Freshworks Inc. (NASDAQ: FRSH), a leading software company
empowering businesses to delight their customers and employees,
today announced financial results for its fourth quarter and full
year ended December 31, 2022.
“Freshworks capped off a strong finish to the year
with revenue growing 30% on a constant currency basis in Q4,” said
Girish Mathrubootham, CEO and Founder of Freshworks. “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. We will continue this
focus into 2023.”
Fourth Quarter
2022 Financial Summary
Results
- Revenue: Total
revenue was $133.2 million, representing growth of 26% compared to
the fourth quarter of 2021 and 30% adjusting for constant
currency.
- GAAP (Loss) from
Operations: GAAP (loss) from operations was $(60.6)
million, compared to $(56.4) million in the fourth quarter of
2021.
- Non-GAAP (Loss) from
Operations: Non-GAAP (loss) from operations was $(2.8)
million, compared to $(10.7) million in the fourth quarter of
2021.
- GAAP Net (Loss) Per
Share: GAAP basic and diluted net (loss) per share was
$(0.19) based on 288.5 million weighted-average shares
outstanding, compared to $(0.28) based on 269.5 million
weighted-average shares outstanding in the fourth quarter of
2021.
- Non-GAAP Net Income (Loss) Per
Share: Non-GAAP basic and diluted net income (loss) per
share was $0.01 based on 292.2 million weighted-average shares
outstanding, compared to $(0.06) based on 269.5 million
weighted-average shares outstanding in the fourth quarter of
2021.
- Net Cash Provided by Operating
Activities: Net cash provided by operating activities was
$7.2 million, compared to $4.8 million in the fourth quarter of
2021.
- Free Cash Flow: Free
cash flow was $4.0 million, compared to $2.8 million in the fourth
quarter of 2021.
- Cash, Cash Equivalents and
Marketable Securities: Cash, cash equivalents, and
marketable securities were $1.1 billion as of December 31,
2022.
Full Year 2022
Financial Summary Results
- Revenue: Total
revenue was $498.0 million, representing growth of 34% compared to
2021 and 37% adjusting for constant currency.
- GAAP (Loss) from
Operations: GAAP (loss) from operations was $(233.4)
million, compared to $(204.8) million in 2021.
- Non-GAAP (Loss) from
Operations: Non-GAAP (loss) from operations was $(22.3)
million, compared to $(18.3) million in 2021.
- GAAP Net (Loss) Per
Share: GAAP basic and diluted net (loss) per share was
$(0.82) based on 284.6 million weighted-average shares
outstanding, compared to $(21.73) based on 130.7 million
weighted-average shares outstanding in 2021.
- Non-GAAP Net (Loss) Per
Share: Non-GAAP basic and diluted net (loss) per share was
$(0.07) based on 284.6 million weighted-average shares
outstanding, compared to $(0.21) based on 130.7 million
weighted-average shares outstanding in 2021.
- Net Cash (Used in) Provided by
Operating Activities: Net cash (used in) operating
activities was $(2.5) million, compared to net cash provided by
operating activities of $11.5 million in 2021.
- Free Cash Flow: Free
cash flow was $(14.8) million, compared to $2.3 million in
2021.
A description of non-GAAP financial measures is
contained in the section titled "Explanation of Non-GAAP Financial
Measures" below and a reconciliation of GAAP to non-GAAP financial
measures is contained in the tables below.
Fourth Quarter Key Metrics
and Recent Business Highlights
- Number of customers contributing more
than $5,000 in ARR was 17,722, an increase of 20% year-over-year
and 21% adjusting for constant currency.
- Net dollar retention rate was 108%,
and 110% adjusting for constant currency, compared to 107% in the
third quarter of 2022 and 114% in the fourth quarter of 2021.
- Welcomed new customers to the
Freshworks community including: The San Francisco 49ers, Addison
Lee, Finchoice, Mahindra, Supara, St. Marche, Yulu Bikes and
more.
- Announced the appointment of Jason
Loomis as Chief Information Security Officer.
- Named one of The Best Places to Work
in 2023 in San Francisco and Colorado by BuiltIn.
- Freshdesk and Freshservice won
TrustRadius Awards for Best Value for the Price and Best Feature
Set.
Financial Outlook
We are providing estimates for the first quarter
and full year 2023 based on current market conditions and
expectations. The revenue growth rates are adjusted for constant
currency to provide better visibility into the underlying business
trends. We emphasize that these estimates are subject to various
important cautionary factors referenced in the section entitled
“Forward-Looking Statements” below.
