Freshworks’ 2022 Loss Jumps 1.2X YoY To $232 Mn, Operating Revenue Up 1.3X

NASDAQ-listed SaaS unicorn Freshworks reported a loss from operations, or GAAP (Generally Accepted Accounting Practices) loss of $232.13 Mn for the calendar year 2022 (CY22), up 1.14X compared to $204.8 Mn in CY21.

Freshworks’ non-GAAP loss stood at $22.3 Mn in 2022, compared to $18.3 Mn in 2021, its filings with the US Securities and Exchange Commission (SEC) showed.

The SaaS unicorn saw its revenue from operations increase 1.34X to $498 Mn in CY22 from $371.02 Mn in CY21. During the fourth quarter of (Q4) CY22, Freshworks’ revenue from operations touched $133.17 Mn, up 1.26X compared to $105.48 Mn during the year-ago period.

Interestingly, the SaaS unicorn had projected a total revenue between $395.5 Mn and $501.5 Mn for 2022 in May 2022, when it reported its Q1 results.

The SaaS unicorn attributed the jump in revenue in Q4 to a rise in the number of customers contributing more than $5,000 to the average revenue rate (ARR). “[The] number of customers contributing more than $5,000 in ARR was 17,722, up 20% year-over-year and 21% adjusting for constant currency,” Freshworks said.

Freshworks added that the net dollar retention rate (NDR), a measure of revenue growth and customer churn, was 110% adjusting for constant currency in Q4CY22, compared to 107% in Q3CY22 and 114% in Q4CY21.

The SaaS unicorn saw its total operating expenses reach $635.6 Mn in 2022, up 1.28X compared to $497.77 Mn in 2021. Of these, $207.7 Mn was down to stock-based compensation.

Talking about stock-based compensation, Freshworks noted that it excludes the same from certain non-GAAP financial measures since it is a non-cash expense. “We believe that excluding this expense provides meaningful supplemental information regarding operational performance,” the SaaS unicorn said.

Freshworks posted a net loss of $232.13 Mn in 2022, up 1.21X compared to $192 Mn in 2021.

The biggest expense for the SaaS unicorn was the advertising spend, which reached $343.21 Mn in 2022, up 1.32X compared to $260.35 Mn in CY21. 

Other significant expense entries included costs incurred for research and development (R&D) and general and administrative expenses, which stood at $135.54 Mn and $156.85 Mn, respectively, during the period under review. 

R&D expenses in CY22 were up 1.13X against $120.41 Mn in CY21, while general and admin expenses were up 1.12X versus $117.02 Mn in the year-ago period. 

The unicorn paid a significant chunk of both R&D and general expenses in stock. Specifically, Freshworks paid $36.41 Mn in R&D costs and $99.92 Mn in general expenses in stock during CY22.

“Freshworks capped off a strong finish to the year with revenue growing 30% on a constant currency basis in Q4,” Freshworks’ founder and CEO Girish Mathrubootham said in a statement.

”Despite macroeconomic uncertainty throughout the year, I am pleased with our focus on product innovation, expansion and new business which drove revenue growth and improved cash flow. We will continue this focus into 2023,” he added.

Shares of the company opened at $16.85 apiece on Wednesday (February 8), up 2.8% following the announcement of the results.