Freightos Ltd 6-K, filed Sep 24, 2024
Freightos Ltd (CRGO)
About this 6-K
Freightos Ltd filed this 6-K on September 24, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2024
Commission File Number: 001-41604
(Translation of registrant’s name into English)
Planta 10, Avda. Diagonal, 211
Barcelona, Spain 08018
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
☒ Form 20-F | | ☐ Form 40-F |
FREIGHTOS LIMITED
FORM 6-K
CONTENTS
This Report of Foreign Private Issuer on Form 6-K consists of Freightos Limited’s (the “Company”): (i) Interim Unaudited Consolidated Financial Statements as of June 30, 2024, which are attached hereto as Exhibit 99.1; and (ii) Operating and Financial Review and Prospects for the six months ended June 30, 2024, which is attached hereto as Exhibit 99.2.
Exhibit No. |
| Description |
99.1 | | Interim Unaudited Consolidated Financial Statements as of June 30, 2024. |
99.2 | | Operating and Financial Review and Prospects for the six months ended June 30, 2024 |
101.INS | | Inline XBRL Instance Document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
104 | | Cover Page Interactive Data File formatted as Inline XBRL and contained in Exhibit 101 |
Incorporation by Reference
The information contained in Exhibits 99.1 and 99.2 hereto is hereby incorporated by reference into the Company’s registration statements on Form S-8 (File No. 333-270303) and Form F-3 (File No. 333-280302), to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FREIGHTOS LIMITED | |
Date: September 24, 2024 |
| |
| /s/ Michael Oberlander | |
| Name: | Michael Oberlander |
| Title: | General Counsel |
Exhibit 99.1
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
IN U.S. DOLLARS
INDEX
| Page |
2 | |
Interim Consolidated Statements of Profit or Loss and Other Comprehensive Loss | 3 |
4 | |
5 - 6 | |
7 - 18 |
- - - - - - - - - - - - -
1
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands
| | June 30, | | December 31, | ||
| | 2024 | | 2023 | ||
|
| (unaudited) |
| (audited) | ||
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
User funds | | | | | | |
Trade receivables, net | | | | | | |
Short-term bank deposit | | | | | | |
Short-term investments | | | — | | | |
Other receivables and prepaid expenses | | | | | | |
| | | | | | |
NON-CURRENT ASSETS: | | | | | | |
Property and equipment, net | | | | | | |
Right-of-use assets, net | | | | | | |
Intangible assets, net | | | | | | |
Goodwill | | | | | | |
Deferred taxes | | | | | | |
Other long-term assets | | | | | | |
| | | | | | |
Total assets | | $ | | | $ | |
LIABILITIES AND EQUITY | | | | | | |
CURRENT LIABILITIES: | | | | | | |
Current maturity of lease liabilities | | $ | | | $ | |
Trade payables | | | | | | |
User accounts | | | | | | |
Warrants liability | | | | | | |
Accrued expenses and other payables | | | | | | |
| | | | | | |
LONG TERM LIABILITIES: | | | | | | |
Lease liabilities | | | | | | |
Employee benefit liabilities, net | | | | | | |
Other long-term liabilities | | | — | | | |
| | | | | | |
EQUITY: (Note 4) | | | | | | |
Share capital | | | | | ||
Share premium | | | | | | |
Reserve from remeasurement of defined benefit plans | | | | | | |
Accumulated deficit | | | ( | | | ( |
Total equity | | | | | | |
Total liabilities and equity | | $ | | | $ | |
(*) |
The accompanying notes are an integral part of the interim consolidated financial statements.
2
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS
U.S. dollars in thousands, except share and per share data
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
|
| 2024 |
| 2023 | ||
| | (unaudited) | | (unaudited) | ||
Revenue | | $ | | | $ | |
Cost of revenue |
| | | | | |
Gross profit |
| | | | | |
Operating expenses: | | | | | | |
Research and development |
| | | | | |
Selling and marketing |
| | | | | |
General and administrative |
| | | | | |
Share listing expense (Note 1d) |
| | — | | | |
Transaction-related costs (Note 1d) | | | — | | | |
Total operating expenses |
| | | | | |
Operating loss |
| | ( | | | ( |
Change in fair value of warrants | | | ( | | | |
Finance income |
| | | | | |
Finance expenses |
| | ( | | | ( |
Financing income, net |
| | | | | |
Loss before income taxes |
| | ( | | | ( |
Income taxes (tax benefit), net |
| | ( | | | |
Loss | | $ | ( | | $ | ( |
Other comprehensive income (loss) (net of tax effect): | | | | | | |
Total components that will not be reclassified subsequently to profit or loss |
| | — | | | — |
Total comprehensive loss |
| $ | ( | | $ | ( |
Basic and diluted loss per Ordinary share (Note 8) | | $ | ( | | $ | ( |
Weighted average number of shares outstanding used to compute basic and diluted loss per share |
| | | | | |
The accompanying notes are an integral part of the interim consolidated financial statements.
