FRSH - Earnings call 3 2023

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Operator

Hello, and welcome to the Freshworks Third Quarter 2023 Earnings Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded. It is now my pleasure to introduce Vice President, Investor Relations, Joon Huh.

Joon Huh

Thank you. to Quarter welcome Call. Earnings and afternoon, Freshworks' XXXX Third Conference Good

Financial me Freshworks' and FreshWorks' Chief Mathrubootham, are Tyler Executive Freshworks' Joining Girish Woodside, Chief today Officer; Dennis Sloat, Officer. President;

call is primary regarding third and for XXXX quarter full of outlook The and financial fourth to our our purpose performance our you with provide year information today's quarter XXXX.

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

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

with release, results, risks refer a affect XX, and the for of XX, could SEC. and important to March Form XXXX the our filings and recently most our For June factors XXXX, our discussion today's that other and Form XX-Q filed material additional other earnings XX-K our XX-Q, please Form quarters periodic ended

law. arise reflect call, the this assumes or Freshworks date update to may by forward-looking as order no obligation after required except events in any circumstances that statements to of

I non-GAAP that, included measures Reconciliations our refer about periodic call earnings on to which in between is let Investor at earnings for we Relations historical with replay site learn FreshWorks. encourage or course the to more GAAP non-GAAP release, reports, visit you certain will SEC ir.freshworks.com. are Girish. over website During it financial access Relations today's today's our to slides, our our available release periods call, earnings And to measures. to me financial a turn Investor and supplemental of of

Rathna Mathrubootham

you Thank you, Joon, our on and us today third everyone. Earnings covering of quarter welcome, XXXX. Freshworks' Call for joining Thank

solid across our key execution we financial outperformed delivered metrics. our as another estimates disclosed previously of quarter We

the free of the financial XX%. free in cash cash to in Our revenue exceeded estimates our for our range, improved we at for QX, $XX.X coming with end We margin high outlook flow million surpassed quarter. and $XXX.X million flow our

we and us a our company Day September, path the first that will also outlined our We Investor believe towards in drive products and held we becoming beyond. where showcased billion $X

AI reap silos, are and much to having more Businesses about of breaking employees. customer messaging continues to to and compete employee center standards. to expectations customers businesses evolving offering around phases X their all modern Freshworks of richer insight digitally. industry for are transform to and benefits experience down help the is understand

unlock program more Freddy to suite. particular, of added and and QX. in products product value up generative across existing capabilities out Freddy our AI quarter, This Self-service is which in Freddy beta Insight Copilots new we following opened our intended

talk me bit customer a You will about hear support. AI today, starting with quite

high a company our help migrate product network self-service sales alone. also all-in-one than the with suite the first fashion not launching the scale more customers new to XXX It's In and to since TV months, than large long-standing ticketing. who combine levels saw with jewelry team traction and higher Freshchat customers. of The have customer engagement August. great a features I'm existing only with seeing suite but including and with on them we new solution service messaging seeing suite with customers, bot ones, excited our customer service signed model in And traction really been we bot, our are X by our decided from capability. U.S. to

in size over offering but Fastway its of company suite, adopter Texas. South Africa a service is nearly service delivered twice across the of customer provider, XX found early to The disjointed previous million the growing, experience different An Couriers customer an parcels area channels. annually

ticket address with insights the are customer and to able suite, Now agents service live automation gain issue, chats deep better handle can this with into trends.

focused productivity. in beta on We for capabilities for In were initial continue driving to users. AI our cutting-edge we Freddy support agent our Copilot, customer invest predominantly

heard luxury brand, have customers, our during from Day. feedback we great luggage including a We Monos, Investor featured our

Freshdesk XXXX, travel in beta-testing process further U.K. business company features outsourcing a iQor, co-pilot XX,XXX Thomas the company productivity. with are to since enhance global Cook, and a agent using popular employees

service increased service Copilot We to customers product we customer to reliability. customers from unified and continue adoption mid-market IT usage improve platform enables QX, In and for operations QX. see our customers. meaningfully win a service growing among with demand with that enterprise Freddy

Healthcare Valley product. see great unified gaining major Children's Group, value in is in our customers, for particular, with ITOM momentum management traction Chalhoub Travelopia Our feature. and Freshservices, including incident

customer Almost major feature We via alert creation incident X,XXX and to report, now organizational and post-incident take capabilities branded added through space. new base growing. is of customers status update automated the a this advantage

high-value to on continue response to summary ticket users of other by IT We focus addition. auto-generated the and enable harness AI to work power ticket using and generative business

forms for release features customers, AI existing create AI and eliminate beta Freshservice for agents adopters to Confluent these virtual Early that power employees. includes new Restaurant XXX newest conversational include Our more of Health. a Gen experience

large with CIO IT on the to of we more has needs meet customer will us enable -- are continued execute and opportunity. to anticipate ITSM increasing of Freshservice these adoption we doubled since I the than mindshare believe QX. this features that mid-market, broader through enterprises in the our innovation

and marketing. On to sales

and of sales marketing and our an user improvements that We revamped revenue. other QX, products. generating continue accessibility. In conversion data to efficiency, increasing We smart execute UI and to productivity to leads, CRM, on Freshsales experience teams we our vision easy-to-use, improve sales the delivering inbound in quick-to-set-up accelerating the made in of

