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Freshworks (FRSH) FY Conference Summary Company Overview - Freshworks is a software company founded in 2010, primarily known for its Freshdesk product line, which has evolved to include AI-powered software for employee-facing (EX) and customer-facing (CX) products [3][4] - The company serves over 74,000 customers, focusing on IT and customer support teams to enhance efficiency and effectiveness [4] Financial Performance - The EX business has surpassed $450 million in revenue, growing over 22% year-over-year in constant currency, with approximately 19,000 customers [5] - The CX business has an annual recurring revenue (ARR) of over $380 million, growing 8% in the last quarter, up from 7% previously, with around 60,000 customers [6] Strategic Focus - The company is prioritizing the EX segment for growth, leveraging its competitive advantages against established players like ServiceNow [12][29] - AI integration across all products is a key strategy, with $20 million in ARR attributed to AI capabilities [13][36] - Freshworks aims to enhance its CX business by improving execution and focusing on the SMB and mid-market segments [14] Competitive Positioning - Freshworks differentiates itself by providing user-friendly, easy-to-implement software at competitive prices, targeting both SMBs and larger enterprises [15][16] - The company sees a significant opportunity in the underserved upmarket, primarily dominated by ServiceNow, which offers complex and expensive solutions [50][51] Sales and Marketing Strategy - Freshworks has two distinct sales motions: one for CX, primarily managed from India, and another for EX, focusing on enterprise sales [28][29] - The company is investing in building its enterprise sales capabilities and optimizing its marketing strategies to drive demand across both segments [30][31] AI Integration and Impact - AI is viewed as an accelerant for Freshworks, enhancing product utility and customer experience while potentially reducing the need for additional hiring among customers [36][46] - The company is focused on integrating AI features that improve agent productivity and customer engagement [41][43] Customer Base and Market Opportunities - Freshworks is expanding its customer base, targeting organizations of various sizes, from small businesses to large enterprises [58] - The company is also exploring adjacent markets, such as employee service management (ESM), to capture additional growth opportunities [60] M&A Strategy - Freshworks is open to pursuing mergers and acquisitions to enhance its product offerings, particularly in areas like security operations and IT operations [62][66] - The acquisition of Device 42 is highlighted as a successful example of entering a new market segment [64] Upcoming Events - Freshworks will hold an Investor Day on September 11, 2025, to provide updates on product strategy, financial goals, and market positioning [70][74] Conclusion - Freshworks is strategically positioned for growth in the EX market, leveraging AI and a strong customer base while addressing the competitive landscape effectively. The focus on execution, product innovation, and market expansion will be critical for its continued success.

Core Insights - Freshworks Inc. will host its Investor Day 2025 on September 11 at 8:30 a.m. Pacific Time in San Francisco, focusing on the company's vision, long-term strategy, product innovation, go-to-market priorities, and financial outlook [1] - The event will feature insights from the Freshworks executive leadership team on how AI-assisted customer and employee service software will drive future growth [1] Company Overview - Freshworks Inc. builds uncomplicated service software aimed at enhancing customer and employee experiences, with over 74,000 companies, including notable names like Bridgestone, New Balance, Nucor, S&P Global, and Sony Music, utilizing its solutions [3] - The company's enterprise-grade solutions are designed to be powerful yet easy to use, delivering quick results and promoting productivity through a people-first approach to AI [3]

Company Announcement - Freshworks Inc. will have Tyler Sloat, Chief Operating Officer and Chief Financial Officer, participate in a fireside chat at the Oppenheimer 28th Annual Technology, Internet & Communications Conference on August 11, 2025 at 9:25 a.m. Pacific Time [1] - An audio webcast replay of the event will be available on the Freshworks investor relations website [1] Company Overview - Freshworks Inc. specializes in creating uncomplicated service software aimed at enhancing customer and employee experiences [2] - The company offers enterprise-grade solutions that are powerful, user-friendly, and deliver quick results [2] - Freshworks employs a people-first approach to AI, which aims to reduce friction and improve employee effectiveness and organizational productivity [2] - Over 74,000 companies, including notable names like Bridgestone, New Balance, Nucor, S&P Global, and Sony Music, utilize Freshworks' customer experience (CX) and employee experience (EX) software [2]

Core Viewpoint - Freshworks reported strong Q2 2025 financial results, exceeding revenue and earnings expectations, driven by operational improvements and AI product adoption [1][5][14] Financial Performance - GAAP revenue reached $204.7 million, surpassing estimates of $198.8 million, marking a 17.6% year-over-year increase from $174.1 million [2][5] - Non-GAAP earnings per share were $0.18, significantly above the expected $0.11 and up 125% from $0.08 in Q2 2024 [2][5] - Non-GAAP income from operations was $44.8 million, a 241.2% increase from $13.1 million in the same quarter last year [2][6] - Adjusted free cash flow increased by 65.5% year-over-year to $54.3 million, with operating cash flow climbing to $58.6 million, up 61.4% [2][6] Profitability Metrics - Gross margin improved to 84.8%, up from 83.8% a year ago, while non-GAAP operating margin reached 21.9%, up from 7.5% [7][6] - Free cash flow margin improved to 26.5%, reflecting effective cost control relative to revenue [6] Customer Growth - The