Freshworks Inc. (NASDAQ: FRSH), a leading software company
empowering businesses to delight their customers and employees,
today announced financial results for its second quarter ended
June 30, 2023.
“Freshworks is building on the foundations we
set at the start of the year to deliver faster product innovation,
and improve our efficiency,” said Girish Mathrubootham, CEO and
Founder of Freshworks. “In Q2, we launched new generative AI
enhancements across our product lines and outperformed our
estimates across all our key financial metrics. I'm excited about
the opportunity for companies to take advantage of our software to
delight their customers and employees.”
Second Quarter
2023 Financial Summary
Results
- Revenue: Total
revenue was $145.1 million, representing growth of 19% compared to
the second quarter of 2022, and 20% adjusting for constant
currency.
- GAAP (Loss) from
Operations: GAAP (loss) from operations was $(43.3)
million, compared to $(67.4) million in the second quarter of
2022.
- Non-GAAP Income (Loss) from
Operations: Non-GAAP income from operations was $11.7
million, compared to non-GAAP (loss) from operations of $(15.8)
million in the second quarter of 2022.
- GAAP Net (Loss) Per
Share: GAAP basic and diluted net (loss) per share was
$(0.12) based on 292.0 million weighted-average shares
outstanding, compared to $(0.24) based on 284.8 million
weighted-average shares outstanding in the second quarter of
2022.
- Non-GAAP Net Income (Loss) Per
Share: Non-GAAP basic and diluted net income per share was
$0.07 based on 296.6 million weighted-average shares outstanding,
compared to net (loss) per share of $(0.06) based on
284.8 million weighted-average shares outstanding in the
second quarter of 2022.
- Net Cash Provided by (Used in)
Operating Activities: Net cash provided by operating
activities was $19.9 million, compared to net cash (used in)
operating activities of $(6.8) million in the second quarter of
2022.
- Free Cash Flow: Free
cash flow was $18.1 million, compared to $(10.2) million in the
second quarter of 2022.
- Cash, Cash Equivalents and
Marketable Securities: Cash, cash equivalents, and
marketable securities were $1.16 billion as of June 30,
2023.
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.
Second Quarter Key
Metrics and Recent Business Highlights
- Number of customers contributing more
than $5,000 in ARR was 19,105, an increase of 18% year-over-year
and 17% adjusting for constant currency.
- Net dollar retention rate was 108%
(107% adjusting for constant currency), compared to 107% in the
first quarter of 2023 and 111% in the second quarter of 2022.
Constant currency net dollar retention rate was 108% in the first
quarter of 2023 and 115% in the second quarter of 2022.
- Welcomed more customers to the
Freshworks community including: Claremont McKenna College, The
State of Hawaii, Houston Museum of Natural Science, Pitchbook, and
Smart Recruiters.
- Hosted a Q2 ’23 Launch Virtual Event
to showcase Freshworks’ AI vision and latest AI-driven product
updates and held a Developer Summit in Bengaluru, India to announce
Freddy Copilot for developers.
- Unveiled Freddy Self Service, Freddy
Copilot and Freddy Insights to make artificial intelligence more
accessible to every workplace, building on the Freshchat and
Freshmarketer beta programs from earlier in the year.
- Appointed Frank Pelzer, the Executive
Vice President and Chief Financial Officer of F5, Inc., to the
Board of Directors.
- Announced an Investor Day will be held
on September 7, 2023 at 8:30 a.m. Pacific Time in San
Francisco.
Financial Outlook
We are providing estimates for the third quarter
and full year 2023 based on current market conditions and
expectations. The revenue growth rates are adjusted for constant
currency to provide better visibility into the underlying business
trends. We emphasize that these estimates are subject to various
important cautionary factors referenced in the section entitled
“Forward-Looking Statements” below.
