Freshworks, the Nasdaq-listed SaaS platform, is restructuring its operations with a significant reduction in its global workforce and a hefty stock buyback. This comes as the company looks to streamline its business and improve its financial health.
Layoffs and Restructuring Plans
In a move aimed at enhancing efficiency, Freshworks has revealed it will be cutting 13% of its workforce, which translates to about 660 employees across its global operations. The company, which employs over 5,000 people across locations such as India, Germany, the US, the UK, France, and the UAE, stated that these layoffs are part of a larger restructuring initiative.
The decision, outlined in a recent filing with the stock exchange, is expected to incur between $11 million and $13 million in charges during Q4 2024. These costs primarily cover severance packages, employee benefits, and related separation expenses. Freshworks aims to wrap up its restructuring efforts by the end of the year.
This workforce reduction follows the company’s strategic realignment, which includes merging teams focused on Customer Experience (CX) products, such as support, sales, and marketing. The company is now re-prioritizing its investments, shifting resources toward its rapidly growing Employee Experience (EX) segment. CEO Dennis Woodside, who took the reins in May 2024 after Girish Mathrubootham’s departure, explained that these decisions were carefully considered to set a strong foundation for the company’s future.
Financial Results: Revenue Growth, But Rising Losses
For the third quarter of 2024, Freshworks reported a 7.16% increase in revenue, reaching $186.57 million compared to $174.1 million in Q2 2024. The company also saw a 21.5% increase in year-on-year revenue, which grew from $153.5 million in Q3 2023.
Despite this revenue growth, Freshworks faced a sharp increase in net losses. For Q3 2024, its losses surged by 49%, totaling $29.96 million, up from $20.1 million in the previous quarter. This marks a stark reversal from the previous quarter, when the company managed to reduce its losses by 13%.
When compared to the same quarter last year, the company’s losses shrank slightly by 3.4%, from $31 million in Q3 2023, though it remains in the red. Despite the widening losses, the revenue growth reflects Freshworks’ ability to drive sales in a competitive SaaS market.
Stock Buyback to Strengthen Financial Position
In addition to the workforce reduction, Freshworks has authorized a stock repurchase program worth up to $400 million. The buyback plan is intended to help boost the value of its Class A common stock, providing confidence to shareholders amidst the company’s ongoing restructuring efforts. The stock repurchase program is part of Freshworks’ broader strategy to enhance shareholder value while focusing on long-term growth.
Looking Ahead: Optimistic Revenue Projections
Freshworks has set its sights on continued growth, with expectations for Q4 2024 to bring in revenue between $187.8 million and $190.8 million. This would represent a year-on-year growth of 17% to 19%. For the full fiscal year 2024, the company is projecting total revenue of approximately $713.6 million to $716.6 million, reflecting steady growth despite the restructuring challenges.
As the company navigates this period of transformation, Freshworks remains focused on building a more efficient and scalable business model. While the layoffs and restructuring efforts are a sign of the company making tough decisions to remain competitive, its positive revenue growth and ambitious projections for the coming quarters show that it is still confident in its future.
Comments