Earnings call transcript Q2 2023

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Operator

Hello and thank you for standing by. Welcome to the Freshworks' Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. [Operator Instructions].

to call like Huh. to now would hand over the Joon I

Joon Huh

you. to conference welcome afternoon second Thank and earnings Freshworks' Good quarter XXXX call.

Dennis full with The our our primary are Chief of performance today's Tyler today and Mathrubootham, to purpose year our Freshworks' Woodside, provide third second is Officer; XXXX you Sloat, Officer. me for and regarding Freshworks' quarter financial Financial Joining Chief XXXX. outlook call and President; information Girish Executive Freshworks' quarter

company, current and questions management's your all Litigation industry, to are expectations contain responses XXXX. subject and discussion our macroeconomic business other of on uncertainties, Securities its of within beliefs statements Private outlook, These estimates and based meaning Reform including and our the may assumptions of to the about are Some forward-looking which change. financial of Freshworks' forward-looking the certain statements by made Act

These projected to Such control statements actual to, improve risks, meet differ cause and to not growth, are to to materially our demand and and customer the to costs could operating that limited ability in sustain uncertainties assumptions are efficiency. include but subject our from innovate, forward-looking those results to risks statements.

or may assumes to that except any order update events law. please required factors most call, Freshworks reflect forward-looking material that earnings today's our a periodic XX-K and of by other other filed obligation For SEC. no in with our and results, after discussion circumstances Form as risks our and refer recently the could of this filings to arise important to affect date release, statements Form XX-Q

at financial periods we non-GAAP GAAP is in call, earnings are financial on release, Relations of non-GAAP measures course the will between refer website historical Investor today's and our to available our ir.freshworks.com. which included for reconciliations During measures, certain

Freshworks. earnings to periodic to of more you about call Investor earnings reports, or today's our our learn slides, a SEC encourage release, access site visit Relations to supplemental replay I

turn me let And it with over that, Girish. to

Girish Mathrubootham

second Joon, XXXX. Freshworks you, Thank everyone. joining today quarter of and for us on you our welcome Thank covering call earnings

We key delivered outperformed QX estimates our metrics. all our strong and a across financial

outlook revenue high-end million Our the coming for our in $XXX.X quarter. the range of at exceeded financial

flow significantly leading our We continue to expectations. cash improve surpassing business $XX.X million, our efficiency free of to

really team this number of results. the we changes are We see our profitable I'm to made after of benefits quarter. larger in proud market the the our a segment customers the target of effort to beginning and a go operational at of year more starting and

in supplemental our As a reminder, highlights the financial on Investor earnings Relations slides we website. have these included

day will hold you in forward our We seeing look investor also first San Francisco. there. on September to X I

beginning business get I'll drivers with into Now innovation. our product

generative showcased In June, strategy, capabilities product that lines. can across introducing AI used our be Freddy AI we new

and personalized businesses with bots. Self-service, customer employee conversational First, offer helps is Freddy which service

which Freddy personal and information are is All can proactive support contextual And that IT Insights, professionals, through agents Freddy to a three and we finally, an insight with even leveraging Copilot, insights marketers tasks. AI Next recommendations works offloading provide Freddy offering assistant more like AI capabilities collaborator, is always and interface. repetitive and salespeople, a AI help efficiently. work more conversational on

pricing more we to will CX our powered monetize enhanced which customers week, for introducing bots our this million for capabilities we including enables assisted Freddy as bots Later AI experience than agents QX. in by and virtual us customers. our in IT, create self-service Powered fresh value interactions in for be AI, new our XXX

per a a at at later introduce add-on, month. agent price provides to to date plan Freddy we access Copilot a that starting our $XX AI addition, In capabilities, of per

in as teams as facing the power possible. put to many customer the of is employee goal AI and of hands Our

AI is this week. our brings our provide to to launching expected our the suite with modern we channels also of first support later service built business, ground customer up future advancements gather offering, service. service solution Freshworks supercharge power insights one Freddy it The service the deliver for With This multi-channel with customer to believe conversational across will be AI. is will the respect suite customers productivity This customer to automated from of self-service and in and proactive and and we ticketing is agent leaders. all customer

next proud be in customers days. up the We this to few to our are opening

that better efficiently capabilities Turning reliably. to to and we organizations with to our business experiences and empower continue provide ITSM Freshservice, make them deliver employee

provides extending of also are in French, language conversational German, of and including We capabilities employees the Spanish. to now choice, self-service It Freshservice. AI Freddy

After we demand. five Nearly their XXXX, Freshservice business every market of business validation one launching thesis large for see to our new of for non-IT Freshservice of adopting continue for are on a accounts initial teams of out themes in functions purchase. initial December

