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With the exception of Klaviyo, sustaining momentum within increasingly demanding markets remains a challenge for the cohort. Over 80% of Klaviyo’s top fifty customers use SMS and it will end the year with $1B in revenue—a first for the company. Sinch and LINK beat their gross profit and EBITDA targets but also showed that aggregation is a commodity business. Both companies remain bullish on RCS but don’t see any material lift in revenues from the medium. Upland showed new logos, though not enough to overcome two years of consistent revenue decline. In terms of financial performance, all companies did what they promised they’d do. However, after last week’s spectacular results—or perhaps because of it—this week’s earnings release felt like a low-energy after-party.
Disclaimer: This is not stock advice. Everything about the messaging business interests me, including asset pricing. Use your judgment to invest your money.
The Good
Hitting Financial Goals
Klaviyo: Like Twilio and Bandwidth, Klaviyo blew past its top-line revenue guidance, coming in at $235 million for the quarter with 34% YoY growth. With the year’s biggest event, Black Friday / Cyber Monday (BFCM), still ahead and at least 5% QoQ growth maintained throughout the year, Klaviyo is on track to close out at $1B in yearly revenue for the first time. There was even banter on the earnings call about a pathway to $6B in revenue.
Klaviyo’s product-led growth engine is thriving, even as its core customer segment, the SMB, shows softness (more on this later). Meanwhile, it reported a 54% increase in customers spending $50K or more in ARR. With 110% net revenue retention (NRR), a 16% increase in new customers, and SMS as a powerful cross-selling vehicle, there’s much to celebrate at Klaviyo. The company also reports that its freemium strategy is working.
Sinch: On the positive side, Sinch is barrel-rolling through its efficiency push. Not only has it exceeded its FY24 savings target, but it also met or exceeded its margin expansion goals. The Americas continue to contribute 60% of its gross profit (GP), while India has been increasing its contribution to GP within the APAC region. In fact, while the Americas grew 1% in GP, APAC grew 12%. Sinch also continued to deleverage its balance sheet from M&A-fueled debt.
However, the company faces significant headwinds. While the applications business (MessageMedia, SimpleTexting, MailGun, etc.) is growing globally at 6%, network connectivity (legacy Inteliquent) was impacted by 8YY reform, resulting in a 5% decline in GP. The API business is also encountering heightened competition for the prized ISV and enterprise markets.
The cross-sell initiative that kicked off earlier this year is showing positive results. Customers who started with email are now buying SMS (like with Klaviyo), and the single Sinch ID initiative has opened up even more cross-selling opportunities. Early signs suggest that self-serve sales might be working.
LINK: The focus on profitability led to organic EBITDA growth of 10%, with LINK, like Sinch, hitting or beating profitability targets. LINK also showed solid CPaaS growth, with RCS and WhatsApp driving 40% of all signed contracts. As its CEO put it, “Revenue is easy to grow.” and went on to explain their profitability focus. There was some customer churn—one due to bankruptcy, others from LINK intentionally stepping away from unprofitable business.
Both Sinch and LINK found their lack of sales growth under a harsh spotlight, especially after the stellar results Twilio and Bandwidth posted.
Upland: Upland delivered exactly as expected, even with its revenue decline. The company brought in 122 new logos and expanded 300 existing accounts, though core organic growth (which wasn’t defined) didn’t make up for the revenue decline.
A Value Product Sells Anywhere; a Commodity Product, Everyone Sells
Klaviyo: Klaviyo’s earnings call underscores a clear growth trajectory with an ambitious international focus. It’s rolling out SMS in eighteen countries, adding new regions like Norway, Denmark, Sweden, Finland, Italy, and Portugal, along with language support for Korean, Spanish, and Italian. This global push is underpinned by an opportunistic expansion strategy, strengthened by ample post-IPO cash reserves.
Klaviyo has outlined four key growth areas:
- Expanding the SMB customer base
- Increasing international reach
- Moving into mid-market and enterprise segments
- Broadening its product portfolio
It is focused on core CDP use cases like customer analytics and data governance, and new features like SMS reviews. RFM analysis remains a core feature, and the company is adding twenty new applications to its integration ecosystem, including Canva, Olo, and OpenTable. The strategy also includes social media integration, with Klaviyo leveraging existing channels like WhatsApp as an immediate engagement tool for businesses.
Klaviyo’s land-and-expand model is evident in its enterprise strategy, where customers often start with email before later transferring their SMS business over. This raises a key question: Who’s losing ground to Klaviyo’s expanded offerings?
Morgan Stanley’s Keith Weiss highlighted a pertinent point about NRR pressures next year, flagging potential challenges in retention, expansion, or cross-sell.
LINK and Sinch: LINK and Sinch demonstrated discipline in the aggregation business, with both companies walking away from low-margin deals—Sinch particularly in the Middle East. Global messaging remains a noisy, competitive marketplace with less sticky customers. Both companies are working to expand in the enterprise segment, with LINK reporting an 8% increase in enterprise business.
The Interesting
An Unthawing of M&A Activity?
LINK: It leads the cohort in inorganic growth. For example, the acquisition of Net Real Solutions expanded LINK’s UK market share to 26%. Overall, M&A is expected to drive growth by up to 10% this year. The company currently has twelve targets under consideration, with four already in due diligence.
Klaviyo: Reaching $1B in revenue marks a major growth inflection point for Klaviyo. Perhaps this is why the company has shown a newfound openness to M&A, though it leans toward integrators or existing partners as primary targets.
Sinch: With the bulk of its efficiency push behind it, Sinch too indicated an openness to M&A as a source of inorganic growth.
The Unknown
When Will RCS Excitement Translate into Revenue?
Sinch, like LINK, Twilio, Bandwidth, and Klaviyo, is clear-eyed about the timeline—RCS isn’t expected to drive significant revenue anytime soon. What it does do, however, is help defend their base. Sinch’s approach to RCS rollout seems to follow a phased strategy: Phase one is all about sending richer, more engaging messages, setting the stage for phase two, where conversations shift from single messages to true interactive sessions. It’s building toward a more dynamic messaging future, even if the payoff is still on the horizon. Once the operators in US, Germany, and other economies roll out RCS support, everyone will be ready to pounce on the opportunity.
How Will 2025 Look?
Looking ahead to 2025, Sinch anticipates a soft start to the year, despite reporting a healthy pipeline and strong bookings. LINK is betting that RCS will soon drive meaningful commercial transactions and is closing new contracts in Europe, where adoption is expected to rise. The US market remains a challenge, with RCS momentum lagging behind Europe, where key countries like Spain, France, the UK, and soon Germany are gearing up to support both Google and iPhone RCS capabilities.
Klaviyo is also cautious about 2025, refraining from issuing guidance for next year. The company continues to see softness in SMB acquisition. While it is well positioned in a value-driven market, there is no expectation that pressures on SMB spending will ease anytime soon.
This cautious outlook aligns this week’s cohort with that of last week’s: nothing has changed in the way 2025 will look, and as such, they cannot anticipate how the year will unfold.
Finally
These companies wouldn’t typically be grouped in the same cohort for a purely financial discussion. One could argue their margin profile, customer spread, product mix, and geographic reach vary. This is a messaging discussion, however, with finance being one aspect. It is a conversation about the infrastructure—who’s building it, who’s using it, who’s sending, and who’s managing the send. Messaging, voice, email and other forms of communications, are as complex as they are pervasive and resilient. They demand that we examine all layers of the value stack to sharpen our situational awareness.