Q4 2021 Freshworks Inc Earnings Call

February 10, 2022

[music].

Thank you for standing by and welcome to the Freshworks Inc.'s fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, June Hu, Vice President, Investor Relations. Please go ahead.

To ask a question. During this session you will need to press star one on your telephone as a reminder, today's program may be recorded I would now like to introduce your host for today's program Joon Huh, Vice President Investor Relations. Please go ahead.

Thank you Jonathan good afternoon, and welcome to <unk> fourth quarter and full year 2021 earnings Conference call. Joining me today argue rich market with them Fresh works, Chief Executive Officer, and Tyler Sloat Fresh works Chief Financial Officer. The primary purpose of todays call is to provide you with information regarding our fourth quarter and full year 2021.

Thank you, Jonathan. Good afternoon and welcome to Freshworks fourth quarter and full year 2021 earnings conference call. Joining me today are Girish Matrabutham, Freshworks Chief Executive Officer and Tyler Sloat, Freshworks Chief Financial Officer.

The primary purpose of today's call is to provide you with information regarding our fourth quarter in full year 2021 performance and our financial outlook for our first quarter in full year 2022.

<unk> and our financial outlook for our first quarter and full year 2022.

Some of our discussion and responses to your questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Some of our discussions and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 B.

These forward-looking statements are based on Freshworks' current expectations and estimates about business and industry, management's beliefs, and certain assumptions made about the company as of the date thereof, all of which are subject to change.

These forward looking statements are based on fresh works current expectations estimates about business and industry management's belief and certain assumptions made about the company as of the date hereof, all of which are subject to change. These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially.

These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statement.

Really from those projected in the forward looking statements.

For discussion of material risks and other important factors that could affect our results, please refer to today's earnings release, our most recently filed Form 10Q, and other periodic filings with the SEC. Freshworks assumes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this presentation, except as required by law.

For a discussion of material risks and other important factors that could affect our results. Please refer to today's earnings release.

Most recently filed Form 10-Q , and other periodic filings with the SEC <unk> assumes no obligation to update any forward looking statements in order to reflect events or circumstances that may arise. After the date of this presentation, except as required by law.

During the course of today's call, we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, which is available on our Investor Relations website at IR Dot fresh works Dot Com I encourage you to visit our Investor Relations site.

During the course of today's call, we will refer to certain non-GAAP financial measures, reconciliation between GAAP and non-GAAP financial measures.

are included in our earnings release, which is available on our Investor Relations website at ir.freshworks.com. I encourage you to visit our Investor Relations site to access our earnings release, periodic SEC reports, a replay of today's call, or to learn more about Freshworks. And with that, let me turn it over to Girish.

Access our earnings release periodic SEC reports, a replay of today's call or to learn more about freshwater and with that let me turn it over to Girish.

Thanks, Jim and Hello, everyone.

Thanks, June , and hello, everyone. Thank you for joining us today as we review the fourth quarter and full year 2021 highlights for Freshworks and our priorities and.

Thank you for joining us today, Anthony to view, the fourth quarter and full year 2021 highlights for fresh looks and.

Our priorities and guidance for this year.

Q4 was another strong quarter.

Q4 was another strong quarter where revenue grew 44% to $105.5 million.

<unk> grew 44% to $105 5 million.

This is also our first 100 million dollar revenue quarter as a company.

This is also our first $100 million revenue quarter as a company.

So we had robust renewal activity in Q4, and our new business activity is seeing positive momentum with our field sales teams closing a number of sizable mid-market deals.

So we had robust renewal activity in Q4.

New business activity is seeing positive momentum with our field sales team closing a number of sizable mid market deals.

We also had another good expansion quadrant Q4.

We also had another good expansion quarter in Q4.

It is encouraging to see that companies of all sizes are demanding Freshworks easy to use modern products that are designed with the user in mind.

It is encouraging to see that companies of all sizes are demanding Chris look easy to use modern products.

Designed with the user in mind.

We accomplished a lot in 2021.

We became a publicly traded company in September and ended the year with over 56,000 customers.

Became a publicly traded company in September and ended the year with over 56000 customers.

We received industry validation from Gartner.

Our flagship product fish desk.

Our flagship product fresh desk was recognized as a visionary in the 2021 Gartner Magic Quadrant for CRM Customer Engagement Center.

Just as a visionary in the 2021, Gartner magic quadrant for CRM customer engagement center.

And fresh service was recognized as a challenger in the ITSM Magic Quadrant.

And for service was recognized as a challenger in the idea of some magic quadrant.

More recently, Fresh Service was also recognized as a strong performer in the Forrester Wave for Enterprise Service Management.

More recently Chris.

Chris Service was also recognized as a strong performer in the Forrester wave for Enterprise service management.

Last year, we also strengthened our board with three new independent directors and expanded our leadership team with proven public company experience.

On the people front, I'm incredibly proud of our employees for their focus and dedication as we continue to innovate, put customers first and execute as a public company. Overall, 2021 .

On the people front.

Incredibly proud of our employees for their focus and dedication as we continue to innovate put customers first and execute as a public company.

2021 was a great year for Facebook.

Now turning to the GTM highlights, in Q4, our field sales engine performed well, driving new logo acquisition and new revenue. Our inbound motion continues to be an efficient, high-velocity, go-to-market engine catering to SMB and mid-market customers. We also saw positive momentum on

Now turning to the GPM highlights in Q4, our field sales engine performed well driving new logo acquisition and new revenue.

Our inbound motion.

It has to be an efficient high velocity go to market engine catering to SMB and mid market customers.

We also saw positive momentum on multi product adoption.

As of Q4.

21% of our customers use more than one Freshworks product.

21% of our customers use more than one <unk> product.

In the cohort of customers paying more than $5,000 in annual recurring revenue, the multi-product adoption is even higher at $35.

In the cohort of customers paying more than $5000 in annual recurring revenue.

The multi product adoption, even higher at 35%.

A good example of multi-product usage is our customer 7-11, their customer support team.

A good example of multi product usage is our customer 711, they're.

<unk> customer support team.

had to deal with a wide variety of incoming requests from multiple channels.

To deal with a wide verity of incoming requests from multiple channels.

By switching to fresh desk, support desk, and contact center products...

By switching to fish desk support desk and contact center products.

711 support agents saw significant productivity benefits from a modern tool and managers were able to improve key support metrics with better insights.

7.11 support agents saw significant productivity benefits from a modern tool, and managers were able to improve key support metrics with better insight.

We are encouraged to learn that 7-Eleven team is planning to expand their Freshworks product usage even further.

We are encouraged to learn that 711 team is planning to expand their fresh looks product usage even further.

Smaller organizations also see the value of working with multiple <unk> products.

Smaller organizations also see the value of working with multiple Freshworks products.

The Southeast Alaska Regional Health Consortium, a nonprofit group, serving the health interests of the native people of Southeast Alaska, is using both fresh service and freshness messaging products to manage their IT helpdesk in rural locations across thousands of miles.

The southeast Alaska Regional help consortium, a nonprofit group serving the health interests of the need to people of southeast Alaska is using book for service and freshness messaging products to manage that helped us in rural locations across thousands of miles.

Now, they can more easily onboard new users, improving efficiency and record...

Now they can more easily onboard new users improving efficiency and record keeping.

These multi-product trends have naturally led to higher revenue per account and contributed to improvements in churn for us.

This multi product trends have naturally led to higher revenue per account and contributed to improvements in churn for us.

In November we held refresh our annual user conference.

In November , we help refresh our annual user conference.

We had over 18000 online resistance, we had several mid market customers showcase that unique product use cases live from Las Vegas.

We had over 18,000 online registrants. We had several mid-market customers showcase their unique product use cases live from Las Vegas.

We also held our inaugural champions of Delight award, recognizing customers, who deliver innovative and delightful employee and customer experiences using our products.

We also held our inaugural Champions of Delight Awards, recognizing customers who delivered innovative and delightful employee and customer experiences using our products.

At refresh we also introduced new product capabilities in it operations management within for service.

At refresh, we also introduce new product capabilities in IT operations management within Fresh Service.

One of our customers power school is.

One of our customers, PowerSchool, is a leading provider of K-12 education technology in North America, serving over a thousand schools and supporting millions of students.

Leading provider of K through 12 education technology in North America, serving Lauder housing schools and supporting millions of students.

They are using our new ITOM capabilities in Fris Service to increase their deployment frequency for the 40 plus products that they support and have reduced the rate of IT issues by over 5 times.

They are using our new item capabilities in for service to increase their deployment frequency for the 40 plus product that they support.

And have reduced the rate of issues.

Over five times.

This allows them to minimize downtime and enable children to keep learning.

Overall, we had a strong fourth quarter and a good finish to 2021.

Now looking ahead to 2020 to Crestwood has a big opportunity to grow in our target markets.

Now looking ahead to 2022, Freshworks has a big opportunity to grow in our target market.

Today, every consumer facing business is exploring new and better ways to engage with customers across digital and social channels like WhatsApp, text messaging or Instagram. For 2022, we are prioritizing customer experience and CRM product enhancements around these changing markets.

Today every consumer facing business is exploring new and better ways to engage with customers across digital and social channels like Whatsapp text messaging, our Instagram followers.

<unk> 2022, we are prioritizing customer experience and CRM product announcements around these changing market trends.

Leading consumer brands like discover.

leading consumer brands like Discover, Klarna, Delivery Hero, and Tritium already use our messaging product to engage with their customers and automate support over digital change.

Pharma delivery hero and <unk> already use our messaging products to engage with their customers and automate support or digitally tenants.

We will be increasing our product efforts to drive conversational agent experiences.

We will be increasing our product efforts to drive conversational agent experiences and increase coverage of digital channels and also offer self-service bots across various new channels.

And increased coverage of digital channels and also offer self service bots across various new channels.

So we'll also continue investing in core help desk capabilities and strengthen our support desk product.

We will also continue investing in core helpdesk capabilities and strengthen our support desk product.

Our second priority is that expansion beyond the it market.

Our second priority is our expansion beyond the ITSM market.

Businesses are rapidly moving their technology applications to the cloud.

Businesses are rapidly moving their technology applications to their cloud, and we frequently hear teams complaining about alarm fatigue, the overwhelming number of tools they have to use, and the manual activities leading to delays in identifying and fixing.

And we frequently hear teams complaining about alarm fatigue, the overwhelming number of tools they have to use the manual activities, leading to delays in identifying and fixing issues.

Based on validation from our early customers, we plan to increase our efforts in offering an integrated IT operations management solution that enables IT and engineering teams to anticipate service disruption, prevent outages, and minimize customer impact. These innovations to our fresh service product will help us further address the $34 billion IT operations management market opportunity.

Based on validation from our early customers.

Plan to increase our efforts in offering an integrated operations management solution that enables it and engineering teams to anticipate service disruption prevent outages and minimize customer impact.

These innovations to offer service product will help us further address the $34 billion <unk> operations management market opportunity.

We plan to continue investing in our Neo platform, which provides shared services and enables rapid product innovation.

We plan to continue investing in a new platform, which provide shared services and enables rapid product innovation.

This includes allowing our customers to extend and integrate our products with their business processes and continued work towards our vision of a unified CRM product to break down the silos across marketing, sales, and support.

To wrap up we believe that has tremendous opportunity across all three markets. We operate in we.

To wrap up, we believe there is tremendous opportunity across all three markets we operate in. We are investing for the long term and will continue to deliver modern unified products that users actually love using.

We are investing for the long term and we will continue to deliver modern unified products that users actually using.

I will now turn it over to our CFO Tyler to share more on our financials.

I will now turn it over to our CFO Tyler to share more on our financial business.

Thanks, Jim and thanks to all of you joining on the webcast as Jim mentioned earlier, we had a strong finish to the year and delivered a good fourth quarter.

Thanks, Gene. And thanks to all of you joining on the webcast. As Gene mentioned earlier, we had a strong finish to the year and delivered a good fourth quarter. Before diving into our financial results, I want to acknowledge all the great work and execution across all of our teams here at Freshworks over the past year.

Before diving into our financial results I want to acknowledge all the great work and execution across all of our teams here at <unk> over the past year.

Our employees have really done a tremendous job and we would really like to thank them.

Our employees have really done a tremendous job and we would really like to thank them. So thank you.

Now for today's call. I'll cover the financial results from our fourth quarter and also provide some key business trends we saw over the past year in 2021.

Now for today's call I'll cover the financial results from our fourth quarter and also provide some key business trends, we saw over the past year in 2021.

Afterward, I will.

Afterward, I'll transition to our forward-looking commentary and close with our expectations for Q1 and for the full year of 2022.

Transitioning to our forward looking commentary and close with our expectations for Q1 and for the full year of 2022.

As I go through our financial results, I'll focus most of my discussion around non-GAAP numbers, as this better represents how we manage our business.

As I go through our financial results I'll focus most of my discussion around non-GAAP numbers as this better represents how we manage our business. These non-GAAP numbers exclude the impact of stock based compensation and related expenses payroll taxes on employee stock transactions amortization of acquired intangibles.

These non-GAAP numbers exclude the impact of stock-based compensation and related expenses, payroll taxes on employee stock transactions, amortization of acquired intangibles, and other adjustments.

And other adjustments.

Starting with revenue, we delivered a $105 5 million in Q4, representing strong year over year growth of 44% for the quarter and 49% for the full year 2021.

Starting with revenue, we delivered $105.5 million in Q4, representing strong year-over-year growth of 44% for the quarter and 49% for the full year 2021.

In Q4, we continue to see healthy expansion and upsell activity from our existing customers.

In Q4, we continued to see healthy expansion and upsell activity from our existing customers.

The leading form of expansion continues to be driven by additional seats or agents.

our new business picked up momentum resulting in us closing more business early in the quarter, while also closing several larger mid-market type deals in the field.

Our new business picked up momentum, resulting in us closing more business early in the quarter. While also closing several larger mid market type deals in the field.

In terms of revenue contribution.

Nearly all of our revenue is subscription revenue, as our products are designed for easy onboarding requiring little or no implementation costs.

Nearly all of our revenue is subscription revenue as our products are designed for easy onboarding, requiring little or no implementation costs.

As a result, services revenue represented less than 5% of total revenue for the full year of 2021.

As a result services revenue represented less than 5% of total revenue for the full year of 2021.

In Q4, our non-gap gross margins maintain an impressive rate of nearly 83%.

In Q4, our non-GAAP gross margins maintain an impressive rate of nearly 83%.

This is the result of the ongoing efficiencies we were able to realize in our infrastructure spend, and an improved revenue mix from higher margin products, especially in the second half of the year.

This is the result of the ongoing efficiencies, we were able to realize in our infrastructure spend and an improved revenue mix from higher margin products, especially in the second half of the year.

Our non-GAAP operating expenses increased by $37 4 million.

Our non-GAAP operating expenses increased by $37.4 million compared to the prior year to $98.2 million.

Compared to the prior year to $98 2 million.

The majority of this increase is the result of personnel costs as we continue to hire and make investments across the company to support the rapid growth of our business over the past year. In addition to preparing us for public company operations. In terms.

The majority of this increase is the result of personnel costs as we continue to hire and make investments across the company to support the rapid growth of our business over the past year.

In addition to preparing us for public company operations.

In terms of quarter over quarter comparisons, our non-GAAP sales and marketing expenses increased $7 $4 million with notable items coming from personnel costs user conference costs and reseller commissions.

our non-GAAP sales and marketing expenses increased $7.4 million with notable items coming from personnel costs, user conference costs, and reseller commission.

non-GAAP G&A expenses increased $6 $9 million quarter over quarter to $17 9 million partially driven.

non-GAAP G&A expenses increased $6.9 million quarter over quarter to $17.9 million, partially driven by one-time costs related to illegal settlement in Q4.

Driven by onetime costs related to a legal settlement in Q4.

All of this led to a non-GAAP operating loss of $10 7 million for the quarter for the full year 2021, non-GAAP operating loss was $18 3 million.

All of this led to a non-GAAP operating loss of $10.7 million for the quarter. For the full year 2021, non-GAAP operating loss was $18.3 million.

As of December 31, 2021, we had approximately 322 million shares outstanding on a fully diluted basis using the Treasury method.

As of December 31, 2021, we had approximately 322 million shares outstanding on a fully diluted basis using the treasury method.

Turning to our operating metrics net dollar retention was 114% in Q4, which was negatively impacted by 1% due to FX for.

Turning to our operating metrics, net dollar retention was 114% in Q4, which was negatively impacted by 1% due to FF.

For contrast, FX and Q3 had a 1% positive impact in the 117% figure. So on a constant currency basis, net dollar retention ticks down 1% from Q3 to Q4.

For contrast, FX in Q3 had a 1% positive impact and the 117% figure so on a constant currency basis net dollar retention ticked down 1% from Q3 to Q4.

We feel good about this number as we expect to land in the 110 to low teens percentage range, given our natural expansion activity and the term characteristics of our business.

We feel good about this number as we expect to land in the 110 to low teens percentage range, given our natural expansion activity and the churn characteristics of our business.

So speaking of term, I'm pleased to say that this was an area where we're making progress with sustainable improvement.

So speaking of churn I am pleased to say that this was an area, where we're making progress with sustainable improvements.

In Q4, we achieved our lowest turn rates for our fresh desk business, which, combined with our ongoing customer success initiatives, led to an improvement in our overall turn rate to the high teens range at the end of the year.

In Q4, we achieved our lowest churn rates for our fresh desk business, which combined with our ongoing customer success initiatives led to an improvement in our overall churn rate to the high teens range at the end of the year.

Our second operating metric of customers contributing more than $5,000 in ARR grew 28% in Q4, ending at 14,814 customers and represents 85% of our ARR.

Our second operating metric of customers contributing more than $5000 and <unk> grew 28% in Q4, ending at 14814 customers and represents 85% of our <unk>.

For larger customers contributing more than $50,000 of ARR, this customer account maintained a high growth rate of 61%

For larger customers contributing more than $50000 of there are this customer can talent account maintained a high growth rate at 61%.

ending at 1,416 customers and represents 41% of ARR.

At 1416 customers and represents 41% of <unk> and.

And finally, our total customers grew 15%, ending the year at over 56,000, reflecting a net add of approximately 1,600 customers in the quarter.

And finally, our total customers grew 15% ending the year at over 56000.

