FRSH - Earnings call 4 2023

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Operator

Good day, and thank you for standing by. Welcome to the Freshworks Fourth Quarter and Full Year 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Joon Huh, VP of Investor Relations. Please go ahead.

Joon Huh

you. Thank welcome Call. Quarter and XXXX Full Freshworks Conference Earnings to afternoon, and Fourth Year Good

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

change. These your to Litigation questions contain subject risks of operating all assumptions to other XXXX. to, management's our estimates could responses Some business to industry, of the on Securities by and to within made about statements growth, Private actual innovate, These results based statements control to and uncertainties, to meaning beliefs and assumptions the sustain revenue meet our to our and to improve statements. including goals, Reform may subject and from which the current costs in are that discussion demand to of efficiency. not company are customer forward-looking of expectations long-term risks, our limited cause but projected our certain are and Freshworks its macroeconomic forward-looking materially and are differ forward-looking ability financial the statements Act uncertainties reach outlook, those include, Such

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

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

Rathna Mathrubootham

to growth full Thank operating A and year you, in efficiency. welcome, expanding year our call on our Joon, winning innovation, we and out quarter focus and and laid earnings our improving everyone, of covering enterprise, XXXX. fourth strategies landing drive revenue ago, to product to growth Freshworks

Freshworks Insights, expanded of the XXXX, and in customers launched flow their Freddy businesses Over with in big Self-service, like for range XXXX we Giant AI and Global, brands Sausage. all Copilot the Forbes, or using free to from XXXX. productivity. We our boost with and work course a Big financial landed cash Johnsonville that mission our went and to Lots, optimize power of million customer inflected like of AI-enabled software Fila, model. pursuit service cash Eagle helps suite We of S&P $XX Cineworld, L.A. operating We our operations Dodgers, improved and efficiency generating in Nucor, significantly capabilities

we entire would the for our the a I Turning to outperformed metrics. Freshworks QX strong thank business team quarter. delivering to key as like across

for cash operating QX. our free of estimates a record margin our the financial at revenue delivered quarter. of coming generating exceeded $XX.X and end in non-GAAP We high the million million Our outperformed flow, $XXX.X in amount

finished $XXX.X with revenue we free flow of the of year million full margin and cash XX%. XXXX, For

strong the QX. they X year help a During finish today's key call, differentiators highlight with how I want our of out to and

multiple products. and of portfolio, us buyers cross-sell to giving departments product serve The our the underpins our ability first with platform, enterprise is power Neo the into which more

velocity which Second achieve our that products productivity product our already And in our improvements. innovation customers customers AI India brings is development drives are team is innovations talented and concrete third to helping faster.

to Neo customers across provides and services marketplace the component data analytics platform and AI, power interoperability our The messaging Freddy development offers products. Suite product is extensibility our of many all for distinct bot, and meet our a Customer the customer of through and our customers. needs Service integrated power that Customer Our of ticketing, AI and success a and product offers of unified critical launch our apps in Service our model generative conversational platform. Freshworks X illustrates capabilities, one Suite combines solution the

marketing, Service Suite. sales, to Freshworks make provider their solution. agile XXX% robust CSS a over company times with forced of powered long required resolution developer replaced because previous improved tools ClickFunnels, investment customers change over achieve even support search to in AI ClickFunnels example, could smallest solution chose X our of CSS For QX, marketing the more rates. According in The offering and surveyed, return that a published e-commerce years. Forrester and for integrated the resulting analytics Customer is capabilities, a Funnel our Total Economic Report by on Impact our to

adoption all of Our products. platform new also technologies helps our into us of with rapid

bots built For just Copilot, built first We and Freshchat and later to Freshdesk Freddy started AI products across extended with example, few Self-service Freshservice. we generative in capabilities for introduced and a our months. then through Freddy

generally help Copilot. Several with are approximately we of results. the launch by capabilities Copilot AI of Copilot service as power recently for the in realized the about later early available customers, year. With opportunity plan reduction Insights and user Freddy our We XX% became Freddy potential hands customers we monetization, and in the this excited agents to are times customer Freddy resolution encouraged the their

a grow, or Freshworks. the that they pick them acquisitions unified either many for And strategy. customers when do, part software disparate together all will growth solution of to of works solutions, As as have choice they one a like inherited use cobble

It bot fashion beauty. several represents they store For to Frasers consolidate chose sportswear, homeware, XXXX completed the that Group retail XX their Frasers added customer saving agents, customer in brands, one, human licensing the interactions company in our and $X recent now customer XX million decades from of in more company. months, in the Freshdesk more acquisitions. Then money example, AI-powered now and Group X/X into deflect X time After over support systems saved can than and over including grown and for a software U.K. has games, costs.