number of customers generating over $5,000 in annual recurring revenue increased by 10% year-over-year to 23,975, indicating strong long-term revenue retention potential [8] - Net dollar retention remained steady at 106%, reflecting stable customer spending [8] AI Developments - The Freddy AI suite surpassed $20 million in annual recurring revenue, showcasing the success of AI-driven solutions [9] - Freshworks launched the Freddy AI Agent Studio, a no-code tool for businesses to create AI-powered automation agents [9] Market Positioning - Freshworks secured a multi-year partnership with McLaren Racing, enhancing its visibility in enterprise sales and competing against larger SaaS vendors [10][11] - The company continues to focus on integrating AI features across its software offerings, utilizing a product-led growth strategy [4] Future Guidance - Management raised revenue guidance for Q3 2025 to between $207.0 million and $210.0 million, projecting 11-12% year-over-year growth [14] - Full-year revenue is expected to be in the range of $822.9 million to $828.9 million, indicating 14-15% growth [14] - Non-GAAP operating income is anticipated to rise to $153.0–$157.0 million, with earnings per share forecasted at $0.56–$0.58 [14] Competitive Landscape - The company faces competitive dynamics as larger software firms introduce their own AI features, which may impact customer adoption rates of Freshworks' AI modules [16]

Core Insights - Freshworks Inc. reported quarterly earnings of $0.18 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, and showing an increase from $0.08 per share a year ago, resulting in an earnings surprise of +50.00% [1] - The company achieved revenues of $204.68 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.99% and up from $174.13 million year-over-year [2] - Freshworks has consistently surpassed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.13 on revenues of $207.73 million, and for the current fiscal year, it is $0.57 on revenues of $818.93 million [7] - The estimate revisions trend for Freshworks was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Internet - Software industry, to which Freshworks belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Freshworks reported Q2 revenue of $204.7 million, an 18% year-over-year increase, with a non-GAAP operating margin of 22%, up over 14 percentage points from the previous year [6][28][30] - Adjusted free cash flow grew 65% year-over-year to $54.3 million, resulting in a free cash flow margin of 27% [27][34] - Total customers increased to over 74,600, with a net addition of over 1,300 customers in the quarter [32][33] Business Line Data and Key Metrics Changes - Employee Experience (EX) business achieved over $450 million in ARR, representing 24% year-over-year growth [8][28] - Customer Experience (CX) business grew to over $380 million in ARR, reflecting an 11% year-over-year increase [18][29] - Professional services revenue contributed $2.7 million in Q2, driven by strong bookings and project completions [28] Market Data and Key Metrics Changes - The company experienced healthy demand across its diversified customer base, with no specific industry overrepresented [67] - The global partner program contributed to over one-third of ARR in Q2, with 130 new partners onboarded [24][55] Company Strategy and Development Direction - Freshworks focuses on three key growth drivers: investing in employee experience, delivering AI capabilities, and enhancing customer experience [7][13] - The company aims to expand its enterprise service management solutions, which could represent a $100 million opportunity [11][12] - Freshworks is actively integrating AI into its products, with over 5,000 customers now paying for AI-related offerings, resulting in an ARR of over $20 million [14][72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business's momentum and the strong demand for their products, despite macroeconomic uncertainties [68] - The company anticipates continued growth in the second half of the year, supported by investments in sales and marketing [40] Other Important Information - Freshworks repurchased 8.2 million shares at an average price of $13.89 per share, totaling nearly 15.9 million shares repurchased to date [35][36] - The company expects to generate approximately $215 million in adjusted free cash flow for the full year 2025 [34] Q&A Session Summary Question: AI agent consumption relative to expectations - Management indicated that AI is pacing at or slightly ahead of internal expectations, with good traction seen in AI products introduced recently [42][43] Question: Q3 guidance and EX growth expectations - Management clarified that while EX growth is strong, the comparison to previous quarters is affected by the anniversary of the Device 42 acquisition [46][50] Question: Long-term contribution of the global partner program - Management noted that the partner channel is expected to contribute a greater percentage of business over the next few years, with a balanced impact across EX and CX [55][57] Question: Macro environment impact on customer conversations - Management reported strong demand across the board, with a diversified revenue base mitigating risks from tariffs and economic uncertainties [66][68] Question: AI Copilot and agents revenue evolution - Management highlighted that AI adoption is still early, with significant growth potential as more customers begin to utilize AI capabilities [71][72] Question: Device 42's impact on net dollar retention - Management acknowledged that Device 42 had a negative impact on net dollar retention due to expected churn, but overall expansion trends remain positive [87][89]

