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United States securities and exchange commission logo
June 10, 2021
Rathna Girish Mathrubootham
Chief Executive Officer
Freshworks Inc.
2950 S. Delaware Street, Suite 201
San Mateo, CA 94403
Re: Freshworks Inc.
Draft Registration
Statement on Form S-1
Submitted May 14,
2021
CIK No. 0001544522
Dear Mr. Mathrubootham:
We have reviewed your 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.
Draft Registration Statement Submitted on Form S-1
The Offering, page 9
1. We note that you
exclude common stock issuable upon the settlement of outstanding
restricted stock units
(RSUs) as of December 31, 2020 from the number of shares of
common stock that will
be outstanding after the offering. To the extent such amounts
include
performance-based RSUs that will vest upon this offering when the liquidity
condition is satisfied,
please revise to include such shares in your disclosure of common
shares outstanding.
Summary Consolidated Financial Data, page 11
2. Please include a pro
forma earnings per share measure to reflect the automatic conversion
Rathna Girish Mathrubootham
FirstName
FreshworksLastNameRathna Girish Mathrubootham
Inc.
Comapany
June NameFreshworks Inc.
10, 2021
June 10,
Page 2 2021 Page 2
FirstName LastName
of preferred stock to common stock upon the closing of this offering.
Also, to the extent
that your RSUs have met the time based vesting provisions and are only
subject to a
liquidity condition that will be satisfied by your offering, please
revise to include such
shares, as well as the impact of recognizing any related stock-based
compensation
expense. Please also revise your pro forma capitalization and dilution
disclosures
accordingly. Refer to Article 11-01(a)(8) of Regulation S-X.
Risk Factors
We track certain key business metrics..., page 15
3. Please provide examples of the limitations of your internal tools and
methodologies for
tracking your metrics.
If we fail to manage our technical operations infrastructure..., page 22
4. We note your disclosure of the importance of Amazon Web Services to
your business.
Please disclose the material terms of your agreement with Amazon Web
Services,
including the term and any termination provisions.
Sales efforts to large customers..., page 26
5. Please disclose the average length of your sales cycle to large
customers as compared to
smaller customers.
We derive, and expect to continue to derive..., page 26
6. Please disclose the percentage of your revenue generated from the four
products listed in
this risk factor for the periods presented.
Risks Related to Ownership of Our Common Stock, page 41
7. Please add a risk factor that addresses the concentration of ownership
among your
directors, officers and principal stockholders.
Key Factors Affecting Our Performance, page 64
8. You disclose that you have over 48,000 total customers as of December
31, 2020.
However, you also disclose a total customer base of over 50,000
organizations elsewhere
throughout the filing. Please revise to address this apparent
inconsistency. Disclose the
actual number of customers for each period presented and clarify
whether such amounts
include customers currently in the free forever tier of Freshsales or
in a free trial period as
customers. With regards to your disclosure of customers for each of
your three main
products, clarify whether you include a customer using more than one
product as a
customer for each product. Also, please revise to disclose the actual
number of customers
per product for each period presented and if applicable, quantify the
number of customers
in each count that are included as customers for more than one
product.
Rathna Girish Mathrubootham
Freshworks Inc.
June 10, 2021
Page 3
9. Please explain whether, and if so how, cancellations are factored into
your annual
recurring revenue (ARR) calculations for the purposes of your cohort
chart presentation.
For example, tell us whether the 2012-2019 cohort groups exclude
customers that
cancelled their subscriptions and if so, explain further how this
measure represents your
ability to retain and expand your customer relationships.
10. You disclose that you define ARR as the sum total of the subscription
revenue you would
contractually expect to recognize over the next 12 months from all
customers at a point in
time, assuming no increases or reductions in their subscriptions.
Please tell us whether
your ARR calculations include the annualized value of monthly
contracts, and if so,
explain your basis for annualizing revenue from such customers. In
your response, please
provide us with cancellation/attrition rates or, alternatively,
renewal rates for your
monthly subscribers as well as the percentage of revenue generated
from monthly
contracts for each period presented. Also, revise your disclosures
related to the ARR
calculations to address the inclusion of monthly subscriptions, to the
extent material.
Key Business Metrics, page 66
11. We note that you present an ARR by cohort graph, the number of
customers with ARR
greater than $5,000 and a dollar net retention rate that compares ARR
from customers in
one period to ARR in a prior period. Elsewhere you disclose the number
of customers
with ARR greater than $50,000. Please tell us whether management uses
the ARR metric
itself to manage the business and if so, tell us what consideration
you have given to
including a quantified discussion of this metric for each period
presented. Refer to SEC
Release No. 33-10751.
12. To provide context to your metric, please revise to disclose the
percentage or amount of
revenue attributable to customers with ARR greater than $5,000 for
each period
presented. Discuss any limitations present, such as the number of
customers with monthly
contracts that may not have annual contractual revenue associated with
them.
Business
Our Business
FirstName Model, page 86Girish Mathrubootham
LastNameRathna
Comapany
13. NameFreshworks
Please Inc. of small-and mid-sized business, mid-market
and enterprise
disclose the number
customers
June 10, for3the periods presented.
2021 Page
FirstName LastName
Rathna Girish Mathrubootham
FirstName
FreshworksLastNameRathna Girish Mathrubootham
Inc.
Comapany
June NameFreshworks Inc.
10, 2021
June 10,
Page 4 2021 Page 4
FirstName LastName
Consolidated Financial Statements
Note 12. Common Stock and Stock Based Compensation, page F-28
14. Please revise to separately disclose the number of performance-based
RSUs and related
unrecognized compensation expense that will vest upon this offering.
Refer to ASC 718-
10-50-2(g).
Note 16. Subsequent Events, page F-35
15. Please provide a breakdown of the 326,740 RSUs granted through May 14,
2021, as well
as for any other issuances through the date of your response, and
include the fair value of
the underlying ordinary shares used to value such grants. If there
were any significant
fluctuations in the fair values between grant dates, describe for us
the factors that
contributed to these fluctuations, including any intervening events
within the company or
changes in your valuation assumptions or methodologies.
16. Please disclose the estimated unrecognized compensation expense
associated with your
equity awards issued subsequent to December 31, 2020, if material, and
the periods over
which it will be recognized. Also, clarify whether these are
time-based or performance-
based awards. Refer to ASC 855-10-50-2(b).
General
17. Please provide a detailed legal analysis analyzing whether the
registrant meets the
definition of investment company under the Investment Company
Act of 1940. Please
include relevant unconsolidated financial information to support your
determination.
Among other things, your analysis should indicate the value of your
investment securities
and total assets, exclusive of cash items and Government securities,
on an unconsolidated
basis. If the registrant is an investment company, provide a complete
and detailed
explanation of the basis for reliance upon any exemption or exclusion
from the definition
of investment company under the Investment Company Act of 1940.
18. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
Rathna Girish Mathrubootham
FirstName
FreshworksLastNameRathna Girish Mathrubootham
Inc.
Comapany
June NameFreshworks Inc.
10, 2021
June 10,
Page 5 2021 Page 5
FirstName LastName
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) 441-4969 or Jeff Kauten, Staff Attorney, at (202) 551-3447
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Sepideh Mousakhani