Hello, everyone, and welcome to Freightos Q3 2023 Earnings Conference Call. A press release with detailed financial results for Q3 2023 was released earlier today and is available at freightos.com/investors. My name is Anat Earon-Heilborn, VP of Investor Relations, and I'm joined today by Zvi Schreiber, the CEO of Freightos; and Ran Shalev, Freightos's CFO. Following the prepared remarks, we will open the call for questions. We are sharing slides during the call, so we recommend using Zoom instead of dialing in by phone. The slides as well as the recording of this call will be available on the Investor Relations section of 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 freightos.com/investors, and the Company undertakes no obligation to update any information discussed in this call at any time. As I mentioned, we recommend using Zoom's desktop or mobile application to submit questions during the course of the call. If you're using the Zoom client, questions can be submitted in writing during the call by using the Q&A feature in Zoom. Please note that our management will participate in the A.G.P. EV and Transportation Virtual Conference on December 5 and the Virtual Investor Summit on December 7. With that, let me hand over to Dr. Zvi Schreiber, the CEO of Freightos. Zvi, please go ahead.

Thank you, Anat, and thanks to everyone who joined. We're pleased to report solid results for Q3 with continued strong growth in the number of transactions, growth in revenue year on year, and a reduction in expenses as a result of the efficiency measures we took at the beginning of the quarter. We're pleased to show a modest increase in revenue even in a year where the industry is experiencing a strong cyclical downturn with most of our customers reporting revenue down by tens of percent. In our mission to digitalize the traditional international freight market, which is, as you know, a vast largely offline industry, our primary objective continues to be expanding the liquidity of our marketplace. As new sellers attract new buyers into the system and new buyers attract new sellers, the network effect reinforces our position as the leading booking and payment platform for international freight, leading with their cargo. As such, we continue to view the number of transactions across our platform as the key performance indicator that tracks our path towards success. We're very pleased to deliver the 15th consecutive quarter of record transactions. In Q3, transactions reached 269,000, up 40% year on year and more than 12% from Q2. This is the first time we exceeded a run rate of 1 million transactions per year, an exciting milestone. Transaction growth was once again driven by both increased usage by existing users and by the addition of new users to illustrate the increased usage by existing freight forwarders considered the cohort who first booked with us in Q3 2021. Two years later, in Q3 of this year, the same cohort is making nearly seven times more monthly bookings on average. This exceptional cohort retention and expansion rate is something we take great pride in, and it's the dynamic we plan to continue until we become a big, profitable company. Of course, we're adding new users too. We added approximately 870 unique buyer users during the third quarter, reaching approximately 17,300 individual users who placed bookings in Q3, and that reflects 16% year-on-year growth. These individual users work at thousands of freight forwarders and importers and exporters of different sizes. And as we just saw, we can expect those new users to place more and more bookings in coming quarters. To draw in new buyers and increase their platform activity, we're actively expanding the supply side by adding more carriers and enhancing the offerings of the existing carriers. In Q3, we added two new air cargo sellers, North Atlantic Airways; and also a new type of seller, aircraft charter company, Chapman Freeborn. North Atlantic Airways will open up real-time bookings on these flights to and from Europe to seven destinations in the US, and they already plan to expand their offering on the cargo by freighters later this year, opening up capacity to Barbados and Jamaica. Chapman Freeborn is an aircraft charter company that routinely organizes part charters, backloads, and other commercially innovative solutions for ad hoc peak season and project cargo. In making its capacity available on our WebCargo platform, the Company aims to gain deeper market penetration and enable its customers to benefit from faster, more flexible bookings. And for us, it moves us even further towards being a true one-stop shop for all air cargo capacity. Talking about being a one-stop shop, in addition to adding more buyers and more sellers, we're expanding our platform by adding new cargo products. For example, in Q3, we saw a nice increase in airlines who offer digital bookings for air cargo shipments of pharmaceutical products. Pharma products are more complex to bulk than general cargo. Now let me move on to discuss the market conditions. As you probably know, the freight industry is cyclical, and this year is definitely a down year for the industry. Let's take a look at ocean and air volumes first. The chart on the left shows that US ocean import volumes increased through Q3 during the typical ocean peak season as we approach the holiday months, and they were 5% higher than last year. However, volumes on major trade lanes like the Transpacific are still 9% lower than Q3 of last year. On the right side, IATA data for global air cargo volumes show that global demand increased gradually in Q3 growing 2% compared to Q2, but volumes are about flat compared to the same time in 2022 and still remain below 2019 levels. Moving on to air and ocean price levels, we can consult the indices that we ourselves publish on our own Freightos terminal. Starting with ocean, container shipping rates are tracked by our FPX indices. Rates did manage to climb about 20% in mid Q3 due to the peak season demand ahead of the shopping holidays, but this is actually a feeble peak season rally and rates remain well below rates a year ago. Rates fell sharply in September and into October, which has already passed the peak season for initiating ocean shipments. The market continues to be affected by growing overcapacity fueled by the delivery of new vessels, especially on the Transpacific and Asia-Europe lanes. The overcapacity problem is actually more acute on Asia-Europe lanes since the largest vessels are often deployed there because the ports in Europe can typically handle bigger ships. The pressure on rates due to overcapacity from the delivery of new ships looks set to continue into next year. The next chart shows the air cargo rates as tracked by our Freightos Air Index or FAX, and they're also soft. The increased capacity is not actually driven by the cargo business at the moment, but rather primarily by increased passenger travel. Q3 air cargo rates were mostly stable during the quarter and are still about 30% lower than last year. We did see the start of a rate rebound in late September, which reflects an uptick in volumes out of China, and that has continued through early November. Presumably, again, this is a short time increase in preparation for the holiday shopping season since air cargo is quicker and it peaks closer to the actual holidays. Regardless of the cyclical downturn, digitalization continues apace. In October, we were proud to host our third FreighTech Conference for industry executives from around the world. The conference explores the latest trends and innovations in the industry, and it was held in Barcelona, near our office. Among the participants were senior executives from a wide array of airlines, ocean liners, freight forwarders, tech platforms, trade journalists, and stock analysts. The topics that we all discussed include the pace of technology and innovation in the freight industry, macroeconomic trends, and supply chain efficiency. Many speakers discussed the need for digitalization and for platformification, leaving us more committed than ever to our mission to digitalize one of the largest offline industries in the world. Before I hand over to our CFO, Ran, I would like to take a moment to address the situation in the Middle East. Our hearts are with those who have suffered losses and are enduring hardship. While our employees in the region are fortunately all safe, the effects of the current events have inevitably led to some interruptions to people's daily lives. Despite these challenges, the resilience of our team is evident, and we have not seen a tangible impact on business results. We certainly appreciate the messages of support that our team has received from investors, customers, and our entire ecosystem, and we're all hoping for more peaceful times. With that, let me now hand over to our CFO, Ran, to discuss our Q3 results and Q4 guidance. Thanks.