Financial Data and Key Metrics Changes - Freshworks reported Q2 revenue of $204.7 million, an 18% year-over-year increase, with a non-GAAP operating margin of 22%, up over 14 percentage points from the previous year [4][25][27] - Adjusted free cash flow grew 65% year-over-year to $54.3 million, resulting in a free cash flow margin of 27% [26][34] - Total calculated billings reached $213.1 million, representing a 15% year-over-year growth [33] Business Line Data and Key Metrics Changes - Employee Experience (EX) business achieved over $450 million in ARR, reflecting a 24% year-over-year growth [7][27] - Customer Experience (CX) business increased to over $380 million in ARR, showing an 11% year-over-year growth [17][28] - Professional services revenue contributed $2.7 million in Q2, driven by strong bookings and project completions [27] Market Data and Key Metrics Changes - Freshworks ended Q2 with over 74,600 customers, adding more than 1,300 net new customers in the quarter [5][33] - The number of customers contributing more than $5,000 in ARR grew 10% year-over-year to 23,975 [32] - The cohort of customers contributing more than $50,000 in ARR grew 22% year-over-year to 3,460 [32] Company Strategy and Development Direction - Freshworks focuses on three key growth drivers: investing in employee experience, delivering AI capabilities, and enhancing customer experience [6][12] - The company aims to expand its enterprise service management solutions, which could represent a $100 million opportunity [10] - Freshworks is also enhancing its AI offerings, with over 5,000 customers now paying for AI products, resulting in an ARR of over $20 million [12][72] Management's Comments on Operating Environment and Future Outlook - Management expressed strong demand across the board, with a diversified revenue base and no significant exposure to industries affected by tariffs [70] - The company remains optimistic about maintaining momentum in the second half of the year, supported by a solid pipeline [70] - Freshworks anticipates continued growth in both EX and CX segments, with AI expected to be a significant growth catalyst moving forward [80][96] Other Important Information - Freshworks has onboarded over 130 new partners in 2025, with partners contributing to over one-third of ARR in Q2 [23][56] - The company is preparing for an Investor Day on September 11, where it will share more about its long-term vision and strategic priorities [40] Q&A Session Summary Question: AI agent consumption relative to expectations - Management indicated that AI is pacing at or slightly ahead of internal expectations, with good traction seen in AI products introduced in June [42][44] Question: Q3 guidance and EX growth expectations - Management clarified that while EX growth is strong, the growth rate is expected to moderate due to anniversary effects from previous acquisitions [46][51] Question: Contribution of the global partner program - Management noted that the partner program is contributing equally across EX and CX, with larger partners generating larger deals [54][56] Question: Changes in sales leadership and team performance - Management expressed satisfaction with the new sales leadership and noted that all regions exceeded internal targets in Q2 [62][65] Question: Macro environment and customer conversations - Management reported strong demand and a diversified revenue base, indicating resilience against macroeconomic challenges [68][70] Question: AI Copilot and agents revenue growth - Management highlighted the significant growth potential in AI, with a long way to go in customer adoption and monetization [72][96] Question: Device 42 integration timeline - Management confirmed plans to release a cloud version of Device 42 in 2026, with ongoing integration efforts [102]

Financial Performance - Revenue for Q2 2025 reached $204.7 million, representing an 18% year-over-year growth[26] - Non-GAAP income from operations for Q2 2025 was $44.8 million[42] - Free cash flow for Q2 2025 amounted to $54.3 million[46] Customer Metrics - The company has over 74,000 customers across more than 120 countries[12] - Customers contributing more than $5,000 in ARR reached 23,975 in Q2 2025[35] - The number of customers with >$50K ARR was 3,460 in Q2 2025[36] Regional Revenue Distribution - North America accounts for 47% of the company's revenue[30] - Europe, Middle East, and Africa (EMEA) contribute 12% to the revenue[30] - Asia-Pacific represents 39% of the revenue[30] - Rest of World accounts for 3% of the revenue[30] Future Outlook - The company projects revenue between $207 million and $210 million for Q3 2025, indicating an 11%-12% year-over-year growth[50] - The company anticipates non-GAAP income from operations to be between $31.2 million and $33.2 million for Q3 2025[50]

Registrant Information [Filing Details](index=1&type=section&id=Filing%20Details) Freshworks Inc., an accelerated filer, filed its Form 10-Q for the quarter ended June 30, 2025, having submitted all required electronic reports - Freshworks Inc. is classified as an **accelerated filer**[4](index=4&type=chunk) - The registrant has filed all required reports and submitted Interactive Data Files electronically during the preceding 12 months[3](index=3&type=chunk) [Securities Information](index=2&type=section&id=Securities%20Information) As of July 24, 2025, Freshworks Inc. had **237.9 million** Class A and **53.5 million** Class B common stock shares outstanding | Metric | Value | | :----- | :---- | | Class A common stock outstanding (July 24, 2025) | 237,933,261 shares | | Class B common stock outstanding (July 24, 2025) | 53,495,414 shares | Special Note Regarding Forward-Looking Statements [Nature of Forward-Looking Statements](index=4&type=section&id=Nature%20of%20Forward-Looking%20Statements) This section clarifies that the report contains forward-looking statements subject to substantial risks and uncertainties - All statements other than historical facts in this report are forward-looking statements, involving substantial risks and uncertainties[9](index=9&type=chunk) - Investors should not rely on forward-looking statements as predictions of future events, as actual results could differ materially[10](index=10&type=chunk)[12](index=12&type=chunk) [Key Areas of Forward-Looking Statements](index=4&type=section&id=Key%20Areas%20of%20Forward-Looking%20Statements) Forward-looking statements cover various aspects of the business, including ARR, revenue, expenses, profitability, and market opportunity - Forward-looking statements