Freshworks Inc.

Good day and thank you for standing by. Welcome to the FreshWorks first quarter 2024 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Junha, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to FreshWorks First Quarter 2024 Earnings Conference Call. Joining me today are Girish Mathurbutam, FreshWorks Chief Executive Officer, Dennis Woodside, FreshWorks President, and Tyler Sloat, FreshWorks Chief Financial Officer. The primary purpose of today's call is is to provide you with information regarding our first quarter 2024 performance and our financial outlook for our second quarter and full year 2024. Some of our discussion and responses to your questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on FreshWorks' current expectations and estimates about its business and industry, including our financial outlook, macroeconomic uncertainties, management's beliefs, and certain other assumptions made by the company, all of which are subject to change. These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks include but are not limited to our ability to sustain our growth, to innovate, to reach our long-term revenue goals, to meet customer demand, and to control costs and improve operating efficiency. For discussion of additional material risks and other important factors that could affect our results, please refer to today's earnings release, our most recently filed Form 10-K, and our other periodic filings with SEC. Freshworks assumes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this call, except as required by law. During the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures for historical periods are included in our earnings release, which is available on our investor relations website at ir.freshworks.com. I encourage you to visit our investor relations site to access our earnings release, supplemental earnings slides, periodic SEC reports, a replay of today's call, or to learn more about Freshworks. And with that, let me turn it over to Girish.

Thank you, June, and thank you all for joining us on this call today to cover our first quarter of 2024. We delivered solid profitable growth in Q1 as we reported revenue of $165.1 million, reflecting an increase of 20% year-over-year. We meaningfully surpassed our estimate for free cash flow with $38.7 million in Q1 for a strong free cash flow margin of 23%. Our results reflect aspects of our growth strategy that are working, specifically in AI innovation, IT business momentum, and CSS adoption with larger customers, as well as the current macro environment. Before talking about our product and growth initiatives for the business, let me start with the news we announced earlier today, that we have signed a definitive agreement to acquire Device 42. With more than 800 customers around the world, Device42 provides enterprise-grade IT asset management capabilities, which we believe can further strengthen our fresh service offering. This is our first acquisition since we became a public company in 2021, and I'm excited about how this will enhance fresh service, which is currently our fastest growing business. With this acquisition, We will be able to provide advanced asset discovery and application dependency mapping across data center and cloud environments. Combined with our robust ITOM and ITSM capabilities, this will help IT infrastructure and ops teams track and understand the IT landscape to achieve greater efficiency in service delivery and reliability in IT operations. Through the combination, we'll be able to offer a more comprehensive solution for our customers. We have historically partnered with device 42 on large enterprise opportunities in the field. And after the transaction closes, we look forward to serving customers as one integrated team. We expect the transaction to close later in Q2. Turning to the quarter, I'm pleased with our progress across the business in Q1. First, we advanced AI innovations across our products and platform to improve agent productivity and customer satisfaction. The use of our bots with FedEx self-service continues to strengthen deflection capabilities across customers' preferred channels. Companies, including Porsche e-bike, Lytrix, and Travelopia, can leverage self-service capabilities to improve personalization and provide AI-generated answers from their knowledge base. Over the past quarter, our customers have seen deflection rates of more than 40% resulting from these bots. During the quarter, we made Freddie Copilot generally available to customers, and I'm excited about the initial traction. We received early feedback that customer service agents are realizing more than a 30% improvement in their response time. While it's still early to track Copilot metrics, we are encouraged by the initial results. Mahindra and Mahindra is an Indian maker of cars and farm equipment with more than $16 billion in revenue. Their on-premise ITSM solution became complicated to manage, had a clunky UI, and poor self-service capabilities. The company says adopting Freddie Copilot on top of fresh service has been a game changer. The solution article generator feature in particular is enabling more than 1,000 engineers to make knowledge management more efficient and enjoyable. And now the company plans to scale these products across other teams. We also saw continued momentum in our IT business with mid-market and enterprise customers. Customers are choosing us because our products are enterprise grade with a much lower total cost of ownership, including the latest AI capabilities. A global leader in golf equipment needed to find a way to solve for its 2,000 employees walking up to the IT service desk with simple or complex problems. After deploying fresh service, They later adopted our Freddie self-service capabilities. With the help of our latest AI bot, the company has been able to further automate requests and significantly reduce resolution times and eliminate the lines waiting for IT help. We continue to invest in helping organizations manage their IT infrastructure and operations. In Q1, we enabled IT teams to proactively communicate the status of critical services to their stakeholders using status pages. This has increased trust and led to reduced incident reports during service downtime. One such customer taking advantage of this capability is the Statue of Liberty Ellis Island Foundation. With more features and improvements, we are winning more mindshare with CIOs as we go after the large market opportunity in ITSM, ESM, and beyond. Turning to the CS business, adoption continues to grow for our customer service suite, our multi-channel solution that combines conversational support with robust ticketing features and powered with AI. Companies like Monica Vinader and Stitch Fix are choosing CSS. Stitch Fix employs more than 5,000 people and leverages stylists and AI to deliver personalized clothing and accessories to over 3 million customers. Their previous customer service solution was expensive and complicated with outdated AI technology. A longstanding free service customer, Stitch Fix adopted customer service suite as their solution in Q1, largely because of our leading AI innovations, including our co-pilot capabilities. Pretty co-pilot is boosting productivity for agents as power users have seen a reduction of resolution and response times of more than 30%. and CSAT scores increase on average by more than 5%. As we continue to improve productivity for these agents, we believe this will lead to higher adoption within organizations and more expansion opportunities. This quarter, we introduced sentiment analysis for real-time insights into the emotional tone of customer interaction. We also added generative AI-led quality management capabilities like article suggestions, and auto-completion to help support teams deliver superior responses. Within one quarter, these capabilities generated over 38 million interactions. Finally, I want to acknowledge today's news that I am transitioning into an executive chairman role at Freshworks, and Dennis Woodside, currently Freshworks president, will assume the chief executive officer role. I'm incredibly proud of what we have accomplished at Freshworks, since I founded the company 14 years ago. We are the first Indian SaaS company to be listed on NASDAQ, a true friend to more than 67,000 customers around the world, and home to our 4,900-strong global kudumba. Our business is strong, and we have a fantastic platform to launch Freshworks into a sustainable and growing public company. Through these 14 years of building and scaling Freshworks, Our hiring philosophy takes inspiration from an ancient poem from Thirukkural, written by a Tamil poet and philosopher, Thiruvalluvar, 2000 years ago. Translated in English, it means find the right person with the skills and resources to finish the job and empower them to do it. After seeing this, play out beautifully over the years. The time has come to apply this to the CEO role at Freshworks, and I'm fully confident that Dennis is the right leader to step into the CEO role. His deep understanding of the Freshworks business, his admiration and respect for our Indian roots, ability to attract world-class talent, and the operational excellence he has brought in to Freshworks over the last 18 months gives me the confidence to pass over the baton to Dennis, and I look forward to being his trusted advisor in my new capacity to help make Freshworks software available to the Fortune 5 million. Moving forward, I look forward to working with our product teams to drive our AI vision and long-term product strategy. I would like to thank the entire Freshworks team for all the support they have given me over the years and for delivering another solid quarter as we continue on our mission to deliver modern, AI-powered, customer and employee service solutions that increase efficiency and improve engagement for companies of all sizes. I would like to congratulate Dennis and now turn it over to him to share what we are seeing in the marketplace, how larger customers are driving our business growth, and how companies are expanding the use of our products.