Freshworks Delivers Strong Results in 2024, Driven by Customer Growth and Operational Efficiency

Freshworks Inc. (NASDAQ: FRSH), the provider of people-first AI service software, has announced its financial results for the fourth quarter and full year ended December 31, 2024. The company delivered another strong quarter, with revenue growing 22% year over year to $194.6 million, operating cash flow margin of 21%, and an adjusted free cash flow margin of 21%. Dennis Woodside, Chief Executive Officer & President of Freshworks, attributed the company's success to its uncomplicated, modern employee and customer experience service solutions.

Freshworks' revenue growth in 2024 was driven by an increase in the number of customers contributing more than $5,000 in ARR, which grew by 11% year-over-year and 13% adjusting for constant currency. The company welcomed and onboarded more customers to its community, including New Balance, Rawlings Sporting Goods, Sophos, Onfido, Mesa Airlines, and many more. Additionally, Freshworks appointed Srinivasan Raghavan as Chief Product Officer and Venkitesh Subramanian as Senior Vice President of Product Management, Customer Experience, further strengthening its product development and customer experience efforts.

The company's strong operating cash flow and adjusted free cash flow margins in 2024 can be attributed to several key drivers. First, Freshworks' revenue growth contributed to its cash flow margins, as the company generated more cash from its increased revenue. Second, Freshworks' operational efficiency improved, as evidenced by its operating cash flow margin of 21% in 2024, up from 18.93% in 2023. The acquisition of Device42, Inc. in 2024 also contributed to Freshworks' revenue and cash flow, with the results for the period after the acquisition included in the 2024 financial numbers.

Freshworks' net dollar retention rate remained strong at 103% (105% adjusting for constant currency), indicating that the company's customers are not only staying with Freshworks but also increasing their spending on its services. This is a significant improvement compared to the third quarter of 2024 and the fourth quarter of 2023, where the net dollar retention rate was 107% and 108%, respectively.

In conclusion, Freshworks' strong performance in 2024 was driven by customer growth, operational efficiency, and strategic initiatives. The company's ability to maintain or accelerate its revenue growth rate, improve its operational efficiency, and successfully execute its strategic initiatives will be crucial in sustaining these trends in the future. As Freshworks continues to deliver uncomplicated, modern employee and customer experience service solutions, investors should keep a close eye on the company's progress and potential opportunities.