Freightos Limited

Hello and welcome to the FREDOS Q1 2024 earnings conference call. A press release with detailed financial results was released earlier today and is available on the investor relations section of our website, FREDOS.com. My name is Anati Ron Heilborn and I'm joined today by Tzvi Schreiber, the CEO of FREDOS and Ran Shalev, CFO. Following the prepared remarks, we will open the call for questions. We are sharing slides during the call so we recommend using Zoom on a computer instead of dialing in by phone. The slides, as well as a recording of this earnings call, will also be available on our website shortly after the call. Please be aware that today's discussion contains forward-looking statements which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors. Please refer to today's press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. In discussing the results of our operations, we'll be providing and referring to certain non-IFRS financial measures. You can find reconciliations to the most directly comparable IFRS financial measures, along with additional information regarding those non-IFRS financial measures, in the press release on our website at fredos.com slash investors. The company undertakes no obligation to update any information discussed in this call at any time. Today's earnings call will begin with an overview of Q1 performance by Zvi, who will also provide insights into the current freight market trends. Next, Ron will present the financial results and the guidance for Q2. We will conclude with Q&A. Questions can be submitted in writing during the call by using the Q&A feature in Zoom. Please go ahead.

Good morning, and thank you for joining us. I'm pleased to report a strong start to the year with first quarter results exceeding our expectations in every metric, namely transactions, gross booking value, revenue, and adjusted EBITDA. This performance highlights the robustness and growing acceptance of our platform and the strides we're making in digitalizing international freight in order to bring efficiency and transparency to this crucial sector. In the first quarter alone, FreightOS facilitated nearly 296,000 transactions, marking a significant 29% increase year-over-year above our expectations for the quarter and at the high end of our long-term expectations of 20-30% annual growth. This is the 17th consecutive quarter of record transactions. We continue to consider transaction growth to be the most important KPI for our business, and its consistent growth as the prime proof point of the benefits users gain from the marketplace we've built for them. Furthermore, the gross booking value of the transactions was over $192 million, growing 14% compared to Q1 last year, and exceeding our expectations of only a modest growth, if at all. Our modest GBV expectations were based on the hope that the Red Sea crisis might pass. However, most shipping is still avoiding the Suez Canal, and as a result, rates remain somewhat elevated in Q1, as I will discuss in more detail later. In Q1, our platform experienced continued growth, with unique buyer users increasing 11% year-over-year. This reflects our platform's appeal and its capacity to continuously attract new buyers, expanding our market presence. Despite most large freight forwarders already being clients, we continue to expand by adding more users within existing customers and engaging new, often smaller customers. We did also onboard a few larger freight forwarders from Asia, Europe and America this quarter, demonstrating our ability to attract key players across regions. The value our platform brings to buyers is demonstrated by the performance of the Q1 2022 cohort, now two years old, of new freight forwarders from that quarter, who have been with us two years now, shown in the chart on the left. This cohort analysis showcases consistent, substantial engagement from freight forwarders. Once they join our platform, their bookings increase significantly over time, driven by more carrier choices on the platform, more coverage and strong retention. On the seller side, we expanded our carrier base to 49 carrier sellers this quarter. We recently made several announcements about new airlines making their capacity available on our platform or expanding their capacity. These include Fitzcargo, Delta Cargo and Singapore Airlines. Our most recent announcement just last week discussed our expanding collaboration with United Airlines. In the US, the expansion of our partnership with Delta Cargo enhances our domestic US offering with all the three largest domestic air cargo carriers now available for electronic booking via our platform. Meanwhile, in Asia, our collaboration with Singapore Airlines and Fitzcargo boosts our regional presence, expanding booking options in Asia-Pacific's busiest hubs and boosting our nascent interlining availability. These new additions are a few examples of the multiple carrier rollouts that took place in the first quarter, and I'm pleased to say that we have a strong pipeline of new airlines for the second quarter, all of which are expected to contribute to transaction growth in the coming months and years. Our carrier cohort analysis on the right indicates dramatic growth in bookings for each new carrier soon after joining, affirming our platform's strength and the expanding scope of our marketplace, which continues to be the clear leader in this emerging space of digital air cargo. We believe that in the first quarter we maintained a share of approximately 80% of all international air cargo digital bookings on platforms. In our last earnings call, we set out four key growth strategies for our marketplace, over and above the increase in the number of transactions. This quarter, we've seen meaningful progress across each of the