For the first quarter and full year 2023, we
currently expect the following results:
|
($ in millions, except per share data) |
First Quarter 2023 |
Full Year 2023 |
|
|
Revenue(1) |
$133.0 - $135.0 |
$575.0 - $590.0 |
|
|
Year-over-year growth |
16% - 18% |
15% - 18% |
|
|
Adjusting for constant currency(2) |
19% - 21% |
16% - 19% |
|
|
|
|
|
|
|
Non-GAAP loss from operations(1) |
($9.0) - ($7.0) |
($14.0) - ($6.0) |
|
|
|
|
|
|
|
Non-GAAP net loss per share(3) |
($0.03) - ($0.01) |
($0.01) - $0.03 |
|
(1) Revenue and non-GAAP loss from operations are
based on exchange rates as of February 3, 2023 for currencies other
than USD.(2) Revenue growth rates adjusted for constant currency
are based on average exchange rates in effect during the comparison
period for currencies other than USD. See the section entitled
“Explanation of non-GAAP Financial Measures” and the table entitled
“Reconciliation of Selected GAAP Measures to non‑GAAP Measures” for
a reconciliation of GAAP to non‑GAAP measures.(3) Non-GAAP net loss
per share was estimated assuming 290.2 million and 293.8 million
weighted-average shares outstanding for the first quarter and full
year 2023, respectively.
These statements are forward-looking and actual
results may differ materially. Refer to the “Forward-Looking
Statements” safe harbor section below for information on the
factors that could cause our actual results to differ materially
from these forward-looking statements.
We have not reconciled our estimates for non-GAAP
loss from operations to GAAP loss from operations or non-GAAP net
loss per share to GAAP net loss per share due to the uncertainty
and potential variability of expenses that may be incurred in the
future. Accordingly, a reconciliation is not available without
unreasonable effort. We have provided a reconciliation of other
GAAP to non-GAAP financial measures in the financial statement
tables for our fourth quarter and full year 2022 non-GAAP results
included in this press release.
Webcast and Conference Call
Information
We will host a conference call for investors on
February 7, 2023 at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern
Time to discuss the company’s financial results and business
highlights. Investors are invited to listen to a live audio webcast
of the conference call by visiting the investor relations website
at ir.freshworks.com. A replay of the audio webcast will be
available shortly after the call on the Freshworks Investor
Relations website and will be available for twelve months
thereafter.
Explanation of Non-GAAP Financial
Measures
In addition to financial measures prepared in
accordance with U.S. generally accepted accounting principles
(GAAP), this press release and the accompanying tables contain
non-GAAP financial measures, including revenue and revenue growth
rates adjusted for constant currency, non-GAAP gross profit,
non-GAAP gross margin, non-GAAP sales and marketing expense,
non-GAAP research and development expense, non-GAAP general and
administrative expense, non-GAAP loss from operations, non-GAAP
operating margin, non-GAAP net loss per share, non-GAAP net loss
attributable to common stockholders, and free cash flow. The
presentation of these financial measures is not intended to be
considered in isolation or as a substitute for, or superior to,
financial information prepared and presented in accordance with
GAAP.
We adjust revenue and related growth rates for
constant currency to provide a framework for assessing business
performance excluding the effect of foreign currency rate
fluctuations. To present this information, current period results
for currencies other than USD are converted into USD at the average
exchange rates in effect during the comparison period (for Q4 2021,
the average exchange rates in effect for our major currencies were
1 USD to 1.14 EUR and 1 USD to 1.35 GBP), rather than the actual
average exchange rates in effect during the current period (for Q4
2022, the average exchange rates in effect for our major currencies
were 1 USD to 1.02 EUR and 1 USD to 1.17 GBP).
We use these non-GAAP measures in conjunction with
GAAP measures as part of our overall assessment of our performance,
including the preparation of our annual operating budget and
quarterly forecasts, to evaluate the effectiveness of our business
strategies and to communicate with our board of directors
concerning our financial performance. We believe these non-GAAP
measures provide investors consistency and comparability with our
past financial performance and facilitate period-to-period
comparisons of our operating results. We believe these non-GAAP
measures are useful in evaluating our operating performance
compared to that of other companies in our industry, as they
generally eliminate the effects of certain items that may vary for
different companies for reasons unrelated to overall operating
performance.
Investors are cautioned that there are material
limitations associated with the use of non-GAAP financial measures
as an analytical tool. The non-GAAP measures we use may be
different from non-GAAP financial measures used by other companies,
limiting their usefulness for comparison purposes. We compensate
for these limitations by providing specific information regarding
the GAAP items excluded from these non-GAAP financial measures.
We exclude the following items from one or more of
our non-GAAP financial measures, including the related income tax
effect of these adjustments:
- Stock-based compensation expense. We
exclude stock-based compensation, which is a non-cash expense, from
certain of our non-GAAP financial measures because we believe that
excluding this expense provides meaningful supplemental information
regarding operational performance. In particular, stock-based
compensation expense is not comparable across companies given the
variety of valuation methodologies and assumptions.
- Employer payroll taxes on employee
stock transactions. We exclude the amount of employer payroll taxes
on equity awards from certain of our non-GAAP financial measures
because they are dependent on our stock price at the time of
vesting or exercise and other factors that are beyond our control
and do not believe these expenses have a direct correlation to the
operation of our business.
