Freshworks(US:FRSH)2026-02-10 23:02Financial Data and Key Metrics Changes - Freshworks achieved profitability for the first time in its history, generating record free cash flow in 2025, with a free cash flow margin of 25% [5][24][29] - Q4 total revenue increased to $222.7 million, growing 14% year-over-year on an as-reported basis and 13% on a constant currency basis [20] - Annual recurring revenue (ARR) ended at $907 million, representing 18% growth year-over-year on an as-reported basis [9] Business Line Data and Key Metrics Changes - Employee Experience (EX) business reached approximately $510 million in ARR, representing 26% year-over-year growth on an as-reported basis [21][10] - Customer Experience (CX) business ended the year with $395 million in ARR, reflecting year-over-year growth of 9% on an as-reported basis [21][16] - Device42 ended 2025 with over $40 million in ARR, with a 30% attach rate to top new EX deals [11][21] Market Data and Key Metrics Changes - Over 1,500 customers now contribute more than $100,000 in ARR, representing a 28% year-over-year growth [9] - The number of customers contributing more than $50,000 in ARR grew 23% year-over-year [26] - Net dollar retention rate was 108% on an as-reported basis, with expectations to improve to approximately 105% in Q1 2026 [25][44] Company Strategy and Development Direction - Freshworks aims to expand its EX business and monetize AI at scale, targeting $100 million in AI-driven ARR by 2028 [17][14] - The acquisition of FireHydrant is expected to enhance IT operations management capabilities and open an $8 billion addressable market [12][34] - The company is focused on integrating its product offerings to provide a unified service operations platform for IT teams [13][80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained growth and profitability, projecting revenue growth of approximately 13.5%-14.5% for the full year 2026 [33][32] - The company anticipates continued demand for its EX solutions, particularly in the mid-market segment [72][73] - Management highlighted the importance of AI in driving customer satisfaction and operational efficiency [15][59] Other Important Information - Freshworks generated $56.2 million in free cash flow in Q4, outperforming expectations due to strong cash collections [28] - The company ended the year with nearly $844 million in cash, cash equivalents, marketable securities, and restricted cash [30] Q&A Session Summary Question: What factors are creating headwinds on the CX side of the business? - Management noted that the focus has been on EX, and the unification of conversational and ticketing capabilities is expected to drive faster growth in CX [39][40] Question: How should we think about the attach rate for Device42 trending? - Management indicated that Device42 is integral to the growth of the EX business and is expected to drive retention and expansion [50][51] Question: What are the expectations for Freddy AI's contribution to growth? - Management reported that Freddy AI has crossed $25 million in ARR and is expected to continue driving growth as capabilities improve [58][60] Question: How does the company view its guidance compared to previous years? - Management expressed confidence in the current guidance, reflecting strong momentum in the EX market and a clear strategy for growth [62][63]