The sellers for and context, interface boost for upgraded AI-powered closure. collaboration deal team helps action faster

help uses Freshsales Click collaborate by and cycle sales Georgia, improve both Freshdesk a to has cabinet sales Studios its helped Click which example, named XX%. For to support better, up local maker it's Studio, to in

We improve boosting marketers capabilities campaign creation, also to and for AI continued conversion to satisfaction. while strengthen rates efficiency, our customer

to In building summary, their QX continue unlocking customers. productivity for businesses innovation our customers offering customer and more through IT we and future products. was employees. And and centered understand service, around marketing will AI-powered insights help and sales

GTM realizing will Now impact and changes to the over who customers of ongoing are making operations. give more to on Dennis. are we our the with opportunities detail we

Dennis Woodside

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

our As about Day, cash a growth targets free on our innovation, profit and we us at operating for few key helping revenue, talked Investor product top are flow. deliver drivers on of

me provide highlights QX. Let some from

an Firstly, million, Freshworks, built Qualfon ASPCA sales like Family Homes motion, ecosystem our unique the a growing with customers scale. inbound mid-market to that's and Fortune presence go-to-market combining field Pointe turned along Large efficient to Jackson Wines. TRI and approach sales Australia, like X and efficiently Salvation serves partner customers Army

resulting net a of the We over quarter, in total customers added XX,XXX. nearly X,XXX in

paying of a or ARR our our the companies basis. customers us addressing year-over-year on larger higher-yielding In Freshworks larger, ARR, XX% XX% over as fuel business. sizes, in constant customers. represent of we're cohort currency growth This targeting While customers we're also QX, of XX% grew continues all $XX,XXX to

disparate them $X in national homebuilder was platform billion and those One employees. that management example, their systems. annual of chose and sales service marketplace needed a manages to scale each They ITSM in help managed previously to a Freshservice management X,XXX improve added global given has and integrations needs. ticketing, consolidated asset their efficiency, They

Another years using over gate. large automation. but because They it provider's a Qualfon right it outsourcer improvement now is to an for Freshservice company easy business employees. month X,XXX ITSM used tool out XX%. never can delivered saw time the and a of with Qualifon, employee average supports chose requests resolution Freshservice use legacy processing per leading needs of They is XX,XXX automate on and

In are $XX,XXX ARR total finding XX% rates than use this customers our Looking In products. opportunity QX, for adoption using of are customers our our of than multiproduct at higher X with multiple to we're customers, customers larger expansion, growth half contributing larger our plus driver. more product. of more

integrate Giant like with members. chose One and other increase and engagement. this introduced summer XXX to approximately in Eagle platforms members, now XX,XXX employee for encouraging Building than a is Giant eager team stores more Freshchat results-driven measure team self-service platform, communication Giant example better is to Eagle, user-friendly text. retailer Freshservice Eagle an among off its

and collaborate Western of teams Canadian teams insurer keeping The Freshservice Financial and an support to ease reporting is example to begun Freshchat. and Moreover, and management another tool asset Freshchat frontline vast allow data effectively wanted unlock to respond needed Freshservice separate. clean expansion. to to enterprise Group recently, problem of opportunities, have chose and using they tools use because interface. automation and expanded its change, for Most They they CMDB. of great

our to SMB large. This opportunity. Turning remains

to advantage adopt mentioned signs QX SMBs and taking in Now encouraging inbound also As customer segment can employee greatly need view stay We Automation and in earlier, competitive experiences. G we as of customers. the with of to and higher driving SMB that attracting conversions simplify churn rate and AI our AI to and believe quarter-over-quarter. year-over-year Millions improved motion by we're a saw enhancing stickier the

pioneer SMB of beta and digital mid-market products customers conscious XXXX fabric socially Stern this, creative Sons, manufacturing, agency. are early companies Underscoring including since & of Identity, many a of an AI Virtual Jacob Ultrafabrics, and specialty agricultural our distributor a today

customers agent and embedding driver across We're these this is virtual automate to with AI our of conversations. X us. uses growth X critical Level a Each as support products for Freddy modern Self-Service Level capabilities

conversations features our just bots in more top value in deploy AI and released of This contact is contact many to one enhancements Insights, tickets and scenario deliver to analyzes Freddy for we New scenarios helps which with for them. QX. Freddy customers include

bot is plan in or a increased model. sessions through automation usage-based consumption monetize to Our

focus be to automation with up our higher-value agents also more them helps productive. As that assist add-on work, we on copilot frees can

larger X to SMB goal and gives $X our opportunity, ARR, We to in our it Freshworks. confidence -- growth $XX,XXX next this continued motion expansion reach Our customers levers create revenue of with in our in over ability billion with is of the and us believe combination unique years. traction in go-to-market that motion a combined large

senior of as management be will Officer a upcoming Marketing to XX. Chief announce in big held that and at new with I'm She Mika previously Gartner was large will and appointment and the the at that leadership are join Freshworks. Experience team Customer sales technology, excited tech executive Digital marketing reach experience Mika roles crucial was Customer Yamamoto of of multiple President Marketing relevant SAP who member helping to Chief most Chief on companies FX Officer goal. recently and Officer public at proven deep November Microsoft. the us and serving and experience Amazon, and has also buyers Marketing us Marketo,