- Amortization of acquired intangibles.
We exclude amortization of acquired intangibles, which is a
non-cash expense, from certain of our non-GAAP financial measures.
Our expenses for amortization of acquired intangibles are
inconsistent in amount and frequency because they are significantly
affected by the timing, size of acquisitions, and the allocation of
purchase price. We exclude these amortization expenses because we
do not believe these expenses have a direct correlation to the
operation of our business.
- Gain on sale of non-marketable equity
investments. We exclude gains on sale of non-marketable equity
investments from certain of our non-GAAP financial measures because
we believe they are unrelated to our ongoing operating performance
and are not expected to recur in our continuing operating
results.
We define free cash flow as net cash provided by
operating activities, less purchases of property and equipment and
capitalized internal-use software. We believe that free cash flow
is a useful indicator of liquidity as it measures our ability to
generate cash from our core operations after purchases of property
and equipment. Free cash flow is a measure to determine, among
other things, cash available for strategic initiatives, including
further investments in our business and potential acquisitions of
businesses.
Operating Metrics
Number of Customers Contributing More Than $5,000
in ARR. We define ARR as the sum total of the revenue we would
contractually expect to recognize over the next 12 months from all
customers at a point in time, assuming no increases, reductions or
cancellations in their subscriptions. We define our total customers
contributing more than $5,000 in ARR as of a particular date as the
number of business entities or individuals, represented by a unique
domain or a unique email address, with one or more paid
subscriptions to one or more of our products that contributed more
than $5,000 in ARR.
Net Dollar Retention Rate. To calculate net dollar
retention rate as of a given date, we first determine Entering ARR,
which is ARR from the population of our customers as of 12 months
prior to the end of the reporting period. We then calculate the
Ending ARR from the same set of customers as of the end of the
reporting period. We then divide the Ending ARR by the Entering ARR
to arrive at our net dollar retention rate. Ending ARR includes
upsells, cross-sells, and renewals during the measurement period
and is net of any contraction or attrition over this period.
We also adjust the above operating metrics and
related growth rates for constant currency to provide a framework
for assessing our business performance excluding the effects of
foreign currency rates fluctuations. To present this information,
the Ending ARR of the current period in currencies other than USD
is converted into USD at the exchange rates in effect at the end of
the comparison period (for Q4 2021, the period end exchange rates
in effect for our major currencies were 1 USD to 1.13 EUR and 1 USD
to 1.35 GBP), rather than the actual exchange rates in effect at
the end of the current period (for Q4 2022, the period end exchange
rates in effect for our major currencies were 1 USD to 1.07 EUR and
1 USD to 1.21 GBP).
Forward-Looking Statements
This release contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to, among other things, our GAAP
and non-GAAP estimates for the first quarter and full year 2023,
our financial outlook, the value of our products to customers, the
results of our focus on product innovation efforts, our ability to
drive long-term growth, our ability to improve cash flow and the
usefulness of the measures by which we evaluate our business, among
other things. These forward-looking statements are based on our
current expectations, estimates and projections about our business
and industry, including our financial outlook and macroeconomic
uncertanties, management’s beliefs and certain assumptions made by
the company, all of which are subject to change. Forward-looking
statements generally can be identified by the use of
forward-looking terminology such as, “future”, "believe," "expect,"
"may," "will," "intend," "estimate," "continue," “anticipate,”
“could,” “would,” “projects,” “plans,” “targets” or similar
expressions or the negative of those terms or expressions. Such
statements involve risks and uncertainties, many of which involve
factors or circumstances that are beyond our control, which could
cause actual results to vary materially from those expressed in or
indicated by the forward-looking statements. Factors that may cause
actual results to differ materially include our ability to achieve
our long-term plans and key initiatives; our ability to sustain or
manage any future growth effectively; our ability to attract and
retain customers or expand sales to existing customers; delays in
product development or deployments or the success of such products;
the failure to deliver competitive service offerings and lack of
market acceptance of any offerings delivered; the impact to the
economy, our customers and our business due to global economic
conditions, including market volatility, foreign exchange rates,
and impact of inflation; the timeframes for and severity of the
impact of any weakened global economic conditions on our customers’
purchasing and renewal decisions, which may extend the length of
our sales cycles or adversely affect our industry; our history of
net losses and ability to achieve or sustain profitability, as well
as the other potential factors described under "Risk Factors"
included in our Annual Report on Form 10-K for the year ended
December 31, 2021 and our Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2022, June 30, 2022 and September 30,
2022, and other documents of Freshworks Inc. on file with the
Securities and Exchange Commission from time to time (available at
www.sec.gov), including our Annual Report on Form 10-K that will be
filed for the year ended December 31, 2022.
