FRSH - Earnings call transcript Q4 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello, and welcome to Freshworks' Fourth Quarter and Full Year 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Joon Huh, Head of Investor Relations. Please go ahead.

Joon Huh

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

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

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

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

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

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

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

Dennis Woodside

XX,XXX for the was Joon, quarter Freshworks. today We and finishing provided joining estimates and the call. all us our metrics profitability, QX everyone, board the another across and on previously with you, thank overpriced software outperformed into great their our growth year key and for on Thanks, a the overcomplicated customers exceeded for vendors note. CX transform high year over legacy drive chosen software to customers products We again, and Time EX Freshworks' hands. ended directly with who've business. our

of operating expectations. our deliver resulting teams. an non-GAAP generated business software IT, Customers of provided and free beating choose cash outperforming free year-over-year In customer powerful adjusted to of uncomplicated previously XX% $XXX.X also Freshworks' XX% XX% a cash support, gains in margin the million, QX, We to estimates. delivered quarter, for adjusted and grew flow for revenue productivity margin $XX.X other million, flow

the representing activity Sporting currency of We in X retention companies software and quarterly X,XXX Airlines, similar to prior Goods, largest New XXX% We customers, We added Sophos. compared and like the notable constant healthy in Rawlings Mesa dollar maintained and on QX, welcomed over retailers net saw quarter. Balance like customers net basis expansion a years. onboarded increase including and a

our in and existing UCLA. including business expanding EDF also large GBT, We succeeded customers, Klarna, Coherent, many AMEX Renewables with

is and working. durable profitable growth drive strategy Our to

investing Our first imperative in is EX.

down ITSM, doubling are and on our fastest-growing includes employee largest, ITOM, ITAM, experience We business, which ESM.

products and our across capabilities AI delivering is imperative second Our platform.

both customer employee our improvements productivity experience. driving customers are for in and experience We

marketing products. our customer service, third and for including solutions, experience Our growth and customer imperative accelerating sales our is

strategy our led I'll Now against share strong to our QX results. the how exactly execution

First, basis. our up-market surpassed currency million for paying on a QX EX was we strong XX% quarter in constant off year-over-year $XXX business. as drive our EX in to investments momentum. another We ARR are continue and grew

fundamentals meaningful be which see FX in strong. business our did in reported call. detail numbers, to on continue underlying impact cover greater the We Tyler Our later will

We customers existing quarter DeviceXX upmarket leadership our accounts, position ESM, XX,XXX a driving building expansion with and with business success, new growth, in trends industries. Several in specific ended and are the EX. attaching within continued to

they under are because turning serving First, that's behind more We more are mid-market. mid-market IT in overcharging SaaS customers, particularly and and and their as largest the our leave to customers believe enterprise Freshworks big competitors. vendors

employees. drive and hard multibillion-dollar Iconic SaaS manufacturers are their embrace legacy after on to dropped companies, turning manufacturer of the Freshworks. which major backs alternative, mid-market companies, we more governments unnecessary enterprise without EX coming define or our to and a in grade XXX XX-year We vendors the software relationship business offer Freshservice. with Recently, a organizations and as city enterprise XX% that's ARR from complexity. Over comes ServiceNow

The security Mesa to centers, legacy data while tasks Freshservice, QX. and care city and important so Airlines privacy of in can too. provide can providers Denver its choosing hospitals, replacing operations. community employees Health needed tool protect and over care. health chose modernize and care us its Freshservice ServiceNow IT San over automating Denver county and also are others, of patient ITSM By a Health, with that the emergency patient of health provider Francisco Universities leading

Mountain other customers marketing XXXX are deliver out in XX% experiences. key continued for ongoing The ESM second Teams. is with Coherent Monetization ESM our attach is eligible ARR big and Freshservice the TeamViewer, Wake and University, Freshservice in Forest build business in a HR, QX. X amazing driving businesses, to and of for in Business ESM Alterra increased utilizing new with deals, Company, of service using finance for and to X Business all trend expansion, Freshservice success momentum X.Xx EX lever our their to in Teams. including growing areas rate

a They across Company, use its and departments Alterra with success operates IT their solution HR, seeing between ski departments, collaboration locations. facilities, marketing. sales owner including single Ikon more After smoother pass, to of enable popular the Mountain and Freshservice environment, year-round expanded in finance, of Alterra technology XX Freshservice wanted resorts.

global a additional procurement. ServiceNow, equipment, multiple XXX to transitioned all of Coherent, workflows its and IT use Coherent and as Freshservice manufacturer agents expand have from HR teams department, Freshservice. XX,XXX facilities Freshservice They expanded recently employees. to tools, plans to internal ITSM including and their laser industrial of such beyond to supporting

a product for more In Personio HR and outside apps, made with our pipeline of integrations the to tools management strengthen launched major capital live have ADP IT. further UKG Paylocity, including going months. human We QX, teams we for of new like connectors improvements and coming offering in strong and

