Freshworks Celebrates 1st-Ever Great Operating Profit At $3.9 Mn In Jan-March.

Freshworks, a Nasdaq-listed Software-as-a-Service (SaaS) powerhouse, recently declared consolidated sales of $138 million for Q1CY23, up roughly 20% year on year, and produced it’s first quarterly adjusted operational (Non-GAAP) profit of $3.9 mn as a public business. The firm reported $133 million in revenue and a $2.8 million operating loss in the fourth quarter of 2022. The SaaS company attributed the increase in Q1 revenue and operating profit to the acquisition of new consumers throughout the quarter.

Girish Mathrubootham, CEO and Founder of Freshworks stated that the firm exceeded its financial forecasts for sales growth and generated its first quarter of non-GAAP operational profit as a public company. More businesses are taking advantage of the opportunity to purchase software that can be scaled to meet their IT and customer needs.

GAAP, which is a set of financial reporting accounting rules and regulations that are widely followed. The company operates on a January to December fiscal year. The impact of stock-based compensation expenditures, payroll taxes on employee stock transactions, amortisation of acquired intangibles, and other adjustments are excluded from non-GAAP financial statements.

Company GAAP (loss) from operations was $48.1 mn in the first quarter of the year 2022, compared to $47.1 million in the previous quarter. The deficit was $60.6 million in the fourth quarter of 2022. The company’s net loss was $43.5 million in Q1 2023, compared to $50 million in Q1 2022, a 13% decrease year on year.

Freshworks reported a positive Non-GAAP income from operations of $3.9 million for the first time since being public, compared to a loss of $0.6 million in the first quarter of 2022.

Freshworks lead to a free cash flow of $9.1 million in the current quarter, up from a negative $1.4 million in the first quarter of 2022. Cash and cash equivalents were $1.5 billion at the end of March, up from $1.1 billion the previous quarter. The number of customers generating more than $5,000 in ARR (Annual Recurring Revenue) to the firm was 18,441, up 18% year on year and 19% when adjusted for constant currency.

Freshworks’ Net Dollar Retention rate was 107% in the first quarter of 2022, up from 108% in the fourth quarter of 2022 & 115% in the first quarter of 2022. This essentially analyses the variations in recurring revenue induced by fluctuations in revenue from the current client base.

According to Dennis Woodside, President of Freshworks, expansion activities for the quarter performed fairly in line with expectations, as agent additions continue to be impacted by a slower growth environment. Going forward, the business anticipates more pressure on existing client retention.

Woodside said that while churn improved in the first quarter, there is still some danger ahead. Given these two considerations, they predicted Q2 constant currency and reported net dollar retention to be about 105%, with net retention stabilising in the second half of the year.

Fila, Johnsonville, the Los Angeles Dodgers, Smyths Toys, Sonata Software, and the City of Escondido are among the new customers for the company.

Freshworks anticipates that its adjusted net income per share will rise between the break-even point of $0.02 per share on revenue of $140 million to $142.5 million. The company anticipates sales of $580 million to $592.5 million for fiscal year 2023. The company reported consolidated sales of $498 million in 2022.

Freshworks promoted Pradeep Rathinam, who was formerly the company’s Chief Customer Officer, to Chief Revenue Officer during the quarter.

Conclusion.

Mathrubootham stated that Freshworks would exploit the capabilities of ChatGPT when it comes to investing in Artificial Intelligence goods. Where the company is excited and investing right now with ChatGPT, which is a priority for the company, like in this quarter and the coming quarters, is in how the company uses generative AI to improve their ability to help businesses deliver better customer experiences and better employee experiences, and used in our IT and Sales products.