include expectations regarding ARR, revenue, expenses, profitability, customer acquisition and retention, usage of existing products, and the ability to manage growth[11](index=11&type=chunk) - Other key areas include future investments, capital requirements, sales and marketing efforts, addressable market opportunity, reliance on key personnel, international expansion, integration of acquired businesses (like D42 Parent, Inc.), and the effects of macroeconomic uncertainties[11](index=11&type=chunk) [Limitations and Disclaimers](index=5&type=section&id=Limitations%20and%20Disclaimers) The company's beliefs are based on available information, and Freshworks undertakes no obligation to update forward-looking statements - Statements reflecting beliefs and opinions are based on information available as of the report date, which may be limited or incomplete[13](index=13&type=chunk) - The company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the report date, except as required by law[14](index=14&type=chunk) [Where You Can Find More Information](index=5&type=section&id=Where%20You%20Can%20Find%20More%20Information) Freshworks disseminates material information through SEC filings, press releases, its website, and social media channels - Material information is disseminated through SEC filings, press releases, public conference calls, the company website, investor relations section, LinkedIn, and X (formerly Twitter)[15](index=15&type=chunk) Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=ITEM%201.%20Financial%20Statements%20%28Unaudited%29) This section presents Freshworks Inc.'s unaudited condensed consolidated financial statements and explanatory notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased from December 31, 2024, to June 30, 2025, primarily due to reduced cash | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total Assets | $1,480,826 | $1,611,884 | $(131,058) | | Total Liabilities | $496,184 | $473,963 | $22,221 | | Total Stockholders' Equity | $984,642 | $1,137,921 | $(153,279) | | Cash and cash equivalents | $485,970 | $620,315 | $(134,345) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Freshworks Inc. reported a significant reduction in net loss for Q2 and H1 2025, driven by revenue growth and lower operating losses | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Revenue | $204,678 | $174,131 | 17.5% | $400,951 | $339,274 | 18.2% | | Gross profit | $173,536 | $145,956 | 18.9% | $339,931 | $285,209 | 19.2% | | Loss from operations | $(8,656) | $(43,787) | 80.2% | $(19,072) | $(75,954) | 74.9% | | Net loss | $(1,739) | $(20,184) | 91.4% | $(3,043) | $(43,509) | 93.0% | | Net loss per share - basic and diluted | $(0.01) | $(0.07) | 85.7% | $(0.01) | $(0.15) | 93.3% | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss significantly decreased for Q2 and H1 2025, primarily due to reduced net loss | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Net loss | $(1,739) | $(20,184) | 91.4% | $(3,043) | $(43,509) | 93.0% | | Total other comprehensive income (loss) | $(506) | $245 | -306.5% | $440 | $(275) | 260.0% | | Comprehensive loss | $(2,245) | $(19,939) | 88.7% | $(2,603) | $(43,784) | 94.1% | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from December 2024 to June 2025, mainly due to **$226.7 million** in common stock repurchases | Metric (in thousands) | As of Dec 31, 2024 | As of Jun 30, 2025 | Change | | :-------------------- | :----------------- | :----------------- | :----- | | Total Stockholders' Equity | $1,137,921 | $984,642 | $(153,279) | | Repurchase and retirement of common stock, including excise tax (6 months) | — | $(226,660) | $(226,660) | | Stock-based compensation (6 months) | — | $103,007 | $103,007 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, financing cash flow rose due to repurchases, and investing activities shifted to a net inflow | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | | Net cash provided by operating activities | $116,564 | $76,955 | 51.5% | | Net cash provided by (used in) investing activities | $3,389 | $(220,495) | 101.5% | | Net cash used in financing activities | $(254,287) | $(34,318) | -640.9% | | Net decrease in cash, cash equivalents and restricted cash | $(134,334) | $(177,858) | 24.4% | - Cash used in financing activities for H1 2025 was significantly impacted by **$227.2 million** in common stock repurchases[31](index=31&type=chunk) - Investing activities in H1 2024 included a **$213.9 million** business combination, which was absent in H1 2025[31](index=31&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations for the financial statements, covering policies, assets, liabilities, and events [1. Basis of Presentation and Summary of Significant Accounting Policies](index=13&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are unaudited, GAAP-compliant, and reflect normal adjustments, with no single customer exceeding **10%** of revenue - The condensed consolidated financial statements are unaudited, prepared in accordance with GAAP, and include only normal recurring adjustments[36](index=36&type=chunk) - No single customer accounted for more than **10%** of revenue for the three and six months ended June 30, 2025 and 2024[41](index=41&type=chunk) - Recent accounting pronouncements (ASU 2023-09 and ASU 2024-03/2025-01) are disclosure-related and are not expected to have a significant impact on the condensed consolidated financial statements[43](index=43&type=chunk)[44](index=44&type=chunk) [2. Cash Equivalents and Marketable Securities](index=15&type=section&id=2.%20Cash%20Equivalents%20and%20Marketable%20Securities) Cash equivalents and marketable securities decreased from December 2024 to June 2025, with minimal unrealized losses | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total cash equivalents | $418,928 | $507,655 | $(88,727) | | Total debt securities | $440,226 | $449,750 | $(9,524) | | Total cash equivalents and debt securities | $859,154 | $957,405 | $(98,251) | | Unrealized Losses (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | U.S. treasury securities | $(47) | $(17) | | U.S. government agency securities | $(28) | $(12) | | Corporate debt securities | $(24) | $(21) | | Total | $(99) | $(50) | [3. Fair Value Measurements](index=16&type=section&id=3.