For the third quarter and full year 2023, we
currently expect the following results:
($ in millions, except per share data) |
|
Third Quarter 2023 |
|
Full Year 2023 |
Revenue(1) |
|
$149.0 - $151.5 |
|
$587.0 - $595.0 |
Year-over-year growth |
|
16% - 18% |
|
18% - 19% |
Adjusting for constant currency(2) |
|
15% - 16% |
|
18% - 20% |
|
|
|
|
|
Non-GAAP income from operations(1) |
|
$6.0 - $9.0 |
|
$24.0 - $32.0 |
|
|
|
|
|
Non-GAAP net income per share(3) |
|
$0.04 - $0.06 |
|
$0.18 - $0.22 |
(1) Revenue and non-GAAP income from operations
are based on exchange rates as of July 28, 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 for the
historical periods provided in this release.(3) Non-GAAP net income
per share was estimated assuming 300.2 million and 299.8 million
weighted-average shares outstanding for the third 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 financial measures to GAAP due to the uncertainty and
potential variability of expenses that may be incurred in the
future. As a result, a reconciliation is not available without
unreasonable effort and we are unable to address the probable
significance of the unavailable information. We have provided a
reconciliation of other GAAP to non-GAAP financial measures in the
financial statement tables for our second quarter and first six
months of 2023 and 2022 non-GAAP results included in this press
release.
Webcast and Conference Call
Information
We will host a conference call for investors on
August 1, 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 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 income (loss) from operations, non-GAAP operating margin,
non-GAAP net income (loss) per share, non-GAAP net income (loss)
attributable to common stockholders, and free cash flow. This press
release and the accompanying tables also contain certain non-GAAP
metrics, including annual recurring revenue, net dollar retention
rates, revenue growth rates, and related presentation thereof
adjusted for constant currency.
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 Q2 2022,
the average exchange rates in effect for our major currencies were
1 USD to 1.07 EUR and 1 USD to 1.26 GBP), rather than the actual
average exchange rates in effect during the current period (for Q2
2023, the average exchange rates in effect for our major currencies
were 1 USD to 1.09 EUR and 1 USD to 1.25 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, however, 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.
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,
growth rates of customers contributing more than $5,000 in ARR and
related presentation thereof 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 Q2 2022, the period
end exchange rates in effect for our major currencies were 1 USD to
1.04 EUR and 1 USD to 1.21 GBP), rather than the actual exchange
rates in effect at the end of the current period (for Q2 2023, the
period end exchange rates in effect for our major currencies were 1
USD to 1.08 EUR and 1 USD to 1.26 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 third quarter and full year 2023,
our financial outlook, the value of our products to customers, the
results of our focus on product innovation efforts 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
uncertainties, 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 Quarterly Report on Form 10-Q for the quarter ended
March 31, 2023 and our Annual Report on Form 10-K for the year
ended December 31, 2022, as such factors may be updated from
time to time in our periodic and other documents of Freshworks Inc.
filed with the Securities and Exchange Commission from time to time
(available at www.sec.gov), including our Quarterly Report on Form
10-Q that will be filed for the quarter ended June 30,
2023.
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) creates
AI-driven business software anyone can use. Purpose-built for IT,
customer support, and sales and marketing teams, our AI-boosted
products let everyone work more efficiently and deliver more value
for immediate business impact. Headquartered in San Mateo,
California, Freshworks operates around the world to serve more than
65,000 customers, including American Express, Blue Nile,
Bridgestone, Databricks, Fila, Klarna, and OfficeMax. For the
freshest company news, visit www.freshworks.com and follow us on
Facebook, LinkedIn, and Twitter.
