Freshworks Expects a Full-year Operating Profit of USD 28 Mn, With Q2 Revenue Growing 19% YoY to USD 145 Mn Compared to the loss of USD 68.16 million posted during the same quarter last year, the company's net loss decreased to USD 35.04 million in the second quarter of 2023. It anticipates that its total revenues in 2023 will be between USD 587 million and USD 595 million.

By Sujata Sangwan

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Freshworks CEO and Founder Girish Mathrubootham

On August 1, Nasdaq-listed SaaS behemoth Freshworks reported consolidated revenue of $145 million for the second quarter of calendar year (CY) 2023, an increase of 19% year over year (YoY). Non-GAAP adjusted operating profit of USD 11.7 million, up from a loss of $15.8 million in the second quarter of 2022, mostly due to an increase in the company's major enterprise clients.

In the company's earnings call on August 1, CEO and Founder Girish Mathrubootham stated, "Freshworks Q2 results exceeded our internal estimates. We continue to improve our business efficiency and have generated a free cash flow of USD 18.1 million in Q2 exceeding our expectations."

19,105 customers, an increase of 18% YoY, contributed more than USD 5,000 in ARR (Annual Recurring Revenue) for the business. Claremont McKenna College, The State of Hawaii, Houston Museum of Natural Science, Pitchbook, and Smart Recruiters are just a few of the new clients that were added during the quarter under review.

As a publicly traded company, Freshworks reported its first-ever quarterly adjusted operating (Non-GAAP) profit of USD 3.9 million in Q1 2023, with consolidated revenue of USD 138 million.

The term "GAAP" stands for "Generally Accepted Accounting Principles," which is a collection of widely used standards and accounting procedures for financial reporting. The impact of stock-based compensation costs, payroll taxes on employee stock transactions, the amortisation of acquired intangibles, and other adjustments are not included in non-GAAP financial results.

Compared to the loss of USD 68.16 million posted during the same quarter previous year, the company's net loss in the second quarter of 2023 was USD 35.04 million. Freshworks' fiscal year runs from January to December.

The GAAP (loss from operations) for Freshworks was USD 43.5 million, a 54 percent year-over-year decrease.

Freshworks generated USD 18.1 million in free cash flow during the reviewed quarter, a doubling on a quarterly basis and an increase of over 80% year over year. Cash and cash equivalents were recorded at USD 1.16 billion as of June 30th, 2023.

In the second quarter of 2023, the company's net retention rate was 108 percent. During the most recent quarter, Freshworks' Net Dollar Retention rate was 107 percent. This essentially tracks changes in recurrent revenue brought on by fluctuations in the income from the current clientele. Financial analysts state that a corporation should normally be happy with an NDR rate of 100%.

The CEO of Freshworks, Mathrubootham, stated that the company's AI launches made during Q2 of 2023 will begin to bear fruit in terms of effectiveness and client happiness from the upcoming quarters.

"We introduced new generative AI improvements across all of our product lines in Q2, and we surpassed our projections on all of our major financial KPIs. I'm thrilled about the opportunity for businesses to use our software to delight both their clients and staff," he remarked.

Freshworks forecasted a non-GAAP operating profit of USD 28 million for the entire 2023 fiscal year. The company anticipates revenue in the following quarter of between USD 149 million and USD 151 million.

It anticipates that its total revenues in 2023 will be between USD 587 million and USD 595 million.

Sujata is an engineering graduate and has done her Post Graduation in Human Resource Management. She has a deep interest in startups, venture capitalists & technology. 

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