Freightos Limited

Hello, and welcome to Freightos Q3 2025 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, freightos.com. My name is Anati Ron Heilborn and I'm joined today by Dr. Tzvi Schreiber, the CEO of Freitas and Pablo Pineos, CFO. Following the prepared remarks, we'll open the call for questions. We are sharing slides during the call and using video, 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 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 fritos.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. In December, Freitas will participate in the AGP Electric Vehicle and Transportation Conference and in Sidoti's year-end investor conference. In February, the company will participate in the Oppenheimer Emerging Growth Conference. Links to webcasts, when applicable, and other event updates can be found on our website. Today's earnings call will begin with an overview of Q3 performance and overall progress by Zvi. Next, Pablo will present the financial results and the guidance for Q4 and full year 2025. We'll conclude with Q&A. Questions can be submitted in writing during the call by using the Q&A feature in Zoom. Zvi, please go ahead.

Thanks, Anat, and welcome everyone. Today I'll cover three topics. I'll start with the quarter's highlights and what they mean. Next, I'll discuss the product and network progress that will power our next phase of growth. Lastly, I'll share how the digital transformation of ocean carriers is creating a significant mid-term opportunity for Freightos, particularly as we expand our multimodal capabilities. First, let's start with the quarter. In Q3, we processed 429,000 transactions, up 27% year on year. It's our 23rd consecutive quarter of record transactions. Unique buyer users were about 20,600, and the number of carriers with more than five bookings from our platform during the quarter increased to 77. Most major airlines are already connected to our platform, so new airline additions are often regional or niche airlines at this point. We're focused on expanding airline coverage in Asia and expect further global expansion as smaller carriers look to leverage our digital channel. These metrics tell a consistent story. More buyers and more sellers are using Freightos more frequently, driving short-term revenue growth and long-term scalability of our business. This gives us both breadth and depth on the platform, more opportunities to monetize transactions and to deepen relationships with higher frequency users. Now, let's put this performance in context of the market. During Q3, air cargo volumes increased 4% compared to Q3 2024, reflecting growth in many markets, even as Trans-Pacific e-commerce volumes faced headwinds from tariffs and changes to US import regulations. According to our Freight of Air Index , average global air cargo rates decreased 6% compared to Q3 last year. The bigger picture in the freight market, given tariffs and macro uncertainty, is that of volatility and nervousness. Such conditions make speed, transparency and automation in logistics more important. When customers need to move faster and make decisions with less friction, they turn to digital platforms. This is helpful to our platform segment, but the market nervousness is unhelpful for selling solutions. Now let's discuss product and network progress. We're excited to highlight our strategic partnership with Visa and Transcard, announced by Visa a couple of weeks ago. This collaboration enables us to provide freight forwarders and importers and exporters with access to modern financing solutions through our platform. The partnership integrates Visa's global commercial solution expertise with Transcard's payment orchestration technology, creating a more efficient payment experience for our users. The fact that a global leader like Visa has chosen to partner with Freightos demonstrates the significant potential they see in the $600 billion international freight market and the role that we, Freightos, play in it. Next, we launched and commercially validated our new multimodal rate management and quoting SAS product, WebCargo rate and quote, Ocean. In Q3, we completed a rollout at our first multinational freight forwarder customer and proved that the workflow, quoting Air and Ocean, in one product works well in practice. Unifying air and ocean quoting allows freight forwarders to give a superior service to their customers, the importers and exporters. But the real transition towards digital booking happens when that workflow is supported by bookable carrier inventory. For Ocean, that bookable inventory depends on carriers digitalizing more meaningfully so we can connect them to our platform. I'll expand on that in a moment. A notable early adopter of this product, the new multimodal solution, is Nippon Express, a top five global freight forwarder. Nippon Express expanded its use of FreightOS this quarter, moving from air only usage to a multimodal deployment across much of its global network. This expansion increased their annual commitment to Freitas by multiples. Given that 90% of goods are transported by ocean, we expect to see many more upsells from air to ocean. Other successes in our solution segment this quarter included a number of renewals and targeted scope expansions. For example, we closed an upsell of our terminal's rate benchmarking capabilities to a global mining company, expanded procure tendering functionality with a top five pharma company, and extended our terminal data contract with a major electronics customer. That said, we had anticipated even stronger solutions revenue growth than the 30% year-on-year we delivered this quarter. As we mentioned earlier in the year, due to tariffs and the current macro environment, enterprise SaaS deals have had longer sales cycles. So in the meantime, we're strengthening commercial execution. Michael Netter recently joined Freightos as Chief Revenue Officer. Michael brings deep experience scaling digital logistics and enterprise sales, most recently as VP and Mayor at Promion and previously as SVP of Sales for Intermodal at Project 44 and other B2B companies. He has a proven track record of building commercial relationships across carriers, forwarders, and shippers, which will help us further scale multimodal adoption and our enterprise deployments. Michael will ensure Freitas has world-class sales and customer success capabilities with value-based selling to both enterprises and small and medium-sized businesses worldwide, optimizing our LTV to CAC ratio. Now, we talked about our updated software solution for quoting Ocean. But what about Ocean booking transactions on our platform? This, of course, requires Ocean carriers to make capacity pricing and booking available digitally through APIs. We discussed one Ocean carrier integration success on our last call. And in Q3, we made progress with two more integrations, which we expect to go live in the coming quarters. Each integration brings more capacity into our system in an automated form, helping forwarders better source and decide on shipping options in real time. We're now among the first platforms receiving rates from several major global ocean carriers. And our launch of a next generation ocean rate management solution is, of course, synergistic with our platform finally making progress integrating to ocean lines. With ocean representing approximately three times the GBV of air cargo, the potential is significant, but we do expect adoption to follow a measured pace as the conservative industry works through its transformation. We anticipate meaningful revenue contribution in the midterm, not in the immediate future, as this transition continues to unfold. Of course, platform growth is not limited to new carriers. Once a carrier is launched on FreightOS, we can continue to grow in different geographies. We can add more advanced services like expanding from general air cargo to temperature control services, expanding from spot bookings or one-offs to handling bookings against negotiated contracts. So, these are the operational and commercial priorities that drove our Q3 progress. Pablo will now walk through the financials and explain how these milestones translate into revenue, margin, and cash. Pablo.

