Freshworks Inc.

Previous wording

Our customer base and operations have scaled over time. Our total revenue was $196.3 million and $165.1 million in the three months ended March 31, 2025 and 2024, respectively, representing year-over-year growth of 19%. We incurred operating losses of $10.4 million and $32.2 million for three months ended March 31, 2025 and 2024, respectively.

Current wording

Our customer base and operations have scaled over time. Our total revenue was $204.7 million and $174.1 million in the three months ended June 30, 2025 and 2024, respectively, representing year-over-year growth of 18%; and $401.0 million and $339.3 million in the six months ended June 30, 2025 and 2024, respectively, representing year-over-year growth of 18%. We incurred operating losses of $8.7 million and $43.8 million for three months ended June 30, 2025 and 2024, respectively; and $19.1 million and $76.0 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Current macroeconomic uncertainties, including inflationary pressures, significant volatility in global markets, tariffs, the threat of new or increased tariffs, escalating trade tensions, and geopolitical developments have impacted and may continue to impact business spending and the overall economy, and in turn our business. These macroeconomic events could adversely affect demand for our products and services. For example, during the recent quarters, our net dollar retention rate was adversely impacted by lower expansion within existing customers driven by macroeconomic pressures and we expect these pressures to persist for the foreseeable future. Additionally, foreign currency exchange rate fluctuations negatively impacted our revenue growth historically and volatility in the foreign currency market still exist. For each of the quarters ended March 31, 2025, December 31, 2024 and March 31, 2024, we had approximately 27%, 27% and 28%, respectively, of revenue exposure related to the euro and British Pound. If adverse conditions arise, they could have a material adverse impact on our results and our ability to accurately predict our future results and earnings.

Current wording

Current macroeconomic uncertainties, including inflationary pressures, significant volatility in global markets, tariffs, the threat of new or increased tariffs, escalating trade tensions, and geopolitical developments have impacted and may continue to impact business spending and the overall economy, and in turn our business. These macroeconomic events could adversely affect demand for our products and services. For example, during the recent quarters, our net dollar retention rate was adversely impacted by lower expansion within existing customers driven by macroeconomic pressures and we expect these pressures to persist for the foreseeable future. Additionally, foreign currency exchange rate fluctuations negatively impacted our revenue growth historically and volatility in the foreign currency market still exist. For each of the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, we had approximately 27% of revenue exposure related to the euro and British Pound. If adverse conditions arise, they could have a material adverse impact on our results and our ability to accurately predict our future results and earnings.

Previous wording

We define ARR as the sum total of subscription, software license, and maintenance revenue we would contractually expect to recognize over the next 12 months from all customers at a point in time, assuming no increases, reductions, or cancellations in their subscriptions, and assuming that revenues are recognized ratably over the term of the contract. For monthly subscriptions, we take the recurring revenue run-rate of such subscriptions for the last month of the period and multiply it by 12 to get to ARR. While monthly subscribers as a group have historically maintained or increased their subscriptions over time, there is no guarantee that any particular customer on a monthly subscription will renew its subscription in any given month, and therefore the calculation of ARR for these monthly subscriptions may not accurately reflect revenue to be received over a 12-month period from such customers, and net dollar retention rate may reflect a higher rate than the actual rate if customers on monthly subscriptions choose not to renew during the course of the 12 months. Monthly subscriptions represented 14% and 16% of ARR as of March 31, 2025 and 2024, respectively. The net dollar retention rate for customers on monthly contracts has generally been lower than our overall net dollar retention rate. In addition, as part of our regular review of customer data that includes reviewing customers purchasing our products via resellers so we can properly attribute them as end customers, we may make adjustments that could impact the calculation of net dollar retention rate.