partners, we with of one the per an X our per to Copilot For developers average publishing significantly help Freddy for QX, month cycle. from developers. In of Copilot X the them app Connectify, apps building XX% productivity are seeing development went utilize improvement of accelerate partner, a month, to for

reimagine company AI latest chance last of to X the had the its every use ChatGPT of introduction the With technology. year,

strategic access this talent in to of India. moment One our in advantages was our high-quality

demand our marketing and significant we opportunities. suite, agent to roadmap. upgrades cross-sell enhance our which integrated advance to plan on AI to Our product expect features our to more sales productivity. In teams growth were and improve integrating generative to and to CS, offerings products departments. model. service In plan the across quickly and migrate fuel This included this across our and continue XXXX, year, language customer able customers engineering to large platform is ESM, upmarket inbound to And and to Freshservice, to verticalized our into expansion we make we designed drive innovate to more ITOM product latest products In our to leverage we AI plan platform.

what to marketplace, to our our the in are and seeing turn how products. Let customers are use expanding how me over business now Dennis larger are it driving share we growth companies of the

Dennis Woodside

of XXXX. finish the congratulations and for to G, capabilities to India our AI platform, enterprise-grade strong strategic team you, advantage G the our teams. about our Thank talked and

we spend time leading more ARR. This taking these for Freshworks of in continue We advantage a companies Now platform to contributing to our progress pressures customers value $XX,XXX build In this emphasis the than in our closed adding we believe time trend. played represents enterprise for by to their me highest to positioned of let XXX our about adds this XXXX, QX, more choose customer fast talking ever. In success. Macroeconomic cohort some quarterly number businesses. how upmarket. the year go-to-market us on greater a winning well smaller is and number of out continued solutions in

We new a operating of contributing in footwear wholesaler firms. record number to include over quarter. U.S.-based company and to our a XXX countries strong millions also $XXX,XXX restaurants, These CS over and IT catering both apparel deals segments and in leading of closed hotels a and

As automation are of a a CPG prime across technologies Products enterprise at larger customers, variety improved quickly Tata example leveraging our of like G roll our said, to we of the platform win X/X offerings. with rapidly new us This realizing benefits. large competitors. cost businesses all multiproduct of is power Consumer because the Customers of workflows. out In AI, sector, our underpinning the enables industries Neo the

tea As world's manufacturer, control companies, one it configuration, they food in India's to of over leading no making are automation difficult overwhelming fallen Freshservice, largest provided by XX% in and and time, Starbucks workflows. phone beverage operate legacy India. Their the of e-mail an volume admin months. faced and ITSM quarries the X create solution Since e-mail the At have calls. adopting company same second

In highest addition, the Copilot. Tata Consumer Products of users of Freddy is one

other supplies to steel and them digitizing trustworthy supply daily and Company and automating worldwide Shifting For initiatives. products. largely chain. IT optimize They to and industrials, The than and to competition, with XX,XXX new that's for customers needed a also tool a Klockner the find easy self-service use, company funds fast service helping beat more is & budget its expansion. metal repurpose assistant. Freshservice

addition several to include agent cross-sells, product with pricing. paths upsells We seat These customers. additions, and enhanced business have existing grow our

We quarter. capabilities, year. pleased on including from XXX% retention expansion opportunities percentage XX,XXX as X earlier a across Our our Copilot bot in reversed increased closed constant net the dollar improved QX add-ons, basis. offer recent and and expansion our we're the large QX sessions to from numbers, AI of growth prior quarter-over-quarter in several customers. Digging introductions our point declining into that additional currency deals trends

incrementally to the also churn from continued We our quarter. dollar-based prior improve

Lastly, our multiproduct to XX% adoption our of customer base. increased

higher as for X,XXX saw more example, business XX% more accounts the grew quarter-over-quarter teams than For Freshservice ending with we year than customers. for adoption

around service, IT. seeing adopters agent University customers time service these departments These customer, highly opportunity ticket up a its achieved the safety, several than customer year. also London, Freshworks weeks from a to the expansion student beyond backlog customer welfare. By the more suite. We're reduced students across early Brunel Freshdesk feedback. the academic to over and newer previous health a serve Already saw service licenses to include from of an student for and and a and campus positive they Freshservice business and college XX,XXX and consistent adding they workspaces, of X,XXX to provide is improve hours average research. more They to recognized XX% X experience resolution center One staff

a across achieved us and contact They since first natural has and Freshworks interoperable over landing X,XXX XX% bots. And switch a response resolving the AI tickets SLA. and solutions. a made through expansion give X-hour path rate products daily CarltonOne Canadian-based example, For are finally, first resolution

For travel QX, unified they deliver an analytics example, limited company Agiito, out rolled a Freshcaller the Freshsales solution added to support support Later, unify generate leads. Freshdesk. mid-market first U.K. This couldn't bought qualified teams. more and channels on-premise was they to across customer and to that more replace and in collaboration in Freshchat management recently,

and motions, In and multiple product-led we our Freshworks paths, growth inbound, go-to-market sales. addition include to what unique both which powerful platform our believe expansion is makes field

is our sales-led. field business inbound marketing-led primarily business while is Our