<unk>, a net add of approximately 600 customers in the quarter.

As we continue to scale and add to our customer base, our revenue growth is being driven more through a higher average revenue per account, or ARPA, which is reflected in the expansion and multi-product trends we're seeing in the business.

As we continue to scale and add to our customer base. Our revenue growth is being driven more through a higher average revenue per account or ARPA, which is reflected in the expansion and multi product trends, we're seeing in the business.

Moving to billings and balance sheet items.

Our calculated billings growth increased to 45% in Q4, compared to 41% in Q3. Specific call-outs that impacted this growth rate are a billing...

Our calculated billings growth increased to 45% in Q4 compared to 41% in Q3.

Specific callouts that impacted this growth radar.

One billing duration mix of a positive 3%.

Early renewals and reserve activity adding up to positive 3%. And FX.

Early renewals and reserve activity, adding up to positive 3%.

And FX movements of a negative 2%.

So on a normalized basis, calculated billings growth for Q4 would be closer to the 41%.

So on a normalized basis calculated billings growth for Q4, we'd be closer to the 41% figure.

Given the number of factors that can impact this growth rate, we expect this figure may fluctuate quarter to quarter, but over a longer period of time, we believe it should track our revenue.

Given the number of factors that can impact this growth rate. We expect this figure may fluctuate quarter to quarter, but over a longer period of time, we believe it should track our revenue growth.

Our balance of cash and cash equivalents remained at approximately $1 3 billion at the end of the Q4.

Our balance of cash and cash equivalents remained at approximately $1.3 billion at the end of BIF Q4.

Similar to the prior quarter.

We generated positive free cash flow of $2 8 million in Q4, resulting in a positive cash flow for the full year 2021 of just over $2 million.

we generated a positive free cash flow of $2.8 million in Q4, resulting in a positive cash flow for the full year 2021 of just over $2 million. We continue to maintain a strong balance sheet for

We continue to maintain a strong balance sheet.

Providing financial flexibility for the business.

We have an efficient business model today, but we also recognize the tremendous growth opportunities in front of US we plan to invest to capture this growth as such we expect free cash flow to be approximately negative $25 million for the full year full year 2022.

We have an efficient business model today, but we also recognize the tremendous growth opportunities in front of.

We plan to invest to capture this growth, and as such, we expect free cash flow to be approximately negative $25 million for the full year 2022.

Factoring in specific timing of our business operations, we expect free cash flow amount to be approximately negative $5 million in Q1, a negative $15 million in Q2 at this quarter includes the impact of our annual merit cycle, ESP purchases and incremental Capex spend.

Factoring in specific timing of our business operations, we expect free cash flow amounts to be approximately negative $5 million in Q1 and negative $15 million in Q2, as this quarter includes the impact of our annual merit cycle, ESPP purchases, and incremental cap expense.

In Q3, we expect to be approximately negative $5 million and then slightly positive free cash flow in Q4 as trends improve by the end of the year and going forward into future years. One quick reminder.

In Q3, we expect to be approximately negative $5 million and slightly positive free cash flow in Q4 as trends improve by the end of the year and going forward into future years.

One quick reminder, which relates to our cash balance there will be a final lockup release for vested equity on Monday February 14th.

There will be a final lock-up release for vested equity on Monday, February 14th.

And we expect to use approximately $150 million of cash to net settle shares in meeting our tax requirements.

The gross number of shares that will be eligible for sale of approximately $202 million with a net settle amount of approximately $6 6 million shares which reduces the total number of shares available in the market.

gross number of shares that will be eligible for sale is approximately 202 million with a net federal amount of approximately 6.6 million shares which reduces the total number of shares available in the market.

This net settled shares activity will not impact free cash flow, but it will reduce our cash.

This net settle shares activity will not impact free cash flow, but it will reduce our cash balance.

As Gene mentioned earlier, we have a number of key business priorities for 2022, and we view this as an important investment.

As Jim mentioned earlier, we have a number of key business priorities for 2022, and we view this as an important investment year.

We're investing in product enhancements and ongoing innovation for the customer experience and CRM.

We're investing in product enhancements and ongoing innovation for the customer experience and CRM market.

We're also doubling down on our fresh service product as we expand our capabilities to further address the <unk> market opportunity.

We're also doubling down on our fresh service product as we expand our capabilities to further address the ITOM market opportunities.

What this means is that we will expect to add and invest more in our most important asset our people.

What this means is that we will expect to add and invest more in our most important asset, our people.

Given the current macro environment and employment trends.

Given the current macro environment and employment trends, we, like many other companies,

Like many other companies.

Expect the cost of retaining and attracting the best talent to increase in the upcoming year.

The cost of retaining and attracting the best talent to increase in the upcoming year.

Additionally, with the stronger U S dollar and based on current rates, we expect FX to have a negative impact to revenue growth of approximately one percentage point in both the first quarter and for full year 2022.

Additionally, with a stronger US dollar and based on current rates, we expect FX to have a negative impact to revenue growth of approximately 1 percentage point in both the first quarter and for full year 2020.

Today, approximately a third of our revenue has currency exposure or is not collected in US dollars.

Today, approximately a third of our revenue has currency exposure or is not collected in U S dollars.

These impacts have all been factored into our estimates going forward. So now let me

These impacts have all been factored into our estimates going forward.

So now let me turn to our forward looking guidance.

For the first quarter of 2022, we expect revenue to be in the range of $107 million to $109 million.

non-gap loss from operations to be in the range of $12.5 million to $10.5 million.

non-GAAP loss from operations to be in the range of $12 5 million to $10 5 million.

And non-GAAP net loss per share to be in the range of seven to five.

And non-GAAP net loss per share to be in the range of $0.07 to $0.57.

Assuming weight average shares outstanding of approximately 278.1 million.

Assuming weighted average shares outstanding of approximately $278 1 million.

For the full year 2022, we expect revenue to be in the range of $486 5 million to $495 million non-GAAP loss from operations to be in the range of $56 5 million to $48 5 million and non-GAAP net loss per share to be in a range of 23.

For the full year 2022, we expect revenue to be in the range of $486.5 million to $495 million.

non-gap loss from operations to be in the range of $56.5 million to $48.5 million, and non-gap net loss per share to be in a range of $0.23 to $0.19.

2019.

Assuming weighted average shares outstanding of approximately 286.5.

Assuming weighted average shares outstanding of approximately $286 $5 million.

Let me close by saying that we're super excited about how we finished the year 2021, and we're looking forward to a great year in 2022.

Let me close by saying that we're super excited about how we finish the year 2021, and we're looking forward to a great year in 2022. With that, let's take your questions. Operator.

With that let's take your questions operator.

Certainly ladies and gentlemen, if you have a <unk>.

Certainly. Ladies and gentlemen, if you have a question at this time, please press star then one on your touch tone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of DJ Hines from the court. Your question please.

Question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of DJ Hynes of Canaccord. Your question. Please.

Hey, Thanks, guys.

Chris maybe I can start with.

Gurish, maybe I could start with the cross-sell execution. I'm wondering if and when you think we get to the point where the majority of expansion is driven by incremental product attach versus seed expansion. I know seed expansion has been the driver to date. And how far off do you think that potential future might be? I know you're highlighting kind of growth being driven by higher ARPA, so I'm just curious to get some color on that front.

The cross sell execution I'm wondering.

If and when you think we get to the point, where the majority of expansion is driven by incremental product attach versus seed expansion I know seat expansion has been the driver to date and how far off do you think that potential future might be I know youre, highlighting kind of growth being driven by higher ARPA. So I'm just curious to get some color on that front.

Okay.

Yeah. Thanks, Vijay for the question.

So.

From a long-term perspective, we clearly see that Cross-cell will continue to grow. So let me just talk about and give you some color on the multi-product adoption trends that you're seeing today. So you notice that we mentioned that 21% of our customers use more than one product today. And that number, to jog your memory, was at 18% during the IPO time. So we are making steady progress, and we are happy with the progress that we're making. Most of the

From a long term perspective.

We clearly see that cross sell will continue to grow. So let me just talk about and give you some color on the multi product adoption trends that you're seeing today, so you'll notice that.

We mentioned that 21% of our customers to use more than one product today and that number to jog my memory was at 18%.

The IPO titles. So we are making steady progress and we are happy with the progress we've been making.

Most of the.

Expansion.

Our cross-sell today is coming from the Freshdesk family of products, where...

Our cross sell today is coming from the fresh desk family of products there.

customers are adding new channels into their support, like chat and automation through bots. So that is where we are seeing most of this coming.

Customers are adding like new candidates into their support like chat and automation through box. So that is where we are seeing.

Most of this coming.

And you also have to remember that two of our biggest products <unk> service, even though they do not have a natural cross sell motion between them, we're seeing customers.

And you also have to remember that two of our biggest products, Fresh Desk and Fresh Service, even though they do not have a natural cross-sell motion between them, we are seeing customers buying them. So we are confident that we will keep making incremental progress in terms of

So we are confident that we will keep making incremental progress in terms of.

this number of customers who are using more than one product, and we're happy with the way things are going. Our natural go-to-market motion, the activities that our customer success groups are doing also results in organic seed expansion as the business grows, so that's a natural example.

This number of customers, who are using more than one product.

We are happy to debate things are.

Natural.

Go to market motion the activity that our customer success groups are doing also result in.

Organic feed expansion, that's a business that's a natural expansion.

Yes, yes, okay.

Yeah, yeah. Okay. And maybe as a follow-up, this is one of the questions I got a lot during the IPO Roadshow was to help kind of try and quantify the cost advantage that you have in running, you know, R&D out of Chennai. And look, I think investors look at the line item at 20% of revenue, and you talked about all the product stuff and ambitions you have to do this year. I think it's a fair question. So is there any way to help investors think about that? And then maybe as part of it, you could talk about what you're seeing in terms of wage inflation in the region.

And then maybe as a follow up this is one of the questions I've got a lot during the IPO roadshow was to help.

Try and quantify the cost advantage that you have in running Arana.

R&D out of Chennai, and look I think investors look at the line item at 20% of revenue and you talked about all the product stuff and ambitions you have to do this year I think it's a fair question. So is there any way to help investors think about that and then maybe as part of it you could talk about what youre seeing in terms of wage inflation in the region.

Yeah, D.J., I'll take that one. This is Tyler.

Yes, I'll take that one this is tyler.

So from a from a core.

Cost advantage perspective, so we absolutely do have an advantage because we have access to an incredibly talented pool of capital and I think now we're kind of regarded as one of the top companies, especially new tech companies to work for in India. What it really does for us...

Cost advantage perspective, so we absolutely do have an advantage because we have access to an incredibly talented pool of capital and I think now we're kind of regarded as one of the top companies, especially kind of new tech companies to work for in India, What it really does for us.

is it allows us to be able to innovate faster, but also innovate more. So if you look at how many products we have.

Is it allows us to be able to innovate faster, but also innovate more so if you look at how many products, we have compared to kind of a relatively similar company. We have a broader set of products that are all starting to get to scale.

compared to kind of a relatively similar company. We, you know, we have a broader set of products that are all, you know, starting to get to scale. And that, you know, even though there is wage inflation, I think it's global. And so we sure we see it in India, we see it here, but we're not like any other company. We're like every other company right now that's kind of dealing with that. And they're, you know, clearly is doing a cost advantage for our employee base in India as compared to similar employee bases that would be here in North America.

And that even though there is wage inflation I think it is global.

Sure we see it in India, we see it here, but we're not like any other company. We're like every other company right now that's kind of.

Dealing with that and there clearly is doing a cost advantage for our employee base in India as compared to similar employee basis that would be here in North America.

So one point I would like to add, D.J. is.

One point I'd like to add D J.

India is not just an R&D center for us. It's also worth noting that our entire SMB business is actually closed from India, right, especially Chennai. So we have access to a top talent pool and we are talking about like sales, marketing, the entire go to market function being staffed from India. We see that also as a strategic advantage where they're able to sell to the long tail of the global SMB from our base in Chennai. So it's not just R&D.

India is not just an R&D center for US, it's also worth noting that.

Our entire SMB business is actually closed from India, especially Chennai, So we have access to.

Top talent pool, and we're talking about like sales marketing the entire go to market function being stopped from India. We see that also as a strategic advantage for being able to sell to the long tail of the global SNB from basin to start just R&D, yes.

Yeah, yeah, yeah, good distinction endpoint. Thank you, guys. I appreciate the color.

Good distinction on point. Thank you guys appreciate the color.

You bet. Thank you.

Thank you. Our next question comes from the line of Mike Murphy from Jpmorgan. Your question. Please.

Thank you. Our next question comes from the line of Mike Murphy from JP Morgan. Your question please.

Thank you very much and congrats on a strong finish to the year. I was looking at the Q4 billings growth and it's quite solid and it's above what we would have expected. It is a tough comparison.

Thank you very much and congrats on a strong finish to the year I was looking at the Q4 billings growth and it is quite solid and it's above what we would've expected and theres a tough comparison.

And, Garish, you did mention closing a number of sizable

And curious you did mention in closing a number of sizable mid market deals.

mid-market deals. So, I'm curious if you could shed any light on how sizable those deals might have been and just whether you see more of those in the 2022 pipeline. Yeah, thanks.

So I'm curious if you could shed any light on how sizable are those deals might have been and just whether you see more of those in the 2022 pipeline.

Okay.

Yes, thanks Mark.

I think.

Where we are seeing these mid-market deals, what I was mentioning, was specifically in the ITSM space where our first service product is seeing strong traction in Q4.

Where we are seeing these mid.

Mid market deals what I was mentioning was specifically in the <unk> space that our service product.

A strong traction in Q4.

At this point, I would also like to remind everyone that our go-to-market motion is not specifically.

At this point I would also like to remind.

Everyone that our go to market motion if not specifically.

like enterprise C, right? We don't have, we don't, I'd like to say we hunt for deer and rabbits, we don't hunt for elephants. So we don't have a traditional enterprise sales motion in that sense. So while we focus on mid-market, we kind of tend to see a lot of larger companies actually come and...

Enterprise <unk>, we don't have we don't I'd like to save your hunt for DRAM graphics, we don't hand for elephant. So we don't have a traditional enterprise sales motion in that sense. So while we focus on mid market.

Tend to see a lot of.

Larger companies actually come in.

Pull us into the enterprise so that's happening.

into the enterprise. So that's happening. And we are also like, if you're specifically asking about demand trends, I think we are seeing both for fresh service and fresh desk with customer engagement and employee engagement starting to become an area of focus for digital transmission. So we are continuing to see strong, healthy demand in both these.

We would also like.

If you are specifically asking about demand trends I think we are seeing both for Bristow is interest desk.

With customer engagement and employee engagement starting to become an area of focus for digital transformation. So we're continuing to see strong demand in both of these sectors.

Okay. And Krish, I'm sorry, one more point to add, sorry, is if you look at the number of customers who are paying us greater than $50,000 ARR, I think that's one of the metrics, they are now contributing to over 40% of our ARR. So we are seeing that number of customers increase 61%.

Okay.

Great.

I'm, sorry can you point to add sorry.

If you look at the number of customers, who are paying us dividends and $50000 I think thats one of the.

Metrics they are now contributing to over 40%.

And so we are seeing that number of customer increased 61%.

Okay, okay. Yes, it's interesting to see what's happening there. So, the second part of my question is, are you then, are you steering your R&D investments?

Okay. Okay.

Yes, it's interesting to see what's happening there so.

The second part of my question is are you then are you steering your R&D investments for this year.

for this year to support kind of ongoing shift towards that 50K kind of band? And it sounds like you are. And then if so, what are the most important enterprise capabilities that your customers are asking you to build? Because I think you had mentioned, you were talking about chatbots.

To support kind of ongoing shift towards that 50 K.

Band.

It sounds like you are.

And then if so what are the most important enterprise capabilities that your customers are asking you to build because I think you had mentioned you were talking about chat bots.

But you were also talking about integrated ITOM and some other vectors of change. What is it that you're going to be investing most heavily in?

But you were you were also talking about integrated.

And sort of some other.

Vectors have changed what is it that you are going to be investing most heavily in.

Our top three priorities mark for the year.

Yeah, our top three priorities, Mark, for the year are obviously in the top in all the in each one of those markets right in the customer service market. What we are seeing is.

Obviously in the top in.

In each one of those markets in the customer service market, what we're seeing is.

a good trend where more and more business, every consumer-facing business is looking to engage with customers not only through traditional channels of phone and email, but also through digital channels, whether it's Instagram or Facebook Messenger or WhatsApp in some parts of the world or text messaging in the U.S. So I think we are seeing that as a trend in our customers, and we are investing in

A good trend that more and more business every consumer facing business is looking to engage with customers.

Only through traditional channels of phone and email, but also through digital channels, whether it's.

Phil Gramm of Facebook messenger or Whatsapp in some parts of the world or text messaging in the U S. So I think we are seeing that as a trend in our customers and we are investing in that.

that area in our CX products specifically to help businesses actually engage better with their customers on these digital channels. On the IT space, what we are seeing again are two trends. One is, okay, all employees are remote. Every business is looking at how do we go hybrid, even if they open offices. So they have to be able to support employees working from remote locations, and they also have to.

<unk> in our CX products, specifically to help businesses actually engage with their customers on these digital Tennessee is on.

On the IP space, what we're seeing again, a two trends one is okay. All employees are.

Not every business is looking at how do we go hybrid even if the open offices. So they have to be able to support employees working from remote locations.

We also have to do.

Do more for that.

do more for their – like, help enable their IT and DevOps teams to have a cloud-first solution. So, that is where, if you look at the fresh service product, our investments are going to be around how do we enable IT teams to offer a cloud-first solution.

Debt and Dev ops teams to have a cloud first solution. So that is that if you look at the fresh service product Artemis things that are going to be around how do we enable 80 teams too.

Offer support.

Through slack.

through Slack and Teams. And we have all that capability already. And the new capability that we are adding is how do we get into enterprise service management, the ESM market, as well as ICOM, where we are able to help.

Teams and we have all the capability already and the new capabilities, we are adding it.

How do we get into enterprise service management in the Esa market as well as <unk>.