QX, mapping, an than dependency Freshservice combined of The more enhance the to delivering with contributed third more infrastructure we ITAM in increase a advanced and to competition, operations. Companies EX their offering create IT which a comprehensive auto-discovery deeper, ITAM DeviceXX. launched Freshservice with advanced power growth The experience driver In easier new to operations seamless DeviceXX. for to their customers. can capabilities insights customers existing actionable integration upsell configure is offering our with using is into

element, accessible deals XXXX. rapid They growth with global DeviceXX CMDB and capabilities closed is IT sales needs. asset a and locations. quarter DeviceXX DeviceXX accurate Major the and brand we posted Freshservice online in integration in self-service a Three portal sportswear business. to of its Microsoft through QX XX and record AI-powered and across The ever ARR the experiencing attach support e-mail for utilized new intuitive of view highest empower an an QX for advanced net New modern Enterprise top its all represented offer the associates DeviceXX New experience. management included Teams portal, Balance internal infrastructure support for will Balance and gives of the

X/X National are Colts San and NFL City Cardinals transformation. League University professional the Major and teams We XXers, Manchester solidifying use Kansas few of in continue education, our these Chiefs, Francisco digital Forest UCLA Freshservice. In leadership Arizona education sports, sports position Wake Freshservice for a of customers. and University, and just Indianapolis to industries. almost use The attract League Baseball organizations, Football our In Metropolitan

In Major Twins Francisco League customers. Minnesota Baseball, Cleveland the Giants, Astros are San and Houston Guardians,

Paris European complexity. that customers that like such employee as a have companies experience number without Southampton as and Everton also multiple Racing. choose enterprise McLaren believe their teams about We We grade of FX care Saint-Germain, and enterprise football Freshservice clubs that's software

second our imperative, AI. to On

our customers, We ARR expect quarter-over-quarter. first After business value. AI tailwind be adds reflecting for We're in Freddy or targets. launching we X,XXX payoffs as Copilot for ended with our growth a February, tangible realizing with to ahead XX% net of year, than of XXX quarterly ending than customers more business its in internal the monetization seeing year Copilot more are

Chiefs for productivity IT taking customers successfully Kansas jargon, In to used a Copilot of Take Chiefs Freshservice AI hype across with finance world The execution. Freddy City improve to the we are AI departments. and from experimentation and example.

For Freshworks been several field. win ways has them helping to off find the years,

In to continued digits rates Attach be attach increased double XX% $XX,XXX QX, SMB Copilot more. we for deals for new over rates maintained of and or quarter-over-quarter.

customers AI Freddy XXX the beta for over customers CX, Agent, we end testing new Freddy were of our self-service AI launch of Freddy latest the X,XXX features this Agent the With year, By version. including product. combined into using the AI

agents using seeing positive results. our them are and improve, As more customers AI

serves for This improving ROI size. deflect focus home for Freshworks on example, frees uses AdaptHealth all care health and tickets. turning The team for time times that AI into AI the X resolution million is speed to patients. outcomes. committed Agent to businesses team IT Freddy patient up of to company a Take

to Freddy AI in we've made are anticipated We and XXXX with see progress expect of on adoption widespread about the meaningful excited progress AI. monetization

at XX,XXX We over CX, contributor is in customer service quarter for cover in in where adds a segment with growing X% SMB customers, million we This better strong QX. momentum, especially currency been to basis, business I'll software and over new to rate constant for a significant was way net generating constant our a $XXX see forward our Finally, CX on currency paving ARR, this similar growth over for the area ended a quarter. decade. that's another flagship the year-over-year the

With initiative to in contributed the quarter. we and the mid-QX, of for business we're that free-to-paid significantly started customer than customers, segment. adds largely conversion ongoing an CX, CX X,XXX for SMB more net initiative the was This seeing which benefited the

month tickets communicate a Networks. majority large conversions, subsidiary vast the owned with to adopted dramatic time from average from Satair, Freshdesk, reduction X onboarding of employees. have including handling Amazing time resolve days in in Freshdesk to Airbus through and and largely a customers, organizations in are see X Freshdesk. so seen reduction ticket They a to benefit choosing are of XX% and previously expect effectively and Airbus, suppliers a smaller We wholly X to QX. AMC

updates as made we to supervisor experience, analytics advanced which Freshdesk's QX, features our support as In delivers admin to our customers. well

launched us also Management, is QX. solid We to Workforce It to customers product improvements stable for Fix. important that these integrations an Stitch contributed with from rates, feature remained retention which Playvox like clear

believe products; are also our customers our total adopting across buying EX We products in and increased vice charge paths: the count versa. in saw first, CX we expansion as quarter-over-quarter; agent growth are third, our several CX seats the strong have customers leading business AI second, CX

