Freshworks(FRSH) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial and Business Highlights 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 - 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] 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 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] - Launching the Freddy AI Agent Studio, a no-code platform for creating autonomous AI agents[11] - Freddy AI Copilot and Agent products surpassed $20 million in combined annual recurring revenue[11] - Announcing a multi-year partnership with the McLaren Formula 1 Team[11] Financial Outlook The company provided guidance for the third quarter of 2025 and raised its full-year 2025 outlook, anticipating continued double-digit revenue growth and strong non-GAAP operating income Q3 and Full Year 2025 Guidance | ($ 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) 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 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 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 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] Reconciliation of GAAP to Non-GAAP Measures 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 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 - 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][22] - 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] - 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] Forward-Looking Statements - 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]