Freshworks(FRSH) - 2025 Q1 - Quarterly Results

Freshworks First Quarter 2025 Results Freshworks reports strong Q1 2025 financial performance, exceeding estimates and providing a positive outlook First Quarter 2025 Financial Summary Results 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] 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] Financial Outlook 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] Financial Statements This section details Freshworks' Q1 2025 financial position, operational performance, and cash flows, including GAAP reconciliations Condensed Consolidated Statements of Operations 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 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 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 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 This section explains Freshworks' non-GAAP financial measures, operating metrics, and forward-looking statements Explanation of Non-GAAP Financial Measures and Operating Metrics 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][21] - 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] - 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][19] Forward-Looking Statements 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] - 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]