3
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
U.S. dollars in thousands
|
| | |
| | |
| Reserve from |
| | |
| | | |
| | | | | | | | re-measurement | | | | | |
| |
| | Share | | Share | | of defined | | Accumulated | | |
| ||||
| | capital | | premium | | benefit plan | | deficit | | Total | |||||
Balance as of December 31, 2023 (audited) | | $ | | $ | | | $ | | | $ | ( | | $ | | |
Total comprehensive loss | | | — | | | — | | | — | | | ( | | | ( |
Issuance of Ordinary shares (see note 4c) | | | | | | | | — | | | — | | | | |
Exercise of options | | | | | | | | — | | | — | | | | |
Share-based compensation | | | — | | | | | | — | | | — | | | |
Balance as of June 30, 2024 (unaudited) | | $ | | $ | | | $ | | | $ | ( | | $ | | |
|
| | |
| | |
| Reserve from |
| | |
| | | |
| | | | | | | | re-measurement | | | | | |
| |
| | Share | | Share | | of defined | | Accumulated | | |
| ||||
| | capital | | premium | | benefit plan | | deficit | | Total | |||||
Balance as of December 31, 2022 (audited) | | $ | | $ | | | $ | | | $ | ( | | $ | | |
Total comprehensive loss | | | — | | | — | | | — | | | ( | | | ( |
Issuance of Ordinary shares | | | | | | | | — | | | — | | | | |
Issuance of Ordinary shares, net in connection with the closing of the BCA (see Note 1d) | | | | | | | | — | | | — | | | | |
Exercise of options | | | | | | | | — | | | — | | | | |
Share-based compensation | | | | | | | | — | | | — | | | | |
Share listing expense | | | — | | | | | | — | | | — | | | |
Balance as of June 30, 2023 (unaudited) | | $ | | $ | | | $ | | | $ | ( | | $ | | |
(*)
The accompanying notes are an integral part of the interim consolidated financial statements.
4
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2024 | | 2023 | ||
|
| (unaudited) |
| (unaudited) | ||
Cash flows from operating activities: | | | | | | |
Loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Adjustments to profit or loss items: | | | | | | |
Depreciation and amortization | | | | | | |
Share listing expense | | | — | | | |
Change in fair value of warrants | | | | | | ( |
Changes in the fair value of contingent consideration | | | ( | | | ( |
Share-based compensation | | | | | | |
Operating expense settled by issuance of shares | | | | | | — |
Finance income, net | | | ( | | | ( |
Taxes on income (tax benefit) | | | ( | | | |
| | | | | | |
Changes in asset and liability items: | | | | | | |
Increase in user funds | | | ( | | | ( |
Increase in user accounts | | | | | | |
Increase in other receivables and prepaid expenses | | | ( | | | ( |
Increase in trade receivables | | | ( | | | ( |
Increase in trade payables | | | | | | |
Increase (decrease) in accrued severance pay, net | | | | | | ( |
Increase (decrease) in accrued expenses and other payables | | | | | | ( |
| | | | | | ( |
Cash paid and received during the period for: | | | | | | |
Interest received, net | | | | | | |
Taxes paid, net | | | ( | | | ( |
| | | | | | |
Net cash used in operating activities | | | ( | | | ( |
Cash flows from investing activities: | | | | | | |
Purchase of property and equipment | | | ( | | | ( |
Proceeds from sale of property and equipment | | | | | | |
Payment of payables for previous acquisition of a subsidiary | | | — | | | ( |
Investment in long-term deposits | | | ( | | | ( |
Withdrawal of a deposit | | | | | | — |
Withdrawal of (investment in) short-term investments, net | | | | | | ( |
Investment in short-term bank deposit | | | ( | | | ( |
Net cash provided by (used in) investing activities | | $ | | | $ | ( |
5
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
U.S. dollars in thousands
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2024 | | 2023 | ||
|
| (unaudited) | | (unaudited) | ||
Cash flows from financing activities: | | | | | | |
Proceeds from the issuance of share capital and warrants net of transaction costs | | $ | — | | $ | |
Repayment of lease liabilities | | | ( | | | ( |
Repayment of short-term bank loan and credit | | | — | | | ( |
Exercise of options | | | | | | |
Net cash provided by (used in) financing activities | | | ( | | | |
Exchange differences on balances of cash and cash equivalents | | | ( | | | ( |
Increase in cash and cash equivalents | | | | |
| |
Cash and cash equivalents at the beginning of the period | | | | |
| |
Cash and cash equivalents at the end of the period | | $ | | | $ | |
(a) Significant non-cash transactions: | |
|
| |
|
|
Right-of-use asset recognized with corresponding lease liability | | $ | — | | $ | |
Issuance of shares for previous acquisition of a subsidiary | | $ | — | | $ | |
Receivables on account of exercise of options | | $ | | | $ | — |
The accompanying notes are an integral part of the interim consolidated financial statements.
