Freshworks (FRSH) Q3 2023 Earnings
Did FRSH Beat Earnings? Q3 2023 Results
Yes. Freshworks reported Q3 2023 earnings of $0.08 a share on Oct 31, 2023, beating the $0.05 consensus estimate by 60.0%. Revenue was $153.6M against a $150.7M estimate.
Freshworks posted a strong third quarter, beating Wall Street estimates on both revenue and earnings as a meaningful profitability inflection took hold across the business. The cloud software company reported Q3 2023 revenue of $153.55 million, up 19.3% year over year and ahead of the $150.70 million consensus, while non-GAAP diluted EPS of $0.08 beat the $0.05 estimate by 60.00%, a sharp improvement from a loss of $0.01 per share in the year-ago period. The primary driver behind the bottom-line swing was disciplined expense management, with non-GAAP sales and marketing costs dropping to 46.4% of revenue from 53.9% a year earlier, allowing operating leverage to flow through as revenue scaled. Non-GAAP operating income reached $17.40 million, compared to a loss of $3.13 million in Q3 2022. Looking ahead, management guided Q4 revenue of $156.70 million to $159.30 million and raised its full-year 2023 revenue outlook to $593.00 million to $595.50 million, reflecting continued confidence in the company's growth trajectory.
- 19% year-over-year revenue growth (18% constant currency)
- Non-GAAP operating margin improved to 11.3% from negative 2.4% in Q3 2022
- Net dollar retention rate of 108%
- Customers contributing more than $5,000 in ARR grew 17% YoY to 19,551
- Non-GAAP gross margin expanded to 84.0% from 82.8%
- Sales and marketing expense as % of revenue declined to 59.1% (GAAP) from 67.5%
“We delivered another solid quarter of execution as we outperformed our estimates across our key financial metrics and further improved our profitability.”
Freshworks CEO, on the earnings call
What Was Freshworks's Outlook in Q3 2023?
For Q4 2023, Freshworks expects revenue of $156.7–$159.3 million (18–20% YoY growth, 17–19% constant currency), non-GAAP income from operations of $5.5–$8.5 million, and non-GAAP net income per share of $0.04–$0.06. For full year 2023, the company expects revenue of $593.0–$595.5 million (19–20% YoY growth), non-GAAP income from operations of $38.5–$41.5 million (midpoint raised to $40 million), and non-GAAP net income per share of $0.23–$0.25.
FRSH YoY Financials
| Metric | Q3 2023 | Q3 2022 | Year over year |
|---|---|---|---|
| Revenue | $153.6M | $128.8M | +19.3% |
| Gross Profit | $127.3M | $104.6M | +21.7% |
| Operating Income | −$38.7M | −$29.0M | +33.6% |
| Net Income | −$31.0M | −$21.2M | +46.4% |
Figures from SEC filings and company reports. Not investment advice.