Freshworks (FRSH) FY Conference Summary Company Overview - Freshworks is a software company founded in 2010, primarily known for its Freshdesk product line, which has evolved to include AI-powered software for employee-facing (EX) and customer-facing (CX) products [3][4] - The company serves over 74,000 customers, focusing on IT and customer support teams to enhance efficiency and effectiveness [4] Financial Performance - The EX business has surpassed $450 million in revenue, growing over 22% year-over-year in constant currency, with approximately 19,000 customers [5] - The CX business has an annual recurring revenue (ARR) of over $380 million, growing 8% in the last quarter, up from 7% previously, with around 60,000 customers [6] Strategic Focus - The company is prioritizing the EX segment for growth, leveraging its competitive advantages against established players like ServiceNow [12][29] - AI integration across all products is a key strategy, with $20 million in ARR attributed to AI capabilities [13][36] - Freshworks aims to enhance its CX business by improving execution and focusing on the SMB and mid-market segments [14] Competitive Positioning - Freshworks differentiates itself by providing user-friendly, easy-to-implement software at competitive prices, targeting both SMBs and larger enterprises [15][16] - The company sees a significant opportunity in the underserved upmarket, primarily dominated by ServiceNow, which offers complex and expensive solutions [50][51] Sales and Marketing Strategy - Freshworks has two distinct sales motions: one for CX, primarily managed from India, and another for EX, focusing on enterprise sales [28][29] - The company is investing in building its enterprise sales capabilities and optimizing its marketing strategies to drive demand across both segments [30][31] AI Integration and Impact - AI is viewed as an accelerant for Freshworks, enhancing product utility and customer experience while potentially reducing the need for additional hiring among customers [36][46] - The company is focused on integrating AI features that improve agent productivity and customer engagement [41][43] Customer Base and Market Opportunities - Freshworks is expanding its customer base, targeting organizations of various sizes, from small businesses to large enterprises [58] - The company is also exploring adjacent markets, such as employee service management (ESM), to capture additional growth opportunities [60] M&A Strategy - Freshworks is open to pursuing mergers and acquisitions to enhance its product offerings, particularly in areas like security operations and IT operations [62][66] - The acquisition of Device 42 is highlighted as a successful example of entering a new market segment [64] Upcoming Events - Freshworks will hold an Investor Day on September 11, 2025, to provide updates on product strategy, financial goals, and market positioning [70][74] Conclusion - Freshworks is strategically positioned for growth in the EX market, leveraging AI and a strong customer base while addressing the competitive landscape effectively. The focus on execution, product innovation, and market expansion will be critical for its continued success.

Financial Data and Key Metrics Changes - Freshworks reported Q2 revenue of $204.7 million, an 18% year-over-year increase, with a non-GAAP operating margin of 22%, up over 14 percentage points from the previous year [6][28][30] - Adjusted free cash flow grew 65% year-over-year to $54.3 million, resulting in a free cash flow margin of 27% [27][34] - Total customers increased to over 74,600, with a net addition of over 1,300 customers in the quarter [32][33] Business Line Data and Key Metrics Changes - Employee Experience (EX) business achieved over $450 million in ARR, representing 24% year-over-year growth [8][28] - Customer Experience (CX) business grew to over $380 million in ARR, reflecting an 11% year-over-year increase [18][29] - Professional services revenue contributed $2.7 million in Q2, driven by strong bookings and project completions [28] Market Data and Key Metrics Changes - The company experienced healthy demand across its diversified customer base, with no specific industry overrepresented [67] - The global partner program contributed to over one-third of ARR in Q2, with 130 new partners onboarded [24][55] Company Strategy and Development Direction - Freshworks focuses on three key growth drivers: investing in employee experience, delivering AI capabilities, and enhancing customer experience [7][13] - The company aims to expand its enterprise service management solutions, which could represent a $100 million opportunity [11][12] - Freshworks is actively integrating AI into its products, with over 5,000 customers now paying for AI-related