We caution you not to place undue reliance on
forward-looking statements, which speak only as of the date hereof
and are based on information available to us at the time the
statements are made and/or management’s good faith belief as of
that time with respect to future events. We assume no obligation to
update any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this release, except
as required by law.
About Freshworks Inc.
Freshworks Inc., (NASDAQ: FRSH) makes business
software people love to use. Purpose-built for IT, customer
support, and sales and marketing teams, our products empower the
people who power business. Freshworks is fast to onboard, priced
affordably, built to delight, yet powerful enough to deliver
critical business outcomes. Headquartered in San Mateo, California,
Freshworks operates around the world to serve more than 60,000
customers including Allbirds, Blue Nile, Bridgestone, Databricks,
Klarna, NHS, OfficeMax, and PhonePe. For the freshest company news
visit www.freshworks.com and follow us on Facebook, LinkedIn and
Twitter.
Investor Relations Contact:Joon
HuhIR@freshworks.com650-988-5699
Media Relations Contact:Jayne
GonzalezPR@freshworks.com408-348-1087
© 2023 Freshworks Inc. All Rights Reserved.
Freshworks and its associated logo is a trademark of Freshworks
Inc. All other company, brand and product names may be trademarks
or registered trademarks of their respective companies. Nothing in
this press release should be construed to the contrary, or as an
approval, endorsement or sponsorship by any first parties of
Freshworks Inc. or any aspect of this press release.
FRESHWORKS INC.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except per share
data)(unaudited)
|
Three Months EndedDecember
31, |
|
Year EndedDecember 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Revenue |
$ |
133,170 |
|
|
$ |
105,480 |
|
|
$ |
497,999 |
|
|
$ |
371,022 |
|
Cost of revenue(1) |
|
25,156 |
|
|
|
20,398 |
|
|
|
95,772 |
|
|
|
78,030 |
|
Gross profit |
|
108,014 |
|
|
|
85,082 |
|
|
|
402,227 |
|
|
|
292,992 |
|
Operating expense: |
|
|
|
|
|
|
|
Research and development(1) |
|
34,658 |
|
|
|
29,030 |
|
|
|
135,543 |
|
|
|
120,407 |
|
Sales and marketing(1) |
|
94,838 |
|
|
|
72,190 |
|
|
|
343,207 |
|
|
|
260,345 |
|
General and administrative(1) |
|
39,126 |
|
|
|
40,237 |
|
|
|
156,849 |
|
|
|
117,022 |
|
Total operating expenses |
|
168,622 |
|
|
|
141,457 |
|
|
|
635,599 |
|
|
|
497,774 |
|
Loss from operations |
|
(60,608 |
) |
|
|
(56,375 |
) |
|
|
(233,372 |
) |
|
|
(204,782 |
) |
Interest and other income
(expense), net |
|
9,973 |
|
|
|
(125 |
) |
|
|
12,582 |
|
|
|
23,303 |
|
Loss before income taxes |
|
(50,635 |
) |
|
|
(56,500 |
) |
|
|
(220,790 |
) |
|
|
(181,479 |
) |
Provision for income
taxes |
|
4,842 |
|
|
|
18,236 |
|
|
|
11,342 |
|
|
|
10,516 |
|
Net loss |
|
(55,477 |
) |
|
|
(74,736 |
) |
|
|
(232,132 |
) |
|
|
(191,995 |
) |
Accretion of redeemable
convertible preferred stock |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,646,662 |
) |
Net loss attributable to
common stockholders |
$ |
(55,477 |
) |
|
$ |
(74,736 |
) |
|
$ |
(232,132 |
) |
|
$ |
(2,838,657 |
) |
Net loss per share
attributable to common stockholders - basic and diluted |
$ |
(0.19 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.82 |
) |
|
$ |
(21.73 |
) |
Weighted average shares used
in computing net loss per share attributable to common stockholders
- basic and diluted |
|
288,457 |
|
|
|
269,502 |
|
|
|
284,587 |
|
|
|
130,652 |
|
______________________(1) Includes
stock-based compensation expense as follows (in thousands):
|
Three Months EndedDecember
31, |
|
Year EndedDecember 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Cost of revenue |
$ |
1,827 |
|
|
$ |
1,621 |
|
|
$ |
7,039 |
|
|