Current wording

We define ARR as the sum total of subscription, software license, and maintenance revenue we would contractually expect to recognize over the next 12 months from all customers at a point in time, assuming no increases, reductions, or cancellations in their subscriptions, and assuming that revenues are recognized ratably over the term of the contract. For monthly subscriptions, we take the recurring revenue run-rate of such subscriptions for the last month of the period and multiply it by 12 to get to ARR. While monthly subscribers as a group have historically maintained or increased their subscriptions over time, there is no guarantee that any particular customer on a monthly subscription will renew its subscription in any given month, and therefore the calculation of ARR for these monthly subscriptions may not accurately reflect revenue to be received over a 12-month period from such customers, and net dollar retention rate may reflect a higher rate than the actual rate if customers on monthly subscriptions choose not to renew during the course of the 12 months. Monthly subscriptions represented 13% and 15% of ARR as of June 30, 2025 and 2024, respectively. The net dollar retention rate for customers on monthly contracts has generally been lower than our overall net dollar retention rate. In addition, as part of our regular review of customer data that includes reviewing customers purchasing our products via resellers so we can properly attribute them as end customers, we may make adjustments that could impact the calculation of net dollar retention rate.

Previous wording

Our net dollar retention rate was 105% as of March 31, 2025, which was a decrease from 106% as of March 31, 2024 primarily due to lower expansion within existing customers driven by macroeconomic pressures, offset by the addition of Device42 and a slight improvement in our overall churn rate. We expect our net dollar retention rate could fluctuate in future periods due to a number of factors, including, but not limited to, difficult macroeconomic conditions, our expected growth, the level of penetration within our customer base, our ability to upsell and cross-sell products to existing customers, and our ability to retain our customers.

Current wording

Our net dollar retention rate remained flat at 106% as of June 30, 2025, compared to 106% as of June 30, 2024, primarily due to lower expansion within existing customers driven by macroeconomic pressures, offset by a favorable foreign currency impact and slight improvement on overall churn rate. We expect our net dollar retention rate may fluctuate in future periods due to a number of factors, including, but not limited to, difficult macroeconomic conditions, our expected growth, the level of penetration within our customer base, our ability to upsell and cross-sell products to existing customers, and our ability to retain our customers.

Previous wording

(1) Free cash flow includes $1.5 million of restructuring costs paid during the three months ended March 31, 2025.

Current wording

(1) Free cash flow includes $0.7 million and $2.2 million of restructuring costs paid during the three and six months ended June 30, 2025.

Previous wording

(2) General and administrative expense includes stock-based compensation associated with RSUs and PRSUs granted to our Executive Chairman of $11.3 million and $13.5 million for the three months ended March 31, 2025 and 2024, respectively.

Current wording

(2) General and administrative expense includes stock-based compensation associated with RSUs and PRSUs granted to our Executive Chairman of $10.4 million and $12.7 million for the three months ended June 30, 2025 and 2024, respectively and $21.7 million and $26.2 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Revenue increased by $31.1 million, or 19%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Of the total increase in revenue, approximately $8.4 million was attributable to revenue from existing customers as of March 31, 2024, net of contraction and churn, and approximately $22.7 million was attributable to revenue from new customers acquired during the twelve months ended March 31, 2025, net of contraction and churn, as well as all revenue from Device42 during the quarter. Our net dollar retention rate of 105% as of March 31, 2025 reflects the expansion within existing customers and the sale of additional products to these customers. Our net dollar retention rate decreased from 106% as of March 31, 2024 primarily due to lower expansion within existing customers driven by macroeconomic pressures, offset by the addition of Device42 and a slight improvement in our overall churn rate. The majority of our revenue continues to be generated from subscription services.

Current wording

Revenue increased by $30.5 million, or 18%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Of the total increase in revenue, approximately $11.4 million was attributable to revenue from existing customers as of June 30, 2024, net of contraction and churn, and approximately $19.1 million was attributable to revenue from new customers acquired during the twelve months ended June 30, 2025, net of contraction and churn. Our net dollar retention rate of 106% as of June 30, 2025 reflects the expansion within existing customers and the sale of additional products to these customers. Our net dollar retention rate remained flat from 106% as of June 30, 2024 primarily due to lower expansion within existing customers driven by macroeconomic pressures, offset by a favorable foreign currency impact and a slight improvement in our overall churn rate. The majority of our revenue continues to be generated from subscription services.

