Freshworks targets 18-19% annual revenue growth on back of winning large clients

Customer relationship software maker Freshworks is increasingly winning contracts from large customers — those who spend more than $50,000-100,000 annually on the software-as-a-service (SaaS) company’s services. This has led the Chennai and San Mateo-based Freshworks to target 18-19% on-year growth in its 2023 revenue, the company’s management said during its first-ever investor day, early Friday.

During the June quarter, Freshworks had 855 customers providing it with annual recurring revenue (ARR) of more than $100,000, against 737 such customers in 2022 and 535 in 2021.

“We have earned the right to engage with larger companies … and we have been able to go in and beat incumbents in some cases and go head to head with some of our competitors to prove that our software serves the needs of those larger organisations,” Tyler Sloat, chief financial officer, Freshworks, said during the presentation.


Record-breaking quarter

Without revealing numbers, Freshworks said it signed the highest number of large deals in the company’s history during the June quarter.

On August 2, the Nasdaq listed company reported that its revenue had increased 19% to $145.1 million for the quarter ended June, and raised its forecast for the whole of 2023, saying it will hit an adjusted operating profit of $28 million.

In the $50,000+ ARR segment, the company said it had 2,186 customers during the June quarter, while the $5,000+ ARR segment had 19,105 customers.

Needless to say, the $5,000+ ARR segment accounts for the majority of Freshworks’ revenue.

“At Freshworks, we have a clear path to creating a multi-billion-dollar scale company. We are operating in three really large TAMs (total addressable markets)...we have started seeing momentum in larger customers going upmarket and that’s working,” said Girish Mathrubootham, founder and chief executive officer of Freshworks. “Our customers are adopting multiple products and we think that’s going to be a very durable opportunity for us.”

A metric turned on its head

The mid-market and enterprise customer segment of Freshworks, which represents the company’s larger clients, accounted for 59% of the company’s annual billing, while the remaining 41% was on account of small and medium businesses (SMBs).

This metric was inverse at the time Freshworks went public in September 2021, Sloat said, with SMBs accounting for 60% of the revenue.

Freshworks, founded in Chennai in 2010 and listed on the Nasdaq in 2021, primarily targets small and medium businesses with its customer relationship management software.