<unk> that we are able to help.

reduce those employee requests altogether by going more proactive on helping engineers and DevOps teams to understand what's happening and reduce those alarms in the first place. So, those two are definitely big priority areas. And obviously, the top priority for us is also how do we continue to deliver on the unified

Reduced dose employee requests altogether by making going to more proactive on helping engineers in the world seems to understand what's happening and introduce those allows us in the first place so those two.

Currently big priority areas and obviously the top priority for US is also how do we continue to deliver on the unified.

Customers are Cogs.

a customer record, so the unified view of the customer. How do we help businesses get that? So we are driving towards that and making good progress on that front as well.

If I'd view of the customer how do we help businesses get that so we are driving towards <unk> been making good progress on that front as well.

Okay very clear thank you very much.

Sure.

Thank you. Our next question comes from the line of Rob Oliver from Baird. Your question. Please.

Thank you. Our next question comes to the line of Rob Oliver from Baird. Your question please.

Great. Thank you very much for taking my questions. Krish, I'll start with you. Just on the S&P environment, one of the things that's come across to us has just been the torrid pace of unicorn development in India, and that pace has continued even amid, you know, choppy markets here in the U.S. to start the year. I know you called out earlier in response to, I think it was DJ's question about the fact that you not only have your R&D team in Chennai, but also your S&P team. So I just would be curious to hear from you just, you know, generally what you're seeing about S&P globally. There's a lot of cross currents, but then specifically about India and a follow-up to that would be like any early momentum around the Fresh Stack offering, which seems particularly compelling for that group. And then I had a quick follow-up for Tyler as well.

Thank you very much for taking my question. This is Chris I'll start with you.

Just on the SMB environment.

One of the things Thats come across to US has just been the torrid pace of Unicorn development in India and that pace has continued even.

Dropping markets here in the U S.

To start the year.

I know you called out earlier in response to I think it was Djs question about.

The fact that you guys not only have your.

R&D team in Shanghai, but also your SMB team. So just would be curious to hear from you just.

Generally what youre seeing about SMB globally, Theres, a lot of cross currents, but then specifically about India and a follow up to that would be like any early momentum around the fresh stack offering which seems particularly compelling for that group and then I had a quick follow up for Tyler as well.

Sure, so the general trend in India, I think there is definitely a ton of activity happening in startups from India, building global products from India is now a trend and you have investors pumping in a lot of VC money, we have seen that.

Sure.

The general trend in India, I think that is definitely a ton of activity happening in.

Startups from India building global products from India is now a trend that you have investors pumping in a lot of we see money if you have seen that and.

And it's obviously a great thing for India. So we are definitely seeing.

It's obviously a great thing for India. So we are definitely seeing.

A lot of FinTech, DevTools, startups, and B2B startups coming from India. So we are obviously like FreshTack, when we announced FreshTack last year in our refresh conference. I would like to remind you that FreshTack was actually...

A lot of Fintech.

<unk> startups and <unk> startups coming from India. So we are obviously fresh pack, when we announced <unk> last year.

Conference.

To remind you that <unk> was actually.

a promotional bundle for startups, a pricing and a packaging bundle, which combined our fresh desk, fresh sales and fresh marketed products into one affordable bundle for startups.

The promotional bundle for startups or pricing packaging bundle, which combined out fresh desk fresh sales in fish marketed products into one.

Affordable bundle for startups, because we wanted to get Starbucks when they were really young and get them on boarded for their front office suite, if they can get onto the fresh tax so that was the idea.

to get startups when they were really young and get them onboarded for the front office suite if they can get onto the fresh stack. So that was the idea. So we are seeing good early traction. We launched it in November , and we have a lot of startups using it.

Are seeing good early traction we launched it in November and we have a lot of startups using it in <unk>.

We expect – we have a full team, a startup program team, which

We expect we have a full team.

Startup program team, which.

not just for India, but globally they are promoting the startup package where we would like to get Freshworks products into the hands of these fast-growing startups at an earlier stage.

Not just for India, but globally. They are promoting that's hard to gauge whether you would like to get special products into the hands of these fast growing startups at an early stage.

Great. That's really helpful. Thanks, Karish. And then, Tyler, just for you, I appreciate the breakdown of the color on the billings growth and the variability there. But I was wondering, you know, to the extent that you can provide a little bit on the kind of free cash flow relative to this year, also very helpful the way you kind of broke it out by quarter. Is the incremental spending there any color, just to understand? I know that you guys have laid out some product initiatives, which Karish just repeated, and then the additional costs and hiring. But wondering if you could just add a little bit more color around some of the variability in that kind of free cash flow outlook for the year. Thank you, guys.

Great. That's really helpful. Thanks, Paresh and tailored just for you I appreciate the breakdown to the color on the.

Billings growth and the variability there.

Wondering to the extent that you can provide a little bit on the cut.

Free cash flow thoughts relative to this year also very helpful. The way you kind of broke it out by quarter.

Is the increment incremental spending there and any any color just to understand I know that you guys have laid out some product initiatives, which.

Rich just repeat it and then the additional cost in hiring but wondering if you could just add a little bit more color around some of the variability in that.

Free cash flow outlook for the year. Thank you guys.

Yes, you bet, Hey, Rob Thanks for the question. So, yes, we kind of broke down.

Yeah, you bet. Hey, Rob, thanks for the question. So, yeah, we kind of broke down how we're thinking about spend this year a little bit. We, you know, we.

How we're thinking about spend this year a little bit.

<unk>.

Really happy about the performance last year, free cash flow positive, produced some cash for the year. We said we're going to burn about $25 million this year.

Really happy about the performance last year free cash flow positive through some cash for the year and we said, we're going to burn about $25 million this year.

There's a couple things to note there. So we broke out the quarterly spend where we said $5 million in Q1, 15, and Q2.

Couple of things to note. There. So we broke broke out the quarterly spend where we said $5 million in Q1, 2015, and Q2 kind of $5 million in Q3 in terms of burn, but then we said will be positive in Q4 and expect to be positive going after and so so why why did we why are we increasing spend.

Kind of 5,000,000 in Q3 in terms of burn, but then we said, we'll be positive in Q4 and expect to be positive going after. And so so why did why did we, why are we increasing spend a couple of reasons? 1 number 1, we think there's a huge opportunity in front of us. And part of the reason to go public was to make sure that we have.

A couple of reasons one number one we think there's a huge opportunity in front of us and part of the reason to go public was to make sure that we have.

the resources and capital will capture that opportunity. We said, hey, as long as we think we can do it efficiently, we're going to do so, which we are.

The resources and capital to go capture that opportunity, we said hey, as long as we think we can do it efficiently we're going to do so which we are.

But there's a couple of other nuances as well. So we built in number one, the cost of being a public company, you think about Dino insurance, just period. That alone is pretty considerable cost. We'll have a full year of that second. We also think that some things are gonna come back to pre cobit levels in terms of.

But theres a couple of other nuances as well so we built in number one the cost of being a public company you think about D&O insurance just period.

That alone is pretty considerable costs will have a full year of that second we also think that some.

Some things are going to come back to pre COVID-19 levels in terms of.

Travel and facilities and we've built that expectation as well. So if you kind of go back to we now have a year and a half us along with every other company.

And we built that expectation in as well. So if you kind of go back to you know, we do know have a year and a half, us along with every other company.

of no travel and facilities, we think that's going to kind of go back to kind of pre-COVID levels there. So we built those costs and if you look at, you know, that incremental spend compared to earlier, it's really, we are being really pretty efficient.

No travel so we think thats going to kind of go back to kind of pre COVID-19 levels. So we built those costs and if you look at that incremental spend compared to earlier, it's really we are being really pretty efficient. We also have some capex spend that's going to happen during the year.

We also have some CapEx spend that's going to happen during the year. But again, the expectation is that we exit cash flow positive in Q4 and therefore going forward as well. Okay. That's really helpful. Thanks.

But again the expectation is that we exit cash flow positive in Q4, and therefore going forward as well.

Okay. That's really helpful. Thanks, Tyler Thanks, Chris I appreciate it.

Thank you.

Thank you. Our next question comes from the line of Brent Braceland from Piper Sandler. Your question please.

You. Our next question comes from the line of Brent <unk> from Piper Sandler Your question. Please.

Good afternoon, thanks for taking the question here, really wanted to start out around the pipeline of

Good afternoon, and thanks for taking the question here really wanted to start out around the pipeline.

of opportunities and funnel looking into 22 under the context of of pretty heavy sales investments and a buildup here over the last couple quarters. So, can you walk through maybe the the ramp and headcount over the last let's say nine months? Is that now starting to contribute to a larger pipeline going into next year? And as you think about the existing sales capacity, how much

Of opportunities and funnel looking into 'twenty two under the context of a pretty heavy sales investments in a buildup here over the last couple of quarters. So can you walk through maybe the the ramp in head count over the last let's say nine months is that now starting to contribute to a larger pipeline going into next year.

And as you think about the existing sales capacity how much more do you plan to kind of step on the gas here given the opportunity I. Appreciate that obviously returned to work and travel expenses will continue to kind of insulate that line, but just trying to understand from a head count perspective sales capacity.

More do you plan to kind of step on the gas here, given the opportunity? I appreciate that, obviously, return to work and travel expenses will continue to kind of inflate that line, but just trying to understand from a headcount perspective, sales capacity perspective, funnel perspective, how are you feeling kind of heading into next year?

It's prospective funnel perspective, how you're feeling kind of heading into next year.

Sure, Brett. I'll take down. This is Tyler. So, total headcount, we ended the year just over 4,600 headcount globally with the majority, you know, 4,000 of which are in India.

Sure I'll take that one this is tyler so.

Total head count we ended the year just over 4600 head count globally.

With the majority 4000 of which are in India.

We're investing across all of our functions. Clearly we, you know, functions like DNA, we want to see efficiencies, but you have to build up the infrastructure to support kind of the global nature. So when we look at product and engineering, we're gonna, you know, fully invest it to innovate and continue to build. But one of the areas that we are really investing in is our go-to-market presence. And you look at that, it's.

We're investing across all of our functions clearly.

Functions like G&A, we want to see efficiencies, but you have to build up the infrastructure to support kind of a global nature.

So when we look at product and engineering.

Fully invested.

And continue to build.

But one of the areas that we are really investing in is our go to market presence and you look at that.

kind of, you know, a couple of different areas. One, driving and help to drive that PLG growth motion to a lot of that is through marketing spend and ad spend to drive the funnel for trials, which then, you know, convert to customers primarily in the F&B side. However, a lot of that inbound also feeds our field pipeline. And then we're, you know,

Kind of a couple.

A couple of different areas, one driving and helped to drive that <unk> growth motion. So a lot of that is true.

Marketing spend and AD spend to drive the funnel for trials, which then convert to customers primarily in the SMB side. However, a lot of that inbound also feeds our field pipeline and then we are.

Really focused on building out the capacity continuing mainly still in New York.

With America, and Europe , but other places around the globe and we're doing it because we do see the demand.

And we're going to do it efficiently.

Meaning that we want to, you know, get enough headcount. So we have quota capacity to meet that demand. And then, you know, we will always kind of pause as we go. We don't break out the number of sales head that we have, our quota bearing reps and things like that.

That we want to get enough head counts, we have quota capacity to meet that demand and then we will always kind of pause as we go we don't break out the number of sales heads that we had our quota bearing reps and things like that.

But as you can imagine, we are hiring as kind of as rapidly as we can in that area.

But as you can imagine we're hiring.

Kind of as rapidly as we can in that area.

Good color. And then just as a follow up to that, Tyler, as you think about those investments, is that converting into, you know, a pretty robust pipeline going to next year? Like, how quickly are some of those investments converting to pipe?

Good color and then just as a follow up to that Tyler as you think about those investments is that converting into.

Pretty robust pipeline going into next year like how quickly some of those investments converting to pipe.

Uh, I would say, you know, we, we, we like to hire when we have the pipe. And so we are hiring and we.

I would say, we like to hire when we have the pipe and so we are hiring and we.

you know, we see really strong demand for our products. I mean, you look at our fresh service product, which is really playing squarely in the kind of mid-market enterprise space. We think there's a ton of upside there in terms of what we can go capture. And, you know,

We see really strong demand for our products and when you look at our fresh service product, which is really.

Thanks squarely in the mid market enterprise space.

Think there's a ton of upside there in terms of what we can go capture.

And.

We're going to act like kind of a lot of, you know, quote, unquote, enterprise companies. When you think about that, we're higher. We have a pipeline coverage ratio that we want to target, and, you know, we will digest and pause. Right now, we are kind of, you know, we see spaces that we can hire to, and we're actively trying to do that.

We're going to act like kind of a lot of quote unquote enterprise companies. When you think about that were higher we have a pipeline coverage ratio that we want to target and we will digest and pause right. Now we are kind of we see spaces that we can hire too and we're actively trying to do that.

Great. And then my last question here for maybe Chris here, what are you seeing on the competitive front? Obviously, I apologize that this question has been asked, but I'll go ahead and ask it again.

Great and then my.

Last question here for me Chris here.

What are you seeing on the competitive front obviously.

Apologize if this question's been asked but I'll go ahead and ask it again.

Are you seeing a distracted competitor, more opportunities, maybe just touch base a little bit about

Or are you seeing a distracted competitor more opportunities, maybe just touch base a little bit about.

The in the trenches Battle right now what are you seeing.

the in-the-trenches battle right now? What are you seeing the competition do? Are they responding with price? We'd love to hear any sort of color as you think about the competitive dynamic over the last, let's say, three to six months.

The competition do are they responding.

With price, we'd love to hear any sort of color as you think about the competitive dynamics over the last let's say three to six months.

Sure I'll take that Brent.

So first thing I'd say is we are not seeing a lot of difference in the last change in the competitive landscape in the last three months.

So first thing I would say is we are not seeing a lot of difference in the last – or change in the competitive landscape in the last three months. In the CX market, I think we see Zendesk and Salesforce Service Cloud predominantly, and we continue to see them. As I had mentioned in my –

The CX market I think.

CNN desk, and Salesforce service cloud predominantly and we continue to see them.

As I had mentioned in my.

Dr.

One of the trends that we are seeing is smaller startups who are offering companies the ability to do conversational support, like on channels like WhatsApp or Facebook, and that's one of the areas where we are investing in. So on the ITS insight, we feel really that's our strongest

One of the trends that we're seeing is smallest startups, who are offering companies the ability to do conversational support like on channels like whatsapp or Facebook and Thats one of the areas that we're investing in so on site.

Site.

<unk> really.

That's our strongest.

Yes.

Opportunity right now as we are seeing that we had a credible alternative to service now and we continue to see service now and therefore, because it's really on the large enterprise. We are squarely focused on being that mid market alternative and we are.

opportunity right now, as we are seeing that we are a credible alternative to ServiceNow, and we continue to see ServiceNow, and their focus is really on the large enterprise. We are squarely focused on being that mid-market alternative, and we are seeing larger customers, so we feel confident about that opportunity going forward. And in sales and marketing, I think it's still early on, but we see good validation for that

Logic customers. So we feel confident about that opportunity going forward and in sales and marketing I think it's still early on but we see.

Good validation for that.

story of the unified customer. We are still on that journey and we see HubSpot and we see all the other standalone CRM players as well. But as I said, it's early days for us. Great, well, great to hear.

So do you have a unified customer we are still on that journey and we see how spot and you see all the others.

Just trying to launch the atom PSS.

As I said, it's early days for us.

Great well, great to hear and thanks for the color. Thank you.

Yes.

Thank you. Our next question comes to the line of Stan Zlosky from Morgan Stanley . Your question, please.

Thank you. Our next question comes from the line of stands Lasky from Morgan Stanley . Your question. Please.

Hi, Ryan breast or understands Alaska here.

Hi, you have a Ryan Bresner on for Stan Zalosky here, just wondering if you have a quick question on maybe the breakdown of ARR by product, or just maybe some sort of additional color on how those have been trending and how we can think about his growth rate in 2022.

I'm just wondering if you ask a quick question on maybe the breakdown of <unk> by product or just maybe some sort of additional color on how those are trending and how we can think about that growth rate is going up by 22.

Yeah. Hey, Ryan, this is Tyler. Thanks for the question. We actually, you know, we don't break down the ARR byproducts right now. You know, what we had said in the past is that our fresh test products is over 200 and our fresh service products over 100. This is something that, you know, if we plan to do an analyst day later this year, which we're contemplating, that's like that's a candidate, right, for what we would talk about and get more detail, but right now we're not breaking down ARR byproducts.

Hey, Ryan this is Tyler thanks for the question, we actually we don't breakdown the air bed products right now what we had said in the past is that our fresh test products over 200, and our first service products over 100. This is something that if we plan to do an analyst day later this year, which we are contemplating.

Our candidate right for what we would talk about and give more detail, but right now we're not breaking down the <unk> byproduct.

They are all what I can say what we have also said in the past is that our.

They're all, what I can say, what we have also said in the past is that, you know, our fresh service product, we talk about it, it's, you know, it is smaller than Freshdesk, but it is growing faster. It's, you know, a great opportunity. Freshdesk is really doing well. We talked about the cross-sell motion and how a lot of that's being driven from a lot of our customers, you know, adopting Omni-Channel as they want different methods of communication with their customers. And then we've mentioned that, you know, our fresh market and sales product is still relatively new, but we're excited about the opportunity there. Thank you.

Press service product, we talk about it.

It is smaller than fresh to us, but it is growing faster.

It's a great opportunity for us to ask you is really doing well, we talked about the cross sell motion, how a lot of thats being driven.

From a lot of our customers adopting omnichannel they want different methods of communication with their customers and that we've mentioned that are <unk>.

From our current sales product is still relatively new but we're excited about the opportunity there.

Okay. Thanks for taking my question.

Thank you. Our next question comes to the line of Alec Wilkin from Wolf Research. Your question, please.

Thank you. Our next question comes from the line of Alex Zukin from Wolfe Research. Your question. Please.

Hey, guys. Thanks for taking my question I guess, maybe just the first.

Hey guys, thanks for that question. I guess maybe just the first

The first one actually maybe two for you Tom.

The follow-up on the cross-sell opportunity, you mentioned that 21% of customers have more than one product versus 18% at the IPO. How much of that is from customers landing with more than one product versus existing customers upgrading or expanding their deployments to multiple products? And more importantly, how do we think about that dynamic going forward for next year and the impact on NRR?