6
NOTE 1: — GENERAL
| a. | Freightos Limited (the “Company” or “Freightos Cayman”, and together with its subsidiaries — “Freightos” or the “Group”) was incorporated on April 12, 2022 under the laws of the Cayman Islands. The Company is an exempted company limited by shares. |
On May 27, 2022, Freightos Hong Kong Limited (formerly: Freightos Limited) (“Freightos-HK”), a Hong-Kong entity, completed a series of share swap transactions with its shareholders by which the shareholders of Freightos-HK exchanged their shares in Freightos-HK for an equivalent number and class of shares of the newly-created Freightos Cayman (the “Group Restructuring”). As of that date, Freightos-HK became a wholly-owned subsidiary of the Company. On September 30, 2022 Freightos-HK distributed the shares of several of its subsidiaries to the Company. Prior to that, in August 2022, as part of the distribution of shares of its subsidiaries, Freightos-HK increased its retained earnings by reducing its share premium for the same amount.
Freightos-HK has filed for, and obtained, a ruling from the Israel Tax Authority (the “ITA”) to confirm there is no current tax event for its Israeli shareholders arising out of these restructuring transactions. The ruling provides the Company, Freightos-HK and their subsidiaries certain tax benefits regarding the exchange of shares and distribution of the shares of Group’s subsidiaries, and includes a condition pursuant to which the Company registered for tax purposes in Israel.
| b. | Freightos operates a leading, vendor-neutral booking and payment platform for international freight. Freightos’ Platform supports supply chain efficiency and agility by enabling real-time procurement of ocean and air shipping across more than importers/exporters, thousands of forwarders, and dozens of airlines and ocean carriers. |
Freightos operates its business through
| c. | The Group has the following subsidiaries as of June 30, 2024: |
Freightos-HK, a wholly-owned subsidiary of the Company following the Group Restructuring (see Note 1a), was incorporated in Hong-Kong on January 10, 2012. Through September 30, 2022 Freightos-HK served as the holding company of the rest of the group entities and on that date distributed the shares of several of its subsidiaries to the Company. Freightos-HK is principally engaged in the provision of business interface and fronting services to its Israeli affiliate.
Freightos Ltd, a wholly-owned subsidiary of the Company (directly and indirectly through Freightos-HK) was incorporated in Israel on August 8, 2012 and started its operation on that date (the “Israeli subsidiary”). Currently, the Israeli subsidiary owns the technology and intellectual property of the Group.
Freightos Software Development and Data Services Ltd., a wholly-owned subsidiary of the Company (whose shares are partially held in trust for the Company), was registered on January 18, 2012 in Ramallah, within the Palestinian Authority (the “Palestinian subsidiary”). The Palestinian subsidiary’s main activity is the development of certain software and know-how related to the Group’s offering of software and services, and customer and technical support.
7
NOTE 1: — GENERAL (Cont.)
Freightos Inc., a wholly-owned subsidiary of the Company, was incorporated in Delaware in the United States on May 28, 2015 (the “US subsidiary”). The US subsidiary is engaged in rendering billing services and holds the membership interests of 9T Technologies, LLC and the shares of Clearit Customs Services, Inc. (see below).
Web Cargo, S.L.U., a wholly-owned Spanish subsidiary of the Company, was acquired in August 2016 (“WebCargo”). WebCargo is a software company that seeks to provide a competitive edge to air freight forwarders by optimizing rate management tasks. Currently, WebCargo operates as a low-risk distributor for certain of the Group’s products and services, as well as a contracted research and development service provider for the Israeli subsidiary.
Freightos Information Technology (Shanghai) Co., Ltd., a wholly-owned subsidiary of Freightos-HK, was established on January 17, 2018, in the People’s Republic of China (the “China subsidiary”). The China subsidiary engages in providing certain customer and technical support services to the Group.
Freightos India Private Limited, a wholly-owned subsidiary of Freightos-HK, was established on March 13, 2019, in India, to act as a low-risk distributor of certain of the Group’s products and services in India.
9T Technologies LLC. (“7LFreight”), a wholly-owned subsidiary of the US subsidiary, organized in the US, was acquired through a business combination closed on December 30, 2021. 7LFreight is a software company that seeks to provide a competitive edge to air freight forwarders by optimizing rate management tasks.