Investor Relations Contact:Joon
HuhIR@freshworks.com 650-988-5699
Media Relations Contact:Jayne
GonzalezPR@freshworks.com 408-348-1087
© 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 third 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 EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
145,079 |
|
|
$ |
121,432 |
|
|
$ |
282,771 |
|
|
$ |
236,069 |
|
Cost of revenue(1) |
|
24,861 |
|
|
|
24,042 |
|
|
|
50,097 |
|
|
|
46,437 |
|
Gross profit |
|
120,218 |
|
|
|
97,390 |
|
|
|
232,674 |
|
|
|
189,632 |
|
Operating expense: |
|
|
|
|
|
|
|
Research and development(1) |
|
34,180 |
|
|
|
34,297 |
|
|
|
67,037 |
|
|
|
65,014 |
|
Sales and marketing(1) |
|
87,975 |
|
|
|
90,038 |
|
|
|
174,785 |
|
|
|
161,504 |
|
General and administrative(1) |
|
41,352 |
|
|
|
40,407 |
|
|
|
82,248 |
|
|
|
77,590 |
|
Total operating expenses |
|
163,507 |
|
|
|
164,742 |
|
|
|
324,070 |
|
|
|
304,108 |
|
Loss from operations |
|
(43,289 |
) |
|
|
(67,352 |
) |
|
|
(91,396 |
) |
|
|
(114,476 |
) |
Interest and other income
(expense), net |
|
11,216 |
|
|
|
(242 |
) |
|
|
20,695 |
|
|
|
360 |
|
Loss before income taxes |
|
(32,073 |
) |
|
|
(67,594 |
) |
|
|
(70,701 |
) |
|
|
(114,116 |
) |
Provision for income
taxes |
|
3,585 |
|
|
|
2,159 |
|
|
|
7,621 |
|
|
|
4,696 |
|
Net loss |
|
(35,658 |
) |
|
|
(69,753 |
) |
|
|
(78,322 |
) |
|
|
(118,812 |
) |
Net loss per share - basic and
diluted |
$ |
(0.12 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.42 |
) |
Weighted average shares used
in computing net loss per share - basic and diluted |
|
291,995 |
|
|
|
284,761 |
|
|
|
291,068 |
|
|
|
281,492 |
|
______________________(1) Includes
stock-based compensation expense as follows (in thousands):
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cost of revenue |
$ |
1,731 |
|
|
$ |
1,914 |
|
|
$ |
3,427 |
|
|
$ |
3,440 |
|
Research and development |
|
10,060 |
|
|
|
7,819 |
|
|
|
19,039 |
|
|
|
16,128 |
|
Sales and marketing |
|
17,273 |
|
|
|
15,033 |
|
|
|
33,029 |
|
|
|
27,569 |
|
General and administrative |
|
25,184 |
|
|
|
25,369 |
|
|
|
49,447 |
|
|
|
49,623 |
|
Total stock-based compensation expense, net of amounts
capitalized |
$ |
54,248 |
|
|
$ |
50,135 |
|
|
$ |
104,942 |
|
|
$ |
96,760 |
|
|
|
FRESHWORKS INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(in
thousands)
|
|
June 30, 2023 |
|
December 31, 2022 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
356,220 |
|
|
$ |
304,083 |
|
Marketable securities |
|
|
804,646 |
|
|
|
843,405 |
|
Accounts receivable, net |
|
|
73,909 |
|
|
|
70,470 |
|
Deferred contract acquisition costs |
|
|
21,694 |
|
|
|
20,139 |
|
Prepaid expenses and other current assets |
|
|
46,827 |
|
|
|
38,913 |
|
Total current assets |
|
|
1,303,296 |
|
|
|
1,277,010 |
|
Property and equipment,
net |
|
|
23,471 |
|
|
|
24,139 |
|
Operating lease right-of-use
assets |
|
|
29,297 |
|
|
|
33,024 |
|
Deferred contract acquisition
costs, noncurrent |
|
|
19,268 |
|
|
|
19,536 |
|
Goodwill |
|
|
6,181 |
|
|
|
6,181 |
|
Deferred tax assets |
|
|
8,671 |
|