The follow up on the cross sell opportunity you mentioned that 21% of customers have more than one product versus 18% at the IPO grief.

Much of that is from customers landing with more than one product versus existing customers.

Upgrading or expanding their deployments to multi multiple products and more importantly, how do we think about that dynamic going forward for next year and the impact on MLR.

Hey Alex, this is Tyler. It's actually coming from both. We are seeing customers when they're landing that, you know, they are choosing omni-channel.

Hey, Alex.

Tyler it's actually coming from both we are seeing customers. When they are landing that they are choosing omnichannel.

as the main LAMD, which is, you know, as opposed to just a pure death solution that.

As the main Lambda, which is you know as opposed to just the pure desk solution that.

They want, you know, all these capabilities, specifically messaging, which G has talked about just in terms of a thesis of.

They want all these capabilities, specifically messaging, which <unk> talked about just in terms of a thesis of what I call a lot of the new modern day.

You know what a lot of the new modern day, you know, kind of communication with the next generation of customers is going to be. And so that's kind of following what we kind of forecasted and we think that will continue.

Kind of communication with the next generation of customers is going to be and so that's kind of following what we kind of forecasted and we think that will continue.

In terms of the other cross-bound motions, like we've talked about, it's still early, but the motion between kind of our marketing sales product to desk, we think that's going to be a natural motion going forward. And that's really going to be, you know, kind of down the road, that's about the vision of this unified customer record and the value that we can provide to our customers with them being able to have all this information around this 360 view of their customers. So we're excited about that, but it's still pretty early. Got it. And then.

In terms of the other cross sell motions.

We've talked about it's still early but the motion between kind of our marketing sales product to desk, we think thats going to be a natural motion going forward.

That's really going to be kind of down the road thats about the vision of this unified customer record in the value that we can provide to our customers with them being able to have all this information around this 360 view of their customers. So we're excited about that but it's still pretty early.

Got it and then I guess.

Given this is the first kind of look at next year.

Given this is the first kind of look at next year as a public company, obviously, a lot of people ask about billings, look at billings, there's a lot of volatility, variability in these, in your numbers quarter to quarter, there's also a number of adjustments. I know you're not guiding there, but how do we think about...

A company obviously a lot of people asked about billings look at billings. There is a lot of volatility variability in these.

Your numbers quarter to quarter. It is also a number of adjustments.

No youre not guiding there, but how.

How do we think about the.

How do you think about the flow and the seasonality for the year with respect to billings, you know, how do we compare it to this year prior year? Is there a good rule of thumb? Just given, you know, you kind of have to code it impacted years. If you will, with respect to that metric.

How do we think about the flow and the seasonality for the year with respect to billings.

How do we compare to this year prior year is there a good rule of thumb just given you kind of have to Covid impacted years, if you will with respect to that metric.

Yes, so I think.

In general, revenue, so in general, we would expect billing to track revenue growth and, you know, there's nuances and we called out some of the nuances from Q4 because we know that everybody.

In general revenue. So in general we would expect billings to track revenue growth and there is nuances and we called out some of the nuances from Q4, because we know that everybody.

You know, tracks billings and looks at it. We did talk about growth this year that, you know, we think it's gonna be impacted negatively by FX by 1% for Q1 and for the full year and also Q1 and Q2 just in terms of comparisons to prior year a pretty tough compares for us this year, you know, the prior year.

Tracks billings and looks at it we did talk about growth. This year that we think it's going to be impacted.

Negatively by FX by 1% for Q1 and for the full year and also Q1 and Q2 just in terms of comparisons to prior year are pretty tough compares versus this year. The prior year benefited from.

benefited from, you know, a week, you know, COVID year, the year before. So those growth rates looked great. And then, so I think we're going to, you know, we're going to have just a tougher compare in our Q1 and Q2.

Covid year the year before so those growth rates look great and then so I think we're going to we're going to have just a tougher compare in our Q1 and Q2.

That being said, like, we think we're doing really well, and we're super excited about the opportunity here. And, you know, the way we think about guidance is we have a lot of visibility kind of into Q1, you know, and then it gets less and less. And we're just trying to guide to what we see and then obviously we're gonna update it as we go along.

That being said, we think we're doing really well and we're super excited about the.

The opportunity here and the way we think about guidance is we have a lot of visibility kind of into Q1.

And then it gets less and less and we're just trying to guide to what we see and then obviously, we're going to update it as we go along.

Got it. Got it. Perfect. Thanks a lot. You better.

Got it.

Got it perfect. Thanks, a lot.

You bet.

Yes.

Thank you once again, ladies and gentlemen, if you have a question. Please press Star then one.

Thank you. Once again, ladies and gentlemen, if you have a question, please press star then one. Our next question comes from the line of Brent Thill from Jeffries. Your question please.

Our next question comes from the line of Brent Thill from Jefferies. Your question. Please.

Hi, This is on for Brent Thill. Thank you for taking my question.

Hi, this is Navsota on for Bread Sales. Thank you for taking my question. Wanted to maybe ask first to Gaurish,

Wanted to maybe ask for it.

<unk>.

One of the things we hear from investors about that.

One of the things we hear from investors is about the pull forward and demand for the front office app space in 2021. Maybe could you talk a little bit about how you look, how you think about demand expectations for next year and is there any pull forward within the markets that you operate in?

All forward in demand.

And as a follow up with that.

Okay.

Maybe could you talk a little bit about.

Nope.

Demand expectations for next year and is there any pull forward in the markets that you operate in.

Hey, Thanks for the question Love.

We have heard about some reports talking about pull forward in demand, but we have not actually noticed a big change in demand or experience of pull forward at Freshworks. So in fact, we actually see a healthy demand environment, and we are focused on capturing that, especially in the mid-market. So we – in Q4, we saw strong demand signals for fresh service in particular, and more than anything, the demand trend that we are seeing is –

I think we have heard about some reports talking about pull forward in demand, but we have not actually noticed a big change in demand experienced a pull forward at crestwood.

So in fact.

We actually see a healthy demand environment and.

We are focused on capturing that especially in the mid market.

In Q4, we saw strong demand signals for our service in particular and more than anything the demand trend that we're seeing.

As companies get out of the pandemic and COVID, we are thinking that, hey,

As companies get out of the pandemic and Covid, we are thinking that hey.

employees are starting to get back but companies are still have to deal with remote and every business now has to engage with customers on multiple channels. Online customer buying patterns are here to stay so we see this as an acceleration of digital transformation and that's going to continue both in customer engagement and employee engagement. So that's what we believe gives us this massive opportunity to keep going.

Employees are starting to get back the company has to have to deal with remote and every business has to engage with customers on multiple China's online customer buying patterns are here to stay so so we see this.

That's the acceleration of digital transformation and that's going to continue both in customer engagement and employee engagement. So thats. What we believe gives us this massive opportunity to keep going.

Got it.

Got it. And maybe one question for Tyler, if I may. Tyler, thank you for the commentary on the churn rates improving. How should we think about the pathway forward for net retention? Are you still thinking of 110 to low teens as we roll into next year? Or should we expect the improvements in churn to translate into higher net retention? Thank you.

And maybe.

One question for Tyler if I may.

Thank you for the commentary on.

The churn rate improving.

Should we think about the pathway forward net retention.

Are you still thinking.

Low teen.

As we roll into next year.

Sure.

Should we expect the improvement in churn comprise mainly to higher net retention.

Hello, Thanks for thanks for that question. So we went public we said hey, we want to be thought of as 110 to low teens and net dollar retention was obviously higher at that time, we said, it's going to come down.

You know, we went public, we said, hey, we're, you know, we want to be thought of as 110 to low teens, and that dollar retention is obviously higher at that time. But we said, it's going to come down. Actually, we're really pleased with the progress we made. I think, you know, we, we gave some color at 114, but that included 1% impact.

Actually we're really pleased with the progress we've made I think we gave some color $1 14, but that included 1% impact from.

From FX, it would have been 115 and the last quarter had a positive impact and so really just moved 1%. Turned being half of it where, you know, we have previously talked about kind of being a low 20s to high teens in terms of turn and now we're solidly in the high teens.

From FX it would have been $1 15 in the last quarter had a positive impact and so really just moved 1% churn being half of it where we had previously talked about kind of being a low twenty's to high teens in terms of churn and now we're solidly in the high teens.

We're not ready to say, hey, you should model out more than the kind of the 110 to low teens in terms of net dollar retention run rate, but things are going in the right direction. And we feel really good about it. We've made some great progress in terms of churn, you know, our fresh desk product had the best.

We're not ready to say Hey, you should model out.

More than the kind of a 110 to low teens in terms of net dollar retention run rate, but things are going in the right direction and we feel really good about we've made some great progress in terms of churn or fresh desk product had the best quarters.

turn quarters ever had. Fresh service was already at great turn levels, and the investments we made in the customer success group over the last year are truly starting to pay off. And so we'll update that as we think you guys should be modeling something different, but it feels really good right now.

Quarters ever had fresh service was already a great churn levels and the investments we made in the customer success group over the last year are truly starting to pay off.

So we'll update that as we as we think.

You guys should be modeling something different but it feels really good right now.

Got it perfect. Thank you.

Thank you. Our next question comes from the line of Natalie Howe from Bank of America Securities. Your question please.

Thank you. Our next question comes from the line of Natalie <unk> from Bank of America Securities. Your question. Please.

Oh, hey, guys. This is Brad Sills from V of A Securities. Thanks so much for taking the question. I wanted to ask about fresh sales. I recall a pretty good user base on the free version. I know it's still early. It wasn't material to ARR at the time of IPO. Just curious, you know, when might we see those conversions perhaps contributing more material to revenue? This year, should we be thinking further out? Thanks so much. Hey, thanks for the question, Brad.

Oh, Hey, guys. This is Brad sills from Bofa securities. Thanks, So much for taking the question.

I wanted to ask you about fresh sales I recall a pretty good.

User base.

Free on the free version.

It's still early it's not wasn't material to <unk> at the time of IPO, just curious when might we see those conversions, perhaps contributing more material to revenue is that this year should we be thinking further out. Thanks so much.

Thanks for the question Brad.

So let me clarify that.

Fresh sales, this is the first full year of the re-architected.

First sales.

This is the first full year of the re architected.

new fresh sales product where we actually unified marketing sales, chat and telephony into one platform with a unified customer record.

New fresh sales product.

Actually unified marketing sales chat and telephony into one platform with a unified customer record so the.

Numbers that we put out in the IPO, the number of customers using fresh sales, that's actually paying customers. It's not free customers.

Numbers that we put out in the IPO the number of customers using for sale, that's actually paying customers has got three customers. So, but we still feel that its early years.

So, but we still feel that it's early years. We are extremely happy with the validation that we are getting from customers who are seeing the value of this unified product. And as Tyler mentioned earlier, like later this year, we are contemplating an analyst day. And I think that would be the right time where we'll probably be ready to break out the customer numbers and hopefully revenue on the fresh sales product as well.

Extremely happy with the validation that we're getting from customers who are seeing the value of this unified product and as Taylor mentioned earlier.

Like later this year, we are contemplating an analyst day, and I think that would be the right timber.

Or would you be ready to break out the customer numbers and <unk>.

Hopefully revenue on the for sale product.

But.

But as you all know, CRM is a massive market and we are super excited about it.

The item with a massive market and we are super excited about this opportunity.

That's great to hear. Thanks so much, Girish. And then one more, if I may, on the churn commentary, I think, Tyler, you alluded to some progress you've made with this investment in customer success. Could you just elaborate a little bit more there and what drove the improvement there? Thanks again.

That's great to hear thanks, so much curious and then one more if I may.

The churn commentary I think Tyler you alluded to some.

Some progress you've made with this investment in customer success could you just elaborate a little bit more there and what drove the improvement there. Thanks again.

Yes, I mean, we I think we had mentioned earlier.

I think we had mentioned earlier that we made a lot of investments over the last year.

Made a lot of investments over the last year under Patty our chief customer officer in a customer success group and so when you look at that that team and the engagement model that we've created for our customers combined with all of the <unk>.

under Patty, our Chief Customer Officer, in a customer success group. And so, when you look at that team and the engagement model that we've created for our customers, combined with all of the innovation that we came out with the last year, right, we now, you know, have a mechanism to have that engagement and then the feedback loop on feature functionality that our customers need, and then, you know, with our pace of innovation to really put out.

Innovation that we came out with the last year right we know.

Have a mechanism to have that engagement and then a feedback loop on feature functionality that our customers need and then with our pace of innovation to really put out.

you know, stuff into the products that our customers want, and that is bearing fruit, right? So, they're staying with us, and then, you know, once – what we know about our customer bases, when they stay, they tend to grow. And you, you know, saw that in the cohort analysis that we had in the S-1. So, you know, we potentially can get a double impact from it. And it feels good, right? We've made a lot of progress, and, you know, we still have a ways to go, but definitely on the right trajectory there.

Stuff into the products that our customers want and that is bearing fruit right. So they are staying with us and then once we know about our customer basis when they stay they tend to grow.

Saw that in the cohort analysis that we had in the S. One so.

We potentially can get a double impact from it and it feels good right that we've made a lot of progress and we still have a ways to go.

But.

Definitely on the right trajectory there.

Thanks, so much Tyler.

You bet Brett Thank you.

Thank you. Our next question comes from the line of Ramo Linschow from Barclays. Your question please.

Thank you. Our next question comes from the line of Raimo <unk> from Barclays. Your question. Please.

Thanks for screening me in Congress for me as well. Two questions, one for Tyler. And how do you kind of maybe could you remind us how you're handling currency, because you obviously have a lot more international exposure than some of the other players and

Thanks for squeezing me in and congrats from me as well.

Two questions one for Tyler.

How are you.

Maybe could you remind us how you're handling currency because you obviously have a lot more international exposure than some of the other players.

you know, we're starting to see like an impact that we need to manage. Like talk a little bit about how you're handling it in terms of hedging, how your pricing works, et cetera. And maybe it's worth almost thinking about constant currency breaking it out rather than you having to do it for us.

We're starting to see like an impact that you need to manage like talk a little bit about how you're handling it in terms of hedging how your pricing works et cetera, and maybe it's worth almost thinking about constant currency breaking it out rather than you having to do with cost and then Gary just one for you. If you think about it and like one of the things that the.

And then, Gerish, one for you. If you think about ITSM, like one of the things that the ServiceNow guys have done is obviously there's a lot of automation on that enterprise level. How do you think about automation on the SMB side? Would that be an overkiller? Would that be like an extra selling opportunity as you go along in the future with your product development? Thank you.

The surface now guys have done is obviously, there's a lot of automation.

That enterprise level, how do you think about automation on the F&B side would that be an ob killer would be that would be like an extra selling opportunity as you go along in the future with your product development. Thank you.

Yeah, hey, why don't I take the ITSM product question first?

Yes.

I don't I take the <unk>.

Some product question first.

Yes.

It's more interesting.

Because it's more interesting.

Yeah.

Yes.

So one thing it's important to clarify is our fresh service product.

The one thing.

Wanted to clarify is our service product.

Basis inherently more mid market, it's not necessarily SMB, because you have to understand that even if you are selling a 10 seat license.

you're talking about a company with 1000 employees, right? Or maybe 500, 750 or 1000 employees. So the fresh service product has a very interesting dynamic where we don't have a lot of really small companies. These are smaller teams, IT teams are very small, but in mid-market companies. And the way we are able to build automation is, so we have an,

Youre talking about a company with thousands of employees are maybe 500 to 750 of those are in place. So.

The first service product has a very interesting dynamic when we don't have a lot of really small companies. These are smaller teams the <unk> team to the small and mid market companies and the way we are able to build automation.

So we have and.

Orchestration layer built into the product.

orchestration layer built into the product, which actually handles a ton of this automation. So, this is like a drag-and-drop interface similar to a low-code, low-code where

Which actually handle kind of this automation.

So this is like a drag and drop interface similar to a local local there.

Frequent runbook automation tasks like spinning off new cloud instances or, let's say, creating a ticket if there's an alert to the monitoring system, a lot of that IT automation capabilities are natively built in Fresh Service and our mid-market customers actually like us. And that's what makes this a credible alternative to service.

Frequent run book automation tasks spinning.

Spinning up new cloud instances are let's say, creating a ticket.

I'll add to the marketing system a lot of that at all.

Automation capabilities natively built in for service and augment bucket customers actually like and Thats what makes us.

A credible alternative to themselves.

Yes, okay.

Yeah, okay. Yeah, I'll take the currency one.

Yes, I'll take the currency so.

Yes so.

Yeah, so we do have some currency impact. We've got about 32% of our ARR that's in non-USD kind of currencies.

I think we do have some currency impact, but we've got about 32% of our IRR thats in non USD.

Currencies. So you asked what are we doing about it number one thinking about constant currency, we have discussed that internally so we might.

So yeah, you asked what are we doing about it? Number one, thinking about constant currency. We have discussed that internally, so we might.

You know, we might be presenting numbers like that. We're obviously not doing it right now. And then we are also looking at putting some hedging programs in place.

Might be presenting numbers like that we're obviously not doing it right now.

And then we are also looking at putting some hedging programs in place that would kind of mitigate risk and just kind of smooth things out and so both of those both of those options. We're looking at right now as you can see we're trying to be as transparent as possible with numbers right now.

that would kind of mitigate risk and just kind of smooth things out. And so both of those options we're looking at right now. As you can see we're trying to be as transparent as possible.

with numbers right now based on the impact and you know clearly if we put in hedging it'll solve some of that but you know it takes a little while to put in those structures uh so until we do that we will try to continue that transparency perfect thank you

Based on the impact in.

Clearly if we put in hedging it will solve some of that but it takes a little while to put in those structures. So until we do that we would try to continue that transparency.

Perfect. Thank you very much.

Thanks very much.

Thank you. Our next question comes from the line of Brian Peterson from Raymond James. Your question please.

Thank you. Our next question comes from the line of Brian Peterson from Raymond James Your question. Please.

Hey guys, this is Chase Donovan on for Brian Peterson. I just had one on the ITOM product launch. You guys launched it back in November . I believe you highlighted the PowerSchool using that in your favorite remarks. Just curious on any broad feedback that you've heard from customers early on and then can you help the investors frame the opportunity there? How do you think about the potential opportunity to be almost 9,000 fresh servers customers in stateomin.org today?