Clearit Customs Brokers Inc. (formerly: 13096351 Canada Inc.) (“Clearit-CA”), a wholly-owned subsidiary of the Company, was established in June 2021 in Canada to acquire certain assets as part of a business combination completed on February 16, 2022 . Clearit-CA is engaged in the business of providing online customs clearance and brokerage services in Canada.
Clearit Customs Services, Inc. (“Clearit-US”), a wholly-owned subsidiary of the US subsidiary, incorporated in the US, was acquired through a business combination completed on February 16, 2022. Clearit-US is engaged in the business of providing online customs clearance and brokerage services in the US.
| d. | Business Combination Agreement |
On May 31, 2022, the Company entered into a business combination agreement (the “BCA”) with Gesher I Acquisition Corp., a Cayman Islands exempted company limited by shares (“Gesher”), Freightos Merger Sub I, a Cayman Islands exempted company limited by shares and a direct, wholly-owned subsidiary of the Company (“Merger Sub I”), and Freightos Merger Sub II, a Cayman Islands exempted company limited by shares and a direct, wholly-owned subsidiary of Freightos (“Merger Sub II”). The BCA was closed on January 25, 2023 (the “Closing Date”).
Pursuant to the BCA, on the Closing Date Merger Sub I merged with and into Gesher, with Gesher being the surviving entity. Then, Gesher merged with and into Merger Sub II with Merger Sub II surviving as a wholly-owned subsidiary of Freightos (collectively, the “Transactions”). Upon consummation of the Transactions, Freightos became a publicly traded company listed on the Nasdaq Capital Market under the symbols “CRGO” and “CRGOW” and the former equity holders of Gesher became equity holders of Freightos.
On the Closing Date, in connection with the closing of the Transactions Freightos also consummated private placements contemplated by a forward purchase agreement and a backstop agreement, each assigned from Gesher to the Company. Pursuant to these agreements a Forward Purchaser, as defined in the forward purchase agreement, purchased
8
NOTE 1: — GENERAL (Cont.)
On the Closing Date, in connection with the closing of the Transactions the Company and its shareholders recapitalized the Company’s equity securities whereby each share of the Company’s Preferred shares was converted into
The Transactions were accounted for as a reverse recapitalization, in accordance with the relevant International Financial Reporting Standards (“IFRS”) and the Group was deemed to be the accounting acquirer. Gesher did not meet the definition of a business in accordance with IFRS 3 - “Business Combinations”, and the Transactions were instead accounted for within the scope of IFRS 2 - “Share based payment” (“IFRS 2”), as a share-based payment transaction in exchange for a public listing service. In accordance with IFRS 2 the Company recorded a one-time share-based Share listing expense of $
|
| |
| Number of |
| | Amount | | Shares |
Shares issued to Gesher shareholders |
|
|
| |
Opening price of the Company’s share on Nasdaq as of January 25, 2023 ($) |
| |
|
|
(A) Fair value of the Company’s shares issued to Gesher shareholders |
| |
|
|
Warrants issued to Gesher shareholders |
|
|
| |
Opening price of the Company’s warrants on Nasdaq as of January 25, 2023 ($) |
| |
|
|
(B) Fair value of the Company’s warrants issued to Gesher shareholders |
| |
|
|
| | | | |
Gesher’s cash in trust |
| |
|
|
Gesher’s liabilities |
| ( |
|
|
| | | | |
(C) Net assets of Gesher |
| |
|
|
| | | | |
IFRS 2 Listing expenses (A+B-C) |
| |
|
|
| e. | These interim consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. As of June 30, 2024, the Company had an accumulated deficit of $ |
9
NOTE 2: — SIGNIFICANT ACCOUNTING POLICIES
a. | Basis of presentation of the financial statements: |
The unaudited interim consolidated financial statements have been prepared using accounting policies consistent with IFRS and in accordance with International Accounting Standard (“IAS”) 34 - “Interim Financial Reporting”.
The Company’s unaudited interim consolidated financial statements as of June 30, 2024 and for the six months then ended (“interim financial statements”) should be read in conjunction with the audited consolidated financial statements of the Company as of December 31, 2023 and for the year then ended which have been prepared in accordance with IFRS.
b. | Significant accounting policies: |
The significant accounting policies, presentation and methods of computation adopted in the preparation of these interim financial statements are consistent with those followed in the preparation of the Company’s consolidated audited financial statements for the year ended December 31, 2023, except as set forth below.
c. | Initial application of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards: |
1). | Amendment to IAS 1, “Presentation of Financial Statements”: |
In January 2020, the International Accounting Standards Board (“IASB”) issued an amendment to IAS 1, “Presentation of Financial Statements” regarding the criteria for determining the classification of liabilities as current or non-current (“the Original Amendment”). In October 2022, the IASB issued a subsequent amendment (“the Subsequent Amendment”).
