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Business software provider Freshworks (NASDAQ: NASDAQ:FRSH) announced better-than-expected results in Q2 CY2024, with revenue up 20% year on year to $174.1 million. Guidance for next quarter's revenue was also better than expected at $181.5 million at the midpoint, 1.6% above analysts' estimates. It made a non-GAAP profit of $0.08 per share, improving from its profit of $0.07 per share in the same quarter last year.
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Freshworks (FRSH) Q2 CY2024 Highlights:
- Revenue: $174.1 million vs analyst estimates of $169 million (3% beat)
- Adjusted Operating Income: $13.11 million vs analyst estimates of $7.93 million (beat)
- EPS (non-GAAP): $0.08 vs analyst estimates of $0.06 ($0.02 beat)
- Revenue Guidance for Q3 CY2024 is $181.5 million at the midpoint, above analyst estimates of $178.7 million
- The company lifted its revenue guidance for the full year from $700 million to $710 million at the midpoint, a 1.4% increase
- Gross Margin (GAAP): 83.8%, up from 82.9% in the same quarter last year
- Free Cash Flow of $32.82 million, down 15.1% from the previous quarter
- Net Revenue Retention Rate: 106%, in line with the previous quarter
- Customers: 21,744 customers paying more than $5,000 annually
- Market Capitalization: $3.98 billion
Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.
Sales SoftwareCompanies need to be able to interact with and sell to their customers as efficiently as possible. This reality coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrates data analytics with sales and marketing functions.
Sales GrowthAs you can see below, Freshworks's revenue growth has been impressive over the last three years, growing from $88.34 million in Q2 2021 to $174.1 million this quarter.
This quarter, Freshworks's quarterly revenue was once again up a very solid 20% year on year. On top of that, its revenue increased $8.99 million quarter on quarter, a very strong improvement from the $5.03 million increase in Q1 CY2024. This is a sign of acceleration of growth and great to see.
Next quarter's guidance suggests that Freshworks is expecting revenue to grow 18.2% year on year to $181.5 million, in line with the 19.3% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 16% over the next 12 months before the earnings results announcement.
Large Customers Growth This quarter, Freshworks reported 21,744 enterprise customers paying more than $5,000 annually, an increase of 1,195 from the previous quarter. That's quite a bit more contract wins than last quarter and quite a bit above what we've typically observed in past quarters, demonstrating that the business has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.
Key Takeaways from Freshworks's Q2 ResultsWe were impressed by Freshworks's significant improvement in new large contract wins this quarter. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. The stock traded up 11.2% to $14.77 immediately following the results.