Now we're through over financials to the go efficiency. to driving talk about QX how and Tyler

Tyler Sloat

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

to was great everyone our Before I on want and once Freshworks get thank person to spend you provide many I again the It story. first of who an in started, attended Day. to with update for Investor you time

We Once QX. our additional in had both in non-GAAP business to again, we continue leverage driving and margins growth free quarter-over-quarter. another and the execution operating cash revenue estimates flow good expand quarter of beat

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

financial metrics certain and expectations of currency our call view include and business with better today, for provide key metrics XXXX. forward-looking full the a provide commentary our our background year QX For constant comparisons QX the also close trends. for cover on to I'll and I'll results, the

As non-GAAP adjustments. a discussion stock-based be of impact reminder, most focused the expenses will compensation and which on results. exclude our of financial other

to the reported quarter. Starting for impacts the the $XXX.X currency the expansion activity QX, down we're euro growth constant grew and basis and for positive ticked of adjusted a beginning past to the income while pound statement. against XX% continued deal in slightly with drive year-over-year the much year. rates rates ITSM the to dollar in over see on XX% currency on as Revenue million

achieved Turning to some quarter-over-quarter. delays which a strong and quarter ongoing scale on was operating XX% margins. driven spend We costs, of percentage headcount-related of the margin by efficiently non-GAAP had point QX, operating a we gross non-GAAP improvements X in XX%, lower-than-expected business. This represents of improvement as we another margin expenses. In

metrics. operating to Turning our

better QX, business in came than the key percentage our concerning and includes our X have ARR. $X,XXX In customers We improving in churn in overall the dollar benefit quarter. dollar slightly retention metrics: than Net was retention point quarter, from FX. net XXX% initial a more from prior which X estimates,

persist the lower for XXX% reported for year and Looking trends currency we the both ahead, net expect in for of to retention the as as net to approximately dollar remainder planning constant be expansion are QX. we

to Moving currency $X,XXX business and year-over-year number contributing XX,XXX to basis, in continues our year-over-year. metric This in metric -- of We represent ARR. On of customers this customers our grew to key XX% more constant XX% other of quarter metric a the XX% grew customer ARR. than

currency, larger contributing ARR. For in our of XX% grew ARR, XX%. X,XXX grew XX% core Adjusting customer $XX,XXX year-over-year at this than customers cohort represents for this to more constant cohort our and

building our an customer and QX. on ended higher The ARPU. which -- count healthier quarter, We X,XXX quarter -- and we the higher-yielding approximately net and continued added attracting increase from was of XX,XXX a customers customers driving nearly in a with base the focus We the as

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

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

to the reported XX% constant approximately be year we For both growth of expect for XXXX, full as revenue annual to expected and billings our calculated growth similar currency.

the quarter, the and cash our We with are we in $XX.X free estimates for securities improvements in marketable the making reflective similar cash, and of a million efficiency flow, ahead billion. of balance During of $X.XX equivalents the ended we business. generated cash quarter

$XX to net amounts financing using in continue the flow. equity is activity We reflected this and during vested is excluded quarter, million settle free which activities, from cash

we QX, amounts to sell to forward of levels. million price current in using $XX QX cash invested plan equity net look we approximately continue As stock usage resulting

equity we year, amounts. $XX use to net the million vested For to approximately expect settle

year efficiencies this million estimates for million. $XX flow operational realized to $XX we the so XXXX we've meaningful the are raising far full Given cash free year, our by

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

Let our estimates. me now provide forward-looking

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

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

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

Our XXXX. forward-looking rates on of as based FX XX, estimates October are

not factored any So are moves in. currency future

into We QX. many pace operational maintained continue and of momentum excited year, to product Let earlier the opportunities initiatives forward help goals realized to and made on of We're look the innovation, benefit our to remain our we on me XXXX. in our focused growth saying close this execute by ahead. rapid drive changes

take most your that, questions. with And

Operator

Needham And of Scott comes & line our Instructions] from Company the [Operator first you. with question Berg Thank

our with question from Ryan And the Barclays. of line MacWilliams comes next

Ryan MacWilliams

continued Pleased profitability to see improve the to here. work

the kind asking through And how Just you so your quarter. in new month been business move about of things of say third how would September? has October how the Like far? did

Tyler Sloat

Sorry Pat. Thanks, that, about Ryan.

