Freshworks investor day – one takeaway that reflects enterprise customer push
In today’s episode one quick takeaway from Freshworks’s first investor day since the company went public two years ago, but first a few headlines. Headlines NVIDIA and Reliance Industries, on Sep. 8, announced a collaboration to develop India’s own foundation large language model trained on the nation’s diverse languages and tailored for generative AI applications to serve the world’s most populous nation, according to a press release from the AI GPU maker. Apple’s much anticipated iPhone 15 will be unwrapped tomorrow, and it will be nighttime in India. One big change everyone’s expecting is of course the USB-C port that Apple’s been forced to switch to, after the European Union mandated it for most electronics gadgets by next year. One thing today So last week, Freshworks organized its first investor day, on Sep. 7. Of course, the company has been providing quarterly updates and holding conference calls with analysts and so on since it was listed on the Nasdaq stock exchange two years ago. But this was a bona fide investor-focused meet where the company provided some granular data on how it’s doing and where it’s headed. The one takeaway for me, and probably for many others, was that the company’s Freshservice product is growing more than twice as fast as the company’s overall growth rate, and not on a very small base either. As many of you know Freshworks was founded in 2010. It has headquartered in San Mateo, California, and CEO Girish Mathrubootham told analysts and investors that 85 percent of the company’s 5,000 or so employees are in India. Mostly in Chennai, but also in Hyderabad, Bengaluru and elsewhere. The company has over 65,000 customers and 19,000 of those pay the SaaS vendor $5,000 or more every year in subscription fees of its software. Among its customers are Coca Cola, Honda, Sotheby’s, Thomas Cook, Klarna, African Bank, PhonePe and Mahindra Group. This year, as Freshworks pushes to become profitable, it’s delivering 10 percent free cash flow margins, Mathrubootham said. Freshworks started with a customer support software, Freshdesk, and today the overall customer support software business is at about $300 million ARR, and growing in the low to mid-teens percent annually, Mathrubootham said. But it’s Freshservice, the IT service management software and related products, that’s emerged as the most promising component of the company’s product portfolio. “Today, that's our fastest growing product with north of $250 million in ARR (annual recurring revenue),” Mathrubootham said. An important reason could be that, especially post Covid, large businesses have been overhauling their IT, moving to the cloud and looking for ways to reduce the complexity of managing a hoard of the technology solutions, including multiple software subscriptions. Freshservice clocked $260 million in ARR as at the end of the June quarter, which is Freshworks’s fiscal Q2. It was growing at more than 40 percent at the time, compared with the company’s overall growth rate of about 20 percent. The business has a total addressable market of some $20 billion, growing at 12 percent, according to market researcher and consultancy Gartner, including the areas of IT Service Management, IT Asset Management & Software Asset Management, IT Infrastructure Monitoring, AIOps, Service Orchestration and Automation Platforms. In this segment, “our customer is the CIO, or a senior IT leader, and we have a lot of traction in mid-market and in enterprise,” Freshworks’s president Dennis Woodside said. The company has some 8,500 customers paying more than $5,000 in annual Freshservice subscription fees, he said. In the coming months and quarters, Freshworks will launch more features to capture adjacent opportunities, Dennis said, with industry specific solutions, such as government agencies, security, operations, governance, risk and compliance.