Freshworks' India arm turns a profit in FY18 but revenue growth slows

Freshworks Technologies Pvt. Ltd, the wholly owned Indian subsidiary of cloud-based customer engagement platform Freshworks Inc., swung to a profit for the year through March 2018 although its revenue growth slowed.

Operating revenue grew 30% to Rs 254.37 crore for 2017-18 from Rs 195.38 crore the year before, according to the consolidated financial statements of Freshworks Technologies filed with the Registrar of Companies.

The company’s operating revenue includes income from software development services, support services, and sales and marketing support services, according to the financial statements.

However, growth in revenue slowed during 2017-18. In 2016-17, the company had almost doubled operating revenue from Rs 95.38 crore the year before. In 2015-16, too, the company’s revenue had more than doubled.

The company posted a net profit of Rs 20.90 crore for 2017-18, as against a net loss of Rs 6.33 crore the previous year. To be sure, the company had posted a net profit in previous years—Rs 8.6 crore in 2015-16 and Rs 3.6 crore in 2014-15.

Total expenses rose nearly 30% to Rs 226.44 crore from Rs 175.63 crore the previous year. Employee expenses, at Rs 171.89 crore, accounted for three-fourths of the total costs.

The financial statements show also that the company recorded had recorded a one-time loss before tax of Rs 18.62 crore during 2016-17, plunging it into a net loss. During 2017-18, one-time loss before tax was only Rs 48 lakh. The company didn’t specify any details.

Email queries sent to Freshworks seeking comment on the latest financial performance of the Indian arm did not elicit a response till the time of publishing this report.

The Indian arm’s financial performance, however, does not reflect the complete health of the software-as-a-services company. Freshworks, which also has operations in the UK, Australia and Germany, does not reveal its consolidated revenue. However, the Indian arm is estimated to account for anywhere between 30% and 40% of its total revenue. In July last year, the company said it had grossed $100 million in annual recurring revenue, a metric that subscription-based businesses track.

Freshworks is one of the most significantly funded startups and considered as a poster boy in the Indian SaaS space. It joined the unicorn club of startups with a valuation of at least $1 billion when it raised $100 million in July 2018 from investors such as Accel, Sequoia Capital and CapitalG, the venture capital arm of tech giant Google’s parent firm Alphabet.

Freshworks was founded in October 2010 by Girish Mathrubootham and Shan Krishnasamy. It was earlier known as Freshdesk. In June 2017, Freshdesk rebranded itself to Freshworks as part of an initiative to position itself as a multi-product brand and for product clarity. Earlier, Freshdesk’s flagship product offering was also the name of the company.

The company counts among its customers Bridgestone, Hugo Boss, the University of Pennsylvania, Toshiba and Cisco. Freshworks, which recently launched an app marketplace for developers and clients, competes with firms such as homegrown Zoho and US-based Salesforce.

Last year, the company launched Freshworks 360—a fully integrated cloud bundle where, on a single platform, users can access Freshdesk (the cloud-based customer relationship management product), Freshsales (the CRM solution for sales teams handling high-velocity leads), Freshmarketer (a product suite of marketing tools), Freshcaller (fully functional call centre on the cloud), and
Freshchat (a chatbot that sends contextual messages to increase engagement).

In November last year, the company strengthened its top deck by appointing Prasad Ramakrishnan as information chief and Shivanath Somanathan as information security chief.