%20Fair%20Value%20Measurements) Financial assets are measured at fair value using a hierarchy, with most classified as Level 1 or Level 2 - Money market funds and U.S. treasury securities are classified within Level 1, while other debt securities and investments are classified within Level 2, based on observable inputs[48](index=48&type=chunk)[51](index=51&type=chunk) | Financial Assets (in thousands) | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Total (June 30, 2025) | | :------------------------------ | :---------------------- | :---------------------- | :-------------------- | | Cash equivalents | $354,211 | $64,717 | $418,928 | | Marketable securities | $192,299 | $247,927 | $440,226 | | Total financial assets | $546,510 | $312,644 | $859,154 | [4. Balance Sheet Components](index=18&type=section&id=4.%20Balance%20Sheet%20Components) Property and equipment, net, and accrued liabilities increased, driven by capitalized internal-use software and commissions | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Property and equipment, net | $30,894 | $25,893 | $5,001 | | Capitalized internal-use software (net carrying value) | $20,400 | $14,500 | $5,900 | | Accrued liabilities | $86,714 | $81,933 | $4,781 | - Capitalization of internal-use software costs increased significantly to **$9.16 million** for the six months ended June 30, 2025, from **$3.16 million** in the prior year period[52](index=52&type=chunk) [5. Business Combinations](index=19&type=section&id=5.%20Business%20Combinations) Freshworks acquired D42 Parent, Inc. in June 2024 for **$238.1 million**, adding goodwill and intangible assets - Freshworks acquired D42 Parent, Inc. in June 2024 for **$238.1 million** to offer a more comprehensive IT solution for customers[54](index=54&type=chunk) | Acquired Assets (in millions) | Value | | :---------------------------- | :---- | | Goodwill | $140.8 | | Intangible assets | $99.0 | | Pro Forma Financials (in thousands) | 6 Months Ended June 30, 2024 | 6 Months Ended June 30, 2023 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Revenue | $354,445 | $300,038 | | Net loss | $(47,195) | $(86,699) | [6. Intangible Assets, Net](index=19&type=section&id=6.%20Intangible%20Assets%2C%20Net) Net intangible assets decreased to **$83.8 million** by June 2025, with amortization expense significantly increasing due to the D42 acquisition | Acquired Intangible Assets (in thousands) | June 30, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | | :---------------------------------------- | :------------------------------- | :------------------------------- | | Developed technology | $25,238 | $27,773 | | Customer relationships | $58,580 | $62,767 | | Trademarks | $0 | $300 | | Total | $83,818 | $90,840 | | Amortization Expense (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Total amortization expense | $7,022 | $976 | 619.5% | - Expected future amortization expense related to acquired intangible assets totals **$83.8 million**, with **$6.8 million** remaining for the rest of 2025[57](index=57&type=chunk) [7. Leases](index=20&type=section&id=7.%20Leases) Freshworks primarily holds operating leases for office space, with a **3.9-year** remaining term and **$9.1 million** in H1 2025 costs | Lease Metric | June 30, 2025 | June 30, 2024 | | :----------- | :------------ | :------------ | | Weighted-average remaining lease term | 3.9 years | 4.7 years | | Weighted-average discount rate | 8.9% | 9.0% | | Lease Costs (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------- | :--------------------------- | :--------------------------- | | Total lease cost | $9,103 | $8,141 | [8. Commitments and Contingencies](index=21&type=section&id=8.%20Commitments%20and%20Contingencies) Freshworks has **$284.0 million** in commitments and is involved in legal proceedings, with no material adverse impact anticipated - Other contractual commitments total **$284.0 million** through 2028, primarily for third-party cloud infrastructure, service subscriptions, and sponsorship arrangements[60](index=60&type=chunk) - A motion for summary judgment was granted in the company's favor on April 10, 2025, in a securities class action, with the plaintiff filing a notice of appeal[61](index=61&type=chunk)[62](index=62&type=chunk) - No currently pending legal proceedings are believed to have a material adverse impact on the business or condensed consolidated financial statements[64](index=64&type=chunk) [9. Revenue From Contracts with Customers](index=22&type=section&id=9.%20Revenue%20From%20Contracts%20with%20Customers) Revenue is primarily from subscription services, totaling **$401.0 million** for H1 2025, with **$568.9 million** in remaining performance obligations - Revenue is primarily derived from subscription fees, software licenses, and maintenance, with professional services making up less than **5%** of total revenue[66](index=66&type=chunk)[70](index=70&type=chunk) | Revenue Type (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | | Subscription services, software licenses and maintenance | $396,175 | $334,173 | 18.5% | | Professional services | $4,776 | $5,101 | -6.5% | | Total revenue | $400,951 | $339,274 | 18.2% | - Remaining performance obligations as of June 30, 2025, were **$568.9 million**, with **$414.3 million** expected to be recognized as revenue in the next 12 months[74](index=74&type=chunk) [10. Segment and Geographic Information](index=24&type=section&id=10.%20Segment%20and%20Geographic%20Information) Freshworks operates as a single segment, with North America contributing the largest share of revenue (**42%** for H1 2025) - Freshworks operates in a single operating segment, with the Chief Executive Officer as the chief operating decision maker[76](index=76&type=chunk) | Geographic Revenue (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | | North America | $186,611 | $152,937 | 22.0% | | Europe, Middle East and Africa | $155,089 | $131,373 | 18.1% | | Asia Pacific | $48,058 | $44,844 | 7.2% | | Other | $11,193 | $10,120 | 10.6% | | Total revenue | $400,951 | $339,274 | 18.2% | - Revenue generated from the United States was approximately **42%** of total consolidated revenue for the six months ended June 30, 2025[77](index=77&type=chunk) [11. Stockholders' Equity and Stock-Based Compensation](index=25&type=section&id=11.