According to the Subsequent Amendment:
| ● | Only financial covenants with which an entity must comply on or before the reporting date will affect a liability’s classification as current or non-current. |
| ● | In respect of a liability for which compliance with financial covenants is to be evaluated within twelve months from the reporting date, disclosure is required to enable users of the financial statements to assess the risks related to that liability. The Subsequent Amendment requires disclosure of the carrying amount of the liability, information about the financial covenants, and the facts and circumstances at the end of the reporting period that could result in the conclusion that the entity may have difficulty in complying with the financial covenants. |
According to the Original Amendment, the conversion option of a liability affects the classification of the entire liability as current or non-current unless the conversion component is an equity instrument.
The Original Amendment and Subsequent Amendment are both effective for annual periods beginning on or after January 1, 2024 and must be applied retrospectively. The Amendments did not have a material impact on the Company’s consolidated financial statements, other than for the Warrants liability which the Company classified as a current liability beginning on January 1, 2024 with a retrospective effect.
2). | Amendments to IFRS 9, “Financial Instruments”, and IFRS 7, “Financial Instruments: Disclosures”: |
In May 2024, the IASB issued “Amendments to the Classification and Measurement of Financial Instruments - Amendments to IFRS 9 and IFRS 7” (“the Amendments”). The Amendments clarify certain aspects of the classification and measurement of financial instruments.
10
NOTE 2: — SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Amendments address the following:
| ● | Derecognition of a financial liability settled through an electronic transfer system - an entity is permitted to make an accounting policy election to derecognize a financial liability (or part of it) that is settled in cash using an electronic payment system before the settlement date if certain conditions are met. An entity that makes this accounting policy election is required to apply it to all financial liabilities settled using the same electronic payment system. |
| ● | Assessing contractual cash flow characteristics for the classification of financial assets - the Amendments clarify how to assess the characteristics of contractual cash flows of financial assets with features linked to environmental, social and corporate governance (ESG) targets and other similar contingent features. The Amendments also enhance the description of the term ‘non-recourse’ and clarify the characteristics of contractually linked instruments (CLIs). |
| ● | Disclosures – the Amendments to IFRS 7 introduce new disclosure requirements for financial assets and liabilities with contractual terms that include contingent features (including ESG-related) and new disclosures for investments in equity instruments measured at fair value through other comprehensive income (FVTOCI). |
The Amendments are to be applied retrospectively commencing from annual reporting periods beginning on or after January 1, 2026. Earlier application is permitted subject to disclosure. An entity is permitted to early adopt only the Amendments that relate to the classification of financial assets and the related disclosures. An entity is not required to restate prior periods, but may do so if, and only if, it is possible to do so without the use of hindsight.
The Amendments are not expected to have a material effect on the Company’s interim consolidated financial statements.
NOTE 3: — FAIR VALUE MEASUREMENT
The carrying amounts of cash and cash equivalents, user funds, trade receivables, short-term bank deposit, short-term investments, other receivables, trade payables, user accounts and other payables approximate their fair values due to the short-term maturities of such instruments.
The fair value of the contingent payments recorded as part of the acquisition of the Clearit business closed in February 2022, was estimated using a valuation method based mainly on the current fair value as well as on certain other management estimations of the probability of meeting certain performance indicators.
The fair value of the Warrants liability was valued using the market price of the instrument, which is listed on the Nasdaq Capital Market under the symbol CRGOW.
The following table presents the fair value measurement hierarchy for the Group’s financial instruments assets and liabilities carried at fair value:
| | Fair value hierarchy (unaudited) | ||||||||||
As of June 30, 2024: |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets measured at fair value: |
| |
|
| |
|
| |
|
| |
|
Other current receivables - hedge instrument | | $ | — | | $ | | | $ | — | | $ | |
Liabilities measured at fair value: | |
| | |
| | |
|
| |
|
|
Other current liabilities - hedge instruments | |
| — | |
| ( | |
| — | |
| ( |
Warrants liability | | $ | ( | | $ | — | | $ | — | | $ | ( |
11
NOTE 3: — FAIR VALUE MEASUREMENT (Cont.)
| | Fair value hierarchy (audited) | ||||||||||
As of December 31, 2023: |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets measured at fair value: |
| |
|
| |
|
| |
|
| |
|
Other current receivables - hedge instrument | | $ | | | $ | — | | $ | — | | $ | |
Liabilities measured at fair value: | |
|
| |
|
| |
|
| |
|
|
Other current liabilities - hedge instruments | | | ( | | | — | | | — | | | ( |
Other long-term liabilities – contingent payments for business combinations | | $ | — | | $ | — | | $ | ( | | $ | ( |
Warrants liability | | $ | ( | | $ | — | | $ | — | | $ | ( |
There were no transfers from Level 1 to Level 2 during the reporting periods.