IT For a support tickets. to and Dune a recently manage growing Freddy AI, with They processes. XX% deflected to their success and retailer, customer added Copilot unified footwear and Freshservice Dune AI example, Freshdesk wanted first assist with of internal London, had which solution Freddy team. IT accessory inquiries

they internal is as X the Freshdesk a the customer management, for HR. queries. mailbox value using scalable its and of and and of of in Freddy are and streamline Freshdesk legal, adopted iPostalX services expanding Freshservice After product of to to operations. iPostalX AI saving been has years expanded base over agents manage XX% Freshservice their solution million. Freddy AI their seeing their business, provider also has to largest time their Agents of resolving digital use operations

Cisco, next QX, welcomed brings play and Freshworks leading chapter will forward. CX key at Freshworks Officer, and shape extensive Srini at role RingCentral, and initiatives innovation who leadership AI will In we our our and executive experience team. the the Srini, Product automation new in Raghavan, EX products shaping to a Chief of FiveX going

welcomed ServiceNow experience customer he SAP roles also Product of to their the we scaled and leadership leadership and SVP team. products. Venki Last CRM held week, Management, CX has where and at Subramanian, launched Venki

our for We every to talent attract customers' all delivering continue in function, world-class on solutions. uncomplicated focused

distributors value-added and we're through driving resellers, avenues customers. providers, pool integrators, solution partnerships ahead, strategic large new Today, have XXX active partners sales system unlocking that more are Looking more of of from we a than growth consultants. globally diverse

Our partners touched XXXX service customers X/X and through of our and many more ARR implementations. in sales

customers, to a Unisys a IT work a MSP an with with future solution Unisys solutions as strong announce and Initially, they strategic highlights Freshservice. offering. looking new for chose this with after for mid-market to of excited their our reseller partner Unisys, mid-market products completing a was global for leading deliver agreement process, enterprise partner. excited review will competitive large and are of SI our We modern and and to Unisys, leveraging plans with partnership momentum companies. We're our a

we increased efforts, margin business. leading and efficiencies expect on in execute to we As evolve improvements partner see strategy, additional in go-to-market our our the to

opportunity in XXXX. I am and the incredibly excited ahead about

advantage competitive We fast. have software results delivers enterprise-grade a with our that

leadership experienced and talented an team. We have

employees enterprise software partners, Thank and for on focused and are to support. ongoing efficiently customers, to are shareholders leading We well your a our company. you positioned be scaling

me details. and let go over turn to the it financial Tyler to Now operational through

Tyler Sloat

and today. on joining the call webcast via thanks, Dennis, everyone, and for Thanks,

our XXXX expectations background the cover full results, For QX key XXXX. and commentary call on year for the forward-looking QX full I'll with financial and our and today, and year close provide metrics

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

about talk which We to restructuring costs will QX. excludes also cash the related cash adjusted free in flow, outlay

made outstanding pleased margin top non-GAAP estimates to our both drive adjusted the remain These QX. year our successful $XX.X million, report strong quarter XX%. line strategic we expanding quarter-over-quarter and XXX growing a year-over-year cash another a line bottom in to business. cost our of improvements operating as our to points overall previously are strong resulted XX% finish basis free initiatives which results confident to our for cash structure, execution free in well to as flow by We growth surpassed we our margin as XX% to as and the provided significant in our ability adjusted of reflect profitable flow We

shift in as Let impact impact negative our me We growth was but a U.S. the FX notable to in with numbers FX minimal QX throughout or meaningful rates driven this in the million first of QX. point X our on had reduction impact a this start resulted dollar. our quarter, by a ARR reported the $XX.X strengthening revenue observed ARR. percentage to

metrics business underlying currency constant better to for a comparisons of of view include I'll many such, provide the our As trends.

the Total on revenue currency a QX Starting XX% $XXX.X shift our as to approximately million and for the Half field million we realized XX% with a $X.X basis revenue we originated synergies partner revenue quarter ARR the in from net $XX.X for growing contributed services increased the the as new of quarter. income cross-sell network. DeviceXX to statement. basis. to reported Freshworks on from in the DeviceXX team growing million, acquisition. contribution was continued constant Professional services revenue

ARR, of basis. driver remains million basis business, currency now in an and EX XX% XX% constant has growing overall the noted, primary $XXX growth Dennis surpassed our on as a as-reported on which business Our for year-over-year

an EX on XX% on basis. a DeviceXX, XX% was growth basis as-reported Excluding currency and constant year-over-year

Our $XXX CX to perform basis an continues and at over as-reported X% well, growing ARR in year-over-year business on constant year-over-year X% at a million is currency and basis. on

customers. our margins. and deliver we We to gross prior compared to year. efficiently over points improvement of our solutions margin for basis an the to This support our non-GAAP as XXX Moving continued approximately strong XX% QX to improved represents

a prior in cost Our a the at strong lower quarter. outperformance performance XX% ahead income is well operating million, of benefits personnel-related expectations. driven non-GAAP as The for from and as of QX revenue non-GAAP expenses operating in $XX.X by combination margin came approximately of representing

million. As a reminder, not results non-GAAP of onetime do restructuring include $X.X expense our a