Previous wording

The $5.4 million or 3%, increase in our operating expenses for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily driven by changes in personnel and related stock-based compensation costs, as well as higher amortization of developed technologies, offset by lower advertisement, marketing and branding costs.

Current wording

The $7.6 million or 4%, decrease in our operating expenses for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, was primarily driven by lower headcount following the restructuring, which decreased stock-based compensation expenses and personnel-related costs. This decrease is partially offset by the impact of annual compensation adjustments and higher variable incentive compensation which increased personnel-related costs. Additionally, the acquisition of D42 Parent, Inc. resulted in higher amortization of acquired developed technologies.

Previous wording

General and administrative expense increased by $5.2 million, or 12%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This was primarily driven by increases of $2.6 million in stock-based compensation expense, primarily due to transition of our President to CEO mid 2024 and $2.0 million in personnel-related costs primarily due to annual compensation adjustments and higher variable incentive compensation.

Current wording

General and administrative expense increased by $2.5 million, or 6%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily driven by increases of $2.7 million in stock-based compensation expense, mainly due to the transition of our President to CEO mid 2024 and $1.2 million in personnel-related costs primarily due to annual compensation adjustments and higher variable incentive compensation. The increases were partially offset by a decrease of $1.3 million in consulting fees, primarily related to acquisition-related expenses from the D42 Parent, Inc. acquisition.

Previous wording

Interest income decreased by $2.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to lower balances maintained in our marketable securities portfolios.

Current wording

Interest income decreased by $3.6 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to lower balances maintained in our marketable securities portfolios.

Previous wording

Other income (expense), net changed by $2.8 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to changes in foreign exchange rates in British Pound, Indian Rupee, and euro against the U.S. dollar.

Current wording

Other income (expense), net changed by $2.9 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to changes in foreign exchange rates in British Pound and euro against the U.S. dollar.

Previous wording

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. For the three months ended March 31, 2025 and 2024, we recorded a provision for income taxes of $3.9 million and $4.0 million on income (loss) before taxes of $2.6 million and $(19.4) million, respectively.

Current wording

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. For the three months ended June 30, 2025 and 2024, we recorded an income tax provision (benefit) of $5.6 million and $(10.4) million on income (loss) before taxes of $3.9 million and $(30.5) million, respectively. The net increase in income tax provision of $15.9 million was primarily related to a tax benefit of $14.3 million from the Device42 acquisition as a result of releasing the valuation allowance due to sufficient income in prior year, and a higher pre-tax profit this year in certain foreign jurisdictions.

Previous wording

Cost of revenue increased by $4.0 million, or 15%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This was primarily due to increases of $1.2 million in amortization of acquired developed technologies, $1.1 million in personnel-related costs primarily due to annual compensation adjustments and changes in retirement benefit obligations for employees in India, $1.0 million in subscription and third-party hosting fees as we increase our capacity to serve our increasing customer base. Our gross margin increased to 85% for the three months ended March 31, 2025 from 84% in the same period of the prior year, as we increased our revenue and continue to realize benefits from economies of scale primarily related to our third-party hosting costs.

Current wording

Cost of revenue increased by $7.0 million, or 13%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily due to increases of $2.2 million in amortization of acquired developed technologies acquired from D42 Parent, Inc., $1.9 million in personnel-related costs primarily due to annual compensation adjustments and changes in retirement benefit obligations for employees in India and $1.3 million in third-party hosting costs as we expand capacity to support our growing customer base. Our gross margin increased to 85% for the six months ended June 30, 2025 from 84% in the same period of the prior year, as we increased our revenue and realized benefits from economies of scale primarily related to our third-party hosting costs.

Previous wording

Restructuring charges of $0.4 million for the three months ended March 31, 2025, consisted of employee severance and termination benefits related to the restructuring plan that we initiated in November 2024.

Current wording

Restructuring charges of $0.4 million for the six months ended June 30, 2025, consisted of employee severance and termination benefits related to the restructuring plan that we initiated in November 2024.

