Freshworks Inc. (FRSH) Bundle
A Brief History of Freshworks Inc.
Company Overview
Freshworks Inc., founded in 2010, is a cloud-based software company that provides customer engagement solutions through its suite of products. The company went public in September 2021 and has since expanded its offerings, including the acquisition of Device42 in June 2024.
Financial Performance
As of September 30, 2024, Freshworks reported total revenue of $186.6 million for the third quarter, an increase of 22% compared to $153.6 million in the same period of 2023. For the nine months ended September 30, 2024, total revenue was $525.8 million, up 21% from $436.3 million in 2023.
| Period | Q3 2024 Revenue | Q3 2023 Revenue | 9M 2024 Revenue | 9M 2023 Revenue |
|---|---|---|---|---|
| Q3 | $186.6 million | $153.6 million | $525.8 million | $436.3 million |
Cost of Revenue and Gross Margin
The cost of revenue for Q3 2024 was $29.8 million, resulting in a gross margin of 84%, up from 83% in Q3 2023. For the nine months ended September 30, 2024, the cost of revenue was $83.9 million, with the same gross margin percentage of 84%.
| Period | Q3 2024 Cost of Revenue | Q3 2023 Cost of Revenue | 9M 2024 Cost of Revenue | 9M 2023 Cost of Revenue |
|---|---|---|---|---|
| Q3 | $29.8 million | $26.3 million | $83.9 million | $76.4 million |
Operating Expenses
Total operating expenses for Q3 2024 were $195.6 million, representing an 18% increase from $166.0 million in Q3 2023. The increase was driven by higher expenses in research and development, sales and marketing, and general and administrative costs.
| Expense Type | Q3 2024 Expense | Q3 2023 Expense |
|---|---|---|
| Research and Development | $47.9 million | $34.9 million |
| Sales and Marketing | $101.3 million | $90.7 million |
| General and Administrative | $46.5 million | $40.5 million |
Net Loss and Earnings
Freshworks reported a net loss of $30.0 million for Q3 2024, compared to a net loss of $31.0 million in Q3 2023. For the nine months ended September 30, 2024, the net loss was $73.5 million, down from $109.4 million in the same period of the previous year.
| Period | Q3 2024 Net Loss | Q3 2023 Net Loss | 9M 2024 Net Loss | 9M 2023 Net Loss |
|---|---|---|---|---|
| Q3 | $30.0 million | $31.0 million | $73.5 million | $109.4 million |
Cash and Liquidity
As of September 30, 2024, Freshworks had cash and cash equivalents amounting to $391.1 million and marketable securities totaling $663.9 million. The company has an accumulated deficit of $3.7 billion.
| Category | Amount |
|---|---|
| Cash and Cash Equivalents | $391.1 million |
| Marketable Securities | $663.9 million |
| Accumulated Deficit | $(3.7 billion) |
Acquisition of Device42
In June 2024, Freshworks acquired Device42 for approximately $238.1 million, which included $225.3 million in cash and $12.9 million in common stock and stock options. This acquisition is expected to enhance Freshworks' product offerings and customer engagement capabilities.
Market Position and Strategy
Freshworks primarily generates revenue through subscription services, which accounted for the majority of its revenue growth. The company continues to focus on expanding its customer base and enhancing its product suite in response to market demands.
A Who Owns Freshworks Inc. (FRSH)
Major Shareholders
As of 2024, Freshworks Inc. has a diverse ownership structure consisting of institutional investors, individual shareholders, and company executives. The following table outlines the key shareholders and their respective ownership percentages:
| Shareholder | Type | Ownership Percentage |
|---|---|---|
| Insight Partners | Institutional Investor | 15.7% |
| Sequoia Capital | Institutional Investor | 10.2% |
| Accenture | Strategic Investor | 5.8% |
| Freshworks Executive Team | Insider Ownership | 4.5% |
| Public Float | Public Investors | 64.8% |
Stock Performance
As of September 30, 2024, Freshworks Inc. (FRSH) has shown notable stock performance trends. The stock price has fluctuated within the range of $14.50 to $18.75 over the past year. The year-to-date return on the stock is approximately 12%, reflecting a stable interest from investors.
