I have followed Freshworks (Nasdaq: FRSH) from the days when its founder, Girish Mathrubootham, met me in 2011 at a TiE Chennai event. I have always seen potential in its offerings. Freshworks, nee Freshdesk, has come a long way since then. What began as a CX offering, has expanded to employee and IT support, to messaging and cloud telephony, and to a unified customer vision that leverages platforms, AI and ML capabilities. Freshworks went public earlier this year, and recently it announced its very first quarterly results since hitting that milestone.

Photo Credit: OnManorama

Freshworks’ Financials

For the third quarter, Freshworks’ revenues grew 46% to $96.6 million. Net loss was $0.04 per share.

For the fourth quarter, Freshworks forecast revenues of $99-$101 million and a loss per share of $0.07-$0.05. It expects revenues of $364.5-$366.5 million and a loss per share of $0.22-$0.20 for the current fiscal year.

Freshworks’s Product Expansion

During the quarter, Freshworks announced its new product, Freshstack. Freshstack is a CRM suite created for the needs of startups, combining customer support, sales, and marketing teams. The product gives startups the ability to personalize marketing to generate pipeline, deliver effortless omnichannel service, and grow faster. Freshstack combines three Freshworks products – Freshdesk, Freshsales, and Freshmarketer. The combination of these applications helps provide startups with access to an instantly available CRM platform that attracts new customers, builds longer relationships with existing users and scales as the size of the organization grows.

Freshworks has been promoting its PaaS capabilities as well. Recently, it hosted a Refresh App Challenge that offers developers the opportunity to invent new ideas to make work easier for customer support service agents, and IT service managers. The event was helpful in building stronger awareness about Freshworks’s Neo Platform. Neo already has an active marketplace that provides more than 30,000 of Freshworks’s customers with access to more than 1200 apps by these developers.

Freshworks has been improving the capabilities available on its Neo Platform. Users can now sign up for early access to unified reporting and analytics across customer experience, IT, Sales, Marketing, and third party data. It has also released Messaging integration with Google’s Business Messages to allow customers to connect with their business over Google Search and Google Maps through a unified messaging interface. Passwordless authentication on the platform allows for a more secure and seamless login experience across Freshworks products, and integration with UiFlow has been able to extend and integrate Freshworks products into business processes with low code.

I would like Freshworks to be significantly more transparent about their PaaS marketplace. It should report relevant metrics such as app usage, revenues from marketplace, and revenues earned by app makers by selling their apps on the Neo Platform. I think it should include, in its quarterly reports, more details on the growth of its PaaS business and the associated market opportunity.

I am a firm believer in the impact a successful PaaS ecosystem has on an organization. Salesforce is a stellar example of a well-implemented PaaS strategy. Its App Exchange has amassed a wide array of companies and over a thousand consultants building apps on its platform. The AppExchange has helped companies like Vlocity, Veeva build industry-specific solutions and build sustainable businesses. Not only do these companies see billion-dollar valuations, but the ecosystem has also helped Salesforce expand its presence into niche verticals. By sharing more PaaS-focused statistics with analysts, I am convinced that Freshworks would help the analysts learn to appreciate and appropriately value its PaaS business.

Freshworks went public in September this year. Before going public, it had raised $484 million in nine rounds of funding. The most recent round was held in Jan 2020 for $85 million. It raised $1 billion by selling the stock at $36 apiece at a valuation of $10.1 billion at the time of listing. It is currently trading at $27.37 with a market capitalization of $7.2 billion.