QX, that and can and for drive customer X to inbound activity, motions matures, inbound leaders the distinct Marketing Yamamoto this growth product-led help commercial greater have joined her team of our Officer Under leadership, will Mika company proven SMB us Chief our support, role hired we motion. Customer our across As scale. In in drive sales. responsibility go-to-market us new including these

Our sales the to a field scale week. years Chief field by will sales I'm nearly executive experience this team joined will who team Abe as of Oracle Cisco Field Smith, XX Global with and be lead to has of announce global Operations business. led our and excited Zoom, at talented He's our

first and a the year. joining as contributions, in him Paddy stepped and the departing during at Pradeep transition as Customer end and organization, the countless and Officer in to of CRO, wish our endeavors. later him our lead out this XXXX finish period us We changes acquisition, all these a our teams thank go-to-market stabilize through strong up After in best his CRO. month. Chief an future the be will delivered Rathinam, Paddy QX With to made Freshworks

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

Tyler Sloat

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

to to our ability throughout with on macroeconomic operating year. reflect was and deliver also a I I improving environment As changing our durable revenue QX adapt really while the efficiency XXXX, to pleased growth

leaders retooled more growth. At serve help AI cash our our go-to-market capabilities Specifically, same cycles, compared full and innovation base. team operating to new diverse XX offerings. We We [ significantly flow to members improved generative the XX percentage by injecting drive year approach our customer into our margins brought and we prior product we our continued ] efficiently non-GAAP the and on additional year. points respectively, points, time, percentage free to

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

XX% the the pound drive adjustments. Starting currency the the of year. constant dollar growth saw majority revenue the exclude reminder, our non-GAAP in other U.S. grew of from XX% ITSM the As be with growth Similar rates and currency, impacts to most QX past our $XXX.X quarters, statement. expenses over which euro we was positive million. as continued revenue results to the QX. Adjusting to year-over-year against on prior of will for discussion compensation stock-based for and a income focused impact financial

in In quarter-over-quarter. our were to addition, improvement encouraged we expansion an see CS activity

Looking prior at for efficiently we scaling as strong which Non-GAAP improvement we point margins flat margin compared represents year. gross of XX%, basis to gross Similarly, non-GAAP the from XX%, QX our business. are the the XXX XXXX, remained year a full achieved at margins.

metrics. operating to our Turning

key was of previous dollar retention ahead retention in X percentage customers includes of net closing which mainly point business churn execution from The In number the QX. and estimates XXX%. ARR. FX a was in deals than expansion of in in to improvements rate a the driven overall higher metrics; from Net XXX% $X,XXX more demand quarter-over-quarter. macro have was dollar quarter, our and QX, benefit saw contributing came We despite we teams by in with existing pressure feel our gross strong rates expansion both This large continuing and field customers. X

we XXX%. are of net QX for forward, Looking retention planning dollar

metric as-reported our customers quarter This Moving currency ARR. our $X,XXX XX% in metric key more ARR. number grew business than an of XX,XXX contributing in year-over-year constant and the to of basis, of and customers represents XX% other to on now

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

ongoing deals. and excited Dennis our G winning in As mentioned we're upmarket about earlier, success

but profitable by we For the over XX,XXX in The logo with smaller focus to customers customers primarily the more higher-yielding, total customers, the service see impacted adds quarter quarter over net from in lower we customers. in XXX net as higher customer continue was customers. churn added segment, we and ARPA attracting on ended improvement

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

estimate to growth is Looking QX preliminary for XX%. ahead XXXX, calculated our billings

be expect For growth growth annual the rate billings revenue of calculated we full XX% similar to our to year XX%. XXXX, to expected

in as one-time was spend the efficiencies as lower-than-expected both on costs, we well above free the we for $XX quarter, was vendor spend year. full infrastructure as nearly year our cash This flow. in we consolidation $XX provided of some $XX.X of the During our in start million annual benefits. improvement estimates generated and ongoing million generated improvements This the flow. the figure year, throughout by free headcount at we cash million driven And realized efficiencies resulting initial

cash, XXXX, QX. a cash with to year marketable For of expect balance and billion. flow that of free $XX generate $XXX ended maintaining full million approximately $X.XX for approximately the with equivalents to million similar we in We QX cash securities QX

full in million $XXX year free continue used financing vested is vested we We XXXX, $XX excluded for activities cash our approximately using activity settle to of in and million net the is net and during equity. $XX quarter have the IPO our amounts in flow. Since equity settlement XXXX. reflected from This million