$ |
5,604 |
|
Research and development |
|
9,967 |
|
|
|
8,339 |
|
|
|
36,413 |
|
|
|
45,162 |
|
Sales and marketing |
|
20,124 |
|
|
|
12,704 |
|
|
|
64,328 |
|
|
|
53,169 |
|
General and administrative |
|
25,126 |
|
|
|
26,520 |
|
|
|
99,916 |
|
|
|
69,508 |
|
Total stock-based compensation expense |
$ |
57,044 |
|
|
$ |
49,184 |
|
|
$ |
207,696 |
|
|
$ |
173,443 |
|
FRESHWORKS INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(in
thousands)
|
|
December 31,2022 |
|
December 31,2021 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
304,083 |
|
|
$ |
747,861 |
|
Marketable securities |
|
|
843,405 |
|
|
|
575,679 |
|
Accounts receivable, net |
|
|
70,470 |
|
|
|
51,756 |
|
Deferred contract acquisition costs |
|
|
20,139 |
|
|
|
14,640 |
|
Prepaid expenses and other current assets |
|
|
38,913 |
|
|
|
31,440 |
|
Total current assets |
|
|
1,277,010 |
|
|
|
1,421,376 |
|
Property and equipment,
net |
|
|
24,139 |
|
|
|
21,478 |
|
Operating lease right-of-use
assets |
|
|
33,024 |
|
|
|
— |
|
Deferred contract acquisition
costs, noncurrent |
|
|
19,536 |
|
|
|
15,007 |
|
Intangible assets, net |
|
|
303 |
|
|
|
1,894 |
|
Goodwill |
|
|
6,181 |
|
|
|
6,181 |
|
Deferred tax assets |
|
|
8,689 |
|
|
|
6,284 |
|
Other assets |
|
|
11,334 |
|
|
|
10,592 |
|
Total assets |
|
$ |
1,380,216 |
|
|
$ |
1,482,812 |
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
5,908 |
|
|
$ |
6,321 |
|
Accrued liabilities |
|
|
59,008 |
|
|
|
55,829 |
|
Deferred revenue |
|
|
205,626 |
|
|
|
160,173 |
|
Income tax payable |
|
|
1,150 |
|
|
|
1,023 |
|
Total current liabilities |
|
|
271,692 |
|
|
|
223,346 |
|
Operating lease liabilities,
non-current |
|
|
28,174 |
|
|
|
— |
|
Other liabilities |
|
|
28,532 |
|
|
|
21,427 |
|
Total liabilities |
|
|
328,398 |
|
|
|
244,773 |
|
Stockholders' equity: |
|
|
|
|
Common stock |
|
|
3 |
|
|
|
3 |
|
Additional paid-in
capital |
|
|
4,562,319 |
|
|
|
4,509,724 |
|
Accumulated other
comprehensive loss |
|
|
(7,431 |
) |
|
|
(747 |
) |
Accumulated deficit |
|
|
(3,503,073 |
) |
|
|
(3,270,941 |
) |
Total stockholders'
equity |
|
|
1,051,818 |
|
|
|
1,238,039 |
|
Total liabilities and
stockholders' equity |
|
$ |
1,380,216 |
|
|
$ |
1,482,812 |
|
FRESHWORKS INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands)(unaudited)
|
Three Months EndedDecember
31, |
|
Year EndedDecember 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
Net loss |
$ |
(55,477 |
) |
|
$ |
(74,736 |
) |
|
$ |
(232,132 |
) |
|
$ |
(191,995 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
2,930 |
|
|
|
3,502 |
|
|
|
11,504 |
|
|
|
13,294 |
|
Amortization of deferred contract acquisition costs |
|
5,211 |
|
|
|
3,759 |
|
|
|
18,532 |
|
|
|
12,844 |
|
Non-cash lease expense |
|
1,732 |
|
|
|
— |
|
|
|
6,195 |
|
|
|
— |
|
Stock-based compensation |
|
57,044 |
|
|
|
49,184 |
|
|
|
207,696 |
|
|
|
173,443 |
|
Premium amortization on marketable securities |
|
(2,191 |
) |
|
|
551 |
|
|
|
(1,627 |
) |
|
|
1,757 |
|
Gain realized on sale of marketable securities and non-marketable
equity investments |
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(23,836 |
) |
Change in fair value of equity securities |
|
4 |
|
|
|
(32 |
) |
|
|
(71 |
) |
|
|
(132 |
) |
Deferred income taxes |
|
(2,714 |
) |
|
|
9,814 |
|
|
|
(2,405 |
) |
|
|
(1,907 |
) |
Other |
|
(581 |
) |
|
|
(161 |
) |
|
|
887 |
|
|
|
(28 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(13,636 |
) |
|
|
(7,470 |
) |
|
|
(18,892 |
) |
|
|
(17,509 |
) |
Deferred contract acquisition costs |
|
(9,006 |
) |
|
|
(7,186 |
) |
|
|
(28,560 |
) |
|
|
(24,218 |
) |
Prepaid expenses and other assets |
|
4,233 |
|
|
|
8,881 |
|
|
|
(8,141 |
) |
|
|
(5,942 |
) |
Accounts payable |
|
2,039 |
|
|
|
2,528 |
|
|
|
77 |
|
|
|
1,986 |
|
Accrued and other liabilities |
|
