Freightos Limited

Hello everyone, welcome to FREDOS Q1 2025 earnings content 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 slash investors. My name is Anati-Ron Heilborn and I am joined today by Dr. Tzvi Schreiber, the CEO of FREDOS and Pablo Pineos, 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 rather than dialing in by phone. The slides, as well as a recording of this earnings call, will 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 findings 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 known IFRS financial measures, in the press release on our website at freydos.com slash investors. The company undertakes no obligation to update any information discussed in this call at any time. Before we begin, I'd like to note our upcoming investor events. During tomorrow and Thursday, Freydos will participate virtually in the Siddhati Microcap Conference. In June, the company will participate in the Investor Summit and in August in the Oppenheimer Technology, Internet and Communications Conference, also virtually. Links to webcasts and other event updates can be found on our website. Today's earnings call will begin with an overview of Q1 performance by Zvi. Next, Pablo will present the financial results and the guidance for Q2 and full year 2025. We will conclude with Q&A. Questions can be submitted in writing during the call using the Q&A feature in Zoom. Zvi, please go ahead.

Good morning, everyone, and thank you for joining us to discuss Freitas' first quarter 2025 results. I'm pleased to report another quarter of strong performance with record revenues and a 21st consecutive quarter of record transactions. I believe this demonstrates again that we're making steady progress in the monumental task of digitalizing international shipping. Here are some highlights. In Q1, we facilitated over 370,000 transactions, representing a 25% increase from Q1 of last year. We added four new carriers to our platform this quarter, bringing the total number of carriers selling digitally on our platform to 71. Following quarter end, we launched a comprehensive Freightos Enterprise software as a service solution for enterprise importers and exporters. This Freightos Enterprise product integrates our acquisition of Shipster from last August into our software suite, creating new sales and cross-sell opportunities. Let's talk about market conditions. In air cargo, where Freightos has its strongest presence, global volumes were up 8% year-over-year, reflecting healthy underlying market conditions. Rates, as measured by our FAX index, were 6% lower compared to last year, which was when the Red Sea crisis began, pushing ocean cargo to air. Having said that, some of the strength in air cargo may have been short-term, front-loading ahead of expected tariffs. In ocean, China to US ocean volumes dropped significantly in the market during the few weeks when a 145% tariff applied on that lane. Our Bellwether FBX01 index, which has been elevated for a year and a half since the Red Sea crisis started, approximately half in March, almost down to $2,000 for shipping a 40% container Trans-Pacific. It's the first time in a while that we're seeing the rates more similar to the long-term average. With that data as backdrop, let me address current affairs, namely tariffs and trade policy developments. Strategically, we firmly believe that trade policy shifts won't fundamentally alter global trade or materially impact our opportunity to digitalize global freight. Supply chains simply don't reorganize overnight. These changes take years and trade will continue to flow, albeit sometimes through different routes. In the short term, the impact of rapidly changing tariffs on our business is mixed. On the positive side, market volatility and rapid changes actually increase the need for our marketplace and for our real-time data. However, we did see some headwinds when specific trade lanes were affected by high tariffs. For example, when China-US tariffs peaked at 145%, we experienced the dip in China-to-US transactions on our Freitas.com platform. and our clearance, customs clearance. Though I should note that this particular trade lane of China to US represents less than 2% of our total transactions. The good news is that in the last two weeks, we're seeing a possible stabilization in trade relations. The recent US-China agreement has postponed the most significant tariffs for at least 90 days, with China reducing the tariffs to 10% and the US reducing theirs to 30%. Initial market reaction has been positive and ocean freight volumes and rates are expected to hold up and normalize in coming months unless massive tariffs return later on. Besides general tariffs, one notable change which seems likely to stick is the cancellation of the US de minimis customs exemption for small imports. This exemption primarily benefited direct-to-consumer e-commerce vendors such as Shein and Temu, who were sending millions of small packages direct-to-consumer, mostly on charter airplanes. As such, it has no material impact on our business. In fact, we expect some capacity to re-enter the general air cargo spot market in Asia and become available on our platform. So this particular change may actually be positive for us. Overall, there's growing optimism, albeit no certainty, that we're on a path to more stable trade conditions. Looking ahead, we're well positioned to be a valuable resource for the industry during these dynamic times. With shifting trade patterns and the Suez Canal still largely out of commission, our platform becomes even more valuable when market conditions require rapid adaptation and real-time price visibility. With all of these factors in mind, we're pleased to reiterate our guidance for the year. Of course, we'll continue to monitor the evolving market conditions. The fundamental shift towards digital freight booking remains strong, and our relatively small share of global volumes today, in fact, the relatively small share of digital transactions, gives us a tremendous headway for growth of digitalization. Having addressed current affairs, let me now walk you through our progress across our key strategic areas. As a reminder, we organize our business around two revenue segments, platform and solutions. A third strategic focus area is network effects, which drive our sustainable competitive advantage and capital efficient growth. Let's start with our platform, which connects importers, exporters, freight forwarders, and carriers to our marketplace. Our transaction volume growth was strong in Q1, and the onboarding of four new carriers during the quarter further validates our platform's value proposition. Our airline network already represents carriers responsible for 70% of global capacity, although not all the carriers make all their capacity available yet. Our growth strategy focuses on expanding our platform across multiple dimensions, adding new types of transactions, enriching existing types with additional services, creating new buyer-seller combinations and leveraging our growing data asset. A great example of this strategy in action is an agreement we recently signed with a major North American ground transportation provider. This partnership will enable freight forwarders to book trucking services relevant to air cargo directly through our platform, spanning door to door, last mile airport to door first mile door to airport and airport to airport services when integrated with our air cargo bookings this creates a seamless connection between air and ground transportation making it significantly easier for freight forwarders or carriers to manage multi-modal shipments through a single interface We expect to announce more details about this partnership soon. This type of expansion reinforces our flywheel effect. As we add more value to each transaction, we attract more participants to the platform, which in turn increases liquidity and creates opportunities for new services. Moving to our solution segment, 2.1 saw several notable enterprise customer wins. For example, a global industrial conglomerate renewed their license for FreightOS terminal data at favorable terms that reflect the growing value they derive from our platform. We also signed a new five-year contract with a major European building materials manufacturer for our procurement solution, enabling them to streamline freight sourcing processes and optimize carrier selection. We continue to see progress in upselling existing customers across our growing suite of enterprise tools. For example, in Q2, a top five global pharmaceutical company that leverages Freighthouse Enterprise procurement and benchmarking solutions renewed and expanded their contract. Our data solutions actually achieved 100% customer retention in Q1, demonstrating the critical value our market intelligence provides to customers during a period of significant market volatility and uncertainty. We also see a growing market interest in index linking, which should increase opportunities for our data and related products. This momentum in our enterprise and data businesses sets the stage for our comprehensive FreightOS Enterprise Suite launch, which occurred shortly after quarter end. This new offering is designed to serve the complex needs of multinational shippers, bringing together our digital freight booking capabilities, rate management tools, and business intelligence, all in one unified platform. So enterprise shippers can now seamlessly manage their entire freight procurement and execution process in one product suite. Early feedback from pilot customers has been encouraging, as they experience significant efficiency gains from having their entire workflow digitalized in one place. The FreightOS Enterprise Suite also creates natural synergies with our platform business, as these multinational shippers often work with multiple logistics service providers already active on our marketplaces. Moving to network effects, we continue to see strong cohort performance from both buyers and sellers on our platform. Looking at buyer dynamics, unique buyer users grew 10% year over year to 19,700, demonstrating the continued appeal of our platform. In addition, transactions per user grew approximately 8% compared to the previous quarter. Our cohort data further reinforces this trend. Once freight forwarders stop using our platform, their booking volumes consistently grow over time with mature cohorts reaching over 500% of their initial transaction volumes. Similarly, on the carrier side, we're seeing strong adoption patterns with cohorts of carriers steadily increasing their activity on the platform. Our carrier network expanded to 71 carriers this quarter, including new specialized cargo operators that enhance our coverage. This virtuous cycle of growing engagement from both buyers and sellers continues to strengthen our competitive position and drive sustainable growth. To sum up, although Q1 is typically the seasonally weakest quarter, Q1 2025 demonstrated the continuous strength of our business model and the resilience of our digital transformation in global freight. We delivered record revenue, record transactions, expanded our carrier network, and broadened our product offering with the launch of FreightOS Enterprise Suite just after the quarter. While macro uncertainties around tariffs and trade policies may affect global trade volumes, the vast majority of international freight services are still booked offline, representing a huge growth opportunity for our digital platform. These operational achievements were reflected in our financial results. Let me hand over to Pablo Pindios, our CFO since March, to present these for the first time.