Moving to operating metrics.

key X retention metrics business in contributing dollar are Our net ARR. customers than $X,XXX and more

was a of FX XXX% basis, retention slightly currency XXX% a result the As constant than reported expectations dollar better basis. impact, performed on and on we a our net at

we QX. expansion, and XXX% of pressure an for constant expected on basis based and a forward as-reported currency XXX% on net Looking dollar retention on on estimate approximately basis

in our to of more XX% XX% end currency on basis this of For as XX% of metric basis constant as-reported represent year-over-year metric grew on number continues XX,XXX to cohort customers. This year-over-year and of $X,XXX second the our business than an customer ARR of contributing ARR. customers key QX, a

more ARR currency customers. X,XXX For basis our year-over-year of in represents larger XX% XX% as of as-reported customer saw constant cohort $XX,XXX cohort of we This QX, XX% a of than year-over-year contributing the end on and on ARR. an our to growth basis

For net X,XXX of initiatives conversions. XX,XXX are to over total results customers free-to-paid our the and with quarter customers Approximately in added customers, improve the we customers. ended the of over recent X,XXX

conversions as We a have conversions the majority QX. these QX to occurred to slight the in expect benefit of

turn to let's billings, Now calculated sheet and cash items. balance

basis an billings and in on both grew year-over-year calculated approximately to constant million Our XX% as-reported $XXX.X currency QX.

of DeviceXX, calculated year-over-year. Excluding the impact billings XX% grew

quarter, revenue quarter. around discussed last long-term on includes in includes of a the liabilities we sheet. total the deferred In the As this in balance $XXX,XXX plus in revenue change included QX, revenue calculated the deferred the our is reported billings other that increase

Looking QX to ahead XXXX.

initial is calculated basis. Our constant estimate currency for billings XX% and a on XX% growth

XXXX, year-over-year For growth year the expect currency a approximately constant XX% on billings an basis and basis. full be calculated on XX% to as-reported we

quarter-over-quarter. We from This FX from percentage onetime few pulled want call includes subsiding QX. factors into points from point the renewal conversion in a out free-to-paid billings QX points X rate X.X to X for growth and comparison QX, activity early percentage percentage

adjusted point of an improvement an for represents cash which resulted and generated XXX outperforming in $XX.X This activities to free margin basis cash improvements our thanks year-over-year. our to operational our million cash items. strong Moving XX%, estimates, continued collection free We efficiencies. in QX, flow adjusted in flow

use costs. a restructuring $X.X of these million of to As do related results a not cash reminder, onetime include

XXXX, adjusted nearly year to full cash the doubled to $XXX.X flow million year. prior compared we For free the our

up million year million to For with to in of flow, stock slightly Pursuant average our higher program approximately in expect of was approved repurchase in $XX announced share. XXXX, previously our price the we QX $XX.X repurchased free million that full at generate common per amounts an approximately QX our we million $XXX QX. QX cash our QX and to shares and of in $XXX to of by $XX.XX XXXX, Board November and

the We long-term repurchase to delivering and quarter. As will a shareholders. update each an committed end practice, allocation value at appropriate on to we capital strategy of general activity our our executing remain

manage We shares. count and settling full continue dilution net million our approximately financing This XX.X our IPO, net quarter by reflected $XXX is $XX and we during activities vested to to and share the approximately year million our flow. XXXX. by offset using excluded equity for $XX nearly million have used cash free in Since is activity amounts settle million the from

vested usage stock settle amounts QX current Looking we and of using expect price equity continue net million approximately will ahead, levels. $XX to cash

year, the with amounts. $X.XX ended approximately For billion. full We of vested million use to quarter equivalents we the cash, equity net securities marketable and $XX expect cash to settle

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

plan dilution continue count managing and thoughtfully with to share and the this of mindful into share repurchases net-settle are activities future. We

Now our on forward-looking estimates. to

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

million Adjusting year impacting have be we would $XXX and outstanding rates in year-over-year. from for to QX financial shares to from our higher share growth. XXXX of point earnings the be last expect million, our constant million range X net be changed in growing currency of of reflects also weighted XX% percentage to $XXX this million, to rates Applying from FX growth shares. per approximately non-GAAP or range revenue XX% $XXX For Since of range to currency XX% million meaningfully, November, estimates. using November, rates our the $X.XX, QX assuming income full year-over-year. FX the XX% call higher operations full year, XXXX, in to $X.XX year Non-GAAP of $X.X to million income estimate of be XXX.X in in average revenue to the $XXX

a of on couple that based to is like outlook financial out. call assumptions we Our would

forward-looking estimates factored on as in. are not XXXX, moves based so First, our February rates FX future of any are X, currency

anniversary we half as rates as Second, acquisition. year first quarter, look the half the we expect to to in to we XXXX growth revenue DeviceXX higher compared of see second the by the

using such of of XX% estimates, revenue midpoint for QX, the range in As expect we QX XX% rates in XX% and and QX and approximately respectively, and QX. QX growth and the

approximately respectively, QX we cycle, for base business. QX, an scale QX, in non-GAAP XX%, merit the and QX, XX% for our by in followed by annual as margin connection QX XX% in XX%, and increase For margin in and using QX, with quarter starting This we reflects the operating midpoint improvements expect cost XXXX.