|
|
8,689 |
|
Other assets |
|
|
10,123 |
|
|
|
11,637 |
|
Total assets |
|
$ |
1,400,307 |
|
|
$ |
1,380,216 |
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
1,686 |
|
|
$ |
5,908 |
|
Accrued liabilities |
|
|
53,761 |
|
|
|
59,008 |
|
Deferred revenue |
|
|
234,358 |
|
|
|
205,626 |
|
Income tax payable |
|
|
1,751 |
|
|
|
1,150 |
|
Total current liabilities |
|
|
291,556 |
|
|
|
271,692 |
|
Operating lease liabilities,
non-current |
|
|
24,251 |
|
|
|
28,174 |
|
Other liabilities |
|
|
26,847 |
|
|
|
28,532 |
|
Total liabilities |
|
|
342,654 |
|
|
|
328,398 |
|
Stockholders' equity: |
|
|
|
|
Common stock |
|
|
3 |
|
|
|
3 |
|
Additional paid-in
capital |
|
|
4,644,686 |
|
|
|
4,562,319 |
|
Accumulated other
comprehensive loss |
|
|
(5,641 |
) |
|
|
(7,431 |
) |
Accumulated deficit |
|
|
(3,581,395 |
) |
|
|
(3,503,073 |
) |
Total stockholders'
equity |
|
|
1,057,653 |
|
|
|
1,051,818 |
|
Total liabilities and
stockholders' equity |
|
$ |
1,400,307 |
|
|
$ |
1,380,216 |
|
|
|
FRESHWORKS INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands)(unaudited)
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
Net loss |
$ |
(35,658 |
) |
|
$ |
(69,753 |
) |
|
$ |
(78,322 |
) |
|
$ |
(118,812 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
3,002 |
|
|
|
2,806 |
|
|
|
6,114 |
|
|
|
5,779 |
|
Amortization of deferred contract acquisition costs |
|
5,852 |
|
|
|
4,421 |
|
|
|
11,469 |
|
|
|
8,696 |
|
Non-cash lease expense |
|
1,877 |
|
|
|
1,492 |
|
|
|
3,727 |
|
|
|
2,896 |
|
Stock-based compensation |
|
54,248 |
|
|
|
50,135 |
|
|
|
104,942 |
|
|
|
96,760 |
|
Premium (discount) amortization on marketable securities |
|
(4,302 |
) |
|
|
331 |
|
|
|
(7,822 |
) |
|
|
1,097 |
|
Change in fair value of equity securities |
|
(46 |
) |
|
|
— |
|
|
|
(61 |
) |
|
|
(85 |
) |
Deferred income taxes |
|
— |
|
|
|
— |
|
|
|
113 |
|
|
|
309 |
|
Other |
|
(33 |
) |
|
|
441 |
|
|
|
52 |
|
|
|
1,195 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(1,109 |
) |
|
|
(6,984 |
) |
|
|
(3,599 |
) |
|
|
(3,824 |
) |
Deferred contract acquisition costs |
|
(7,188 |
) |
|
|
(7,041 |
) |
|
|
(12,756 |
) |
|
|
(12,641 |
) |
Prepaid expenses and other assets |
|
677 |
|
|
|
240 |
|
|
|
(6,571 |
) |
|
|
(8,445 |
) |
Accounts payable |
|
(2,727 |
) |
|
|
2,513 |
|
|
|
(4,221 |
) |
|
|
454 |
|
Accrued and other liabilities |
|
(5,089 |
) |
|
|
8,178 |
|
|
|
(5,481 |
) |
|
|
3,206 |
|
Deferred revenue |
|
13,808 |
|
|
|
8,384 |
|
|
|
28,732 |
|
|
|
22,623 |
|
Operating lease liabilities |
|
(3,417 |
) |
|
|
(1,987 |
) |
|
|
(4,917 |
) |
|
|
(4,677 |
) |
Net cash provided by (used in) operating activities |
|
19,895 |
|
|
|
(6,824 |
) |
|
|
31,399 |
|
|
|
(5,469 |
) |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
Purchases of property and equipment |
|
(329 |
) |
|
|
(1,984 |
) |
|
|
(712 |
) |
|
|
(3,381 |
) |
Proceeds from sale of property and equipment |
|
34 |
|
|
|
66 |
|
|
|
58 |
|
|
|
83 |
|
Capitalized internal-use software |
|
(1,486 |
) |
|
|
(1,378 |
) |
|
|
(3,511 |
) |
|
|
(2,722 |
) |