%20Stockholders%27%20Equity%20and%20Stock-Based%20Compensation) Freshworks repurchased **$225.4 million** in stock, while stock-based compensation decreased to **$102.7 million** for H1 2025 | Share Repurchase Activity (6 months ended June 30, 2025) | Value | | :------------------------------------------------------- | :---- | | Shares repurchased | 14,912,789 | | Aggregate purchase price | $225.4 million | | Remaining available for repurchase | $159.1 million | | Stock-Based Compensation (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Total stock-based compensation expense | $102,657 | $108,337 | -5.2% | - Unrecognized stock-based compensation expense related to unvested awards totaled **$386.7 million** as of June 30, 2025, with a weighted-average recognition period of **2.9 years** for RSUs and PRSUs[98](index=98&type=chunk) [12. Restructuring Charges](index=29&type=section&id=12.%20Restructuring%20Charges) Freshworks incurred **$0.4 million** in restructuring charges for H1 2025, with the plan now complete and no remaining liability - Restructuring charges of **$0.4 million** were incurred during the six months ended June 30, 2025, as part of a plan to improve operating efficiency[99](index=99&type=chunk) - The restructuring plan is complete, with no remaining liability as of June 30, 2025[99](index=99&type=chunk)[100](index=100&type=chunk) [13. Income Taxes](index=29&type=section&id=13.%20Income%20Taxes) Freshworks recorded a **$9.5 million** income tax provision for H1 2025, primarily due to the Device42 acquisition and foreign profits | Income Tax (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | | Provision for (benefit from) income taxes | $9,487 | $(6,403) | 248.2% | - The change in income taxes is primarily due to a **$14.3 million** tax benefit from the Device42 acquisition in the prior year and higher foreign profits in 2025[101](index=101&type=chunk) - A full valuation allowance is maintained against U.S. federal and state deferred tax assets[102](index=102&type=chunk) [14. Net Loss Per Share](index=30&type=section&id=14.%20Net%20Loss%20Per%20Share) Basic and diluted net loss per share significantly improved to **$(0.01)** for H1 2025 from **$(0.15)** in the prior year | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :----- | :--------------------------- | :--------------------------- | :--------- | | Net loss per share - basic and diluted | $(0.01) | $(0.15) | 93.3% | - Potential common equivalents (RSUs, PRSUs, stock options, ESPP) totaling **27.8 million** shares were excluded from diluted net loss per share computation due to their antidilutive effect[106](index=106&type=chunk) [15. Subsequent Events](index=30&type=section&id=15.%20Subsequent%20Events) The OBBBA was signed into law, and Freshworks entered new lease agreements for its San Mateo headquarters - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, allows immediate expensing of domestic U.S. research and development costs and certain capital expenditures, with an immaterial impact expected for Q3/Q4 2025[107](index=107&type=chunk) - New lease agreements for the San Mateo headquarters were entered in July 2025, extending the lease term to July 2031 and expanding office space, with an estimated total commitment of **$18.0 million**[108](index=108&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Freshworks' financial condition, results, key metrics, non-GAAP measures, liquidity, and macroeconomic impacts [Overview](index=32&type=section&id=Overview) Freshworks provides AI-powered CX and EX software, reporting **18%** YoY revenue growth and significantly reduced operating losses - Freshworks offers people-first, AI service software for Customer Experience (CX) and Employee Experience (EX), including generative AI solutions like Freddy AI Agent and Freddy AI Copilot[110](index=110&type=chunk) | Metric (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Growth | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Growth | | :------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Total revenue | $204.7 | $174.1 | 18% | $401.0 | $339.3 | 18% | | Operating losses | $(8.7) | $(43.8) | 80.2% | $(19.1) | $(76.0) | 74.9% | [Macroeconomic and Other Factors](index=32&type=section&id=Macroeconomic%20and%20Other%20Factors) Macroeconomic uncertainties impact business spending and net dollar retention, with **27%** of revenue exposed to foreign currency risk - Macroeconomic uncertainties, including inflationary pressures and global market volatility, have impacted business spending and adversely affected the net dollar retention rate due to lower expansion within existing customers[113](index=113&type=chunk) - Approximately **27%** of revenue is exposed to foreign currency exchange rate fluctuations, particularly the euro and British Pound[113](index=113&type=chunk) [Key Business Metrics](index=33&type=section&id=Key%20Business%20Metrics) Customers contributing over **$5,000** in ARR increased by **10%**, while the net dollar retention rate remained flat at **106%** | Metric | As of June 30, 2025 | As of June 30, 2024 | % Growth | | :------------------------------------------------ | :------------------ | :------------------ | :------- | | Number of customers contributing > $5,000 in ARR | 23,975 | 21,744 | 10% | | ARR from customers contributing > $5,000 in ARR as % of total ARR | 91% | 90% | 1% pt | | Net dollar retention rate | 106% | 106% | 0% | - The net dollar retention rate remained flat at **106%** due to lower expansion within existing customers driven by macroeconomic pressures, offset by favorable foreign currency impact and a slight improvement in overall churn rate[120](index=120&type=chunk) - Monthly subscriptions represented **13%** of ARR as of June 30, 2025, and generally have a lower net dollar