Freshworks Reports Strong Q2 2023 Performance, Driven by AI Integration and Customer Growth

Freshworks Revenue Growth in Q2 2023 | Chennai News - Times of India

Chennai: Nasdaq-listed software services firm Freshworks's revenue grew 20% in the June quarter to $174.1 million, it said in exchange filings. Its GAAP loss from operations was $43.8 million, marginally higher compared to $43.3 million in the same period last year. Free cash flow for the quarter was $32.8 million, compared to $18.1 million in Q2 of 2023. Freshworks outlook for the full year stood at $707 million to $713 million, with up to 19.5% yearly growth in revenue.In the earnings call, Dennis Woodside, chief executive & president of Freshworks said the company nearly doubled customers using its artificial intelligence bot. "We nearly doubled the number of customers that are paying for our self-serve bot." He added that their Copilot edition is $29 a seat per month. "Our results reflect our increasing financial discipline and our ability to meet the needs of customers with our AI-powered solutions," he said. The SaaS firm's non-GAAP Income from operations was at $13.1 million, compared to $11.7 million in the same period last year, it said in a release. Net dollar retention rate was 106%, compared to 108% in the second quarter of 2023. Number of customers contributing more than $5,000 in ARR was 21,744, an increase of 14% YoY and 14% adjusting for constant currency.

Freshworks reports 20% revenue growth in Q2 to $174 million

The Chennai-based firm also upped its revenue guidance. Freshworks has given a 2024 full-year guidance revenue of $707 -$713 million, which has gone up marginally by around 1-2% on the back of rising demand for the firm's AI solutions.Nasdaq-listed Software-as-a-Service (SaaS) firm Freshworks on Wednesday said its revenue jumped 20% year-on-year to touch $174 million in the second quarter of calendar year 2024 owing to improved sales and rising demand for AI-enabled solutions from customers. "Freshworks delivered a solid Q2, growing revenue to $174.1 million with a free cash flow margin of 19%," Dennis Woodside, CEO & President of Freshworks said in a statement. "Our results reflect our increasing financial discipline and our ability to meet the needs of customers with our AI-powered solutions," Woodside added. This marks the first reporting period since Woodside succeeded Girish Mathrubootham as CEO. The Chennai-based firm also upped its revenue guidance. Freshworks has given a 2024 full-year guidance revenue of $707 -$713 million, up marginally by around 1-2% on the back of rising demand for the firm's AI solutions. The company has also revised its non-GAAP income from operations for the full year to $60-$66 million as against an outlook of $58-$64 million during Q1 of FY24. Freshworks' shares rallied around 12% on Nasdaq and closed at $14 per share. However, its GAAP Loss stood at $43.8 million in the second quarter as against a loss of $43.3 million in the second quarter of 2023. "During my first quarter as our CEO, I spent extensive time in India with our product and engineering teams, digging into our product roadmap and upcoming anticipated innovations. I also met with customers, partners, and other key stakeholders in New York, Boston, Chennai, and Bangalore, gathering feedback and better understanding what we do well and what we can do better," Woodside said during the firm's earnings call. He added that the firm is "betting big" on its AI capabilities and that Freshworks has seen customer adoption for Freddy AI double sequentially. "We are finding all of our customers are comfortable with the idea that AI can make their agents more productive. And when they see the value of the AI suggesting answers to customers for deeply technical questions that often take time for agents to research and resolve, the agents don't have the answers at the tip of their tongue. They see the value... So that's what's driving our growth there," Woodside added. Freshworks said it ended the quarter with over 1,200 customers using Freddy Copilot and 900 customers using Freddy Self Service capabilities. Woodside added that the focus now would be to optimize the company's existing resource profile which included the talented engineers as well as be laser focused on AI. "We spent the last year building out our AI offerings, deepening them, testing them, ensuring that the quality of results is high. Now we're seeing it pay off and really putting the pedal on monetizing that AI opportunity, starting with Copilot, but we've got some exciting innovation coming around Freddy Self Serve as well that'll make deploying bots much easier towards the back half of this year," he said. During the last quarter, Freshworks reported consolidated revenue of $165.5 million, up 20 percent year-on-year (YoY). The SaaS firm said that the number of customers contributing more than $5,000 in ARR was 21,744, an increase of 14% year-over-year and 14% adjusting for constant currency. Freshworks' net dollar retention rate, a key metric used to measure the growth and stability of a company's recurring revenue base was around 106% in the second quarter. During the quarter, the firm has also launched a new data centre in the UAE, powered by Amazon Web Services (AWS), to help with global expansion and support job creation and digital skills development in the region.

Freshworks forecasts third-quarter revenue above estimates as AI drives strong demand

The San Mateo, California-based company also offers an IT service management product called Freshservice, which assists businesses with employee onboarding and management. "We have doubled our number of paying customers for Freddy Copilot to 1,200 and those customers are seeing 30% productivity improvement," CEO Dennis Woodside told Reuters. Freddy Copilot, an AI agent of Freshworks, helps employees improve their performance by summarizing issues and handling repetitive tasks. Freshworks, which counts Oracle, Salesforce and ServiceNow among its competitors, completed the acquisition of Device42 in June to drive its IT asset management capabilities. The company, founded in India's Southern city of Chennai in 2010, has more than 67,000 customers, including Databricks, American Express, Nucor and Sony. Freshworks forecast third-quarter revenue to be between $180 million and $183 million, the mid-point of which is above analysts' average estimate of $178.7 million, according to LSEG data. It expects adjusted profit per share to be between 7 cents and 8 cents for the third quarter, compared with estimates of 8 cents. It also raised its annual revenue forecast to between $707 million and $713 million, compared with its prior expectations of between $695 million and $705 million. However, Freshworks trimmed the upper end of its annual adjusted profit per share forecast range. In the second quarter ended June 30, revenue came in at $174.1 million, beating estimates of about $169 million. On an adjusted basis, quarterly profit per share stood at 8 cents, which also beat estimates of 6 cents per share. Freshworks appointed insider Dennis Woodside as the CEO in May, taking the reins from founder Girish Mathrubootham who assumed the role of firm's executive chairman. (Reporting by Jaspreet Singh in Bengaluru; editing by Alan Barona)