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United States securities and exchange commission logo
July 12, 2021
Rathna Girish Mathrubootham
Chief Executive Officer
Freshworks Inc.
2950 S. Delaware Street, Suite 201
San Mateo, CA 94403
Re: Freshworks Inc.
Amendment No. 1 to
Draft Registration Statement on Form S-1
Submitted June 25,
2021
CIK No. 0001544522
Dear Mr. Mathrubootham:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments. References to prior comments are to those in our letter dated
June 10, 2021.
Amendment No. 1 to Draft Registration Statement on Form S-1
Prospectus Summary
Overview, page 1
1. We note from your
response to prior comment 12, that 12,332 customers who each
contributed more than
$5,000 in ARR for the first quarter of fiscal 2021 represented
approximately 83% of
your total ARR. You also state in response to comment 11 that
customers of a smaller
size do not meaningfully contribute to your financial success. To
add context to the
50,000 customers that you disclose throughout the filing, please revise
your prospectus summary
to also disclose the number of customers with over $5,000 in
ARR along with their
contribution to total ARR for each period presented.
Rathna Girish Mathrubootham
FirstName
FreshworksLastNameRathna Girish Mathrubootham
Inc.
Comapany
July NameFreshworks Inc.
12, 2021
July 12,
Page 2 2021 Page 2
FirstName LastName
Summary Consolidated Financial Data, page 11
2. We note your pro forma earnings per share measure added in response to
prior comment
2. Please revise to also include the number of RSU shares that will
vest as a result of your
offering, as well as the related compensation expense, as previously
requested.
Risk Factors, page 15
3. Please include a risk factor relating to the requirements of the
Investment Company Act of
1940, including a discussion regarding the possibility that you could
be required to
register under the Act and the possible risks to shareholders if you
were deemed an
investment company.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Factors Affecting Our Performance, page 64
4. We note your response to prior comment 8. Please revise this section
to provide the actual
number of customers as previously requested rather than providing a
general statement
that, for example, you have "over 48,000 customers." Provide this
information within
this section for each reported period so a reader may understand how
trends in these
numbers relate to your performance in the reported periods. Also, as
previously
requested, disclose the actual number of customers for each of your
products. To provide
appropriate context, revise to disclose the reasons why prior or
interim period customer
counts are not included for each of your products.
5. You state in your response to prior comment 8 that approximately 7% of
your customers
are customers for more than one product and are therefore counted as a
customer for each
of your three main product lines. Tell us the number of customers that
were counted more
than once in your total customer count. To the extent this amount is
material to your total
customer count, please explain further why you believe highlighting a
customer count
over 50,000 is appropriate. Lastly, where you first present your
customer count, ensure
that this measure is appropriately defined. In this regard, it is
unclear from the disclosures
on page 109 that customers can be counted more than once if they
purchase multiple
products.
Key business metrics, page 72
6. We note your response to prior comment 11. We further note a number of
announcements
and public statements on your website regarding the company reaching
certain ARR
milestones when discussing operating performance. For example, you
disclosed on
February 21, 2021 that you surpassed $300 million in ARR and
experienced 40% year
over year ARR growth. You also announced on May 5, 2020 that you
reached $200
million ARR and the time frame over which you doubled that from $100
million ARR.
This was again highlighted in your August 6, 2020 press release
discussing your
performance for the first half of fiscal year 2020. Thus, it appears
that you consider this
Rathna Girish Mathrubootham
Freshworks Inc.
July 12, 2021
Page 3
information material to evaluating your performance. As such, please
revise your filing to
include a quantified discussion of this metric for each period
presented. Refer to SEC
Release Nos. 33-10751 and 33-8350.
7. We note your response to our prior comment 12. While a net dollar
retention rate for
customers on monthly contracts of 100% or more may support the
inclusion of your
monthly contracts in your annualized revenue based metrics, these
contracts nevertheless
have no contractual annual recurring revenue associated with them.