think I is the around linearity. question

out it, as larger loaded. companies September, through dealing more call the of kind and bit little we've a expected. as year over that we become last, deals larger and meaning back-end with went so played And been we let's

just October, see the trying expected. was everything that call you guidance we're out as that it into takes So to we see, we gave account it.

as expected well. So as we October is going

Ryan MacWilliams

know I around customer Freddy AI. interest heard And lot it's but that. of Appreciate early, we've a

a any what of any the or commentary So expectations can can customer rollout kind we early more the be may -- And timing any of customer on penetration Or the detail initially more within like additional how see adopted that there? that first? be just base, your rate? around

Rathna Mathrubootham

Ryan. Sure, is Girish. This I'll that. take

several AI, during were That which bots service. that platform. and actually, quarter monetizing employee are the So customers the Freddy for through if our capability our said last remember actually Freddy is -- we we beta-testing customers, Day, of customer used have Self-service, customer automation by we self-service Investor our you it is specifically, being service our and service

Freddy put QX, customers, and Copilot in we using put our it have Freddy say in beta we And actually I'm thousands it when and -- are have quarter, this I this in Insights, customers actually quarter, it. of to

for we Copilot are add-on for agency licenses. plans Copilot,and would QX Freddy start to charging of be we XXXX thinking is that's monetizing would Our when an

Insights. are We working with customers still on

finalized not pricing Insights have the yet. for We

Operator

question & Needham Scott Company. Berg line next with comes from Our of the

Scott Berg

couple Hopefully, Dennis, them. pleased time. quarter, everyone hear I Congrats you start with the Sales this me quarter. strong with guess quite can wanted on I a seem in you. to

do you always dip of trends years second as sales I help be the of remind it year, guess this customer the change over nuance with third like it us to causing European kind there just QX? that little particular? cycles. the I've But has are is the QX of of adds don't . Can from of much looks more quarter kind call it's couple to that have And seasonal the My bit you versus results. what if might anything noticed your One quarter last there's you same. know a very something in to out see a internationally

Dennis Woodside

Yes. anything cycles. really Thanks, related this think Scott. sales don't had I there. Yes, quarter we to European nuanced nothing

net see strength around did in uptick the adds the we continue quarter to quarter. continue see IT. in accounts, last for We And to see X,XXX an to net larger in from strength adds

the So in kind we've dip see past. the we that seen didn't perhaps of

we the fresh our offering net Remember, had last -- that in QX. overall has the in increase a had in and quarter, adds that for we resulted QX, we pulled for product sales back, free then

Scott Berg

Got wanted on improving it. up Helpful. on down me, excuse improving market. rates And then follow the churn or I question -- to win

about low, is I think you to the the there on over maybe that's opportunity software . How makes should line notoriously in number. because churn I big across churn what kind that think always do a for we improve that improvement runway top have bottom all several like segment? But next always SMB both looks think that a super line about improvement success and some improving know that, interesting difference, how had of your quarters? point profitability. we

Tyler Sloat

Scott, this is Tyler.

was on quarters us a good actually terms other really board, churn made across the right. we a had past that's or products. where stable job remain done best plus company kind and the quarters it. company across a over improvement churn year then call just of as And good it, actually on we've in You're for We've general. where a some in quarter last, the of This

characteristic customer the in couple has even and getting last of at lower ideal led better focusing customers, of on number for are which more to seen our ICPs the the which SMB, that side, quarters on products maybe total cases. some for think we're customers, of but customers I better, we've also SMB profiles better the in getting right slightly On kind it's

forward, think next be that over think do improvements to churn year, I X.X a do the that are to room do terms we in subtle, but the have bit more years. of So of going going improving go I little

Scott Berg

. strong again. on the quarter Congrats

Operator

with And JPMorgan. our line next the Pinjalim question comes Bora from of

Pinjalim Bora

bot-based of quarter.I the side. understand maybe to Can ARR the ask us bot on Congrats what today pricing? on portion is the you help driven overall by want you

of the that How how went model? layered to should be changes into about in effect the we and the And August. in that packaging into think kind pricing is going

Tyler Sloat

at with which in that, terms of Yes, Tyler. the I'll the We bots Pinjalim. pricing that, embed the then capabilities. the about Freddy embedded really talk in This of start is also Self-service the it's kind end changed really, pricing, QX which are parts, our of financial would new. chat

don't to new have increase that continue of decent that in We here. to would we as a and amount functionality. chat of feature And have of we kind terms do revenue expect embedded so much we progress the

still be that's haven't coming that's The will charging other in for it. AI started QX, next and they Copilot will They're beta, be coming kind capabilities, and the right? of out. where We out the X

every quarter, reflected to little in more to be on going expect Freddy And so more a have Again, bit Self-service. we increase that's usage. chat

Pinjalim Bora

that stabilization QX, look is Yes. on geopolitical as XXXX? like What you a monetizing metric. next NDR help Tyler, Obviously, will climate wildcard. the and maybe on understand you how But forward? seems a bot-based SKUs takes the tailwinds are think about in puts macro we thinking have and us I potential are the that Understood. then, said AIs the be few And it going Girish year, topic pricing, like to

