Freshworks delivers another solid earnings and revenue beat

Freshworks delivers another solid earnings and revenue beat

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Freshworks Inc. beat expectations on earnings and revenue for its fourth quarter, but its stock barely moved as it offered guidance that fell just shy of Wall Street’s forecasts.

The company reported a net loss of $60.6 million, with earnings before certain costs such as stock compensation of a penny per share, rising from a loss of six cents per share one year earlier. Revenue for the period rose 26% from a year ago, to $133.5 million. Wall Street had been looking for a loss of four cents per share on sales of $130.3 million.

It also reported full-year fiscal 2022 revenue of $498 million, up 34% from a year earlier. Its net loss for the full year came to $233.4 million.

Freshworks is considered to be an emerging rival to companies such as Salesforce.com, SAP SE, Workday Inc. and Oracle Corp. that dominate the customer relationship management software market. It sells a customer management and engagement platform that helps businesses to acquire new customers, close deals and maintain relationships in the long term. According to Freshworks, its platform is more user-friendly than the likes of Salesforce, easier to implement and less expensive.

These advantages have helped it gain a solid footing among midmarket businesses, which account for a significant chunk of its revenue. Even so, Freshworks has seen some success in attracting larger customers recently, with the San Francisco 49ers, Addison Lee Ltd., Finchoice and Dealer Spike LLC all signing up in the last quarter.

Freshworks founder and Chief Executive Girish Mathrubootham (pictured) said the company made a strong finish to the year, with its revenue rising by more than 30% on a constant currency basis. “Despite macroeconomic uncertainty throughout the year, I am pleased with our focus on product innovation, expansion and new business which drove revenue growth and improved cash flow,” he said.

The company ended the quarter with 17,722 customers that delivered at least $5,000 in annual revenue, up 20% from a year earlier. Freshworks also reported a net dollar retention rate of 108%. That’s an important metric that represents how much revenue growth or churn a company had over time from its existing pool of customers, and gives investors clues as to the overall health and growth potential of the business.

Despite the impressive rate at which it has been adding new customers and growing its revenue, Freshworks was somewhat cautious with its guidance for the coming quarter. It forecast earnings ranging from a three-cent-per-share loss to a penny-per-share profit, with revenue of between $133 million and $135 million. In contrast, Wall Street is looking for a two-cent-per-share loss on higher revenue of $137.5 million.

Freshworks’ stock rose just over 1% in late trading, having gained less than a percentage point during the regular session.

Photo: USISPF Communications/YouTube

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