Freshworks(FRSH) - 2023 Q1 - Quarterly Report

Financial Performance - Total revenue for the three months ended March 31, 2023, was $137.7 million, representing a year-over-year growth rate of 20% compared to $114.6 million in the same period of 2022[103] - Revenue for the three months ended March 31, 2023, was $137.7 million, a 20% increase from $114.6 million in the same period of 2022[138] - Non-GAAP income from operations for the three months ended March 31, 2023, was $3.9 million, compared to a loss of $0.6 million in the same period of 2022[118] - Net loss for Q1 2023 was $42.7 million, compared to a net loss of $49.1 million in Q1 2022, reflecting a reduction in loss before income taxes[138] - The company incurred operating losses of $48.1 million for the three months ended March 31, 2023, compared to $47.1 million in the same period of 2022[103] Customer Metrics - The number of customers contributing more than $5,000 in annual recurring revenue (ARR) increased to 18,441 as of March 31, 2023, up from 15,639 in 2022[108] - The net dollar retention rate decreased to 107% as of March 31, 2023, down from 115% in the same period of 2022, primarily due to lower expansion within existing customers driven by macroeconomic pressures[112] - The company reported a net dollar retention rate of 107% as of March 31, 2023, down from 115% a year earlier, indicating slower expansion within existing customers[142] - Monthly subscriptions represented 19% of ARR as of March 31, 2023, down from 23% in 2022[111] Cash Flow and Liquidity - Free cash flow for the three months ended March 31, 2023, was $9.1 million, a significant improvement from a negative free cash flow of $1.4 million in 2022[121] - Cash and cash equivalents as of March 31, 2023, totaled $344.5 million, with marketable securities amounting to $806.1 million[152] - Net cash provided by operating activities for Q1 2023 was $11.5 million, reflecting a net loss of $42.7 million, adjusted for non-cash items including stock-based compensation of $50.7 million[158] - Net cash provided by investing activities for Q1 2023 was $41.3 million, primarily from $43.7 million in proceeds from maturities and sales of marketable securities[160] - Net cash used in financing activities for Q1 2023 was $12.4 million, entirely for payment of withholding taxes on net share settlement of equity awards[162] Operating Expenses - Total operating expenses increased by $21.2 million, or 15%, to $160.6 million in Q1 2023, primarily due to higher personnel-related costs and stock-based compensation[145] - Research and development expenses rose by 7% to $32.9 million in Q1 2023, driven by increased personnel-related costs[146] - Sales and marketing expenses increased by 21% to $86.8 million in Q1 2023, largely due to higher personnel costs and stock-based compensation[147] Profitability and Margins - Gross profit margin improved to 82% for Q1 2023, up from 80% in Q1 2022, driven by economies of scale and cost structure improvements[144] Future Obligations and Contracts - Remaining performance obligations as of March 31, 2023 totaled $325.6 million, consisting of $220.6 million in deferred revenue and $105.0 million in unbilled revenue[165] - Estimated future contractual obligations as of March 31, 2023 totaled $126.4 million, with $33.4 million in operating lease commitments and $93.0 million in other contractual obligations[168] Foreign Currency and Interest Rates - Approximately 26% of revenue exposure was related to the Euro and British Pound Sterling for the quarters ended March 31, 2023, and December 31, 2022[104] - The total notional amount of outstanding designated foreign currency forward contracts as of March 31, 2023 was $22.3 million[175] - A hypothetical 100 basis points movement in interest rates would not have a material effect on the combined market value of cash, cash equivalents, and marketable securities[179] - Interest income surged to $9.3 million in Q1 2023, a 1050% increase from $0.8 million in Q1 2022, due to higher balances in marketable securities[149] Taxation - Provision for income taxes increased by 59% to $4.0 million in Q1 2023, primarily due to higher profits in foreign jurisdictions[151] Other Metrics - The net cash outflows from changes in operating assets and liabilities for Q1 2023 were $3.8 million, driven by increases in operating assets[158] - The company does not utilize fluctuations in remaining performance obligations as a key management metric internally[166]