Purchases of marketable securities |
|
(274,664 |
) |
|
|
(136,792 |
) |
|
|
(492,418 |
) |
|
|
(288,200 |
) |
Sales of marketable securities |
|
— |
|
|
|
34,050 |
|
|
|
— |
|
|
|
92,786 |
|
Maturities and redemptions of marketable securities |
|
279,245 |
|
|
|
110,820 |
|
|
|
540,719 |
|
|
|
180,570 |
|
Net cash provided by (used in) investing activities |
|
2,800 |
|
|
|
4,782 |
|
|
|
44,136 |
|
|
|
(20,864 |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
Proceeds from issuance of common stock under employee stock
purchase plan, net |
|
4,312 |
|
|
|
7,011 |
|
|
|
4,312 |
|
|
|
7,011 |
|
Proceeds from exercise of stock options |
|
39 |
|
|
|
68 |
|
|
|
45 |
|
|
|
96 |
|
Payment of withholding taxes on net share settlement of equity
awards |
|
(15,303 |
) |
|
|
(18,401 |
) |
|
|
(27,737 |
) |
|
|
(138,349 |
) |
Payment of deferred offering costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(109 |
) |
Net cash used in financing activities |
|
(10,952 |
) |
|
|
(11,322 |
) |
|
|
(23,380 |
) |
|
|
(131,351 |
) |
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
11,743 |
|
|
|
(13,364 |
) |
|
|
52,155 |
|
|
|
(157,684 |
) |
Cash, cash equivalents and restricted cash, beginning of
period |
|
344,570 |
|
|
|
603,544 |
|
|
|
304,158 |
|
|
|
747,864 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
356,313 |
|
|
$ |
590,180 |
|
|
$ |
356,313 |
|
|
$ |
590,180 |
|
|
|
FRESHWORKS
INC.RECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES(in thousands, except percentages
and per share data)(unaudited)
|
|
Three Months EndedJune 30, |
|
|
|
|
|
2023 |
|
|
2022 |
|
|
Growth Rates |
Revenue |
|
|
|
|
|
|
GAAP revenue |
|
$ |
145,079 |
|
$ |
121,432 |
|
|
19% |
Effects of foreign currency rate fluctuations |
|
|
1,197 |
|
|
|
|
Revenue adjusted for constant currency |
|
$ |
146,276 |
|
|
|
20% |
|
|
FRESHWORKS
INC.RECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES(in thousands, except percentages
and per share data)(unaudited)
|
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Reconciliation of gross profit and gross
margin: |
|
|
|
|
|
|
|
|
GAAP gross profit |
|
$ |
120,218 |
|
|
$ |
97,390 |
|
|
$ |
232,674 |
|
|
$ |
189,632 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
1,731 |
|
|
|
1,914 |
|
|
|
3,427 |
|
|
|
3,440 |
|
Employer payroll taxes on employee stock transactions |
|
|
30 |
|
|
|
22 |
|
|
|
73 |
|
|
|
(33 |
) |
Amortization of acquired intangibles |
|
|
— |
|
|
|
315 |
|
|
|
158 |
|
|
|
840 |
|
Non-GAAP gross profit |
|
$ |
121,979 |
|
|
$ |
99,641 |
|
|
$ |
236,332 |
|
|
$ |
193,879 |
|
GAAP gross margin |
|
|
82.9 |
% |
|
|
80.2 |
% |
|
|
82.3 |
% |
|
|
80.3 |
% |
Non-GAAP gross margin |
|
|
84.1 |
% |
|
|
82.1 |
% |
|
|
83.6 |
% |
|
|
82.1 |
% |
|
|
|
|
|
|
|
|
|
Reconciliation of operating expenses: |
|
|
|
|
|
|
|
|
GAAP research and development |
|
$ |
34,180 |
|
|
$ |
34,297 |
|
|
$ |
67,037 |
|
|
$ |
65,014 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
(10,060 |
) |
|
|
(7,819 |
) |
|
|
(19,039 |
) |
|
|
(16,128 |
) |