the quarter business our demonstrate last execution of strength from results priorities. effective our strategic our and Our against

success. proud of in in innovation driving disciplined our and improving for the We're we while position about as excited maintaining profitability. Freshworks opportunities are We a made ahead also we've approach long-term the growth progress

take Operator? let your that, with us And questions.

Operator

moment from Piper our Instructions] of One with Bracelin question. the It comes Brent line first for [Operator Sandler.

Brent Bracelin

to if Do XX% the here think the double into growth you you now growth could business, click one sustain opportunity my organic What's as $XXX is I you potential anniversary XX% plus? EX. here million wanted plus EX? to here, a This click DeviceXX? in you there first thinking How could. you about start Double guess rate. ARR are

Dennis Woodside

Thanks, Brent.

that EX business So squarely it's think the end is and our enterprise. is lower Dennis. of mid-market opportunity and huge, We on the -- focused

Our you a ITAM. think need you with have demands. to of employees. Typically, They need businesses And anywhere market, sophisticated we are from about global. They ITOps. have. is IT need part the if ICP the XX,XXX They company XXX that what department, these

And requires competitor, product the complex work lot get biggest of obviously, up from. is get this ServiceNow, very running, and a of value to We hear lot that work and to a time. all the

in for overall companies total they're enterprise that enterprise-grade those fast that's without value So segment, to and looking complexity, something cost. the that's time lower and

to So an coming the a were last is choosing because Ivanti they're reason that off of legacy it of XX-plus or wins or like we is that And starting think they had, switching customers are was that flywheel mid-market if a I responding. we're $XXX,XXX a over Cherwell, quarter, provider ServiceNow. get us

So we market is huge. that think

for account Just define $XX trillion it, mid-market, we activity. economic in in U.S. the as alone, about the

there. think can very we So we business build a big

accelerant. and product, DeviceXX, with QX building the there's with, of we way. that's we've pipeline with But I we out IT to and effort tool an absolutely We the AI it QX. going be a terms stuff kind roughly behind lot that's on getting spent double was the it enter selling as of QX In better pipeline on a as of entered of only to in the need the post-merger companies their QX think now companies business real all really a to what been well. a side are help And think security we accelerant interest handle because well. for them -- that looking to that to an assets. a think is AI get They from

XXXX, of puts into good this lot a proud QX. into year. performance of very good and pull It I'm in a the going going place in So to levers us

Brent Bracelin

I more $X then, implies M&A consider of for I you the where road complement margins? balancing And you cash, investments use maintaining process How model around looks still That of this over about quarter that guide Tyler, would and quick see and to forward milestone milestone? prudent thinking are us here going cash, the margin even invest? while accelerate with thought XX% Walk conservative. you XX% follow-up margin year. in crossed product with Great op op some now But map Absolutely. growth margin help the the acquisition. the the that through XX% could. over if you've you in know efficient one next billion op the plus to

Tyler Sloat

Sure. Yes, Thanks, Brent. you're right.

I think really, really of just going this doing theme that really past an year, well to we're flow continue on We're perspective as been efficiency clear. we've in margin. efficiency. cash have to well terms operating as free But also really

to will get at and optimize DeviceXX clearly DeviceXX and up. really look they years can I We're is in, for what come we've substantial deal opportunities, X opportunities as We done trying we one, the inorganic those. continue first think, first at the and that. we'll to digesting look

year. were good places that kind focused going execute exercise, to lot we lot And reinvest QX of the use repurchase right time, to said planning that areas. same continue in the into when making share on on the of of in that restructuring and to business, a in people really do went have we growth At we portion the a our investing our to of continue net settles, a we're the sure for we right this through which also we and cash

do So both. I we think can

biggest while going we invest we're the line bringing think to like of bottom performance. prudent we really and get can returns kind of where also better feel investments I kind make

Operator

from line David It Canaccord with Hynes comes the of Genuity.