offerings, resulting in an ARR of over $20 million [14][72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business's momentum and the strong demand for their products, despite macroeconomic uncertainties [68] - The company anticipates continued growth in the second half of the year, supported by investments in sales and marketing [40] Other Important Information - Freshworks repurchased 8.2 million shares at an average price of $13.89 per share, totaling nearly 15.9 million shares repurchased to date [35][36] - The company expects to generate approximately $215 million in adjusted free cash flow for the full year 2025 [34] Q&A Session Summary Question: AI agent consumption relative to expectations - Management indicated that AI is pacing at or slightly ahead of internal expectations, with good traction seen in AI products introduced recently [42][43] Question: Q3 guidance and EX growth expectations - Management clarified that while EX growth is strong, the comparison to previous quarters is affected by the anniversary of the Device 42 acquisition [46][50] Question: Long-term contribution of the global partner program - Management noted that the partner channel is expected to contribute a greater percentage of business over the next few years, with a balanced impact across EX and CX [55][57] Question: Macro environment impact on customer conversations - Management reported strong demand across the board, with a diversified revenue base mitigating risks from tariffs and economic uncertainties [66][68] Question: AI Copilot and agents revenue evolution - Management highlighted that AI adoption is still early, with significant growth potential as more customers begin to utilize AI capabilities [71][72] Question: Device 42's impact on net dollar retention - Management acknowledged that Device 42 had a negative impact on net dollar retention due to expected churn, but overall expansion trends remain positive [87][89]

Financial Data and Key Metrics Changes - Freshworks reported Q2 revenue of $204.7 million, an 18% year-over-year increase, with a non-GAAP operating margin of 22%, up over 14 percentage points from the previous year [4][25][27] - Adjusted free cash flow grew 65% year-over-year to $54.3 million, resulting in a free cash flow margin of 27% [26][34] - Total calculated billings reached $213.1 million, representing a 15% year-over-year growth [33] Business Line Data and Key Metrics Changes - Employee Experience (EX) business achieved over $450 million in ARR, reflecting a 24% year-over-year growth [7][27] - Customer Experience (CX) business increased to over $380 million in ARR, showing an 11% year-over-year growth [17][28] - Professional services revenue contributed $2.7 million in Q2, driven by strong bookings and project completions [27] Market Data and Key Metrics Changes - Freshworks ended Q2 with over 74,600 customers, adding more than 1,300 net new customers in the quarter [5][33] - The number of customers contributing more than $5,000 in ARR grew 10% year-over-year to 23,975 [32] - The cohort of customers contributing more than $50,000 in ARR grew 22% year-over-year to 3,460 [32] Company Strategy and Development Direction - Freshworks focuses on three key growth drivers: investing in employee experience, delivering AI capabilities, and enhancing customer experience [6][12] - The company aims to expand its enterprise service management solutions, which could represent a $100 million opportunity [10] - Freshworks is also enhancing its AI offerings, with over 5,000 customers now paying for AI products, resulting in an ARR of over $20 million [12][72] Management's Comments on Operating Environment and Future Outlook - Management expressed strong demand across the board, with a diversified revenue base and no significant exposure to industries affected by tariffs [70] - The company remains optimistic about maintaining momentum in the second half of the year, supported by a solid pipeline [70] - Freshworks anticipates continued growth in both EX and CX segments, with AI expected to be a significant growth catalyst moving forward [80][96] Other Important Information - Freshworks has onboarded over 130 new partners in 2025, with partners contributing to over one-third of ARR in Q2 [23][56] - The company is preparing for an Investor Day on September 11, where it will share more about its long-term vision and strategic priorities [40] Q&A Session Summary Question: AI agent consumption relative to expectations - Management indicated that AI is pacing at or slightly ahead of internal expectations, with good traction seen in AI products introduced in June [42][44] Question: Q3 guidance and EX growth expectations - Management clarified that while EX growth is strong, the growth rate is expected to moderate due