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Freshworks (FRSH)
NASDAQ:FRSH
Top Page
Freshworks
(NASDAQ:FRSH)
70Neutral
Positive Factors
AI Innovation
Further Freddy product releases should provide momentum in adoption, customer addition metrics, and ARPU growth offering Freshworks an incremental tailwind.
Financial Performance
Freshworks reported solid Q1 results, as revenue topped the high-end of guidance by more than $3M, with operating margins improving by 10-points year-over-year and calculated billings growing by 17%.
Strategic Expansion
Freshworks is executing well on its strategic imperatives, such as maintaining momentum in its Employee Experience business, expanding its AI capabilities, and driving growth.
Negative Factors
Economic Risks
Recession risks and inflationary pressures both in the U.S. and abroad could negatively impact Freshworks results.
Growth Challenges
Lapping of Device42 slows growth in the second half, where there is a need to build confidence in upward revisions before gaining investor support.
Freshworks (FRSH) vs. S&P 500 (SPY)
Market Cap
$4.47B
Dividend YieldN/A
Average Volume (3M)3.18M
Price to Earnings (P/E)―
Beta (1Y)1.62
Revenue Growth20.46%
EPS Growth39.37%
CountryUS
Employees4,400
SectorTechnology
Sector Strength64
IndustrySoftware - Application
Share Statistics
EPS (TTM)-0.24
Shares Outstanding243,922,590
10 Day Avg. Volume3,151,936
30 Day Avg. Volume3,180,722
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap0.87
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit6.39
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$20.07Price Target Upside35.88% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering15
Freshworks Business Overview & Revenue Model
Company DescriptionFreshworks Inc., a software development company, provides modern software-as-a-service products worldwide. Freshworks Inc. was formerly known as Freshdesk Inc. and changed its name to Freshworks Inc. in June 2017. The company was incorporated in 2010 and is headquartered in San Mateo, California.
How the Company Makes MoneyFreshworks generates revenue primarily through a subscription-based model for its software-as-a-service (SaaS) offerings. Customers pay recurring fees, typically on a monthly or annual basis, to access the company's suite of products. These products include Freshdesk for customer support, Freshsales for sales automation, and Freshservice for IT service management, among others. Freshworks also offers tiered pricing plans, which provide different levels of functionality and support to meet the varying needs of businesses. Additionally, the company benefits from strategic partnerships and integrations with other technology providers, enhancing its product offerings and expanding its market reach. Upselling and cross-selling additional features or higher-tier plans to existing customers also contribute significantly to Freshworks' revenue growth.
Freshworks Financial Statement Overview
Summary
Freshworks exhibits strong revenue growth and maintains a solid financial position with low leverage and substantial cash reserves. However, challenges remain in achieving profitability, as indicated by negative profit margins. The significant improvement in cash flow generation is a positive indicator of future operational stability.Income Statement
Freshworks has shown strong revenue growth, with a TTM increase of 20.8%. Gross profit margin is robust at 84.3% TTM, indicating effective cost management. However, the company is yet to achieve profitability, with a negative net profit margin of -13.2% TTM. Although EBIT and EBITDA margins are negative, there is a positive trend in narrowing losses.72
Positive
Balance Sheet
The company maintains a strong equity position with an equity ratio of 70.6% TTM. Freshworks has manageable leverage, with a low debt-to-equity ratio of 0.03 TTM. Return on equity is negative due to the unprofitability of operations, but the overall balance sheet is stable with significant cash reserves.65
Positive
Cash Flow
Freshworks has achieved significant improvement in cash flows, with free cash flow growing by 91.6% TTM. The operating cash flow to net income ratio is positive, highlighting efficient cash conversion despite negative net income. The company continues to generate positive free cash flow, enhancing liquidity and operational flexibility.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 720.42M | 596.43M | 498.00M | 371.02M | 249.66M | Gross Profit |
| 607.09M | 493.06M | 402.23M | 292.99M | 197.17M | EBIT |
| -138.61M | -170.17M | -233.37M | -204.78M | -56.11M | EBITDA |
| -109.53M | -158.03M | -221.87M | -194.03M | -44.94M | Net Income Common Stockholders |
| -95.37M | -137.44M | -232.13M | -192.00M | -57.29M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.07B | 1.19B | 1.15B | 1.32B | 238.12M | Total Assets |
| 1.61B | 1.46B | 1.38B | 1.48B | 367.42M | Total Debt |
| 30.22M | 29.49M | 34.95M | 0.00 | 0.00 | Net Debt |
| -590.09M | -458.63M | -269.13M | -747.86M | -95.38M | Total Liabilities |
| 473.96M | 384.51M | 328.40M | 244.77M | 3.06B | Stockholders Equity |
| 1.14B | 1.07B | 1.05B | 1.24B | -2.70B |
| Cash Flow | Free Cash Flow | |||
| 151.47M | 77.84M | -14.77M | 2.34M | 21.77M | Operating Cash Flow |
| 160.65M | 86.18M | -2.52M | 11.46M | 32.53M | Investing Cash Flow |
| 38.80M | 158.50M | -284.83M | -420.30M | -11.43M | Financing Cash Flow |
| -67.26M | -60.62M | -156.35M | 1.06B | -1.91M |
Freshworks Technical Analysis
Positive
14.77
Price Trends
14.76
Positive
15.89
Negative
14.21
Positive
Market Momentum
-0.16
Negative
59.62
Neutral
93.61
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FRSH, the sentiment is Positive. The current price of 14.77 is above the 20-day moving average (MA) of 13.06, above the 50-day MA of 14.76, and above the 200-day MA of 14.21, indicating a bullish trend. The MACD of -0.16 indicates Negative momentum. The RSI at 59.62 is Neutral, neither overbought nor oversold. The STOCH value of 93.61 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FRSH.
