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01/11 16:02
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A indicate positive financial performance with strong customer growth, AI adoption, and increased revenue guidance. The company is expanding partnerships and has raised its full-year revenue expectations. Despite some uncertainties in product-specific revenue impacts and pricing models, the overall sentiment is positive due to strong growth metrics and optimistic guidance. Given the market cap, this is likely to result in a stock price increase in the 2% to 8% range over the next two weeks.
Revenue Freshworks grew Q2 revenue 18% year-over-year to $204.7 million. This growth was attributed to strong demand for their solutions and foreign exchange tailwinds.
Non-GAAP Operating Margin Expanded to 22%, an increase of over 14 percentage points compared to a year ago. This improvement was due to disciplined expense management and strong revenue performance.
Adjusted Free Cash Flow Grew 65% year-over-year to $54.3 million, resulting in a margin of 27%. This was driven by strong collections and operational discipline.
Employee Experience (EX) ARR Achieved over $450 million in ARR, representing 24% year-over-year growth on an as-reported basis and 22% on a constant currency basis. Growth was driven by mid-market and enterprise adoption, as well as product innovations like Freshservice Journeys.
Customer Experience (CX) ARR Grew to over $380 million, reflecting 11% growth year-over-year on an as-reported basis and 8% on a constant currency basis. Growth was attributed to strong momentum in Freshdesk and AI product adoption.
Net Dollar Retention Came in at 106% on an as-reported basis and 104% on a constant currency basis. Improvements in churn rate and steady customer expansion contributed to this metric.
Customers Contributing More Than $5,000 in ARR Grew 10% year-over-year to 23,975 customers. This cohort represents 90% of ARR, with growth driven by free-to-paid initiatives and strong bookings.
Customers Contributing More Than $50,000 in ARR Grew 22% year-over-year to 3,460 customers, representing over 50% of ARR. Growth was driven by strong adoption in larger customer segments.
Calculated Billings Increased to $213.1 million, representing 15% year-over-year growth on an as-reported basis and 13% on a constant currency basis. This was driven by stronger-than-expected bookings.
Freddy Agentic AI Platform: Introduced product innovations within the Freddy Agentic AI Platform and across EX and CX portfolio.
Freshservice Journeys: Released a tool to help HR teams automate and streamline employee transitions like onboarding and offboarding.
Freddy AI Agent Studio: Launched for Freshdesk to build and manage AI agents for autonomous actions.
Freddy AI Agent for Email: Designed for organizations where email is the primary support channel.
Freddy AI Agent for Unified Search: Connects to systems like Microsoft SharePoint for faster answers.
Freddy AI Insights: Provides actionable intelligence to IT teams about operational health.
Freshservice for MSPs: New ITSM product for small managed service providers.
Customer Base Expansion: Ended Q2 with over 74,600 customers, including notable names like Seagate, Covington & Burling LLP, and AEP Energy.
Global Partner Program: Onboarded over 130 new partners, with partners touching more than 1/3 of ARR in Q2.
Industry Verticals: Momentum in sports, public sector, and partnerships like McLaren Formula 1 team.
Revenue Growth: Q2 revenue grew 18% year-over-year to $204.7 million.
Non-GAAP Operating Margin: Expanded to 22%.
Adjusted Free Cash Flow Margin: Achieved 27%, with $54.3 million in adjusted free cash flow.
Net Dollar Retention: Came in at 106% on an as-reported basis.
Employee Experience (EX) Growth: EX achieved over $450 million in ARR, growing 24% year-over-year.
AI Adoption: Over 5,000 customers paying for AI products, with ARR from these SKUs crossing $20 million.
Customer Experience (CX) Growth: CX grew to over $380 million in ARR, representing 11% growth year-over-year.
Macroeconomic Environment: Uncertainties in the macroeconomic environment and market volatility could adversely impact the company's financial performance and growth.
Sustaining Growth: Challenges in sustaining growth and reaching long-term revenue goals, particularly in a competitive market.
