Shares in Freshworks Inc. plunged more than 23% in late trading today after the customer service and support software firm fell short on its outlook and revised its revenue guidance for the full year downward, despite beating estimates in its most recent quarter.

The company also announced that it has appointed a new chief executive, current President Dennis Woodside. In addition, it said it has agreed to acquire information technology asset management company Device42 Inc. to strengthen its IT solutions for midmarket and enterprise companies. Oddly, the only mention outside the earnings release was a filing with the SEC that put the purchase price at $230 million.

For its first quarter that ended on March 31, Freshworks reported adjusted earnings of 10 cents per share, up from three cents per share in the same quarter of last year, on revenue of $165.1 million, up 20% year-over-year. Both were beats, as analysts had been expecting earnings per share of eight cents on revenue of $163.5 million.

Freshworks reported an adjusted loss from operations in the quarter of $32.2. million, down from a loss of $48.1 million in the first quarter of 2023. Net cash from operating activities was $40.6 million, up from $11.5 million, fresh cash flow was $38.7 million and Freshworks had $1.21 billion on hand in cash, cash equivalents and marketable security as of the end of March.

Through the quarter, Freshworks saw the number of customers contributing more than $5,000 in annual recurring revenue grow 11% year-over-year, to 20,549, and those customers are sticking around, with Freshworks seeing a net retention rate of 106%. Notable new customers in the quarter included Dark Matter Technologies Inc., British Transport Police, YoungCapital Holdings B.V., Coeur Mining Inc. and Kramp Group B.V.

“Freshworks delivered 20% revenue growth with improving profitability and a strong free cash flow margin in Q1,” outgoing Chief Executive Officer Girish Mathrubootham said. “I’m particularly proud of the progress we’ve made in AI innovation across our products and its tangible impact on our customers.”

Looking forward — perhaps one reason Freshwork shares are down so much in late trading — the company said it expects to see adjusted earnings per share of five to six cents in its fiscal second quarter on revenue of $168 million to $170 million. The earnings outlook was fine — analysts were looking for an outlook of five cents — but the revenue outlook fell short of an expected $172.1 million.

For the full fiscal year, Freshworks expects adjusted earnings per share of 32 to 35 cents, ahead of an expected 30 cents, but forecast revenue of $695 million to $705 million was below an expected $708.3 million. Notably, the yearly forecast was down from the $703.5 million to $711.5 million predicted by Freshworks in February.

Alongside the earnings, the company announced that it has appointed Dennis Woodside as its new chief executive, with the appointment effective today. Former CEO Mathrubootham will remain the chairman of the Board of Directors and will also take up a new role as executive chairman.

Mathrubootham founded Freshworks in 2010 and has served as its CEO since then, including its initial public offering in 2021. Woodside, who joined Freshworks as president in September 2022, was previously the chief operating officer of Dropbox Inc. and, prior to that, worked at Google LLC, where, among other roles, he served as the CEO of Motorola Mobility after Google acquired the company in 2012.

Photo: Freshworks/Facebook