Freshworks(US:FRSH)2025-07-29 22:00Financial 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]