Since solution offers research infrastructure customers, They another One for provider PitchBook market and insights were suited Freshservice onboarding by work, financial requested facilities processes not and times response over was for off it their boarding. and of but live IT for make our cumbersome objective. their well-known wait RevOps decreased to trying and to PitchBook IT XX% and department, going agent and employee capital has with professionals. IT and automated

sellers marketing close on smarter, have AI we faster. we generative engage sharper, and and by business, helps support remain and building them closing deals a In message Freshsales, powered Within on operate engage process. that our how focused provides Freddy focus frees sales improved AI solution delivering This teams deals. sell modules, throughout better, customers copilot the CRM relationships to sales with across and integrating key by

generative Within solution. gain launch allows we with which highly Freshmarketer, to behavior, and released our integration to store customer of our access to patterns WooCommerce, purchase AI personalized owners campaigns. preferences Freshmarketer insights into and are QX, In millions get help marketers leveraging we

time to a has neo nine also we enabling and than Freddy Freddy developer from a the QX, XX copilot app In to cut generative applying weeks developers experience. AI instances, In week. development announced some faster to for platform copilot less

time framework of to single app apps developers less the developers to expected market, can and Freshworks launched and marketplace building a managing products. across publish enable across product. is to also that Freshworks integrations overhead faster That work better to multiple Global provide We apps

In efficiency the leverage for significant to we've last scale plan sizes. AI to bring of we and our advancements in to accessible generative to continue customers. our made all months, few companies And these solutions

I the and to group President and of Chief President Executive Freshworks former Before pleased add cloud I'm announce the I'm Financial companies business recent excited to Board to and hand Officer currently our of cloud SAP. the of of to the Frank it Vice global and Frank over at Pelzer Inc., software his is Dennis, appointment Directors. FX to Operating Chief board. experience building scaling Officer tremendous the

in GTM positively over Dennis, will impacted how our detail Now business. who have changes our to

Dennis Woodside

G appreciate We and you us thank you for joining Thanks, today's everyone. call.

realize benefits As year. you earlier of decisions go-to-market the of to can this the see starting strategic we our we're some QX results, in made

are actions win We that efficiency within to bigger our are a expand accounts, that seeing improve growth working our and operating on to deals, set existing for Freshworks. us profitable path drive

see we and our landing quarter, shifted bigger field customers this we January, to focus results. the to teams began on In

from us include the a growth company, the In are Recent British product customer Japanese well-known Clopay XX% year-over-year, our represents as ARR our American $XX,XXX examples XX% over ARR of a QX company, customers tech in of business. cohort This paying fueling conglomerate, up large QX. saw XX% now in larger a consumer Freshworks growth famous we grew customers and car Corporation.

garage a Clopay this manufacturer with walk-ins The see forms, continues for Freshdesk, dealers door necessitated a America's and to customer mobile increasing engagement. Clopay calls, platform multi-channel achieve service improve to and unified Freshchat benefits. interactions customer significant is leading customer better chats, website physical garage and experience. to North Freshcolor door agent Freshworks came to through chose and and

January, and with in our teams to dedicated Also ensuring customers solidified we us. grow succeed

net from majority ARR, We QX. change is expansion. are coming results our seeing adds $XX,XXX customer in in that the over from Of

Our net accounts for the well rate our enterprise mid-market expansion for average company. is XX%, the above was which and

per rate the Solutions as experience, team Partner in from Freshdesk year, for average X QX, technology just Demand they by usage A Freshchat to relied travelers QX, and rail deciding increased ITSM their train seat our is In price citing for of up countries. doubled riders in value and changes on factor. and increased adopted app rounding we Trainline's in platform price downloads their needs. expanded great time the Freshservice serving partners' Trainline the multiproduct for digital Our main to their international an U.S. which X%, manage and adoption and customer in service January XX Trainline, realized example issued XX%. coach to improved

as multiple legacy impact several selected grown changes workflows have our business vendors An X efficiently. leading another After Freshservice company. years, Freshservice they unit IT providing from we and efficiently. one has a example after consistently These half XXX and more to them agents, made excellent year-after-year. replaced acquiring centralize to time on we higher-performing govern manufacturer XXXX, to We've changes customers for business how next, the to a tactical In is steel of first acquire go-to-market had units the positive seed value instance XXX of American business. XX with in one companies expansion this

in a acquisition efficiency, First, contributed This XX% QX. to percentage QX non-GAAP sales our demonstrated higher an in to we adjusted revenue from of overall by overweight larger, as the XX% improvement marketing marketing in budget customers. to potential of going and

related expanded free of in both spending of for at number $X,XXX we recently a continue in a changes, than expanded test future offering our months customers paying costs. QX. fewer as marketing to optimize free attract of larger this We of we added our But Second, and ARR pool lower a those consequence for test less offerings. products as Freshsales tactical to discontinued a customers we

our and Johns Claremont billings and increasing with we new contracts This State contracts annual more total XX,XXX including ended We the calculated Dave than quarter of customers monthly quarterly & quarter-over-quarter. annual McKenna to Hawaii, and Third, trend College, contributed agreements. multiyear QX from to customers, more Hopkins Buster's. moved towards the purposely in growth

customers to base churn increased added relatively kept we stable. number a lower and of quarters, While we compared prior dollar ARPA

