Freshworks (FRSH) UBS Global Technology and AI Conference summary

Demand environment and business performance

• CX products focused on SMB and low-mid market continue to face macro pressures, with agent expansion rates leveling off but not yet recovering.

• Churn rates in CX reached their best levels ever, and net new customer additions have started to rise after previous declines.

• EX business remains strong, with expected Q4 recovery due to enterprise sales cycles, and is the main driver of overall growth.

• Q4 guidance assumes no macro improvement, with growth skewed toward EX and low to mid-teens revenue growth projected for next year.

• Bottom line guidance includes greater than 16% non-GAAP operating profit and over 25% free cash flow margin.

Growth strategy and segment focus

• Strategic review led to increased investment in EX, with new business and outbound efforts prioritized for this segment.

• CX will focus on SMB and commercial segments, with less emphasis on mid-market and low enterprise.

• Growth rates for EX are expected to maintain around 30%, with some pressure from scale and recent acquisitions.

• Device42 acquisition is expected to drive cross-sell opportunities, especially after integration and cloud migration.

• Tougher year-over-year comparisons are anticipated in the back half of next year due to Device42's inherited business degradation.

Expansion, innovation, and AI

• Net Dollar Retention in CX is just under one, with limited expansion modeled; focus remains on churn reduction.

• Major sales and product plays for next year include Device42 integration, ESM, and AI capabilities, with new features expected to impact bookings in the second half.

• AI is the primary expansion opportunity for CX, with strong attach rates for Copilot and self-service AI products in new deals.

• Early adopters of AI products are not reducing seat counts, and ARPAs are holding up, with a strategy to offer free trials to drive upsell.

• Freddy AI Agent, a new conversational self-service tool, is gaining traction among SMBs, with future innovation planned to enable more complex workflows.