retention rate than the overall rate[119](index=119&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP income from operations (**$91.2 million**), net income (**$108.4 million**), and free cash flow (**$109.7 million**) all significantly increased for H1 2025 - Non-GAAP financial measures exclude stock-based compensation, employer payroll taxes on employee stock transactions, amortization of acquired intangibles, restructuring charges, and income tax adjustments[124](index=124&type=chunk)[125](index=125&type=chunk) | Non-GAAP Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :----------------------------- | :--------------------------- | :--------------------------- | :--------- | | Non-GAAP income from operations | $91,200 | $34,869 | 161.5% | | Non-GAAP net income | $108,421 | $53,934 | 100.9% | | Free cash flow | $109,661 | $71,495 | 53.4% | [Components of Our Results of Operations](index=36&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section details revenue sources, cost of revenue, and operating expenses, including R&D, sales & marketing, and G&A - Revenue is primarily derived from subscriptions for cloud-based software products, with software licenses, maintenance, and professional services (less than **5%** of total revenue) also contributing[130](index=130&type=chunk)[131](index=131&type=chunk) - Cost of revenue consists primarily of personnel-related expenses, cloud-based infrastructure costs, payment gateway fees, product support, professional services, third-party license fees, and amortization of acquired technology and capitalized internal-use software[133](index=133&type=chunk) - Operating expenses (Research and Development, Sales and Marketing, General and Administrative) are expected to increase in dollar amount but may decline as a percentage of revenue over the longer term[137](index=137&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Freshworks achieved **18%** revenue growth for Q2 and H1 2025, with improved gross margin and significantly reduced net loss [Comparison of the Three Months Ended June 30, 2025 and 2024](index=39&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Q2 2025 revenue grew **18%** to **$204.7 million**, gross margin improved to **85%**, and net loss significantly decreased | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Total revenue | $204,678 | $174,131 | $30,547 | 18% | | Gross Margin | 85% | 84% | 1% pt | | | Total operating expenses | $182,192 | $189,743 | $(7,551) | (4)% | | Net loss | $(1,739) | $(20,184) | $18,445 | 91.4% | - The increase in revenue was attributable to approximately **$19.1 million** from new customers and **$11.4 million** from existing customers[149](index=149&type=chunk) - The decrease in operating expenses was primarily driven by lower stock-based compensation (**$1.8 million** in R&D, **$6.6 million** in Sales and Marketing) and personnel-related costs due to employee terminations following restructuring[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=42&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) H1 2025 revenue grew **18%** to **$401.0 million**, gross margin improved to **85%**, and net loss significantly decreased | Metric (in thousands) | H1 2025 | H1 2024 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Total revenue | $400,951 | $339,274 | $61,677 | 18% | | Gross Margin | 85% | 84% | 1% pt | | | Total operating expenses | $359,003 | $361,163 | $(2,160) | (1)% | | Net loss | $(3,043) | $(43,509) | $40,466 | 93.0% | - The increase in revenue was attributable to approximately **$32.6 million** from new customers and **$29.1 million** from existing customers[161](index=161&type=chunk) - The decrease in operating expenses was primarily driven by lower stock-based compensation (**$10.5 million** in Sales and Marketing) and personnel-related costs from lower headcount due to restructuring, partially offset by increased amortization of acquired intangible assets from the D42 Parent, Inc. acquisition (**$3.6 million**)[163](index=163&type=chunk)[165](index=165&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Freshworks holds **$486.0 million** in cash and **$440.2 million** in marketable securities, with **$116.6 million** from H1 2025 operating activities | Liquidity (in millions) | June 30, 2025 | | :---------------------- | :------------ | | Cash and cash equivalents | $486.0 | | Marketable securities | $440.2 | - Net cash provided by operating activities was **$116.6 million** for the six months ended June 30, 2025[177](index=177&type=chunk) - The company repurchased **$225.4 million** of Class A common stock during H1 2025, with **$159.1 million** remaining available under the program[174](index=174&type=chunk) - Existing liquidity is expected to be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[176](index=176&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No changes to critical accounting policies and estimates were reported for Q2 and H1 2025 - No changes to critical accounting policies and estimates were reported for the three and six months ended June 30, 2025[185](index=185&type=chunk) [Recent Accounting Pronouncements](index=46&type=section&id=Recent%20Accounting%20Pronouncements) Recent accounting pronouncements are disclosure-related and not expected to materially impact financial statements - Information on recent accounting pronouncements is provided in Note 1, with the guidance primarily related to disclosures and not expected to have a significant impact on the financial statements[186](index=186&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=46&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Freshworks is exposed to foreign currency and interest rate risks, mitigated by hedging and investment classification [Foreign Currency Exchange Risk](index=46&type=section&id=Foreign%20Currency%20Exchange%20Risk) Freshworks is exposed to foreign currency risk, hedging Indian Rupee expenses with **$63.6 million** in forward contracts - Freshworks is exposed to foreign currency exchange risk, particularly from changes in the Indian Rupee, British Pound, and euro, due to operating expenses