David Hynes

IT slowdown ahead metric new already Dennis, be have there. I also that the but me kind the I quarter, metric can of mean, may that you touch on doesn't like cross-sell feel upsell, in capture maybe that the the adds $XX,XXX-plus the customers threshold. it and the business net didn't of customer makes best realize ESM of

me help of just to relative point business. of the side interpret kind saw bookings that you So data that the the IT on

Dennis Woodside

the so thanks question. Yes, for

because from players FX QX. First impact of from a FX our disproportionate coming a had other revenue remember, than all, of XX% we've We're of got and about in exposed of rest world. Europe around XX% more we lot

-- $XX,XXX X affected that that's So number. that

we well. were pretty QX, effect The second a as an and is that prior had lapping QX strong against in year

the that And them. we more of deals is thing other but are larger landing fewer

a in over number We both deals most $XXX,XXX, $XXX,XXX. we are and our expansion renewals. So over those QX, of had, and had large deals

affect with those absolute all the in So customers $XX,XXX just of things revenue. number over

So up, and you ARPA that cohort, at also closely. for look we that's that look at if the that's actually something

by -- the we're So I some that definitely momentum. this comfortable factors. other was upmarket through, think our pretty time with But that affected metric

just of global New that You upmarket. opportunities a are players, and that the gathering look stable to see we at press we're customers to Balance, continue like sophisticated

David Hynes

broadly touch there makes mentioned on customer? Yes. perspective kind side you opportunity, Yes, the just from on you you meaningful a Unisys that could of Maybe And business. MSP be that sense. type evolve to as opportunity follow-up, how that Maybe that IT explanation. partnership of opportunity time. to of over are and a an the could the maybe helpful the MSP to product the That's a support today

Dennis Woodside

Yes.

able product that large were they to around companies are out because wanted excited that sweet market evaluating really their companies a and those QX. build I meet end bring And and line chance they spot, right for spent in cohort every mid-market, And Unisys They with in Unisys. them about to to and looking it an had product in enterprise lower a right an GSI. alternative. our a the And be IT us. we're So a have market, year a are to space. CEO go in of service they chose coming to of

our well we're already they're -- doing first as while on working that MSP And a now We've our an been motion. going be we've for of we've and product. developed building had landed as couple the Unisys to with building is functionality product. co-sell MSP deals investing in our what of a around And now Freshservice

We MSP, enhance set have and in will the releases functionality management May are that so of a coming things forth. like an that for out multi-account

functionality using product we really, that's though We been over MSPs MSP. specific for up the already X,XXX recently, even have until building haven't

is about large, quite pretty and there opportunity So we the it. I'm think excited

Operator

of question next with Stanley. Our Morgan from is Elizabeth the Porter line

Elizabeth Elliott

little they could are to become customers NRR years what's we've re-expand? with lever lean the side, just of AI that a a outlook point expansion opportunity recover? start from I a more expansion that what side it's to been at also AI that to for monetization pressure, wanted pressured bit start innovation get And had that drive to also, still few sense a the towards the And given kind shifting for seems cycle running enough we're to seeing and the On expansion. that

Dennis Woodside

take I'll the Maybe second.

I'll Dennis. then the second about talk it's Elizabeth, part NRR. and So we'll take

our is for I our in Copilot total segment. well. AI in into think that, cycle quarter involve seeing of products really in as healthy part adds net AI, starting of out. And those just best innovation going attach selling customers the AI systematically Freddy double-digit customer to X SMB years. rates quarter, customers Agent of saw that Freddy conversations now to growth we're base both and play And We're A our Freddy large AI. very those the then in XX,XXX and you

the And big to about that talk adoption can early also, feel accelerate. year NDR. there think forward. we growth still Tyler drive opportunity do to from see And cycle. year going segment AI that But when this is there's we're we're a really going in to the So that we continue

Tyler Sloat

talking the is also we -- at our what which largest a been on we we've Elizabeth, is expansion on talked bit been XXX% for doing churn pressure about, addition. of so in for been well kind so We've little about it's constant churn, we products and net yes, agent being dollar on better actually retention than That came still how currency, thought. we've said, hey, in now motion, solid had mid-teens. across seeing all really

pressure have that years. We on for

compare. Now the back we kind rate the in expansion a year-over-year kind kind have see of the but of of of did addition to a start in stop decline year, the agent still decline for we from half

churn why of see -- still calling we see we So expansion comes kind QX. the right in, way XXX% see what of we're now for we That's if what it. kind and that's

on capacity the doing on and to These some 'XX of to to lot we going work them are for Freshservice existing addition. are into going rate to we're attach obviously, agent our go a mentioned customers. has we supplement business to well. into Freddy the Freshservice offering our DeviceXX, need for then just base that perspective, still products add-on think, business, really ESM a products, for our be So agents but that new kind focused of the our monetization really base, really do on healthy. getting Dennis really, installed are existing From those on they're

Elizabeth Elliott

lot SMB as the just improvement on sounds a It wanted free-to-paid And adds side. conversion. net double the execution the in a was Great. like I to click follow-up, of on

an we the SMB that was that's into quarter on And continuing? of I to about Is kind what's started something demand broader get update hoping just last XXXX? your improvement to hear the So environment. outlook

