Freshworks (FRSH) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $174.1 million, up 20% year-over-year, with strong free cash flow of $32.8 million and a 19% margin, reflecting over 600 basis points of margin improvement.

• Device42 acquisition completed in June 2024 for $238.1 million, enhancing IT asset management capabilities and expanding the addressable market, with integration and cloud-native transition underway.

• AI adoption accelerated, with Freddy Copilot and Self-Service bots seeing rapid customer uptake and measurable productivity gains, now core to sales conversations.

• Customer base grew to over 68,800, with notable wins in IT and employee experience, and strong attach rates for AI products across segments.

• Operating loss was $43.8 million for Q2 2024, similar to Q2 2023, with net loss improving to $20.2 million from $35.7 million.

Financial highlights

• Non-GAAP gross margin held at 85%, up nearly 100 basis points year-over-year; GAAP gross margin was 84%.

• Non-GAAP operating income was $13.1 million (8% margin), ahead of expectations due to lower expenses.

• Net dollar retention was 106%, with 21,744 customers contributing over $5,000 in ARR (14% growth YoY).

• Calculated billings grew 17% to $185.9 million; excluding Device42, billings grew 12%.

• Ended Q2 with $1.02 billion in cash, cash equivalents, and marketable securities.

Outlook and guidance

• Q3 2024 revenue expected between $180 million and $183 million, up 17%-19% year-over-year.

• Full year 2024 revenue guidance raised to $707 million-$713 million (18.5%-19.5% growth), including $11 million from Device42.

• Non-GAAP operating income for 2024 projected at $60 million-$66 million; free cash flow estimate increased to $132.5 million.

• Net dollar retention expected to be approximately 105% in Q3, reflecting ongoing expansion pressure.

• Non-GAAP net income per share guidance: $0.07–$0.08 for Q3, $0.32–$0.34 for full year.