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Business News/ Companies / News/  Freshworks CEO Girish Mathrubootham steps down, shares tumble more than 25%

Freshworks CEO Girish Mathrubootham steps down, shares tumble more than 25%

Dennis Woodside, who was president of India's largest listed SaaS company, has taken over as the chief executive officer

Girish Mathrubootham, founder of Freshworks. (Mint)Premium
Girish Mathrubootham, founder of Freshworks. (Mint)

BENGALURU:Girish Mathrubootham has stepped down from the role of chief executive officer of Nasdaq-listed software firm Freshworks, transitioning into the role of executive chairman.

Dennis Woodside has taken charge as CEO effective 1 May, Freshworks said during its first-quarter earnings call on Thursday. Woodside, who had previously been CEO of Motorola Mobility and chief operating officer of Dropbox, joined Freshworks as president in 2022.

Shares of the San Mateo, California-based software-as-a-service, or SaaS, company fell more than 25% in extended trading on Nasdaq, settling at $18.25 apiece at the time of publication.

“The past 14 years have been an incredible journey, one that has seen Freshworks grow from a fledgling startup in Chennai into the global SaaS company that we are today," Mathrubootham wrote in a blog post dated 2 May. “I’m incredibly proud that we are the first Indian SaaS company listed on Nasdaq."

Mathrubootham added that several years ago he had shared with Freshworks' board of directors his intention to shift focus to the firm’s long-term product vision and invest in its presence in India, he wrote.

“As I pass the baton to Dennis and move into my new seat as Executive Chairman, I look forward to continuing to serve Freshworks, focusing on our long-term product vision and AI, spending more time with our teams in India, and being a trusted advisor to Dennis," he said.

Signs of trouble

In March, the board cancelled Mathrubootham’s stock unit award of 6 million shares stating that stock price hurdles were too far ahead of the current stock price for the award to have the retention value expected at the time it was granted. 

The board, however, blamed this on macroeconomic conditions that it said were “entirely outside the control of the company’s leadership".

For the January-March quarter, Freshworks reported a consolidated revenue of $165 million, up 20% year-on-year. Non-GAAP operating profit jumped to $21.8 million from $3.9 million in the year-ago period, when the company had announced its first full-year operating profit since listing publicly.

In the first quarter, free cash flow stood at $38.7 million, compared with $9.1 million a year earlier.

“Freshworks delivered 20% revenue growth with improving profitability and a strong free cash flow margin in Q1," said Mathrubootham, who also runs an early-stage venture capital fund called Together Fund.

“I’m particularly proud of the progress we’ve made in AI innovation across our products, and its tangible impact on our customers. We remain more focused than ever on product innovation, bringing more large customers onto our platform, and expanding adoption of products across our portfolio."

Stock pressure

Mathrubootham founded Freshworks, originally named Freshdesk, in 2010 in Chennai and guided the company to go public on Nasdaq in 2021.

Since its public listing in September 2021, the first by an Indian SaaS company, Freshworks has recorded a consistent rise in revenue every quarter. It turned in a 46% rise in revenue year-over-year to $96.6 million in the third quarter of 2021.

In the first quarter of 2023, Freshworks delivered its first full-year non-GAAP operating profit of $3.9 million. (Non-GAAP numbers generally exclude certain expenses such as stock-based compensation expenses, payroll taxes on employee stock transactions, amortization of acquired intangibles, and other adjustments.)

But the Freshworks stock has fared rather poorly on the stock market. Since its listing, the company's share price has tanked by about 60%, which has been of particular concern to the board. Despite a short bumpup, reaching an intraday high of $24.98 in January, the stock has registered a 17% decline so far this year.

Freshworks has been working on improving its operating margins by focusing on large enterprises over small businesses, and reworking its spending on infrastructure and marketing.

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Sowmya Ramasubramanian
Sowmya is a Senior Correspondent at Mint. An alumnus of Asian College of Journalism, Sowmya is deeply interested in covering sectors at the intersection of consumer and technology as well as healthcare and the venture capital ecosystem. Previously, Sowmya worked for the editorial team at YourStory. Her earlier stints include long form journalism at The Morning Context and technology reporting at The Hindu in Chennai.
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Published: 02 May 2024, 07:40 AM IST
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