Thus, this appears to
be a known limitation associated with your metric. Please revise to
disclose this and any
other known limitations. Also, revise to disclose the percentage of
ARR from monthly
contracts for each period presented and explain that the net dollar
retention rate for such
contracts has historically been lower than the total amounts
presented. To the extent you
believe that the net dollar retention metric provides relevant context
to this limitation,
revise to provide the net dollar retention rate for your monthly
contracts as included in
your response to prior comment 10.
Index to Consolidated Financial Statements, page F-1
8. Please update the index to indicate that your financial statements
also include the
unaudited quarterly period ended March 31, 2021.
Note 12. Common Stock and Stock Based Compensation, page F-33
9. Please refer to prior comment 14. As previously requested, please
revise to separately
disclose the number of performance-based RSUs and related unrecognized
compensation
expense that will vest upon this offering.
Note 17. Subsequent Events (unaudited), page F-41
10. We note that the 174,713 RSUs granted in April 2021, and the related
unrecognized
compensation expense, are included in the total RSU grants for both
your audited and
unaudited subsequent events disclosures. Please revise to clarify.
11. We note that in April of 2021, you became aware that a malicious third
party gained
unauthorized access to your third party vendor, Codecov that affected
hundreds of
Codecov s customers, including you. We further note that you disclose
a variety of
impacts and actions taken as a result of the incident, including
engaging a third-party
forensics firm to assist in your investigation, response, and impact
mitigation. Please tell
FirstName LastNameRathna Girish Mathrubootham
us how you evaluated and assessed any contingent liabilities associated
with the Codecov
Comapany NameFreshworks
incident. Refer to ASCInc.
450-20-55-14. Also, explain your consideration
of disclosing the
Codecov incident
July 12, 2021 Page 3 as a subsequent event pursuant to ASC 855-10-50.
FirstName LastName
Rathna Girish Mathrubootham
FirstName
FreshworksLastNameRathna Girish Mathrubootham
Inc.
Comapany
July NameFreshworks Inc.
12, 2021
July 12,
Page 4 2021 Page 4
FirstName LastName
General
12. Please provide us with a detailed analysis of the exemption (if any)
under the Investment
Company Act of 1940 that your subsidiaries intend to rely on and how
their investment
strategies will support that exemption.
13. You state in your response to prior comment 17 that you are not an
investment company
by virtue of Section 3(b)(1) of the Investment Company Act of 1940.
You also state that
while it does not currently appear to be eligible for Rule 3a-1 or
Rule 3a-8 under the
ICA, it is possible it could be based on its June 30, 2021. Please
provide a detailed
analysis supporting your reliance on such Section and Rules. In your
response, provide us
with sufficient detail to assess your analysis.
14. Your response also indicates that the company "intends to divest a
portion of the
investment securities held by it to reduce the percentage of
investment securities to total
assets (less Government securities and cash items) to less than 40% of
its total assets
determined on an unconsolidated basis, and that as a result of
such divestiture, the
relevant percentage of investment securities will be less than 40% of
total assets as of June
30, 2021. Please confirm whether you have divested such investment
securities
(including the divestiture amount) or indicate whether you have set an
alternative date for
when you will no longer be an investment company as defined under the
Investment
Company Act of 1940.
15. Please revise the graphics at the forefront of the registration
statement to disclose your
GAAP cash flow more prominently than your measure of free cash flow.
Also, provide
footnote disclosure referring a reader to your non-GAAP
reconciliation. Refer to
Question 102.10 of the Non-GAAP C&DIs and Question 101.02 of the
Securities Act
Forms C&DIs.
You may contact Rebekah Lindsey, Senior Staff Accountant, at (202)
551-3303 or
Kathleen Collins, Accounting Branch Chief, at (202) 551-3499 if you have
questions regarding
comments on the financial statements and related matters. Please contact Anna
Abramson, Staff
Attorney, at (202) 551-4969 or Jeff Kauten, Staff Attorney, at (202) 551-3447
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Sepideh Mousakhani