We're larger future a creating confident after healthier from in going quarters. stronger base is and to deals customers grow that of intentionally

profitability. helping All and business of these in changes further are efficiencies the improve drive

the over Tyler to through details. financial go to Now

Tyler Sloat

and joining everyone Thanks, us. Dennis, again to thanks for

create and leverage revenue estimates in to and percentage again, QX. quarter-over-quarter. Once expand non-GAAP business had quarter we our points margins the strong both by in flow free significant cash beat We X growth operating a

made starting financial and the long-term for we're changes year, profitable the foundation healthier to growth. resulting in the from a position the benefits to business are We operational realize earlier creating

trends. I'll and and QX for currency business non-GAAP key the of as include the our certain of adjustments. provide will financial be close which full our and a with our expectations For XXXX. results, reminder, discussion financial And compensation results, focused commentary most expenses constant metrics QX background stock-based a and cover of on for call year metrics to on provide I'll better view our other the exclude today, the comparisons forward-looking impact

Starting million as an $XXX.X with revenue pound adjusting statement. dollar year-over-year, the for income the we rates saw the on Revenue grew over XX% as-reported past currency grew euro year. for constant basis, currency. impacts against to and On XX% the negative

growth New the QX, slightly the of business strength in ticked in down overall expansion ITSM quarter. continued while rates to much drive in

costs our result one-time percentage spend, point QX, XX% items. improvements AWS X infrastructure other non-GAAP on gross efficiency as our In of quarter-over-quarter increased margins to a and

lower decrease $X year-over-year a base. durable, quarter-over-quarter the go-to-market in shifting operating $X expenses non-GAAP majority includes of million we and were our was expenses sales spend customer than The as more higher-yielding down and efforts. This improved more relatively million Our by of towards flat driven year-over-year. focus marketing

profit $XX.X led All a of operating operating QX. margin in this non-GAAP and of significant for to million X% non-GAAP outperformance

we've tangible the Given efficiency. past changes with making many pleased made year, in I'm improvements we're the over our the

XXX% includes our quarter-over-quarter. our line roughly increased in performed our QX, estimates, from dollar a X benefit in point slightly better which expansion to operating metrics. percentage Turning was expectations. growth but than was with retention FX. quarter, In Net churn the Dollar-based

the retention rate We lower net are and in the half be continue in net expect the XXX% constant the to on to currency the to dollar trends XXX% range planning of expansion largely second for year.

represents metric to other key year-over-year customers constant a prior our number metric ARR. XX% and similar year-over-year quarter our operating customers XX,XXX now growth a than to currency rate Moving This contributing metric, customer of XX% compared ARR. maintained grew of in in the quarter. this more to grew On basis, $X,XXX and the XX%

quarter, constant For $XX,XXX grew year-over-year, the smaller customer more currency, in our all this in from customers less customers the difference ARR, ARR. larger customer net was now cohort at quarterly this than XXX the to of approximately Adjusting in cohort which historical represents Nearly lower customers for added growth with count figures. We than XX%. $X,XXX contributing ARR. XX% XX% X,XXX was than of our and improved of

tactical quarter attracting with ARPA. of was driving for more mentioned higher well cohort larger adds our Dennis and we logo Net and CX customers. this as as smaller impacted ended the customers, from earlier healthier churn changes by base on a XX,XXX the than a a customer focus higher count as building We that continued

Moving created on $XXX.X normalized calculated a the and to Calculated currency XX% slight million. contracts timing calculated growth duration year-over-year billings to resulting quarter grew billings, on a including reserves in and cash billings of XX%. Factors and balance in both sheet of items. benefit, revenue as-reported constant a approximately basis

XX% billings constant is for and estimate preliminary on our as XX% XXXX, a QX to ahead basis. reported calculated currency Looking growth

we year on calculated of as reported billings full expect XX% expected growth similar annual to constant currency rate be and XX% the XXXX, growth our approximately For basis. to a

generated the improvements cash free in business. we're $XX During million making quarter, the the significantly of our we and ahead flow, efficiency reflective over estimates in of

a equivalents marketable cash the and cash, As billion. $XX balance quarter of million $X.XX end a in to with added we result, securities

using $XX continue equity as selling activities reflected excluded equity levels. million to plan is free net activity to financing net invested QX usage this from $XX amounts the cash We is continue which in price than resulting stock quarter, approximately selling We of invested more using amounts flow. cash in current million during

realized QX half respectively. to million, of free $XX and $XX first raising in our flow $XX full year, the we meaningful for and the approximately for the estimates operational are efficiencies the we year Given QX, cash XXXX million million expected with

XX, to for million XX fully Turning and options. calculation XXX a QX. diluted shares RSUs June approximately fully diluted count PRCs consists XXXX. X related and approximately as share We shares of outstanding basis related to The outstanding XXX had unvested shares million on shares of our million to outstanding, million