Previous wording

As of March 31, 2025, our principal sources of liquidity were cash and cash equivalents of $594.2 million and marketable securities of $401.1 million, which were primarily held for working capital resources.

Current wording

As of June 30, 2025, our principal sources of liquidity were cash and cash equivalents of $486.0 million and marketable securities of $440.2 million, which were primarily held for working capital resources.

Previous wording

As of March 31, 2025, we had an accumulated deficit of $3.7 billion. Our operating activities resulted in cash inflows of $58.0 million for the three months ended March 31, 2025.

Current wording

As of June 30, 2025, we had an accumulated deficit of $3.7 billion. Our operating activities resulted in cash inflows of $116.6 million for the six months ended June 30, 2025.

Previous wording

Our material cash requirements from known contractual obligations consists of our obligations under operating leases for office space and contractual obligations for third-party cloud infrastructure. See Note 7 — Leases and Note 8 — Commitments and Contingencies for additional discussion of our principal contractual commitments.

Current wording

Our material cash requirements from known contractual obligations consists primarily of our obligations under operating leases for office space and contractual obligations for third-party cloud infrastructure, service subscription, and sponsorship arrangement to promote our brand and services. See Note 7 — Leases and Note 8 — Commitments and Contingencies for additional discussion of our principal contractual commitments.

Previous wording

In November 2024, our board of directors approved the share repurchase program, which authorized the repurchase of up to $400 million of our outstanding Class A common stock. For the three months ended March 31, 2025, we repurchased a total of 6.7 million shares of Class A common stock under this program in open market transactions for an aggregate purchase price of $111.8 million. As of March 31, 2025, $272.7 million remained available for future share repurchases.

Current wording

In November 2024, our board of directors approved the share repurchase program, which authorized the repurchase of up to $400 million of our outstanding Class A common stock. For the six months ended June 30, 2025, we repurchased a total of 14.9 million shares of Class A common stock under this program in open market transactions for an aggregate purchase price of $225.4 million. As of June 30, 2025, $159.1 million remained available for future share repurchases.

Previous wording

Net cash provided by operating activities of $58.0 million for the three months ended March 31, 2025 reflects our net loss of $1.3 million, adjusted for non-cash items such as stock-based compensation of $51.7 million, amortization of deferred contract acquisition costs of $7.6 million, depreciation and amortization of $6.4 million, and non-cash lease expense of $2.3 million; offset by $1.9 million from discount amortization of marketable securities and 0.5 million from changes in deferred income taxes. Additionally, net cash outflows from changes in operating assets and liabilities were $6.3 million. The net cash outflows from changes in operating assets and liabilities were due to an increase of $15.3 million in prepaid expenses and other assets, an increase of $8.7 million in deferred contract acquisition costs; offset by a decrease of $10.6 million in accounts receivable and an increase of $7.0 million in deferred revenue.

Current wording

Net cash provided by operating activities of $116.6 million for the six months ended June 30, 2025 reflects our net loss of $3.0 million, adjusted for non-cash items such as stock-based compensation of $100.9 million, amortization of deferred contract acquisition costs of $15.4 million, depreciation and amortization of $12.6 million, and non-cash lease expense of $4.6 million; offset by $3.7 million from discount amortization of marketable securities. Additionally, net cash outflows from changes in operating assets and liabilities were $10.3 million. The net cash outflows from changes in operating assets and liabilities were primarily due to increases of $22.7 million in prepaid expenses and other assets and $18.8 million in deferred contract acquisition costs; offset by increases of $15.4 million in deferred revenue and $7.8 million in accrued and other liabilities, and a decrease of $7.0 million in accounts receivable.