Thanks, Zvi. Revenue for Q3 '23 was $5.1 million, up 9% compared to Q3 of '22 or 7% on a constant currency basis. Total platform revenues in the third quarter were $1.8 million, flat compared to last year, while solutions revenue was $3.3 million, up 14% from Q3 of last year. Profitability measures improved significantly with IFRS gross margin at 54.9%, the same as in Q3 of last year, but non-IFRS gross margins increased to 69.5% compared to 63.5% in Q3 of last year, up 600 basis points. Compared to Q2 of '23, non-IFRS gross margin was up 450 basis points. The factors that drove the increased margin in Q3 were the organization we implemented at the beginning of the quarter and other efficiencies. We believe these efficiencies are sustainable going forward and expect our non-IFRS gross margins to remain at around 68% to 70% in the coming quarters. Adjusted EBITDA in Q3 '23 was negative $4.1 million compared to a negative $3.4 million in Q3 of '22, primarily due to the cost of being a public company. On the other hand, the EBITDA of negative $4.1 million in Q3 compared to negative $5.3 million in Q2 of this year, the improvement of $1.2 million primarily reflects cost savings due to the reorganization done. We remain committed to navigating a balance between the need to grow while controlling costs. We reiterate our expectations to be able to reach breakeven with the existing cash at hand. Our cash balance at the end of September, including bank deposits and short-term investments, was a healthy $55.2 million compared to $61 million at the end of June. We're very pleased with our modest cash burn, which is very close to our adjusted EBITDA. As mentioned before, we are currently fully funded and believe we have the resources and business momentum required to become the international freight digital ecosystem leader we envision. Let's move to our Q4 '23 guidance. We believe we will grow transactions across our platform to between 273,000 and 284,000, reflecting a year-on-year growth rate of between 30% to 35%. Gross booking volume is expected to continue to grow less than the number of transactions due to industry freight rates. We expect Q4 '23 GBV range to be between $163.5 million and $175 million. We anticipate generating between $5.1 million and $5.3 million in revenues in Q4, representing a growth of between 4% and 10%. Adjusted EBITDA losses are expected to be between $4.7 million to $4.4 million.