Tyler Sloat

Yes.

give -- our the XXXX numbers talked think yet. terms in kind XX Day, At I out of to you're this we haven't about we XXXX Investor So some for quarter. revenue right. so roll guided we at numbers of end XXXX getting then of the XXXX. We'll and anything of talked about to do

there, make of said improvements think we but slight some the terms right can . churn, heading it's definitely In just I in direction. I

We'll don't see turn we meaning expect a expansion have around. be with pressure agent reflected And the expect to immediately continued other that for And those comment to you going are things. would hiring our see -- wait and while. addition, one for new. increasing macro on that in us, motion on we companies made back In it's terms to AI the SKUs, of so and macro,

of kind that expectations. So into our built we've

Operator

Rob And Oliver the of comes Baird. line from our with next question

Robert Oliver

Great. XX,XXX-plus Dennis, customers using you great around just progress that the for of one on half front now you than the clearly, products. comment guys. more on X for

I think Day, what the Analyst at is at which overall, had kind you you which XX%, is said it's of said great.

multiproduct make that Or you a as largely had of still are in what talk then there's curious, are bit move lands? I more And can expands? upmarket, seeing pipe these follow-up see sort Just of a a you and quick those? mix the you then And little you about if .

Dennis Woodside

Yes. sure. Yes.

So thanks, Rob. We do see within to the multiproduct be lands. They multiproducts tend family. same

So be IT plus customer ESM taking an or Freshdesk. Freshchat example a would and

of our Now those in TruePersona, accounts CS. to so to from tends most larger expansion go across IT

In at those cross-product our largest true are fact, expansions, expansion. look if we

about think I them, remarks Eagle and Western prepared Giant like the of Financial. Some we talked in

upmarket, expansion is and becoming a next for us, big and that's So emphasis motion move continue to more year. as going to us that we be going more important for into

Robert Oliver

last your not sounds additions. comments reiterated to counting the those pressure helpful. of Tyler, macro appreciate at really that's macro, that's here. you're on we're you then response And count kind really the and about hey, on remain said just Day, likely about is, in just agent to you going which agent That's Analyst the Great. question, thinking like around a where And what that Yes. how

you like for the hand, delivered tremendous it on guys value you mean, price. I seem the -- does other But

customers Are here, mid-market is some value those a side headwinds well? upper sort where what a feeling can macro of strong you you just I'm maybe end to there has get as seeing curious are execution flip been guys? of with So more a lot some as of that to get the sense like the

Rathna Mathrubootham

Girish. that. I'll is Rob, This take

not from first macro considering say significant their because in clearly, So affordable a to we of total X spends, are carefully to are a cost companies compared and of any would all, our this, we lower QX are like of I And of pricing change choice vendor ownership. that of standpoint, still QX. when seeing

customers. may our That's be our in pretty much that's that not to QX. specific -- not play, to promise So but

us And hiring that see money a hiring hope offset, not Insight moving agents new demand as we'll when to make for and productive product forward, will helping AI up are strategy open making we make are and our also for continued by SKU businesses agents, businesses that even AI help our hey, money when leaders. them more we

Operator

Our line Cantor of Knoblauch from the next Brett question comes . with Fitzgerald.

Brett Knoblauch

the AI products. about might early quarter. adopters about help in I for is market? the I Congrats think be your And maybe you at step drive improvement that seems of that lower me, of like function thinking it? SMEs the do churn how guess first it on And could talked a maybe biggest that you're the this, end

Rathna Mathrubootham

So yes, I'll that. take

larger first in So, X support. I of by of because support of and you millions they all, for volume if look customers really, the customers coming Freddy of Self-service who our strategy, pillars useful AI large adopted be really at are the will like think, ones have a

for where automation scope much the that's is higher. So

to productive Copilot, more probably market do SMBs become SMBs other would less. hand, with to universally the like customers now On and because applicable be every user more Freddy want can with more and really

because Freddy companies benefit their be could needs leaders, different more is and So teams larger. for -- from data may again, larger for Insights

specifically we AI, said think the in and us this So earnings helping macro, -- with I on call. the deal last

So we macro not are for focused to -- we are waiting improve. the

on like more We focus in can, can deals like into controlling and on growth drive our can pillars, existing How we more larger focus how efficiency. on base? the we How variables that can our operational product cross-sell use you are X AI. focused we innovation

to So our is the plan macro wait while executing that for as we keep to return.

Dennis Woodside

And just -- it's Dennis.

our all -- products are across still though to broad adoption in even customer we're Today, add our seeing color there. beta, pretty product. Just AI seeing some sizes we're for

customers So we over Copilot agent productivity. to beta using in X,XXX improve have Freddy

our using our aspect We gamut Insights. Freddy range to smallest from And largest X,XXX some have over those customers. of customers the

have it's is support looking an a agenda have to our all on So outcomes. whether efficiency their They're you operations. improved all IT the -- And think for customers, CEO. AI every leader, of I improved leader, for strategy. in you're looking customer AI for They're

So very next going that's over And of year. this to lot how a provoking is the about play out we're optimistic discussions.