Hey, guys. This is James Donovan on for Brian Peterson, just had one on the.

Product launch you guys launched that back in November I believe Holliday pad.

Squeezing that youre prepared remarks.

Just curious on kind of any broad feedback that you've heard from customers early on and then can you help the investors frame the opportunity there how do we think about the potential upsell opportunity.

Almost 9000 crushers customer okay. Thanks.

So on the, on the, thanks for the question, Steve. I think, or Chase, Chase, I didn't get the name right.

So on the thanks for the question Steve.

Steve I think.

Our chase Jacobson.

Named rate.

So on the item function I think the first thing.

So on the ITAM functionality, the first thing is we actually started building ITAM after hearing

<unk> actually started building item after hearing.

from our customers on why they thought it made sense to be in the first service product. So they were all using other third-party tools and they felt it would make a great value addition. So this was actually built in partnership with some of our customers. So just to clarify, what are the capabilities that we have released? In fact....

Like from our customers on why they thought it made sense to be in the first service product.

So they are all using other third party tools and they felt it.

Valuation. So so this was actually built in.

Partnership with some of our customers. So just to clarify what are the capabilities that we have released to in fact.

We have unified incident response management on call scheduling and automated alert grouping, we just bought.

We have unified incident response management with on-call scheduling and automated alert grouping, which is powered through our AIOps. So basically what it helps is.

So basically what it helps us.

most IT teams instead of reacting to customers.

Most teams instead of reacting to customers.

Complaint about what's not working so we are helping them really get proactive by understanding all the alerts that are coming in from the monitoring system, but take out the false positives really help them understand what's going on and be proactive. So this is like a super value add to 80 teams.

complaints about what's not working. So we are helping them really get proactive by understanding all the alerts that are coming in from the monitoring system, but take out the false positives, really help them understand what's going on and be proactive. So this is like a super value add to IT teams and our customers. We are hearing encouraging reports from our customers like PowerSchool. And I think

Our customer that we are getting encouraging reports from our customers like power school.

And I think.

We definitely think this is going to, we'll be able to take this module as an add-on to all of our existing customers, as well as land new teams with fresh services.

We definitely think this is going to be able to take this.

Module as an add on to all of our existing customers as well as.

Land new teams.

Good for service.

Perfect. Thanks.

Thank you. Our next question comes to the line of Scott Berg from Needham. Your question, please.

Thank you. Our next question comes from the line of Scott Berg from Needham Your question. Please.

Hi, everybody. This is John on for Scott. I appreciate you taking my question. I'm just wrapping the quarter. I'm just kind of curious if you could provide some additional color into what extent the Fresh Service product is influenced by, you know, the inbound kind of PLG motion versus the outbound efforts. And are you seeing an evolution around who the actual buyer is of this product at all? And then second, as you expand on kind of the capabilities of this platform, what do you think about packaging that going forward? Thank you very much.

Everybody. This is John on for Scott I. Appreciate you, taking my question and scrap in the quarter just kind of curious if you could provide some additional color on to what extent that's fresh service product.

By inbound kind of P&G motion person outbound efforts.

And are you seeing an evolution around who the actual buyer this product at all and then.

Second as you expand on kind of the capabilities of the platform. How do you think about packaging that going forward. Thank you very much.

So I think.

Per service.

First service.

Pretty much follows.

pretty much follows the rest of the overall product in terms of it also gets a ton of inbound leads and we have an outbound field team which is actually generating mid-market leads. So the customer profile is more mid-market for fresh service, but from a lead gen standpoint, we actually have both inbound or I should say inbound, outbound and partner generated leads. So

This overall product in terms of it also gets a ton of inbound.

Leif and Bill.

We havent outbound field team, which is actually generating mid market lead.

Up profile.

More mid market offer service, but from a lead Gen standpoint, we actually have both inbound.

I should say inbound outbound and partner.

Generated leads.

So from a.

How are we packaging item.

Packaging ITOM standpoint, I think currently we are having it as an add-on module that people – like, because this is bringing additional users into the system who, in an ITSM system, the DevOps folks or the engineers will not actually

One point I think currently.

We are having it as an add on module.

People like because this is bringing additional users into the system and.

In the <unk> system.

Dev ops folks are the engineers will not actually be at.

So this.

It's being offered as an asset management add-on with a per-agent licensing, but this will

Is being offered as an asset management add on.

<unk> per agent licensing, but this will be.

be additive in the number of users from other teams that it is bringing.

And the number of.

Users from other teams that it is bringing.

Alright, thanks, guys.

Thank you and as a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then one.

Thank you. As a reminder, ladies and gentlemen, if you have a question at this time, please press star then 1.

And this does conclude the question and answer session of today's program.

Thank you, ladies and gentlemen, for your participation. You may now disconnect. Everyone have a great day.

Thank you ladies and gentlemen for your participation you may now disconnect everyone have a great day.

Thank you everybody.

[music].

Okay.

[music].

Thanks for watching!

Thank you for standing by and welcome to the Freshworks, Inc.'s fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, June Hu, Vice President, Investor Relations. Please go ahead.

Thank you for standing by and welcome to the fresh works Inc's fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program may be re.

Corded I would now like to introduce your host for today's program Joon Huh, Vice President Investor Relations. Please go ahead.

Thank you Jonathan good afternoon, and welcome to fresh works fourth quarter and full year 2021 earnings conference call. Joining me today, arguing Martha put them fresh works, Chief Executive Officer, and Tyler Sloat Fresh works Chief Financial Officer.

Thank you, Jonathan. Good afternoon and welcome to Freshworks' fourth quarter and full year 2021 earnings conference call. Joining me today are Girish Mathurbutham, Freshworks' Chief Executive Officer, and Tyler Slote, Freshworks' Chief Financial Officer.

The primary purpose of today's call is to provide you with information regarding our fourth quarter and full year 2021 performance and our financial outlook for our first quarter and full year 2022.

The purpose of today's call is to provide you with information regarding our fourth quarter and full year 2021 performance and our financial outlook for our first quarter and full year 2022.

Some of our discussion and responses to your questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Some of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 B.

These forward-looking statements are based on Freshworks' current expectations and estimates about business and industry, management's belief and certain assumptions made about the company as of the date hereof, all of which are subject to change.

These forward looking statements are based on fresh works current expectations estimates about business and industry managements belief and certain assumptions made about the company as of the date hereof, all of which are subject to change. These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially.

These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statement.

From those projected in the forward looking statements.

For discussion of material risks and other important factors that could affect our results, please refer to today's earnings release, our most recently filed Form 10-Q , and other periodic filings with the SEC. Freshworks assumes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this presentation, except as required by law.

For a discussion of material risks and other important factors that could affect our results. Please refer to today's earnings release, our most recently filed Form 10-Q , and other periodic filings with the SEC Fresh works assumes no obligation to update any forward looking statements in order to reflect events or circumstances.

May arise after the date of this presentation, except as required by law.

During the course of today's call, we'll refer to certain non-GAAP financial measures, reconciliations between GAAP and non-GAAP financial.

are included in our earnings release, which is available on our investor relations website at ir.freshworks.com. I encourage you to visit our investor relations site to access our earnings release, periodic SEC reports, a replay of today's call, or to learn more about Freshworks. And with that, let me turn it over to Girish.

Roddick SEC reports, a replay of today's call or to learn more about freshwater and with that let me turn it over to Girish.

Thanks, June and hello everyone. Thank you for joining us today as we review the 4th quarter and full year 2021 highlights for Freshworks. And our priorities and.

Thank you.

Hello, everyone. Thank you for joining us today as we review the fourth quarter and full year 2021 highlights for fresh looks.

And our priorities and guidance for this year.

Q4 was another.

Q4 was another strong quarter where revenue grew 44% to $105.5 million.

Strong quarter, where revenue grew 44% to $105 5 million.

This is also our first $100 million revenue quarter as a company.

So, we had robust renewal activity in Q4, and our new business activity is seeing positive momentum with our field sales teams closing a number of sizable mid-market deals.

So we had robust renewal activity in Q4.

New business activity is seeing positive momentum with our field sales team closing a number of sizable mid market deals.

We also had another good expansion quarter in Q4.

It is encouraging to see that companies of all sizes are demanding Freshworks easy-to-use modern products that are designed with the user in mind.

It is encouraging to see that companies of all sizes.

<unk> fresh <unk> easy to use modern products that are designed with the user in mind.

We accomplished a lot in 2021.

We became a publicly traded company in September and ended the year with over 56,000 customers.

It became a publicly traded company in September .

We ended the year with over 56000 customers.

We received industry validation from Gartner.

Our flagship product, Fresh Desk, was recognized as a visionary in the 2021 Gartner Magic Quadrant for CRM Customer Engagement Center.

Our flagship product fresh desk was recognized as a visionary in the 2021 Gartner magic quadrant for CRM customer engagement center.

And fresh service was recognized as a challenger in the ITSM Magic Quadrant.

And for service.

Goodness as a challenger in the <unk> Magic quadrant.

More recently, Fish Service was also recognized as a strong performer in the Forrester wave for enterprise service management.

More recently.

This service was also recognized as a strong performer in the Forrester wave for Enterprise service management.

Last year, we also strengthened our board with three new independent directors and expanded our leadership team with proven public company experience.

On the people front, I'm incredibly proud of our employees for their focus and dedication as we continue to innovate, put customers first, and execute as a public company. Overall, 2021.

On the people front I am incredibly proud of our employees for their focus and dedication as we continue to innovate put customers first and execute as a public company.

2021 was a great year for Facebook.

Now, turning to the GTM highlights, in Q4, our field sales engine performed well, driving new logo acquisition and new revenue. Our inbound motion continues to be an efficient high-velocity go-to-market engine catering to SMB and mid-market customers. We also saw positive momentum on

Now turning to the <unk> highlights in Q4, our field sales engine performed well driving new logo acquisition and new revenue are.

Our inbound motion continues to be an efficient high velocity go to market engine catering to SMB and mid market customers.

We also saw positive momentum on multi product adoption.

As of Q4.

21% of our customers use more than one Freshworks product.

21% of our customers use more than one <unk> product.

In the cohort of customers paying more than $5000 in annual recurring revenue, the multiproduct adoption is even higher at 35%.

In the cohort of customers paying more than $5000 in annual recurring revenue.

Our multi product adoption is even higher at 35%.

A good example of multiproduct usage is our customer 7-11, their customer support team.

A good example of multi product usage is our customer 711, they're.

<unk> customer support team.

had to deal with a wide variety of incoming requests from multiple channels.

To deal with a wide variety of incoming requests from multiple channels.

By switching to Fresh Desk, Support Desk, and Contact Center products,

By switching to fresh desk support desk and contact center products.

711 support agents saw significant productivity benefits from a modern tool, and managers were able to improve key support metrics with better insight.

711 support agents saw significant productivity benefits from a modern tool and managers were able to improve key support metrics with better insights.

We are encouraged to learn that 7-Eleven team is planning to expand their Freshworks product usage even further.

We are encouraged to learn that 717 is planning to expand their fresh looks product usage even further.

Smaller organizations also see the value of working with multiple <unk> products.

Smaller organizations also see the value of working with multiple thresholds products.

The Southeast Alaska Regional Health Consortium, a non-profit group, serving the health interests of the native people of Southeast Alaska, is using both fresh service and freshness messaging products to manage their IT helpdesk in rural locations across thousands of miles.

The southeast Alaska Regional help consortium, a nonprofit group serving the health interest of the native people of Southeast Alaska is using both for service and fresh this messaging products to manage that helped us in rural locations across thousands of miles.

Now, they can more easily onboard new users, improving efficiency and record.

Now they can more easily onboard new users improving efficiency and record keeping.

These multiproduct trends have naturally led to higher revenue per account and contributed to improvements in churn for us.

These multi product trends have naturally led to higher revenue per account and contributed to improvements in churn for us.

In November , we held Refresh, our annual user conference.

In November we held refresh our annual user conference.

We had over 18,000 online registrants. We had several mid-market customers showcase their unique product use cases live from Las Vegas.

We had over 18000 online distance, we had several mid market customers showcase their unique product use cases live from Las Vegas.

We also held our inaugural Champions of Delight Awards, recognizing customers who delivered innovative and delightful employee and customer experiences using our product.

We also held our inaugural champions of Delight award, recognizing customers, who delivered innovative and delightful employee and customer experiences using our products.

At Refresh, we also introduce new product capabilities in IT operations management within Fresh Service.

And to refresh we also introduced new product capabilities in it operations management within for service.

One of our customers, PowerSchool, is a leading provider of K-12 education technology in North America, serving over a thousand schools and supporting millions of students.

One of our customers power school is a leading provider of K through 12 education technology in North America, serving over a thousand schools and supporting millions of students.

They are using our new ITARM capabilities in Fresh Service to increase their deployment frequency for the 40-plus products that they support and have reduced the rate of IT issues by over five times.

They are using a new item capabilities in for service to increase their deployment frequency for the 40 plus product that they support.

And have reduced the rate of issues.

By over five times.

This allows them to minimize downtime and enable children to keep learning.

Overall, we had a strong fourth quarter and a good finish to 2021.

Now, looking ahead to 2022, Freshworks has a big opportunity to grow in our target market.

Now looking ahead to 2020 to Crestwood has a big opportunity to grow in our target markets.

Today, every consumer-facing business is exploring new and better ways to engage with customers across digital and social channels, like WhatsApp, text messaging, or Instagram. For 2022, we are prioritizing customer experience and CRM product enhancements around these changing market.

Today every consumer facing business is exploring new and better ways to engage with customers across digital and social channels like Whatsapp text messaging our Instagram.

For 2022, we are prioritizing customer experience and CRM product enhancements are all these changing market trends.

Leading consumer brands like discover.

Leading consumer brands like Discover, Klarna, Delivery Hero, and Paytm already use our messaging product to engage with their customers and automate support over digital channels.

Pharma delivery hero and <unk> already use our messaging products to engage with their customers and automate support or digital channels.

We will be increasing our product efforts to drive conversational agent experiences and increase coverage of digital channels. And also offer self-service bots across various new channels.

We will be increasing our product efforts to drive conversational agent experiences and increased coverage of digital channels and also offer self service bots across various new channels.

So we'll also continue investing in core helpdesk capabilities and strengthen our support desk product.

We will also continue investing in core helpdesk capabilities and strengthen our support desk product.

Our second priority is that expansion beyond the ATM market.

Our second priority is our expansion beyond the ITSM market.

Businesses are rapidly moving their technology applications to the cloud.

And we frequently hear teams complaining about alarm fatigue, the overwhelming number of tools they have to use the manual activities, leading to delays in identifying and fixing issues.

Based on validation from our early customers.

These innovations to our fresh service product will help us further address the $34 billion IT operations management market opportunity.

These innovations to offer service product will help us further address the $34 billion 80 operations management market opportunity.

We plan to continue investing in our new platform, which provides shared services and enables rapid product innovation.

We plan to continue investing in a new platform, which provides shared services and enables rapid product innovation.

This includes allowing our customers to extend and integrate our products with that business processes and continued work towards our vision of a unified CRM product to breakdown the silos across marketing sales and support.

To wrap up we believe that has tremendous opportunity across all three markets. We operate in we are investing for the long term and will continue to deliver modern unified products that users actually using.

I will now turn it over to our CFO , Tyler, to share more on our financial.

I will now turn it over to our CFO Tyler to share more on our financial business.

Thanks, G, and thanks to all of you joining on the webcast. As G mentioned earlier, we had a strong finish to the year and delivered a good fourth quarter. Before diving into our financial results, I want to acknowledge all the great work and execution across all of our teams here at Freshworks over the past year.

Thanks, Jim and thanks to all of you joining on the webcast as Jim mentioned earlier, we had a strong finish to the year and delivered a good fourth quarter.

Before diving into our financial results I want to acknowledge all the great work and execution across all of our teams here at <unk> over the past year.

Our employees have really done a tremendous job and we would really like to thank them.

Our employees have really done a tremendous job and we would really like to thank them. So thank you.

Now, for today's call, I'll cover the financial results from our fourth quarter and also provide some key business trends we saw over the past year in 2021.

Now for today's call I'll cover the financial results from our fourth quarter and also provide some key business trends, we saw over the past year in 2021.

Afterward, I'll transition to our forward-looking commentary and close with our expectations for Q1 and for the full year of 2022.

Afterward, I'll transition to our forward looking commentary and close with our expectations for Q1 and for the full year of 2022.

As I go through our financial results, I'll focus most of my discussion around non-GAAP numbers, as this better represents how we manage our business.

These non-GAAP numbers exclude the impact of stock-based compensation and related expenses, payroll taxes on employee stock transactions, amortization of acquired intangibles, and other adjustments.

And other adjustments.

Starting with revenue, we delivered $105.5 million in Q4, representing strong year-over-year growth of 44% for the quarter and 49% for the full year 2021.

Starting with revenue, we delivered $105 5 million in Q4, representing strong year over year growth of 44% for the quarter and 49% for the full year 2021.

In Q4, we continue to see healthy expansion and upsell activity from our existing customers.

In Q4, we continued to see healthy expansion and upsell activity from our existing customers that.

The leading form of expansion continues to be driven by additional seats or agents.

Our new business picked up momentum resulting in us closing more business early in the quarter while also closing several larger mid-market type deals in the field.

Our new business picked up momentum, resulting in us closing more business earlier in the quarter. While also closing several larger mid market type deals in the field.

In terms of revenue contribution.

Nearly all of our revenue is subscription revenue as our products are designed for easy onboarding requiring little or no implementation costs.

Nearly all of our revenue is subscription revenue as our products are designed for easy onboarding, requiring little or no implementation costs as.

As a result, services revenue represented less than 5% of total revenue for the full year of 2021.

As a result services revenue represented less than 5% of total revenue for the full year of 2021.

In Q4, our non-gap gross margins maintain an impressive rate of nearly 83%.

In Q4, our non-GAAP gross margins maintained an impressive rate of nearly 83%.

This is the result of the ongoing efficiencies we're able to realize in our infrastructure spend and an improved revenue mix from higher margin products, especially in the second half of the year.

This is the result of the ongoing efficiencies, we were able to realize in our infrastructure spend and an improved revenue mix from higher margin products, especially in the second half of the year.

Our non-GAAP operating expenses increased by $37.4 million compared to the prior year to $98.2 million.