Employer payroll taxes on employee stock transactions |
|
|
(92 |
) |
|
|
(26 |
) |
|
|
(189 |
) |
|
|
152 |
|
Non-GAAP research and development |
|
$ |
24,028 |
|
|
$ |
26,452 |
|
|
$ |
47,809 |
|
|
$ |
49,038 |
|
GAAP research and development as percentage of revenue |
|
|
23.6 |
% |
|
|
28.2 |
% |
|
|
23.7 |
% |
|
|
27.5 |
% |
Non-GAAP research and development as percentage of revenue |
|
|
16.6 |
% |
|
|
21.8 |
% |
|
|
16.9 |
% |
|
|
20.8 |
% |
|
|
|
|
|
|
|
|
|
GAAP sales and marketing |
|
$ |
87,975 |
|
|
$ |
90,038 |
|
|
$ |
174,785 |
|
|
$ |
161,504 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
(17,273 |
) |
|
|
(15,033 |
) |
|
|
(33,029 |
) |
|
|
(27,569 |
) |
Employer payroll taxes on employee stock transactions |
|
|
(416 |
) |
|
|
(696 |
) |
|
|
(1,012 |
) |
|
|
(208 |
) |
Amortization of acquired intangibles |
|
|
(46 |
) |
|
|
(100 |
) |
|
|
(145 |
) |
|
|
(199 |
) |
Non-GAAP sales and marketing |
|
$ |
70,240 |
|
|
$ |
74,209 |
|
|
$ |
140,599 |
|
|
$ |
133,528 |
|
GAAP sales and marketing as percentage of revenue |
|
|
60.6 |
% |
|
|
74.1 |
% |
|
|
61.8 |
% |
|
|
68.4 |
% |
Non-GAAP sales and marketing as percentage of revenue |
|
|
48.4 |
% |
|
|
61.1 |
% |
|
|
49.7 |
% |
|
|
56.6 |
% |
|
|
|
|
|
|
|
|
|
GAAP general and administrative |
|
$ |
41,352 |
|
|
$ |
40,407 |
|
|
$ |
82,248 |
|
|
$ |
77,590 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
(25,184 |
) |
|
|
(25,369 |
) |
|
|
(49,447 |
) |
|
|
(49,623 |
) |
Employer payroll taxes on employee stock transactions |
|
|
(179 |
) |
|
|
(263 |
) |
|
|
(484 |
) |
|
|
(292 |
) |
Non-GAAP general and administrative |
|
$ |
15,989 |
|
|
$ |
14,775 |
|
|
$ |
32,317 |
|
|
$ |
27,675 |
|
|
|
|
|
|
|
|
|
|
GAAP general and administrative as percentage of revenue |
|
|
28.5 |
% |
|
|
33.3 |
% |
|
|
29.1 |
% |
|
|
32.9 |
% |
Non-GAAP general and administrative as percentage of revenue |
|
|
11.0 |
% |
|
|
12.2 |
% |
|
|
11.4 |
% |
|
|
11.7 |
% |
|
|
|
|
|
|
|
|
|
Reconciliation of operating loss and operating
margin: |
|
|
|
|
|
|
|
|
GAAP loss from operations |
|
$ |
(43,289 |
) |
|
$ |
(67,352 |
) |
|
$ |
(91,396 |
) |
|
$ |
(114,476 |
) |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
54,248 |
|
|
|
50,135 |
|
|
|
104,942 |
|
|
|
96,760 |
|
Employer payroll taxes on employee stock transactions |
|
|
717 |
|
|
|
1,007 |
|
|
|
1,758 |
|
|
|
315 |
|
Amortization of acquired intangibles |
|
|
46 |
|
|
|
415 |
|
|
|
303 |
|
|
|
1,039 |
|
Non-GAAP income (loss) from operations |
|
$ |
11,722 |
|
|
$ |
(15,795 |
) |
|
$ |
15,607 |
|
|
$ |
(16,362 |
) |
GAAP operating margin |
|
|
(29.8 |
)% |
|
|
(55.5 |
)% |
|
|
(32.3 |
)% |
|
|
(48.5 |
)% |
Non-GAAP operating margin |
|
|
8.1 |
% |
|
|
(13.0 |
)% |
|
|
5.5 |
% |
|
|
(6.9 |
)% |
|
|
|
|
|
|
|
|
|
Reconciliation of net loss attributable to common
stockholders: |
|
|
|
|
|
|
|
|
GAAP net loss attributable to common stockholders - basic and
diluted |
|
$ |
(35,658 |
) |
|
$ |
(69,753 |
) |
|
$ |
(78,322 |
) |
|
$ |
(118,812 |
) |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