Thank you, SV, and good morning, everyone. I will now go through how the quarter's operating progress translated to the P&L. cover cash and liquidity, and then walk through our near-term outlook and priorities. Revenue for the quarter was $7.7 million, up 24% year-over-year. Platform revenue was $2.6 million, up 15% year-on-year. And solutions revenue was $5.1 million, up 30% year-on-year. As Sv said, solutions and platforms support each other. The way solutions drive bookings is practical and proven. Our mission-critical SaaS solutions become embedded in a customer's day-to-day operations. Our customers centralize pricing and workflow on Freightos and makes it far easier for them to quote and then convert those quotes into bookings. Our data supports that dynamic. Forwarders that adopt our tool tend to grow transaction volume materially over time. Looking to our cohort data, we see three to four times growth in transactions volumes for cohorts over their initial two years using our platform. Put it simple, solutions creates the stickiness that enables more frequent platform bookings. Because we're still early in the industry's transition to platform model, solutions today represents the majority of our revenue. Over the long term, we target platform revenue to scale faster and ultimately outpace solutions revenue. Now let's take a closer look at platform revenue. You will notice that platform transaction volume and GBV are growing faster than our platform revenue. This is purely due to our business mix. Take rates are not going down in any segment. Our WebCargo platform, which connects freight forwarders with carriers, consistently grows at a faster rate than Freightos.com, which serves importers and exporters. WebCargo operates mainly on a fixed fee model with a lower implied take rate compared to Freightos.com higher take rate structure. As the faster growing web cargo continues to outpace freighters.com, the aggregate revenue platform naturally grows more slowly than transactions volume. Our carrier cohort analysis reinforced this. Carriers run quickly after integration, producing a strong booking growth, but much of that early volume is under relative low fixed fees. So it doesn't translate into proportional transaction revenue immediately. Gross margins were strong this quarter. On an IFRS basis, gross margin improved from 65% a year ago to 69.1% in Q3 this year. And our non-IFRS gross margin rose from 72.7% to 74.8%. That improvement reflects the inherent operating leverage in our model as we continue scaling. We are seeing benefits from our automation efforts in customer services, which allow us to handle more transactions without proportional increases in personnel or infrastructure cost. Looking ahead, restructuring our hosting agreements and infrastructure improvements represents our next significant opportunity to enhance margins. While we have made good progress optimizing our infrastructure costs, there is still more efficiencies to capture. Adjusted EBITDA improved to negative $2.6 million in Q3 2025 versus negative $2.8 million in Q3 last year. That improvement reflects revenue growth, a stronger gross margin, and disciplined cost management. Those operational gains were, however, but partially offset by continued currency impacts. A stronger Euro on cycle versus the US dollar reduced the gain in adjusted EBITDA compared to our operating performance. Our hedging program limited the impact on the cash. So the translation effect shows in the P&L more than in the cash balance. We closed the quarter with $30.6 million in cash and short-term bank deposits. a position that supports our continued measured investments in product and commercial execution while we scale the business to break even. Looking ahead, we remain focused on the levers that will narrow losses and drive durable profitability. The overall plan remains the same. Keep growing revenue and margins while keeping OPEX close to constant. Our new CRO is already a lesser focus on cost-efficient growth. With these concrete actions, we continue to plan to reach adjusted EBITDA breakeven in Q4 2026. For the fourth quarter of 2025, we anticipate continued year-on-year growth across transactions, GBV, and revenue. Adjusted EBITDA will likely continue to be impacted by foreign exchange headwinds. This means that for the full year, we now expect a more modest year-on-year improvement in adjusted EBITDA than what we have projected at the beginning of the year. Despite successfully reducing our total cost by almost 5% this quarter and 3% year-to-date compared to our budget in our constant currency basis, exchange rate fluctuations have created an unfavorable impact that has significantly reduced this cost savings. A secondary factor relates to our revenue composition. While we remain on track to meet our revenue guidance, despite a challenging year on the logistic industries, the mix between our revenue streams differs from our initial expectations. We are finishing the year with a slightly better performance of platform revenue relative to solutions revenue than what we had planned, which we attribute to the longer sales cycles as Vy has mentioned it earlier. Since solutions typically generate higher margins, this shifting mix has modestly impacted our overall profitability. Nevertheless, we are pleased that our cash spend remain on track throughout the year. We expect to end the year with cash and equivalents of approximately $27 million, reflecting on cash burn of about $10 million for 2025 compared with $15 million in 2024. We remain focused on the fundamentals, growing revenue while maintaining disciplined cost management and operational efficiency. Based on these fundamentals, we continue to expect reaching break-even, adjusted EBITDA by Q4 2026. Thank you for your attention. We are now open to questions.