Freshworks reports 20% revenue growth to $174 million in Q2CY24

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 Q2.

Nasdaq-listed Software-as-a-Service (SaaS) firm Freshworks clocked a revenue of $174 million in the second quarter of calendar year 2024, up around 20% year-on-year (YoY) on the back of 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%...Our results reflect our increasing financial discipline and our ability to meet the needs of customers with our AI-powered solutions,” Dennis Woodside, CEO and President of Freshworks said in a statement on July 31.

Q2 2024 is a pivotal quarter for the company, as it marks the first reporting period since Woodside succeeded Girish Mathrubootham as CEO.

“During my first quarter as CEO, I spent a considerable time with our product and engineering team in India, I also met with key customers and investors to gather information on what we are doing well and what needs improvement,” Woodside said during the firm's earnings call.

Also Read: For Freshworks to scale and become a global company, things will have to change: CEO Dennis Woodside

Key Numbers

The firm’s Free Cash Flow (FCF) was $32.8 million in Q2 of 2024 which has gone up by around 81% YoY compared to $18.1 million in the second quarter of 2023. Freshworks has a cash and cash equivalents of around $1 billion as of June 30.

The firm’s GAAP Loss was at $43.8 million in the second quarter as against a loss of $43.3 million in the second quarter of 2023.

The firm reported consolidated revenue of $165.5 million, up 20 percent year-on-year (YoY), with non-GAAP operating profit zooming to $21.8 million as against $3.9 million in the first quarter of 2023.

The firm’s net loss on a non-GAAP basis went down to $21 million in Q2 as against $35 million in the first quarter of 2023. Its non-GAAP operating  income was recorded at $35 million.

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 Q2.

A new data centre in UAE

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, the firm said in a statement.

Several prominent SaaS firms have launched their own data centres to enhance performance, security, and compliance. Recently, Freshwork's direct competitor, Zoho opened two data centres in Saudi Arabia.

Other software majors like Salesforce, SAP and Microsoft have doubled down on building more data centres. Data centers are crucial for modern digital infrastructure, and AI solution building.

Overall it plays a fundamental role in supporting various aspects of technology and business operations

Freshworks’ Outlook for 2024

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.

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.

The firm's shares went up around 12% on Nasdaq and closed at $14 per share.