Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Freshworks (NASDAQ:FRSH) Posts Better-Than-Expected Sales In Q3 But Contract Wins Slow Down

Published Oct 31, 2023 04:12PM ET Updated Oct 31, 2023 04:31PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Freshworks (NASDAQ:FRSH) Posts Better-Than-Expected Sales In Q3 But Contract Wins Slow Down
 
FRPT
+3.20%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Business software provider Freshworks (NASDAQ: FRSH) announced better-than-expected results in Q3 FY2023, with revenue up 19.3% year on year to $153.6 million. The company also expects next quarter's revenue to be around $158 million, in line with analysts' estimates. Turning to EPS, Freshworks made a GAAP loss of $0.11 per share, improving from its loss of $0.20 per share in the same quarter last year.

Is now the time to buy Freshworks? Find out by reading the original article on StockStory.

Freshworks (FRSH) Q3 FY2023 Highlights:

  • Revenue: $153.6 million vs analyst estimates of $150.7 million (1.86% beat)
  • EPS (non-GAAP): $0.08 vs analyst estimates of $0.05 ($0.03 beat)
  • Revenue Guidance for Q4 2023 is $158 million at the midpoint, roughly in line with what analysts were expecting
  • Free Cash Flow of $22.1 million, up 22.1% from the previous quarter
  • Net Revenue Retention Rate: 108%, in line with the previous quarter
  • Customers: 19,551 customers paying more than $5,000 annually
  • Gross Margin (GAAP): 82.9%, up from 81.2% in the same quarter last year
“We delivered another solid quarter of execution as we outperformed our estimates across our key financial metrics and further improved our profitability,” said Girish Mathrubootham, CEO and Founder of Freshworks.

Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.

Sales SoftwareCompanies need to be able to interact with and sell to their customers as efficiently as possible. This reality coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrates data analytics with sales and marketing functions.

Sales GrowthAs you can see below, Freshworks's revenue growth has been strong over the last two years, growing from $96.6 million in Q3 FY2021 to $153.6 million this quarter.

This quarter, Freshworks's quarterly revenue was once again up 19.3% year on year. We can see that Freshworks's revenue increased by $8.47 million in Q3, up from $7.39 million in Q2 2023. While we've no doubt some investors were looking for higher growth, it's good to see that quarterly revenue is re-accelerating.

Next quarter's guidance suggests that Freshworks is expecting revenue to grow 18.6% year on year to $158 million, slowing down from the 26.3% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 18% over the next 12 months before the earnings results announcement.

Product SuccessOne of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

Freshworks's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 108% in Q3. This means that even if Freshworks didn't win any new customers over the last 12 months, it would've grown its revenue by 8%.

Freshworks has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.

Key Takeaways from Freshworks's Q3 Results Sporting a market capitalization of $5.17 billion, Freshworks is among smaller companies, but its more than $1.16 billion in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

It was encouraging to see Freshworks narrowly top analysts' revenue expectations this quarter. The company also beat Wall Street's free cash flow estimates and raised its full-year outlook for adjusted operating profit. That really stood out as a positive in these results. On the other hand, its new large contract wins slowed. Overall, this was a mixed quarter for Freshworks. In terms of new products, the company shared that it unveiled an AI-powered Customer Service Suite that brings together self-service bots, agent-led conversational messaging, and automated ticketing management. The stock is up 1.95% after reporting and currently trades at $18.31 per share.

The author has no position in any of the stocks mentioned in this report.

Freshworks (NASDAQ:FRSH) Posts Better-Than-Expected Sales In Q3 But Contract Wins Slow Down
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email