[Second Quarter 2025 Financial and Business Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20and%20Business%20Highlights) Freshworks exceeded Q2 2025 financial estimates with 18% revenue growth and significant non-GAAP operating income, driven by customer expansion and AI product launches [Q2 2025 Financial Performance](index=1&type=section&id=Q2%202025%20Financial%20Performance) - Freshworks exceeded financial estimates in Q2 2025, driven by **strong revenue growth** and **significantly improved operating cash flow** and **adjusted free cash flow margins**[3](index=3&type=chunk) Q2 2025 Financial Summary (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $204.7M | $174.1M | +18% | | GAAP (Loss) from Operations | $(8.7)M | $(43.8)M | +80.1% | | Non-GAAP Income from Operations | $44.8M | $13.1M | +242.0% | | GAAP Net (Loss) Per Share | $(0.01) | $(0.07) | +85.7% | | Non-GAAP Net Income Per Share | $0.18 | $0.08 | +125.0% | | Net Cash from Operating Activities | $58.6M | $36.3M | +61.4% | | Adjusted Free Cash Flow | $54.3M | $32.8M | +65.5% | [Q2 2025 Key Metrics and Business Highlights](index=1&type=section&id=Q2%202025%20Key%20Metrics%20and%20Business%20Highlights) Key Operating Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Customers > $5,000 ARR | 23,975 | - | - | +10% | | Net Dollar Retention Rate | 106% | 105% | 106% | Flat | - Recent business highlights include onboarding new customers such as AEP Energy, Seagate Technology, and Manchester Metropolitan University[11](index=11&type=chunk) - Launching the Freddy AI Agent Studio, a no-code platform for creating autonomous AI agents[11](index=11&type=chunk) - Freddy AI Copilot and Agent products surpassed **$20 million** in combined annual recurring revenue[11](index=11&type=chunk) - Announcing a multi-year partnership with the McLaren Formula 1 Team[11](index=11&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) The company provided guidance for the third quarter of 2025 and raised its full-year 2025 outlook, anticipating continued double-digit revenue growth and strong non-GAAP operating income Q3 and Full Year 2025 Guidance | ($ in millions, except per share data) | Third Quarter 2025 | Full Year 2025 | | :--- | :--- | :--- | | Revenue | $207.0 - $210.0 | $822.9 - $828.9 | | Year-over-year growth (constant currency) | 11% - 12% | 14% - 16% | | Non-GAAP income from operations | $31.2 - $33.2 | $153.0 - $157.0 | | Non-GAAP net income per share | $0.12 - $0.14 | $0.56 - $0.58 | [Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited financial statements reveal a significant reduction in net loss, strong liquidity, and robust operating cash flow, despite increased financing outflows [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Highlights (Three Months Ended June 30) | (in thousands) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $204,678 | $174,131 | +17.5% | | Gross Profit | $173,536 | $145,956 | +18.9% | | Loss from Operations | $(8,656) | $(43,787) | +80.2% | | Net Loss | $(1,739) | $(20,184) | +91.4% | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights | (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $485,970 | $620,315 | | Marketable securities | $440,226 | $449,750 | | Total Assets | $1,480,826 | $1,611,884 | | Deferred Revenue | $339,210 | $323,435 | | Total Liabilities | $496,184 | $473,963 | | Total Stockholders' Equity | $984,642 | $1,137,921 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Highlights (Three Months Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58,591 | $36,336 | | Net cash provided by (used in) investing activities | $(42,842) | $(182,724) | | Net cash used in financing activities | $(124,014) | $(11,364) | - The **significant increase** in cash used in financing activities in Q2 2025 was primarily due to **$113.6 million** in common stock repurchases, which did not occur in the same period of 2024[32](index=32&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section details the reconciliation of GAAP to non-GAAP financial metrics, highlighting adjustments for stock-based compensation to derive non-GAAP operating income and net income Q2 2025 Reconciliation of GAAP Loss to Non-GAAP Income from Operations | (in thousands) | Amount | | :--- | :--- | | **GAAP loss from operations** | **$(8,656)** | | Stock-based compensation expense | $49,280 | | Employer payroll taxes on employee stock transactions | $702 | | Amortization of acquired intangibles | $3,508 | | Restructuring charges | $— | | **Non-GAAP income from operations** | **$44,834** | Q2 2025 Computation of Adjusted Free Cash Flow | (in thousands) | Amount | | :--- | :--- | | Net cash provided by operating activities | $58,591 | | Less: Purchases of property and equipment | $(380) | | Less: Capitalized internal-use software | $(4,676) | | Add: Restructuring costs paid | $728 | | **Adjusted free cash flow** | **$54,263** | [Important Disclosures and Definitions](index=3&type=section&id=Important%20Disclosures%20and%20Definitions) This section clarifies the company's non-GAAP financial measures and operating metrics, along with a disclaimer regarding forward-looking statements and associated risks [Explanation of Non-GAAP Financial Measures and Operating Metrics](index=3&type=section&id=Explanation%20of%20Non-GAAP%20Financial%20Measures%20and%20Operating%20Metrics) - The company uses non-GAAP measures to assess performance by excluding certain expenses, primarily stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangibles, and restructuring charges[17](index=17&type=chunk)[22](index=22&type=chunk) - Key operating metrics are defined as: **Customers > $5,000 in ARR** are business entities with one or more paid subscriptions contributing over $5,000 in annual recurring revenue[19](index=19&type=chunk) - **Net Dollar Retention Rate** is calculated by dividing the Ending ARR from a cohort of customers by the Entering ARR from the same cohort 12 months prior[20](index=20&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements, including financial guidance for Q3 and full-year 2025, which are subject to risks and uncertainties such as **uncertain global economic conditions**, **ability to attract and retain customers**, and a **history of net losses**[23](index=23&type=chunk)