Thank you, SB. In my first quarter as CFO, I've had the opportunity to deep dive into our business model and operations, and I have been particularly impressed by the robust unit economics, the effectiveness of our go-to-market strategy, and the vast market potential of our platform. As digitalization becomes increasingly critical for efficient global trade, these strengths position us well for continued growth. I'm pleased to report that we met or exceed our guidance across key metrics this quarter, and we are well positioned to continue executing on our plans for the rest of 2025. We generated revenue of 6.9 million, representing 30% growth year-on-year. This growth was driven by platform revenue of 2.3 million, up 23% year-on-year, and solutions revenue of 4.6 million, up 33% year-on-year. We saw strong contributions from enterprise procurement solutions added through the acquisition of Shipsta, SAS Solutions, and customer clearance services. Our gross margin continued to improve. reaching 66.8% this quarter on an IFRS basis, up from 62.6% in Q1 last year, while our non-IFRS gross margin increases to 73.7% from 70.3% a year ago, demonstrating the scalability of our platform. Since I joined, I've made it a priority to continue the discipline cost management the company had displayed. all while investing in strategic growth initiatives. As a result, adjusted EBITDA improved to negative 3.0 million from negative 3.6 million in Q1 last year, reflecting our revenue growth, gross margin expansion, and continued operational efficiency gains as we scale. We remain on track to achieve break-even adjusted EBITDA by the end of 2026. We ended the quarter with $36.4 million in cash and cash equivalents, maintaining a strong balance sheet as we progressed towards our profitability goals. Looking ahead for the second quarter of 2025, we expect 380,000 to 385,000 transactions, representing growth of 20% to 22% year-on-year. and GBV of $278 to $285 million, up 37 to 40% year-on-year. Revenue is expected to reach $7.0 to $7.1 million, representing growth of 23 to 25% year-on-year, and adjusted EBITDA is expected to be a loss of $2.8 to $2.9 million. For the full year 2025, we are reiterating our previous guidance, While we recognize the evolving microenvironment, including recent trade policy change, potential freight rate volatility, and broader economic uncertainties, the resilience of our business model and our strong balance sheet position as well to navigate these dynamics while continuing to invest in growth opportunities. The fact that the vast majority of international freight is still being booked offline represents significant growth opportunities for our digital solutions, regardless of short-term trade policy fluctuations. With that, we will open the call to questions.