[Freshworks First Quarter 2025 Results](index=1&type=section&id=Freshworks%20First%20Quarter%202025%20Results) Freshworks reports strong Q1 2025 financial performance, exceeding estimates and providing a positive outlook [First Quarter 2025 Financial Summary Results](index=1&type=section&id=First%20Quarter%202025%20Financial%20Summary%20Results) Freshworks reported strong Q1 2025 results, exceeding financial estimates with revenue growing 19% year-over-year to $196.3 million. The company demonstrated significant improvement in profitability and cash flow, with non-GAAP income from operations more than doubling to $46.4 million and adjusted free cash flow increasing to $55.4 million. Key business metrics showed a 13% increase in customers contributing over $5,000 in ARR and a net dollar retention rate of 105% - Freshworks outperformed its financial estimates in Q1, with **revenue growing 19% YoY** to **$196.3 million**, an **operating cash flow margin of 30%**, and an **adjusted free cash flow margin of 28%**[3](index=3&type=chunk) Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $196.3M | $165.1M | | GAAP (Loss) from Operations | $(10.4)M | $(32.2)M | | Non-GAAP Income from Operations | $46.4M | $21.8M | | GAAP Net (Loss) Per Share | $0.00 | $(0.08) | | Non-GAAP Net Income Per Share | $0.18 | $0.10 | | Net Cash from Operating Activities | $58.0M | $40.6M | | Adjusted Free Cash Flow | $55.4M | $38.7M | Q1 2025 Key Operating Metrics | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Customers > $5,000 ARR (YoY Growth) | 13% | - | 13% | | Net Dollar Retention Rate | 105% | 103% | 106% | - The company welcomed new customers including All3Media, Broad River Retail, and Veracode, and launched a new global partner program to expand offerings for resellers and service delivery[7](index=7&type=chunk) [Financial Outlook](index=3&type=section&id=Financial%20Outlook) Freshworks provided its financial outlook for the second quarter and full year 2025. For Q2, the company expects revenue between $197.3 million and $200.3 million, representing 13-15% YoY growth. For the full year, revenue is projected to be between $815.3 million and $824.3 million, a 13-14% YoY increase. Non-GAAP income from operations is also guided for both periods Q2 and Full Year 2025 Financial Outlook | ($ in millions, except per share data) | Second Quarter 2025 | Full Year 2025 | | :--- | :--- | :--- | | Revenue | $197.3 - $200.3 | $815.3 - $824.3 | | Year-over-year growth (constant currency) | 13% - 15% | 13% - 15% | | Non-GAAP income from operations | $27.8 - $29.8 | $139.5 - $147.5 | | Non-GAAP net income per share | $0.10 - $0.12 | $0.56 - $0.58 | - The company has not reconciled its non-GAAP financial estimates to GAAP due to the uncertainty and potential variability of future expenses, making a reconciliation unavailable without unreasonable effort[10](index=10&type=chunk) [Financial Statements](index=8&type=section&id=Financial%20Statements) This section details Freshworks' Q1 2025 financial position, operational performance, and cash flows, including GAAP reconciliations [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the first quarter of 2025, Freshworks reported revenue of $196.3 million, a 19% increase from $165.1 million in Q1 2024. The company significantly reduced its loss from operations to $(10.4) million from $(32.2) million a year prior. Net loss also narrowed substantially to $(1.3) million, or $0.00 per share, compared to a net loss of $(23.3) million, or $(0.08) per share, in the same period last year Statement of Operations Summary (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $196,273 | $165,143 | | Gross Profit | $166,395 | $139,253 | | Loss from Operations | $(10,416) | $(32,167) | | Net Loss | $(1,304) | $(23,325) | | Net Loss Per Share | $0.00 | $(0.08) | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Freshworks held $1.0 billion in cash, cash equivalents, and marketable securities. Total assets stood at $1.54 billion, while total liabilities were $479.4 million. Total stockholders' equity was reported at $1.06 billion Balance Sheet Summary (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $594,243 | $620,405 | | Marketable securities | $401,078 | $442,272 | | Total Assets | $1,541,180 | $1,610,010 | | Total Liabilities | $479,350 | $475,830 | | Total Stockholders' Equity | $1,061,830 | $1,134,180 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, Freshworks generated $58.0 million in net cash from operating activities, an increase from $40.6 million in Q1 2024. Investing activities provided $46.2 million in cash, primarily from maturities of marketable securities. Financing activities used $130.3 million, largely due to a $113.6 million repurchase of common