Customer service and support software firm Freshworks Inc. delivered another strong earnings and revenue beat in its latest quarter and cut its overall losses substantially, sending its stock more than 14% higher in extended trading today.

The company reported second-quarter earnings before certain costs such as stock compensation of seven cents per share, with revenue growing 19%, to $145.1 million. That was better than expected on both counts, with analysts looking for earnings of just two cents per share on sales of $141.4 million. Its net loss came to $35.6 million, down from a loss of $69.7 million one year before.

Freshworks also reported a free cash flow of $18.1 million, up from negative $10.2 million a year earlier. Cash, equivalents and marketable securities were valued at $1.16 billion at the end of the quarter.

Founder and Chief Executive Girish Mathrubootham (pictured) said the company is building on its strong foundations to deliver faster product innovation and improve its efficiency. “In Q2, we launched new generative AI enhancements across our product lines and outperformed our estimates across all our key financial metrics,” the CEO said.

The company is often considered to be an emerging rival to customer relationship management software giants such as Salesforce Inc., Workday Inc. and Oracle Corp. Its customer management and engagement platform helps businesses acquire new clients, close deals and maintain long-term relationships. However, Freshworks has found a niche for itself targeting midsized companies rather than huge enterprises, with a platform that’s more user-friendly, easier to implement and less expensive.

At the end of the quarter, the company had 19,105 customers that generate at least $5,000 per year in revenue, up 18% from a year prior. It also reported a net dollar retention rate of 18%. Investors often watch this metric, as it serves as a gauge on how much revenue growth or churn a company had over time from its existing pool of customers. As such, it provides useful clues as to the overall health and growth potential of the business.

Liz Miller of Constellation Research Inc. said Freshworks’ growth is being aided by the introduction of generative AI-powered assistants earlier this year that help customers become more productive. “Its series of AI assistants is not meant to be an overwhelming IT addition, but rather about quick recommendations and better support for sellers, service agents and marketers, and it resonates,” she said.

However, the analyst warned that Freshworks still needs to act cautiously in the current economy as it’s still looking to become profitable. “The team will need to find new avenues for cost control and not let a solid quarter ramp up the spend engine too much,” Miller said. “Freshworks has proven it can keep its collective head focused, but as players like Salesforce double down with their own focus on AI, it can’t afford to celebrate too long.”

Looking to the third quarter, Freshworks offered an outlook that more or less matched Wall Street’s. It’s forecasting revenue of between $149 million and $151.5 million, which is more or less in line with the analyst consensus estimate of $150.6 million.

Freshworks is optimistic in the longer term, too. It said it’s raising its full-year revenue guidance to a range of between $587 million and $595 million, up from an earlier forecast of between $580 million and $592.5 million. Wall Street continues to forecast full-year revenue of $586.3 million.

Photo: USISPF Communications/YouTube