received from our customers.

In September 2023, we completed our IPO, which resulted in aggregate cash proceeds of approximately $320.1 million, after deducting approximately $17.7 million in underwriting discounts and commissions and $7.4 million in offering-related expenses.

As of December 31, 2024, our principal sources of liquidity included cash, cash equivalents, and restricted cash totaling $882.6 million, with such amounts held for working capital purposes.

In doing so, we review and analyze our primary sources and uses of liquidity, including cash balances on hand and cash flows from operations.

Since our inception through December 31, 2025, we have financed our operations primarily through payments received from our customers and sales of equity securities, including the completion of our IPO in September 2023.

As of December 31, 2025, our principal sources of liquidity included cash, cash equivalents, and restricted cash totaling $1.1 billion, with such amounts held for working capital purposes.

Our cash equivalents were comprised of $325.9 million in money market funds.

Our primary cash needs are for personnel-related expenses, selling and marketing expenses, and third-party cloud infrastructure expenses.

Our primary cash needs are for personnel-related expenses, selling and marketing expenses, third-party cloud infrastructure expenses, and outbound communication sending costs.

Based upon our current levels of operations, we believe our operating cash flows provide sufficient liquidity to support liquidity and financing needs for at least the next twelve months.

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(1) Restricted cash related to our required collateral to fund payroll and credit card obligations in our Australia entity.

Working capital consists of current assets (including cash, current portion of restricted cash, accounts receivable, current deferred contract acquisition costs, current prepaid expenses and other current assets), less current liabilities (including accounts payable, accrued expenses, current lease liabilities, and deferred revenue, all of which is current).

Statement of Cash Flows

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Net cash provided by operating activities of $218.0 million for the year ended December 31, 2025 was primarily attributable to a net loss of $31.8 million, adjusted for non-cash charges of $287.4 million and net cash outflows of $37.6 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $135.2 million of stock-based compensation expense, $52.9 million of prepaid marketing expense amortization, $19.8 million of deferred contract acquisition cost amortization, $17.7 million of depreciation and amortization expense, and $12.7 million of operating lease costs.

Net cash outflows from changes in operating assets and liabilities primarily consisted of a $34.4 million increase in deferred contract acquisition costs related to increase in

sales commissions resulting from our increase in revenues, a $20.8 million increase in accounts receivable due to an increase in customer billings, a $17.3 million increase in prepaid expenses and other noncurrent assets, and a $16.7 million decrease in operating lease liabilities due to payments related to our operating lease obligations.

The cash outflow was offset by cash inflows primarily from a $36.3 million net increase in accrued expenses and accounts payable due to timing of vendor payments and introduction of the company-wide bonus program and a $24.4 million increase in deferred revenue resulting from increased billings for subscriptions.

Non-cash charges primarily consisted of $162.0 million of stock-based compensation expense, $52.9 million of prepaid marketing expense amortization, $29.9 million of deferred contract acquisition cost amortization, $24.8 million of operating lease costs, and $18.6 million of depreciation and amortization expense.

Net cash outflows from changes in operating assets and

liabilities primarily consisted of a $54.3 million increase in deferred contract acquisition costs related to higher sales commissions resulting from our increased revenues, a $23.8 million decrease in operating lease liabilities due to payments on our operating lease obligations, a $19.7 million increase in accounts receivable due to higher customer billings, and a $6.8 million increase in prepaid expenses and other noncurrent assets.

The cash outflow was offset by cash inflows primarily from a $38.7 million increase in deferred revenue resulting from increased billings for subscriptions and a $29.6 million net increase in accrued expenses and accounts payable due to timing of vendor payments.

Net cash provided by operating activities of $166.0 million for the year ended December 31, 2024 was primarily attributable to a net loss of $46.1 million, adjusted for non-cash charges of $239.8 million and net cash outflows of $27.7 million from changes in operating assets and liabilities.

Net cash outflows from changes in operating assets and liabilities primarily consisted of a $26.9 million increase in deferred contract acquisition costs related to increase in sales commissions resulting from our increase in revenues, a $15.2 million decrease in operating lease liabilities due to payments related to our operating lease obligations, and a $12.9 million increase in accounts receivable due to an increase in customer billings.