Our non-GAAP operating expenses increased by $37 4 million compared to the prior year to $98 2 million.

The majority of this increase is the result of personnel costs as we continue to hire and make investments across the company to support the rapid growth of our business over the past year.

In addition to preparing us for public company operations.

Our non-GAAP sales and marketing expenses increased $7.4 million with notable items coming from personnel costs, user conference costs, and reseller commissions.

non-GAAP G&A expenses increased $6.9 million quarter over quarter to $17.9 million, partially driven by one-time costs related to a legal settlement in Q4.

non-GAAP G&A expenses increased $6 $9 million quarter over quarter to $17 9 million partially driven.

Driven by onetime costs related to a legal settlement in Q4.

All of this led to a non-GAAP operating loss of $10 7 million for the quarter for the full year 2021, non-GAAP operating loss was $18 3 million.

All of this led to a non-GAAP operating loss of $10.7 million for the quarter. For the full year 2021, non-GAAP operating loss was $18.3 million.

As of December 31st, 2021, we had approximately 322 million shares outstanding on a fully diluted basis using the Treasury method.

As of December 31, 2021, we had approximately 322 million shares outstanding on a fully diluted basis using the treasury method.

Turning to our operating metrics net dollar retention was 114% in Q4, which was negatively impacted by 1% due to FX.

Turning to our operating metrics, net dollar retention was 114% in Q4, which was negatively impacted by 1% due to FF.

For contrast, FX and Q3 had a 1% positive impact in the 117% figure. So on a constant currency basis, net dollar retention ticks down 1% from Q3 to Q4.

For contrast, FX in Q3 had a 1% positive impact and the 117% figure so on a constant currency basis net dollar retention ticked down 1% from Q3 to Q4.

We feel good about this number as we expect to land in the 110 to low teens percentage range, given our natural expansion activity and the characteristics of our business.

We feel good about this number as we expect to land in the 110 to low teens percentage range, given our natural expansion activity and the churn characteristics of our business.

So speaking of term, I'm pleased to say that this was an area where we're making progress with sustainable improvement.

So speaking of churn I am pleased to say that this was an area, where we're making progress with sustainable improvements in.

In Q4, we achieved our lowest turn rates for a fresh desk business, which combined with our ongoing customer success initiatives, led to an improvement in our overall turn rate to the high teams range at the end of the year.

Our second operating metric of customers contributing more than $5,000 in ARR grew 28% in Q4, ending at 14,814 customers and represents 85% of our ARR.

Our second operating metric of customers contributing more than $5000 and <unk> grew 28% in Q4, ending at 14814 customers and represents 85% of our era.

For larger customers contributing more than $50000 of there are this customer can talent account maintained a high growth rate of 61%.

ending at 1,416 customers and represents 41% of ARR.

At 1416 customers and represents 41% of <unk> and.

And finally, our total customers grew 15%, ending the year at over 56,000, reflecting a net add of approximately 1,600 customers in the quarter.

And finally, our total customers grew 15% ending the year at over 56000, reflecting a net add of approximately 600 customers in the quarter.

Moving to billings and balance sheet items.

Our calculated billings growth increased to 45% in Q4, compared to 41% in Q3. Specific call-outs that impacted this growth rate are a billing...

Our calculated billings growth increased to 45% in Q4 compared to 41% in Q3.

Specific callouts that impacted this growth radar.

One billing duration mix of a positive 3%.

Early renewals and reserve activity, adding up to positive 3%. And FX.

Early renewals and reserve activity, adding up to positive 3%.

And FX movements of a negative 2%.

So on a normalized basis, calculated billings growth for Q4 would be closer to the 41%.

So on a normalized basis calculated billings growth for Q4, we'd be closer to the 41% figure.

Given the number of factors that can impact this growth rate, we expect this figure may fluctuate quarter to quarter, but over a longer period of time, we believe it should track our revenue growth.

Given the number of factors that can impact this growth rate. We expect this figure may fluctuate quarter to quarter, but over a longer period of time, we believe it should track our revenue growth.

Our balance of cash and cash equivalents remained at approximately $1 3 billion at the end of the Q4.

Our balance of cash and cash equivalents remained at approximately $1.3 billion at the end of the Q4.

Similar to the prior quarter.

We generated positive free cash flow of $2 8 million in Q4, resulting in a positive cash flow for the full year 2021 of just over $2 million.

we generated positive free cashflow of $2.8 million in Q4, resulting in a positive cashflow for the full year 2021 of just over $2 million. We continue to maintain a strong balance sheet.

We continue to maintain a strong balance sheet.

In providing financial flexibility for the business.

We have an efficient business model today, but we also recognize the tremendous growth opportunities in front of.

We plan to invest to capture this growth, and as such, we expect free cash flow to be approximately negative $25 million for the full year 2022.

Full year 2022.

Factoring in specific timing of our business operations, we expect free cash flow amount to be approximately negative $5 million in Q1, a negative $15 million in Q2 as this quarter includes the impact of our annual merit cycle, ESP purchases and incremental Capex spend.

In Q3, we expect to be approximately negative $5 million and then slightly positive free cash flow in Q4 as trends improve by the end of the year and going forward into future years.

In Q3, we expect to be approximately negative $5 million, and then slightly positive free cash flow in Q4, as trends improve by the end of the year and going forward into future years. One quick reminder.

One quick reminder, which relates to our cash balance there will be a final lockup release for vested equity on Monday February 14th.

There will be a final lock-up release for vested equity on Monday, February 14th.

And we expect to use approximately $150 million of cash to net settle shares in meeting our tax requirements.

This net settled shares activity will not impact free cash flow, but it will reduce our cash.

This net settle shares activity will not impact free cash flow, but it will reduce our cash balance.

As Gene mentioned earlier, we have a number of key business priorities for 2022, and we view this as an important investment.

As gene mentioned earlier, we have a number of key business priorities for 2022, and we view this as an important investment year.

We're investing in product enhancements and ongoing innovation for the customer experience and CRM.

We are investing in product enhancements and ongoing innovation for the customer experience and CRM market.

We're also doubling down on our fresh service product as we expand our capabilities to further address the ITOM market opportunity.

We're also doubling down on our fresh service product as we expand our capabilities to further address the <unk> market opportunity.

What this means is that we will expect to add and invest more in our most important asset, our people.

What this means is that we will expect to add and invest more in our most important asset our people.

Given the current macro environment and employment trends.

Given the current macro environment and employment trends, we, like many other companies,

Like many other companies expect the cost of retaining and attracting the best talent to increase in the upcoming year.

Expect the cost of retaining and attracting the best talent to increase in the upcoming year.

Additionally, with a stronger U.S. dollar and based on current rates, we expect FX to have a negative impact to revenue growth of approximately 1 percentage point in both the first quarter and for full year 2020.

Today, approximately a third of our revenue has currency exposure or is not collected in U.S. dollars.

Today, approximately a third of our revenue has currency exposure or is not collected in U S dollars.

These impacts have all been factored into our estimates going forward. So now let me

These impacts have all been factored into our estimates going forward.

So now let me turn to our forward looking guidance.

For the first quarter of 2022, we expect revenue to be in the range of $107 million to $109 million.

non-gap loss from operations to be in the range of $12.5 million to $10.5 million.

non-GAAP loss from operations to be in the range of $12 5 million to $10 5 million.

a non-gap net loss per share to be in the range of $0.07 to $0.05.

non-GAAP net loss per share to be in the range of seven to five assuming weighted.

weight average shares outstanding of approximately 278.1 million.

Weighted average shares outstanding of approximately $278 1 million.

For the full year 2022, we expect revenue to be in the range of $486.5 million to $495 million.

non-gap loss from operations to be in the range of $56.5 million to $48.5 million, and non-gap net loss per share to be in a range of $0.23 to $0.19.

To 19.

assuming weighted average share is outstanding of approximately 286.5.

Assuming weighted average shares outstanding of approximately $286 $5 million.

Let me close by saying that we're super excited about how we finished the year 2021, and we're looking forward to a great year in 2022.

Let me close by saying that we're super excited about how we finish the year 2021 and we're looking forward to a great year in 2022. With that, let's take your questions. Operator?

With that let's take your questions operator.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered and you'd like to move yourself from the queue. Please press the pound key our first question comes from the line of D. J Hynes of Canaccord. Your question. Please.

Certainly. Ladies and gentlemen, if you have a question at this time, please press star, then one on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes in the line of DJ Hines from the court. Your question, please. Hey.

Hey, Thanks, guys.

Chris maybe I can start with.

Gurish, maybe I could start with the cross-sell execution. I'm wondering if and when you think we get to the point where the majority of expansion is driven by incremental product attach versus seed expansion. I know seed expansion has been the driver to date. And how far off do you think that potential future might be? I know you're highlighting kind of growth being driven by higher ARPA. So I'm just curious to get some color on that front.

The cross sell execution I'm wondering.

If and when you think we get to the point, where the majority of expansion is driven by incremental product attach versus seed expansion I know seat expansion has been a driver to date and how far off do you think that potential future might be I know youre, highlighting kind of growth being driven by higher ARPA. So I'm just curious to get some color on that Brian .

Okay.

Yeah. Thanks, Vijay for the question.

So.

From a long-term perspective, we clearly see that CrossSell will continue to grow. So let me just talk about and give you some color on the multi-product adoption trends that you're seeing today. So you notice that we mentioned that 21% of our customers use more than one product today. And that number, to jog your memory, was at 18% during the IPO time. So we are making steady progress, and we are happy with the progress that we are making. Most of the...

From a long term perspective, we clearly see that cross sell will continue to grow. So let me just talk about and give you some color on the multi product adoption trends that you're seeing today, so you'll notice that.

You mentioned that.

21% of our customers to use more than one product today and that number to jog. Our memory was at 18% during the IPO titles. So we are making steady progress and we are happy with the progress that youre, making.

Most of the.

Expansion.

Our cross-sell today is coming from the Freshdesk family of products, where...

Our cross sell today is coming from the fresh desk family of products there.

Customers are adding, like, new channels into their support, like chat and automation through bots. So, that is where we are seeing most of this coming.

Customers are adding like new channels into their support like chat and automation through box. So that is where we are seeing.

Most of this coming.

And you also have to remember that two of our biggest products different fish service, even though they do not have a natural cross sell motion between them, we're seeing customers.

And you also have to remember that two of our biggest products, Fresh Desk and Fresh Service, even though they do not have a natural cross-sell motion between them, we are seeing customers buying them. So, we are confident that we will keep making incremental progress in terms of…

So we are confident that we will keep making incremental progress in terms of.

this number of customers who are using more than one product, and we're happy with the way things are going. Our natural go-to-market motion, the activities that our customer success groups are doing, also results in organic seed expansion as the business grows. So that's a natural expansion.

This number of customers, who are using more than one product and we are happy to debate things are going at a natural.

Go to market motion the activity that our customer success groups are doing also results in.

Organic seat expansion as the business grows that's a natural expansion.

Yeah, yeah. Okay. And maybe as a follow-up, this is one of the questions I got a lot during the IPO roadshow, was to help kind of try and quantify the cost advantage that you have in running, you know, R&D out of Chennai. And look, I think investors look at the line item at 20% of revenue, and you talked about all the product stuff and ambitions you have to do this year. I think it's a fair question. So is there any way to help investors think about that? And then maybe as part of it, you could talk about what you're seeing in terms of wage inflation in the region.

Okay.

And then maybe as a follow up this is one of the questions I've got a lot during the IPO Road show was to help kind of try and quantify.

Don't defy the cost advantage that you have in running R&D.

Yeah, D.J., I'll take that one. This is Tyler.

Yes, DJ I'll take down this is Tyler.

So from a from a core.

Cost advantage perspective, so we absolutely do have an advantage because we have access to an incredibly talented pool of capital. And I think now, you know, we're kind of regarded as one of the top, you know, companies, especially, you know, kind of new tech companies to work for. What it really does for us

Cost advantaged perspective, so we absolutely do have an advantage because we have access to an incredibly talented pool of capital and I think now we're kind of regarded as one of the top companies, especially kind of new tech companies to work for in India, What it really does for us.

is it allows us to be able to innovate faster, but also innovate more. So, if you look at how many products we have,

That allows us to be able to innovate faster, but also innovate more so if you look at how many products, we have compared to kind of a relatively similar company. We have a broader set of products that are all starting to get that scale.

Compared to kind of a relatively similar company, we, you know, we have a broader set of products that are all, you know, starting to get to scale. And that, you know, even though there is wage inflation, I think it's global, and so we sure we see it in India, we see it here, but we're not like any other company, we're like every other company right now that's kind of dealing with that. And they're, you know, clearly still in a cost advantage for our employee base in India as compared to similar employee bases that would be here in North America.

And that even though there is wage inflation I think it is global.

Sure we see it in India, we see it here, but we're not like any other company. We're like every other company right now thats kind of.

Dealing with that and there clearly is doing a cost advantage for our employee base in India as compared to similar employee basis that would be here in North America. So.

So one point I would like to add, D.J. is.

I'd like to add BJ.

India is not just an R&D center for US, it's also worth noting that our.

The entire SMB business is actually closed from India, especially today, so we have access to.

Top talent pool, and we're talking about like sales marketing the entire go to market function being stopped from India. We see that also as a strategic account base that theyre able to sell to the long tail of the global SMB from basin. So it's not just R&D yeah Yep Yep. Good good distinction endpoint. Thank you guys I appreciate the color.

Yes. Good distinction and point. Thank you, guys. I appreciate the color.

You bet. Thank you.

Thank you. Our next question comes from the line of Mike Murphy from Jpmorgan. Your question. Please.

Thank you. Our next question comes from the line of Mike Murphy from J.P. Morgan. Your question, please.

Thank you very much and congrats on a strong finish to the year I was looking at the Q4 billings growth and it is quite solid and it's above what we would've expected and theres a tough comparison.

Thank you very much and congrats on a strong finish to the year. I was looking at the Q4 billings growth and it's quite solid and it's above what we would have expected. There's a tough comparison.

And Girish, you did mention closing a number of sizable mid-market deals, so I'm curious if you could shed any light on how sizable those deals might have been and just whether you see more of those in the 2022 pipeline. Yeah, thanks.

And curious you did mention in closing a number of sizable mid market deals.

So I'm curious if you could shed any light on how sizable are those.

Those deals might have been and just whether you see more of those in the 2022 pipeline.

Yes.

Yeah. Thanks Mark.

So I think.

Where we are seeing these mid-market deals, what I was mentioning, was specifically in the ITSM space where our first service product is seeing strong traction in Q4.

Where we are seeing this.

Mid market deals what I was mentioning was specifically in the <unk> space that offer service product the same strong traction in Q4.

At this point, I would also like to remind everyone that our go-to-market motion is not specifically

At this point I would also like to remind.

Everyone that our go to market motion if not specifically.

like enterprise-y, right? We don't have – we don't – I like to say we hunt for deer and rabbits. We don't hunt for elephants, so we don't have a traditional enterprise sales motion in that sense. So, while we focus on mid-market, we kind of tend to see a lot of larger companies actually come and –

Like enterprise <unk>, we don't have we don't I'd like to say that <unk>, we don't Hanford elephant. So we don't have a traditional enterprise sales motion in that sense.

So while we focus on mid market, we kind of tend to see a lot of.

Larger companies actually come in.

Pull us into the <unk>.

pull us into the enterprise. So that's happening. And we are also, like, if you're specifically asking about demand trends, I think we are seeing both for fresh service and fresh desk with customer engagement and employee engagement starting to become an area of focus for digital transformation. So we are continuing to see strong, healthy demand in both these.

Enterprise, so that's happening and.

We are also like.

If you are specifically asking about demand trends I think we are seeing both for Bristow is interest desk.

With customer engagement and employee engagement starting to become an area of focus for digital transformation. So we are continuing to see strong healthy demand in both of these sectors.

One more point to add, sorry, is if you look at the number of customers who are paying us greater than $50,000 ARR, I think that's one of the metrics, they are now contributing to over 40% of our ARR. So we are seeing that number of customers increase 61%.

Okay and great.

Im sorry, just one point to add sorry.

If you look at the number of customers, who are paying us dividends $50000 I think thats one of the.

Metrics they are now contributing to over 40% of our.

So we are seeing that number of customer increased 61%.

It's interesting to see what's happening there. The second part of my question is, are you steering your R&D investments?

Okay. Okay.

Yes, it's interesting to see what's happening there so.

The second part of my question is are you then are you steering your R&D investments for this year.

To support kind of ongoing shift towards that 50 K.

Band.

It sounds like you are.

And then if so what are the most important enterprise capabilities that your customers are asking you to build because I think you had mentioned you were talking about chat bots.

But you were also talking about integrated ITOM and sort of some other vectors of change. What is it that you're going to be investing most heavily in?

But you were you were also talking about integrated.

And sort of some other.

Vectors of change what is it that youre going to be investing most heavily in.

Yes top three priorities mark for the year.

Yeah, our top three priorities, Mark, for the year are obviously in the top in all the in each one of those markets right in the customer service market. What we are seeing is.

Obviously in the top and all of that in each one of those markets in the customer service market. What we're seeing is.

a good trend where more and more business, every consumer-facing business is looking to engage with customers not only through traditional channels of phone and email but also through digital channels, whether it's Instagram or Facebook Messenger or WhatsApp in some parts of the world or text messaging in the U.S. So I think we are seeing that as a trend in our customers, and we are investing in.

A good trend that more and more business every consumer facing business is looking to engage with customers not only through traditional channels of phone and email, but also through digital channels whether it's.

Instagram or Facebook messenger or whatsapp in some parts of the world or text messaging in the U S. So I think we are seeing that as.

The trend in our customers.

We are investing in.

that area in our CX products specifically to help businesses actually engage better with their customers on these digital channels. On the IT space, what we are seeing, again, are two trends. One is, okay, all employees are remote. Every business is looking at how do we go hybrid, even if they open offices. So they have to be able to support employees working from remote locations, and they also have to.

That area in our CX products, specifically to help businesses actually engage better with their customers on these digital Tennessee in the IP space, what we're seeing again, a two trends.

Okay. All employees are remote every business is looking at how do we go hybrid even if they opened offices. So they have to be able to support employees working from remote locations and they also have to.

Do more for that help enable that and Dev ops teams to have a cloud first solution. So that is that if you look at the first service product Artemis ones that are going to be around how do we enable 80 teams too.

Offer support.

Through slack.

Teams and we have all the capability already and the new capabilities, we are adding it.

Do we get into enterprise service management, BSM market as well as item that we are able to help.

Reduced dose employee request altogether by making going more proactive, helping engineers and Dev ops teams to understand what's happening in <unk>.

Use those allows us in the first place. So those two are definitely big priority areas and obviously the top priority for US is also how do we continue to deliver on the unified.

a customer's record, so the unified view of the customer. How do we help businesses get that? So we are driving towards that and making good progress on that front as well.

Customers in our Cogs.

A unified view of the customer how do we help businesses get that so we are driving towards to have been making good progress on that front as well.

Okay very clear thank you very much.

Thank you. Our next question comes to the line of Rob Oliver from Baird. Your question please.

Thank you. Our next question comes from the line of Rob Oliver from Baird. Your question. Please.

Great. Thank you very much for taking my questions, Krish. I'll start with you. Just on the S&P environment, one of the things that's come across to us has just been the torrid pace of unicorn development in India, and that pace has continued even amid, you know, choppy markets here in the U.S. to start the year. I know you called out earlier in response to, I think it was DJ's question, about the fact that you not only have your R&D team in Chennai, but also your S&P team. So I just would be curious to hear from you just, you know, generally what you're seeing about S&P globally. There's a lot of cross currents, but it's specifically about India. And a follow-up to that would be like any early momentum around the Fresh Stack offering, which seems particularly compelling for that group. And then I had a quick follow-up for Tyler as well.

Thank you very much for taking my questions, It's Chris I'll start with you.

Just on the SMB environment.

One of the things Thats come across to US has just been the torrid pace of Unicorn development in India.

And that pace has continued even chop.

Choppy markets here in the U S.

To start the year.

You called out earlier in response to I think it was D. J's question about.

The fact that you guys not only have your.

R&D team in Chennai, but also your SMB team. So just would be curious to hear from you just <unk>.

Generally what youre seeing about SMB globally. There is a lot of cross currents, but then specifically about India and a follow up to that would be like any early momentum around the fresh stack offering which seems to be particularly compelling for that group and then I had a quick follow up for Tyler as well.

Sure.

The general trend in India, I think that is definitely.

Turned off activity happening in.

Startups from India building global products from India is now a trend that you have investors pumping a lot of VC money, if you have seen that and.

And it's obviously a great thing for India. So we are definitely seeing.

It's obviously a great thing for India. So we are definitely seeing.

A lot of FinTech, DevTools startups, and B2B startups coming from India. So we are obviously like FreshTack, when we announced FreshTack last year in our refresh conference. And I would like to remind you that FreshTack was actually...

A lot of Fintech depth.

<unk> startups and <unk> startups coming from India. So we are obviously.

<unk>, when we announced <unk> last year and a refresh conference.

I'd like to remind you that <unk> was actually.

a promotional bundle for startups, a pricing and a packaging bundle, which combined our fresh desk, fresh sales and fresh marketed products into one affordable bundle for startups.

Our promotional bundle for startups, the pricing and packaging bundles, which combined are fresh desk fresh sales in fish marketed products into one.

Affordable bundle for startups, because we wanted to guest targets when they were really young and get them on boarded for their front office suite, if they can get onto the fish tax so that was the idea so.

Are seeing good early traction we launched it in November and we have a lot of startups using it and we expect we have a full team.

The startup program team, which.

not just for India, but globally, they are promoting the startup package where we would like to get Freshworks products into the hands of these fast-growing startups at an earlier stage.

Not just for India, but globally. They are promoting that's hard to gauge whether you would like to get specialty products into the hands of these fast growing startups at an earlier stage.

Great. That's really helpful. Thanks, Paresh and then Tyler just for you I appreciate the breakdown of the color on the.

Great. That's really helpful. Thanks, Karish. And then, Tyler, just for you, I appreciate the breakdown of the color on the billings growth and the variability there. I was wondering, you know, to the extent that you can provide a little bit on the kind of free cash flow thoughts relative to this year, also very helpful the way you kind of broke it out by quarter. Is the incremental spending there any color? Just to understand, I know that you guys have laid out some product initiatives, which Karish just repeated, and then the additional costs and hiring, but wondering if you could just add a little bit more color around some of the variability in that kind of free cash flow outlook for the year. Thank you, guys.

Billings growth and the variability there.

I'm wondering to the extent that you can provide a little bit on that.

Free cash flow thoughts relative to this year also very helpful. The way you kind of broke it out by quarter.

Is the Ingram incur incremental spending there or any any any color just to understand I know that you guys have laid out some product initiatives, which.

So ill just repeat it and then the additional cost in hiring but wondering if you could just add a little bit more color around some of the variability in that.

I had a free cash flow outlook for the year. Thank you guys.

Yeah, you bet. Hey, Rob. Thanks for the question. So, yeah, we kind of broke down how we're thinking about spend this year a little bit. We, you know, we.

Yes, you bet, Hey, Rob Thanks for the question. So, yes, we kind of broke down.

How we are thinking about spend this year a little bit.

<unk>.

Really happy about the performance last year, pre-cash flow positive, produced some cash for the year. We said we're going to burn about $25 million this year.

Really happy about the performance last year free cash flow positive prove some cash for the year and we said, we're going to burn about $25 million this year.

There's a couple things to note there. So, we broke out the quarterly span where we said 5 million in Q1, 15 in Q2.

Couple of things of note. There. So we broke broke out the quarterly spend where we said $5 million in Q1, 2015, and Q2 kind of $5 million in Q3 in terms of burn, but then we said will be positive in Q4 and expect to be positive going after and so so why why did we why are we increasing spend.

Kind of 5 million in Q3 in terms of burn, but then we said we'll be positive in Q4 and expect to be positive going after. And so, so why did why did we, why are we increasing spend a couple of reasons? 1 number 1, we think there's a huge opportunity in front of us. And part of the reason to go public was to make sure that we have.

A couple of reasons one number one we think there's a huge opportunity in front of us and part of the reason to go public was to make sure that we have.

the resources and capital go capture that opportunity. We said, hey, as long as we think we can do it efficiently, we're going to do so, which we are. But there's a couple other nuances as well. So, we built in, number one, the cost of being a public company. You think about D&O insurance, just period, that alone is pretty considerable cost. We'll have a full year of that. Second, we also think that some things are going to come back to pre-COVID levels in terms of travel.

The resources and capital go capture that opportunity and we said hey, as long as we think we can do it efficiently we're going to do so which we are.

But theres a couple of other nuances as well so we built in number one the cost of being a public company think about D&O insurance just period.

That alone is pretty considerable cost will have a full year of that second. We also think that some things are going to come back to pre COVID-19 levels in terms of <unk>.

Travel and facilities and we've built that expectation as well. So if you kind of go back to we now have a year and a half us along with every other company.

and we've built that expectation in as well. So if you kind of go back to, you know, we now have a year and a half, us along with every other company, of no travel and facilities, if we think that's gonna kind of go back to kind of pre-COVID levels there. So we built those costs in. If you look at, you know, that incremental spend compared to earlier, it's really, we are being really pretty efficient. We also have some CapEx spend that's gonna happen during the year. But again, the expectation is that we exit, you know, cashflow positive in Q4 and therefore going forward as well. Okay, that's really helpful. Thanks.

No travel so we think that's going to kind of go back to kind of pre COVID-19 levels. There. So we built those costs and if you look at that incremental spend compared to earlier is really we are being really pretty efficient. We also have some capex spend that's going to happen during the year, but again the expectation is that we exit cash flow positive in Q4, and therefore going forward is.

Well.

Okay. That's really helpful. Thanks, Tyler Thanks, Chris I appreciate it.

Thank you. Thank you. Our next question comes from the line of Brent <unk> from Piper Sandler Your question. Please.

Thank you. Our next question comes from the line of Brent Braceland from Piper Sander. Your question please.

Good afternoon, thanks for taking the question here, really wanted to start out around the pipeline of

Good afternoon, and thanks for taking the question here really wanted to start out around the pipeline.

opportunities and funnel looking into 22 under the context of pretty heavy sales investments and a build-up here of the last couple quarters. So can you walk through maybe the the ramp and headcount over the last let's say nine months? Is that now starting to contribute to a larger pipeline going into next year? And and as you think about the existing sales capacity, how much

More do you plan to kind of step on the gas here given the opportunity? I appreciate that obviously return to work and travel expenses will continue to kind of inflate that line, but just trying to understand from a headcount perspective, sales capacity perspective, funnel perspective, how are you feeling kind of heading into next year?

It's prospective funnel perspective, how you are feeling kind of heading into next year.

Sure, Brett. I'll take that one. This is Tyler. So total headcount, we ended the year just over 4,600 headcount globally, with the majority, you know, 4,000 of which are in India.

Sure Brian I'll take that this is Tyler so.

Total head count we ended the year just over 4600 head count globally with the majority 4000 of which are in India.

We're investing across all of our functions. Clearly, functions like DNA, we want to see efficiencies, but you have to build up the infrastructure to support kind of the global nature. So when we look at product and engineering, we're going to fully invest to innovate and continue to build. But one of the areas that we are really investing in is our go-to-market presence. And you look at that.

We're investing across all of our functions clearly.

Functions like G&A, we want to see efficiencies, but you have to build up the infrastructure to support kind of a global nature.

So when we look at product and engineering.

Fully invested.

And continue to build.

But one of the areas that we are really investing in is our go to market presence and you look at that.

Kind of, you know, a couple of different areas, one driving and help to drive that growth motions. A lot of that is through marketing spend and ad spend to drive the funnel for trials, which then, you know, convert to customers, primarily the F and B side. However, a lot of that inbound also feeds our field pipeline and then we're, you know.

Kind of a.

Couple of different areas, one driving and helped to drive that <unk> growth motion a lot of that is true.

Marketing spend and AD spend to drive the funnel for trials, which then convert to customers primarily in the F&B side. However, a lot of that inbound also feeds our field pipeline and then we are.

really focused on building out the capacity, continuing mainly still in North America and Europe , but other places around the globe. And we're doing it because we do see the demand. And we're gonna do it efficiently, meaning that we want to get enough headcount so we have quota capacity to meet that demand. And then we will always kind of pause as we go. We don't break out the number of sales head that we have or quota bearing reps and things like that.

Really focused on building out the capacity continuing mainly stone New York.

North America, and Europe , but other places around the globe and we're doing it because we do see the demand.

And we're going to do it efficiently.

Meaning that we want to get enough head count. So we have a quota capacity to meet that demand and then we will always kind of pause as we go we don't break out the number of sales head that we had our quota bearing reps and things like that.

But as you can imagine, we are hiring as kind of as rapidly as we can in that area.

But as you can imagine we are hiring.

Kind of as rapidly as we can in that area.

Good color and then just as a follow up to that Tyler as you think about those investments is that converting into.

A pretty robust pipeline going into next year like how quickly some of those investments converting to pipe.

I would say, you know, we like to hire when we have the pipe and so we are hiring and we.

I would say, we like to hire when we have the pipe and so we are hiring and we.

We see really strong demand for our products I mean, you look at our fresh service product, which is really.

Brian squarely in the mid market enterprise space.

There's a ton of upside there in terms of what we can go capture.

And.

We're going to act like kind of a lot of quote unquote enterprise companies. When you think about that were higher we have a pipeline coverage ratio that we want to target and we will digest and pause right. Now we're kind of we see spaces that we can hire too and we're actively trying to do that.

Great, and then my last question here for me, Chris here, what are you seeing on the competitive front? Obviously, I apologize if this question has been asked, but I'll go ahead and ask it again.

Great and then my last question here from me Chris here.

What are you seeing on the competitive front obviously.

Apologize. If this question has been asked but I'll go ahead and ask it again.

Are you seeing a distracted competitor, more opportunities, maybe just touch base a little bit about

Or are you seeing a distracted competitor more opportunities, maybe just touch base a little bit about.

the in the trenches battle right now? What are you seeing the competition do? Are they responding with price? We'd love to hear any sort of color as you think about the competitive dynamic over the last, let's say, three to six months.

The in the trenches Battle right now what are you seeing.

The competition do are they responding.

With price I would love to hear any sort of color as you think about the competitive dynamics over the last let's say three to six months.

Sure I'll take that Brent.

So first thing I'd say is we are not seeing a lot of difference in the last change in the competitive landscape in the last three months.

The CX market I think.

<unk> Salesforce service cloud predominantly and we continue to see them.

As I had mentioned in my.

Dr track.

One of the trends that we're seeing is smaller startups, who are offering companies the ability to do conversational support like on channels like whatsapp or Facebook and Thats, one of the areas, where we had existing.

So on site feel really.

That's our strongest.

In larger customers. So we feel confident about that opportunity going forward.

In sales and marketing I think it's still early on but we see.

Good validation for that.

So do you have a unified customer we are still on that journey, and we see hotspot and we see all the others.

Standalone CRM players as well, but as I said, it's early days for us.

Great great to hear and thanks for the color. Thank you.

Yes.

Thank you. Our next question comes to the line of Stan Zlotsky from Morgan Stanley . Your question please.

Thank you. Our next question comes from the line of stands Lasky from Morgan Stanley . Your question. Please.

Hi, you have a Ryan Bresner on for Stan Zalosky here. Just wonder if you have a quick question on maybe the breakdown of ARR by product, or just maybe some sort of additional color on how those have been trending and how we can think about the growth rate in 2022.

Hi, Ryan breast or understand Alaska here.

I'm just wondering if you have a quick question on maybe the breakdown of <unk> by product or just maybe some sort of additional color on how those have been trending and how we can think about the growth rate of anecdote I plan to.

Yeah, Hey, Ryan This is Tyler thanks for the question, we actually we don't breakdown the era of our products right now and what we had said in the past is that our fresh test products is over 200, and our first service products over 100. This is something that if we plan to do an analyst day later this year, which we're contemplating that.

Our candidate right for what we would talk about and give more detail, but right now we're not breaking down <unk> by product.

They are all what I can say what we have also said in the past is that.

They're all, but I can't say what we have also said in the past is that, you know, our fresh service product, we talk about it, it's, you know, it is smaller than Freshdesk, but it is growing faster. It's, you know, a great opportunity. Freshdesk is really doing well. We talked about the cross-sell motion and how a lot of that's being driven from a lot of our customers, you know, adopting Omnichannel as they want different methods of communication with their customers. And then we've mentioned that, you know, our fresh market and sales product is still relatively new, but we're excited about the opportunity there.

Fresh service product, we talk about it.

It is smaller than fresh desperate is growing faster.

It's a great opportunity for us to ask is really doing well, we talked about the cross sell motion in a lot of thats being driven.

From a lot of our customers adopting omnichannel they want different methods of communication with their customers and that we've mentioned that our fresh marketing sales product is still relatively new but we're excited about the opportunity there.

Okay. Thanks for taking my question.

Thank you. Our next question comes from the line of Alec Wilkins from Wolf Research. Your question please.

Thank you. Our next question comes from the line of Alex <unk> from Wolfe Research. Your question. Please.

Hey, guys. Thanks for taking my question I guess, maybe just the first.

Hey guys, thanks for that question. I guess maybe just the first

The first one actually maybe two for you Tom.

Actually, maybe two for you, Tyler. The follow-up on the cross-sell opportunity, you mentioned 21% of customers have more than one product versus 18% at the IPO, Gaurish, actually. How much of that is from customers landing with more than one product versus existing customers upgrading or expanding their deployments to multiple products? And more importantly, how do we think about that dynamic going forward for next year and the impact on NRR?

Follow up on the cross sell opportunity you mentioned that 21% of customers have more than one product versus 18% at the IPO during such a how much of that is from customers landing with more than one product versus existing customers.

Operating or expanding their deployments to multi multiple products and more importantly, how do we think about that dynamic going forward for next year and the impact on MLR.

Hey Alex, this is Tyler. It's actually coming from both. We are seeing customers when they're landing that, you know, they are choosing omni-channel.

Hey, Alex.

Tyler it's actually coming from both we are seeing customers. When they are landing that they are choosing omnichannel.

as the main LAMD, which is, you know, as opposed to just a pure desk solution that they want, you know, all these capabilities, specifically messaging, which G has talked about just in terms of a thesis of, you know, what a lot of the new modern day, you know, kind of communication with the next generation of customers is going to be. And so, that's kind of following what we kind of forecasted, and we think that will continue.

As the main Lambda, which is as opposed to just a pure desk solution that.

They want all these capabilities, specifically messaging, which which GE has talked about just in terms of a thesis of what I call a lot of the new modern day.

Kind of communication with the next generation of customers is going to be and so that's kind of following what we kind of forecasted and we think that will continue.

In terms of the other cross-sell motions, like we've talked about, it's still early, but the motion between kind of our marketing sales product to desk, we think that's going to be a natural motion going forward. And that's really going to be, you know, kind of down the road, but it's about the vision of this unified customer record and the value that we can provide to our customers with them being able to have all this information around this 360 view of their customers. So we're excited about that, but it's still pretty early. Got it. And Ben?

In terms of the other cross sell motions.

We've talked about it's still early but the motion between kind of our marketing and sales product to desk, we think thats going to be a natural motion going forward.

And that's really going to be kind of down the road thats about the vision of this unified customer record in the value that we can provide to our customers with them being about have all this information around this 360 view of their customers. So we're excited about that but it's still pretty early.

Got it and then I guess.

Given this is the first kind of look at next year.

Company, obviously, a lot of people asked about billings look at billings. There is a lot of volatility variability in these.

Your numbers quarter to quarter. It is also a number of adjustments.

No youre not guiding there but.

How do we think about the.

How do we think about the flow and the seasonality for the year with respect to billings, you know, how do we compare it to this year prior year? Is there a good rule of thumb? Just given, you know, you kind of have to code it impacted years. If you will, with respect to that metric.

How do we think about the flow and the seasonality for the year with respect to billings.

How do we compare to this year prior year is there a good rule of thumb, just given you kind of add to Covid impacted years, if you will with respect to that metric.

Yes, so I think.

In general revenue, so in general, we would expect billing to track revenue growth and, you know, there's nuances and we called out some of the nuances from Q4 because we know that everybody.

In general revenue.

In general we would expect billings to track revenue growth and there's nuances and we called out some of the nuances from Q4, because we know that everybody.

Tracks billings and looks at it we did talk about growth. This year that we think it's going to be impacted.

Negatively by FX by 1% for Q1 and for the full year and also Q1 and Q2 just in terms of comparison to prior year are pretty tough compares versus this year. The prior year benefited from.

benefited from a weak COVID year the year before, so those growth rates looked great. And then, so I think we're going to have just a tougher compare in our Q1 and Q2.

Weak.

Over the year or the year before so those growth rates. So it looks great and then so I think we're going to we're going to have just tougher compare in our Q1 and Q2.

That being said, we think we're doing really well and we're super excited about.

The opportunity here and the way we think about guidance is we have a lot of visibility kind of into Q1.

And then it gets less and less and we're just trying to guide to what we see and then obviously, we're going to update it as we go along.

Got it. Got it. Perfect. Thanks a lot. You bet.

Got it.

Got it perfect. Thanks, a lot.

You bet.

Yes.

Thank you. Once again, ladies and gentlemen, if you have a question, please press star, then one. Our next question comes from the line of Brent Thill from Jefferies. Your question, please.

Thank you once again, ladies and gentlemen, if you have a question. Please press Star then one.

Our next question comes from the line of Brent Thill from Jefferies. Your question. Please.

Hi, this is Navs Kota on for Brandsail. Thank you for taking my question. Wanted to maybe ask first to Gaurish,

Hi, this is non soda on for Greg. Thank.

Thank you for taking my question.

I wanted to maybe ask for it.

<unk>.

No.

One of the things we hear from investors is about the pull forward in demand for the front office aspect in 2021. Maybe could you talk a little bit about how you think about demand expectations for next year and is there any pull forward within the markets that you operate in?

One of the things we hear from investors.

About the pull forward in demand.

First off with that.

Maybe could you talk a little bit about how are you.

How do you think about demand expectations for next year and is there any pull forward in the markets that you operate in.

Hey, Thanks for the question.

We have heard about some reports talking about pull forward and demand, but we have not actually noticed a big change in demand or experience of pull forward at Freshworks. So in fact, we actually see a healthy demand environment, and we are focused on capturing that, especially in the mid-market. So we – in Q4, we saw strong demand signals for fresh service in particular, and more than anything, the demand trend that we are seeing is –

I think we have heard about some reports talking about pull forward in demand, but we have not actually noticed a big change in demand experienced a pull forward at fresh look.

So in fact.

We actually see a healthy demand environment, and we are focused on capturing that especially in the mid market.

We in Q4, we saw strong demand signals for our service in particular and more than anything the demand that we're seeing.

As companies get out of the pandemic and COVID, we are thinking that, hey,

As companies get out of the pandemic and Covid, we are thinking that hey.

Employees are starting to get back, but companies are still have to deal with remote and every business now has to engage with customers on multiple channels. Online customer buying patterns are here to stay. So, we see this as an acceleration of digital transformation, and that's going to continue both in customer engagement and employee engagement. So, that's what we believe gives us this massive opportunity to keep going.

Employees are starting to get back but companies have still have to deal with remote and every business has to engage with customers on multiple China's online customer buying patterns are here to stay so we see this.

That's an acceleration of digital transformation and that's going to continue both in customer engagement and employee engagement. So thats. What we believe gives us this massive opportunity to keep growing.

Got it.

Got it. And maybe one question for Tyler, if I may. Tyler, thank you for the commentary on the churn rate improving. How should we think about the pathway forward for net retention? Are you still thinking of 110 to low teens as we roll into next year? Or should we expect the improvements in churn to translate into higher net retention?

And maybe.

One question for Tyler if I may.

Got it and thank you for the commentary on.

The churn rate improving.

How should we think about the pathway forward net retention.

Are you still thank you.

Hello team.

As we roll into next year or.

Should we expect the improvement in churn to translate into higher net retention.

Hello, Thanks for thanks for that question.

So we went public we said hey, we.

We thought it was 110 to low teens and net dollar retention was obviously higher at that time, we said, it's going to come down.

Actually we're really pleased with the progress we've made I think we gave some color 114, but that included 1% impact.

from FX it would have been 115 in the last quarter had a positive impact and so really just moved 1%. Turned being half of it where, you know, we have previously talked about kind of being a low 20s to high teens in terms of turn and now we're solidly in the high teens.

From FX it would have been $1 15 in the last quarter had a positive impact and so really just moved 1% churn being half of it where we had previously talked about kind of being a low <unk> to high teens in terms of churn and now we're solidly in the high teens.

We're not ready to say Hey, you should model out.

More than the kind of the 110 to low teens in terms of net dollar retention run rate, but things are going in the right direction and we feel really good about we've made some great progress in terms of churn or fresh desk product had the best churn.

turn quarters ever had. Fresh service was already at great turn levels and the investments we made in the customer success group over the last year are truly starting to pay off. So we'll update that as we think you guys should be modeling something different, but it feels really good right now.

Quarters ever had fresh service was already at great churn levels and the investments we've made in the customer success group over the last year are truly starting to pay off.

So we'll update that as we as we think.

You guys should be modeling something different but it feels really good right now.

Got it perfect. Thank you.

Thank you. Our next question comes from the line of Natalie Howe from Bank of America Securities. Your question please.

Thank you. Our next question comes from the line of Natalie <unk> from Bank of America Securities. Your question. Please.

Oh, hey, guys. This is Brad Stills from V-based Securities. Thanks so much for taking the question. I wanted to ask about FreshSales. I recall a pretty good user base on the free version. I know it's still in early. It wasn't material to ARR at the time of IPO. Just curious, you know, when might we see those conversions perhaps contributing more material to revenue? Is it this year? Should we be thinking further out? Thanks so much. Hey, thanks for the question, Brad.

Oh, Hey, guys. This is Brad sills from Bofa securities. Thanks, So much for taking the question.

I wanted to ask about fresh sales I recall, a pretty good.

User base on free on the free version.

It's still early it's not wasn't material to <unk> at the time of IPO, just curious when might we see those conversions, perhaps contributing more material to revenue. This year should we be thinking further out thanks, so much.

Hey, Thanks for the question Brad.

So let me clarify that.

Fresh sales, this is the first full year of the re-architected.

First sales.

This is the first full year of the re architected.

a new fresh sales product where we actually unified marketing sales, chat and telephony into one platform with a unified customer record. So the

New fresh sales product.

Actually unified marketing sales chat and telephony into one platform with the unified customer record. So the numbers that we put out in the IPO the number of customers using for sale, that's actually paying customers had thought three customers. So, but we still feel that its early years.

Numbers that we put out in the ITU, the number of customers using FreshSales, that's actually paying customers. It's not free customers.

Extremely happy with the validation that we are getting from customers who are seeing the value of this unified product.

And as Taylor mentioned earlier.

Like later this year, we are contemplating in analyst day, and I think that would be that a timber, we'll probably be ready to break out the customer numbers and.

Hopefully revenue.

The first sales product asset.

But we all know CRM is a massive market and we are super excited about it.

But we all know.

The item with a massive market and we actually can excited about this opportunity.

That's great to hear. Thanks so much, Girish. And one more, if I may, on the churn commentary, I think, Tyler, you alluded to some progress you've made with this investment in customer success. Could you just elaborate a little bit more there and what drove the improvement there? Thanks again.

That's great to hear thanks, so much curious and then one more if I may.

On the churn commentary I think Tyler you alluded to.

Some progress you've made with this investment in customer success could you just elaborate a little bit more there.

And what drove the improvement there thanks again.

Yes, I mean, we.

I think we had mentioned earlier that we made a lot of investments over the last year.

I think we had mentioned earlier.

Made a lot of investments over the last year under Patty our chief customer officer in a customer success group and so when you look at that that team is.

under Patty, our chief customer officer in a customer success group. And so, when you look at that team and the engagement model that we've created for our customers, combined with all of the innovation that we came out with the last year, right, we now, you know, have a mechanism to have that engagement and then a feedback loop on feature functionality that our customers need. And then, you know, with our pace of innovation to really put out

And the engagement model that we've created for our customers combined with all of the <unk>.

Innovation that we came out with last year right we know.

Have a mechanism to have that engagement and then a feedback loop on feature functionality that our customers need and then with our pace of innovation to really put out.

Stuff into the products that our customers want and that is bearing fruit right. So they are staying with us and then once we know about our customer basis when they stay they tend to grow.

And you saw that in the cohort analysis that we had in the S. One so.

We potentially can get a double impact from it and it feels good right that we've made a lot of progress and we still have a ways to go.

But.

Definitely on the right trajectory there.

Thanks, so much Tyler.

You bet Brett Thank you.

Thank you. Our next question comes from the line of Ramo Linschow from Barclays. Your question please.

Thank you. Our next question comes from the line of Raimo <unk> from Barclays. Your question. Please.

Hey, thanks for screening me and congrats on me as well. Two questions, one for Tyler. How do you kind of, maybe could you remind us how you're handling currency? Because you obviously have a lot more international exposure than some of the other players. And, you know, we're starting to see like an impact that we need to manage. Like talk a little bit about how you're handling it in terms of hedging, how your pricing works, et cetera. And maybe it's worth almost thinking about constant currency breaking it out rather than you having to do it for us.

Thanks for squeezing me in and congrats from me as well.

Two questions one for Tyler.

How are you.

Maybe could you remind us how you're handling currency because you obviously have a lot more international exposure than some of the other players.

And then, Gerrish, one for you. If you think about ITS and one of the things that the ServiceNow guys have done is obviously a lot of automation on that enterprise level. How do you think about automation on the SMB side? Would that be an overkiller? Would that be an extra selling opportunity as you go along in the future with your product development? Thank you.

The surface now guys have done is obviously, there's a lot of automation on that enterprise level. How do you think about automation on the F&B side would that be an OLED killer would be that would be like an extra selling opportunity as you go along in the future with your product development. Thank you.

Yeah, hey, why don't I take the ITSM product question first?

Yes.

Why don't I take the <unk>.

Some product question first.

I think it's more interesting. Yeah. Yeah. Yeah. So.

Because it's more interesting.

Yeah.

Yes.

So one thing it's important to clarify is our service products.

One thing.

Wanted to clarify is our service product.

the customer base is inherently more mid-market. It's not necessarily SMB, because you have to understand that even if you're selling a 10 seat license.

<unk> basis inherently more mid market, it's not necessarily SMB, because you have to understand that even if you are selling a 10 seat.

You're talking about a company with 1,000 employees, right? Or maybe 500, 750, 1,000 employees. So the Fresh Service product has a very interesting dynamic where we don't have a lot of really small companies. These are smaller teams. The IT teams are very small, but in mid-market companies. And the way we are able to build automation is, so we have an

License.

Talking about the company with thousands of employees that are maybe 500 751000 in place so.

The first service product has a very interesting dynamic where we don't have a lot of really small companies. These are smaller teams. The <unk> team to the small and mid market companies and the way we are able to build automation is so we have and.

orchestration layer built into the product, which actually handles a ton of this automation. So, this is like a drag-and-drop interface similar to a low-code, low-code where

Orchestration layer into the product.

Which actually handled I kind of this automation.

So this is like a drag and drop interface similar to a local local there.

Frequent runbook automation tasks, like spinning off new cloud instances or, let's say, creating a ticket if there's an alert to the monitoring system, a lot of that IT automation capabilities are natively built in Fresh Service and our mid-market customers actually like us. And that's what makes us a credible alternative to service.

Frequent glenbrook automation tasks spinning.

Spinning up new cloud instances are let's say, creating a ticket.

Allowed to the monitoring system a lot of that at all.

Automation capabilities natively built in for service and our mid market customers actually like and Thats, what makes us a credible alternative because now.

Yeah, okay. Yeah, I'll take the currency one.

Yes, okay.

Yes, I'll take the currency went so.

Yeah, so we do have some currency impact. We've got about 32% of our ARR that's in non-USD kind of currencies.

Yes so.

I think we do have some currency impact, but we've got about 32% of our IRR thats in non USD.

Kind of currencies. So you asked what are we doing about it number one thinking about constant currency. We have discussed that internally. So we might we might be presenting numbers like that we're obviously not doing it right now and then we are also looking at putting some hedging programs in place that would kind of mitigate risk and just kind of smooth things out and so both of them.

So yeah, you asked, what are we doing about it? Number one, thinking about constant currency. We have discussed that internally, so we might.

You know, we might be presenting numbers like that. We're obviously not doing it right now. And then we are also looking at putting some hedging programs in place.

that would kind of, you know, mitigate risk and just kind of smooth things out. And so both of those, both of those options we're looking at right now. As you can see, we're trying to be as transparent as possible.

<unk>.

Both of those options, we're looking at right now as you can see we're trying to be as transparent as possible with numbers right now.

with numbers right now based on the impact and you know clearly if we put in hedging it'll solve some of that but you know it takes a little while to put in those structures.

Based on the impact in <unk>.

Clearly if we put in hedging it will solve some of that but it takes a little while to put in those structures. So until we do that we would try to continue that transparency.

So, until we do that, we will try to continue that transparency.

Perfect. Thank you very much Congress.

Thanks very much.

Thank you. Our next question comes from the line of Brian Peterson from Raymond James. Your question please.

Thank you. Our next question comes from the line of Brian Peterson from Raymond James Your question. Please.

Hey guys, this is Chase Donovan on for Brian Peterson. Just had one on the ITOM product launch. You guys launched that back in November , but you highlighted the PowerSchool using that in your prior remarks. Just curious on kind of any broad feedback that you've heard from customers early on, and then can you help the investors frame the opportunity there? How do we think about the potential upsell opportunity to the almost 9,000 fresh servers customers that you have today?

Hey, guys. This is James Donovan on for Brian Peterson, just had one on the.

Product launch you guys launched that back in November with holiday.

Squeezing that in prepared remarks.

Just curious on kind of any broad feedback that you've heard from customers early on when we can.

Can you help the investors frame the opportunity there how do we think about the potential upsell opportunity to almost 9000 crusher responsibility okay. Thanks.

So on the, thanks for the question, Steve, I think, or Chase, if I didn't get the name right.

So on the thanks for the question Steve.

Steve I think.

Our chase Chase.

Named rate.

Sure.

So, on the ITARM functionality, the first thing is we actually started building ITARM after hearing.

So on the item function I think the first thing.

We actually started building item after hearing.

like from our customers on why they thought it made sense to be in the first service product. So, they were all using other third-party tools and they felt it would make a great value addition. So, this was actually built in partnership with some of our customers. So, just to clarify, what are the capabilities that we have released? So, in fact,

Like from our customers on why they thought it made sense to be in the first service product.

So they are all using other third party tools and they felt it too.

Valuation. So so this was actually built in.

Our partnership with some of our customers. So just to clarify what are the capabilities that we have released or in fact.

We have unified incident response management on call scheduling and automated alert grouping, which is power.

So basically what it helps us.

Most IT teams, instead of reacting to customers.

Most teams instead of reacting to customers.

complaints about what's not working, so we are helping them really get proactive by understanding all the alerts that are coming in from the monitoring system, but take out the false positives, really help them understand what's going on, and be proactive. So this is like a super value add to IT teams and our customers, like we are hearing encouraging reports from our customers like PowerSchool. And I think

Our customers like we are getting encouraging reports from our customers like power school.

And I think.

We definitely think this is going to, we'll be able to take this module as an add-on to all of our existing customers, as well as land new teams with fresh servers.

We definitely think this is going to be able to take this.

Module as an add on to all of our existing customers as well as.

Land new teams.

Good for service.

Perfect. Thanks.

Thank you. Our next question comes from the line of Scott Byrd from Needham. Your question please.

Thank you. Our next question comes from the line of Scott Berg from Needham Your question. Please.

Hi, everybody. This is John on for Scott. I appreciate you taking my question and stressing the quarter. I'm just kind of curious if you could provide some additional color into what extent the fresh service product is influenced by the inbounds kind of PLG motion versus the outbound efforts. And are you seeing an evolution around who the actual buyer is of this product at all? And then second, as you expand on kind of the capabilities of this platform, what do you think about packaging that going forward? Thank you very much.

Everybody. This is John on for Scott I appreciate taking my question and scrap in the quarter just kind of curious if you could provide some additional color on to what extent that's fresh service product.

By inbound kind of P&G motion person outbound efforts and are you seeing an evolution around who the actual buyer this product at all and then.

Second as you expand on kind of the capabilities of the platform. How do you think about packaging back going forward. Thank you very much.

Okay.

So I think.

Perseverance.

First service.

pretty much follows the rest of the overall product in terms of it also gets a ton of inbound leads and we have an outbound field team which is actually generating mid-market leads. So the customer profile is more mid-market for fresh service, but from a lead gen standpoint we actually have both inbound, or I should say inbound, outbound, and partner generated leads. So from a lead gen standpoint we have both inbound, or I should say inbound, outbound,

Pretty much follows.

This overall product in terms of it also gets a ton of inbound.

Yes.

We have an outbound field team, which is actually generating mid market lead. So the customer profile is more mid market offer service, but from a lead Gen standpoint, we actually have both inbound.

I should say inbound outbound and partner Jim.

Agenda item <unk>.

So from a.

How are we packaging.

Packaging ITOM standpoint, I think currently we are having it as an add-on module that people like, because this is bringing additional users into the system who, in an ITSM system, the DevOps folks or the engineers will not actually be added.

Packaging item standpoint, I think currently.

We are having it as an add on module.

People like because this is bringing additional users into the system.

The <unk> system.

Their ops folks are the engineers will not actually be added so this.

It's being offered as an asset management add-on with a per-agent licensing, but this will be additive in the number of users from other teams that it is bringing.

Is being offered as an asset management add on.

Agent licensing, but this will be additive in the number of <unk>.

Users from other teams that it is bringing.

Great. Thanks, guys.

Thank you. As a reminder, ladies and gentlemen, if you have a question at this time, please press star then 1.

Thank you as a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then one.

And this does conclude the question and answer session of today's program.

Thank you, ladies and gentlemen, for your participation. You may now disconnect. Everyone have a great day.

Thank you ladies and gentlemen for your participation you may now disconnect everyone have a great day.

Thank you everybody.

Q4 2021 Freshworks Inc Earnings Call

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