Financial Performance - Total revenue for the three months ended March 31, 2025, was $196.3 million, representing a year-over-year growth of 19% from $165.1 million in the same period of 2024[104] - Revenue for the three months ended March 31, 2025, was $196.3 million, a 19% increase from $165.1 million in the same period of 2024[136] - Gross profit increased to $166.4 million, with a gross margin of 85% for Q1 2025, up from 84% in Q1 2024[141] - Non-GAAP income from operations for the three months ended March 31, 2025, was $46.4 million, compared to $21.8 million in 2024[118] - Free cash flow for the three months ended March 31, 2025, was $53.9 million, an increase from $38.7 million in 2024[120] - The company incurred operating losses of $10.4 million for the three months ended March 31, 2025, compared to $32.2 million in 2024[104] Customer Metrics - The number of customers contributing more than $5,000 in annual recurring revenue (ARR) increased to 23,275, a growth of 13% from 20,549 in 2024[108] - Monthly subscriptions represented 14% of ARR as of March 31, 2025, down from 16% in 2024[111] - The net dollar retention rate decreased to 105% as of March 31, 2025, down from 106% in the same period of 2024, primarily due to lower expansion within existing customers[112] - The net dollar retention rate was 105% as of March 31, 2025, reflecting expansion within existing customers despite a decrease from 106% in the prior year[140] Expenses - Research and development expenses rose by $5.3 million, or 15%, totaling $40.0 million for Q1 2025, driven by increased personnel-related costs[144] - Sales and marketing expenses decreased by $5.5 million, or 6%, totaling $89.2 million for Q1 2025, primarily due to lower stock-based compensation and marketing costs[145] - General and administrative expenses increased by $5.2 million, or 12%, totaling $47.2 million for Q1 2025, mainly due to higher stock-based compensation and personnel-related costs[146] - Total operating expenses for Q1 2025 were $176.8 million, a 3% increase from $171.4 million in Q1 2024[143] Cash Flow and Liquidity - Net cash provided by operating activities for the three months ended March 31, 2025, was $58.0 million, an increase from $40.6 million in the same period of 2024[157] - As of March 31, 2025, the company had cash and cash equivalents of $594.2 million and marketable securities of $401.1 million, totaling $995.3 million in liquidity[152] - The company reported an accumulated deficit of $3.7 billion as of March 31, 2025[152] - Net cash used in financing activities for the three months ended March 31, 2025, was $130.3 million, primarily due to share repurchases[162] - The company repurchased 6.7 million shares of Class A common stock for $111.8 million under its share repurchase program, with $272.7 million remaining for future repurchases as of March 31, 2025[154] - The company had net cash provided by investing activities of $46.2 million for the three months ended March 31, 2025, mainly from maturities and redemptions of marketable securities[160] Market and Economic Conditions - The company expects macroeconomic pressures to continue impacting demand for its products and services in the foreseeable future[106] - A 10% adverse change in foreign currency exchange rates could result in a gain or loss of approximately $9.2 million[167] - As of March 31, 2025, the total notional amount of outstanding designated foreign currency forward contracts was $62.7 million[169] - A hypothetical 100 basis points movement in interest rates would not have a material effect on the combined market value of cash and cash equivalents and marketable securities[172] Other - The acquisition of D42 Parent, Inc. in 2024 expanded the company's product offerings to include software licenses with associated maintenance[103] - Interest and other income, net, was $13.0 million for Q1 2025, a slight increase of 1% compared to $12.8 million in Q1 2024[149] - Restructuring charges of $0.4 million were recorded for Q1 2025, related to the restructuring plan initiated in November 2024[148] - For the three months ended March 31, 2025, the provision for income taxes was $3.9 million, a decrease of 2% from $4.0 million in the same period of 2024[151]

Freshworks Reports First Quarter 2025 Results San Mateo, Calif. – April 29, 2025 – Freshworks Inc. (Nasdaq: FRSH), the provider of people-first AI service software, today announced financial results for its first quarter ended March 31, 2025. "Freshworks had another fantastic quarter, outperforming our previously provided financial estimates in Q1 with revenue growing 19% year- over-year to $196.3 million, operating cash flow margin of 30% and adjusted free cash flow margin of 28%," said Dennis Woodside, Ch ...