to anniversary effects from previous acquisitions [46][51] Question: Contribution of the global partner program - Management noted that the partner program is contributing equally across EX and CX, with larger partners generating larger deals [54][56] Question: Changes in sales leadership and team performance - Management expressed satisfaction with the new sales leadership and noted that all regions exceeded internal targets in Q2 [62][65] Question: Macro environment and customer conversations - Management reported strong demand and a diversified revenue base, indicating resilience against macroeconomic challenges [68][70] Question: AI Copilot and agents revenue growth - Management highlighted the significant growth potential in AI, with a long way to go in customer adoption and monetization [72][96] Question: Device 42 integration timeline - Management confirmed plans to release a cloud version of Device 42 in 2026, with ongoing integration efforts [102]

Financial Performance - Revenue for Q2 2025 reached $204.7 million, representing an 18% year-over-year growth[26] - Non-GAAP income from operations for Q2 2025 was $44.8 million[42] - Free cash flow for Q2 2025 amounted to $54.3 million[46] Customer Metrics - The company has over 74,000 customers across more than 120 countries[12] - Customers contributing more than $5,000 in ARR reached 23,975 in Q2 2025[35] - The number of customers with >$50K ARR was 3,460 in Q2 2025[36] Regional Revenue Distribution - North America accounts for 47% of the company's revenue[30] - Europe, Middle East, and Africa (EMEA) contribute 12% to the revenue[30] - Asia-Pacific represents 39% of the revenue[30] - Rest of World accounts for 3% of the revenue[30] Future Outlook - The company projects revenue between $207 million and $210 million for Q3 2025, indicating an 11%-12% year-over-year growth[50] - The company anticipates non-GAAP income from operations to be between $31.2 million and $33.2 million for Q3 2025[50]

Freshworks (FRSH) 2025 Conference Summary Company Overview - Freshworks is focused on scaling its operations, particularly in the SMB (Small and Medium-sized Business) sector, with a strong emphasis on AI integration and customer satisfaction [5][6]. Key Industry Insights - The adoption of AI, particularly through the Freddie Copilot, has accelerated among customers, with a current attach rate exceeding 20% [9]. - Customers are increasingly seeking efficiencies and improved customer satisfaction rather than merely cost-cutting measures [13]. - The company has seen a 7% growth in Annual Recurring Revenue (ARR) in its CX (Customer Experience) business, which is consistent with previous quarters [29]. Core Business Strategies - Freshworks is focusing on enhancing customer satisfaction and retention while driving efficiency through AI solutions [13]. - The company is shifting its pricing strategy towards more intuitive models, such as usage-based pricing, although current pricing remains per agent [18][19]. - Freshworks is actively revamping its partner relationships to foster more collaborative and performance-based partnerships [39][40]. Customer Engagement and Market Position - Customers are increasingly asking for integrated solutions that streamline interactions across multiple channels, including voice, social media, and email [45]. - The company has a strong competitive position against larger firms like Zendesk and ServiceNow, primarily due to its simplicity and cost-effectiveness [66][71]. - Freshworks has implemented a strategy to convert free users to paid plans by limiting the number of free agents and the duration of free usage, resulting in significant conversion rates [82][84]. Financial Performance and Growth Opportunities - The company is experiencing healthy expansion in its business, particularly in AI investments and add-ons, which are contributing to increased Average Contract Value (ACV) [14][15]. - Freshworks is seeing a trend where customers are willing to invest in solutions that promise faster ROI, even amidst macroeconomic uncertainties [60][62]. Future Outlook - The company is preparing for upcoming product announcements and innovations aimed at enhancing customer experience and operational efficiency [26][34]. - Freshworks is committed to maintaining its focus on the SMB market, which is less complex and more aligned with its product offerings compared to larger enterprises [72][75]. Additional Insights - The macroeconomic environment has not deterred customers from investing; instead, it has prompted them to seek solutions that offer greater efficiencies [63]. - Freshworks is leveraging its existing customer base to demonstrate the effectiveness of its AI solutions, which is a significant selling point in competitive scenarios [46][50].