54,248 |
|
|
|
50,135 |
|
|
|
104,942 |
|
|
|
96,760 |
|
Employer payroll taxes on employee stock transactions |
|
|
717 |
|
|
|
1,007 |
|
|
|
1,758 |
|
|
|
315 |
|
Amortization of acquired intangibles |
|
|
46 |
|
|
|
415 |
|
|
|
303 |
|
|
|
1,039 |
|
Income tax adjustments |
|
|
485 |
|
|
|
582 |
|
|
|
1,138 |
|
|
|
963 |
|
Non-GAAP net income (loss) attributable to common stockholders -
basic and diluted |
|
$ |
19,838 |
|
|
$ |
(17,614 |
) |
|
$ |
29,819 |
|
|
$ |
(19,735 |
) |
|
|
|
|
|
|
|
|
|
Reconciliation of net loss per share - basic and
diluted: |
|
|
|
|
|
|
|
|
GAAP net loss per share - basic and diluted |
|
$ |
(0.12 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.42 |
) |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
0.19 |
|
|
|
0.18 |
|
|
|
0.36 |
|
|
|
0.34 |
|
Employer payroll taxes on employee stock transactions |
|
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
Amortization of acquired intangibles |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.01 |
|
Income tax adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-GAAP net income (loss) per share - basic |
|
$ |
0.07 |
|
|
$ |
(0.06 |
) |
|
$ |
0.10 |
|
|
$ |
(0.07 |
) |
Non-GAAP net income (loss) per share - diluted |
|
$ |
0.07 |
|
|
$ |
(0.06 |
) |
|
$ |
0.10 |
|
|
$ |
(0.07 |
) |
Weighted-average shares used in computing GAAP net loss per share -
basic |
|
|
291,995 |
|
|
|
284,761 |
|
|
|
291,068 |
|
|
|
281,492 |
|
Weighted-average shares used in computing non-GAAP net income
(loss) per share - diluted (1) |
|
|
296,562 |
|
|
|
284,761 |
|
|
|
295,790 |
|
|
|
281,492 |
|
|
|
|
|
|
|
|
|
|
Computation of free cash flow: |
|
|
|
|
|
|
|
|
Net cash provided by provided by (used in) operating
activities |
|
$ |
19,895 |
|
|
$ |
(6,824 |
) |
|
$ |
31,399 |
|
|
$ |
(5,469 |
) |
Less: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(329 |
) |
|
|
(1,984 |
) |
|
|
(712 |
) |
|
|
(3,381 |
) |
Capitalized internal-use software |
|
|
(1,486 |
) |
|
|
(1,378 |
) |
|
|
(3,511 |
) |
|
|
(2,722 |
) |
Free cash flow |
|
$ |
18,080 |
|
|
$ |
(10,186 |
) |
|
$ |
27,176 |
|
|
$ |
(11,572 |
) |
Net cash provided by (used in) investing activities |
|
$ |
2,800 |
|
|
$ |
4,782 |
|
|
$ |
44,136 |
|
|
$ |
(20,864 |
) |
Net cash used in financing activities |
|
$ |
(10,952 |
) |
|
$ |
(11,322 |
) |
|
$ |
(23,380 |
) |
|
$ |
(131,351 |
) |
(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 stock options and RSUs as potential common stock
equivalents but excluded them from the computation of GAAP diluted
net loss per share attributable to common stockholders, as their
effect was antidilutive. For the three months ended June 30,
2023, potentially dilutive shares of 4.6 million shares were
included in the weighted average shares used in computing non-GAAP
net income per share. For the six months ended June 30, 2023,
potentially dilutive shares of 4.7 million shares were included in
the weighted average shares used in computing non-GAAP net income
per share.
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