Core Viewpoint - Freshworks Inc. reported strong financial results for Q1 2025, with a revenue increase of 19% year-over-year, driven by the adoption of its AI service software solutions by businesses [2][6]. Financial Summary - Total revenue for Q1 2025 was $196.3 million, up from $165.1 million in Q1 2024, marking a 19% growth [6]. - GAAP loss from operations improved to $(10.4) million from $(32.2) million in the same quarter last year [6]. - Non-GAAP income from operations was $46.4 million, compared to $21.8 million in Q1 2024 [6]. - GAAP net loss per share was $0.00, an improvement from $(0.08) in Q1 2024 [6]. - Non-GAAP diluted net income per share increased to $0.18 from $0.10 year-over-year [6]. - Net cash provided by operating activities was $58.0 million, up from $40.6 million in Q1 2024 [6]. - Adjusted free cash flow reached $55.4 million, compared to $38.7 million in the prior year [6]. Key Metrics and Business Highlights - The number of customers contributing more than $5,000 in ARR increased by 13% year-over-year to 23,275 [6]. - The net dollar retention rate was 105%, slightly down from 106% in Q1 2024 [6]. - Freshworks onboarded several new customers, including All3Media and Broad River Retail [6]. - A new global partner program was launched to enhance offerings for resellers and service delivery [6]. Financial Outlook - For Q2 2025, revenue is expected to be between $197.3 million and $200.3 million, reflecting a year-over-year growth of 13% to 15% [7]. - Full-year 2025 revenue is projected to be between $815.3 million and $824.3 million, with a similar growth rate [7]. - Non-GAAP income from operations for Q2 2025 is estimated to be between $27.8 million and $29.8 million [7].

Core Viewpoint - Freshworks Inc. is set to announce its financial results for the first quarter of 2025 on April 29, 2025, with a live audio webcast to discuss the results and business highlights [1][2]. Group 1: Financial Results Announcement - The financial results for the first quarter ended March 31, 2025, will be announced after market close on April 29, 2025 [1]. - A live audio webcast will take place at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on the same day [2]. - The webcast will be accessible via Freshworks' investor relations website, and a replay will be available afterward [2]. Group 2: Company Overview - Freshworks Inc. specializes in uncomplicated service software aimed at enhancing customer and employee experiences [3]. - The company serves over 72,000 clients, including notable names like Bridgestone, New Balance, Nucor, S&P Global, and Sony Music [3]. - Freshworks emphasizes a people-first approach to AI, which aims to improve employee effectiveness and organizational productivity [3].

Core Insights - Freshworks has launched a new global partner program aimed at resellers and service delivery partners to enhance customer value and accelerate time to value [1][2] - The program is designed to simplify the business process for partners, offering flexible monetization options and a quicker return on investment [2] Group 1: Program Features - The revamped partner program includes over 500 transacting partners, facilitating Freshworks' expansion in Asia, Latin America, North America, and Europe [2] - Partners can choose from various sales engagement models, including one-time commissions or ongoing revenue opportunities as authorized resellers or service providers [5] - A new offering for service delivery partners includes training, certifications, and direct engagement with Freshworks' sales teams [5] Group 2: Partner Benefits - Partners benefit from a people-first approach that empowers them to manage the full customer lifecycle with specialized enablement and direct access to Freshworks experts [5] - Premier resellers receive recurring margins on sales, control over billing and renewals, and enhanced customer relationships [5] - Increased regional sales support, marketing development funds, and technical enablement training are provided to partners to ensure their success [5] Group 3: Partner Testimonials - Climb Channel Solutions recognized Freshworks as a leader in the ITSM market, enabling them to deliver innovative solutions for digital transformation [4] - Gorilla Services emphasized the alignment of values with Freshworks, allowing them to deliver results to European customers quickly [4] - Whitlock appreciated the clarity and structure of the program, which supports their go-to-market strategy [4]

Group 1 - Freshworks Inc. is positioned as a strong investment opportunity for the year, particularly in serving mid-market organizations [1] - The company is expected to benefit from increased investments in Customer Experience (CX) and Employee Experience (EX) by these organizations [1] - The analysis is backed by the author's extensive experience in financial markets and institutions, focusing on undervalued companies [1]