Thank you, Ran. Zvi and Ran will now take your questions. Jason Helfstein, Oppenheimer.

Thanks. Good afternoon, everybody. Thoughts and best wishes with all your employees in Israel and all those affected.

Thanks, Jason.

Just a few questions, one, it obviously makes sense. Platform revenue highly ties to, I mean, particularly like pricing trends you're seeing. Maybe just for the audience, help us understand how solutions revenue tracks, how it ties back to macro factors, and how you're thinking about that, broader next year? That's question one. And then question two, sales and marketing, I think it's the highest levels of percent of gross bookings and revenue this year. How much of that is a function of the revenue? What are you doing to kind of lean into sales and marketing? How are you thinking about your ability to drive growth next year through your initiatives as opposed to just whatever the macro factors are? Thanks.

Thanks, Jason, it was great seeing you last week. Regarding solutions revenue, it's not directly linked to transactions as you inferred. It's based on subscriptions and the number of users. However, it's important to consider that a significant portion of our revenue comes from freight forwarders, who are currently experiencing substantial declines in revenue and profit, with some even facing losses. This makes it considerably more challenging to sell software to them. We managed to stabilize and even begin increasing our revenue during this difficult period for our customers. While there's not a direct link, there is a strong indirect connection to the overall economic environment. Ran, would you like to share your thoughts on sales and marketing costs?

Yes, I believe it's aligned with our original budget expectations. We are focusing on both revenue growth and transaction growth while hiring only as needed. We will only increase our workforce when we observe growth in both key performance indicators, and this approach will also apply in 2024. We do not expect an increase in sales and marketing expenses relative to revenues. Therefore, I anticipate continued growth in all areas.

So if can follow-up, can you comment on how you think solutions revenue would lay out next year relative to macro? And then just the housekeeping, G&A was up a lot sequentially. Were there any one-time items in G&A this quarter? Thanks.

Ran, you should take this, please.

Yes, when examining our solutions, which include tools for freight forwarders and data subscriptions for both forwarders and shippers, we are experiencing strong growth from both areas. We expect this momentum to persist. Recently, we launched the terminal and indexes, which have gained significant traction, and we anticipate our sales momentum will continue alongside our SaaS tools. The team is successfully increasing both the upsell of existing forwarder solutions and acquiring new customers consistently. Regarding G&A, in the past three months, there were no one-time special expenses. We focus on adjusted EBITDA, which accounts for one-time expenses like share-based compensation, depreciation, amortization, and reorganization costs. After adjusting for these, the EBITDA reflects improvement compared to the previous quarter and is expected to continue improving next year.

So probably what we're seeing in our reported results is the impact from higher stock comp on G&A probably?

In G&A, correct.

Yes. Okay, thank you.

Okay. Thanks, Jason. George Sutton, Craig-Hallum.

Zvi, real quick on passenger volumes, in air, you mentioned that there would be a fairly significant increase there. Help us understand the impact on price and the impact on transactions as you see it. Obviously, one other function that we heard pretty loud and clear at FreighTech was smaller shipper shipping sizes. Help us understand through the model how that works for you.

Hi, George. It was great to see you as well. Thanks for the event. The rise in passenger travel in air leads to greater capacity, but it does not affect transactions significantly. However, it does exert downward pressure on prices due to increased supply meeting the same demand. A significant portion of our booking and transactional revenue comes from flat transactions, which remain unaffected by price decreases, as they depend primarily on transaction volumes. When our earnings are tied to prices, we are indeed impacted by excess supply reducing those prices. Predicting next year is challenging given the turmoil we've experienced this year in the industry. We see some indications that conditions might be stabilizing. We anticipate prices will be low next year but hopefully stable. Therefore, we are planning based on the assumption that conditions will remain consistent, without anticipating a recovery or further rate reductions.