Operator

of Our comes line the next question Scotia Bank. from with Nick Altman

Nicholas Altmann

A Awesome.

and had I was expansion you both think year-over-year about SMB that you improved that's I trended? can earlier side quarter-over-quarter. how in churn the and noted has maybe wondering talk if

And then that any made you quantify has tailwind you the be of could been you've would a that And to a were as if year, sort pricing disclose NRR? helpful. changes this that, just earlier that? to of If that follow-up,

Tyler Sloat

that take one. Nick, this I'll is Tyler.

this have So just [indiscernible] subtle yes, kind past we to in been and I customers, that company of I because deals. made a have way part they're improvements quarter. the churn, while of goes we're it a up. larger for turn in just moving mentioned, these from best been mean doing because kind signing And better, annual SMB are just ever of all we is

Expansion hasn't environment it's markets, Asian So the part -- it and mix changing you Freshservice of the in in expansion and changed, addition. tough really side asked expansion. shift of still question, base growing a is customer general, for -- of is on is around flip When larger and about it that which the the pretty specifically our plays great faster characteristics. has

ways been have other to our we at what so with looking base. doing customer And expand is

we One this which to of benefit our price some that from some changes did Freshservice did is that year. get you've so far we those, on alluded do product,

has that slightly. net retention so dollar helped And our

motion from is price overall we on And get coming from down, also the some but one bit, little so a side, churn. benefit benefit did expansion even expansion though

down it you. So for hopefully, that breaks

Operator

our the And comes with Brent question Thilll Jefferies. line of next from

Brent Thill

in QX. going bottom Tyler, that for Is QX to on NRR? in moderate be moderation is you NRR, mentioned it to going more a

EMEA held and APAC would that showed happened U.S. going up slowdown. on Dennis, describe the a really APAC Anything for pretty in but there? big maybe what well, And

Tyler Sloat

Brent, of I'll first the take part it.

kind going have calling has the expect. calling we XXX part going been better a bit out the go we'll So kind what kind and to reasons on kind kind now, the assumes right as be thought kind levels we've expansion expansion little been going coming of We're doing based And come is And -- anything QX able of to that not even floor That of maintain and if hope because churn of obviously through year, kind that, going worse. of of do churn see we get QX doing to QX. update dramatically we'll for of next been of to XXX, that's we we in of we've that and we XXX was into the the better range. of changes. because that

into And obviously going number. so the that's that assumptions

Dennis Woodside

Yes.

slowdown Just we didn't geography in Pac. see question, really Asia a on the

consistent We our geos. have across big X pretty performance

there. no no would to appreciable So -- I trend out call say

Operator

line comes question Zukin next with Alex of Wolfe Research. from Our the

Ethan Bruck

I Ethan is quick Alex on have for on Zukin. Congrats results. X This Bruck the questions.

So consolidation. are like Just that solid just what like that seeing results than first, just XXXX? month early discussion the lot like what growth customer based We've like and around peers there's curious noted early that environment our heard for September? slowdown I'm where the given in conversations. Budgets, your some true in in is on a you're

the larger across them strategic you how office front deals? guys solve stack, some helping curious driving just So

Tyler Sloat

take I'll Ethan, that.

the part surprise to as was we've back-end been back-end little of field more it of it terms came as bit around hey, And no through expect kind of already of but that a September, the doing in as we've loaded dealing loaded real And -- are with of I question mentioned, nature wasn't customers, motion. larger become is kind that expected. So first of of the we that more there we continue that there. quarters we kind

budgets, to might go terms hey, G in look great about, anything to seeing kind year into just muscle of to especially we're part going great customers, with that budget mentioned is, some try engage anything our play software we we that a to is of next seeing they're great heavy as we as continue alternative. we're And And seeing we a flex cost a be not As have. feel big you can if their We alternative are asked different. different? be of to and of pressures. that they

Ethan Bruck

a follow-up around just quick suite. the then And AI Yes.

traction directly you So just how hearing the through how about . the you're thinking about from Copilot expect to most AI surely based new you or 'XX the you is on retention, constructive. improving the early SKUs guys XQ you just And on spend what If just beta. impact guys be I'm seeing in curious gross numbers? in would just stack Gen impact coming uplift would and rank? are think in this.

Tyler Sloat

We We Yes. being CoPilot, Ethan, rolling on QX it. so There's right? it's again, which be question kind monetization. out a just -- early, we of monetization which that's I Self-service, reflected about to Freddy mean -- going the talked have selling start we'd in our GA essentially starting chat. in is,

then and AI got learn X that Dennis go right just roll a customers the as different lot that I we across out. think are planning and now, of plates beta in we've start to stuff mentioned, we have the we're to

time we're next that probably going So to anything really first I have first year. the half we talk the about would of think

Ethan Bruck

Congrats again on the results. .