Let me now provide our estimates. forward-looking

quarter shares $X $X.XX, year-over-year. the constant in the For reflects XX% Non-GAAP from operations $X.XX income million outstanding in to approximately $XXX assuming weighted be XX% $X be to growth of range in to shares. we to XXXX, million, the Adjusting year-over-year. of to net and be the range of share XXX.X XX% per revenue $XXX.X to income million for to currency, to XX% of non-GAAP of of third range growing this average expect million million

of the to from assuming be non-GAAP $XX reflects for For Non-GAAP XX% to full approximately $XX expect to year-over-year. in XX% $X.XX $XXX income we operations range and growing to year of the outstanding million shares range to this revenue constant average net of income million XXXX, $X.XX, to million, the be year-over-year. Adjusting be to in XX% the to currency, million XX% per weighted range share $XXX million. of in XXX.X of growth

a our growth in negative year, dollar slight trends the impact Given we rate QX. saw past U.S. the over to

XX, of so moves rates any currency Our estimates based as FX are XXXX, in. factored July are on future not forward-looking

pleased me growth and the the as in these Even second performance improve the carry We and from continues close changes and growth. to of many Let business operating to we excited benefits with our the and look our saying, forward by our drive our targets ahead. ever the this the leverage of profitable of changes some deliver year. see the a go-to-market our year, we to into to starting half approach We're business. business as remain momentum opportunities we made to plan for though I'm through execute manage on first and of changes operations, number the to team business half

Operator? With us your questions. that, take let

Operator

first And from with Thank Instructions] you. question Piper Sandler. [Operator Please comes proceed. Bracelin Brent our

Brent Bracelin

for for looks double you Thank acceleration saw fundamentals question. you like [ph] could it the taking here the [XX,XXXk] Good in maybe are Obviously, afternoon. Dennis, click you cohort. stabilizing. into you, the

larger about growth XX% Or that's changes made improved there in internal some the do there's think you tied looked from like Thanks. that with the the Is else I of acceleration those think XX%. customers you it resonating a product? something to execution? to

Dennis Woodside

the for question, Thanks Brent.

absolutely, enabled and benefits, we that and to of healthier lot made back the the even of that changes us stronger grow has realize starting January So from. to larger these create base a we customers are an in to

a high advanced of has product Our at very last over rate couple the years.

If you specifically. products look at ITSM the

our We have have the market doing those ITSM, and we are quite sellers have well. ESM ITOM, we in now. resonating All are

at that deals seeing we've just that put sure. for but more not in more wood we're deals, So larger you're getting behind the and the and slightly numbers huge

Operator

MacWilliams from with the Ryan Please comes line Barclays. of It proceed.

Ryan MacWilliams

taking Thanks the model AI AI you forward your the product see coming just this the the and excited how guys. contribution to in years? Really on guidance? quarters guess, announcements for Hey, or Are contemplated do coming. new layering I these the And Thanks. in Tyler, products question. pricing. the from envision into

Tyler Sloat

Ryan. for Hey, the question. Thanks

pricing any from I products So we on based learn. is our coming that and upside think actually to early guidance AI. we today have to changes haven't what see expect that built we'll so because have no, upside without from any sell the and we is in But what reflective are essentially the forward what we of it

Ryan MacWilliams

to drivers head count pleased What the the are also profitability any there? were strong And in improvement see in to of materially changes And Great. improvement? Thanks. quarter. there the this some contributed the

Tyler Sloat

that built of in like to guidance a into model year have at in leverage forward. leverage efficiency have we And obviously beginning Yes, you're initiatives continue we place can always We're the model, of out. going excited really we feel kind we've right. that and had those we've our the which and thought played put the about in of the the how lot

to we actually moving haven't of been forward in anything dramatic. had making culture do performance sure the We've we right as the places. else count have Head right we move people just and everything kind to and wise,

Operator

of from with the Bora proceed. line comes Pinjalim It JPMorgan. Please

Pinjalim Bora

on quarter. understand of appetite within the how Freddy other pricing are Congrats question of maybe for tools? copilots on Copilot, we just of of kind a trying of AI business? kind and talk to ramp your Copilot you uptake the about and CX thinking how the about conversations One think the or customers of kind with your self-serve and should insight And

Girish Mathrubootham

Girish. question. Pinjalim. is Hey, Thanks the for This

Freddy working all or it are first our users, think folks, customer we all, So assistant it's of our whether service of an -- is for AI as Copilot cetera. of et sales -- people

have New several working we you So seeing customer -- of in customers, York using early it it. is of is I in this a using a can the and early customers company with in we are customer are summarizing adopter of replies like shipping and actually creating postal who we people terms that give One some terms example for launched service features that. things

we So can that looking routine also the help manual are sure making Copilot at automate tasks.

excited. So we are

are X,XXX like we as more with We working customers adopters. early in than are that

trying are matter in to soon of the we monetize time. Copilot a So

Pinjalim Bora

on it. million. $XX towards cash it talking you duration about the went is $XX Got for much it entered $XX because year How I was if annual? to million, remember I this now in and you change that ramp And you're like, seems of free think about flow, of then year, Thanks. Interesting. when the correctly, that million