Core Viewpoint - Freshworks Inc. reported strong financial results for Q2 2025, with an 18% year-over-year revenue growth, reflecting increased demand for its AI-powered service solutions [2][6]. Financial Summary - Total revenue for Q2 2025 was $204.7 million, up from $174.1 million in Q2 2024, marking an 18% increase. Adjusted for constant currency, the growth was 17% [6][35]. - GAAP loss from operations improved to $(8.7) million from $(43.8) million in the same quarter last year [6]. - Non-GAAP income from operations was $44.8 million, compared to $13.1 million in Q2 2024 [6]. - GAAP net loss per share was $(0.01), an improvement from $(0.07) in Q2 2024 [6]. - Non-GAAP diluted net income per share was $0.18, up from $0.08 in Q2 2024 [6]. - Net cash provided by operating activities was $58.6 million, compared to $36.3 million in Q2 2024 [6]. - Adjusted free cash flow reached $54.3 million, compared to $32.8 million in Q2 2024 [6]. Key Metrics and Business Highlights - The number of customers contributing more than $5,000 in ARR increased by 10% year-over-year to 23,975 [7]. - The net dollar retention rate was 106%, consistent with Q1 2025 and Q2 2024 [7]. - Freshworks onboarded several new customers, including AEP Energy and Seagate Technology [7]. - The company launched the next generation of its Freddy AI Platform, enhancing its AI capabilities [7]. - The combined annual recurring revenue from Freddy AI Copilot and Freddy AI Agent products surpassed $20 million [7]. Financial Outlook - For Q3 2025, Freshworks expects revenue between $207.0 million and $210.0 million, representing a year-over-year growth of 11% to 12% [9]. - The full-year 2025 revenue guidance is set between $822.9 million and $828.9 million, indicating a growth of 14% to 15% [9]. - Non-GAAP income from operations for Q3 is projected to be between $31.2 million and $33.2 million, with non-GAAP net income per share expected to be between $0.12 and $0.14 [9].

Core Insights - Freshworks has announced a multi-year partnership with McLaren Racing, becoming an Official Partner of the McLaren Formula 1 Team [1] - The partnership involves the integration of Freshworks' ITSM solution, Freshservice, to enhance productivity and improve IT services within the McLaren team [1][2] Company Overview - Freshworks Inc. specializes in uncomplicated service software aimed at delivering exceptional customer and employee experiences, with over 73,000 companies relying on its solutions [8] - McLaren Racing, founded in 1963, has a rich history in motorsport, winning 21 Formula 1 world championships and competing across multiple racing series [5][6] Partnership Details - Freshservice will support McLaren's IT team by reducing tech-related issues, allowing the team to focus on performance during races [3][15] - Freshworks branding will be prominently displayed on McLaren's race cars and team kit for the remainder of the 2025 season, starting with the Belgian Grand Prix [3] Leadership Statements - Zak Brown, CEO of McLaren Racing, emphasized that improving efficiencies off the track is crucial for on-track performance, highlighting the value of the partnership with Freshworks [4] - Dennis Woodside, CEO of Freshworks, stated that the partnership aims to optimize McLaren's IT operations, enhancing their support for winning performance through AI-driven solutions [4]

Group 1 - Freshworks describes its business as providing modern and innovative AI-guided customer and employee service solutions aimed at enhancing engagement and productivity for companies of all sizes [1] - The company operates in the technology sector, particularly focusing on customer service and employee engagement solutions [1]

