Klaviyo (KVYO -2.50%) is a recent IPO (initial public offering) stock that might be hitting its stride. Its share price slid following a hot IPO in September, but investors have been slowly returning to the stock. One reason for that is likely a reevaluation of its first set of quarterly results as a publicly traded company. Let's take a look at those earnings -- released Nov. 7 -- and tease out why the market might be getting more optimistic about the company.

That's one nice top-line pop

For its third quarter, Klaviyo, which specializes in marketing and communications automation for businesses, booked total revenue of just under $176 million. This represented year-over-year growth of 48%. This rise was on the back of a roughly 24% increase in customer count to more than 135,000.

On the downside, the highly specialized tech company's net loss ballooned to more than $297 million ($1.24 per share) for the period compared to the year-ago deficit of less than $24 million. On average, analysts tracking the stock were expecting only $167 million and a bit of change for revenue, so Klaviyo notched a clear beat on that line item. No reliable consensus estimates for net loss were available.

What drove the net loss up so sharply was stock-based compensation, which was lofty. Stripping out these outlays (plus other line items, like employer payroll tax on employee stock transactions and amortization of prepaid marketing) reveals Klaviyo actually became more disciplined with costs. After such adjustments, spend on the three categories combined only climbed 19% higher as revenue rose by that near-50%.

Other metrics portend a bright future for the company. Clients tend to stick with its services, as evidenced by the 119% net revenue retention rate during the quarter. This wasn't a fluke, as the figure has landed well above the 100% mark for 10 quarters in a row.

Another positive is the number of big-spender clients. During the quarter, the number of customers generating annual recurring revenue (ARR) of more than $50,000 was 1,699, nearly double the 899 in last year's third quarter.

Several solid ways to grow

The ARR statistics illustrate the significant growth opportunities Klaviyo has in front of it. The company offers tiered subscription plans based on the number of consumer profiles a client has stored on Klaviyo's platform.

Assuming said client stays with Klaviyo (and those retention rates indicate this is likely), all things being equal, that profile base will expand. As it does, the client should move into higher Klaviyo tiers. While the $50,000-plus ARR club is growing, it's small, and there's vast room for more members.

International expansion, meanwhile, is also a growth lever. In the third quarter, 31% of the company's revenue came from outside the U.S., a one-percentage point uptick from the same period of 2022. That means clients abroad brought in nearly $20 million more this third quarter than last.

Earth is full of all sorts of enterprises that can use a Klaviyo-style marketing and customer engagement boost. Anyone with a bit of capital, no matter where they're based, can throw a business online. The trick is to be competitive in an environment where anyone else sufficiently equipped can do so, too.

Finally, with the so far encouraging client loyalty Klaviyo has managed to establish, it has some scope to raise its rates without fear of extensive customer exodus. It did so at the end of the third quarter, so its top line should see a nice quarter-over-quarter jump on that basis alone. Investors would be well advised to watch those retention rates going forward, though.

I should also note that a major player in the e-commerce universe is a believer in Klaviyo. In mid-2022, Shopify provided the company with a $100 million strategic investment. Since then, it has stayed on as an important institutional shareholder. It's also a partner, as the two companies signed a collaboration agreement.

Don't fear the potential revenue slowdown

With its latest results, Klaviyo proffered guidance for both its current (fourth) quarter and for the entirety of 2023. The revenue estimates for the former might have initially caused some concern among investors, as the company forecast $195 million to $197 million for the period. This would represent year-over-year growth of 36% at most, some distance down from that 48% of the third quarter.

Zooming out, the company says the top line for the full year should land at $691.5 million to $693.5 million, for a best-case growth number of 47%. The company did not provide net income projections.

Slowing growth is always a concern, but as a newly minted public entity, Klaviyo is still finding its sea legs to a degree. I like this company's prospects, as it satisfies a large need for businesses and appears to do it well. I'm also encouraged by the numerous ways it can grow its operations. I classify Klaviyo as a stock to own, albeit as a long-term play that might have a few more bumps on its road to sustained profitability.