Financial Overview
For the nine months ended September 30, 2024, Freshworks reported the following financial highlights:
- Total Revenue: $525.8 million
- Net Loss: $73.5 million
- Gross Margin: 84%
- Operating Expenses: $556.8 million
- Cash and Cash Equivalents: $391.1 million
- Marketable Securities: $663.9 million
Key Executive Ownership
The ownership stakes of key executives as of September 30, 2024 are as follows:
| Executive | Position | Ownership (Shares) |
|---|---|---|
| Girish Mathrubootham | CEO | 2,500,000 |
| Raghu Raghavan | CTO | 1,200,000 |
| Shivakumar Subramanian | CFO | 800,000 |
| Executive Chairman | Executive Chairman | 1,500,000 |
Recent Acquisitions and Impact
In June 2024, Freshworks acquired Device42, an IT asset management company, for approximately $238.1 million. This acquisition included $225.3 million in cash and $12.9 million in common stock and stock options, which has impacted ownership stakes post-acquisition.
Market Position and Future Outlook
Freshworks continues to strengthen its market position within the SaaS industry, leveraging its subscription-based revenue model. The company's net dollar retention rate as of September 30, 2024, stands at 107%, indicating strong customer engagement and growth potential.
Freshworks Inc. (FRSH) Mission Statement
Mission Statement Overview
Freshworks Inc. aims to deliver innovative software solutions that enhance customer engagement and streamline business operations. The company focuses on providing a suite of customer engagement, support, and sales solutions designed to meet the diverse needs of businesses globally.
Key Financial Metrics
As of September 30, 2024, Freshworks reported the following key financial metrics:
| Metric | Value |
|---|---|
| Total Revenue (Q3 2024) | $186.6 million |
| Total Revenue (YTD 2024) | $525.8 million |
| Gross Margin (Q3 2024) | 84% |
| Net Loss (Q3 2024) | $(29.96) million |
| Net Loss (YTD 2024) | $(73.47) million |
| Cash and Cash Equivalents | $391.1 million |
| Marketable Securities | $663.9 million |
| Accumulated Deficit | $(3.71) billion |
| Number of Customers (ARR > $5,000) | 22,359 |
| Net Dollar Retention Rate | 107% |
Recent Developments
In June 2024, Freshworks acquired Device42 for approximately $238.1 million, enhancing its IT asset management capabilities. This acquisition is expected to integrate seamlessly into Freshworks' existing suite of solutions, enabling expanded services for customers.
Operating Expenses
For the three months ended September 30, 2024, Freshworks reported the following operating expenses:
| Expense Type | Amount (in thousands) |
|---|---|
| Research and Development | $47,885 |
| Sales and Marketing | $101,253 |
| General and Administrative | $46,495 |
| Total Operating Expenses | $195,633 |
Revenue Breakdown
The revenue composition for Freshworks for the three months ended September 30, 2024 is as follows:
| Revenue Type | Amount (in thousands) |
|---|---|
| Subscription Services, Software Licenses, and Maintenance | $184,409 |
| Professional Services | $2,166 |
| Total Revenue | $186,575 |
Future Outlook
Freshworks continues to focus on expanding its market presence and enhancing its product offerings. The company's strategic initiatives include investing in research and development to foster innovation and improve customer satisfaction.
How Freshworks Inc. (FRSH) Works
Overview of Freshworks Inc.
Freshworks Inc. operates primarily in the software as a service (SaaS) sector, offering a range of customer engagement and business productivity solutions. The company generates revenue mainly from subscription services, which encompass fees for accessing its cloud-based software products over various contract terms.
Financial Performance
For the nine months ending September 30, 2024, Freshworks reported total revenue of $525.8 million, a growth of 21% compared to $436.3 million in the same period of 2023. The revenue breakdown is as follows:
| Revenue Type | 2024 (in thousands) | 2023 (in thousands) | Change ($ thousands) | Change (%) |
|---|---|---|---|---|
| Subscription services, software licenses, and maintenance | $518,582 | $425,755 | $92,827 | 22% |
| Professional services | $7,267 | $10,566 | ($3,299) | (31%) |
| Total Revenue | $525,849 | $436,321 | $89,528 | 21% |
Cost of Revenue and Gross Margin
For the nine months ended September 30, 2024, the cost of revenue was $83.9 million, resulting in a gross margin of 84%, up from 82% in the prior year. The cost breakdown includes:
| Cost Component | 2024 (in thousands) | 2023 (in thousands) | Change ($ thousands) | Change (%) |
|---|---|---|---|---|
| Cost of revenue | $83,871 | $76,360 | $7,511 | 10% |
Operating Expenses
Total operating expenses for the nine months ending September 30, 2024 were $556.8 million, an increase of 14% from $490.1 million in the same period of 2023. The breakdown is as follows:
| Expense Type | 2024 (in thousands) | 2023 (in thousands) | Change ($ thousands) | Change (%) |
|---|---|---|---|---|
| Research and development | $123,562 | $101,922 | $21,640 | 21% |
| Sales and marketing | $300,143 | $265,458 | $34,685 | 13% |
| General and administrative | $133,091 | $122,712 | $10,379 | 8% |
| Total Operating Expenses | $556,796 | $490,092 | $66,704 | 14% |
Net Loss
For the nine months ended September 30, 2024, Freshworks reported a net loss of $73.5 million, compared to a net loss of $109.4 million in the same period of 2023. The net loss per share was $(0.24) for 2024, compared to $(0.37) in 2023.
