A strong Q4 to end the year saw Freshworks pass an important milestone, reporting a 44% year-on-year revenue increase to deliver its first $ 100 million plus quarter.
The company posted revenue of $ 105.5 million for Q4 with a net loss of $ 74 million. Full-year revenue increased 49% year-over-year to reach $ 317.0 million with a net loss of $ 191 million.
Other note statistics:
- 14,814 customers now contribute more than $ 5000 in Annual Recurring Revenue (ARR), up 28% year-on-year and now 85% of the total ARR.
- Customers contributing $ 50,000 or more to the ARR now total 1,416 and account for 41% of the total ARR, up 61% year-over-year.
- 21% of our customers use more than one Freshworks product, with that percentage rising to 35% among $ 5000+ users.
- New signatures in Q4 include The British Museum, Databricks, Humanscale, Jollyroom, KaDeWe, Nation Safe Drivers, StyleSeat and Wheel Pros.
CEO Girish Mathrubootham noted that the larger customer demographic shows the largest growth rate, despite the fact that the enterprise market has not yet grown the main approach to going to market to date:
I want to say we hunt deer and rabbits, we don’t hunt elephants. So we don’t have a traditional business selling move in that sense. As we focus on the mid-market, we’re likely to see a lot of big companies actually coming in and pulling us into the enterprise. So that’s happening … both for Freshservice and Freshdesk, whose customer engagement and employee engagement are starting to become an area of focus for digital innovation.
Users
He selected several successful use cases to illustrate the continued momentum, including 7-Eleven, an example of a multi-product user:
Their customer support team had to deal with a wide variety of incoming requests from multiple channels. By moving to Freshdesk support desk and contact center products, 7-Eleven support agents, have seen significant productivity benefits from a modern tool, and managers have been able to improve key support metrics with better insights. We are encouraged to know that the 7-Eleven team plans to further expand their use of the product at Freshworks.
Other customer examples include The Southeast Alaska Regional Health Consortium, a non-profit group, serving the health interests of Southeast Alaska’s indigenous people, using Freshservice and Freshdesk messaging to manage IT help- its desks in rural locations thousands of miles away and onboard new users more easily and efficiently.
Q4 also saw the introduction of new IT ops management capabilities within Freshservice. Mathrubootham points to an early use case here:
One of our customers, PowerSchool, is a leading provider of K-through-12 education technology in North America, serving more than 1,000 schools and supporting millions of students. They use our new ITSM capabilities in Freshservice to increase the frequency of their deployment for the 40+ products they support, and reduce the rate of IT issues by more than five times. This allows them to reduce downtime and allow children to continue learning.
IT up
ITSM is seen as a sweet spot for expansion, Mathrubootham added, citing it as a $ 34 billion market opportunity:
Businesses are rapidly migrating their technology applications to their cloud. We often hear teams complain about alarm fatigue, the sheer number of tools they need to use, and the manual activities that lead to delays in identifying and fixing issues. Based on validation from our previous customers, we plan to increase our efforts to offer an integrated IT operations management solution that enables IT and engineering teams to predict service delays, avoid the losses and reduce the customer impact.
He added:
In the IT space, what we see are two trends. One is, all employees are away. Every business is looking at how they can be hybrid, even if they are opening offices. They need to support employees working from remote locations and they also need to do more for that, such as help enable their IP and DevOps teams to have a cloud-first solution.
So where, if you look at the Freshservice product, are our investments close – how do we allow IT teams to offer support through Slack and Teams? We already have all the capabilities and the new capability we are adding is, how can we enter the Enterprise Service Management market as well as ITOM, where we help reduce employee demands by being more active in helping engineers and DevOps teams understand what’s going on, and reduce those allowances in the first place?
In broader market terms, Q4 also saw the settlement of a trade secret misappropriation lawsuit filed by rival Zoho, regarding a former Freshworks employee wrongfully and without direction on access and use. of Zoho’s confidential information. Freshworks agreed to repair any damage done and Zoho dismissed its lawsuit.
As for the rest of the competitive scene, Mathrubootham says it remains relatively stable:
In the CX market, I think we see Zendesk and Salesforce Cloud service predominant, and we continue to see them. One of the trends we’re seeing is smaller start-ups that offer companies the ability to communicate and support, as in channels like WhatsApp or Facebook, and that’s one of the places if where we invest.
On the ITSM side, it really feels right [like] our strongest opportunity so far, as we see that we are a trusted alternative to ServiceNow. We continue to see ServiceNow and their focus is really on big business. We’re really focused on being that mid-market alternative.
What I take
The turmoil in the broader tech market and Wall Street’s (very grizzly) bearish stance toward tech stocks haven’t helped Freshworks more than a host of other companies recently. But the underlying direction of travel here remains strong with a focus on the mid-market ITSM/ITOM space that looks particularly healthy.
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