stock. This resulted in a net decrease in cash of $26.1 million for the quarter Statement of Cash Flows Summary (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $57,973 | $40,619 | | Net cash provided by (used in) investing activities | $46,231 | $(37,771) | | Net cash used in financing activities | $(130,273) | $(22,954) | | Net decrease in cash | $(26,069) | $(20,106) | [Reconciliation of GAAP to Non-GAAP Measures](index=11&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section details the adjustments made to reconcile GAAP figures to non-GAAP metrics. For Q1 2025, a GAAP operating loss of $(10.4) million was adjusted, primarily for $51.7 million in stock-based compensation, to arrive at a non-GAAP income from operations of $46.4 million. Similarly, a GAAP net loss of $(1.3) million was adjusted to a non-GAAP net income of $55.9 million. Adjusted free cash flow for the quarter was calculated at $55.4 million Reconciliation of GAAP Loss from Operations to Non-GAAP Income from Operations (Q1 2025, in thousands) | Description | Amount | | :--- | :--- | | **GAAP loss from operations** | **$(10,416)** | | Stock-based compensation expense | $51,664 | | Employer payroll taxes on employee stock transactions | $1,199 | | Amortization of acquired intangibles | $3,514 | | Restructuring charges | $405 | | **Non-GAAP income from operations** | **$46,366** | Computation of Adjusted Free Cash Flow (Q1 2025, in thousands) | Description | Amount | | :--- | :--- | | **Net cash provided by operating activities** | **$57,973** | | Less: Purchases of property and equipment | $(1,296) | | Less: Capitalized internal-use software | $(2,772) | | Add: Restructuring costs paid | $1,493 | | **Adjusted free cash flow** | **$55,398** | [Supplementary Information](index=4&type=section&id=Supplementary%20Information) This section explains Freshworks' non-GAAP financial measures, operating metrics, and forward-looking statements [Explanation of Non-GAAP Financial Measures and Operating Metrics](index=4&type=section&id=Explanation%20of%20Non-GAAP%20Financial%20Measures%20and%20Operating%20Metrics) The company uses non-GAAP financial measures to supplement its GAAP results, believing they provide better insight into its operational performance. Key adjustments include excluding stock-based compensation, amortization of acquired intangibles, and restructuring charges. The report also defines key operating metrics used to evaluate the business, such as Annual Recurring Revenue (ARR), the number of customers contributing over $5,000 in ARR, and Net Dollar Retention Rate - Non-GAAP measures are used to assess performance by excluding items such as stock-based compensation, employer payroll taxes on stock transactions, amortization of acquired intangibles, and restructuring charges[16](index=16&type=chunk)[21](index=21&type=chunk) - Adjusted free cash flow is defined as net cash from operating activities, less purchases of property/equipment and capitalized software, plus restructuring charges. It is used as an indicator of liquidity and cash generation from core operations[17](index=17&type=chunk) - Key operating metrics include the number of customers with over **$5,000 in Annual Recurring Revenue (ARR)** and the **Net Dollar Retention Rate**, which measures revenue from existing customers over a 12-month period[18](index=18&type=chunk)[19](index=19&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section serves as a safe harbor notice, cautioning that the press release contains forward-looking statements, including the financial outlook for Q2 and the full year 2025. It highlights that these statements are based on current expectations and are subject to risks and uncertainties, such as economic conditions and customer purchasing decisions, which could cause actual results to differ materially - The report contains forward-looking statements regarding financial estimates, business plans, and the value of its products. These are subject to risks and uncertainties that could cause actual results to differ[22](index=22&type=chunk) - Investors are cautioned not to place undue reliance on these statements, as they are based on information available as of the date of the release and the company is not obligated to update them[23](index=23&type=chunk)

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].

Michael Wiggins De Oliveira is an inflection investor. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable over the next year.With a focus on tech and “the Great Energy Transition (including uranium)”, Michael runs a concentrated portfolio with approximately 15 to 20 stocks and an average holding period of 18 months. Through his 10+ years analyzing countless companies, Michael has accumulated outsta ...