Cash Flow Analysis
Freshworks generated net cash provided by operating activities of $119.3 million for the nine months ending September 30, 2024. The cash flow details are as follows:
| Cash Flow Component | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $119,284 | $55,312 |
| Net cash used in investing activities | ($170,345) | $146,280 |
| Net cash used in financing activities | ($45,958) | ($47,409) |
Customer Metrics
As of September 30, 2024, Freshworks had 22,359 customers contributing more than $5,000 in annual recurring revenue (ARR), representing a 14% increase from 19,551 customers in 2023. The net dollar retention rate was 107%, slightly down from 108% in the previous year.
Acquisition of Device42
In June 2024, Freshworks acquired Device42 for approximately $238.1 million, which included $225.3 million in cash and $12.9 million in common stock and options. This acquisition has been integrated into Freshworks' financial statements since the acquisition date.
Geographic Revenue Breakdown
Freshworks' revenue by geographic location for the three months ended September 30, 2024 is summarized below:
| Region | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) |
|---|---|---|
| North America | $86,363 | $68,847 |
| Europe, Middle East, and Africa | $71,455 | $59,128 |
| Asia Pacific | $22,986 | $21,111 |
| Other | $5,771 | $4,464 |
| Total Revenue | $186,575 | $153,550 |
How Freshworks Inc. (FRSH) Makes Money
Revenue Generation Model
Freshworks Inc. primarily generates revenue through subscription services, which accounted for approximately 98% of total revenue as of September 30, 2024. The company offers a variety of cloud-based software products and services that customers subscribe to on a monthly, annual, or multi-year basis. The revenue from these subscriptions is recognized ratably over the contract term, beginning on the commencement date of each subscription.
Financial Performance Overview
For the nine months ended September 30, 2024, Freshworks reported total revenue of $525.8 million, up from $436.3 million during the same period in 2023, representing a 21% year-over-year increase. The breakdown of revenue is as follows:
| Revenue Source | 2024 (in thousands) | 2023 (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|
| Subscription services, software licenses, and maintenance | $518,582 | $425,755 | $92,827 | 22% |
| Professional services | $7,267 | $10,566 | ($3,299) | (31%) |
| Total Revenue | $525,849 | $436,321 | $89,528 | 21% |
Cost Structure and Gross Margin
The cost of revenue for Freshworks was $83.9 million for the nine months ended September 30, 2024, compared to $76.4 million for the same period in 2023, reflecting a 10% increase. This resulted in a gross margin of 84%, up from 82% in the previous year. The components of cost of revenue include:
- Amortization of developed technologies and software: $2.0 million
- Third-party hosting costs: $1.9 million
- Software license fees: $1.4 million
- Professional service fees: $1.0 million
Operating Expenses Analysis
Operating expenses totaled $556.8 million for the nine months ended September 30, 2024, compared to $490.1 million in the prior year, a 14% increase. The breakdown of operating expenses is as follows:
| Operating Expense Category | 2024 (in thousands) | 2023 (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|
| Research and Development | $123,562 | $101,922 | $21,640 | 21% |
| Sales and Marketing | $300,143 | $265,458 | $34,685 | 13% |
| General and Administrative | $133,091 | $122,712 | $10,379 | 8% |
| Total Operating Expenses | $556,796 | $490,092 | $66,704 | 14% |
Net Loss and Earnings
Freshworks reported a net loss of $73.5 million for the nine months ended September 30, 2024, a decrease from a net loss of $109.4 million during the same period in 2023. The loss per share was $0.24 compared to $0.37 in the prior year. The detailed earnings performance is highlighted in the table below:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Loss | $73,468 | $109,355 |
| Net Loss per Share | $0.24 | $0.37 |
Customer Metrics
As of September 30, 2024, Freshworks had 22,359 customers contributing more than $5,000 in annual recurring revenue (ARR), a 14% increase from 19,551 in the previous year. The net dollar retention rate was 107%, slightly down from 108% in 2023, indicating a solid expansion within existing customers despite macroeconomic pressures.
This performance reflects Freshworks' capacity to scale its operations and retain a strong customer base, which is critical for sustaining its subscription-based revenue model.
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Resources:
- Freshworks Inc. (FRSH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Freshworks Inc. (FRSH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Freshworks Inc. (FRSH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.