Tyler Sloat

little change around and performance. actual It duration not billings that had billing is lot annual does it to have operational impact cost of on The that in driving nominal. hiring. impacted. prudence we've the that's our bit Yes, not prudence side of of collections really kind the pretty numbers. is around just But say A a I would our

Operator

proceed. comes with Please from the Peterson of Brian It Raymond James. Instructions]. line [Operator

Brian Peterson

quarter. Congrats on the

products I the there's hope one I product all Thanks do medium-term more they kind I some in-market have, that becomes perspective front, a AI you're ramp Just think On love are know build today? to for me. understand today, and guys. sales and AI announcements as on can as those commonplace, changes the from they lot of of but where selling I'd get the marketing you products on that that. for you already

Girish Mathrubootham

take I'll that. Brian. Sure,

is and and for then users announced Freddy assistant an Copilot, and for Freddy AI quick for this Insights a data self-service. So Self-service Freddy insight driven brief. is our leaders. We customer employee which like

is, product priced launching are we do per So what which monetizing our our on Freddy copilot, $XX when we be thinking we're we at suite, August Freshbots. Self-service customer trying And are of our will like it be but will later. to monetized be our X -- agent through then it new service will

follow early customers, we will and soon. Insights We mentioned, working that as are with still adopter Freddy

Operator

Patrick comes It the JMP Securities. go with Walravens from line ahead. of Please

Patrick Walravens

Congratulations a the in row. good on quarter second really

of I've deliver that G, AI been lot is So the sort area that to you wondering about one a resources solutions. need generative

[indiscernible]? enough you do to then sort And GPUs design access have have of trading particular, PhD in to do you level the talent these? for So AI and the

Girish Mathrubootham

So investments. those are Pat, making we

in So have have we experience we from we know -- have some but the exact count like have, who working I PhDs many team. how Microsoft AI of much our don't leaders

are providers, we technology Open it's of of out other some working with AI the also the Azure, providers leading So there. or whether some

investing build We of in process domain-specific the kind to large are in models. language customer-specific also and AI of

up are in part of AI we thinking India. So as of some setting labs that,

plan. the in is that So

Patrick Walravens

this Great. you power to And get to access all to that hard about models? how stuff, the NVIDIA actually then these -- what train is need GPU it

Girish Mathrubootham

Yes.

think if a Nadella that we becomes Sathya have I cause that say heard scarcity disruption. to

to is investments to so up set one have reasons we want the So of that why access we that that.

we investors to us And offered our -- of connect. GPUs see some their through access like also have

future. the for So shortage, are we we like -- waiting face to don't are but play out we now, how think all see things I in

Operator

Hynes line proceed. the Genuity. Canaccord Please comes It of with from DJ

DJ Hynes

billings on want I ask to guide. Tyler, the

currency was if growth. think it look, are my XX% right, I numbers So QX, in constant

improved This to quarter normalized. XX%

again feel wondering in prudence something like seeing qualitative, you said all I'm business typical that might mean suggest XX% or you slow in pretty the good momentum. are think you're about would the you guiding I from business to if guys things I just like quantitative in commentary, that's QX. QX. sounds it

Just any of kind be would thoughts helpful. high-level there

Tyler Sloat

in trying No, as coming it into to down don't higher churn we see we're We XXX%. last the QX. We going started slowdown but still Thanks, to to up XXX%, better year. QX expect there's there, say to at ticked are se. kind talking expansion think saying actually see expected did dollar slightly, to a be why it. was beginning our bit come than motion, had continued seeing We it it per Yes. didn't then of do net a it's call still We We and that retention the we expectations. year, DJ. actually we of about that's really some the going pressure come little we is down. And pressure. see which

what see is it obviously, it, along. so call will we we're update as it then trying as just And we to go and we do

Operator

from with comes the It line of Morgan Elizabeth Please Porter proceed. Stanley.

Elizabeth Porter

increases and customers I as on think called you just a customers. you be expanded you. the the low-end to do upmarket. with more has successful motion, lever broadly, know guys Thank But Yet have of the the able still as high-end balances more ITSM. you about upmarket and pricing you you customers? along up wanted largely to which being to address how of both about portfolio, out focus market ask pricing, go-to-market move more the in allowed price I pricing

Dennis Woodside

that our up. first one prices year I customers and realized in levels prices we an price coming that need focused higher this customers And are our numbers. Elizabeth, remarks, that for is it's took X% those realize us seeing the there of today, ARPA to it Dennis. we going all make have a have renewing saw net We that way bring We're then we be that product more given we for out, as it's are in up made opportunity of discount new And moves said you're and pricing where on. deals customers. of our the a to as may to the the we're We across up, we customers. absolutely been also in the the for Thanks increase renewal delivering rapid with lever and advance than renewing lever and price IT to we value products as seeing for -- that roll ARPA a to about suite, pricing question. the on see

price us those better So I gets for think price become going a value, as and absolutely at will things thinking forward. of lever we on. It's focused about the I'm bigger to want one company the pricing And our terms our prices We ticket of meaningful to against software. all have in preserve actual as a implementing the marketplace. well still of as in cost both position TCO our competitors, of advantage our