denominated in local currencies[188](index=188&type=chunk) - Foreign exchange forward contracts are used to hedge a portion of forecasted Indian Rupee expenses, with a total notional amount of **$63.6 million** outstanding as of June 30, 2025[189](index=189&type=chunk) - A hypothetical **10%** adverse foreign currency exchange rate change would result in an approximate **$12.1 million** gain or loss on total monetary assets and liabilities[188](index=188&type=chunk) [Interest Rate Risk](index=46&type=section&id=Interest%20Rate%20Risk) Cash, cash equivalents, and marketable securities are subject to interest rate risk, but a **100 basis point** movement is immaterial - The company's cash, cash equivalents, and marketable securities are subject to market risk due to changes in interest rates[191](index=191&type=chunk) - A hypothetical **100 basis points** favorable or adverse movement in interest rates would not have a material effect on the combined market value of cash, cash equivalents, and marketable securities[193](index=193&type=chunk) - Marketable securities are classified as 'available for sale,' so unrealized gains or losses from interest rate changes are not recognized unless securities are sold or declines are determined to be other-than-temporary[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were effective, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=47&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025 - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[194](index=194&type=chunk) [Changes in Internal Control over Financial Reporting](index=47&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting were identified during the most recent fiscal quarter - No material changes in internal control over financial reporting were identified during the most recent fiscal quarter[195](index=195&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=47&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Any system of controls provides only reasonable assurance, subject to inherent limitations and future event assumptions - Any system of controls provides only reasonable, not absolute, assurance, and its effectiveness is subject to inherent limitations and assumptions about future events[196](index=196&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=48&type=section&id=ITEM%201.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 8, Commitments and Contingencies - Information on legal proceedings is incorporated by reference from Note 8. Commitments and Contingencies in the financial statements[198](index=198&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to risk factors were reported from those previously disclosed in the Annual Report on Form 10-K - No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, were reported[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales or specific use of proceeds were reported, but **8.18 million** shares were repurchased for **$113.6 million** [Unregistered Sales of Equity Securities](index=48&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities) No unregistered sales of equity securities occurred during the reporting period - No unregistered sales of equity securities occurred during the reporting period[200](index=200&type=chunk) [Use of Proceeds](index=48&type=section&id=Use%20of%20Proceeds) No specific use of proceeds was reported - No specific use of proceeds was reported[201](index=201&type=chunk) [Issuer Purchases of Equity Securities](index=48&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Freshworks repurchased **8.18 million** Class A common shares for **$113.6 million** in Q2 2025, with **$159.1 million** remaining | Period (3 months ended June 30, 2025) | Total Shares Repurchased | Average Price Paid Per Share | Approximate Dollar Value Remaining | | :------------------------------------ | :----------------------- | :--------------------------- | :--------------------------------- | | April 1 - April 30, 2025 | 4,226,826 | $12.81 | $218,557,000 | | May 1 - May 31, 2025 | 2,462,769 | $14.88 | $181,902,000 | | June 1 - June 30, 2025 | 1,490,804 | $15.29 | $159,110,000 | | Total | 8,180,399 | | | - The share repurchase program, approved in November 2024, authorized the repurchase of up to **$400 million** of outstanding Class A common stock[204](index=204&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to Freshworks Inc. for the reporting period - This item is not applicable[205](index=205&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Freshworks Inc. for the reporting period - This item is not applicable[206](index=206&type=chunk) [Item 5. Other Information](index=50&type=section&id=ITEM%205.%20Other%20Information) This section discloses Rule 10b5-1 trading plans adopted or terminated by officers and directors [Rule 10b5-1 Trading Plans](index=50&type=section&id=Rule%2010b5-1%20Trading%20Plans) Officers and directors adopted Rule 10b5-1 trading plans for Class A common stock sales during Q2 2025 | Name | Title | Action | Adoption Date | Expiration Date | Total Shares to be Sold | | :--------------- | :------------------------------------ | :----- | :------------ | :-------------- | :---------------------- | | Philippa Lawrence | Chief Accounting Officer | Adoption | June 16, 2025 | March 27, 2026 | Up to 34,178 shares | | Tyler Sloat | Chief Operating Officer and Chief Financial Officer | Adoption | May 27, 2025 | August 31, 2026 | Up to 500,000 shares | [Item 6. Exhibits](index=51&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents and certifications - Exhibits include corporate documents (Amended and Restated Certificate of Incorporation, Bylaws), CEO/CFO certifications (302 and 906), and Inline XBRL Instance Document and Taxonomy Extensions[211](index=211&type=chunk) Signatures [Report Signatures](index=52&type=section&id=Report%20Signatures) The Quarterly Report on Form 10-Q was signed on July 29, 2025, by the CEO, COO/CFO, and CAO - The report was signed on July 29, 2025, by the Chief Executive Officer and President, Chief Operating Officer and Chief Financial Officer, and Chief Accounting Officer[216](index=216&type=chunk)