3,872 |
|
|
|
(803 |
) |
|
|
7,746 |
|
|
|
17,714 |
|
Deferred revenue |
|
14,657 |
|
|
|
17,014 |
|
|
|
45,453 |
|
|
|
55,989 |
|
Operating lease liabilities |
|
(950 |
) |
|
|
— |
|
|
|
(8,787 |
) |
|
|
— |
|
Net cash provided by (used in) operating activities |
|
7,167 |
|
|
|
4,844 |
|
|
|
(2,525 |
) |
|
|
11,460 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
Purchases of property and equipment |
|
(1,841 |
) |
|
|
(1,509 |
) |
|
|
(7,129 |
) |
|
|
(5,565 |
) |
Proceeds from sale of property and equipment |
|
5 |
|
|
|
55 |
|
|
|
137 |
|
|
|
620 |
|
Capitalized internal-use software |
|
(1,288 |
) |
|
|
(502 |
) |
|
|
(5,116 |
) |
|
|
(3,552 |
) |
Sale of non-marketable equity investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,979 |
|
Purchases of marketable securities |
|
(310,059 |
) |
|
|
(531,250 |
) |
|
|
(848,560 |
) |
|
|
(686,078 |
) |
Sales of marketable securities |
|
— |
|
|
|
94,339 |
|
|
|
92,786 |
|
|
|
131,170 |
|
Maturities and redemptions of marketable securities |
|
189,430 |
|
|
|
6,576 |
|
|
|
483,055 |
|
|
|
119,130 |
|
Net cash used in investing activities |
|
(123,753 |
) |
|
|
(432,291 |
) |
|
|
(284,827 |
) |
|
|
(420,296 |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
Proceeds from initial public offering, net of underwriting
discounts |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,069,348 |
|
Proceeds from issuance of common stock under employee stock
purchase plan, net |
|
3,859 |
|
|
|
— |
|
|
|
10,870 |
|
|
|
— |
|
Proceeds from exercise of stock options |
|
11 |
|
|
|
51 |
|
|
|
109 |
|
|
|
94 |
|
Payment of withholding taxes on net share settlement of equity
awards |
|
(15,508 |
) |
|
|
(3,343 |
) |
|
|
(167,224 |
) |
|
|
(3,343 |
) |
Payment of deferred offering costs |
|
— |
|
|
|
(1,358 |
) |
|
|
(109 |
) |
|
|
(6,830 |
) |
Payment of acquisition-related liabilities |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(900 |
) |
Net cash used in financing activities |
|
(11,638 |
) |
|
|
(4,650 |
) |
|
|
(156,354 |
) |
|
|
1,058,369 |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
(128,224 |
) |
|
|
(432,097 |
) |
|
|
(443,706 |
) |
|
|
649,533 |
|
Cash, cash equivalents and restricted cash, beginning of
period |
|
432,382 |
|
|
|
1,179,961 |
|
|
|
747,864 |
|
|
|
98,331 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
304,158 |
|
|
$ |
747,864 |
|
|
$ |
304,158 |
|
|
$ |
747,864 |
|
FRESHWORKS
INC.RECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES(in thousands, except percentages
and per share data)(unaudited)
|
|
Three Months EndedDecember
31, |
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Growth Rates |
Revenue |
|
|
|
|
|
|
GAAP revenue |
|
$ |
133,170 |
|
|
$ |
105,480 |
|
|
26% |
Effects of foreign currency rate fluctuations |
|
|
3,933 |
|
|
|
— |
|
|
|
Revenue adjusted for constant currency |
|
$ |
137,103 |
|
|
|
|
30% |
|
|
Year EndedDecember 31, |
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Growth Rates |
Revenue |
|
|
|
|
|
|
GAAP revenue |
|
$ |
497,999 |
|
|
$ |
371,022 |
|
|
34% |
Effects of foreign currency rate fluctuations |
|
|
11,301 |
|
|
|
— |
|
|
|
Revenue adjusted for constant currency |
|
$ |
509,300 |
|
|
|
|
37% |
FRESHWORKS
INC.RECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES(in thousands, except percentages
and per share data)(unaudited)
|
|
Three Months EndedDecember
31, |
|
Year EndedDecember 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Reconciliation of gross profit and gross
margin: |
|
|
|
|
|
|
|
|
GAAP gross profit |
|
$ |
108,014 |
|
|
$ |
85,082 |
|
|
$ |
402,227 |
|
|
$ |
292,992 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
1,827 |
|
|
|
1,621 |
|
|
|
7,039 |
|
|
|
5,604 |
|
Employer payroll taxes on employee stock transactions |
|
|
16 |
|
|
|
(236 |