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

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

from QX. million X unvested The had to RSUs growth share We for to of calculation related XX related outstanding a consists million fully XXXX, approximately count and to less outstanding of Turning on shares diluted as the our outstanding, options. year. basis December diluted million X% XXX PRSUs XX, than share of shares and XXX million shares approximately fully prior representing

our provide now me Let estimates. forward-looking

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

and we year to growing the want financial as we the to of weighted of $X.XX call range full of as I part $XXX.X shares And XX% the assumptions XX% today. out to our XXXX, in to approximately XXX.X model. the of million shares. our be share average per of $XX it of to range of $X.XX, to million that, the couple in best be assuming from a see be to view to We in range $XXX.X outstanding net want provide operations million For to in million non-GAAP year-over-year. income $XX million, Non-GAAP expect revenue income business

of February as based X, forward-looking First, our are rates XXXX. FX estimates on

factored So moves are any not future in. currency

in into merit seasonality Second, typically as QX expenses increases business effect. our in with our annual we stepping up have come

operating to QX in approximately in we QX income million add $XX to result, $X full up and the remainder a anticipate the year coming in amount. non-GAAP QX and be As to million

close we with accomplished I'm in XXXX. me Let all that pleased saying, by

our go-to-market to continued enhance efforts, operational We innovation rapid and meaningful efficiency. our pace improvements our all while of making

excited and look questions. focused As we your our initiatives, to opportunities with we're for are ahead. And Operator? XXXX, growth take we Let's many on that, the

Operator

we Scott first Needham. coming today Berg is The of Instructions] from question [Operator that have

Scott Berg

of you Really start AI side. wanted G, get the you're sales what I I functionality seeing of nice with the that to with quarter some the on a beta. with start some -- couple. on have in front

the one these is technologies or AI just enterprise Is some in uplift going or positive the some looks amongst forward? to or more what concerns like what chance think the business timeframe. a had a for less prevalent on your going do opportunity become think have maybe a software one impact the Freshworks to of and your of is about investors be of positive I well? you resolution model that the as is. And that in use more [indiscernible] that impacted customers adds in seat beta be it improvement in How might XX% made the module like there they of a maybe seat-based customers terms you ARPU commented side

Rathna Mathrubootham

Yes. the Thanks question, Scott. for

me So by very the let early from AI. days, before right start saying off even

like most and automation, IVR One service for have XXXX, goals like always about things for how in technology been call and businesses we customer a can driver. to drive from of Think particular, customers we driving Freshchat and employee in in or right? automation. automation help Freshdesk, the that, So in services, that's business more vendors more the business the helping for drive -- Freshworks centers

Self-service companies a to and language, automation Freddy some service customer and today of AI for service, So what using are bring largest and bots Freddy the with our BXC we customer automation. conversational Gen opportunity AI natural the of is have

a question. actually in So the we and when simple help help driving us along a a automatable will a actually transfer goes live and beyond be actual -- Freshworks to believe with beneficiary with customer automation agent -- in it query this better seamless

workflows. then use have hand complex be seamlessly and human do line think defense and of in you a industry we over we the have the a omnichannel do best the and I service as how that. customer -- handle We it overall, of as then automation think use all the look So to to at businesses will big product how first we today, beneficiary

Scott Berg

follow-up, field new Dennis, it. And then you a you Got Helpful. are a sales mentioned have from that starting.

came. in to strategy opportunity lot enact go-to-market individual, with you this a of that of of like of make a helped here going in your some terms number 'XX? might since adjustments? to be more in what are You've this organization changes Is the be to obviously But looks subtle are moving an there parts occurring

Dennis Woodside

that's over adjustments. I last to our we've primarily QX more subtle both say create Well, in an SMB from that change opportunity done business announced business make more would made a this to the field. We our inbound of quite that from is inbound year. we focus field on to well Field, separate business,

We have that's ] And some opportunity in why that SMB in. Meek inbound [ brought we business.

distinct. Abe those deals announcement large and think every businesses is big focus going other very X managing It's a of today's thousands really next customers, hand, leads on creating industrial and that's as single week. with negotiating I generating the funnel with out, the step different on

to we want and to businesses, we of made both the that's change. bring focus why those So

Operator

in coming And next JPMorgan. question. the moment Bora for our from next is question Pinjalim One of

Pinjalim Bora

in bots? about you there? is are the improvement to that bit suite Good grow accelerate driven Or I customer characteristic you you and if is a the to pricing CX deeper, seeing service wanted side. around kind the changes the of to ask it largely can go or -- little hear expansion starts expansion maybe seats by

Tyler Sloat

mix all the a lot mid-market which have had a that We Pinjalim, is Tyler. out expansion did CX. seat quarter, of of it. in actually specifically but on we expansion. this above, driving is We -- of the called we strong enterprise, It's

increase and us. coming I up early of they're always it renew that their ARR actually with they're expansion, QX renewals sign, with forward to customer was which a pull see renewal is early in from and going good Some coming a

encouraging. -- a agents It's that seen And CX years. was of for has pressure [ on out. couple ] We've been so calling that

we thought of really good was And that quarter a so side. it execution on

Pinjalim Bora

The guidance, retention for you assumptions Are from whole logo perspective from another the Tyler, maybe can thinking the one for on guidance? What are a a some year unpack think net should you a the Understood. of you you. What about add pricing Anything we same? of that kind perspective? from leverage thinking of be to can macro view point help. in you will about guidance?