Group 1 - Freshworks Inc. (FRSH) has experienced a significant decline of 18.8% over the past four weeks, but it is now in oversold territory, indicating a potential trend reversal [1] - The Relative Strength Index (RSI) for FRSH is currently at 20.42, suggesting that the heavy selling pressure may be exhausting itself [5] - Analysts have raised their earnings estimates for FRSH, with a 21.3% increase in the consensus EPS estimate over the last 30 days, which typically correlates with price appreciation [6] Group 2 - FRSH holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a turnaround [7]

Core Viewpoint - Freshworks Inc. (FRSH) has shown significant stock performance, rallying 41.4% over the past six months, outperforming key indices and sectors [1] Company Overview - Freshworks is a leading provider of AI and SaaS-based customer and employee experience solutions, serving over 72,000 companies globally, and is gaining market share by replacing costly legacy systems [3] - The company offers a wide range of solutions including IT service management, IT asset management, IT operations management, enterprise service management, and customer service management, which allows for effective upselling and cross-selling [3] Business Segment Performance - The employee experience (EX) segment grew 35% year over year in Q4 2024, surpassing $400 million in annual recurring revenues [4] - The customer experience (CX) segment, which includes products like Freshdesk and Freshsales, grew 7% year over year, accounting for over $360 million in annual recurring revenues in Q4 2024 [5] Revenue and Earnings Projections - Freshworks anticipates revenue for 2025 to be in the range of $809-$821 million, with a Zacks Consensus Estimate of $815.1 million, indicating a year-over-year growth of 13.14% [6] - The expected bottom line for 2025 is projected to be between 52-54 cents per share, with a Zacks Consensus Estimate of 53 cents per share, reflecting a year-over-year growth of 23.3% [7] Competitive Positioning - Freshworks has significant room for expansion in the customer relationship management space, targeting customers of legacy vendors like Oracle and SAP, as well as competing against ServiceNow and Atlassian in the employee experience suite market [9][10] - The company is preferred by organizations due to its unified suite that reduces the total cost of ownership compared to maintaining separate systems, thus avoiding integration challenges [11] Conclusion - Freshworks is rapidly capturing market share in both customer relationship management and employee experience sectors, driven by strong traction in its AI solutions, making it an attractive investment opportunity for long-term rewards [12]

Core Insights - Freshworks has announced a strategic partnership with Unisys to resell its IT Service Management (ITSM) solutions, including Freshservice and Device42, targeting the mid-market segment [1][2] - The collaboration aims to provide a fresh approach to IT services, focusing on ease of use and rapid deployment to enhance customer experiences [2][4] - Unisys, as a large-scale Managed Service Provider (MSP), will leverage its global presence and expertise to support Freshworks' expansion into mid-size and large enterprise markets [2][4] Company Overview - Freshworks Inc. is recognized for its people-first AI service software, serving over 72,000 companies, including notable clients like American Express and Sony [6] - Unisys is a global technology solutions provider with a diverse portfolio, including cloud, AI, and digital workplace solutions, operating in over 120 countries [7] Partnership Impact - The partnership is expected to enhance the operational capabilities of clients by delivering innovative ITSM solutions, thereby driving significant value [4] - A recent success story includes a U.S. midsized industrial company that transitioned to Freshservice from its previous ITSM provider, achieving a live deployment in under 12 weeks [3]