Customer Retention: Pressure on gross expansion trends and churn rates, particularly in the Device42 partner business, which could affect net dollar retention.
Cost Management: The need to control costs and improve operating efficiency while balancing growth and profitability.
Regulatory Risks: Potential risks related to compliance with regulatory requirements and changes in laws that could impact operations.
Currency Fluctuations: Foreign exchange rate fluctuations could impact revenue and financial performance.
Integration Challenges: Integration of acquired businesses like Device42 poses risks, including retention issues and operational alignment.
AI Adoption Risks: While AI adoption is growing, there is a risk of slower-than-expected customer adoption or challenges in demonstrating measurable value from AI products.
Competitive Pressures: Intense competition from legacy competitors and other market players could impact market share and pricing power.
Operational Scalability: Challenges in scaling operations efficiently to meet growing customer demand and expanding product offerings.
Revenue Projections: For Q3 2025, revenue is expected to be in the range of $207 million to $210 million, representing 11% to 12% year-over-year growth. For the full year 2025, revenue is projected to be between $822.9 million and $828.9 million, reflecting 14% to 15% year-over-year growth.
Non-GAAP Operating Income: For Q3 2025, non-GAAP income from operations is expected to range between $31.2 million and $33.2 million. For the full year 2025, non-GAAP income from operations is projected to be between $153 million and $157 million.
Non-GAAP Net Income Per Share: For Q3 2025, non-GAAP net income per share is expected to range from $0.12 to $0.14. For the full year 2025, non-GAAP net income per share is projected to range from $0.56 to $0.58.
Net Dollar Retention: Net dollar retention is estimated to be approximately 105% on an as-reported basis and 104% on a constant currency basis for Q3 2025.
Calculated Billings Growth: For Q3 2025, calculated billings growth is expected to be 14% year-over-year on an as-reported basis and 13% on a constant currency basis. For the full year 2025, calculated billings growth is projected to be approximately 16% year-over-year on an as-reported basis and 14% on a constant currency basis.
Adjusted Free Cash Flow: For the full year 2025, adjusted free cash flow is expected to be approximately $215 million, with $55 million in Q3 and $50 million in Q4.
Repurchase of shares: In Q2, Freshworks repurchased an additional 8.2 million shares at an average price of $13.89 per share. The company has now repurchased nearly 15.9 million shares using over $240 million through Q2. Additionally, Freshworks continues to manage and offset share count dilution by net settlement of vested equity amounts, using approximately $14 million during the quarter for this purpose. Looking ahead, the company plans to continue net settlement of vested equity amounts and expects Q3 cash usage of approximately $17 million at current stock price levels. For the full year, Freshworks expects to use approximately $64 million to net settle vested equity amounts.
The earnings call highlights solid financial metrics, including 14% YoY revenue growth and a 27% free cash flow margin, indicating operational discipline. The Q&A reveals positive sentiment towards AI and EX product growth, with strategic investments for future expansion. Despite no buyback expansion, the focus on M&A and reinvestment is seen positively. While management was vague on some specifics, the overall tone and strategic direction suggest a positive market reaction, especially given the company's market cap.
The earnings call summary and Q&A indicate positive financial performance with strong customer growth, AI adoption, and increased revenue guidance. The company is expanding partnerships and has raised its full-year revenue expectations. Despite some uncertainties in product-specific revenue impacts and pricing models, the overall sentiment is positive due to strong growth metrics and optimistic guidance. Given the market cap, this is likely to result in a stock price increase in the 2% to 8% range over the next two weeks.
The earnings call highlights strong financial performance with a 19% YoY revenue growth, improved operating margin, and significant free cash flow increase. The share repurchase program and customer growth are positive indicators. Although there are concerns about competitive pressures and regulatory issues, the Q&A shows confidence in AI-driven efficiencies and a strong pipeline. The market cap suggests a moderate reaction, leading to a positive outlook for the stock price over the next two weeks.
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