Freshworks (FRSH) Conference Summary Company Overview - Freshworks is an enterprise software company founded 15 years ago, initially as FreshDesk for customer support software, later evolving to include Freshservice and rebranding to Freshworks [4][5] - The company focuses on two main categories: Customer Experience (CX) products and Employee Experience (EX) products, with a strong emphasis on human-enabled AI products [5] Key Points Business Strategy and Growth - Freshservice now accounts for over 50% of the company's Annual Recurring Revenue (ARR), growing faster than Freshdesk, which has an ARR of $370 million and is growing at high single digits [7][8] - The market for Freshworks is expected to grow in the low to mid-teens, and the company aims to return Freshdesk to double-digit growth by refocusing on the SMB and low mid-market segments [7][30] - The appointment of CEO Dennis Woodside has led to a renewed focus on operational rigor and strategic execution, with a clear plan to prioritize EX products and AI integration across all offerings [10][11][12] AI Integration - Freshworks has developed three AI products: Freddie Co-Pilot, Freddie AI Agent, and Freddie Insights, which are integral to the company's strategy moving forward [12] - The company believes that AI will change how software is delivered and used, with a focus on making products easier to deploy and use [24][25] - AI products are currently not a significant revenue stream but are expected to become more material over time, with a shift towards consumption-based pricing models [35][37] Market Position and Competition - Freshworks is positioned well against legacy providers like BMC and ServiceNow, filling a gap in the market for easy-to-deploy enterprise-grade software [15][16] - The company has made its first acquisition of Device42, enhancing its EX offerings and competitiveness in the enterprise space [13] Financial Performance and Projections - The company reported an ARR growth of around 19%, with guidance for 13% to 15% growth moving forward [41][45] - Freshworks has a healthy balance sheet with $1 billion in cash and is actively engaging in a $400 million buyback program [49][50] - The company aims to maintain efficiency while growing, projecting over $200 million in free cash flow for the year [50] Employee Structure and Operational Efficiency - Over 80% of Freshworks' employees are based in India, providing a cost advantage and operational efficiency [56][58] - The company underwent a headcount reduction of 13% to improve focus and efficiency, emphasizing the need for the right people in the right roles [59][60] Additional Insights - The company is focused on execution in its sales motion and improving conversion rates, particularly in the CX segment, which is currently growing at high single digits [30][32] - Freshworks is committed to innovation in AI while ensuring that core functionalities remain strong, as customers still value traditional support features [39][40]

Financial Data and Key Metrics Changes - In Q1 2025, revenue grew 19% year over year to $196.3 million, with a non-GAAP operating margin of 24% and an adjusted free cash flow margin of 28% [6][29][31] - Adjusted free cash flow increased by 43% year over year to $55.4 million, reflecting strong collection activities and operational efficiencies [29][36] - The company achieved a rule of 47 in Q1, indicating strong growth and profitability [6] Business Line Data and Key Metrics Changes - Employee Experience (EX) business reached over $420 million in ARR, growing 33% year over year [8][31] - Customer Experience (CX) business generated over $370 million in ARR, reflecting 7% year over year growth [21][31] - The company added over 1,000 net customers in Q1, ending with over 73,300 total customers [6][34] Market Data and Key Metrics Changes - Net dollar retention remained stable at 105% on a constant currency basis [7][33] - The number of customers contributing more than $5,000 in ARR grew 13% year over year to 23,275 customers [33] - The number of larger customers contributing more than $50,000 in ARR grew 24% year over year to 3,217 customers [33] Company Strategy and Development Direction - The company focuses on three strategic imperatives: investing in employee experience, delivering AI capabilities across products, and accelerating growth for customer experience solutions [7][8] - The integration of Device 42 into the product offerings is enhancing the value proposition and driving new business [50] - The company aims to leverage AI to improve operational efficiency and customer satisfaction [20][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain growth despite macroeconomic uncertainties, citing the essential nature of their software solutions [90][92] - The company anticipates continued demand for its products as businesses seek efficiency and cost savings [90] - Forward-looking estimates for Q2 2025 include revenue growth of 13% to 15% year over year [39][40] Other Important Information - The company repurchased $111.8 million of its shares in Q1, continuing its capital allocation