The changes in Level 3 in the period of six months ended June 30, 2024 were as follows:
|
| | |
| | Other long- | |
|
| term liabilities | |
| | | |
Fair value as of December 31, 2023 | | $ | |
Change in fair value | |
| ( |
| | | |
| | $ | — |
NOTE 4: — EQUITY
| a. | Composition of share capital: |
| |
| |
| |
| | |
| | | | Issued and | | | | Issued and |
| | Authorized | | outstanding | | Authorized | | outstanding |
| | June 30, 2024 | | December 31, 2023 | ||||
| | (unaudited) | | (audited) | ||||
Ordinary shares of $ |
| |
| |
| |
| |
Preferred shares of $ |
| |
| — |
| |
| — |
| b. | Movement in issued and outstanding share capital: |
| Number of shares | |
Balance as of January 1, 2024 | | |
Issuance of Ordinary shares | | |
Vested RSU’s | | |
Exercise of options into Ordinary shares | | |
Balance as of June 30, 2024 | | |
12
NOTE 4: — EQUITY (Cont.)
| c. | Issuance of Ordinary shares in the period of six months ended on June 30, 2024: |
In January 2024 and in May 2024 the Company issued
| d. | Rights attached to shares: |
The holders of Ordinary shares are entitled to receive dividends only when, as and if declared by the Board of Directors and are entitled to
| e. | Capital management: |
Capital comprises share capital and reserves as stated in the statement of financial position. The Company’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for the shareholders.
NOTE 5: — SHARE-BASED PAYMENT
In May 2022 as part of the Group Restructuring, the Company established the Freightos 2022 Long-term Incentive Plan (the “2022 Plan”), which is intended to be a successor to the Company’s 2012 Global Incentive Option Scheme (the “2012 Plan”), such that no additional stock awards will be granted under the 2012 Plan. Any shares that otherwise remained available for future grants under the 2012 Plan ceased to be available under the 2012 Plan and will not be available for grants under the 2022 Plan. In addition, Freightos-HK assigned to the Company all rights, obligations and liabilities under the 2012 Plan and all options to purchase Freightos-HK Ordinary shares that were granted under the 2012 Plan, whether vested or unvested, have been converted into and became options to purchase an identical number of Ordinary shares of the Company under the 2022 Plan.
The fair value of share options, granted in the periods of six months ended June 30, 2024 and 2023, was estimated using the Black- Scholes option pricing model with the following assumptions:
| | For the period of | | ||
| | six months ended | | ||
| | June 30, | | ||
| | 2024 | | 2023 | |
|
| (unaudited) |
| (unaudited) |
|
Weighted average expected term (years) | | | | ||
Interest rate | | | % | % | |
Volatility | | % | % | ||
Dividend yield | | | % | | % |
The expected life of the share options is based on the midpoints between the available exercise dates (the end of the vesting periods) and the last available exercise date (the contracted expiry date), as adequate historical experience is still not available to provide a reasonable estimate.
13
NOTE 5: — SHARE-BASED PAYMENT (Cont.)
The share-based compensation expense was recorded in the statement of profit or loss and other comprehensive loss as follows:
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2024 | | 2023 | ||
|
| (unaudited) |
| (unaudited) | ||
Cost of revenue | | $ | | | $ | |
Research and development | | | | | | |
Selling and marketing | | | | | | |
General and administrative | | | | | | |
| | $ | | | $ | |
The changes in outstanding share options were as follows:
| | For the period of six months | ||||||
| | ended June 30, | ||||||
| | 2024 (unaudited) | | 2023 (unaudited) | ||||
| | | | Weighted | | | | Weighted |
| | Number | | average | | Number | | average |
|
| of options |
| exercise price |
| of options |
| exercise price |
| | | | $ | | | | $ |
Options at beginning of the period | | | | | | | | |
Granted | | | | | | | | |
Exercised | | ( | | | | ( | | |
Forfeited | | ( | | | | ( | | |
Options outstanding at end of the period | | | | | | | | |
Options exercisable at end of the period | | | | | | | | |
Based on the above inputs, the weighted average fair value of the options granted in the periods of six months ended June 30, 2024 and 2023, was determined at $
The weighted average remaining contractual life for the share options outstanding as of June 30, 2024 was
The range of exercise prices for share options outstanding as of June 30, 2024 was $
There were
| | | | Weighted- |
| | Number | | average fair |
|
| of Units | | value |
Balance at January 1, 2024 | | | | |
Granted | | | | |
Vested | | ( | | |
Cancelled | | ( | | |
Units outstanding at June 30, 2024 | | | | |
As of June 30, 2024 there was $
14
NOTE 6: — COMMITMENTS AND CONTINGENT LIABILITIES
As of June 30, 2024 the Company issued
Certain long-term investments in the amount of $
NOTE 7: — OPERATING SEGMENTS
| a. | General: |
The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated and assess their performance. Accordingly, for management purposes, the Group is organized into
| 1. | Solutions segment. Freightos provides software tools and data to help the freight industry participants automate their pricing, sales, and procurement processes. Revenue includes recurring subscriptions for SaaS or data and certain non-recurring revenue from professional services that enable a user to implement and use the SaaS solution. |
| 2. | Platform segment. Freightos provides digitized price quoting, booking and payments while considering actual capacity among global freight participants (the users). The transactional platforms enable freight forwarding companies to procure capacity from carriers, and enable importers and exporters to procure services from freight forwarders, or occasionally, directly from carriers. Revenue is transactional type fees generated from specific freight-service transactions booked between buyers and sellers on Freightos’ Platform. |
Each segment’s performance is determined based on operating loss reported in the financial statements. The results of a segment reported to the CODM include items attributed directly to a segment, as well as other items, which are indirectly attributed using reasonable assumptions and exclude share-based compensation charges as they are not considered in the internal operating plans and measurement of the segment’s financial performance.