Core Insights - The article does not provide specific company or industry insights, focusing instead on disclosures and disclaimers related to investment positions and advice [1][2] Group 1 - There are no stock, option, or similar derivative positions held by the analyst in any mentioned companies, nor plans to initiate such positions within the next 72 hours [1] - The article expresses personal opinions of the author and does not reflect the views of Seeking Alpha as a whole [2] - Seeking Alpha's analysts include both professional and individual investors who may not be licensed or certified by any regulatory body [2]

Core Insights - Freshworks has launched Freshservice Journeys, an AI-assisted capability aimed at enhancing employee experience (EX) by streamlining complex employee processes such as onboarding and promotions [1][9] - The solution is designed to improve efficiency, reduce friction, and enhance collaboration across departments, addressing issues caused by legacy systems and siloed operations [2][8] Product Features - Freshservice Journeys offers no-code workflow creation, AI-powered task automation, real-time progress tracking, and cross-department visibility, which helps eliminate bottlenecks and improve employee experience [3][4][6] - The platform allows IT and HR teams to rapidly design and deploy workflows without technical support, using either custom workflows or pre-built templates [5][7] Market Adoption - Over 60% of Freshworks' total Annual Recurring Revenue (ARR) now comes from mid-market and enterprise clients, with 79% of this driven by solutions enhancing employee experience [8][9] - The company continues to grow its customer base, adding around 250 customers to reach more than 1,600, indicating strong market demand for its services [10] Financial Performance - Freshworks maintains a focus on investing in employee experience and AI to boost customer productivity, contributing to its revenue and profit growth [9] - The company has a Zacks Rank 1 (Strong Buy), with shares gaining 19.2% over the past year, compared to the industry growth of 36.4% [12]

Core Viewpoint - Freshworks Inc. is set to announce its financial results for the second quarter of 2025 on July 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 second quarter ended June 30, 2025, will be announced after market close on July 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 offers enterprise-grade solutions that are powerful yet user-friendly, designed to deliver quick results [3]. - Over 73,000 companies, including notable names like Bridgestone, New Balance, Nucor, S&P Global, and Sony Music, utilize Freshworks' software for customer experience (CX) and employee experience (EX) [3].

Core Viewpoint - Freshworks Inc. has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2] Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [3][5] - Institutional investors often rely on earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [3] Freshworks' Earnings Outlook - For the fiscal year ending December 2025, Freshworks is expected to earn $0.57 per share, unchanged from the previous year [7] - Over the past three months, the Zacks Consensus Estimate for Freshworks has increased by 20.5%, indicating a positive trend in earnings estimates [7] Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [6] - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions [8][9] Implications for Investors - The upgrade to Zacks Rank 1 positions Freshworks among the top 5% of stocks, suggesting potential for market-beating returns in the near term [9]

Core Insights - Freshworks has launched Freshservice Journeys, an AI-powered capability aimed at simplifying complex workflows across HR, IT, and facilities to enhance employee experiences during transitions [1][2] - The solution addresses inefficiencies caused by legacy systems and siloed operations, enabling better coordination and accountability among departments [2][3] Product Features - Freshservice Journeys allows organizations to create no-code workflows for key employee events such as onboarding, offboarding, promotions, and relocations [1][5] - The platform leverages AI to automate routine tasks, reducing manual work and speeding up task completion [5][6] - It features an intuitive interface that enables admins to configure workflows easily and utilize pre-built templates for faster implementation [5][6] Benefits and Impact - Organizations using Freshservice Journeys report significant improvements in efficiency, with processes that previously took days now completed in hours [4][6] - The solution enhances cross-functional collaboration by automating task assignments, reminders, and providing real-time progress tracking [5][6] - Companies that implement cross-functional processes describe them as transformative, enabling seamless orchestration of employee experiences without compromising departmental needs [3][4] Customer Testimonials - Qualfon's Vice President of IT Operations noted that Freshservice has transformed their offboarding process, improving visibility and compliance [4] - EquiTrust Life Insurance's IT Service Management Analyst highlighted the benefits of customized workflows and real-time visibility for HR [4] Company Overview - Freshworks Inc. provides service software designed to enhance customer and employee experiences, with over 73,000 companies relying on its solutions [7]

Group 1 - Freshworks Inc. (NASDAQ: FRSH) is identified as a potential value buy, possibly fitting into a Growth at a Reasonable Price (GARP) strategy [1] - There are questions regarding the company's growth levels and operating margins, indicating a need for deeper analysis despite no immediate red flags [1] - The analysis is conducted by a stock analyst with over 20 years of experience in quantitative research, financial modeling, and risk management, emphasizing a focus on equity valuation and market trends [1] Group 2 - The analyst has a background as a former Vice President at Barclays, leading teams in model validation and stress testing, which contributes to a deep expertise in both fundamental and technical analysis [1] - The research is co-authored with a partner, combining complementary strengths to deliver high-quality, data-driven insights, with a focus on macroeconomic trends and corporate earnings [1]