Summary
Freshworks closed its fiscal 2024 second quarter with revenue of $174.1 million, up 20% from the prior-year quarter. Year-to-date revenue reached $339.3 million, also up 20%. The top line carried through to gross profit of $146.0 million in the quarter, up 21.4%, and $285.2 million for the six months, up 22.6%. Gross margin improved to 83.8% from 82.9% a year earlier, a gain of 1.0 percentage point, helped by economies of scale in third-party hosting costs.
Profitability remains the sticking point. GAAP operating loss was $43.8 million in the quarter, slightly wider than the $43.3 million loss a year ago, a 1.2% widening. On a year-to-date basis the operating loss narrowed to $76.0 million from $91.4 million, an improvement of 16.9%. Operating margin was negative 25.1% for the quarter, up 4.7 percentage points from negative 29.8%. Net loss narrowed sharply to $20.2 million from $35.7 million, a 43.4% improvement, and diluted loss per share was $0.07 versus $0.12. For the six months, net loss was $43.5 million versus $78.3 million, and diluted loss per share was $0.15 versus $0.27.
Cash generation was the quarter's standout. Operating cash flow was $36.3 million, up 82.6% from $19.9 million a year earlier, and $77.0 million for the six months, up 145.1%. Capital expenditures were $2.3 million in the quarter, up from $0.3 million. Free cash flow, a non-GAAP measure, was $32.8 million versus $18.1 million, and the company cited a free cash flow margin of 19%. Cash, cash equivalents and marketable securities stood at $1.02 billion as of June 30, 2024.
Customers contributing more than $5,000 in ARR totaled 21,744, up 14% year over year. Net dollar retention rate slipped to 106% from 108% a year earlier, which management attributed to lower expansion within existing customers under macroeconomic pressure, partly offset by the Device42 addition. Deferred revenue was $287.6 million, up 22.7%, and remaining performance obligations were $469.8 million, up 33.9%. The company closed its acquisition of Device42 on June 6, 2024 for roughly $238.1 million, adding IT asset management to its IT service offerings. It ended the quarter with over 1,200 customers using Freddy Copilot and 900 using Freddy Self Service, and launched a data center in the UAE.
For the third quarter, Freshworks guided revenue to $180.0 million to $183.0 million, growth of 17% to 19%, with non-GAAP income from operations of $13.0 million to $15.0 million and non-GAAP net income per share of $0.07 to $0.08. For the full year 2024, revenue is guided to $707.0 million to $713.0 million, growth of 18.5% to 19.5%, with non-GAAP income from operations of $60.0 million to $66.0 million and non-GAAP net income per share of $0.32 to $0.34.
The main risks are familiar ones. Macroeconomic uncertainty, inflation and geopolitical developments could weigh on business spending. About 27% of revenue carries exposure to the Euro and British Pound, so currency swings matter. The company has a history of net losses and an accumulated deficit of $3.7 billion. Management also flagged that the effects of macro conditions may not show up in revenue until future periods given the subscription model.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $174.1M | $165.1M | +5.4% | $145.1M | +20.0% |
| Gross profit | $146.0M | $139.3M | +4.8% | $120.2M | +21.4% |
| Gross margin | 83.8% | 84.3% | -0.5 pp | 82.9% | +1.0 pp |
| Research & development | $41.0M | $34.7M | +18.2% | $34.2M | +19.9% |
| Sales & marketing | $104.2M | $94.6M | +10.1% | $88.0M | +18.5% |
| General & administrative | $44.5M | $42.1M | +5.7% | $41.4M | +7.6% |
| Total operating expenses | $189.7M | $171.4M | +10.7% | $163.5M | +16.0% |
| Operating income (loss) | -$43.8M | -$32.2M | -36.1% | -$43.3M | -1.2% |
| Operating margin | -25.1% | -19.5% | -5.7 pp | -29.8% | +4.7 pp |
| Net income (loss) | -$20.2M | -$23.3M | +13.5% | -$35.7M | +43.4% |
| Net margin | -11.6% | -14.1% | +2.5 pp | -24.6% | +13.0 pp |
| Diluted EPS | -$0.07 | -$0.08 | +$0.01 | -$0.12 | +$0.05 |
| Customers | 1,200 | 67,000 | -98.2% | 65,000 | -98.2% |
| Net retention rate | 106.0% | 106.0% | ±0.0 pp | 108.0% | -2.0 pp |
Risks
MD&A states the net dollar retention rate was 106% as of June 30, 2024, a decrease from 108% as of June 30, 2023, primarily due to lower expansion within existing customers driven by macroeconomic pressures, and the company expects these pressures to persist. The filing also says current macroeconomic uncertainties have impacted and may continue to impact business spending.
MD&A discloses that approximately 27% of revenue exposure was related to the Euro and British Pound for the quarter ended June 30, 2024, and that foreign currency exchange rate fluctuations negatively impacted revenue growth historically while volatility may still exist.
The company acquired Device42 in June 2024 for approximately $238.1 million, adding IT asset management offerings, software license revenue and maintenance revenue, and consolidated Device42 in its results since the acquisition date. Integration, purchase accounting and related tax effects may create execution and reporting risk.
MD&A notes monthly subscriptions represented 15% and 19% of ARR as of June 30, 2024 and 2023, respectively, and that net dollar retention for monthly contracts has generally been lower than overall net dollar retention.
SaaS KPIs
All quarters →Net Dollar Retention Rate
Non-GAAP Operating Margin
Number of Customers Contributing More Than $5,000 in ARR
Free Cash Flow
Remaining Performance Obligations
ARR from Customers Contributing More Than $5,000 in ARR as a Percentage of Total ARR
Total Customers
Summary, forecast, risks and KPIs are extracted from Freshworks Inc.'s SEC filings for Q2 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.