Dennis Woodside

on demand think say, that you we've quarters figure Yes. where improving. I basis, year-over-year. stable X Elizabeth, I is see X% of ARR the a would to that in for seen, the And around CX constant currency

that little team. are them AI range especially SMBs in rates an support the the more they XXX- think rates of to it, a still the interest AI on relative are And I and them, are effective, that are can larger So have IT that help high they where realize to other quite constrained that efficient, side can in more customer starting But history. XXX-employee help. bit they for be department to have SMBs a

So -- our really business and is where focused. that's

that with completely for we clear a XXXX. give optimistic but I'm definitely one I single the way can't progress were or So made QX. in the like you we happy other,

Operator

of the Pinjalim Instructions] It with line from Bora JPMorgan. comes [Operator

Noah Herman

bit what XXXX in business you business This well? at Freshservice as CX color side more both little Pinjalim. a the the around maybe is Noah we for on as you're Can the as the guidance just look embedding provide well of as

Tyler Sloat

been what And market. been what focused on on said is break doing the in growth well. we've is sustainability out earlier QX. We're that's huge has there X and about of that's terms stabilized. Yes. one a of kind talking question was products. We really different efforts XX% it a that EX the doing what we had that we're is growth, Tyler. open think Noah, very between X% in We about kind didn't is still there, We've this of of kind of an at And very ICP. CX we

guidance, year, lot When we for fidelity we than is as we into we'll for the do a throughout guidance revenue look the we for -- the do at year, it update guidance the have clearly QX the first and more year. full clearly, year. this We go the the

I year acquisition, in compares the one DeviceXX is call did out tougher perspective get are think from the half we thing that they the the the a revenue front. the are in do so that back be we of to going than annualizing

that the the around margin And to we our go We also the merit in that cycle continue efficiencies to expect we and noted operating drive that's to of up. half to there back some really are QX. to nuances would expect why year,

quarter. the as about called out can reflect we to we So Clearly, as quarter and know now. from end we this this as get right performance nuance much of

this year will For the after quarter. update rest the the guidance year, for of we

Operator

with of from And it JMP. Citizens the line Patrick Walravens comes

Patrick Walravens

do your you think guys that a I'm the and sort the add list. App seen base? maybe ] customer what wrap of you you which your that you before arms you customers, didn't incur that you across to are when and the Mistral, of deliver do let what could AI implications is the also around we've your curious, in cost sudden, could means for then top advances what of the congratulations. for my terms [ And front today, of up Store guys DeepSeek me with all on the ramping recent of sort with time Dennis, Have had AI to

Dennis Woodside

Thank Pat. you. Definitely,

us is in will various pricing innovate. competition can at as for look, to already to So we LLMs, and built already test -- space stack pricing drive continue and and our has and look We've among the tech down. driven continues LLMs competition that good down so do

value, in capability we we OpenAI. find a and So we data, because respect to respect are certain today with that protections built there of rely that. for that are that to our And have that's top on Azure on protections provides own then hallucinations conversational Microsoft with

we tested have But also Anthropic.

We have AI for, looking We're data security. performance, image. other to that out at always Google's And are there. cost, balance models going in tested we're particular,

lower something better are time. that's over to important just customers. help overall our cost All of deliver those going And to things is the a us at competition a product

of far, that so for good So, all is us.

all we're that coming good, evaluating the out. and are of developments the are constantly All models

Operator

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

Robert Morelli

ITSM? on opportunities on Is with this and with SMB Morelli about the still invest Berg. Congrats Rob large for CX in is the your momentum? CX. some how hear momentum to about This Great Scott do proportion the going With mind, there for to think quarter. go-to-market XXXX? the recent you towards this are Or of investments in

Dennis Woodside

Yes.

and to so on CX business. And for we X/X we of the business be CX about is see invest tends mid-market CX. SMB, and a opportunity. today against our EX of the that marketing, lower balance and We into continue across So the enterprise SMB more demand in community where EX we particular, business, -- depending investments to end to among the drive

into field going and are investments those alike. So

the look last that to way about efficiency the the revenue we've over coming where us both economics see see So kind line of see make those we of sure think the allocate it at of sales very to of investment mindful And we depending the in we're item. where course and going marketing seeing. I on and sales that the and we sense. continually percentage year all what the to of and the payback And results opportunity and as throughout marketing a terms drive been makes continuing down investments in business, momentum, adjust year, we're you that

Operator

from It comes the of Jefferies. Brent with Thill line

Brent Thill

Copilot on average? is you're to seeing there Freddy Is ACV what uplift, any impressive. very for way attach XX% The quantify the