Tyler Sloat

Yes.

I'll couple you different take a So that dollar pieces. On guidance, net retention. of mentioned in

really, We have one the been as a kind down stabilize in calling of still our And a thought called that saying, of we the churn at at we're be hitting and that had it to just better well we're coming XXX%, churn. In and now we that's to previously, well hey, going in getting a it as we're of really think XXX%, was to base. be But year. into and XXX% the at do XXX%. going going expansion on get QX, little because number. reasons hit it we really is was really we'd customer QX. QX, earlier stabilize health really number we XXX% think going we're the reflection combination kicking And the we we And in didn't to now of in to didn't QX, for XXX% And bit. QX, doing of think

at mentioned that growth. to and kind did for just of of falling, it's QX based full just QX billings best that, we little to into XX% be renewals it we what -- early our that the estimate to lower little On be from that And a call track in actually going and number bit that, expect then I year, And revenue, XX%, year, we we on -- into some a QX also, today the that the just the of for actually to areas we calculate that is XX% for really other expect QX, kind the on had billings timing. is revenue expect QX but to we are out -- see are year way it we track around some XX%. pulled renewals guidance that bit

Operator

Stanley. question our will from And Morgan next of Next. Porter be Elizabeth coming

Elizabeth Elliott

First, ask I wanted to just monetization impacts. the on AI

You usage-based bots Freddy some I believe and later year. this seat from coming Copilot the coming have of you in the add-ons. Insights, mentioned revenue is

upside So what you attach kind is to Or guidance? an more assuming? rates driver are of of this or penetration

Dennis Woodside

So the thanks question. for

think quite all, those in customers of So first self-serve in, usage we programs for for of that And of the they but adoption so customers only for have amongst the opted Insights thousands rates far, have and into terms opted not have high. I Freddy beta Copilot. is

we usage forth. We So active track things GA. like those programs and into so recently put

and can -- purchase Insights our on sorry, Copilot or you you So can today purchase website. self-serve

then and over moving If new customer you're customers a the all we're beta or so. into pay programs the month next

adoption. are the providing flow we're those much very now, monetization on value indicator We're much products very customers. That's our the a see to on focused through. But focused us. leading for to start we'll for So good that

how a year, the things putting the terms into it about play year meaningful see number. full in our thinking In because wanted we're AI from we before for of how anything haven't out to upside baked we to

Elizabeth Elliott

then And margin. to as follow-up, a just hit wanted on Great. I

really impressive the some had expansion You year. over last

minimal despite Looking ahead, some guidance topline implies more solid growth. expansion still upside

So first, should fiscal back-end second, any your should of about be And just linearity 'XX some hit think about incremental targets? in more then the 'XX? fiscal we to leverage in investment we areas just how thinking

Tyler Sloat

Yes.

huge last year. make this did So thanks, some We is Elizabeth, Tyler. improvements

pretty of think improvements I those one-time. been Some we've And kind were of consistent.

don't think some also are that still very the You of we of 'XX stair same expect to The invest. there's very, focused kind step -- on kind improvement we efficiency, coming here. into fiscal but areas

we On side, continue appropriate. advantage have. And invest in specifically in to side, think that's going we see there the to marketing where on sales to going lean the field innovation, and that it a opportunities are and we see continue R&D hiring we we to really big is where in in --

bottom the driving also So but cash. areas investment, of driving some to built we're have line focusing we and while margin, dollars driving more on in more

Operator

from next our question of Brent Sandler. coming And Piper Bracelin be will

Hannah Rudoff

Hannah It's was past on to? Rudoff net adds that lot [ record to is by but CS it see new Brent you is this attribute of a encouraging ITSM, what for do of probably today. I ] well. I that guess, quarter. you as really some driven that Suite This it XX,XXX imagine

just in you So the about if witnessed wondering cohort? talk you could dynamics that

Dennis Woodside

Yes.

correct. is lot ITSM, You're driven but for we're promising results of A seeing CSS. it by some

company Canada. that's in a in another that's Tata of ITSM customer. about customer. that's One I larger talked ITSM we customer new the talked Europe, Klockner, the in remarks, CarltonOne, prepared earlier, CSS new one a companies also of a another up steel that about they're loyalty the companies customer,

that it's pane but think not or from suite, if with enterprise-grade a is WhatsApp, ingest out can is added something the product that our so coming ESM market both investment more and through lot the business phone and positive of by teams. driven and And quarter, recently, has acceptance in in Freshservice through an SMS on unique that done of with my integrated ITOM, ITAM, coming had enhanced of ticketing in traditional That in comments fully that where over last and far. customer years, last then conversational in I best-in-class, covers of for I built or we've product. And really e-mail respond. marketplace -- that AI. we've growth in agent we then an product just that's where the couple has a made see I'm single really the And the glass, have CSS, a customers the that ITSM in something