So want to about room to for us absolutely any there's we changes, sophisticated price be for thoughtful sure. have but about be We more room of kind pricing.

pricing our You're about as seeing it with $XX be AI add-on seat. to a at the AI pricing well, where going we're

this pricing, which allow scheme, bot a later going to higher monetize us to announce which a bot with it week revised seeing rate. we're will at pricing You're bots

Operator

It comes McGinnis proceed. UBS. with Please from line the of Taylor

Taylor McGinnis

we And than largely I XQ. to in you it the know performance sequential the in billings relative a guide the roughly in quarter, you said little. the churn adjust growth like is picked point to what stronger by for guess, solid. So and some July the days or of if really I of characterize it how driven you just guide previously? improvement, Are the rightsizing to what of starting slower up the versus looks expansion some we've was XQ is that environment guided But a changes lap seeing made? Are activity or demand could in seen you've helping? be sales would signs the you that June I

Tyler Sloat

Yes.

our clearly, we Taylor. know mean, I largely, along affect now. the -- expected, information into we think I it's gone as is guidance taken right all

we really going, terms are The guide, as it And quarter to I so earlier, see as of it. how expected. the like we trying in it's said is call

ITSM business in guidance. if think our of it that of specifically, new to QX advance. the would you continue, I impacted was pay all customers expect motion. field a that at really was slightly We built to we in but larger that tend strong, with in billings, kind annually our to And into look specifically by kind move

Operator

It America. Bergere of comes from the with line of Please Adam proceed. Bank

Adam Bergere

in Can differences you Thanks. AI any you And office solutions? back just versus versus may CRM just you churn For do will Freshservice. office, office what business expand proposition the also or demand example, greater for? seeing then, have, front maybe value expansion office thinking which about comparing will be front on a have think versus in back

Dennis Woodside

about start some and talk of AI I G then One have the stuff.

little start higher a I kind me of think, generally let level. bit just speaking,

terms a we're the in ESM product X,XXX particular, And which that seeing suitable a makes of solid In well. number really We've for us functionality of of way. long the business, think that about do aspects ITOM a mid-market IT for business, is product and because introduced that's partly employee new come has capabilities other very I company.

more tend have do the in And be in service product lot tend set. over more you we customers a than largest IT. to team that's customer to because of Our customer agents support a

of a quite bit expansion there. see we So

sustain the and at helping as accounts, that our or we move higher than rates expansion we've We seen. accounts expanding that's are net also those larger larger into seeing, are us rate smaller drive accounts,

that. think I than different the So slightly demand is

motion CX motion expansion for like expansion for seeing installed would gives motion seeing new are there, good seeing strong the and newer, say, We're IT the the that on whole demand, expand demand new or also the CX base We're IT us a We demand those for on is muted I more side. a on quite products with product ESM, newer side. customers. very business is large reasonable

stuff? bit So that a talk flavor. the of you gives maybe AI little about Gee, And can a you

Girish Mathrubootham

while Adam, is come self-service or I'd is the from come the add, products, transformation adoption we the expect across all Yes. customers change going front and I biggest to AI office. demand to going think quickly in

Operator

comes It line Please Wolfe Research. Zukin from of the with Alex proceed.

Alex Zukin

two Just me. ones for quick

maybe front clear, first mentioned bit end conceptualize -- understand and it your was we kind understand retention were out got of just demand of the but all of as the first quarter, of from and pain on in if trends asking just think on look the out arguably just market? in and through of us some guidance, see optimization the monthly the But better were you going trends in, arc the I help trends. the I've not patterns than markets, demand AI. quarter You of I'm anticipating. these a even you kind about So And as quick of step back coming this follow-up just we can kind little evolving for optimization we coming contracts are a versus you comment, you in peak but maybe your had that. out you

Tyler Sloat

take that Yes. is one. Alex. This I'll Tyler.

lot do continued to in there think think will of year. trends, I there. we're stabilize just there's terms and which and staying net of to expect we that annualize be hey, do bit calculated going pressure meaning stuff demand think last number on kind kind that little could And motion think expansion of dollar churn, be happened how a are with the XXX%. the just we do I of of constant, it think some on the we relatively as it they of is is we year-over-year is why the saying, retention the a We XXX%, pressure be increased

to from think little there's perspective, okay, pressure there. So we be a still that going

in mentioned, markets execution good that to products would On lot some had the new some continue. really and field mean are good expect our really we receptive motion, the specifically business we and for recipes field and for we of a that like the Freshservice, really

Dennis Woodside

Just to more there. color add a little bit

TAM massive fast are innovating our remember are Yes, fragmented. but large lot a that as not of we the are competitors, there playing So there's legacy are, of players every in product still a lot we're and that improving and room. There's as the in markets relatively month. is

a we very mid-market field on bringing teams business. go-to-market and large So lot Those and runway. focus outbound the on QX. this sales, enterprise, build SMB, a both made changes in The happened that in have changes just driving leadership inbound more can just that balanced in of we and the

opening, quarters. that we So big go. quarter of every of a we're there's than a upside. ever in big the long see prior more deals seeing We're but of than deals we're more impact kind said We're starting, we starting as more lot I ever the to way in we the had. And in closing there's think to had

of, numbers close have quarter, XXk we goal, and as an a Last beat example, every we around deals that quarter. that those to number in We goals quarter. need a handily go up

really So in and going about in business, we're go-to-market out early the that are that's how feeling changes play the still I the us. take to think to long-term and mark still pretty is how good -- going that we're