| b. | The following table presents revenue and operating loss per segment: |
|
| Solutions |
| Platform |
| Unallocated |
| Total | ||||
For the period of six months ended June 30, 2024 (unaudited) | | | | | | | | | | | | |
Subscriptions | | $ | | | $ | — | | $ | — | | $ | |
SaaS-related professional services | | | | | | — | | | — | | | |
Transactional Platforms fees | | | — | | | | | | — | | | |
Total revenue | | | | | | | | | — | | | |
| | | | | | | | | | | | |
Operating loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | |
For the period of six months ended June 30, 2023 (unaudited) |
| | |
| | |
| | |
| | |
Subscriptions |
| $ | | | $ | — | | $ | — | | $ | |
SaaS-related professional services |
|
| | |
| — | |
| — | |
| |
Transactional Platforms fees |
|
| — | |
| | |
| — | |
| |
Total revenue |
|
| | |
| | |
| — | |
| |
| | | | | | | | | | | | |
Operating income (loss) |
| $ | | | $ | ( | | $ | ( | | $ | ( |
Unallocated includes corporate expenses and share-based compensation.
15
NOTE 7: — OPERATING SEGMENTS (Cont.)
For the periods of six months ended June 30, 2024 and 2023, no single Solutions customer or Platform user accounted for 10% or more of the Company’s consolidated income.
c. | The Company’s geographic information on revenue is as follows: |
|
| Solutions |
| Platform |
| Total | |||
For the period of six months ended June 30, 2024 (unaudited) |
| | |
| |
|
| |
|
Europe |
| $ | | | $ | — | | $ | |
Hong Kong |
|
| | |
| | |
| |
United States |
|
| | |
| | |
| |
Other |
|
| | |
| | |
| |
|
| $ | | | $ | | | $ | |
For the period of six months ended June 30, 2023 (unaudited) |
| | |
| | |
| | |
Europe |
| $ | | | $ | — | | $ | |
Hong Kong |
|
| | |
| | |
| |
United States |
|
| | |
| | |
| |
Other |
|
| | |
| | |
| |
|
| $ | | | $ | | | $ | |
The Company’s revenue from its Solutions segment is classified based on the location of the customers.
The Company’s revenue from its Platform segment is classified to its business in Hong Kong except for revenue earned by Clearit or 7LFreight which is classified based on the location of the billing entity. This classification is independent of where the user resides or where the user is physically located while using the Company’s services.
As of June 30, 2024 and December 31, 2023, the carrying amounts of non-current assets (property and equipment, right-of-use assets, and intangible assets) are mainly in Canada and US due to acquisitions and also in Israel, Hong Kong and Spain.
NOTE 8: — LOSS PER ORDINARY SHARE
Details of the number of shares and loss used in the computation of basic and diluted loss per share:
| | Number of shares | ||
| | For the period of | ||
| | six months ended | ||
| | June 30, | ||
| | 2024 | | 2023 |
|
| (unaudited) | | (unaudited) |
Weighted number of Ordinary shares(*) |
| | | |
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2024 | | 2023 | ||
|
| (unaudited) |
| (unaudited) | ||
Loss | | $ | | | $ | |
Preferred shares dividend (**) | |
| — | |
| |
For the computation of basic and diluted loss per share | | $ | | | $ | |
(*) | The computation of diluted loss per share did not take into account potential Ordinary shares (detailed below) due to their anti-dilutive effect: |
16
NOTE 8: — LOSS PER ORDINARY SHARE (Cont.)