Hannah Rudoff

this do that you you need that on still more Great. is Super to is helpful. upmarket now? execution? And done motion to just be on continue Or then right there do? you're it feel execute And to what to needs still Dennis,

Dennis Woodside

over going deals We're partnerships. in them where a new working multiple making We're are announced years that partnership maker large be meaningful of -- to deals. to investment AWS. us AWS to assisted a buying on committed they're with couple deals partners weeks ago a largest in by terms of into AWS, our with and of credits a bringing commitments with We -- customers One -- year by software. spend We our our they've was apparel in able this retire

buying So the us, it to time them process for easier for that makes and the sale. much speeds

an that example large growth a time. partner us that's can think help So we over of accelerate

best better We better about Will effort. in and America. Anastas, quarter North months X America is had ago, also sales at just Not think surprisingly, our execution. ever I our getting we brought North leading who

and seeing the Abe game general continue the as in we made And and think we're we've a market. up tried true to year well. coming go will Abe field So that in. hires the even going think last to with some of our he's I big as that benefit we is of more

Operator

Brian of going Next. coming James. from Raymond And our be question next Peterson to is

Brian Peterson

[indiscernible] question.

follow to wanted I improved. the So up had on dynamics [indiscernible] fee

has mentioned under overall that forward, you little expand been also a and [indiscernible] going the pressure that [indiscernible] You [indiscernible]. could for think through the bit. Do broader

Tyler Sloat

is this Tyler. Brian,

and [indiscernible] is about just You're or breaking up expansion you're of over pressure not. a or little but think it's whether bit, I seat kind asking

the we to very the on that there. more an general, we've about couple coming but addition a other and like adds churn customers good we right be base in been bit -- figuring is also X.X from has that edition continue out saw -- it net of years in just several talking ago, it, expect of same to with it focused QX. away. talking see to of fantastic. outside agent seat we've would we over saw getting as introducing expand In that a ago, one and divisions. stack not don't agent actually across up comes well long call planning we is kind years. it to that's really feature was SMB time, lower lower -- of was use And recovered very the to what at at about and was new things levels our good focused them right, back, little the In products, introducing not having you're as some years what back. Because we Now and how some of did reasons the There functionality, CX, That recover kind edition. signs amounts of the But on been edition, specifically, we're actually last, seat pressure are see we expansion on pressure, moving addition for QX SMB new tail customer

so right all And we a did but have not good It's now. our what back, that's focus is way the quarter. expansion

Brian Peterson

Nice on Any to Any you XXXX. the if comments to could follow-up you're in just hear. this, update on hiring Maybe a on about [indiscernible]. field make thinking the pace teams. build of how

Tyler Sloat

the you're field think asking hiring of I is I heard. in what pace about

going opportunity, field do think areas been in. hiring and areas that. there's specifically we We that have to continue We're in and lean definitely the in think there's we to to

been regional and in he's there. so Abe capacity and hire Our and a that to is there's a is we and to think taking in going over, have out part And continue quota the coming while, of plan big ] leaders through. he's opportunity because [ work build place for are to

Operator

is Research. And from Alex coming Wolfe our question next Zukin of

Aleksandr Zukin

just solid Congrats year? you about And Maybe Tyler, better? by meaningfully versus quick Dennis maybe it Has different the seeing? or gotten just you you entering can on And feel guys a changed? you're one, QX, exiting geography Is the to macro better it to do macro Has first a it what like this was terms I extent follow-up. quarter. the changing the executing of the positive? then like got in what talk

Dennis Woodside

Sure.

mid-market, that and consistent in trends earlier QX the we were to in in is I the we we And continue saw trends really year. So see solid think that with saw traction. enterprise

They're their help excited of AI them. They're workflows, because bring GA. do that. And and that looking can consolidating already ] is in see desks, operations, and [ add roadmap to in for platforms in AI looking into now there about their much the vendors they part their we number. they're and beta out the You do are spend. more what can it have And for XX,XXX we

there. those things all help So

a I is bit overall more SMB, on challenged. think SMB

customers the There little things we're business. bit smaller pay our off tightly what hearing efforts, from pressure can -- are we more us. And with the to SMB for think growth do those that's, more back think you're if driving I also is going all a we the market a better. is next will aligning under product-led marketing our again, level, things to

of we we where that SMB we was as upside So part the customer forward. quickly saw what business source was saw growing in But the potentially as larger in for cohort. QX us prior a think the is going was what that with quite not of quarters consistent

