Freshworks(FRSH) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, revenue grew 22% year-over-year to $194.6 million, exceeding previous estimates [11][52] - Non-GAAP operating margin improved to 21$41.7 million, resulting in a free cash flow margin of 21% for the quarter [11][63] Business Line Data and Key Metrics Changes - Employee Experience (EX) business surpassed $400 million in ARR, growing 35$360 million in ARR, growing at 7% year-over-year on a constant currency basis [36][55] - Professional Services revenue contributed $2.4 million, while Device42 revenue was approximately$10.3 million for the quarter [53] Market Data and Key Metrics Changes - Over 72,200 total customers were reported, with a net addition of over 2,600 customers in Q4 [11][60] - Net dollar retention was 105% on a constant currency basis, with expectations of approximately 104% for Q1 2025 [58][108] - The number of customers contributing more than $5,000 in ARR grew 11$190 million to $193 million, reflecting a growth rate of 15$15.5 million of its shares in Q4 as part of a $400 million stock repurchase program [65] - Cash, cash equivalents, and marketable securities totaled$1.07 billion at the end of the quarter [68] Q&A Session Summary Question: Growth potential in EX business - Management believes the EX business has significant growth potential, particularly in the mid-market segment, and is seeing a shift from legacy providers to Freshworks [78][80] Question: Balancing investments and M&A opportunities - The company plans to continue focusing on operational efficiency while exploring inorganic growth opportunities as they arise [85][89] Question: Customer additions and IT ESM business performance - Management noted that FX impacts and a strong prior year affected the number of customers contributing over $50,000 in revenue, but they are seeing strong upmarket momentum [92][94] Question: MSP opportunity with Unisys - The partnership with Unisys is expected to evolve into a managed service provider opportunity, with ongoing investments in MSP functionality [96][99] Question: NRR outlook and AI innovation cycle - Management indicated that the innovation cycle around AI is just beginning, with expectations for growth in net dollar retention as AI products gain traction [102][106] Question: SMB demand environment - Demand in the SMB segment is stable to improving, with AI helping to enhance efficiency and effectiveness [111][113] Question: Guidance for CX and Freshservice - The company expects to see tougher revenue comparisons in the second half of 2025 due to the Device42 acquisition anniversary [118][120]