Freshworks’ Q2 revenue up 19% YoY to $145 million, expects full-year operating profit of $28 million

Freshworks reports Q2 2023 results

Nasdaq-listed Software-as-a-Service (SaaS) giant Freshworks on August 1, reported consolidated revenue of $145 million during the second quarter of the calendar year (CY) 2023, up 19 percent year-on-year (YoY). Non-GAAP adjusted operating profit at $11.7 million, as against a loss of $15.8 million in Q2 of 2022 mainly on the back of a rise in its large enterprise customers.

“Freshworks Q2 results outperformed our internal estimates..we continue to improve our business efficiency and have generated a free cash flow of $18.1 million in Q2 surpassing our expectations,” said Girish Mathrubootham, CEO and Founder of Freshworks in the company's earnings call held on August 1st.]

The company's number of customers contributing more than $5,000 in ARR (Annual Recurring Revenue) was recorded at 19,105, an increase of 18 percent YoY. New customers added during the quarter under review include Claremont McKenna College, The State of Hawaii, Houston Museum of Natural Science, Pitchbook, and Smart Recruiters.

In Q1 of 2023, Freshworks’ consolidated revenue was recorded at $138 million and it delivered its first-ever quarterly adjusted operating (Non-GAAP) profit of $3.9 million as a public company.

GAAP refers to Generally Accepted Accounting Principles, which is a collection of commonly-followed accounting rules and standards for financial reporting. Meanwhile, non-GAAP financial results exclude the impact of stock-based compensation expenses, payroll taxes on employee stock transactions, amortization of acquired intangibles and other adjustments.

Also read: MakeMyTrip Q1 results: Net profit soars to 18.6 million, EBITDA at $25.9 million

The company's net loss was at $35.04 million in Q2 of 2023 as against a loss of $68.16 reported during the same quarter last year. Freshworks follows January to December as its financial year.

Freshworks' GAAP (loss) from operations was $43.5 million which has shrunk 54 percent YoY.

During the quarter under review, Freshworks had a free cash flow of $18.1 million which has doubled on a quarterly basis and is up around 80 percent YoY. As of June 30th, 2023, cash and cash equivalents were recorded at $1.16 billion.

The company’s net retention rate in Q2 of 2023 was recorded at 108 percent. Freshworks' Net Dollar Retention rate was recorded at 107 percent during the last quarter. This basically measures the changes in recurring revenue caused due to fluctuations within the revenue from the existing customer base. As per financial experts, an NDR rate of 100 percent is generally considered positive for a company.

The SaaS firm’s shares were down 2.25 percent on Nasdaq and closed at $18.24 a piece.

Investments in AI

Freshworks’ CEO Mathrubootham while announcing the results said that the firm’s AI launches made during Q2 of 2023 will start to fructify in terms of efficiency and customer satisfaction from the coming quarters.

“In Q2, we launched new generative AI enhancements across our product lines and outperformed our estimates across all our key financial metrics. I'm excited about the opportunity for companies to take advantage of our software to delight their customers and employees,” He said.

Outlook

Freshworks has given a full-year 2023 financial outlook for non-GAAP operating profit to be at $28 million. The firm expects to clock a revenue in the range of $149 million to $151 million in the next quarter.

It expects its overall revenues in 2023 to be in the range of $587 million to $595 million.