strategy [37] - The launch of Freddie AI Insights is expected to enhance decision-making capabilities for managers [19][78] Q&A Session Summary Question: Update on Device 42 pipeline and CX growth - Management noted that demand remains strong and Device 42 is driving platform wins, with a significant number of deals being integrated [45][50] - CX continues to see growth in agent count and AI adoption, with optimism about future developments [51][52] Question: Operational efficiencies from AI and spending plans - The company has seen significant improvements in productivity due to AI, with a reduction in headcount by nearly 20% over two years [56][57] - Management plans to continue investing in sales and marketing despite some expected increases in spending [59] Question: Changes in the partner program and impacts for fiscal 2025 - The partner program has been updated to a transfer pricing model to create more opportunities for resellers [66] - Management is optimistic about the potential for growth through partnerships [67] Question: Market strength and pipeline characterization - The pipeline remains strong, with several enterprise wins and a growing interest from mid-market customers [99][100] - Management does not anticipate any disruption from recent changes in the sales team [104]

Q1 2025 Earnings Presentation April 29, 2025 © 2025 Freshworks Inc. All rights reserved. Disclaimer This presentation has been prepared by Freshworks Inc. ("Freshworks") for informational purposes only and not for any other purpose. Nothing contained in this presentation is, or should be construed as, a recommendation, promise, or representation by Freshworks or any officer, director, employee, agent, or advisor of Freshworks. This presentation does not purport to be all inclusive or to contain all of the i ...

Financial Data and Key Metrics Changes - In Q1 2025, revenue grew 19% year over year to $196.3 million, with a non-GAAP operating margin of 24% and an adjusted free cash flow margin of 28% [8][31][34] - The non-GAAP operating margin expanded by more than 10 percentage points compared to the previous year [8] - Adjusted free cash flow increased by 43% year over year to $55.4 million [31][38] Business Line Data and Key Metrics Changes - Employee Experience (EX) business achieved over $420 million in ARR, growing 33% year over year [10][33] - Customer Experience (CX) business reached over $370 million in ARR, reflecting 7% year over year growth [23][33] - The company added over 1,000 net customers in Q1, ending with over 73,300 total customers [9][36] Market Data and Key Metrics Changes - Net dollar retention remained stable at 105% on a constant currency basis [9][35] - The number of customers contributing more than $5,000 in ARR grew 13% year over year to 23,275 [35] - The number of customers contributing more than $50,000 in ARR increased by 24% year over year to 3,217 [35] Company Strategy and Development Direction - The company focuses on three strategic imperatives: investing in employee experience, delivering AI capabilities across products, and accelerating growth for customer experience solutions [9][10] - The integration of Device 42 into existing offerings is enhancing the value proposition and driving new business [52] - The company is committed to leveraging AI to improve operational efficiency and customer satisfaction [22][30] Management Comments on Operating Environment and Future Outlook - Management noted no significant changes in demand due to macroeconomic conditions, emphasizing the necessity of their solutions for efficiency [49][90] - The company expects to continue benefiting from its competitive pricing and uncomplicated solutions compared to legacy providers [51][92] - Future guidance includes revenue expectations for Q2 2025 in the range of $197.3 million to $200.3 million, growing 13% to 15% year over year [41] Other Important Information - The company repurchased $111.8 million of its shares in Q1, continuing its capital allocation strategy [39] - The launch of Freddie AI Insights is expected to enhance decision-making capabilities for managers [21][80] Q&A Session Summary Question: Update on Device 42 and CX growth - Management confirmed strong demand for Device 42, with significant contributions to new business and upsell opportunities [52] - CX continues to see growth in agent count and AI adoption, with optimism about future developments [54] Question: Operational efficiencies from AI - Management highlighted over 70 instances of AI products enhancing productivity and driving margin expansion [58] - The company plans to continue investing in AI to optimize operations and improve margins [60] Question: Changes to the partner program - The company is moving to a transfer pricing model for resellers to create more opportunities for partners [66] - There is strong interest from partners, particularly in mid-market segments [68] Question: Market strength and pipeline characterization - The pipeline remains strong, with numerous enterprise wins and a growing recognition of the company's offerings in the market [100]