The cash outflow was offset by cash inflows primarily from a $31.2 million net increase in accrued expenses and accounts payable due to timing of vendor payments and the implementation of a company-wide sabbatical program and a $15.0 million increase in deferred revenue resulting from increased billings for subscriptions.

Net cash outflows from changes in operating assets and liabilities primarily consisted of a $34.4 million increase in deferred contract acquisition costs related to higher sales commissions resulting from our increased revenues, a $20.8 million increase in accounts receivable due to higher customer billings, a $17.3 million increase in prepaid expenses and other noncurrent assets, and a $16.7 million decrease in operating lease liabilities due to payments on our operating lease obligations.

These cash outflows were partially offset by cash inflows primarily from a $36.3 million net increase in accrued expenses and accounts payable due to the timing of vendor payments and the implementation of a company-wide bonus program and a $24.4 million increase in deferred revenue resulting from increased billings for subscriptions.

Investing Activities

Net cash used in investing activities of $17.2 million for the year ended December 31, 2024 consisted of $11.3 million of capitalized software costs and $5.9 million purchases of property and equipment.

Net cash used in investing activities of $9.4 million for the year ended December 31, 2023 consisted of $5.7 million of capitalized software costs and $3.7 million purchases of property and equipment.

Net cash used in investing activities of $30.5 million for the year ended December 31, 2025 consisted of $19.0 million of capitalized software costs, $9.5 million of purchases of property and equipment, and $2.0 million of business acquisition costs.

Net cash used in investing activities of $17.2 million for the year ended December 31, 2024 consisted of $11.3 million of capitalized software costs and $5.9 million of purchases of property and equipment.

Financing Activities

Net cash used in financing activities of $5.8 million for the year ended December 31, 2024 primarily consisted of approximately $23.7 million used for the payment of employee tax obligations related to the vesting of stock-based compensation awards offset by $9.7 million of proceeds from the exercise of stock options and $8.1 million of proceeds from the employee stock purchase plan.

Net cash provided by financing activities of $242.7 million for the year ended December 31, 2023 primarily consisted of approximately $320.1 million of our IPO proceeds net of issuance costs and $4.2 million of proceeds from the exercise of common stock options offset by $81.6 million used for the payment of employee tax obligations related to the net share settlement of stock-based compensation awards.

Net cash used in financing activities of $4.5 million for the year ended December 31, 2025 primarily consisted of approximately $18.0 million used for the payment of employee tax obligations related to the vesting of stock-based compensation awards offset by $11.3 million of proceeds from the Company’s 2023 Employee Stock Purchase Plan (the “ESPP”) and $2.2 million of proceeds from the exercise of stock options.

Net cash used in financing activities of $5.8 million for the year ended December 31, 2024 primarily consisted of approximately $23.7 million used for the payment of employee tax obligations related to the vesting of stock-based compensation awards offset by $9.7 million of proceeds from the exercise of common stock options and $8.1 million of proceeds from the ESPP.

Cash Management

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We expect a continued increase in our cash balances as our business continues to grow.

We expect to continue to diversify our cash management strategy to primarily include money market funds, highly-liquid debt instruments

We expect to continue to diversify our cash management strategy to primarily include money market funds, highly-liquid debt instruments of the U.S.

government and its agencies, senior corporate bonds, and commercial paper to reduce our global exposure on banking deposits.

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Other Contractual Obligations

We enter into various noncancellable agreements with marketing vendors and various service providers.

We enter into various noncancellable agreements with marketing vendors and service providers.

Our noncancellable obligations as of December 31, 2025 were $929.2 million, with $215.0 million payable within 12 months.

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Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included elsewhere in this filing, which have been prepared in accordance with GAAP.

In preparing the consolidated financial statements, we make estimates and judgements that affect the reported amounts in the consolidated financial statements and related footnote disclosures included elsewhere in this filing.

In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts in the consolidated financial statements and related footnote disclosures included elsewhere in this filing.

Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

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By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.

The critical accounting estimates that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements included elsewhere in this filing include those noted below.

The critical accounting estimates that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements include those noted below.

Revenue Recognition

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The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for these services.

Our SaaS subscription agreements with customers offer personalized email and SMS marketing services through a cloud-based software platform, as well as add-ons, such as reviews and our CDP offering.