Tyler Sloat

attach the We broken rate on attach rate have out deals. terms double-digit yet quantification. new dollars SMB the And is of on the larger business not in attach deals, the really the the rate to for

more is Day, we for going -- our beginning probably in be specifically strategy back can monetization products. through kind year, of of which Investor half our at look to the As as the this of go to we the year, about the provide go Freddy we

to of Copilot, as agents, consumption-based is our add-on AI we is Agent, we more a model. our but monetized the As have a have that more is which one reminder, use it. which price $XX, at gets an customers And which also Freddy our

over also those actually for now additional many customers are which bot customers, X,XXX paying We sessions. customers of about is that talked are how now paying

actual out dollars. broken So the again, haven't we

really I still it's think a but early, little positive. really, the bit is progress

Dennis Woodside

Yes.

to there. one Just thing add

drive you options today, number of are to sale. CX a expansion or selling drive bigger to a have If you

Freddy You can problems. LX Agent AI solve support to add

improve Freddy add productivity that you're per Copilot, can of AI the seat the license, agents to You the serving.

Freshservice You Teams, can ESM the if Business within DeviceXX you set for of -- product, you're employees company, selling address can broader bring to provision or you in. our can IT, a

forward us ago So business our helping us we have drive are there's growth. at fingertips didn't have frankly, a lot of that expansion we options helping years drive that, X now and the that consistent

Operator

Our next Baird. line question with Oliver the from of is Rob

Robert Oliver

opportunity that? to for your to you in DeviceXX seeing But you competitive the you and has to have Brent's in after that And the earlier. that guys are an come improvement to I ITSM? the comment table a does sort rates guys that ITAM to market opportunity on help question with of how maybe win the solution? ask in now What done well follow-up as Dennis, wanted

think as just us milestones this have well. that technological to deadlines of but or forward you can be also should know anniversarying mentioned other then we some there's And DeviceXX? it the look financial for remind of of year I what or aware milestones to Tyler we I

Dennis Woodside

Yes.

the So with let milestones. me start

and January. earlier Freshservice The in seamless between was DeviceXX integration -- revamped in those X launched allows synchronization met We of one more across that first for data a platforms.

from see and that's which couldn't you DeviceXX, before. can do I pulled in data being working So be Freshservice

and You needed to switch applications forth. so

So that milestone. was first the

are version as The well. keep to that's year, on is year, this milestones track mind. which and the of we're early X cloud second next Those DeviceXX, for in technical late a milestone slating

lower for and out was the of were dynamics, that we went end losing management mid-market functionality In of for terms we asset competitive over solution reason that in IT an looked the management. deals the enterprise and IT asset

we're A companies, we these we that a to with ITSM, company. to their along kind did New that's with And but good the to us larger able we move when lot A kind Balance. of consistently initially hadn't it. now. them, and when their we're seen is into of what buy And DeviceXX of larger came example had manager want and the is asset New we've And buying they're they're deployments. that partnership the purchased of the as and solution. their during course discussions then part winning customer global with And implementing now that of DeviceXX want Balance we

is that component Another customer A of sale ServiceNow. of referenced, XX-year the hard big I manufacturer X that drive was DeviceXX.

been make us to it's a and seeing last to absolutely of had would market -- ability the as buzz been upmarket it sales for this that's entered deals is the involved we only pipeline super DeviceXX essential quarter, been remember, among was quarter again, quarter good, is just positive that DeviceXX we the last our And The the that fully to team pretty the twice but say largest and X about well. for with we've -- that positive. quarter fact when X XX just for and together, I the growth -- selling then real as fact our it's bring only DeviceXX positive. has been we're motion. that And So

Operator

Ryan from question last Barclays. MacWilliams our comes with And

Ryan MacWilliams

the for think this of by net year we how XXXX? guide? should contribution about DeviceXX implied the for about should revenue retention And we think shape how as Tyler, the

Tyler Sloat

Yes.

But dollar year. the anything we for see didn't we full talked about is right kind for -- don't for So net give different of talk QX we XXX%, year. guidance retention really and full the now,

rates, I model as now, get it's number fidelity we to expansion see as quarter, will And out Clearly, as and But that. update relatively more that that, on out consistent. QX. think get for it rates right so as churn we we we each be we going would just

plan to not do number. actually we DeviceXX, DeviceXX of the out terms In break

right, were positive top X bundle the the sold means included that's teams, deals As as in in the fruition. a is did script, DeviceXX Freshservice. sold that such, we actually half DeviceXX, of reason we the in new they're XX deal which really starting net And and come that deals to indicator with of Freshworks indicated QX by the to

go going very to to starting that. kind product, other be disassociate we and be one as one of all to united difficult revenue as product, the through one included from It's to it's

them So out, plan we to there's anomalies, but call any general, in if distinguish. don't huge we'll

Operator

and now all today. this Thank you, Thank program may concludes and you our session for for and Q&A disconnect. participating, you

Freshworks (FRSH) 11 Feb 252024 Q4 Earnings call transcript