Aleksandr Zukin

a follow-up Perfect. G. And then just for maybe

the SMB seeing doing on learnings different in see versus couple just you because enterprise but field, AI motions question you're or later And escape have mid-market slower? from times, You've more a are you those one and you maybe in early Are of of gotten what year? kind ones faster monetization in terms or are that vice of versa, the versus what either. of adoption which you best potentially seeing velocity working of the that number getting a the in in early

Rathna Mathrubootham

Yes.

helping thousands our as seeing it's ripe across for this we have BXC scaling well that seeing fewer like look and across if customers, cases are it's at you traction of Freddy companies like So segments, agents with automation. in seeing Copilot, get are it excitement SMB like seeing customer X as -- answer of I are use is more customers, adoption because or across BXC that self-service, is that companies When But we at look mid-market. productive, sizes you millions success so larger would because that parts.

again, it will still get I'm both, but we'll hopeful get escape we to in days. wait early velocity? So see we'll where it's

heads we value so execute more and for customers And down velocity continue our and will and put through both. escape our to deliver get

Operator

coming Ryan from will Our be next question MacWilliams of Barclays.

Ryan MacWilliams

customers. on focus your note to want I upmarket guess I

the much customers the those change are looking just sense some $XXXX in now? below for So landscape? But it Are that why churning competitive any service it segment. leaving Or customer cheaper alternatives? reason they are makes customers is smaller in

Dennis Woodside

wouldn't I that cheaper for Yes. say looking they're alternatives. necessarily

think have a that. see shrink, churn frankly and -- in natural I businesses, natural bit a or of as quite we there's SMB, fail you

try think they're line, too small. product also we have customers what the come they're for I whatever maybe in doesn't looking for, it had and fit reason, who

customers that competitor one any there's say that's if wouldn't we those migrating find I question. to, So your

Ryan MacWilliams

to a Tyler, than retention here? are in would you the And better to please need Excellent. call what up things it -- would And like What in back to then we're macro? waiting for get step some see of to think XXX% NRR, for see that do you see trough? net just to need That's for come just we expected. Fresh like

Tyler Sloat

I now And mid-teens". said, point -- stabilize In QX. calling we're Ryan, We're time. think low period we went kind it gross like of basis be we churn churn low we're a terms today were can to we'll so in points maybe over is a things. hit basis combination possibly we "Hey, public, I now I progress to XXX trough, for XXs make think going think a do of a of getting on right called going We and kind of think we previously kind XXX% and total kind it's of is of now, a to it XXX%. then We subtle see points, think can it's continue XXX% what that of I from we make of -- couple still back there. had where up but XXX%, longer XXX there, progress to from

And would is of play. really be are called on. if kind one was working to it are. got things hey, our of, be Investor motion. And of In back. what comes macro sixth Day, that no-brainer. we a we've of out that some lot initiatives X So that a actually we're The to up kind called going out expansion there the We those in

we counting think We're that, and organically. wave to would to just ride we not expect I that don't get on overnight. happen that

And do eventually to going on we the customer to can so take back ways think of outside bring we based to are on XXX% bit very it's grow that a but other very, time. focused that. that, little up we And of base it

Operator

question next from will Pat Securities. our And of come Walravens JMP

Austin Cole

Cole This for is Austin Pat. on

point, the that to are on better-than-expected expansion, that of I that And prudent So flip operating business the this kind side incremental with grow it of XX% Why discussing could piggyback next at guys might the be and the of churn. not unlocks this on improving guidance wanted you implied. at looking year? say to the topline, the just of all kind given efficiency answer kind to

Tyler Sloat

is our of give going some like close just our the results very, Day these guide take play And to AI monetization what we that and play are to in be that the said, that up see going what but a there guide thus, be we build monetization happen have -- could right? And we said that from based come them that we are. right Investor the to bit excited an about they And in things is the Well, hey, is in things very to below aren't I to But do to longer-term yet. that. XX% build to these out, out and about can't we just is signs specifically going upside we those rate. they're of have we're middle out. initiatives the what talk called in can initiatives overnight we time -- to those, we've And early on are a out play. like little X lot We in what what on kind now. said, that a of the year hopefully, we update QX of growth

Operator

Jefferies. next from of question Brent Thill will be coming Our

Brent Thill

want basis I last a year, guys year, point increase to but gave the appreciates scratching I their XX Tyler, you think this are margin us many heads.

push bit. million. to your a $XXX back little just run At So rate

the everyone's again, are And view, be, this you product? Is last margin gave us characterize that a in lot better. product? respect field, field, would think because all XX% I these going? of natural you should year. the of questioning the my trajectory XX% XX% how where what XX% investments

trying think that's you to maybe in gave just was it, So just it's to... trying -- margin big -- just bump I a but us

