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freshworks results: Freshworks raises full-year guidance for 2023, appoints CMO

Homegrown software-as-a-service major Freshworks has raised its full-year 2023 financial forecast midpoint for adjusted operating profit to $40 million against its previous forecast of $28 million.

The San Mateo, California headquartered company said its net loss shrunk to $31.03 million, or 11 cents per share in the third quarter ended September, from $57.8 million, or 20 cents per share, a year earlier.

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During the quarter, the number of Freshworks customers paying over $50,000 in annual recurring revenues (ARR) grew 32% year-over-year. This cohort represented 46% of the company’s overall ARR.

Revenue for the quarter grew 19% year-over-year to $153.6 million.

The Nasdaq-listed company also announced the appointment of a new management team member, Mika Yamamoto, as chief customer and marketing officer, effective November 20.

“I think the addition of Mika Yamamoto as our new chief customer marketing officer—that’s a big add for us because a lot of what we need to do also is in that marketing space,” president Dennis Woodside told analysts on the earnings conference call.

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Chief financial officer Tyler Sloat told analysts that lower-than-expected headcount-related costs, delays in spends and improvements on operating expenses helped the company report an adjusted operating margin of 11%, a 3-percentage-point improvement quarter over quarter.Net dollar retention stood at 108% in the quarter, the same as in the preceding quarter. This NDR rate, important for subscription-reliant businesses such as Freshworks, represents the percentage of revenue retained from clients that existed a year ago.

In October, rival Zoho’s co-founder and CEO Sridhar Vembu had cautioned that the global economy is likely to take a turn for the worse. He said that the company saw a “fairly pronounced” slowdown in growth in September across countries and across products.

During the call, Sloat noted: “We don’t expect the macro to immediately turn around. For us, that would be reflected in our expansion motion increasing with agent addition, meaning, companies are going back to hiring and we expect that to see continued pressure for a while. So, we’ve kind of built that into our expectations.”

In August, chief human officer Suman Gopalan and chief marketing officer Stacey Epstein, both top-rung leaders reporting to founder and CEO Girish Mathrubootham, resigned. While Gopalan had spent a little over five years with the firm, Epstein spent nearly 2.5 years.

The new executive, Yamamoto, was most recently the chief customer experience and marketing officer of F5, a cybersecurity software service company. Previously, he was the president of Marketo, a marketing automation platform, chief digital and marketing officer at German software giant SAP, and held senior roles at Amazon, Gartner and Microsoft.

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