Freshworks(US:FRSH)2025-07-29 22:02Financial 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]