Freshworks Risk Analysis
Freshworks disclosed 65 risk factors in its most recent earnings report. Freshworks reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Freshworks Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Neutral | $4.47B | ― | -6.85% | ― | 20.46% | 39.37% | |
66 Neutral | $4.65B | 486.34 | 2.11% | ― | 16.42% | ― | |
64 Neutral | $4.58B | ― | -966.61% | ― | 32.71% | -131.68% | |
63 Neutral | $3.76B | ― | -92.26% | ― | 10.94% | 4.54% | |
59 Neutral | $4.20B | ― | 99.24% | ― | 17.24% | 57.87% | |
59 Neutral | $10.65B | 10.45 | -6.56% | 3.01% | 7.31% | -12.18% | |
51 Neutral | $3.35B | ― | -32.59% | ― | 8.56% | 13.34% |
* Technology Sector Average
Performance Comparison
FRSH
Freshworks
14.77
0.10
0.68%
WK
Workiva
75.27
-4.77
-5.96%
BILL
Bill.com Holdings
45.57
-17.73
-28.01%
KC
Kingsoft Cloud Holdings
13.59
10.10
289.40%
ASAN
Asana
16.14
0.51
3.26%
GRND
Grindr
21.97
11.78
115.60%
Freshworks Earnings Call Summary
Earnings Call Date:Apr 29, 2025
(Q1-2025)
| % Change Since: 3.00%|
Next Earnings Date:Aug 05, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive quarter for Freshworks, with strong revenue growth, improved profitability, and significant progress in AI adoption and enterprise customer wins. However, the company faces challenges with slower CX growth, economic uncertainty, and leadership transitions.Q1-2025 Updates
Positive Updates
Strong Revenue Growth
Revenue grew 19% year-over-year to $196.3 million in Q1, driven by both EX (Employee Experience) and CX (Customer Experience) segments.
Significant Profitability Improvements
Delivered a non-GAAP operating margin of 24% and adjusted free cash flow margin of 28%, achieving a Rule of 47 due to revenue growth and cash flow margin.
Employee Experience (EX) Segment Success
EX business surpassed $420 million in ARR, growing 33% year-over-year on a constant currency basis, with significant upmarket success.
AI Adoption and Impact
Freddy AI products have seen significant adoption, with over 2,700 Copilot customers and AI driving productivity improvements and operational efficiencies.
Strategic Enterprise Wins
Secured large enterprise customers like Travis Perkins and Sophos, replacing legacy systems with Freshworks solutions.
Negative Updates
Moderate CX Growth
CX business grew only 7% year-over-year on a constant currency basis, indicating slower growth compared to EX segment.
Concerns Over Economic Uncertainty
Acknowledged market volatility and economic uncertainty, which could impact future performance.
Leadership Transition
Departure of Head of Sales, Abe, for personal reasons, with interim leadership in place, could lead to potential instability in sales operations.
Company Guidance
During Freshworks' first quarter 2025 earnings call, the company reported a 19% year-over-year revenue growth to $196.3 million, with a non-GAAP operating margin of 24% and an adjusted free cash flow margin of 28%, achieving a Rule of 47 for the quarter. The company added over 1,000 net customers, ending with more than 73,300 customers, and maintained a net dollar retention rate of 105% on a constant currency basis. Freshworks highlighted its strategic focus areas, including the expansion of its employee experience (EX) business, which surpassed $420 million in ARR, growing 33% year-over-year. The company also emphasized its AI product adoption, noting substantial improvements in customer resolution times and operational efficiencies. Additionally, Freshworks raised its full-year 2025 revenue guidance to between $815.3 million and $824.3 million, reflecting a year-over-year growth of 13% to 15% on a constant currency basis.Freshworks Corporate Events
Stock BuybackBusiness Operations and StrategyFinancial Disclosures
Freshworks Reports Strong Growth and Announces Stock Buyback
Positive
Nov 6, 2024
Freshworks Inc. announced a robust third quarter of 2024 with a notable 22% year-over-year revenue growth to $186.6 million and improvements in cash flow margins, reflecting strong market positioning among mid-market and enterprise clients. The company also revealed a stock repurchase program worth up to $400 million, showcasing its commitment to shareholder value amidst dynamic market conditions. Freshworks’ strategic focus on AI-enhanced services continues to attract major clients, supporting its growth trajectory.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.