) |
|
|
41 |
|
|
|
287 |
|
Amortization of acquired intangibles |
|
|
176 |
|
|
|
990 |
|
|
|
1,191 |
|
|
|
3,929 |
|
Non-GAAP gross profit |
|
$ |
110,033 |
|
|
$ |
87,457 |
|
|
$ |
410,498 |
|
|
$ |
302,812 |
|
GAAP gross margin |
|
|
81.1 |
% |
|
|
80.7 |
% |
|
|
80.8 |
% |
|
|
79.0 |
% |
Non-GAAP gross margin |
|
|
82.6 |
% |
|
|
82.9 |
% |
|
|
82.4 |
% |
|
|
81.6 |
% |
|
|
|
|
|
|
|
|
|
Reconciliation of operating expenses: |
|
|
|
|
|
|
|
|
GAAP research and development |
|
$ |
34,658 |
|
|
$ |
29,030 |
|
|
$ |
135,543 |
|
|
$ |
120,407 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
(9,967 |
) |
|
|
(8,339 |
) |
|
|
(36,413 |
) |
|
|
(45,162 |
) |
Employer payroll taxes on employee stock transactions |
|
|
(62 |
) |
|
|
449 |
|
|
|
65 |
|
|
|
(1,183 |
) |
Non-GAAP research and development |
|
$ |
24,629 |
|
|
$ |
21,140 |
|
|
$ |
99,195 |
|
|
$ |
74,062 |
|
GAAP research and development as percentage of revenue |
|
|
26.0 |
% |
|
|
27.5 |
% |
|
|
27.2 |
% |
|
|
32.5 |
% |
Non-GAAP research and development as percentage of revenue |
|
|
18.5 |
% |
|
|
20.0 |
% |
|
|
19.9 |
% |
|
|
20.0 |
% |
|
|
|
|
|
|
|
|
|
GAAP sales and marketing |
|
$ |
94,838 |
|
|
$ |
72,190 |
|
|
$ |
343,207 |
|
|
$ |
260,345 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
(20,124 |
) |
|
|
(12,704 |
) |
|
|
(64,328 |
) |
|
|
(53,169 |
) |
Employer payroll taxes on employee stock transactions |
|
|
(319 |
) |
|
|
(207 |
) |
|
|
(1,273 |
) |
|
|
(4,616 |
) |
Amortization of acquired intangibles |
|
|
(100 |
) |
|
|
(101 |
) |
|
|
(400 |
) |
|
|
(400 |
) |
Non-GAAP sales and marketing |
|
$ |
74,295 |
|
|
$ |
59,178 |
|
|
$ |
277,206 |
|
|
$ |
202,160 |
|
GAAP sales and marketing as percentage of revenue |
|
|
71.2 |
% |
|
|
68.4 |
% |
|
|
68.9 |
% |
|
|
70.2 |
% |
Non-GAAP sales and marketing as percentage of revenue |
|
|
55.8 |
% |
|
|
56.1 |
% |
|
|
55.7 |
% |
|
|
54.5 |
% |
|
|
|
|
|
|
|
|
|
GAAP general and administrative |
|
$ |
39,126 |
|
|
$ |
40,237 |
|
|
$ |
156,849 |
|
|
$ |
117,022 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
(25,126 |
) |
|
|
(26,520 |
) |
|
|
(99,916 |
) |
|
|
(69,508 |
) |
Employer payroll taxes on employee stock transactions |
|
|
(121 |
) |
|
|
4,147 |
|
|
|
(578 |
) |
|
|
(2,668 |
) |
Non-GAAP general and administrative |
|
$ |
13,879 |
|
|
$ |
17,864 |
|
|
$ |
56,355 |
|
|
$ |
44,846 |
|
|
|
|
|
|
|
|
|
|
GAAP general and administrative as percentage of revenue |
|
|
29.4 |
% |
|
|
38.1 |
% |
|
|
31.5 |
% |
|
|
31.5 |
% |
Non-GAAP general and administrative as percentage of revenue |
|
|
10.4 |
% |
|
|
16.9 |
% |
|
|
11.3 |
% |
|
|
12.1 |
% |
|
|
|
|
|
|
|
|
|
Reconciliation of operating loss and operating
margin: |
|
|
|
|
|
|
|
|
GAAP loss from operations |
|
$ |
(60,608 |
) |
|
$ |
(56,375 |
) |
|
$ |
(233,372 |
) |
|
$ |
(204,782 |
) |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
57,044 |
|
|
|
49,184 |
|
|
|
207,696 |
|
|
|
173,443 |
|
Employer payroll taxes on employee stock transactions |
|
|
518 |
|
|
|
(4,625 |
) |
|
|
1,827 |
|
|
|
8,754 |
|
Amortization of acquired intangibles |
|
|
276 |
|
|
|
1,091 |
|
|
|
1,591 |
|
|
|
4,329 |
|
Non-GAAP loss from operations |
|
$ |
(2,770 |
) |
|
$ |
(10,725 |
) |
|
$ |
(22,258 |
) |
|
$ |
(18,256 |
) |
GAAP operating margin |
|
(45.5 |
)% |
|
(53.4 |
)% |
|
(46.9 |
)% |
|
(55.2 |
)% |
Non-GAAP operating margin |
|
(2.1 |
)% |
|
(10.2 |
)% |
|
(4.5 |
)% |
|
(4.9 |
)% |
|
|
|
|
|
|
|
|
|
Reconciliation of net loss attributable to common
stockholders: |
|
|
|
|
|
|
|
|
GAAP net loss attributable to common stockholders - basic and
diluted |
|
$ |
(55,477 |
) |
|
$ |
(74,736 |
) |
|
$ |
(232,132 |
) |
|
$ |
(2,838,657 |
) |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Accretion of redeemable convertible preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,646,662 |
