Freshworks(US:FRSH)2022-02-11 02:59Financial Data and Key Metrics Changes - Revenue for Q4 2021 grew 44% year-over-year to $105.5 million, marking the first quarter with over $100 million in revenue [5][15] - Full-year revenue growth for 2021 was 49% [15] - Non-GAAP gross margins for Q4 were approximately 83% [15] - Non-GAAP operating loss for Q4 was $10.7 million, with a full-year operating loss of $18.3 million [16] - Net dollar retention was 114% in Q4, impacted by 1% due to foreign exchange [17] Business Line Data and Key Metrics Changes - 21% of customers used more than one Freshworks product as of Q4, up from 18% at the time of the IPO [8][25] - Customers contributing more than $5,000 in annual recurring revenue (ARR) grew 28% in Q4, totaling 14,814 customers [17] - Customers contributing more than $50,000 in ARR grew 61%, ending at 1,416 customers [18] Market Data and Key Metrics Changes - The company reported strong demand in both customer engagement and employee engagement sectors, particularly in the ITSM space [36][40] - The Southeast Alaska Regional Health Consortium and 7-Eleven are examples of customers successfully using multiple Freshworks products [9][10] Company Strategy and Development Direction - Freshworks aims to enhance customer experience and CRM product offerings in response to changing market trends, focusing on digital engagement channels [10][11] - The company plans to expand beyond the ITSM market, targeting the $34 billion IT operations management market [11][12] - Continued investment in the Neo platform for product innovation and integration is a priority [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, noting no significant pull-forward in demand but a healthy outlook for 2022 [67] - The company anticipates a negative impact of approximately 1% on revenue growth due to foreign exchange fluctuations [21][22] - Free cash flow is expected to be negative $25 million for the full year 2022, with a gradual improvement anticipated by Q4 [19][20] Other Important Information - Freshworks ended 2021 with approximately 322 million shares outstanding on a fully diluted basis [16] - The company maintained a cash balance of approximately $1.3 billion at the end of Q4 [19] Q&A Session Summary Question: Cross-sell execution and future expansion - Management noted that cross-sell will continue to grow, with 21% of customers using multiple products, up from 18% at IPO [25][26] Question: Cost advantage of R&D in Chennai - The company highlighted its access to a talented workforce in India, which allows for faster and more efficient innovation despite global wage inflation [27][28] Question: Insights on mid-market deals - Management confirmed strong traction in mid-market deals, particularly in the ITSM space, and noted a focus on mid-market rather than traditional enterprise sales [36][37] Question: Competitive landscape - The company sees Zendesk and Salesforce as primary competitors but believes it offers a credible alternative to ServiceNow in the mid-market [54] Question: Demand expectations for 2022 - Management indicated a healthy demand environment with no significant pull-forward in demand, particularly for Freshservice [67] Question: Free cash flow outlook - The company expects to burn approximately $25 million in free cash flow for 2022, with a positive outlook for Q4 [19][20]