Alex Zukin

of you going I questions, the super And talked hopefully, Dennis, insightful. you one to to I pricing SKUs everyone AI look, conceptual I'm is about copilots. and roll pricing but about a ask for this that's I'm struck few call. some think little because -- the AI to going want So on pricing announcements with G, and the by for times mentioned a

You $XX. talked about

the popular at Pro, adoption largest a XX% that's be Freshsales that's think going I SKU, if customers and adopting price. obviously come from that that's most less to is Pros, would on -- your uplift

into But the should just products the specific or adoption tailwind we for the think of at SKU a Like And how as going expect layers understand, greater time level, the into driving copilot AI I success. from but your not high it, the what's drive or help us rationale adoption within guess, uplift cohorts. the model? growth -- why we layering know that's of to over to guiding pricing, either about that this I like ultimately, you're

Girish Mathrubootham

days. you still I can So pricing. we a thinking early the Alex, I give about brief think on, it's are how

the XX%, going going idea faster done exactly say, look available Are automates costs. add-on. for are plans save get task and a XX%, not routine agents like whole to the the XX% then job productivity to helps businesses like still them, agent decided going them be, copilot on are if on more to hey, from we But it have going at is are to have $XX for make standpoint, to it We everybody? which because their productive

it's productivity, But still I we'll capture we Day in that and think But more that's XX% And a of September for so thinking win-win a thought So like the Investor some you early have we it's can how in like Freshworks. our days, this. color on about of are customers how and process X. for terms actually maybe if both value?

Operator

Oliver It the with line Rob comes Please proceed. from Baird. of

Rob Oliver

Dennis, I on appreciate on questions I all the the just color you've $XX,XXX that. given it's really which wanted in in cohort, ask to over that like the sounds prepared remarks well. to going and response

XX% that at of up outset now the is customers. multiproduct You say to did

IPO, Freshservice seeing the opportunity is there, have sort done mostly since look job just for that maybe within and would already Freshdesk? Or a already you you expansion up. you little that could at meaningful you And maybe say, into that So helpful. nice guys cross-sell of you a talk seeing migrating just core enterprise When that be bit seat products are guys, sold? expansions today, the the of, if about NRR you're opportunity

Dennis Woodside

Yes.

I combination the say would business. So of strength a new is net

value. in new that that of contract, agents really, and b, X who time net So and mid-market still you that. vendors for a story. talked like alternative because on higher a were the a provides that they're actually, number for have lot really a are customers up X looking their And well, a is fast of We lot ago, of large the coming an X-year an the game our interface the or value, not We I contract. years all expansion, big X-year about, to offer part or company, modern a growth was that's a wins of steel

So those more new we're and more getting that's side. of the on

kind cross-sell a the we sports of And with side true on persona into the moved of we sale example think example that's are cross-sell example started the company side, an mentioned On an a Trainline, another side. cross the IT where, remarks, I out steel the the that expansion and sales. opportunity cross-persona seeing to I in of the that

did in expansions. sales, getting needs the and the And existing new the of the the to have, art value motion art servicing we that's big pay that have going of one to decision then a the kind need hunting in that's right and of farming business, these opportunities seeing solution beginning and the the perfect So front add of we things remember separate, out year the of what And at where starting we true we're where the to within that winning prove you cross-persona off their from of need business. new see to accounts, makers we that motion. and to perfect we is get

of little of kind So we're opportunity about thinking that's bit color a the how there. of

Operator

line & the Schwartz with from comes It of Oppenheimer Brian Company.

Brian Schwartz

quarter. real on a nice Congratulations

on we your you. those of product to any AI G, products launches -- continue more right Thank out? about just any the adoption on should question or to uptake one topic. that thinking a think Is there comparing of way the of the installed within insights maybe products. how of about to the Just base the they previous get any AI on rolled ask you pace for as

Girish Mathrubootham

So thanks Brian. question, for the

the is think I excited thing launch we August are modern first about So suite. X service of customer our

starting collaboration could seamless natural language enabling look agent represents Gen self-service, should ticketing. based handing of and how like conversational with through actually future what that think service be the customer and human from we then support So seamlessly AI off

all together. bringing it So we're

event, use who also access this. customers will buying or Freshdesk Freshchat our standalone Also, products it's standalone to But not Brian. onetime or have a

that is going a lot as three as of insights. terms are continuously of copilot self-service well So of these building all to in as as stuff there pillars we keep well

So I adoption. see opposed we rolling a kind adoption band to one will think continue to of thunder as big