|
Stock-based compensation expense |
|
|
57,044 |
|
|
|
49,184 |
|
|
|
207,696 |
|
|
|
173,443 |
|
Employer payroll taxes on employee stock transactions |
|
|
518 |
|
|
|
(4,625 |
) |
|
|
1,827 |
|
|
|
8,754 |
|
Amortization of acquired intangibles |
|
|
276 |
|
|
|
1,091 |
|
|
|
1,591 |
|
|
|
4,329 |
|
Gain on sale of non-marketable equity investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23,830 |
) |
Income tax adjustments |
|
|
450 |
|
|
|
13,357 |
|
|
|
1,978 |
|
|
|
1,802 |
|
Non-GAAP net income (loss) attributable to common stockholders -
basic and diluted |
|
$ |
2,811 |
|
|
$ |
(15,729 |
) |
|
$ |
(19,040 |
) |
|
$ |
(27,497 |
) |
|
|
|
|
|
|
|
|
|
Reconciliation of net loss per share - basic and
diluted: |
|
|
|
|
|
|
|
|
GAAP net loss per share attributable to common stockholders - basic
and diluted |
|
$ |
(0.19 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.82 |
) |
|
$ |
(21.73 |
) |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Accretion of redeemable convertible preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20.26 |
|
Stock-based compensation expense |
|
|
0.20 |
|
|
|
0.18 |
|
|
|
0.73 |
|
|
|
1.33 |
|
Employer payroll taxes on employee stock transactions |
|
|
— |
|
|
|
(0.02 |
) |
|
|
0.01 |
|
|
|
0.07 |
|
Amortization of acquired intangibles |
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.03 |
|
Gain on sale of non-marketable equity investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.18 |
) |
Income tax adjustments |
|
|
— |
|
|
|
0.05 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Non-GAAP net income (loss) per share attributable to common
stockholders - basic |
|
$ |
0.01 |
|
|
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.21 |
) |
Non-GAAP net income (loss) per share attributable to common
stockholders - diluted |
|
|
0.01 |
|
|
|
(0.06 |
) |
|
|
(0.07 |
) |
|
|
(0.21 |
) |
Weighted-average shares used in computing GAAP net loss per share
attributable to common stockholders - basic |
|
|
288,457 |
|
|
|
269,502 |
|
|
|
284,587 |
|
|
|
130,652 |
|
Weighted-average shares used in computing non-GAAP net income
(loss) per share attributable to common stockholders - diluted
(1) |
|
|
292,182 |
|
|
|
269,502 |
|
|
|
284,587 |
|
|
|
130,652 |
|
|
|
|
|
|
|
|
|
|
Computation of free cash flow: |
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
$ |
7,167 |
|
|
$ |
4,844 |
|
|
$ |
(2,525 |
) |
|
$ |
11,460 |
|
Less: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(1,841 |
) |
|
|
(1,509 |
) |
|
|
(7,129 |
) |
|
|
(5,565 |
) |
Capitalized internal-use software |
|
|
(1,288 |
) |
|
|
(502 |
) |
|
|
(5,116 |
) |
|
|
(3,552 |
) |
Free cash flow |
|
$ |
4,038 |
|
|
$ |
2,833 |
|
|
$ |
(14,770 |
) |
|
$ |
2,343 |
|
Net cash used in investing activities |
|
$ |
(123,753 |
) |
|
$ |
(432,291 |
) |
|
$ |
(284,827 |
) |
|
$ |
(420,296 |
) |
Net cash provided by (used in) financing activities |
|
$ |
(11,638 |
) |
|
$ |
(4,650 |
) |
|
$ |
(156,354 |
) |
|
$ |
1,058,369 |
|
(1) Diluted net income (loss) per share
attributable to common stockholders is determined by giving effect
to all potential common equivalents during the reporting period,
unless including them yields an antidilutive result. The Company
considers its redeemable convertible preferred stock, stock options
and RSUs as potential common stock equivalents but excluded them
from the computation of diluted net loss per share attributable to
common stockholders, as their effect was antidilutive. For the
three months ended December 31, 2022, potentially diluted shares of
3.7M shares were included in the weighted average shares used in
computing non-GAAP net income per share.
Freshworks (NASDAQ:FRSH)
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