A couple of things that I think were key points at FreighTech, one was all of the discussion around AI and different use cases. Can you just give us a sense of how you expect AI to play out within your solution? And then also, just give us a sense on the One Stack project and what the timeframe looks like for that to come out.

Yes, George. AI is certainly a significant transformative technology across all industries, including ours. I'm not ready to share specifics about the features we're rolling out with AI, but I hope to make some announcements soon. We're actively engaged with the latest advancements in generative AI and other AI technologies, and we're starting to apply these effectively. I don’t anticipate any major dramatic changes for us or others. In our industry, AI is more of an incremental tool. We believe it will aid in innovating our products, but we don’t expect it to bring about major changes to our business in the near term. Regarding One Stack, our project is ongoing, and we have a history of making acquisitions. In the past, we acquired WebCargo and, more recently, 7LFreight. We have various software stacks due to these successful acquisitions, and we are now seriously focusing on merging these technologies. We have already established integrations so that the products can effectively communicate. We have initiated a process, referred to internally as One Stack, to merge these technologies into one cohesive platform over the next year or so.

One last thing, if I could. You had your first interline booking flight in the past quarter. Can you just give us a sense of the significance of that opportunity?

Interlining is quite important in the medium term. We are just starting to sign up our first airlines as buyers and sellers. Interlining is similar to codeshare for those who are familiar with it. We are initiating our first transactions in this area, so we are in the early stages. Even next year, the numbers will be small, but looking two or three years ahead, interlining holds two key significances. First, it presents incremental transactions and potential transactions with a higher take rate. Second, it enables us to create unique supply on our platform by combining airlines, which allows us to offer routes that other platforms do not have. This uniqueness is crucial for building a competitive advantage. We aim not just to be a one-stop shop for various airlines but also to create unique combinations and routes that no one else can provide.

Perfect. Thank you.

Okay, so we have a question from Greg Pendy from Chardan on the chat. He is asking, as usage from existing carriers has grown, can you provide color on where you believe the penetration rates are now with some of your largest airlines?

Thanks, Greg. Yes, we have to make a distinction between penetration of overall bookings and penetration of digital bookings because we're still dealing with an industry which is probably 97%, 98% offline in terms of air cargo. But our best customers, our best airline partners, we're probably in more than 50% of their digital bookings and perhaps order of magnitude, 10% to 15% of all of their bookings at this time. That's for our best partners, still many other airlines where we have none, where we have less. But some of our best partners, we're already a very significant channel for them, and we're the dominant digital channel for them.

Okay, great. And let's open the line for Michael Stern. Michael, you need to unmute.

Hi, yes. While there's growth in transaction volumes, as far as I can say, Freightos seems to earn the same approximate amount of about $20 per transaction, which doesn't seem a large amount. Do you see revenue per transaction growing? And if so, how and when? That's the first question. Second question is, can I have, I guess, a breakdown between profitability from air cargo versus profitability from shipping? And what is the expected growth in each current category? I know these are guesses, but your guess is a lot better than mine.

Yes, thanks, Michael. To address the first question, we anticipate that the take rate, whether in dollars or as a percentage per transaction, will increase over the long term. However, some factors will prevent this from being visible for some time, primarily due to the mix of transactions. This ties into your second question. While I can't provide a detailed answer regarding that, I can mention that airline bookings are relatively new for us, and our transaction volumes from these bookings are significantly lower. Nonetheless, this segment is growing at a faster pace. Revenue per transaction is indeed increasing across all our segments, but the mix results in the segment with the lowest revenue per transaction expanding more quickly, which might obscure the overall increase. You may notice that the dollars generated per transaction aren't rising, but in every segment, they are actually increasing. Due to the mix, this won't be apparent in the averages for a while, though it will be in the future. Regarding your second question, we do not provide a detailed breakdown of air versus ocean transactions. However, I can share that a significant portion of our transactions involves air cargo. We also make more revenue from some ocean and multi-modal door-to-door transactions through Freightos.com, which have been around longer and are better monetized. Unfortunately, we have opted not to disclose the precise breakdown due to competitive sensitivity, so I hope you can understand that.

Thanks, Michael.

Okay. We have no more questions, so thanks, everyone, for joining. Feel free to reach out to us at any time at [email protected]. Have a good day.