March 29, 2024

Freshworks Reports 46% YoY Growth in Revenue in Q3 2021

The SaaS solution provider Freshworks reported its third-quarter (Q3) 2021 results on Tuesday. It generated USD 96.6 Million in revenue, a 46% year-over-year (YoY) growth since Q3 2020. The company posted an earnings loss of 4 cents per share while reporting a GAAP net loss of USD 140.3 Million from its operations as compared to a net income of USD 0.1 Million since the last year same quarter.

“Our strong third quarter results reflect the continued adoption of our modern and easy-to-use products by companies of all sizes,” said CEO and founder of Freshworks, Girish Mathrubootham. “We grew 46% year over year, and saw healthy expansion activity from our customer base.” The company has announced its quarterly results for the first since its IPO. Freshworks posted a free cash flow of USD 4.2 Million in Q3 2021, while it was USD 10.3 Million in Q3 2020.

The company mentioned that the number of customers that have contributed USD 5,000 in ARR has increased 31% YoY. It also said that the net dollar retention rate was 118% YoY as compared to 109% in the third quarter of 2020. The net dollar retention rate means the revenue a company generates through its pre-existing clients. Since the IPO, it has increased its customer base, which includes clients such as ForgeRock, Lucidworks, Double Diamond Resorts, Phillips, Scotch and Soda, Hunter College NY, Smashburger, Toyota Connected India, ForgeRock, and Watsons.

Future Insights

Freshworks expects its revenue to be between USD 99 Million and USD 101 Million. Moreover, it estimates that its non-GAAP earning per share would be around USD 0.07 – USD 0.05. “Our non-GAAP operating expenses increased by $28.5 million mainly driven by increased investments in our teams for R&D, sales marketing and general and administrative over the past 12 months. More specific to marketing, we increased our advertising branding PR and event cost by $5.5 million compared to last year, as we created more awareness for our products in the marketplace,” said Girish Mathrubootham during the earnings call.

Talking about the bigger picture, the company predicts that its full-year revenue will be between USD 364.5 Million and USD 366.5 Million. Furthermore, it projects that Non-GAAP net loss per share to be around USD 0.22 – USD 0.20. We have had really healthy growth throughout the year and we continue to support that with an efficient financial model. Even with growth investments and increased public company expenses in Q4, we expect to be roughly free cash flow breakeven for the quarter,” said Mathrubootham.

Following the Q3 2021 results, the company’s share price tanked more than 13% in after-hours trading. Freshworks stock price was listed in September at USD 36 per share. Since its public listing, the stock has gained 39%. As now the lock-up period for the investors will be over tomorrow, they can sell the shares for the first time. The major investors in the company include Capital G (backed by Alphabet), Tiger Global Management, Accel, and Sequoia Capital India. The company currently competes with Salesforce, Oracle, and SAP in the global market. On Tuesday, the market capitalization of Freshworks stood at USD 13.56 Billion.

Latest Developments in the Quarter

In October 2021, the company announced that it helped Raddison Hotel Group to improve its distributed workforce with its IT service management (ITSM) solution. “My team receives forty to fifty service requests per day — from simple applications to technically complex challenges. We selected Freshservice to gain more real-time insight into the IT workload and also to better distribute the work,” said vice president of RevTech and Distribution at Radisson Hotel Group, Benjamin Muratet.

In September 2021, Freshworks announced that India’s e-commerce app Dunzo is using its customer engagement software to manage customer queries and scale its revenue.  “Freshworks’ fast and intuitive products are enterprise-grade and have been able to match the scale at which we are growing,” Dunzo’s chief customer officer Vidyanand Krishnan.