Financial Performance - The company reported net losses of $137.4 million and $95.4 million for the years ended December 31, 2023 and 2024, respectively, with an accumulated deficit of $3.7 billion as of December 31, 2024[65]. - The company increased operating expenses to $745.7 million in 2024 from $663.2 million in 2023, while continuing to report a net loss of $95.4 million[93]. - The company relies heavily on a limited number of customers for a significant portion of its revenue, making it vulnerable to fluctuations in those relationships[228]. - The company has foreign tax credits of $8.1 million that will begin to expire in 2027[202]. - The effective tax rate may increase due to new tax laws or regulations, which could adversely affect the company's financial performance[205]. Growth and Market Conditions - The company has experienced significant growth recently, but future growth rates may decline due to factors such as macroeconomic conditions and market maturation[67]. - Future growth is at risk due to disruptive technologies, particularly in AI, necessitating additional investment in proprietary datasets and machine learning systems[81]. - The company must attract new customers and convert trial users to paying customers to achieve revenue growth and profitability[78]. - The competitive landscape is rapidly evolving, with significant competition from both established and emerging companies, which may affect market share and pricing strategies[86][88]. - The company faces risks from larger organizations developing or acquiring their own tools, which could reduce demand for its products[141]. Customer Retention and Sales Strategy - The company relies heavily on customer retention and subscription renewals, with any decline in retention potentially harming future operating results[64]. - Subscription-based revenue model is critical, with customer retention directly impacting future operating results; any decline in renewal rates could harm revenue growth[83]. - The company has experienced increased churn rates, particularly among small and mid-sized business customers, which may negatively affect financial performance[83]. - The typical sales cycle for mid-market and enterprise customers is approximately 130 to 150 days, compared to 30 days for small and medium-sized business (SMB) customers[77]. - Maintaining successful relationships with channel partners is essential for revenue growth; the company has over 500 non-exclusive partners[97]. Operational Risks and Challenges - The company has a limited operating history at its current scale, making it difficult to evaluate future prospects and increasing operational risks[70]. - Macroeconomic uncertainties, including inflation and supply chain disruptions, have adversely affected the business and may continue to do so[73]. - The company faces intense competition for qualified personnel, particularly in AI and machine learning, which may hinder future growth if recruitment efforts are unsuccessful[101]. - The company is susceptible to various cybersecurity threats, including ransomware attacks, which can lead to significant operational interruptions and reputational harm[107]. - The company faces risks related to the use of generative AI technologies, which could lead to leaks of sensitive information and adversely affect business operations[121]. Regulatory and Compliance Issues - The company is subject to stringent data protection laws, which could lead to regulatory investigations, fines, and reputational harm if not complied with[144]. - The implementation of India's Data Protection Act could impose significant financial burdens and compliance costs on the company[156]. - The company anticipates that maintaining compliance with evolving data protection laws will increase legal risks and compliance costs[148]. - Non-compliance with anti-corruption and anti-bribery laws could result in significant fines and harm the company's reputation[166]. - The company is subject to various export control and trade sanction laws that could impair its ability to compete internationally[172]. Intellectual Property and Technology - Unauthorized use of the company's technology and intellectual property remains a challenge, as policing such use is difficult and may not be effective[118]. - The company's ability to protect its intellectual property rights is crucial for maintaining its competitive position, especially in international markets[187]. - The company relies on third-party software and may face risks related to licensing and compliance with open source software, which could disrupt product functionality[199]. - The company may be required to indemnify channel partners and customers against third-party infringement claims, potentially leading to costly litigation[186]. - The company uses AI and ML technologies in its products, which are subject to increasing regulation and scrutiny, potentially impacting business efficiency[157]. Financial Strategy and Capital Management - The company plans to issue an additional 2,850,000 shares of Class A common stock, which will result in dilution for existing stockholders[217]. - A stock repurchase program for up to $400 million of Class A common stock was approved in November 2024, aimed at enhancing long-term stockholder value[218]. - The company does not intend to pay dividends for the foreseeable future, expecting to retain future earnings to fund business development and growth[247]. - The company may need additional capital in the future to support business growth and respond to unforeseen circumstances, with no assurance that financing will be available on favorable terms[245]. - The company is expanding its international operations, which may subject it to potential adverse tax consequences depending on various jurisdictions' tax laws[206]. Environmental, Social, and Governance (ESG) Considerations - Failure to effectively address ESG matters could lead to reputational damage and impact investor relations[258]. - Climate change and related events may disrupt business operations and increase costs, impacting financial condition and results[257]. - The company maintains disaster response plans, but catastrophic events could disrupt operations and harm business results[255]. Employee and Workforce Management - As of December 31, 2024, approximately 3,700 employees reside in India, representing about 83% of the total employee population[161]. - Wage increases in India may diminish the company's competitive advantage and reduce profit margins[169]. - The company may encounter difficulties in attracting and retaining qualified personnel due to increased compliance costs and regulatory requirements[231]. - The company executed a workforce realignment plan resulting in a 13% reduction in force, incurring a charge of approximately $9.7 million in Q4 2024[103]. - The company’s ability to attract users through unpaid internet search results is critical, and any decline in search rankings could negatively impact traffic and revenue[129].