Previous wording

Net cash provided by operating activities of $40.6 million for the three months ended March 31, 2024 reflects our net loss of $23.3 million, adjusted for non-cash items such as stock-based compensation of $52.4 million, amortization of deferred contract acquisition costs of $6.7 million, net cash inflows of $4.1 million from changes in operating assets and liabilities, depreciation and amortization of $3.0 million and non-cash lease expense of $2.0 million; offset by $4.6 million from discount amortization of marketable securities. The net cash inflows from changes in operating assets and liabilities were due to a decrease in operating assets of $12.9 million in accounts receivable; offset by increases in operating assets of $7.1 million in deferred contract acquisition costs and $6.6 million in prepaid expenses and other assets; and an increase in operating liabilities of $9.5 million in deferred revenue, offset by decreases in operating lease liabilities of $2.8 million and $2.0 million in accounts payable.

Current wording

Net cash provided by operating activities of $77.0 million for the six months ended June 30, 2024 reflects our net loss of $43.5 million, adjusted for non-cash items such as stock-based compensation of $107.6 million, amortization of deferred contract acquisition costs of $13.5 million, depreciation and amortization of $6.7 million and non-cash lease expense of $4.4 million; offset by $13.8 million from changes in deferred income taxes and $8.7 million from discount amortization of marketable securities. Additionally, net cash inflows from changes in operating assets and liabilities were $11.0 million. The net cash inflows from changes in operating assets and liabilities were due to a decrease of $4.9 million in accounts receivable and increases in operating liabilities of $17.2 million in deferred revenue, $8.9 million in accrued and other liabilities and $6.0 million in accounts payable; offset by increases in operating assets of $16.9 million in deferred contract acquisition costs and $7.2 million in prepaid expenses and other assets; and a decrease of $2.0 million in operating lease liabilities.

Previous wording

Net cash provided by investing activities of $46.2 million for the three months ended March 31, 2025 consisted of $50.3 million in maturities and redemptions of marketable securities, net of purchases; offset by $2.8 million in capitalized internal-use software and $1.3 million in purchases of property and equipment.

Current wording

Net cash provided by investing activities of $3.4 million for the six months ended June 30, 2025 consisted of $12.5 million in maturities and redemptions of marketable securities, net of purchases; offset by $7.4 million in capitalized internal-use software and $1.7 million in purchases of property and equipment.

Previous wording

Net cash used in investing activities of $37.8 million for the three months ended March 31, 2024 consisted of $35.9 million in purchases of marketable securities, net of proceeds from maturities and sales, $1.2 million in capitalized internal-use software and $0.7 million in purchases of property and equipment.

Current wording

Net cash used in investing activities of $220.5 million for the six months ended June 30, 2024 consisted of $213.9 million cash paid for business combination, $1.2 million in purchases of marketable securities, net of proceeds from maturities and sales, $2.4 million in capitalized internal-use software and $3.1 million in purchases of property and equipment.

Previous wording

Net cash used in financing activities of $23.0 million for the three months ended March 31, 2024 consisted of $23.0 million in payment of withholding taxes on net share settlement of equity awards

Current wording

Net cash used in financing activities of $254.3 million for the six months ended June 30, 2025 consisted of $227.2 million cash paid to repurchase shares of our common stock, including $1.8 million of unsettled common stock repurchases as of December 31, 2024, and $30.5 million in payment of withholding taxes on net share settlement of equity awards; offset by $3.3 million of proceeds from the issuance of common stock under our employee stock purchase plan, net of taxes withheld.

Previous wording

Net cash used in financing activities of $130.3 million for the three months ended March 31, 2025 consisted of $113.6 million cash paid to repurchase shares of our common stock and $16.7 million in payment of withholding taxes on net share settlement of equity awards.

Current wording

Net cash used in financing activities of $34.3 million for the six months ended June 30, 2024 consisted of $38.0 million in payment of withholding taxes on net share settlement of equity awards, offset by $3.6 million of proceeds from the issuance of common stock under our employee stock purchase plan, net of taxes withheld.

Previous wording

There have been no changes to our critical accounting policies and estimates during the three months ended March 31, 2025 as compared to those disclosed in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K filed with the SEC on February 20, 2025.

Current wording

There have been no changes to our critical accounting policies and estimates during the three and six months ended June 30, 2025 as compared to those disclosed in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K filed with the SEC on February 20, 2025.