Our SaaS subscription agreements with customers offer access to our cloud-based software platform, which enables personalized email, text messaging, WhatsApp messaging, and mobile push marketing, as well as customer service offerings, marketing analytics, CDP offerings, and reviews.

Subscription fees are generated from customers accessing our hosted platform services and our subscription agreements do not provide our customers with the right to take possession of our software.

Contractual subscriptions for customers generally auto-renew on either a monthly, quarterly, or annual basis, and customers may elect not to renew by providing at least five days’ advance notice for contracts on a monthly billing cycle and thirty days’ advance notice for contracts with any other billing cycles.

Subscription pricing is determined based on a customer’s profile count and monthly messaging quantities based on a tiered pricing structure and is considered fixed.

Variable consideration

in our contracts is not material but represents the overage charges incurred by customers who exceed their allotments.

We recognize revenue under the core principle to depict the transfer of control to our customers in an amount reflecting the consideration to which we expect to be entitled.

Contractual subscriptions for customers generally auto-renew on either a monthly, quarterly, or annual basis, and customers may elect not to renew by providing at least five days’ advance

notice for contracts on a monthly billing cycle and thirty days’ advance notice for contracts with any other billing cycles.

Subscription pricing is determined based on a customer’s profile count and messaging quantities based on a tiered pricing structure and is considered fixed.

Variable consideration in our contracts is not material but represents the overage charges incurred by customers who exceed their allotments.

We recognize revenue under the core principle that depicts the transfer of control to our customers in an amount reflecting the consideration to which we expect to be entitled.

We account for individual performance obligations separately if they have been determined to be distinct, and we allocate the transaction price to the distinct performance obligations on a relative stand-alone selling price basis.

The determination of stand-alone selling price uses judgments and estimates that are based upon the prices at which we separately sell subscriptions.

If not considered distinct, the goods or services promised by us are combined and accounted for as a combined performance obligation.

If not considered distinct, the goods or services promised by us are combined and accounted for as a single performance obligation.

Determining the distinct performance obligations in a contract requires judgment.

Typically, our SaaS subscription agreements consist of a single performance obligation, and revenue is recognized over time as the performance obligation is satisfied.

Our single performance obligation primarily consists of access to our platform and professional services.

Our single performance obligation primarily consists of access to our platform and related professional services.

Costs to Obtain Customers

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The prepaid marketing expense asset is amortized into selling and marketing expense on a straight-line basis over the expected benefit period, which we determine to be the seven-year term of the collaboration agreement as the core activities and deliverables of the collaboration agreement will remain in place for seven years and Shopify does not have the right to terminate the collaboration agreement for convenience.

Under the stock purchase agreement, we issued and sold shares of common stock to Shopify and provided an investment option which allows Shopify to purchase additional shares of common stock at a fixed price, exercisable

at any time at Shopify’s option until July 28, 2030.

We determined that the purchase price equals the fair market value of the instruments issued as Shopify was an outside investor at the time we entered into the stock purchase agreement and the purchase represented an arms-length transaction.

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however, all equity grants issued subsequent to our IPO are made pursuant to our 2023 Stock Option and Incentive Plan (“2023 Plan”), which was approved by our board of directors effective as of September 19, 2023.

During the year ended December 31, 2024, stock-based compensation awards issued were in the form of RSUs subject to only service-based vesting conditions under our 2023 Plan.

During the year ended December 31, 2023, stock-based compensation awards issued were in the form of RSUs subject to both service-based and performance-based vesting conditions under our 2015 Plan and RSUs subject to only service-based vesting conditions under our 2023 Plan.

During the years ended December 31, 2025 and 2024, stock-based compensation awards issued were in the form of RSUs subject to only service-based vesting conditions under our 2023 Plan.

Stock-based compensation awards that contain only service-based vesting conditions are recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award.

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Recent Accounting Pronouncements

Summary of Significant Accounting Policies in the notes to our consolidated financial statements included elsewhere in this filing for a discussion about new accounting pronouncements adopted as of the date of this Annual Report on Form 10-K.

Summary of Significant Accounting Policies in the notes to our consolidated financial statements included elsewhere in this filing for a discussion of new accounting pronouncements adopted as of the date of this Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis