Q3 2025 Freshworks Inc Earnings Call

His presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising that your hand is raised to withdraw. Your question. Please press star. One again, please be advised that today's conference call is being recorded I would now like to hand, the conference over to your first speaker today, Brian Lawn director of Investor.

Brian Lan: These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks include, but are not limited to, our ability to sustain our growth, to innovate, to reach our long-term revenue goals, to meet customer demand, and to control costs and improve operating efficiency. For a discussion of additional material risks and other important factors that could affect our results, please refer to today's earnings release, our most recently filed Form 10-K, 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 call, except as required by law. During the course of today's call, we will refer to certain non-GAAP financial measures.

Relations. Please go ahead.

Thank you good afternoon, and welcome to <unk> third quarter 2025 earnings Conference call.

Speaker #1: Good day and thank you for standing by . Welcome to the Freshworks Inc. third Quarter 2020 Earnings Conference Call . At this time , all participants are in a listen only mode .

Joining me today are Dennis Woodside, <unk>, Chief Executive Officer, and President and Tyler Sloat, <unk>, Chief operating officer, and Chief Financial Officer.

Speaker #1: After the speaker's presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .

The primary purpose of todays call is to provide you with information regarding our third quarter 2025 performance and our financial outlook for our fourth quarter and full year 2025.

Speaker #1: You will then hear an automated message advising that your hand is raised to withdraw your question , please press star one one again .

Speaker #1: Please be advised that today's conference call is being recorded . I would now like to hand the conference over to your first speaker today , Brian Lawn , Director of Investor Relations .

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.

Speaker #1: Please go ahead .

Speaker #2: Thank you . Good afternoon , and welcome to Freshworks Inc. Third quarter 2020 Earnings Conference Call . Joining me today are Dennis Woodside Freshworks Inc. Chief Executive Officer and president .

These forward looking statements are based on our management's beliefs about our business and industry, including our financial expectations and estimates uncertainties in the macroeconomic environment in which we operate and market volatility and certain other assumptions made by the company all of which are subject to change.

Brian Lan: Reconciliations between GAAP and non-GAAP financial measures for historical periods 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, supplemental earnings slides, periodic SEC reports, and a replay of today's call, or to learn more about Freshworks. With that, let me turn it over to Dennis.

Speaker #2: And Tyler Sloat Freshworks Inc. , chief Operating Officer and chief Financial officer . The primary purpose of today's call is to provide you with information regarding our third quarter 2025 performance and our financial outlook for our fourth quarter and full year 2025 .

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

Dennis Woodside: Thank you, Brian. Freshworks delivered an outstanding Q3, marking the third consecutive quarter this year that we surpassed our estimates across growth and profitability metrics. We grew Q3 revenue 15% year over year to $215.1 million on both an as-reported and constant currency basis, approximately three points above the high end of our previously issued estimates. Non-GAAP operating margin expanded to 21%, five points above our estimate. Our free cash flow margin was 27%, and we added a fifth straight quarter of a rule of 40-plus. We ended the quarter with nearly 75,000 customers, including new logos such as global auto manufacturer Stellantis, multinational bank Société Générale, the Pennsylvania Gaming Control Board, and Travis Perkins, the UK's leading distributor of building materials. Our positive results also reflect significant expansion deals with existing customers like Wiley, The Access Group, and iRhythm Technologies.

Speaker #2: 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 .

Such risks include but are not limited to our ability to sustain our growth to innovate to reach our long term revenue goals to meet customer demand and to control costs and improve operating efficiency.

Speaker #2: These forward looking statements are based on our management's beliefs about our business and industry , including our financial expectations and estimates , uncertainties in the macroeconomic environment in which we operate , and market volatility and certain other assumptions made by the company .

For a discussion of additional material risks and other important factors that could affect our results. Please refer today's earnings release, our most recently filed Form 10-K, and other periodic filings with the SEC.

Speaker #2: All of which are subject to change . These statements are subject to risks , uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements .

<unk> assume no obligation to update any forward looking statements in order to reflect events or circumstances that may arise. After the date of this call 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 for historical periods are included in our earnings release, which is available on our Investor Relations website at IR <unk> Dot com.

Speaker #2: Such risks include , but are not limited to , our ability to sustain our growth , to innovate , to reach our long term revenue goals , to meet customer demand , and to control costs and improve operating efficiency .

Speaker #2: For a discussion of additional material risks and other important factors that could affect our results , please refer to those earnings release . Our most recently filed form 10-K and other periodic filings with the SEC .

I encourage you to visit our Investor Relations site to access our earnings release supplemental earnings slides periodic SEC reports and a replay of today's call or to learn more about fresh works.

Dennis Woodside: In Q3, we saw a more than 40% year-over-year increase in the number of new and expansion deals with greater than $50,000 in ARR. Our strategy has focused on three key growth drivers: investing in employee experience, delivering AI capabilities across our products and accelerating adoption, and driving continued expansion in customer experience. At our Investor Day in September, we outlined our path to $1.3 billion in ARR in the next three years, and we continue to make progress towards our goal of ESM, AI, and ITAM, each generating over $100 million in ARR. Before we dive into the results, I want to speak to the transformative AI opportunity ahead for Freshworks. We have over 50 AI-driven applications in the hands of customers right now, and the direct monetization of these products demonstrates that we are driving incremental growth and that customers are realizing tangible outcomes from our AI.

Speaker #2: Freshworks Inc. assumed no obligation to update any forward looking statements in order to reflect events or circumstances that may arise after the date of this call , except as required by law .

And with that let me turn it over to Dennis. Thank you, Brian Fresh works delivered an outstanding Q3, marking the third consecutive quarter of this year that we surpassed our estimates across growth and profitability metrics.

Speaker #2: During the course of today's call , we will refer to certain non-GAAP financial measures . Reconciliations between GAAP and non-GAAP financial measures for historical periods are included in our earnings release , which is available on our Investor Relations website at IR Freshworks Inc. .

We grew Q3 revenue, 15% year over year to $215 1 million on both an as reported and constant currency basis, approximately three points above the high end of our previously issued estimates.

non-GAAP operating margin expanded to 21% five points above our estimate our free cash flow margin was 27% and we added a fifth straight quarter of rule of 40 plus.

Speaker #2: I encourage you to visit our Investor Relations site to access our earnings release , supplemental earnings slides , periodic SEC reports , and replay of today's call , or to learn more about Freshworks Inc. .

We ended the quarter with nearly 75000 customers, including new logos, such as global auto manufacturers to Lantus multinational Bank Society Generale.

Speaker #2: And with that , let me turn it over to Dennis .

Speaker #3: Thank you . Brian . Freshworks delivered an outstanding Q3 , marking the third consecutive quarter this year that we surpassed our estimates across growth and profitability metrics .

The Pennsylvania Gaming control Board in Travis Perkins plc, the Uk's, leading distributor of building materials.

Speaker #3: We grew Q3 revenue 15% year over year to $215.1 million on both an as reported and constant currency basis , approximately three points above the high end of our previously issued estimates .

Dennis Woodside: The headline here is that businesses need the right foundation: workflow, data, and security that all work together, and that's what we provide. Companies will continue to rely on us because we have the operational context, data connections, and governance needed to manage full-service functions like customer support and IT service at scale. Security, privacy, and compliance are already built into our architecture. That's what makes our AI enterprise-ready compared to general-purpose AI. Employee experience continues to lead in durable growth, achieving over $480 million in ARR. That represents 24% year-over-year growth on an as-reported basis, and 23% year-over-year growth on a constant currency basis, an acceleration from Q2. Three primary growth drivers that contributed to these results include expansion into departments outside of IT, continued growth up market, and deepening our foothold in IT asset management with Device 42.

Our positive results also reflect significant expansion deals with existing customers like Wiley the access group and I rhythm technologies.

In Q3, we saw a more than 40% year over year increase in the number of new and expansion deals with greater than $50000 in IRR.

Speaker #3: non-GAAP operating margin expanded to 21% , five points above our estimate . Our free cash flow margin was 27% , and we added a fifth straight quarter of rule of 40 plus .

Our strategy has focused on three key growth drivers investing in employee experience delivering AI capabilities across our products and accelerating adoption and driving continued expansion in customer experience.

Speaker #3: We ended the quarter with nearly 75,000 customers , including new logos such as Global Auto manufacturer Stellantis , multinational bank Societe Generale , the Pennsylvania Gaming Control Board and Travis Perkins plc .

At our Investor Day in September we outlined our path to $1 3 billion an IRR in the next three years and we continue to make progress towards our goal of ESN, AI and <unk>, each generating over $100 million in IRR.

Speaker #3: The UK's leading distributor of building materials . Our positive results also reflect significant expansion deals with existing customers like Wiley . The access Group and Irhythm Technologies .

Speaker #3: In Q3 , we saw a more than 40% year over year increase in the number of new and expansion deals with greater than $50,000 in IRR .

Before we dive into the results I want to speak to the transformative AI opportunity ahead for fresh works, we have over 50, AI driven applications in the hands of customers right now in the direct monetization of these products demonstrates that we are driving incremental growth and that customers are realizing tangible outcomes from our AI.

Speaker #3: Our strategy has focused three key growth drivers investing in employee experience , delivering AI capabilities across our products , and accelerating adoption and driving continued expansion in customer experience .

Dennis Woodside: Enterprise service management continues to be an important expansion lever as customers increasingly use Freshservice in areas of their business outside of IT. Our ESM solution, Freshservice for Business Teams, has doubled its annual recurring revenue in the past year and exceeded $35 million in ARR in Q3. Customers like Databricks, RingCentral, and Qualcomm are using our ESM offering to automate workflows and deliver more personalized employee experiences at scale. As of Q3, one in every four eligible Freshservice customers are using Freshservice for Business Teams. To meet this surging customer demand today, we announced that we are expanding enterprise service management access by making Freshservice for Business Teams available as an independent product for non-IT functions.

The headline here is that businesses need the right Foundation workflow data and security that all work together and Thats, what we provide.

Speaker #3: At our Investor Day in September , we outlined our path to 1.3 billion in IRR . In the next three years , and we continue to make progress towards our goal of SM , AI , and ITAM .

<unk> will continue to rely on us because we have the operational context data connections and governance needed to manage full service functions like customer support and service at scale.

Speaker #3: Each generating over 100 million in IRR . Before we dive into the results , I want to speak to the transformative AI on opportunity ahead for Freshworks .

Security privacy and compliance are already built into our architecture, that's what makes our AI enterprise ready compared to general purpose AI.

Speaker #3: We have over 50 AI driven applications in the hands of customers right now , and the direct monetization of these products demonstrates that we are driving incremental growth , and that customers are realizing tangible outcomes from our AI .

Employee experience continues to lead in durable growth achieving over $480 million in IRR that represents 24% year over year growth on an as reported basis and 23% year over year growth on a constant currency basis and acceleration from Q2.

Speaker #3: The headline here is that businesses need the right foundation , workflow , data and security that all work together . And that's what we provide .

Dennis Woodside: With a standalone product, we are no longer limited to using IT as our entry point, and we can now sell directly to HR, finance, facilities, and legal, even if an organization is already locked into another ITSM tool. Second, we continue to move up market with mid-size and enterprise customers. In Q3, ARR from customers who spend more than $100,000 with us grew 25% year-over-year. The steady flow of new product innovations like employee journeys, our AI-powered onboarding and offboarding capability, and increased adoption of business teams contributed to the momentum of these larger customers. Freshworks is positioned as a clear alternative to legacy players, and we continue to displace incumbents. In Q3, we delivered our highest ITSM competitive win rates in two years as customers selected Freshservice for its ease of use, fast deployment, and lower total cost of ownership. Freshworks has an established track record in ITSM.

Speaker #3: Companies will continue to rely on us because we have the operational context , data connections and governance needed to manage full service functions like customer support .

Three primary growth drivers that contributed to these results include expansion into departments outside of it.

Speaker #3: And IT service at scale . Security , privacy and compliance are already built into our architecture . That's what makes our AI enterprise ready compared to general purpose AI .

Continued growth upmarket and deepening our foothold in asset management with device 42.

Enterprise service management continues to be an important expansion lever as customers increasingly use fresh service in areas of their business outside of it.

Speaker #3: Employee experience continues to lead in durable growth , achieving over $480 million in IRR that represents 24% year over year growth on an as reported basis , and 23% year over year growth on a constant currency basis .

Our <unk> solution fresh service for business teams has doubled its annual recurring revenue in the past year and exceeded $35 million in <unk> in Q3.

Customers like data bricks ring central in qualifying our using our <unk> offering to automate workflows and deliver more personalized employee experiences at scale.

Speaker #3: And acceleration from Q2 three primary growth drivers that contributed to these results include expansion into departments outside of it , continued growth up market , and deepening our foothold in IT .

As of Q3, one in every four eligible fresh service customers are using fresh service for business teams.

Speaker #3: Asset management with device 42 , Enterprise Service Management continues to be an important expansion lever as customers increasingly use fresh service in areas of their business outside of it .

To meet the surge in customer demand today, we announced that we're expanding enterprise service management access by making press service for business teams available as an independent product for non it functions.

Dennis Woodside: Mid-market and enterprise organizations want speed and simplicity, and Freshworks delivers. One example is Holtcat, the largest US dealer of Caterpillar equipment, who saw significant improvement in efficiency and productivity as agents were able to handle nearly 10,000 tickets within six months and bring their average ticket resolution time to under five hours. The third growth lever in EX is our advanced IT asset management offering expansion with Device 42. In Q3, we closed our biggest Device 42 new deal to date with the largest US-based sporting goods retailer. Device 42's deep integration with Freshservice and its differentiated discovery engine made it the clear choice for enterprises that are seeking real-time visibility and control. The momentum is evident as half of our top 10 largest deals in the quarter included a Device 42 component. In addition to these three growth drivers, we're deepening our presence across key verticals.

Speaker #3: Our ESM solution fresh service for business teams has doubled its annual recurring revenue in the past year and exceeded 35 million in IRR in Q3 .

With a standalone product, we are no longer limited to using it as our entry point and we can now sell directly to HR finance facilities and legal even if an organization is already locked into another TSM tool.

Speaker #3: Customers like Databricks , RingCentral and Qualcomm are using our ESM offering to automate workflows and deliver more personalized employee experiences at scale . As of Q3 , one in every four eligible fresh service customers are using fresh service for business teams to meet this surging customer demand .

Second we continue to move upmarket with midsize and enterprise customers in Q3, <unk> from customers, who spend more than $100000 with us grew 25% year over year.

The steady flow of new product innovations like employee journeys, our AI powered onboarding and off boarding capability and increased adoption of business teams contributed to the momentum of these larger customers.

Speaker #3: Today , we announced that we are expanding enterprise service Management access by making fresh service for business teams available as an independent product for Non-it functions with a standalone product , we are no longer limited to using it as our entry point , and we can now sell directly to HR , finance , facilities and legal .

<unk> is positioned as a clear alternative to legacy players and we continue to displace incumbents.

In Q3, we delivered our highest TSM competitive win rates in two years as customers selected press service for its ease of use fast deployment and lower total cost of ownership.

Speaker #3: Even if an organization is already locked into another ITSM tool . Second , we continue to move up market with midsize and enterprise customers .

Dennis Woodside: For example, in Q3, we doubled our law firm customer count, reaching over 1,000. In sports, we want to congratulate the Los Angeles Dodgers, one of several Major League Baseball teams that rely on Freshservice, on winning back-to-back World Series, and also the McLaren Formula One team for winning back-to-back Constructors Championships. Finally, we continue to drive greater efficiency and focus on our go-to-market motion. On the leadership front, we welcomed Enrique Artegan as Senior Vice President and General Manager of America Field Sales. Enrique's experience leading high-performing sales organizations will help sharpen our execution, accelerate growth, and strengthen our GTM discipline across North and South America. Now let's talk about our AI tailwind. Freddy AI continues to be a growth driver and expansion opportunity across EX and CX, and is delivering exceptional results for thousands of customers who are seeing tangible business value and returns quickly after adoption.

Speaker #3: In Q3 , IRR from customers who spend more than $100,000 with us grew 25% year over year . The steady flow of new product innovations like employee journeys , our AI powered onboarding and offboarding capability , and increased adoption of business teams contributed to the momentum of these larger customers .

<unk> has an established track record in ITM, Midmarket and enterprise organizations want speed and simplicity and fresh works delivers.

One example is whole cat the largest U S dealer of Caterpillar equipment, who saw significant improvement in efficiency and productivity as agents were able to handle nearly 10000 tickets within six months and bring their average ticket resolution time to under five hours.

Speaker #3: Freshworks is positioned as a clear alternative to legacy players , and we continue to displace incumbents in Q3 . We delivered our highest ITSM competitive win rates in two years as customers selected fresh service for its ease of use , fast deployment and lower total cost of ownership .

The third growth lever <unk> is our advanced it.

Management offering expansion with device 42.

In Q3, we closed our biggest device 42, new deal to date with the largest U S based sporting goods retailer.

Speaker #3: Freshworks has an established track record in ITSM for mid-market and enterprise organizations. They want speed and simplicity, and Freshworks delivers. One example is Holt Cat, the largest U.S. dealer of Caterpillar equipment, who saw significant improvement in efficiency and productivity as agents were able to handle nearly 10,000 tickets within six months and bring their average ticket resolution time to under five hours.

Device 42, deep integration with fresh service and its differentiated discovery engine made it the clear choice for enterprises that are seeking real time visibility and control the.

Dennis Woodside: As we stated before, we believe this can be a $100 million standalone revenue stream over the next three years. AI is becoming a core productivity engine for every team, not just for IT. Here is why Freshworks is winning: our products sit where real work happens in customer support, IT, HR, and operations, helping businesses automate tasks, resolve issues faster, and deliver better experiences with less effort. Our AI is deeply embedded in how our customers work every day. It is writing replies, classifying tickets, generating insights, and increasingly taking action on behalf of employees and customers. The results speak for themselves. AI ARR has doubled year-over-year. Customers are now using Freddy AI to resolve millions of problems every week. Our new AI agents are performing real work across industries, from handling returns in e-commerce to managing employee requests in HR.

The momentum is evident as half of our top 10 largest deals in the quarter included a device 42 components.

In addition to these three growth drivers we are deepening our presence across key verticals. For example in Q3, we doubled our law firm customer count reaching over 1000 in sports we want to congratulate the Los Angeles Dodgers one of several major League baseball teams. They rely on for our service are winning back to back World series and also the Mclaren Formula one team for winning back to.

Speaker #3: The third growth lever index is our advanced . IT Asset management offering expansion with device 42 . In Q3 , we closed our biggest device , 42 new deal to date with the largest US based sporting goods retailer .

Constructors Championships.

Finally, we continue to drive greater efficiency and focus on our go to market motion on the leadership front, we welcomed Enrique <unk> as senior Vice President and General manager of America field sales <unk> experienced leading high performing sales organization will help sharpen our execution accelerate growth and strengthen our GTS disciplined across.

Speaker #3: Device 42 is deep integration with fresh service and it's differentiated discovery engine made it the clear choice for enterprises that are seeking real time visibility and control .

Speaker #3: The momentum is evident as half of our top ten largest deals in the quarter included a device 42 component . In addition to these three growth drivers , we're deepening our presence across key verticals .

North and South America.

Dennis Woodside: As a testament to our AI momentum, we have seen AI agent usage expand more than six-fold in the past seven months, while our existing AI Copilot solutions continue to double in usage year-over-year. Freddy Copilot ARR grew 160% year-over-year and was included in over 60% of our new customer deals over $30,000, a five-point increase from the prior quarter. We also saw double-digit attach rates again for new SMB customers in Q3. The number of customers using Copilot grew significantly too, by over 130% year-over-year. Travis Perkins upgraded from legacy complexity to service efficiency with Freshservice and Freddy AI Copilot. Travis Perkins is now able to provide best-in-class IT service management to 17,000 employees across 1,400 locations, while improving operational execution, optimizing costs, and increasing productivity for HR and IT teams. These Freddy Copilot customers stick with us.

Speaker #3: For example , in Q3 , we doubled our law firm customer count , reaching over 1000 . In sports , we want to congratulate the Los Angeles Dodgers , one of several Major League Baseball teams that rely on fresh service and winning back to back World Series , and also the McLaren Formula One team for winning back to back constructors championships .

Now, let's talk about our AI tailwind.

AI continues to be a growth driver and expansion opportunity across <unk> and CX and is delivering exceptional results for thousands of customers, who are seeing tangible business value and returns quickly after adoption.

As we stated before we believe this can be a $100 million standalone revenue stream over the next three years.

Speaker #3: Finally , we continue to drive greater efficiency and focus on our go to market motion on the leadership front , we welcomed and Hartigan as Senior Vice president and general manager of America Field Sales .

AI is becoming a core productivity engine for every team not just for it.

And here's why fresh works is winning or products that were real work happens in customer support it HR and operations, helping businesses automate tasks resolve issues faster and deliver better experiences with less effort.

Speaker #3: Enriquez experience leading high performing sales organizations will help sharpen our execution , accelerate growth , and strengthen our GTM discipline across North and South America .

Speaker #3: Now , let's talk about our AI tailwind . Freddy AI continues to be a growth driver and expansion opportunity across X and Z , and is delivering exceptional results for thousands of customers who are seeing tangible business value and returns quickly after adoption .

Our AI is deeply embedded in how our customers work everyday it's writing replies classified tickets generating insights and increasingly taking action on behalf of employees and customers.

The results speak for themselves AI <unk> has doubled year over year.

Speaker #3: As we stated before , we believe this can be a $100 million standalone revenue stream over the next three years . AI is becoming a core productivity engine for every team , not just for it .

Customers are now using Freddie AI to resolve millions of problems every week.

Dennis Woodside: Their net retention rate is 112% in Q3 for both CX and EX, higher than our overall base, and a tangible sign that AI is driving deeper engagement and long-term value. We believe this tailwind will continue to strengthen our growth trajectory. The number of Freddy AI agent sessions grew over 70% in Q3, and we have seen 650,000 sessions per month since launch. Freddy AI agent deflected more than 50% of tickets for CX and EX customers. Those who had early access to agentic workflows that we launched in June are seeing their average deflection rate jump to 65%, with a handful of customers seeing 80% of service issues resolved by AI agents. We're seeing positive feedback from customers who have had early access in Q3 to several products we announced at our June refresh event.

And our new AI agents are performing real work across industries from handling returns in e-commerce to managing employee requests in HR.

Speaker #3: And here's why . Freshworks is winning our products that were real work happens , and customer support . It . HR and operations helping businesses automate tasks , resolve issues faster and deliver better experiences with less effort .

As a testament to our AI momentum, we have seen AI agent usage expand more than six fold in the past seven months, while our existing AI copilot solutions continued to double and usage.

Speaker #3: Our AI is deeply embedded in how our customers work every day . It's writing replies , classifying tickets , generating insights , and increasingly taking action on behalf of employees and customers .

Over a year.

Pretty copilot IRR grew 160% year over year and was included in over 60% of our new customer deals over $30000, a five point increase from the prior quarter.

Speaker #3: The results speak for themselves . AI are has doubled year over year . Customers are now using AI to resolve millions of problems every week , and our new AI agents are performing real work across industries , from handling returns and e-commerce to managing employee requests in HR .

We also saw double digit attach rates again toward new SMB customers in Q3.

The number of customers using copilot grew significantly two by over 130% year over year.

Travis Perkins plc upgraded from legacy complexities to service efficiency with fresh service and Freddie AI co pilot.

Speaker #3: As a testament to our AI , AI momentum , we have seen AI agent usage expand more than sixfold in the past seven months .

Dennis Woodside: For example, Gales Bakery, a mid-sized UK café chain with over 170 locations, used Freddy AI agent studio for Freshdesk to build AI agents. These Freddy AI agents now handle 1,000 inquiries per month to deflect more than 1/3 of total volume. Employees are freed from repetitive work and can dedicate more time to more complex customer cases like allergies, ingredients, or complaints that require personal care. Next week, we'll share new product announcements across our entire portfolio at Refresh North America on 13 November 2024 in San Francisco and at our virtual summit on 18 November 2024. This includes new vertical agentic AI agents that bring our growth strategy to life, demonstrating how we're executing through AI innovation that expands our addressable market and deepens customer value.

<unk> is now able to provide best in class. It service management to 17000 employees across 1400 locations, while improving operational execution optimizing costs and increasing productivity for HR and it teams.

Speaker #3: While our existing AI Copilot solutions continue to double in usage year over year, our AR grew 160% year over year and was included in over 60% of our new customer deals.

These Freddie copilot customers stick with us their net retention rate is 112% in Q3 for both <unk> and <unk> <unk> higher than our overall base.

Speaker #3: Over $30,000 , a five point increase from the prior quarter . We also saw double digit attach rates again for new SMB customers in Q3 .

And a tangible sign that AI is driving deeper engagement and long term value.

Speaker #3: The number of customers using Copilot grew significantly too , by over 130% year over year . Travis Perkins plc upgraded from legacy complexities to service efficiency with fresh service and Freddy AI , copilot Travis Perkins is now able to provide best in class .

We believe this tailwind will continue to strengthen our growth trajectory.

The number of Freddie AI agent sessions grew over 70% in Q3, and we have seen.

650000 sessions per month since launch Freddie AI agent deflected more than 50% of tickets for CX <unk> X customers.

Speaker #3: IT service management to 17,000 employees across 1400 locations , while improving operational execution , optimizing costs and increasing productivity for HR and IT teams .

Dennis Woodside: Our third imperative, customer experience, grew to over $390 million in ARR, representing 8% growth year-over-year on an as-reported basis, and 7% on a constant currency basis. Q3 growth was driven by deeper product adoption and customer sentiment that Freshdesk is easier to implement and use than the legacy alternatives. To build momentum, we refocused our CX products and will be announcing a new unified experience at Refresh next week, a single workspace that consolidates Freshdesk, Freshchat, and all of our Freddy AI products for customer support teams. This hub centralizes all conversations, context, and tools to help agents resolve inquiries and get work done more efficiently. This will be a force multiplier for frontline support teams, helping them improve the speed and quality of customer service. Freddy AI continues to be an expansion driver for CX, with measurable impact for customers using Freddy AI agents in Freshdesk.

Those who had early access to agenda workflows that we launched in June are seeing their average deflection rate jumped to 65% with a handful of customers seeing 80% of service issues resolved by AI agent.

Speaker #3: These Freddy Copilot customers stick with us . Their net retention rate is 112% in Q3 for both CX and X , higher than our overall base , and a tangible sign that AI is driving deeper engagement and long term value .

We're seeing positive feedback from customers, who have had early access in Q3 to several products, we announced at our June refresh event.

Speaker #3: We believe this tailwind will continue to strengthen our growth trajectory . The number of Freddy AI agent sessions grew over 70% in Q3 , and we have seen 650,000 sessions per month since launch , Freddy AI agent deflected more than 50% of tickets for CX and X customers .

For example, <unk> bakery, a mid sized U K cafe chain with over 170 locations used Freddie AI agent studio for fresh test to build AI agents. These.

These Freddie AI agents now handle 1000 increase per month to deflect more than one third of total volume.

<unk> are freed from repetitive work and can dedicate more time to more complex customer cases, like allergies ingredients, our complaints that require personal care.

Speaker #3: Those who had early access to Agentic workflows that we launched in June are seeing their average deflection rate jump to 65% , with a handful of customers seeing 80% of service issues resolved by AI agent .

Next week, we will share new product announcements across our entire portfolio of refresh North America on November 13th in San Francisco and at our virtual summit on November 18th.

Speaker #3: We are seeing positive feedback from customers who have had early access in Q3 to several products . We announced at our June refresh event .

Dennis Woodside: For example, Bergsite, a leading German outdoor retailer, uses Freddy AI agents to automatically retrieve real-time order data and provide status updates, return label, and invoices with customers in seconds. This has significantly reduced ticket volume and improved response times, driving higher satisfaction and greater trust in the Bergsite brand. The potential of agentic workflows is tremendous. Traditionally, building AI agents like this took months, designing customer support workflows, training data, and endless testing. Our pre-built AI agents help our customers deploy on day one to handle tasks like expediting orders, processing returns, or checking delivery status. That means faster setup, faster results, and a better customer experience from the start. While SMB and commercial segments continue to turn to Freshdesk, we are also seeing larger implementations with mid-size and enterprise organizations like the University of Pennsylvania, who consolidated its finance support into a single hub with Freshworks.

This includes new vertical identic AI agents that bring our growth strategy to life, demonstrating how we are executing through AI innovation that expands our addressable market and deepens customer value.

Speaker #3: For example, Gail's Bakery, a mid-sized UK café chain with over 170 locations, used Freddy AI Agent Studio for Freshdesk to build AI agents.

Speaker #3: These Freddy AI agents now handle 1000 enquiries per month to deflect more than one third of total volume . Employees are freed from repetitive work and can dedicate more time to more complex customer cases like allergies , ingredients or complaints that require personal care .

Our third imperative customer experience grew to over $390 million, representing 8% growth year over year on an as reported basis and 7% on a constant currency basis.

Q3 growth was driven by deeper product adoption and customer sentiment that process is easier to implement and use than the legacy alternatives to.

Speaker #3: Next week , we'll share new product announcements across our entire portfolio at Refresh North America . On November 13th in San Francisco and at our virtual summit on November 18th .

To build momentum, we refocused our CX products, and we will be announcing a new unified experience at refresh next week, a single workspace that consolidates fresh desk fresh chat and all of our Freddie AI products for customer support teams.

Speaker #3: This includes new vertical AI agents that bring our growth strategy to life , demonstrating how we're executing through AI innovation that expands our addressable market and deepens customer value .

This hub Centralizes, all conversations context in tools to help agents resolve inquiries and get work done more efficiently. This.

Speaker #3: Our third imperative customer experience grew to over $390 million in IRR , representing 8% growth year over year on an as reported basis and 7% on a constant currency basis .

This will be a force multiplier for frontline support teams, helping them improve the speed and quality of customer service.

Dennis Woodside: In just six months, the university processed more than 30,000 service tickets, streamlining workflows and improving stakeholder satisfaction. We believe customers of all sizes continue to choose Freshworks CX solutions for its AI-driven efficiency and uncomplicated customer support experience. Around the world, businesses are choosing software that delivers real outcomes, speed, simplicity, and measurable ROI, and that's exactly where we stand out. Our enterprise-grade products deliver faster time to value and lower total cost of ownership, aligning perfectly with what today's buyers demand. With solid momentum behind us, we're leaning into the global opportunity ahead to expand our pipeline, acquire new customers, and fuel durable growth. Thank you to our customers, partners, employees, and shareholders for your ongoing support. Now let me turn it over to Tyler to go through the operational and financial details. Thanks, Dennis, and thanks everyone for joining on the call and via webcast today.

<unk> AI continues to be an expansion driver for CX with measurable impact for customers using Freddie AI agents impressed us.

Speaker #3: Q3 growth was driven by deeper product adoption and customer sentiment that Freshdesk is easier to implement and use than the legacy alternatives to build momentum .

For example, <unk>, a leading German outdoor retailer uses Freddie AI agent to automatically retrieve real time order data and provide status updates return label and invoices with customers in seconds. This.

Speaker #3: We've refocused our products and will be announcing a new , unified experience at refresh next week . A single workspace that consolidates Freshdesk fresh chat and all of our AI products for customer support teams .

Has significantly reduced ticket volume and improved response times, driving higher satisfaction and greater trust and the Brookside brand.

Speaker #3: This hub centralizes all conversations , context and tools to help agents resolve inquiries and get work done . More efficiently . This will be a force multiplier for frontline support teams , helping them improve the speed and quality of customer service for AI continues to be an expansion driver for CX , with measurable impact for customers using AI agents in Freshdesk , for example , Birzeit , a leading German outdoor retailer , uses AI agents to automatically retrieve real time order data and provide status updates , return label and invoices with customers in seconds .

The potential of <unk> workflows is tremendous traditionally building AI agents like this took months designing customer support workflows training data and endless testing, our prebuilt AI agents help our customers deploy on day, one to handle tasks like expediting orders processing returns or checking delivery status.

That means faster setup faster results and a better customer experience from the start.

Dennis Woodside: We are very pleased that we continued our streak of outperforming across both growth and profitability during the third quarter. We once again exceeded our revenue, non-GAAP operating income, and adjusted free cash flow expectations. This strong overperformance reflects the continued demand for our AI-powered and uncomplicated EX and CX solutions. Our consistent execution and financial discipline position us well to capture the significant long-term opportunities ahead. For our call today, I'll cover the Q3 2025 finance results, provide background on the key metrics, and close with our forward-looking commentary and updated expectations for Q4 and full year 2025. As a reminder, most of our discussion will be focused on non-GAAP financial results, which exclude the impact of stock-based compensation expenses, restructuring charges, and other adjustments. We will also talk about our adjusted free cash flow, which excludes the cash outlay related to restructuring costs.

While SMB and commercial segments, continuing to turn to fresh desk. We are also seeing larger implementations with midsized and enterprise organizations like the University of Pennsylvania, who consolidated its finance support into a single hub with fresh works.

Speaker #3: This has significantly reduced ticket volume and improved response times , driving higher satisfaction and greater trust in the brand . The potential of Agentic workflows is tremendous .

In just six months the university processed more than 30000 service tickets streamlining workflows and improving stakeholder satisfaction.

Speaker #3: Traditionally , building AI agents like this took months . Designing customer support workflows , training data , and endless testing . Our pre-built AI agents help our customers deploy on day one to handle tasks like expediting orders , processing returns , or checking delivery status .

We believe customers of all sizes continue to choose fresh work CX solutions for its AI, driven efficiency and uncomplicated customer support experience.

Around the world businesses are choosing software that delivers real outcomes speed simplicity, and measurable ROI and Thats exactly where we stand out.

Speaker #3: That means faster setup , faster results , and a better customer experience from the start . While SMB and commercial segments continue to turn to Freshdesk , we are also seeing larger implementations with midsize and enterprise organizations like the University of Pennsylvania , who consolidated its finance support into a single hub with Freshworks in just six months .

Our enterprise grade products deliver faster time to value and lower total cost of ownership aligning perfectly with what today's buyers demand.

With solid momentum behind us, we're leaning into the global opportunity ahead to expand our pipeline and acquire new customers and fuel durable growth.

Speaker #3: The university processed more than 30,000 service tickets , streamlining workflows and improving stakeholder satisfaction . We believe customers of all sizes continue to choose Freshworks solutions for its AI driven efficiency and uncomplicated customer support experience around the world .

Thank you to our customers partners employees and shareholders for your ongoing support now let me turn it over to Tyler to go through the operational and financial details.

Dennis Woodside: To provide greater transparency into our underlying business performance, we will also include constant currency comparisons throughout today's call. Starting with the income statement, Q3 total revenue increased to $215.1 million, growing 15% year-over-year on both an as-reported and constant currency basis. Revenue outperformance includes a one-time $1 million contribution coming from our on-premise Device 42 business. Professional services revenue modestly declined quarter to quarter to just over $2 million, consistent with our ongoing shift in leveraging our partner network as we scale our business. In 2025, we saw partner involvement expand significantly across our largest deals. Partners helped to lead implementations for over half of our ARR deals greater than $50,000, a notable increase from last year, underscoring the success of our robust and growing partner ecosystem.

Thanks, Dennis and thanks, everyone for joining on the call and via webcast today.

We are very pleased that we continued our streak of outperforming across both growth and profitability during the third quarter.

Speaker #3: Businesses are choosing software that delivers real outcomes , speed , simplicity and measurable ROI . And that's exactly where we stand out . Our enterprise grade products deliver faster time to value and lower total cost of ownership .

We once again exceeded our revenue non-GAAP operating income and adjusted free cash flow expectations.

Speaker #3: Aligning perfectly with what today's buyers demand . With solid momentum behind us , we're leaning into the global opportunity ahead to expand our pipeline , acquire new customers , and fuel durable growth .

This strong over performance reflects the continued demand for our AI powered and uncomplicated <unk> solutions.

Our consistent execution and financial discipline position us well to capture the significant long term opportunities ahead.

Speaker #3: Thank you to our customers , partners , employees and shareholders for your ongoing support . Now , let me turn it over to Tyler to go through the operational and financial details .

For our call today I'll cover the Q3 2025 financial results provide background on the key metrics and close with our forward looking commentary and updated expectations for Q4 and full year 2025.

Speaker #4: Thanks , Dennis , and thanks , everyone for joining on the call . And be a webcast today . We are very pleased that we continued our streak of outperforming across both growth and profitability during the third quarter .

As a reminder.

Most of our discussion will be focused on non-GAAP financial results, which exclude the impact of stock based compensation expenses restructuring charges and other adjustments.

Dennis Woodside: Our EX business accelerated in Q3, growing to over $480 million in ARR, representing growth of 24% year-over-year on an as-reported basis, and 23% year-over-year on a constant currency basis. Our faster growth was driven by strength across our entire EX portfolio, as we saw positive momentum in not only ITSM, but also meaningful progress in ESM, advanced ITAM, and AI, each of which we believe can eventually be $100 million ARR businesses. Our CX business increased to over $390 million in ARR, reflecting growth of 8% on an as-reported basis and 7% year-over-year on a constant currency basis. We continue to see healthy and predictable demand for our Freshdesk products. Moving to margins, we maintained a non-GAAP gross margin of 86% in Q3, as we continued to scale our business efficiently.

Speaker #4: We once again exceeded our revenue . non-GAAP operating income and adjusted free cash flow expectations . This strong overperformance reflects the continued demand for our AI powered and uncomplicated X and solutions .

We will also talk about our adjusted free cash flow, which excludes the cash outlay related to restructuring costs.

To provide greater transparency into our underlying business performance. We will also include constant currency comparisons throughout today's call.

Speaker #4: Our consistent execution and financial discipline position us well to capture the significant long term opportunities ahead for our call today , I'll cover the Q3 2020 financial results , provide background on the key metrics , and close with our forward looking commentary and updated expectations for Q4 and full year 2025 .

Starting with the income statement Q3, total revenue increased to $215 1 million growing 15% year over year on both an as reported and constant currency basis.

Revenue outperformance includes a onetime $1 million contribution coming from our on premise device 42 business.

Speaker #4: As a reminder , most of our discussion will be focused on non-GAAP financial results , which exclude the impact of stock based compensation expenses , restructuring charges , and other adjustments .

Professional services revenue modestly declined quarter over quarter to just over $2 million consistent with our ongoing shift in leveraging our partner network as we scale our business.

Speaker #4: We will also talk about our adjusted free cash flow , which excludes the cash outlay related to restructuring costs to provide greater transparency into our underlying business performance .

In 2025, we saw partner involvement expand significantly across our largest deals.

Dennis Woodside: Our non-GAAP operating income for Q3 came in at $45.2 million, representing a non-GAAP operating margin of 21%, and ahead of our prior expectations, reflecting our continued top-line momentum and effective cost management. Moving to operating metrics, our net dollar retention came in at 105% on an as-reported basis and 104% on a constant currency basis, both in line with our expectations. Just like last quarter, Device 42 represented a small drag of 60 basis points to net dollar retention. We expect Device 42 retention to improve gradually as we continue to scale the business with our ITSM offering. Looking ahead, we estimate net dollar retention of approximately 105% on an as-reported basis and 104% on a constant currency basis for Q4.

Speaker #4: We will also include constant currency comparisons throughout today's call , starting with the income statement , Q3 total revenue increased to $215.1 million , growing 15% year over year on both an as reported and constant currency basis .

Partners help to lead implementations for over half of our <unk> deals greater than $50000. A notable increase from last year underscoring the success of our robust and growing partner ecosystem.

Our <unk> business accelerated in Q3 growing to over $480 million in IRR, representing growth of 24% year over year on an as reported basis and 23% year over year on a constant currency basis.

Speaker #4: Revenue outperformance includes a one time $1 million contribution coming from our on premise device , 42 business professional services revenue modestly declined quarter over quarter to just over $2 million .

Our faster growth was driven by strength across our entire <unk> portfolio as we saw positive momentum in not only TSM were also meaningful progress and GSM advanced item and AI.

Speaker #4: Consistent with our ongoing shift in leveraging our partner network as we scale our business in 2025 , we saw partner involvement expand significantly across our largest deals .

Speaker #4: Partners helped to lead implementations for over half of our AR deals , greater than $50,000 . A notable increase from last year . Underscoring the success of our robust and growing partner ecosystem .

Each of which we believe can eventually be $100 million <unk> businesses.

Our CX business increased over $390 million in the IRR, reflecting growth of 8% on an as reported basis and 7% year over year on a constant currency basis, we continue to see healthy and predictable demand for our fresh desk products.

Dennis Woodside: As of the end of Q3, the number of customers contributing more than $5,000 in ARR grew 9% year-over-year on both an as-reported and constant currency basis to 24,377 customers. This customer cohort continues to represent over 90% of our ARR. For our larger customer cohort, as of the end of Q3, the number of customers contributing more than $50,000 in ARR grew 20% year-over-year on an as-reported basis and 19% on a constant currency basis to 3,612 customers. This cohort represents over 50% of our ARR if we have continued to move up market successfully. For total customers, we added over 260 net new customers in the quarter and have nearly 75,000 customers as of the end of 30 September 2023.

Speaker #4: Our X business accelerated in Q3 , growing to over $480 million in RR , representing growth of 24% year over year on an as reported basis and 23% year over year on a constant currency basis .

Moving to margins, we maintained our non-GAAP gross margin of 86% in Q3, as we continue to scale our business efficiently.

Speaker #4: Our faster growth was driven by strength across our entire X portfolio. As we saw positive momentum in not only ITSM, but also meaningful progress in ESM, advanced items, and AI, each of which we believe can eventually be $100 million.

Our non-GAAP operating income for Q3 came in at $45 2 million.

Representing a non-GAAP operating margin of 21% and ahead of our prior expectations, reflecting our continued topline momentum and effective cost management.

Speaker #4: RR businesses , our business increased to over $390 million in RR , reflecting growth of 8% on an as reported basis and 7% year over year on a constant currency basis .

Moving to operating metrics.

Our net dollar retention came in at 105% on an as reported basis and 104% on a constant currency basis.

Both in line with our expectations.

Just like last quarter device 42 represented a small drag of 60 basis points to net dollar retention.

Speaker #4: We continue to see healthy and predictable demand for our freshdesk products moving to margins . We maintained a non-GAAP gross margin of 86% in Q3 as we continue to scale our business efficiently , our non-GAAP operating income for Q3 came in at $45.2 million , representing a non-GAAP operating margin of 21% , and ahead of our prior expectations , reflecting our continued top line momentum and effective cost management .

Dennis Woodside: Given the continued success of our up-market strategy and our focus on mid-market and enterprise customers, we believe total customer count is no longer a meaningful indicator of our performance. Starting with the release of Q1 results next year, we will discontinue reporting this metric on a quarterly basis and shift our focus to larger customer measures that better reflect how we manage the business and its trajectory. Now let's turn to calculated billings, balance sheet, and cash items. Our calculated billings grew to $224 million in Q3, representing growth of 14% year-over-year on both an as-reported and constant currency basis, matching our prior expectation on an as-reported basis, and coming in ahead of our constant currency forecast of 13%. Looking ahead to Q4 2025, our initial estimate for calculated billings growth is 17.5% year-over-year on an as-reported basis and 14% on a constant currency basis.

We expect device 42 retention to improve gradually as we continue to scale the business with our <unk> offering looked.

Looking ahead, we estimate net dollar retention of approximately 105% on an as reported basis and 104% on a constant currency basis for Q4.

As of the end of Q3, the number of customers contributing contributing more than $5000 in IRR grew 9% year over year on both an as reported and constant currency basis to 24 377 customers.

Speaker #4: Moving to operating metrics , our net dollar retention came in at 105% on an as reported basis , and 104% on a constant currency basis , both in line with our expectations .

This customer cohort continues to represent over 90% of our IRR.

Speaker #4: Just like last quarter , device 42 represented a small drag of 60 basis points to net dollar retention . We expect device 42 retention to improve gradually as we continue to scale the business with our ITSM offering .

For our larger customer cohort.

As of the end of Q3, the number of customers contributing more than $50000 <unk> grew 20% year over year on an as reported basis and 19% on a constant currency basis to 3612 customers.

Speaker #4: Looking ahead , we estimate net dollar retention of approximately 105% on an as reported basis and 104% on a constant currency basis for Q4 .

This cohort represents over 50% of our <unk>, we have continued to move upmarket successfully.

Dennis Woodside: For the full year 2025, we expect calculated billings growth to be approximately 16% year-over-year on an as-reported basis and 14% on a constant currency basis, both of which are in line with our expectations from last quarter. Moving to our cash items, we generated $57.2 million in adjusted free cash flow in Q3, driven by continued operational discipline and strong collections. This resulted in an adjusted free cash flow margin of 27%, which represents an over 5% point improvement year-over-year. For the full year 2025, we now expect to generate approximately $222 million of adjusted free cash flow with approximately $55 million in Q4. As a reminder, we successfully completed our inaugural $400 million share repurchase program after buying back an additional 12 million shares in Q3 at an average price of $13.28 per share. In total, we repurchased approximately 27.9 million shares at an average price of $14.35.

Speaker #4: As of the end of Q3 , the number of customers contributing more than $5,000 in RR grew 9% year over year on both an as reported and constant currency basis to 24,377 customers .

For total customers, we added over 260 net new customers in the quarter and have nearly 75000 customers as of the end of September 30.

Given the continued success of our up market strategy and our focus on mid market and enterprise customers. We believe total customer account is no longer a meaningful indicator of our performance.

Speaker #4: This customer cohort continues to represent over 90% of our RR for our larger customer cohort , as of the end of Q3 , the number of customers contributing more than $50,000 in RR grew 20% year over year on an as reported basis , and 19% on a constant currency basis to 3612 customers .

Starting with the release of Q1 results next year, we will discontinue reporting this metric on a quarterly basis and shift our focus to larger customer measures that better reflect how we manage the business and its trajectory.

Speaker #4: This cohort represents over 50% of our RR . We have continued to move up market successfully for total customers . We added over 260 net new customers in the quarter and have nearly 75,000 customers as of the end of September 30th .

Now, let's turn to calculated billings balance sheet and cash items.

Our calculated billings grew to $224 million in Q3, representing growth of 14% year over year on both an as reported and constant currency basis matching our prior expectation on an as reported basis and coming in ahead of our constant currency forecast of 13%.

Speaker #4: Given the continued success of our up market strategy and our focus on mid-market and enterprise customers , we believe total customer account is no longer a meaningful indicator of our performance .

Looking ahead to Q4 2025, our initial estimate for calculated billings growth of 17, 5% year over year on an as reported basis and 14% on a constant currency basis.

Speaker #4: Starting with the release of Q1 results next year , we will discontinue reporting this metric on a quarterly basis and shift our focus to larger customer measures that better reflect how we manage the business and its trajectory .

Dennis Woodside: We continue to manage and offset share count dilution by net settling vested equity amounts. During Q3, we used approximately $15 million for that purpose. This activity is reflected in our financing activities and is excluded from our adjusted free cash flow calculations. Looking ahead, we will continue to net settle vested equity amounts and expect Q4 cash usage of approximately $12 million at current stock price levels. For the full year, we expect to use approximately $58 million to net settle vested equity amounts. We ended the quarter with cash, cash equivalents, and marketable securities of approximately $813 million. Turning to our share count as of 30 September 2025, we had approximately 309 million fully diluted shares, which represents a decrease of 7% year-over-year. The fully diluted calculation includes 282 million basic shares outstanding, which represents a decrease compared to both the prior year and quarter.

For the full year 2025, we expect calculated billings growth to be approximately 16% year over year on an as reported basis and 14% on a constant currency basis, both of which are in line with our expectations from last quarter.

Speaker #4: Now , let's turn to calculated billings , balance sheet and cash items . Our calculated billings grew to $224 million in Q3 , representing growth of 14% year over year .

Moving to our cash items, we generated $57 2 million and adjusted free cash flow in Q3, driven by continued operational discipline and strong collections.

Speaker #4: On both and as reported , and constant currency basis matching our prior expectation on an . As reported basis . And coming in ahead of our constant currency forecast of 13% .

This resulted in an adjusted free cash flow margin of 27%, which represents an over five percentage point improvement year over year.

Speaker #4: Looking ahead to Q4 2025 , our initial estimate for calculated billings growth is 17.5% year over year on an as reported basis , and 14% on a constant currency basis for the full year 2025 , we expect calculated billings growth to be approximately 16% year over year on an as reported basis , and 14% on a constant currency basis .

For the full year 2025, we now expect to generate approximately $222 million of adjusted free cash flow with approximately $55 million in Q4.

As a reminder, we successfully completed our inaugural $400 million share repurchase program after buying back an additional 12 million shares in Q3 at an average price of $13 28 per share.

Speaker #4: Both of which are in line with our expectations from last quarter . Moving to our cash items , we generated $57.2 million in adjusted free cash flow in Q3 , driven by continued operational discipline and strong collections .

In total we repurchased approximately 27 9 million shares at an average price of $14 35.

Dennis Woodside: It also includes 24.5 million shares related to unvested RSUs and PRSUs, and over 2 million shares related to outstanding options. We remain committed to thoughtfully managing our share count dilution over time. Now on to our forward-looking estimates. For the fourth quarter of 2025, we expect revenue to be in the range of $217 million to $220 million, growing 12% to 13% year-over-year. Adjusting for constant currency using FX rates from Q4 of last year, this reflects growth of 11% to 13% year-over-year. Non-GAAP income from operations to be in the range of $30.6 million to $32.6 million, and non-GAAP net income per share to be in the range of $0.10 to $0.12, assuming weighted average shares outstanding of approximately 284.5 million shares. For the full year 2025, we expect.

Speaker #4: This resulted in adjusted free cash flow margin of 27% , which represents an over 5% point improvement year over year . For the full year 2025 , we now expect to generate approximately $222 million of adjusted free cash flow , with approximately $55 million in Q4 .

We continue to manage and offset share count dilution by net settling invested equity amounts.

During Q3, we used approximately $15 million for that purpose.

This activity is reflected in our financing activities as is and is excluded from our adjusted free cash flow calculations.

Speaker #4: As a reminder , we successfully completed our inaugural $400 million share repurchase program after buying back an additional 12 million shares in Q3 at an average price of $13.28 per share .

Looking ahead, we will continue to net settle vested equity amounts and expect Q4 cash usage of approximately $12 million at current stock price levels.

For the full year, we expect to use approximately $58 million to net settle vested equity amounts.

Speaker #4: In total , we repurchased approximately 27.9 million shares at an average price of $14.35 . We continue to manage and offset share count dilution by net settling , vested equity amounts during Q3 , we used approximately $15 million for that purpose .

We ended the quarter with cash cash equivalents in marketable securities of approximately $813 million.

Turning to our share count as of September 32025, we had approximately 309 million fully diluted shares.

Speaker #4: This activity is reflected in our financing activities and is and is excluded from our adjusted free cash flow calculations . Looking ahead , we will continue to net settle vested equity amounts and expect Q4 cash usage of approximately $12 million at current stock price levels for the full year .

Dennis Woodside: Revenue to be in the range of $833.1 million to $836.1 million, growing approximately 16% year-over-year on both an as-reported and constant currency basis. Non-GAAP income from operations to be in the range of $167 million to $169 million, and non-GAAP net income per share to be in the range of $0.62 to $0.64, assuming weighted average shares outstanding of approximately 293.9 million shares. Our financial outlook is based on a few assumptions that we would like to call out. First, our forward-looking estimates are based on FX rates as of 31 October 2025 and do not take into account any impacts from currency moves. As a reminder, we had a $1 million revenue benefit in Q3 related to a large Device 42 deal that we would not expect to repeat in Q4.

Which represents a decrease of 7% year over year.

The fully diluted calculation includes 282 million basic shares outstanding which represents a decrease compared to both the prior year and quarter.

It also includes $24 5 million shares related to Unvested, <unk>, and psus and over 2 million shares related to outstanding options.

Speaker #4: We expect to use approximately $58 million to net settle vested equity amounts. We ended the quarter with cash, cash equivalents, and marketable securities of approximately $813 million.

We remain committed to thoughtfully managing our share count dilution over time.

Now onto our forward looking estimates.

For the fourth quarter of 2025, we expect.

Speaker #4: Turning to our share count as of September 30, 2025, we had approximately 309 million fully diluted shares, which represents a decrease of 7% year over year.

Revenue to be in the range of $217 million to $220 million.

Growing 12% to 13% year over year.

Adjusting for constant currency using FX rates from Q4 of last year. This reflects growth of 11% to 13% year over year.

Speaker #4: The fully diluted calculation includes 282 million basic shares outstanding , which represents a decrease compared to both the prior year and quarter . It also includes 24.5 million shares related to Unvested , Rsu's and Prca's , and over 2 million shares related to outstanding options .

non-GAAP income from operations to be in the range of $30 6 million to $32 6 million.

Dennis Woodside: Secondly, given our strong operating and go-to-market execution this year, we are strategically reinvesting a portion of our earnings outperformance to further build on that momentum. As such, we anticipate a one-time increase in spending during Q4 to expand our pipeline and drive customer acquisition, with a modest corresponding impact on operating margins. These planned investments are reflected in our financial outlook, and position us well for continued growth. Looking beyond Q4, we are reaffirming the long-term model we outlined at our investor day in September. Based on our current forecasts, we continue to expect full year 2026 revenue growth of 13% to 14%, and we remain on track to achieve GAAP profitability by end of year. As a reminder, the fourth quarter has historically been our largest bookings quarter, and a good indicator for us.

non-GAAP net income per share to be in the range of 10 to 12.

Assuming weighted average shares outstanding of approximately 284 5 million shares.

Speaker #4: We remain committed to thoughtfully managing our share count dilution over time . Now on to our forward looking estimates for the fourth quarter of 2025 , we expect revenue to be in the range of 217 million to $220 million , growing 12% to 13% year over year , adjusting for constant currency , using FX rates from Q4 of last year .

For the full year 2025, we expect.

Revenue to be in the range of $833 1 million to $836 1 million.

Growing approximately 16% year over year on both an as reported and constant currency basis.

non-GAAP income from operations to be in the range of $167 million to $169 million and non-GAAP net income per share to be in the range of <unk> 62 to 64.

Speaker #4: This reflects growth of 11% to 13% year over year . non-GAAP income from operations to be in the range of 30.6 million to $32.6 million , and non-GAAP net income per share to be in the range of $0.10 to $0.12 .

Assuming weighted average shares outstanding of approximately 293 9 million shares.

Our financial outlook is based on a few assumptions that we would like to call out.

Speaker #4: Assuming weighted average shares outstanding of approximately 284.5 million shares for the full year 2025 , we expect revenue to be in the range of 833.1 million to $836.1 million , growing approximately 16% year over year on both an as reported and constant currency basis .

<unk>.

Our forward looking estimates are based on FX rates as of October 31, 2025, and do not take into account any impact from currency moves.

Dennis Woodside: We will follow our typical cadence of providing a more detailed outlook for 2026 on our next earnings call. With that said, let me provide some additional color on our operating margin linearity for the full fiscal year 2026. We anticipate that our Q1 2026 operating margin will be slightly better than Q4 2025 and represent the low point for next year. This is driven by the strategic decision to move the timing of our annual merit increase process from April to January, as well as the reset of US payroll taxes and the start of new benefit plans. Following this Q1 low point, we project a subsequent linear ramp-up throughout the remainder of fiscal year 2026, culminating in an operating margin exiting Q4 2026 at over 23%. Our results underscore the exceptional execution and financial discipline our global team has demonstrated throughout the year.

As a reminder.

We had a $1 million revenue benefit in Q3 related to a large device 42 deal that we would not expect to repeat in Q4.

Speaker #4: non-GAAP income from operations to be in the range of 167 million to $169 million and non-GAAP net income per share to be in the range of $0.62 to $0.64 .

Secondly, given our strong operating and go to market execution. This year, we are strategically reinvesting a portion of our earnings outperformance to further build on that momentum.

Speaker #4: Assuming weighted average shares outstanding of approximately 293.9 million shares . Our financial outlook is based on a few assumptions that we would like to call out .

As such we anticipate a onetime increase in spending during Q4 to expand our pipeline and drive customer acquisition with a modest corresponding impact on operating margins. These planned investments are reflected in our financial outlook and position us well for continued growth.

Speaker #4: First , our forward looking estimates are based on FX rates . As of October 31st , 2025 , and do not take into account any impacts from currency moves .

Looking beyond Q4, we are reaffirming our long term model, we outlined at our Investor day in September.

Speaker #4: As a reminder , we had a $1 million revenue benefit in Q3 related to a large device 42 deal that we would not expect to repeat in Q4 .

Based on our current forecast, we continue to expect full year 2026 revenue growth of 13% to 14% and.

Speaker #4: Secondly , given our strong operating and go to market execution this year , we are strategically reinvesting a portion of our earnings outperformance to further build on that momentum .

Dennis Woodside: As we get ready to close out 2025, we remain focused on continuing that momentum and thoughtfully reinvesting in our growth to capture the multitude of significant opportunities ahead. We appreciate your continued confidence in Freshworks as we execute on our strategy to deliver long-term profitable growth. With that, let us take your questions. Operator? Certainly. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Please limit yourselves to one question and a follow-up, and please stand by while we compile our Q&A roster. One moment for our first question. Our first question will be coming from Scott Berg of Needham & Company. Your line is open. Hi, everyone.

And we remain on track to achieve GAAP profitability by end of year.

As a reminder, the.

Fourth quarter has historically been our largest bookings quarter and a good indicator for us.

Speaker #4: As such , we anticipate a one time increase in spending during Q4 to expand our pipeline and drive customer acquisition with a modest corresponding impact on operating margins .

So we will follow our typical cadence of providing a more detailed outlook for 2026 on our next earnings call.

With that said.

Speaker #4: These planned investments are reflected in our financial outlook and position us well for continued growth. Looking beyond Q4, we are reaffirming the long-term model we outlined at our Investor Day in September.

Let me provide some additional color on our operating margin linearity for the full fiscal year 2026.

We anticipate that our Q1 2026 operating margin will be slightly better than Q4, 2025 and represent the low point for next year.

Speaker #4: Based on our current forecasts , we continue to expect full year 2026 revenue growth of 13% to 14% . And we remain on track to achieve GAAP profitability by end of year .

This is driven by the strategic decision to move the timing of our annual Merit increase process from April to January as.

As well as the reset of U S payroll taxes, and the start of new benefit clients.

Speaker #4: As a reminder , the fourth quarter has historically been our largest bookings quarter and a good indicator for us . So we will follow our typical cadence of providing a more detailed outlook for 2026 on our next earnings call .

Dennis Woodside: Really nice results here in the quarter. Dennis, I wanted to talk about the announcement today. You're selling ESM as a standalone solution. That's certainly not news to us that we're paying attention at the analyst day. I just want to hear kind of, I guess, how you're thinking about that solution. Is this going to be sold with a, I guess, separate sales force now? As you're selling it standalone, it's going to be sold with the same sales force that you're using. Any changes to, I don't know, pricing or, I guess, whatever the marketing message looks like around that in the standalone environment? Yeah, thanks, Scott. First of all, we launched Freshservice for Business Teams in 2022. We had a lot of demand outside of core IT departments for a service desk solution.

Following this Q1 low point, we projected subsequent linear ramp up throughout the remainder of fiscal year 2026, culminating in an operating margin exiting Q4 2026 at over 23%.

Speaker #4: With that said , let me provide some additional color on our operating margin linearity for the full fiscal year 2026 . We anticipate that our Q1 2026 operating margin will be slightly better than Q4 2025 , and represent the low point for next year .

Our results underscore the exceptional execution and financial discipline, our global team has demonstrated throughout the year.

As we get ready to close out 2025, we remain focused on continuing that momentum and thoughtfully reinvesting our growth to capture the multitude of significant opportunities ahead.

Speaker #4: This is driven by the strategic decision to move the timing of our annual merit increase process from April to January , as well as the reset of US payroll taxes and the start of new benefit plans following this Q1 low point , we project a subsequent linear ramp up throughout the remainder of fiscal year 2026 , culminating in an operating margin exiting Q4 2026 at over 23% .

We appreciate your continued confidence in <unk> as we execute on our strategy to deliver long term profitable growth.

And with that let's take your questions operator.

Certainly.

At this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourselves to one question and a follow up please standby, while we compile the Q&A roster.

Dennis Woodside: That, as you know, has been a huge driver for us. We crossed $35 million in ARR. That business has doubled year-over-year. About a quarter of our customers now, for our Freshservice customers, are using Freshservice for Business Teams in some way, shape, or form. It's a really strong value proposition. What we've seen is some prospects where they might be locked into a contract for their core ITSM with a larger incumbent. They don't necessarily want to increase their vendor dependency on that incumbent. They want to preserve optionality to potentially move to us at a later date. They need a solution now for the teams outside of IT. That's why we launched this. In those cases, we can sell to them now. We can preserve that optionality, get to know them a little bit.

Speaker #4: Our results underscore the exceptional execution and financial discipline our global team has demonstrated throughout the year . As we get ready to close out 2025 , we remain focused on continuing that momentum and thoughtfully reinvesting our growth to capture the multitude of significant opportunities ahead .

One moment for your first question.

Our first question will be coming from Scott Berg of Needham <unk> Company. Your line is open.

Hi, everyone really nice results here in the quarter.

Speaker #4: We appreciate your continued confidence in Freshworks as we execute on our strategy to deliver long term , profitable growth . And with that , let us take your questions .

Dennis I wanted to talk about the announcement today as you saw on ESN as a standalone solution. That's certainly not news to us that will get attention at the analyst day, but just wanted to hear kind of I guess, how you're thinking about that solution as it can be sold with us via a separate sales force now as you're selling Standalone excuse me you sold we've seen.

Speaker #4: Operator .

Speaker #1: Certainly at this time , we will conduct the question and answer session as a reminder to ask a question , you will need to press star one one on your telephone and wait for your name to be announced .

Dennis Woodside: When that contract does come up for renewal for core ITSM, we're there, and they've had a positive experience with us. There's no new sales force around this. We already have a pretty well-worn try-to-buy way of getting a lot of customers started. All of our typical outbound and inbound marketing methodologies apply here. It's going to be the same sales force we have, so we think we'll get a lot of scale out of that. This is on top of the core ESM business that we have, the product that is attached to Freshservice. We think that alone, when we talked about this at analyst day, that alone has a path to $100 million. This is additive to that. We're launching it today.

Speaker #1: To withdraw your question , please press star one one again . Please limit yourself to one question and a follow up . And please stand by while we compile our Q&A roster .

Sales folks that youre using in any.

Any changes to I don't know.

Pricing or I guess whatever.

Marketing message it looks like around that enough in the Standalone environment.

Speaker #1: One moment for our first question . Our first question will be coming from Scott Berg of Needham and Company . Your line is open .

Yeah, Thanks, Scott so far.

First of all we launched fresh service for business teams in 2022, we had a lot of demand outside of core IP departments for a service desk solution and that as you know has been a huge driver for us we crossed $35 million in IRR that business has doubled year over year about a quarter of our customers now.

Speaker #4: Hi everyone .

Speaker #5: Really nice results here in the quarter . Dennis , I wanted to talk about the announcement today . You're selling SM as a standalone solution .

Speaker #5: That's certainly not news to us that we're paying attention at the Analyst Day . But just want to hear kind of , I guess , how you're thinking about that solution .

Speaker #5: Is this going to be sold with a , I guess , a separate sales force ? Now , as you're selling standalone , it's going to be sold with the same sales force that you're using .

Now for a fresh service customers now are using press service for business teams in some way shape or form. So it's a really strong value proposition and what we've seen is some prospects where they might be locked into a contract for their core Ips M with the larger incumbent they.

Dennis Woodside: We'll have more next quarter in terms of early traction, but we're pretty positive about where this is going to go, just given the success of the products that we've had in the market already. Excellent. From a follow-up perspective, maybe this is for Tyler, it's around your buyback program. It expired in the quarter. You've certainly been buying back some shares at higher levels. I didn't see that repeated here, which I kind of almost expected, I guess, in the quarter, or at least an expansion of those efforts. Should we take that as maybe an indication or a shift in your capital allocation strategy, or I don't know, maybe there's something more on just on a timing basis there? Any details there would be great. Thank you. Yeah. Hey, thanks, Scott. Yeah. We finished the inaugural buyback in Q3.

Speaker #5: And any changes to , I don't know , pricing or I guess whatever the marketing message looks like around that in the standalone environment .

They don't necessarily want to increase their vendor dependency on that income that they want to preserve optionality to potentially move to us at a later date.

Speaker #3: Yeah . Thanks , Scott . So first of all , we launched fresh Service for business teams in 2022 . We had a lot of demand outside of core .

But they need a solution now for the teams outside of it and that's why we launched this in those cases, we can sell to them now we can preserve that optionality get to know them a little bit so when that contract does come up for renewal for core ITM.

Speaker #3: IT departments for a service desk solution , and that , as you know , has been a huge driver for us . We crossed 35 million in IRR .

Speaker #3: That business has doubled year over year . About a quarter of our customers now for fresh service customers now are using fresh service for business teams in some way , shape or form .

And were there and they've had a positive experience with US there is no new salesforce around this we already have.

Pretty well.

Speaker #3: So it's a really strong value proposition . And what we've seen is some prospects where they might be locked into a contract for their core ITSM with a larger incumbent .

Well worn try to buy.

They are getting a lot of customers started so all of our typical outbound and inbound marketing.

Dennis Woodside: We just finished it a month and a half ago. That was authorized a year ago for $400 million, and we completed that. We were happy to get that done. I think the weighted average price is just over $14. We are committed to working with the board on a continued capital allocation strategy. We've always said we've been open to M&A. If that comes forward, we're obviously going to invest in the business where that's needed, but we're producing a lot of cash flow now. We'll continue to talk with the board about other uses of capital, including other buybacks. We are still doing our net settles, and we provide the data there. We're still spending money every single quarter on net settlements, and that's been outside of the buyback. That'll be a continual discussion that we will have with the board. Awesome.

<unk> apply here, it's going to be the same sales force. We have so we think we'll get a lot of scale out of that and.

Speaker #3: They don't necessarily want to increase their vendor dependency on that incumbent; they want to preserve optionality to potentially move to us at a later date.

This is on top of.

The core ESN business that we have the product that is attached to fresh service, we think that alone when we talked about this at analyst day that alone.

Speaker #3: But they need a solution now for the teams outside of it . And that's why we launched this . In those cases , we can sell to them now .

Speaker #3: We can preserve that optionality , get to know them a little bit . So when that contract does come up for renewal , for core ITSM , we're there and they've had a positive experience with us .

It has a path to $100 million. This is additive to that so we're launching it today.

More next quarter in terms of early traction, but we're pretty pretty positive about where this is going to go just given the success of the products that we've had in the market already.

Speaker #3: There's no new sales force around this . We already have , you know , a pretty well well worn try to buy way of getting a lot of customers started .

Excellent and then from a follow up perspective.

Speaker #3: So all of our typical outbound and inbound marketing methodologies apply here . It's going to be the same sales force we have . So we think we'll get a lot of scale out of that .

Maybe this is for Tyler is.

On your buyback program expired in the quarter.

Dennis Woodside: Nice quarter again. Thank you. Yeah. Our next question will be coming from Alex Zukin of Wolf Research. Your line is open. Hi, how are you? This is Mark Keatser calling for Alex Zukin at Wolf. Congrats on the great results. Can you just give us a little bit more color on how you're balancing the amount of position versus adoption play with the Freddy AI suite of tools? Any way we should think about how that might change with the new agent capabilities? Yeah. Just to recap our strategy, we have a Freddy AI agent, which is a consumption-based model for CX, where our customers pay us on a per-session basis. We have Freddy Copilot, which is a per-seat license adder, and then we have our Freddy Insights, which is only available in the enterprise plan. Different products have different monetization levers and paths. For.

Certainly been buying back some shares at higher levels I didn't see that repeated here, which I kind of almost expected I guess in the quarter or at least expansion of those efforts.

Speaker #3: And you know this this is on top of the the core business that we have . The product that is attached to fresh service .

Should we take that as maybe.

Speaker #3: We think that alone when we talked about this at Analyst Day , that alone has a path to 100 million . This is additive to that .

The indication or a shift in your capital allocation strategy or.

Maybe there is something more.

Speaker #3: So we're launching it today . We'll have more next quarter in terms of early traction . But we're pretty pretty positive about where this is going to go .

Tiny basis.

Can you give some details there would be great. Thank you.

Hey, Thanks, Scott. So we finished we finished the inaugural buyback in Q3. So we just finished a month and a half ago that was authorized a year ago for $400 million and we completed that.

Speaker #3: Just given the success of the products that we've had in the market already .

Speaker #5: Excellent . Then from a follow up perspective , maybe this is for Tyler . Is surrounded buy back program . It expired in the quarter .

We're happy to get that done I think the weighted average price of just over $14.

Speaker #5: You certainly been buying back some shares at a higher levels . I didn't see that repeated here , which I kind of almost expected .

We are committed to working with the board on a continued capital allocation strategy. We've always said we've been open to M&A.

Speaker #5: I guess in the quarter , or at least expansion of of those efforts . Should we take that as maybe an indication or a shift in your capital allocation strategy ?

That come forward, we're obviously going to invest in the business, where that's needed, but we're producing a lot of cash flow now and well continue to talk about the board about other uses of capital, including other buybacks. We are still doing our net settles and we provided the data there and so we're still spending money every single quarter on net settlements and that's been outside of the buyback so that'll be a continual discuss.

Speaker #5: Or maybe there's something more just on a tiny basis. Are there any details? That would be great. Thank you. Yeah.

Dennis Woodside: AI agents, we've historically priced those based on sessions, with our agentic AI agents coming out in a matter of weeks. We have revisited pricing. We're not revealing that now, but we are going to be more in line with industry pricing, which is considerably higher than where our pricing historically has been. We think that the market will support that based on what we've seen in early access, with some customers seeing up to 80% deflection rates based on their use of AI agents. What's coming in a couple of weeks are agents that are focused on very specific verticals like fintech, like travel, logistics, e-commerce, that take action on behalf of the end customer. We know that those interactions are quite valuable. We're not quite to the point to move to full resolution-based pricing, and frankly, neither are our customers.

Speaker #4: Hey . Thanks , Scott . Yeah . So we finished . We finished the inaugural buyback in Q3 . So we just finished it a month and a half ago .

From that we will have with the board.

Speaker #4: That was authorized a year ago for 400 million . And we completed that . And , you know , we were happy to get that done .

Awesome nice quarter again, thank you.

And our next question will be coming from Alex Zukin of Wolfe Research. Your line is open.

Speaker #4: I think the weighted average price is just over $14. We are committed to working with the board on a continued capital allocation strategy.

How are you. This is mark keeps inbound problems you can at Wolf Congrats on great results.

Speaker #4: We've always said we've been open to M&A . If that if that come forward , we're obviously going to invest in the business where that's needed .

You just give us a little bit more color on how you are balancing.

Speaker #4: But we're producing a lot of cash flow now and we'll continue to talk about the board , about other uses of capital , including other buybacks .

The monetization versus adoption play with the suite of tools and the way, we should think about how that might change with.

Jim.

Speaker #4: We are still doing our net settles and we provide the data there . And so we're still spending money every single quarter on net settlements .

Okay.

Yeah, So <unk>.

Just to recap our strategy we have.

Speaker #4: And that's been outside of the buyback . So that'll be a continual discussion that we'll have with the board .

Freddie AI agent, which is a consumption based model for CX, where our customers pay us on a per session basis, we have Freddie co pilot, which is.

Dennis Woodside: The session-based pricing makes a lot of sense for where we are now. We're always open to evolving that as our customers ask us to and as customer demand warrants. You will see a meaningful price change with the launch of those products, which will allow us to monetize it quite well. Great, thanks, guys. Our next question will be coming from Patrick Walravens of Citizens Bank. Your line is open. Oh, great, thank you, and congratulations on the third quarter in a row this year. The big question I still get, Dennis, believe it or not, is for investors who are just looking at Freshworks, they still want to know, is it an AI winner or an AI loser? I see lots of evidence that it should be in the winner's camp, including your $100 million targets.

Speaker #5: Awesome. Next, again, thank you.

Speaker #6: Yeah .

Speaker #1: And our next question will be coming from Alex Zukin of Wolfe Research. Your line is open.

Per seat license Adder, and then we have our Freddie insights, which is only available in the enterprise plan. So different products have different monetization levers and paths for for AI agents.

Speaker #7: Hi . How are you ? This is Mark at Wolfe . Congrats on the great results . Can you just give us a little bit more color on how you're balancing the the monetization versus adoption play with the AI suite of tools .

Historically priced those based on sessions with our adjourn take AI agents coming out.

Speaker #7: Any way we should think about how that might change with a new agent ? Capabilities .

Matter of weeks.

We have revisited pricing, we're not revealing that now, but we are going to be more in line with industry pricing, which is considerably higher than where our pricing. Historically has been we think that the market will support that based on what we've seen in early access with some customers seeing up to 80% deflection rates based on their use of AI agents.

Speaker #6: Yeah .

Speaker #3: So just to recap , our strategy , we have a free AI agent , which is a consumption based model for CX , where our customers pay us on a per session basis .

Speaker #3: We have free Copilot , which is a per seat license adder . And then we have our Freddy Insights , which is only available in the enterprise plan .

What's coming in a couple of weeks are agents that are focused on very specific verticals like fintech like travel logistics E Commerce.

Speaker #3: So different products have different monetization levers and paths for for AI agents . We've historically priced those based on sessions with our Agentic AI agents coming out in a matter of weeks .

Dennis Woodside: What you just talked about actually is really interesting about the specific verticals for agents. Just to make it easier for people, if you're going to boil it down to two or three key points that you would make on that topic, why Freshworks is an AI winner, what are they? What would you lay out? First of all, look, we are the system of record for our customers in IT and in customer support. We have the native workflows that they're running their business off of. That is super important for all of what we're focused on. The products that we ship have ready-made skills, guardrails, governance, things that our customers all need in order to run their support and IT departments, and that's what they demand.

That can take action on behalf of the end customer and we know that those interactions are quite valuable we're not quite to the point to move to full resolution based pricing and frankly, neither our customers.

Speaker #3: We have revisited pricing . We're not revealing that now , but we are going to be more in line with industry pricing , which is considerably higher than where our pricing historically has been .

So the session based pricing makes a lot of sense for where we are now, but we're always open to evolving that as our customers ask us to and as customer demand.

Speaker #3: We think that the market will support that based on what we've seen in early access , with some customers seeing up to 80% deflection rates based on their use of AI agents .

Warrants, but you will see a meaningful price change with that the launch of those products, which will allow us to monetize it quite quite quite well.

Speaker #3: What's coming in a couple of weeks are agents that are focused on very specific verticals , like fintech , like travel , logistics , e-commerce that take action on behalf of the end customer .

Alright, thanks, guys.

And our next question will.

We will be coming from Patrick Wall Ravens of citizens Bank. Your line is open.

Speaker #3: And we know that those interactions are quite valuable . We're not quite to the point to move to full resolution based pricing . And frankly , neither our customers .

Dennis Woodside: There's a meme that, oh, everybody's going to go directly to OpenAI or to Anthropic to build their solutions. That's just not going to happen. In such complex environments as Seagate's IT department or some of these others, the customers need the AI to be integrated into their workflow. They need the security, and we can tap into the best-of-breed models as the LLMs evolve by tapping into Anthropic for coding or Gemini for image and so forth. We think that we're actually really well-positioned as the market evolves and as customers continue to adopt AI to succeed there. Awesome. Thank you. One moment for our next question. Our next question will be coming from Elizabeth Porter of Morgan Stanley. Elizabeth, your line is open. Hi, this is Oscar on for Elizabeth. Thank you for taking my question. Congrats on a great quarter.

Oh, great. Thank you and congratulations on.

In the third quarter in a row this year.

So the big question I still get Dennis.

Speaker #3: So the session based pricing makes a lot of sense for where we are now . But we're always open to evolving that as our customers ask us to .

Believe it or not is.

For investors, who are just looking at fresh works. They still want to know is it an AI winner or loser.

Speaker #3: And as a customer demand warrants . But you will see a meaningful price change with that . The launch of those products , which will allow us to monetize it quite , quite , quite well .

Lots of evidence that it should be in the winters camp.

Including your 100 million dollar targets.

Talked about actually is really interesting about the specific verticals for agents, but just to just to make it easier for people if youre going to boil it down to two or three key points that you would make on that topic why fresh works as an AI winter.

Speaker #7: Great . Thanks .

Speaker #1: And our next question will be coming from Patrick Walravens of Citizens Bank . Your line is open .

What are they what would you lay out.

Speaker #8: Oh , great . Thank you . And congratulations on the third quarter in a row this year . So the big question I still get Dennis , believe it or not , is for investors who are just looking at Freshworks Inc. .

So first of all look we are the system of record for our customers in it and in customer support we have the native workflows that they're running their business off of and that is that is super important for all of what we're focused on.

Speaker #8: They still want to know is it an AI winner or an AI loser . And I see lots of evidence that it should be in the winners camp , including your $100 million dollar targets and what you just talked about actually is really interesting about the specific verticals for agents .

The products that we ship have readymade skills garb rails governance things that our customers all need in order to run their support 19 departments and this is what they demand.

Dennis Woodside: I wanted to ask, in terms of government exposure for Freshworks, tends to be more state and local. I just wanted to check if you have seen any impact from the government shutdown, either in the form of longer sales cycles or smaller deals, and either directly or indirectly, if it has pressured any small businesses within CX. Thank you very much. Yeah, Dennis. We have seen no impact whatsoever. We do not have large federal government exposure. Our government business comes from state and local entities, municipalities, universities, none of which we have seen at least any kind of change. We actually landed quite a few governments and universities this last quarter, and we have seen quite a bit of expansion there. We really just have not seen any impact at all from the shutdown or any of the federal issues. Thank you very much.

Speaker #8: But just to just to make it easier for people , if you're going to boil it down to 2 or 3 key points that you would make on that topic , why Freshworks Inc. an AI winner ?

No.

There is a mean that everybody is going to go directly to open AI or 10 Tropic to build their solutions, that's just not going to happen.

Speaker #8: What are they ? What would you lay out .

In such complex environments as seagate's, It department or some of these others.

Speaker #9: So first of all , look , we .

Speaker #3: Are the system of record for our customers and it and in customer support , we have the native workflows that they're running their business off of .

The customers need the AI to be integrated into their workflow they need the security.

And we can tap into the best of breeds models as the LMS evolve.

Speaker #3: And that is that is super important for all of what we're focused on . The products that we ship have ready made skills , guardrails , governance , things that our customers all need in order to run their support .

By tapping into anthropic for coding or.

Or Gemini for image and so forth. So we think that we're actually really well positioned as as the market evolves and as customers continue to adopt AI to succeed there.

Speaker #3: And IT and that's what they demand . So , you know , there's a meme that , oh , everybody's going to go directly to open or to anthropic to build their solutions .

Awesome. Thank you.

Speaker #3: That's just not going to happen in such complex environments as , Seagate , IT Department or some of these others . The , the , the customers need the AI to be integrated into their workflow .

Okay.

And one moment for our next question.

Dennis Woodside: One moment for our next question. Our next question will be coming from Brent Thill of Jefferies. Your line is open, Brent. Great. Thank you. Tyler, I apologize if you covered this, but this one-time investment you're talking about in Q4, can you articulate a little more detail what that is? Yeah. Hey, Brent. This is kind of reflecting on the fact that we've now strung together four really, really good quarters and really see a very strong demand environment for our EX products in the field specifically. Because we've also done really, really well on our efficiencies this year, where we've beat our operating kind of margin goals and consistently every quarter said, part of it's timing.

Our next question will be coming from Elizabeth <unk> of Morgan Stanley Elizabeth Your line is open.

Hi, This is Oscar on for Elizabeth. Thank you for taking my question.

Speaker #3: They need the security . And we can tap into the best of breed models as the Llms evolve by tapping into anthropic for coding or or Gemini for image and so forth .

Congrats on a great quarter I wanted to ask in terms of government exposure of refresh works tends to be more state and local so I just wanted to check if you have seen any impact from the government shutdown.

Speaker #3: So , you know , we think that we're actually really well positioned as as the market evolves and as customers continue to adopt AI to to succeed , their .

Either in the formula longer sales cycles, or smaller deals and either directly or indirectly if asked pressured any small businesses within CX. Thank you very much.

Speaker #8: Awesome . Thank you .

Yes. It is Dennis so we see no impact whatsoever, we.

Speaker #1: And one moment for our next question , our next question will be coming from Elizabeth Porter of Morgan Stanley . Elizabeth , your line is open .

We do not have large federal government exposure, our government business comes from state and local entities municipalities universities, none of which we've seen at least any kind of change we actually landed quite a few government and university as this last quarter, we've seen quite a bit of expansion. There. So we really just have not seen any impact at all from the shut.

Dennis Woodside: We're going to reinvest, but just keep beating. We actually, at the beginning of this quarter, did release spend specific to building pipe for EX in the field because the market opportunity is there. We're still beating our goals, but we actually decided to release that spend for the year. It's more one-time, just for Q4, not repeated. That's why we also kind of gave the linearity for operating margins for next year as well. I'm sorry, where does that go into reps? Marketing? What's the— Oh, yeah. Majority of it is marketing, and it's really pipe and demand gen efforts. Okay. I got some good ideas. We can talk later about the campaign. It has to do with the Dodgers, Freddy, Fresh. And just for Dennis, when you talk about that 25% growth above $100,000, it seems like the reference ability is building really well.

Speaker #5: Hi , this . is Oscar on for Elizabeth . Thank you for taking my question . Congrats on a great quarter . I wanted to ask , in terms of , you know , government exposure for Freshworks tends to be more state and local .

<unk> already have the federal issues.

Speaker #5: I just wanted to check if you have seen any impact from the government shutdown . You know , either in the form of longer sale cycles or smaller deals .

Thank you very much.

Speaker #5: And either directly or indirectly , if it has pressured any small businesses within CX . Thank you very much .

One moment for our next question. Our next question will be coming from Brent Thill of Jefferies. Your line is open Brian.

Speaker #3: Yeah , it's Dennis , so we've seen no impact whatsoever . We do not have large federal government exposure . Our government business comes from state and local entities , municipalities , universities , none of which we've seen at least any kind of change .

Great. Thank you.

Miller.

I apologize if you covered this but.

One time.

The investment you're talking about in Q4 can you can you articulate a little more detail on what that is.

Speaker #3: We actually landed quite a few governments and universities this last quarter . We've seen quite a bit of expansion there . So , you know , we really just have not seen any impact at all from the shutdown or any of the federal issues .

Yes. This is really hey, Brian this is.

Kind of reflecting on the fact that we've now strung together for really really good quarters, and really see a very strong demand environment for our <unk>.

Products in the field, specifically and so.

Because we've also done really really well on our efficiencies this year, where we beat our operating margin goals and consistently every quarter said, hey, part of its timing, we're going to reinvest, but just keeping and we actually at the beginning of this quarter did release spend specific to building pipe for <unk> in the field.

Dennis Woodside: What are kind of the next milestones? It's been going well. It seems like it's headed in the right direction. What are the next kind of hurdle that you'd like to see crossed where you're like, okay, we're clearly on a continued trajectory? Not that you aren't. It's just like, what's the next stop, if you will? Yeah. Look, I think we've got a really good sweet spot in customers ranging from 5 to 20,000 employees. That's where there's a ton of business out there that's looking for a solution that is enterprise-grade, that is faster time to value, that's got AI built in. We're going to continue focusing there. I think in terms of where we're headed, we talked in the analyst day about continuing to drive our EX business in the low to mid-20s in terms of growth.

Speaker #5: Thank you very much .

Speaker #1: And one moment for our next question. Our next question will be coming from Brent Thill of Jefferies. Your line is open.

Speaker #1: Brent .

Speaker #8: Great . Thank you . Tyler .

Speaker #10: I apologize if you covered this , but this one time investment you're talking about in Q4 . Can you can you articulate a little more detail what that is ?

The market opportunity is there.

And we're still.

Speaker #4: Yeah , this is really hey , Brent , this is , you know , kind of reflecting on the fact that , you we've now strung together four really , really good quarters and really see a very strong demand environment for our X products in the field specifically .

Meeting our goals, but we actually decided to release that spend for the year.

One time just for Q4 now.

Not repeated and Thats why we also kind of give the linearity for operating margins for next year as well.

Speaker #4: And so because we've also done really , really well on our efficiencies this year where we beat our operating kind of margin goals and consistently every quarter said , hey , part of its timing , we're going to reinvest .

And I'm, sorry, what where does that go into reps marketing what like what's the.

Yes.

Majority of it is marketing and it's really pipe pipe and demand Gen efforts.

Speaker #4: But just keeping it . We actually at the beginning of this quarter did release spend specific to building pipe for X in the field , because the market opportunity is there .

Okay I got some good ideas, we can talk later about that.

Dennis Woodside: You saw a slight tick up in growth on a constant currency basis this quarter. We're going to keep pressing these larger and larger deals every single quarter. For us, the attach rate for Device 42, that's an important metric that we look at, how many of our larger deals are including Device 42. We have a big milestone coming up in Q1 where we expect to release Device 42 on cloud. Once we do that, we'll be able to tap into another segment of the market that doesn't want to go on-prem with any solution. They want everything to be in cloud. It'll also make it easier for us to upsell our existing customers into Device 42 as a product. That's going to be another accelerant to growth. We've got a lot of positive, I would say, momentum and positive accelerants to that business.

Hey.

It has to do the Rogers.

Yeah.

Friday fresh.

The.

Speaker #4: And , you know , we're still beating our goals , but we actually decided to release that spend for the year . It's more one time just for Q4 not repeated .

And just for Dennis when you talk about 25% growth above 100 K.

It seems like the reference ability is building really well like what are you what are the kind of the next milestones and it's been going well it seems like it's headed in the right direction, but what are the next.

Speaker #4: That's why we also kind of gave a linearity for operating margins for next year as well .

Speaker #10: And I'm sorry , where does that go into marketing ? What's the .

Hurdle that you'd like to see cross where you're like okay.

Speaker #4: Oh yeah , it's majority of it is marketing . And it's really pipe pipe and demand gen efforts .

We're clearly on a continued trajectory.

Not that you arent just like Whats next whats the next stop if you will.

Speaker #10: Okay . I got some good ideas . We can talk later about the campaign . It has to do with the Dodgers . The .

Yes look I think we've got a really good sweet spot in customers ranging from 5% to 20000 employees, that's where there's a ton of business out there that's.

Speaker #10: Freddy Fresh the . And just for for Dennis when you when you talk about that 25% growth above 100 K it seems like the reference ability is building really well .

Dennis Woodside: Tyler was just talking about the demand gen investment we're making in Q4. That's all going into the EX business and into AI. That really is a huge driver for us as well. I think EX has a lot of kind of positive momentum behind it, and we're just going to keep leaning into it every single quarter. Great, thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. Our next question will be coming from Brian Peterson of Raymond James. Brian, your line is open. Hi, thank you. This is Jonathan McCarry on for Brian. I wanted to ask on some of the AI deployments in your customer base.

That's looking for a solution that is enterprise grade that is faster time to value that Scott AI built in and we're going to continue focusing there I think in terms of where we're headed we talked in the analyst day about continuing to drive our <unk> business in the.

Speaker #10: What do you what are kind of the next milestones ? It's been going well . It seems like it's headed in the right direction .

Speaker #10: But what are the next kind of hurdle that you'd like to see cross where you're like , okay , we're we're clearly on a continued trajectory .

The low to mid Twenty's in terms of growth you saw a slight pickup in growth on a constant currency basis this quarter.

Speaker #10: And not that you aren't . It's just like , what's what's the next what's the next stop , if you will ?

We're going to keep pressing these larger larger deals every single quarter for us the attach rate for <unk> 42, that's.

Speaker #3: Yeah . Look , I think we've got a really good sweet spot in customers ranging from 5 to 20,000 employees . That's where there's a ton of business out there .

That's an important metric that we look at how many of our larger deals including device 42.

We have a big milestone coming up in Q1, where we expect to release device 42 on cloud once we do that we'll be able to tap into another.

Speaker #3: That's that's looking for a solution that is enterprise grade . That is , you know , faster time to value . That's got AI built in .

Dennis Woodside: Can you talk about the appetite for that and how that may differ between the SMB and then the more mid-market enterprise customers? I'm curious specifically if you're seeing that it's a more important piece of the conversation in certain parts of the customer base or if SMBs versus enterprises are moving from pilots to kind of forward deployments quickly. I'd be curious how that differs across the different customer sizes. Yeah. As we look at our AI paid footprint, it's actually pretty even across SMB, mid-market, and enterprise. We've seen traction across all three, and different companies are in different stages of understanding AI and adopting. In terms of products, the product that clearly is leading for us has been Copilot. That's the product that for us is both most mature functionally and.

Speaker #3: And we're going to continue focusing there . I think in terms of where we're headed , we talked in the Analyst Day about continuing to drive our business in the low to mid 20s .

<unk> of the market that that doesn't want to go on Prem with any solution. They want they want everything to be in cloud. It will also make it easier for us to up sell our existing customers into device 42 is a product that's going to be another accelerant to growth.

Speaker #3: In terms of growth . You saw a slight tick up in growth on a constant currency basis this quarter . We're going to keep pressing these larger and larger deals .

So we've got a lot of positive I would say momentum and positive accelerants to that.

Speaker #3: Every single quarter . You know , for us , the attach rate for D42 that's a that's an important metric that we look at .

To that business and Tyler was just talking about the demand Gen investment, we're making in Q4, that's all going into the <unk> business and in the AI.

Speaker #3: How many of our larger deals are including device 42 . We have a big milestone coming up in Q1 where we expect to release device 42 on cloud once we do that , we'll be able to tap into another segment of the market that that doesn't want to go on prem with any solution they want .

That that really is a huge driver for us as well.

So I think <unk> has a lot of kind of positive.

And behind it and we're just going to keep leaning into it every single quarter.

Yes.

Great. Thank you.

Speaker #3: They want everything to be in cloud . It'll also make it easier for us to upsell our existing customers into device 42 as a product .

Dennis Woodside: If you think from a customer standpoint, that's the first port of call where you still have a human in the loop. They still have some control, so they feel more comfortable going there first. What we've seen in the last couple of months is really an uptick in AI agent. We think with the launch of our agentic capabilities in CX in particular, that's really going to take off, and we're going to lean into it heavily. That, plus the fact that we're going to monetize at a much higher rate than we have before. We've been, I would say, quite underpriced relative to the market when it comes to our AI agent capabilities. That, we think, is going to create a big opportunity for us going into next year. I think overall, the customers, there's not one vertical.

And as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker #3: That's going to be another accelerant to growth . So we've got a lot of positive . I would say momentum and positive accelerants to that , to that business .

Our next question will be coming from Brian Peterson.

Raymond James Brian Your line is open.

Alright. Thank you. This is jonathan to carry on for Brian. So I wanted to ask on some of the AI deployments in your customer base can you talk about the appetite for that and how that may differ between the SMB and in the more mid market enterprise customers I'm curious specifically, if youre seeing that it's more important piece of the conversation in certain parts of the customer base or the SMB versus enterprise or moving from pilots.

Speaker #3: And , you know , Tyler was just talking about the demand . Gen investment we're making in Q4 . That's all going into the business and into AI .

Speaker #3: But that that really is a is a huge driver for us as well . So I think X has a lot of kind of positive momentum behind it .

Speaker #3: And and we're just going to keep leaning into it every single quarter .

For deployments quickly just would be curious how that how that differs across the different customer sizes.

Speaker #10: Great . Thank you .

Yeah, So as we look at our AI.

Speaker #1: And as a reminder to ask a question please press star one one on your telephone and wait for your name to be announced .

Paid.

Dennis Woodside: It's not an SMB or mid-market enterprise issue. It's relatively even across CX and EX in terms of the monetization opportunities today. We just think every one of our customers over time is going to need the AI that we offer. We're a little over 5,000 customers that are paying for AI now. That's just going to continue to grow. It's a core part of how we're selling now. Very helpful. Thanks, Dennis. Maybe one for Tyler here. It's good to see the continued strength in EX, the slight acceleration there. Just hoping, can you unpack the growth a little bit in terms of what's trending, how NRR is trending there versus net new, and kind of where you think that that should head longer term as you look to continue the low 20s growth profile? Thanks, guys. Yeah.

Footprint, it's actually pretty even across SMB mid market and enterprise.

Speaker #1: Our next question will be coming from Brian Peterson of Raymond James. Brian, your line is open.

We've seen traction of course across all three different companies are in different stages of understanding AI and <unk>.

Speaker #11: Hi . Thank you . This is Jonathan MacQuarrie on for Brian . So I wanted to ask on on some of the AI deployments in your customer base .

And adopting.

In terms of products the product that clearly is leading for US has been co pilot. That's the product that for US is both both most mature functionally and and and if you think from a customer standpoint, that's the first port of call, where you still have a human in the loop they still have some control.

Speaker #11: Can you talk about the appetite for that and how that may differ between the SMB . And then the more mid-market enterprise customers ?

Speaker #11: I'm curious specifically if you're seeing that it's more important piece of the conversation in certain parts of the customer base or SMB versus enterprises are moving from pilots to full deployments quickly .

Speaker #11: I'd be curious how that how that differs across the different customer sizes .

So they feel more comfortable going there first but what we've seen in the last couple of months is really an uptick in AI agent and we think with the launch of our agenda capabilities in CX in particular, that's that's really going to going to take off and we're going to lean into it heavily that plus the fact that we're going to monetize at a much higher rate than we have before we have been.

Speaker #3: Yeah . So as we look at our AI paid footprint , it's actually pretty even across SMB , mid-market and enterprise , we've we've seen traction across all three .

Dennis Woodside: I mean, we're growing across all segments of the business, right? We talked about how ITSM core is strong, but also ESM that we gave out the number of over $35 million now. Device 42, we've talked about as well, and then the Copilot components within there. If you look at how that's going to trend, you asked about NRR. Our EX products have always had strong NRR. Device 42 is a little bit of a drag because of the stuff we inherited when we made that acquisition. We also said, hey, we expect that to actually start coming up. We've also said that EX has kind of always had enterprise-grade net dollar retention numbers. I'm sorry, churn numbers, which is high single digits. That continues. It's just a very, very strong product. Our next question will be coming from Rob Oliver of Baird.

Speaker #3: And you know , different companies are in different stages of understanding AI and and adopting in terms of products . The product that clearly is leading for us has been copilot .

I would say quite under priced relative to the market when it comes to our AI agent capabilities.

Speaker #3: That's the product that for us is both both most mature functionally and and and if you think from a customer standpoint , that's the first port of call where you still have a human in the loop , they still have some control .

That we think is going to create a big opportunity for us going into next year.

So I think overall the customers there's not one vertical there's not it's not an SMB or mid market enterprise issue, it's relatively even across CX and <unk> in terms of.

Speaker #3: So they feel more comfortable going there . First . But what what we've seen in the last couple of months is really an uptick in AI agent .

The monetization opportunities today.

Speaker #3: And we think with the launch of our Agenta capabilities in in particular , that's that's really going to going to take off and we're going to lean into it heavily .

And we just think every one of our customers over time is going to need the AI that we offer.

We're a little over 5000 customers that are that are paying for AI now that's just going to continue to grow it's a core part of how we are selling now.

Speaker #3: That plus the fact that we're going to monetize at a much higher rate than we have before . We've been , I would say quite underpriced relative to the market when it comes to our AI agent capabilities that we think is going to create a big opportunity for us going into next year .

Very helpful. Thanks, Dennis and then maybe one for Tyler here, it's good to see the continued strength in es. The slight acceleration there just hoping can you unpack the gross out a little bit in terms of what's trending and how MLR is trending there versus versus net new and kind of where you think that that should had longer term as you look to continue the low twenty's gross profile. Thanks guys.

Dennis Woodside: Your line is open, Rob. Great. Hi, good afternoon. Thanks for taking my question. Dennis, I wanted to go back to the ITSM win rates that you called out. I think the best in two years. That's also coming, I think, as you've really pivoted the business up towards that mid-market or upper end of mid-market. Just wanted to get a sense from you for kind of what the biggest key differentiators have been there in terms of repositioning for that opportunity. As you look at kind of your pipeline today, how you feel about the pipeline as it sets up relative to the competition and kind of what's winning when you go head-to-head with some potentially bigger players at the low end of their stack. I had a quick follow-up question. Yeah, sure.

Speaker #3: So I think overall , the customers , there's not one vertical , there's not it's not an SMB or mid-market enterprise issue . It's relatively even across C-x and X in terms of the monetization opportunities today .

Yes.

We're growing across all segments of the business right, we talked about how <unk> core is strong but also ESI that we gave out the number of over $35 million now device 42, we've talked about.

Speaker #3: And we just think every one of our customers , over time is going to need the AI that we offer . We're , you know , we're a little over 5000 customers that are that are paying for AI .

As well and then the.

Speaker #3: Now , that's just going to continue to grow . It's a core part of how we're selling now .

The co pilot components within there.

If you look at if you look at how that's going to trend you asked about NR.

Speaker #11: Very helpful . Thanks , Dennis . And maybe one for Tyler here . It's good to see the continued strength in X . The slight acceleration .

Our <unk> products have always had strong in our device very to us a little bit of a drag because of the stuff. We inherited when we made that acquisition, but we also said hey, we expect that to actually start coming up and we've also said that <unk> kind of always had enterprise grade net dollar retention numbers.

Speaker #11: There . Just hoping . Can you unpack the growth a bit in terms of what's trending , how Gnrhr is trending there versus versus net new and kind of where you think that that should head longer term as you look to continue the low 20s growth profile .

Dennis Woodside: Look, what we've built over the last couple of years is a complete enterprise-grade solution that helps an IT department drive their operations, power their operations, and deliver great employee service. That's what we're selling. That's what's working in the marketplace. Enterprise-grade product that has the kind of security and extensibility that you'd expect, and that can work in a large account. The kind of extensibility outside of core ITSM, that's why Device 42 is super important for us. Typically, buyers are looking for their ITSM and their asset management solution all in one. That's what we provide now. The functionality outside of IT, that's also something that everybody looks for when they're making these decisions. Two years ago, two and a half years ago, the product wasn't there. A lot of this momentum has happened relatively recently.

Speaker #11: Thanks guys .

Speaker #4: Yeah , I mean , we're growing across all segments of the business , right ? We talked about how ITSM core is strong , but also ESM that we gave out the number of over 35 million .

Oh, I'm, sorry, churn numbers, which is single the high single digits and that continues and it's just a very very strong product.

Speaker #4: Now device 42 , we've talked about as well . And then , you know , the the co-pilot components within there , if you look if you look at how that's going to trend , you asked about Gnrhr our X products have always had strong Gnrh-r device is a little bit of a drag because of the stuff we inherited when we made that acquisition , but we also said , hey , we expect that to actually start coming up .

And our next question.

We will be coming from Rob Oliver of Baird. Your line is open Rob.

Great Hi, good afternoon. Thanks for taking my question Dennis I wanted to go back to.

The <unk> win.

Some win rates that you called out.

First in two years and Thats also coming I think as you've really pivoted the business towards that mid market or upper end of in market and just wanted to get a sense from you or kind of what the biggest key differentiators have been there in terms of repositioning for that opportunity and then as you look at kind of your pipeline today, how you feel about the pipeline et cetera.

Speaker #4: And we've also said that X has kind of always had enterprise grade net dollar retention numbers . I'm sorry , churn numbers , which is , you know , single high single digits .

Dennis Woodside: A lot of customers are looking for choice in that market. There hasn't been a lot of choice. The largest provider is very focused on the biggest customers in the market or the biggest companies in the market. That leaves a lot of room for us to compete in that kind of lower end of enterprise, upper end of mid-market. Think of New Balance with 5,000 or 6,000 employees, or Seagate with 20,000 employees. We had a customer this time through Flowserve with about 20,000 employees. These are sophisticated customers. They've got sophisticated IT departments, but they're looking for something that's more modern, more flexible, enterprise-grade, AI built in, and that's what we have. I think we're just going to continue to invest in our capabilities and functionality there. We've got our customer advisory board next week. We've got 40 customers coming in.

Speaker #4: And that continues . And it's just a very , very strong product .

Relative to the competition and kind of what's winning when you go head to head with some potentially bigger players at the low end of their stack and then I had a quick follow up question.

Speaker #1: And our next question will be coming from Rob Oliver of Baird . Your line is open . Rob .

Yeah sure so.

Speaker #12: Great . Hi . Good afternoon . Thanks for taking my question , Dennis . I wanted to go back to the ITM , TSM win rates that you called out .

Look what we've built over the last couple of years as a complete enterprise grade solution for that help.

Helps and it department.

Speaker #12: You know , I think the best in two years . And that's also coming . I think as you've really pivoted the business , you know , up towards that mid market or upper end of the market .

Drive their operations power of their operations and deliver great employee service and that's that's what that's what we're selling that's what's working in the marketplace.

Speaker #12: And I just wanted to get a sense from you for , you know , kind of what the biggest key differentiators have been there in terms of repositioning for that opportunity .

So enterprise grade product that has the kind of security and extensibility that you would expect and that can work in a large account.

Speaker #12: And then as you look at kind of your pipeline today , how you feel about , you know , the pipeline as it sets up relative to the competition and kind of what's winning when you go head to head with some , you know , potentially bigger players at the low end of their stack .

Kind of extensibility outside of core ICM, that's why device 42 Super important for US typically buyers are looking for there at TSM and their asset management solution. All in one that's what we provide now.

Dennis Woodside: We're going to hear from them on what share our roadmap, talk about what can we do to move faster, to solve more of their needs. We got a lot of ideas last year at our cab that we put into practice and launched in innovation that has delivered and that has helped us continue to move up market. At the same time, the whole go-to-market side of things has matured as well. That's why we're confident in investing more in Q4 in demand gen because we have a much better sense for how investment in demand gen connects to actual return. We feel if we do that now, we'll just get a head start on Q1 because we've got a really good pipeline going into the last quarter. In terms of the pipeline, I would say that.

Speaker #12: And then I had a quick follow up question .

Speaker #3: Yeah , sure .

The functionality outside of it that's also something that everybody looks for when they are making these decisions.

Speaker #10: So .

Speaker #3: Look what we've built over the last couple of years is a complete enterprise grade solution for that helps an IT department drive their operations , power their operations , and deliver great employee service .

Two years ago, two and a half years ago the product wasn't there.

So a lot of this momentum has happened relatively recently a lot of customers are looking for choice in that market. There hasnt been a lot of choice.

Speaker #3: And that's that's what that's what we're selling . That's what's working in the marketplace . So , enterprise grade product that has the kind of security and extensibility that you'd expect .

The largest provider is very focused on the biggest customers in the market or the biggest companies in the market and that leaves a lot of room for.

Speaker #3: And that can work in a large account . The kind of extensibility outside of core ITSM . That's why device 42 is super important for us .

For us to compete in that kind of lower end of enterprise upper end of the market think of new balance with five or 6000 employees are seagate with 20000 employees or we had customer. This time through flow serve was about 20000 employees. These are sophisticated customers they've got sophisticated IP departments, but theyre looking for something Thats more mark.

Dennis Woodside: When I looked at pipeline, let's say 18 months ago, a $100,000 deal was a big deal, and we made a big deal about it. Now, we have tons of $100,000 deals. That's not an unusual deal anymore. The bigger deals are half a million dollar lands. The other thing is that we would be invited into those half a million dollar RFPs two years ago, and we would often lose. We'd win the $100,000 deal or the $30,000 deal. We'd lose the $500,000 deal. This last quarter, I can't recall a deal over $200,000 that we're involved in that got stopped. Now, it may have happened, but nothing that I was involved in was a loss. I think we're just getting better at competing and winning for those larger deals. The capability is there, the functionality is there.

Speaker #3: Typically , buyers are looking for their ITSM and their asset management solution , all in one . That's what we provide now , the functionality outside of it , that's also something that everybody looks for when they're making these decisions .

Speaker #3: And , you know , two years ago , two and a half years ago , the product wasn't there . So a lot of this momentum has happened relatively recently .

And more flexible enterprise grade AI built in and that's what we have so I think we're just going to continue to invest in our capabilities and functionality there we've got our.

Speaker #3: A lot of customers are looking for choice in that market . There hasn't been a lot of choice . The you know , the largest provider is very focused on the biggest customers in the market or the biggest companies in the market .

Customer Advisory Board next week, we've got 40 customers coming in.

We're going to hear from them on what Cheryl roadmap talk about what can we do to move faster to solve more of their needs. We got a lot of ideas last year at our cab that we put into practice.

Speaker #3: And that leaves a lot of room for us , for us to compete in that kind of lower end of enterprise , upper end of mid-market , you know , think of New Balance with 5 or 6000 employees or Seagate with 20,000 employees .

And launched an innovation that has delivered and that has helped US continue to move upmarket and then at the same time the whole go to market side of things as matured as well that's why we're confident in investing more in Q4 and demand Gen. Because we have a much better sense for how investment in demand Gen connects to actual return and we feel if we do that now we'll just.

Speaker #3: Or , you know , we had a customer this time through Flowserve was about 20,000 employees . These are sophisticated customers . They've got sophisticated .

Dennis Woodside: All that's a winning combination for us. Great. That's really helpful. Thanks, Dennis. Tyler, I apologize if you touched on this at all, but that net revenue retention number is kind of really stabilized in that 104% to 105% range on a constant currency basis for the last three quarters. You guys are getting some market momentum. I realize trailing indicator, but how you think about that kind of leveling off and potentially starting to improve, and what kind of visibility you have into that? Yeah. We're pleased with the progress we've made there, both on the expansion products we've introduced. We think ESM is going to be a new land, but then have a much bigger expansion opportunity once we start landing that with that if we can bring in Freshservice. Obviously, with Device 42 and others.

Speaker #3: IT departments , but they're looking for something that's more modern , more flexible , enterprise grade AI built in . And that's what we have .

Speaker #3: So I think we're just going to continue to invest in our capabilities and functionality there . We've got our customer advisory board next week .

A head start on Q1.

Because we've got a really good pipeline going into the last quarter in terms of the pipeline I would say that.

Speaker #3: We've got 40 customers coming in , and we're going to hear from them . On what , you know , share our roadmap , talk about what can we do to move faster to solve more of their needs .

When we look at when I looked at pipeline lets say 18 months ago.

$100000 deal was a big deal.

Speaker #3: We got a lot of ideas last year at our cab that we put into practice and launched in innovation that has delivered , and that has helped us continue to move our market .

It made a big deal about it now.

Tons of $100000 deals that's not that's not an unusual deal anymore, the bigger deals or half a million dollars lands.

Speaker #3: And then at the same time , the whole go to market side of things has matured as well . That's why we're confident in investing more in Q4 , in demand Gen , because we have a much better sense for how investment and demand gen connects to actual return .

And the other thing is that we would be invited into those $5 million Rfps two years ago, and we would often lose and we win the $100000 deal with a 30000 dollar deal we lose the $500000.

Dennis Woodside: What we've been doing on churn. We've been talking about churn for a year now, how we've just been getting a little bit better incrementally. That's not something that moves really quickly. We guided to essentially the same amount for Q4, which is stable. Obviously, at the end of the year, based on what we learned this quarter in terms of expansion, the pipe will guide for next year. Yes, I feel like it's heading in the right direction. We've been talking about this as the mix shift of our business continues to move more towards EX, and that is the majority of our business now. The attributes of that business are much better, and we will get a tailwind from that at some point. This concludes today's conference call. You may disconnect.

Speaker #3: And we feel if we do that now , we'll just get a head start on Q1 because we've got a really good pipeline going into the last quarter in terms of the pipeline .

This last quarter I don't I can't recall.

A deal over $200000 were involved as well.

Speaker #3: You know , I would say that that when we look at , you know , when I looked at pipeline , let's say 18 months ago , $100,000 deal was a big deal .

Now it may have happened, but nothing that I was involved in was a loss.

So I think we're just getting better at competing and winning for those larger deals and the capability is there. The functionality is there all of that is a winning combination for us.

Speaker #3: And , you know , we made a big deal about it . Now we have tons of $100,000 deals . That's not that's not an unusual deal anymore .

Speaker #3: You know , the bigger deals are half $1 million lands . And and the other thing is that we would we would be invited into those half $1 million RFPs .

Great. That's really helpful. Thanks, Dennis and then Paolo I apologize if you touched on this at all but.

Is that net revenue retention number is kind of really stabilized in that kind of one off Florida wildfires.

Speaker #3: Two years ago , and we would often lose and we'd win the $100,000 deal or the $30,000 deal . We'd lose the $500,000 deal .

Range on a constant currency basis for the last three quarters and you guys are getting some more market momentum I realize a trailing indicator but.

Speaker #3: You know , this last quarter , I don't you know , I can't recall a deal over $200,000 involved . That got now , you know , may have happened , but nothing that I was involved in was a loss .

How you think about that kind of leveling off and potentially starting to improve and what kind of visibility you have into that.

Yes, we're pleased with the progress we've made there both on the expansion products we've entered.

Speaker #3: So I think we're just getting better at competing and winning for those larger deals . And the capability is there . The functionality is there .

Introduced in and we think ASM is going to be a new land, but then.

Speaker #3: All that's a winning combination for us .

They have a much bigger expansion opportunity once we start aligning that with that if we can bring in press service.

Speaker #12: Great . That's really helpful . Thanks , Dennis . And then Tyler , I apologize if you touched on this at all , but you know that that that revenue retention number is kind of really stabilized in that kind of 100 , 4 to 105 range on a constant currency basis for the last three quarters .

But obviously with device 42 and others.

And on what we've been doing on churn we've been talking about churn for a year now how we'd be just being again, a little bit better incrementally and that's not something that moves really quickly.

Speaker #12: And you guys are getting some market momentum . I realize , you know , trailing indicator . But you know , how you think about that kind of leveling off and potentially starting to improve and what kind of visibility you have into that ?

We guided so essentially the same amount.

For Q4, which is stable.

And obviously at the end of the year based on what we learned this quarter in terms of expansion the pipe or guide for next year, but yes, I feel like it's heading into right direction and then we've been talking about this as a mix shift of our business continues to move more towards <unk> and that is the majority of our business now.

Speaker #12: Yeah .

Speaker #5: We're pleased .

Speaker #4: With the progress we've made there . Both . You know , on the expansion products we've entered introduced and we think ESM is going to be a new land , but then have a much bigger expansion opportunity once we start landing that with that , if we can bring in fresh service , but obviously with device 42 and others .

<unk>.

The attributes of that business are much better and we will get a tailwind from that at some point.

Speaker #4: And on what we've been doing on churn , we've been talking about churn for a year now , how we've just been getting a little bit better incrementally .

Okay.

This concludes today's conference call you may disconnect.

Speaker #4: And that's not something that moves really quickly . You know , we guided to essentially the same amount for Q4 , which is stable .

Speaker #4: And obviously at the end of the year , based on what we learned this quarter in terms of expansion , the pipe will guide for next year .

Speaker #4: But yes , I feel like it's heading in the right direction . And then , you know , we've been talking about this as the mix shift of our business continues to move more towards X .

Speaker #4: And that is , you know , the majority of our business now , the the , the attributes of that business are much better .

Speaker #4: And we will get a tailwind from that at some point .