Freshworks Delivers Exceptional Q3 Performance with 22% Revenue Growth and Strong Free Cash Flow Margin
Freshworks, a leading cloud-based software company, has reported exceptional third-quarter (Q3) performance, surpassing estimates for growth and profitability. The company's Q3 results reflect its focus on product innovation, operational discipline, and strategic imperatives.
According to the company's CEO, Dennis Woodside, Freshworks outperformed across all key metrics, exceeding previously provided estimates for revenue growth and profitability. Revenue grew 22% year-over-year to $186.6 million, while the company generated free cash flow of $40.1 million, representing a free cash flow margin of 21%.
This significant improvement in free cash flow is notable, as it nearly doubled compared to last year, with a margin increase of more than 700 basis points year-over-year. Furthermore, Freshworks exceeded the rule of 40 in the quarter, indicating strong operational efficiency while scaling its business.
The company's customer base has also seen significant growth, with over 69,600 total customers added to its platform during Q3. This represents the highest organic net adds for customers in the last four quarters. Freshworks welcomed several notable customers onto its platform, including Republic Airways, University of Oxford, and Sparebank 1.
Freshworks' CEO highlighted three key strategic imperatives driving durable, profitable growth as the company scales its business. The first imperative focuses on investing in its largest and fastest-growing employee experience (EX) business, which includes ITSM, ITAM, IT operations, and ESM solutions. This investment has yielded impressive results, with over $390 million in annual recurring revenue (ARR) and a year-over-year growth rate of more than 40% in Q3.
The company's EX business is strong, with over 17,800 customers using its EX solutions to deliver exceptional IT and service management. By prioritizing investments in EX, Freshworks' customers are able to move up-market and win more mid-market and enterprise deals.
Freshworks' AI capabilities across its platform have also been a key focus area, aiming to increase productivity for customers and employee experience while improving customer experience. The company has accelerated growth for its customer experience solutions, including customer service and sales and marketing products, further driving profitable growth.
Overall, Freshworks' Q3 performance demonstrates the company's commitment to innovation, operational discipline, and strategic imperatives. With a strong free cash flow margin, significant revenue growth, and increased customer adoption, Freshworks is poised for continued success in the coming quarters.