four. Firstly, more types of transactions. We continue to leverage our broad and diverse transaction types to encourage not only more transactions, but also to enhance their value. In the first quarter, we started dynamically suggesting alternative options when people book, including highlighting premium air cargo products like Express on relevant searches, driving more value for customers and, in some cases, increasing our transactional revenue. These enhanced service offerings contribute to our monetization efforts, optimizing how we generate revenue from each transaction. Secondly, covering more aspects of the transaction on platform. We aim to cover more services related to each transaction. In Q1, we successfully rolled up payments in more countries by adding a new payments partner in Asia. We're very pleased with the strong growth in payments revenue, although the numbers are still small. Thirdly, more buyer-seller interactions. interlining where one airline purchases cargo services from another, a little bit like co-chairing passenger, is a key initiative here, and we introduced it last year. Traction for this interlining offering continues to be strong, and the number of such transactions in the quarter significantly exceeded our expectations, although it's still a small number. While the revenue contribution from these transactions was modest, as more airlines make their capacity available for interlining on our platform, we expect booking value and revenue from interlines to grow. Lastly, data and connectivity. Our data utilisation through Freitas Terminal has provided valuable market insights throughout the Red Sea crisis. This quarter we leveraged our data to attract new subscribers and improve service offerings, while we also got some good publicity such as my appearances on BBC News and Fox News. I'd like to draw your attention once again to the United Airlines announcement from last week. We're proud that United Airlines has chosen Freightos as their main technology partner to build a state-of-the-art air cargo web portal. The new portal is intended to enhance United Cargo's website offering to freight forwarders. The heightened online experience will enable seamless booking and tracking functionality as well as other capabilities. United customers have a choice in how to access and book United Cargo's available capacity directly through its website or through our web cargo platform. As we advance through our strategic growth avenues, it's important to keep in mind the huge market potential available to us. The combined market size for our core sectors of air and ocean freight totals in hundreds of billions in potential gross booking value per year, although the exact size of the market of course fluctuates with price levels. Importantly, data indicates that 30% to 50% of this market is spot and could be transactions on a platform-based solution like ours in the coming years, presenting an opportunity for us to potentially target some $10 billion in high-margin recurring transactional revenue. This market potential fuels our drive to innovate and enhance our platform's offerings. Moving on to the freight market conditions during the first quarter. Starting with ocean and air volumes, both showed the typical seasonal decline, but increased year on year. The chart on the left shows normal seasonality in global ocean freight during Q1, as volumes decreased in February during the Lunar New Year holiday in China and parts of Asia, and then picked up again in March. Total ocean volumes were up 9% compared to the first quarter of 2023. On the right side, IATA data for global air cargo volumes shows that the global demand Their global demand continued its recovery in Q1, increasing 13% compared to Q1 last year. Demand growth out of China is largely attributable, though, to the new and growing presence of B2C e-commerce volumes such as Temu and Xi'an as a major air cargo segment, while Red Sea disruptions to ocean freight push some ocean volumes to air cargo, especially out of India and the sea air hub Dubai. Looking at our Freightos terminal, we can see that air and ocean freight price levels also showed a typical seasonal trend, but were also affected by the Red Sea crisis. On the left, our FBX indices show that ocean container shipping rates increased more than 150% from the close of 2023 to their peak in late January, but then gradually eased 57% from that January peak till the end of Q1, as demand pressure decreased and operations stabilized to a new normal as carriers adjusted their networks and schedules and sailing speeds to the new situation of circumventing africa However, since the new routine requires longer journeys and more vessels, absorbing significantly more capacity than normal, rates remained double their level compared to late December and 84% higher than in Q1 last year. On average, FBX was 58% higher than Q1 last year. This next chart shows that air cargo rates, to which our GBV is significantly more exposed, And it's tracked by our Freightless Air Index, FAX, which dipped during the Lunar New Year period, but ended the quarter 3% higher than at the end of Q4. This was driven by B2C e-commerce volumes from China and shifts from sea to air due to the Red Sea crisis. South Asia export rates increased 80% to North America and 125% to Europe, also contributing to the global rate level. On average, our FAX air cargo price index was 21% lower compared to Q1 last year. In closing, our progress this quarter reinforces our optimism and commitment to reshaping the freight industry through innovation. Our mission to streamline global logistics continues to drive us forwards and inspire our actions. Now let's turn to our CFO, Ran, who will discuss our Q1 results and outline our projections for the future.

Ran? Thank you, Tzvi.