Tyler Sloat

Brent. it, get Totally

look And we last whole one-time If if compare. sales year-over-year do we get the R&D kind type had slightly only "Hey, million look at we when efficiencies at 'XX. of and like year". Especially And of really in then right? stayed don't driving year benefits, they higher from a at for impression want marketing, $XX time sales you We last as be year, some feel the And said, look a to same things marketing, we now are next away of really and year subtle -- higher, so going to year, flat And you the into that did you but 'XX we we're bit and reshuffled of make kind settle. lot little beginning of moving let and the that at lean we into about to investments. going -- stuff don't it's expect some thinking efficiency.

which growth. We the are we XXXX, by cash specifically of flow to getting very Rule XX focused margin out free and called on and

at look and we're you revenue. about XX%, on what XX% margin If XX% we're for guiding to, cash year flow just the under free on

invest said to But pretty we faster, a or able efficient we're first do possible think lose to that, to And to growing. going we so get feel as to be sight trajectory and to doing opportunity opportunity that's have be of and we're that. going going obviously to be what have we going we're us not to to a path like bit I little we that take and that we're grow to as while if do we're the good

Operator

coming be our will McGinnis next of from Taylor question And UBS.

Taylor McGinnis

XQ a point only If I FY look the it's rate. revenue growth at rev 'XX of the exit high the end guide, below

So some topline growth. it stability implies in

gives that framework. of what level conservatism? outlook about in still you embeds a talk any you comfort Or this can the change So guidance

growth think too. despite expecting forward stable the billings to more remain you're even I pull

just you can outlook? CS for what seeing in versus growth you're that's ITSM comment your macro, assumptions what maybe on supporting are the that So

Tyler Sloat

Tyler. is think that the on -- tried to will a this cadence We recognize. get guys guidance, we've I to you Taylor,

like not what see. we're be overly We to we conservative. are guiding And it's trying to

then and will update every single obviously trying that it to are We we quarter. it, as call see we

XXX%. think right in that don't we is view talked expect we now. kind bottom -- okay, to dollar point we'll We to that. those the rates terms the start the rate of faster. business us. We these general, on as the positive. to returns of actually We business feel in, We're let and about For front I'm things to really we XXX% and is be in to to initiatives those in do just we point out, good now quarter, working growth things actually where, on we play stabilization, the to it good we're like a do need going expansion, pretty a year, do think a be and as again, we're retention to at think some We we're worse. able we're we And about was thought of just the net it calling coming get have But going build going just we them. see off good too of really early that. to we're grow pretty how and It's of

Operator

from Canaccord And the final coming Hynes question be for today Genuity. David of will

David Hynes

Dennis if early giving I'm going But us G. -- very adoption to prop pile seems or the on with apparent. another AI I question. value don't are customer know look, it's the for examples

buyers would guess advanced AI matter helpful. curious price Any the market? For of features the to market, sensitive I price a point? folks in the organizational are the sensitivities that aren't this latter, just given there Is more yet forward, readiness? of to color Are at I'm to particularly on yes. are some there come be moving how it

Dennis Woodside

Yes.

Dennis. is So this

have I the as opted said beta. far, there's earlier, So, into so customers of thousands like

level all So I interest. degree or think our some to of of customers one another, have

very may Copilot those if human-driven they they Freddy let's self-serve, or on going say, of they human a prefer going little but the less value customers adopt some other be have to to then product. interaction they're on customer adopt involved, cautious and have to are a to high our reliant more be they likely become Now end a have a

provision value So then if of time it's of into of the to agents do, that They're question or well, all to some whether trial when a nice work. see in going get just does or we their it's making the they these is sort. And of into going and investment of what agents their I opt matter they a in discussion a that think AI. product. before some all not how about, that's be And they're

customer we're seeing these customers So of are resolution that's interaction, of this value. the a value that a call AI we're customer quality us some with the rates, huge opportunity seeing lot in resolution, come products from improvement and and year. And for recognizing

how to going pretty see out, a of that materialize all we're over going have is I'm it So that's to us to really the opportunity for optimistic this plays but year. huge course the

David Hynes

Yes.

And That's maybe Okay. helpful color. then, Tyler, you. follow-up a for

doing have asked that? $X this there in growth. we new hit the some Can enhancements, get you're think you see push, current Do there enterprise do the for a you need future that to It ways, in different out all improve think but the with acceleration stuff to get Or macro I 'XX. couple billion can AI, the the it's you implies target been there products, go-to-market today? you of environment?

Tyler Sloat

Yes.

on That's not based environment. current the back. in coming macro there get to able be to is plan Our

David Hynes

thank guys, Alright you.

Dennis Woodside

Thanks, everybody.

Operator

This disconnect. today's concludes may conference Everyone call.

Freshworks (FRSH) 6 Feb 242023 Q4 Earnings call transcript