Operator

the Piper with question line next of comes Brent Our from Sandler. Bracelin

Brent Bracelin

hundred customer to think there think you you customers uplift with the as . when [ Is no Or uplift ACV like stack a move? G, Suite? What sounds is by couple CS ] modernized about an this you're this quarter. with excited a you. we here. customers more should Suite Thank and a I'll that uplift start of ASP product, It moves deploying that about CS the of

Rathna Mathrubootham

Okay. Thanks, Brent.

XX% CSS Freshchat an numbers. back for standard or get so would different. realizations higher I but And of it's probably to is uplift. exact is probably, actual be XX% all, to Freshdesk I I the first the you higher, say, because think pricing yes, to suite would than the slightly there alone, have could But

because experience there bot but ASP conversational ticketing -- So X agent and as in getting an customer uplift package. as the is principle, is in all well yes,

and pricing Freshdesk on well. will stand-alone than higher and it's Freshchat So add stand-alone as bots usage-based

Brent Bracelin

think color doing are then Got a about job parts? navigating just you good it. And Dennis, guys environment. Helpful a as are challenging there. of the some moving there here, You business

on clearly, out strength to in One things ITSM. me stood enterprise, about is the of the strength you're talking that

SMB slightly some SMB industry down adds, the was across it seeing looking was weakness and the space are on up. We look side. If the NetLogo I like enterprise did at look

you initiative, is bit relative demand, starting on if to of us customer that PLG on little and you quarter have give here an just SMB that Maybe a saw net X.X adds? an to in update the impact larger could overall update what

Dennis Woodside

Yes.

are needs sales bit, back a and the So between we're needs up support support competing and a and we IT any any remember, markets massive marketing needs customer what solutions. size IT in solution, to an provide, sales just solution, that of business need and marketing, customer

And you across still, in revenue So quarter, our still our you into the fluctuations get XX% relatively underpenetrated, about today. SMB market SMB, to massive. versus when SMB is any cycles is large account see -- of think acquisition. given in take like place from of going . We third particular, we're in to buying if lot as a the end the about of tend the at have opposed in enterprise, Also, quarter. you to that year

So for that it potentially QX. into played

the and before the But in We've our particular, about the some leads to -- business. do that of QX, improve the Day funnel. Analyst our sources the scale quarter, But I -- SMB, of things started to spent past efficiency in we've some this -- of talked in of SMB the at diversifying of

prospect marketing going more for personalized into and the on So about trial What like drive we're affiliate doing itself. funnel leads that's this And efficiency like in funnel. to focusing think more trial that's organic SEO investing that of improving creating journeys our quarter things early, the is communicate on -- in the in into and a faster. educated chat of faster if using to We them X you know more ideally to trial or that day to help means get value other get convert. product likely much to you're the value get to product, trying to first itself the and much is higher through

of pulled out over which the there's funnel, year. in that optimizing will that of there we lot think haven't levers play course a we -- So the really next

we've expansion that So I with existing got end in funnel mid-market calling cross-sell year going our and with emphasis more continue we'll broadly we're talking base and SMB the with to very over X.X. we're pushing be to through calls. enterprise, humming be speaking, levers PLG particular, lower really next customers, what course on Those on getting about think big X into that products, then and the more and our of IT be our the of are of playing

Operator

And with our line question Brian & Oppenheimer from comes Company. next of Schwartz the

Brian Schwartz

the NRR Tyler, to up button guidance compression. the and just

it was weaker then expansion maybe commentary. like it think called the expected in sounds little out than I ITSM you more broad-based. your kind is introductory Q&A, being of the a But in

seeing get on business? the to it to it's clarity the that product maybe wanted some you're just Or if So across constrained ITSM set.

you're for and just We seeing new you're light on Can industries, you across heard there solution any one the across in strength And just if customer then Dennis, what given suppliers. adds. any question how the some automotive horizontal And industries? wondering about shed weakness on or seeing you weaknesses is?

Tyler Sloat

pressure, expansion the really now, need saying part. that. which mainly motion continues addition over Brian, don't to the particular year first agent to the out ITSM didn't call we part pressure, general in I'll see No, a take -- of seen in think just I it expansion has for

out on slowed. have little might we called a agent that little that the is price actually kind bit offset this bit of we of that year what ITSM, think of I leverage had a additions so and

And so general, to that a of has in ITSM larger also better with was more kind positive of characteristics customers. churn as ITSM dealing it's

trying hopefully, out that weren't pressure call clarifies. ITSM So expansion specifically. We to on

Dennis Woodside

was industry -- is so the address that very market the reasons think we talking fact a on question, I fact that broad such just that the the about market, horizontal. for I just the

department need it. have or customer If you to automate support IT an a department, you

for X industry get lot we companies. we say, to any today. a We nice X on where concentration reference us single to would accounts, get travel don't really get that drives or the larger tend -- tend have we I a of cycle

where industrial recently sudden, industrial got we've a some handful got we XX we've on seen with the we've manufacturing, had of going a steel, thing, a of Next in there. that all lot of travel companies, some companies,

all is is aspects ed other efficient automate trying the on more they're account of to of put referred an as an departments, platform. universities we stacks business. continued area have University the across strength to their where very say, of that become the an then of well, lots expansion the example last And same They're I one we typically existing to everybody that the where fragmented are higher trying over of have was fairly IT trying in and to different and that where Pennsylvania education seen, several school course would quarters of

given or I So weakness we are seeing industry any that kinds have. of that board. showed the broad wouldn't across those particular say in we're strength But customers the that of things there's that the -- base specific

Operator

comes the line Pat Walravens next Our question Securities. JMP of with from

Patrick Walravens

the on results. Congratulations Great.