Operator

the with line of from Brent Please Jefferies. Thill proceed. comes It

Brent Thill

color those helpful. that the you to the changes? I'm do how playbook QX. is in in go-to-market of more mentioned run you terms more curious have feel team thinking that the how you current in or be sales you're would changes the go-to-market Do that far going Any you're this in are you're right making, you about into spot, form? Dennis,

Dennis Woodside

more we're still there, think there's I but do. work getting to

then very think remember, the got inbound an business, an our of business outbound in, on the accounts as I've the has is because our out of us, to opportunity. outbound So of for was meaningful that the larger focused business. the inbound me kind that's as a you've business and been such a started which lead lot that had clear commentary of And near-term coming lot and

I business. the to we're we've on on focusing areas we're see been kind the really, right recently past that you're talking that in we about And servicing do in, sorts getting are than to tactics okay, to cross-sell, right in, in. can that better And inbound what invest is we've Freshsales, is of can track, other was in if fire and business that cross-sell starting starting surfacing that What we're in the we do getting got now done better we've things really think products we outbound up. One those people at before, inbound that much Freshservice, more the traction. some of of

that growth and themselves. us. getting how grow thesis of growth back innovation product-led really our can bringing to some for area That's products So another to

So growth I think in more more that pockets of we're just finding business. and the

last brought two we have in really the side, joined leaders On in that the field the us quarters.

year. of pay and QX that But to we've rest them taking a takes lot continue they opportunity up root time good that's was indicator believe the to changes to we the get And got to a of this that off that get get we throughout if way are of it for kind They speed. So need want. their this teams in focused a to going can right.

Operator

Needham of the from Berg Company. line Please proceed. comes Scott & It with

Scott Berg

guess thanks the a question also traction nice for I upmarket my quarter. And really that for there. on taking on you're a question. having Congrats I have Dennis

a we Can least like? what you you're low-end it? enterprise, And outside competitors the you. to better upmarket? end short the the But of further even or into market than what further targeted that Thank think you however trajectory think then looks probably reflects you you you your of any lot think do high-end a structuring mid-market, we agree think looking I Dennis, from in about try expected. differently even the enterprise, do that all of in, know, that, do don't within have the target probably that you about I if how success timeframe a all move markets at

Dennis Woodside

Yes.

audience team, have think we demanding of or a right? that business, a demanding customer side. So side support you the mid-market Where is solid it's customer X,XXX on person sophisticated our you IT base if have you IT a you're talking the on ICP today really internal if have

a the their offer that's you where support large want You want product. we And to implement customers are that fast to to and that on the need you group really of kind don't end you to shine. for or interface customer time demanding, pay something chat tech side, That's stuff. of conversational your all afford service, can't consultants value, just

that Now those characteristics. and more said, larger more companies are demonstrating

the to company steel second there's their cases, won were they -- mentioned, to workflows In I a both IT actually that solve that quarter. So issues. to this in company steel modify looking use, for to easier a both implement, we that cases, for for, solution was

similar companies where larger of enterprise opportunity X,XXX of that these are the lower well that some above at ICT, so that's an we have characteristics, end And demonstrating are they and today. person that

our for product the as products. roadmap matures, and products CRM both and very we IT a Now the have exciting

us. for that's opportunity As up open and mature, going they more to more

and then that is be that at know more to then the characteristics on areas to the satisfy make that demonstrating highest you more the moving focused art the those near you're So and the happen you upmarket. sure and term off accounts larger have pick opportunity that can gradually

that thoughtful don't just we get I go about based on the where there. -- how we have think we to can We on hard just we think there's today. be So have customers a limit that

Operator

Nick the from coming Altmann with line Scotiabank. It's proceed. Please of

Nick Altmann

the for was impressive. quarter guys and in margins the the The Thanks very Awesome. flow free question. guide taking cash

the around but trade-off is year, there versus my one-time stabilization. So I underlying items growth level that some improvements. there's I really some know question suggest guess is of this the of margin some of metrics

be time exciting how years over thinking a go-to-market where to you that coming sort mind, new with seem about guys coming tweaks have the you guess, nicely I of things to stabilizing, online. leverage the and handful working margin SKUs of be seem in So are in a

Tyler Sloat

that. Yes. I'll Nick. is answer This Tyler.

well. had said leverage always really and margins thought actually We've kind right. we We've the on You're we model the really just doing on and we focused great had of in that. bottom-line performance

the efficient [net continue Now right to and we're And to grow X the and talk profits focused is probably there and returns. do a motions to bit year. sure we September growth. really the not to cash producing in are machine] to But continue go-to-market that next those that of get invest to continuing we're the and going clear, [ph]. are our We when in of we And expense want invest want and we investments we're there's make a back in those we at continue down, are to be capturing Day we kind going And think this that going absolutely, about as something all we fuel to to do to our across growth. opportunity same opportunities. market but our for we'll break fund, product Investor lines huge on on

Operator

Thank all for Q&A. is end you for the you, participating, your time. disconnect. now and may This of you everybody, the Thank

Freshworks (FRSH) 1 Aug 232023 Q2 Earnings call transcript