QX So XX% billings currency QX. QX constant in versus was and in in XX% growth

QX, assess as is sales it us was maybe in that the Dennis, as fair but attainment good to for half? So good not quite in first

Dennis Woodside

quarter So terms of with overall, we where in the landed. pleased we look, are

can We've we're Of And do better. course, think seeing for with ourselves. the we at said We the there. I kind goals high this we satisfied now. at Day, set that we on lot not got the a growth of rates get think -- we're much to we Investor going

us think that's of we is . also because I new in Chief big lot what Officer, to do Customer as space. Yamamoto a a marketing need Marketing Mika add that addition the our for of

seeing mean So aspiration, what do. that yes, we're now, we're to to going to grow continue that's than continue are what goals the I business are our our to and rates at higher

Patrick Walravens

breaking in or the that of than still low Or overall business? was the service and helpful. like -- Day, the That's was at there the by mid-teens Great. I and in IT you're customer very not then less accurate XXs out specifically Day, change? you know low right. and But guys growing sales And to XX. Analyst All the roughly at Is some segment. Analyst assessment

Dennis Woodside

Yes.

to some at numbers on intend a give that data at investors business. to scale those shared to of Day. the Investor potentially parts of quarterly size and we Day, as We specifically So don't update different the future basis, the sense a Analyst our

trends the trends that shared this we as September, what we've we the speaking, QX -- shared back with quarter in are that in we data well. broadly But consistent that and seen the

Operator

with next our America. of of Adam question Bank And Bergere the line comes from

Adam Bergere

common have found with for? So be the investments of or naturally, the kind And there? initiatives biggest some focus what on products pairings pushing are that to you what of cross-sell, more you're just

Dennis Woodside

that. I'll take Yes,

that So that of started ESM. we I IT and help last that really is the to one highlighted motions think quarter

department more for more IT are finding into only of their an to plus, legal we're ITSM often include are engine and to that So IT discussion and department. plus customers go discussion can just we've we've a discussion on or their provision all to broaden departments workflow customers we the finance departments. our an And we looking IT back conserved single that other turn can proven because

for real clear that's we're market. we part just us motion a how So of that go making to

on the interactions customers seeing with their customer who tried You're customers. support to side, moving not their have into automate bots may previously

for it to their with those build customers, because to AI stream. interactions to small maybe and fairly a to revenue just on there and fraction their handling more upsell bots a that's have educate are an bots inbound opportunity interactions to upsell that rudimentary of inquiry. or natural actually we have that more customers consumption us apply them how opportunity automate There's creates for So they this an how

particular workflows well, have the stream BXC, they've only That's turn, of we're really to lot apply us. BXB workflows. can allows a quarter to as or automated be to sizable automate consumer this but where not rudimentary year in that, of bases lot for have a that AI automated does more. revenue as is this who they spending going next in customers a time because -- we BXC a creates And you then lot as many particular have particularly and -- in it

So bit of little of the we're flavor a that motions focused on. a that's big

Operator

UBS. final with our the of Taylor line question McGinnis And from comes

Taylor McGinnis

lowered the the end medium, Just of a XQ the question guide constant range. unchanged, currency for on -- you revenue you median kept high the of the but

quarter. at of was upside a what lighter the maybe that expected? at you the areas something we softer the reflection is . And being all end Perhaps bit than last of any a saw if than look a was quarter. of tad there at So billings, it

header? that mentioned help but X being I those us you things maybe you metrics. loaded, maybe So more back-end know can earlier bridge

Tyler Sloat

I much wouldn't into read Tyler. is this it. Taylor, too

I I we So is mean, still kind want think are yes, right? in cautious we things we've we as And been like out. every on still. general, in of quarter, to play as there pressures macro go we -- that expansion, see

In it. it we call the trying we to are terms as see of guidance, just

your based of annual contracts. comes shift really side, unpredictable have in still help lot those have of proration the decent kind those of to that's billing larger billing which to advance, we cycle. expansion motion deals, we the a On then does and play But tend this do slightly on through again, as but a had it

into to So QX, mean, I adds on businesses. expansion wouldn't still numbers the midpoints execute It read we're that side of be were But to cautious just going but in new this the in came and going on I it, and too the quarter. much net QX, whatnot. good. we need

Operator

for Thank and you. This thank concludes gentlemen, you Ladies participating. program. today's

now You disconnect. may

Freshworks (FRSH) 31 Oct 232023 Q3 Earnings call transcript