| a. |
| b. |
| c. |
(**) | In January 2023 the Company converted all of its Preferred shares to Ordinary shares as part of the Transactions - see Note 1d. |
NOTE 9: — RELATED PARTIES
| a. | For the six months ended June 30, 2024, related parties consisted of |
| b. | Related party transactions: |
The Company entered into a number of commercial agreements with a subsidiary of one of its investors in connection with a number of ocean cargo indexes. The investor’s subsidiary serves as a benchmark administrator for the indexes and the Company serves as the calculating agent of these indexes. In addition, the parties share the revenue from licensing certain data used in calculating the indexes. The total expense accrued by the Company during the six month periods ended June 30, 2024 and 2023 was $
Certain of the Company’s investors also conduct business on the Company’s transactional platforms through other of the investors’ respective group members. Fees charged for these users are no more favorable than terms generally available to third parties under the same or similar circumstances.
| c. | Benefits to directors: |
|
| For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2024 | | 2023 | ||
|
| (unaudited) |
| (unaudited) | ||
| | | | | | |
Compensation to directors not employed by the Company or on its behalf | | $ | | | $ | |
Share-based payments to directors not employed by the Company or on its behalf | | | | | | — |
| | $ | | | $ | |
Number of directors who received the above compensation by the Company | |
| | |
| |
17
NOTE 9: — RELATED PARTIES (Cont.)
| d. | Compensation of key management personnel of the Group recognized as an expense during the reporting period: |
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2024 | | 2023 | ||
|
| (unaudited) |
| (unaudited) | ||
Short-term employee benefits | | $ | | | $ | |
Share-based payments | |
| | |
| |
Post-employment benefits | |
| | |
| — |
| | $ | | | $ | |
Number of key officers | |
| | |
| |
NOTE 10: — EVENTS AFTER THE REPORTING DATE
On August 16, 2024 the Company acquired all of the shares of Shipsta, a leading freight tender procurement platform. The acquisition will be financed through a combination of cash and equity. The consideration includes a cash payment of approximately Euro
- - - - - - - - - - - - - -
18
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of results of operations, financial condition and prospects of Freightos Limited (referred to as “Freightos”, “the Company”, “our company”, “we”, “us” and similar terms) together with (i) our interim unaudited consolidated financial statements for the six months ended June 30, 2024, included as Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K (the “Report”) to which this Operating and Financial Review and Prospects is attached, and (ii) our audited consolidated financial statements and the related notes for the year ended December 31, 2023 appearing in our Annual Report on Form 20-F for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 21, 2024 (our “Annual Report”) and “Item 5 – Operating and Financial Review and Prospects” of that Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs that involve risks and uncertainties. As a result of many factors, such as those set forth under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Our mission is to expand trade among the people of the world by digitalizing the international shipping industry, reducing the friction that plagues global supply chains.
We operate a leading, vendor-neutral booking and payment platform for international freight. Our global freight booking and payments platforms, Freightos and WebCargo (collectively, the “Platform”), support supply chain efficiency and agility by enabling real-time procurement of ocean and air shipping across more than ten thousand importers/exporters, thousands of freight forwarders, and dozens of airlines and ocean carriers. According to the United Nations Conference on Trade and Development (“UNCTAD”), the value of goods traded internationally reached an estimated $23.8 trillion in 2023, representing approximately 23% of global gross domestic product (“GDP”). International trade is facilitated by the third-party logistics market, which, according to logistics research firm Armstrong & Associates, generated 1.2 trillion dollars in revenue in 2023, exceeding pre-pandemic numbers by some 25%.
Despite its size and importance, global freight has not yet undergone a comprehensive digital transformation. Unlike passenger travel, hotels and retail, cross-border freight services remain largely offline, opaque and inefficient. Most international air and ocean shipments involve multiple intermediaries, often with as many as 30 actors and 100 people, communicating across time zones. These manual processes, replicated hundreds of thousands of times each day, typically result in delays, non-binding and inconsistent pricing, and uncertain transit times. Even on major trade lanes, such as Asia to the United States, our research shows that it is common for importers/exporters to wait several days for a spot price quote, and prices often vary by tens of percentage points. Actual prices and transit times are usually not guaranteed and are unpredictable.
The consequences of this dysfunction flow through international freight, supply chains and, ultimately, businesses and consumers everywhere. As a result, consumers pay more for goods, businesses experience reduced margins, and goods remain under or overstocked. The environment also suffers from this lack of efficiency; according to the International Air Transport Association (“IATA”), air cargo holds, for example, were typically about 50% unutilized pre-pandemic, almost doubling greenhouse gas emissions per unit weight of cargo.
These challenges are exacerbated by ongoing and persistent supply chain problems, making global freight pricing more volatile than most stock and commodity markets. Without digitalization, supply chains are unable to respond to stressors in an agile and cost-effective manner. As a result, supply chains have struggled to adjust in an agile and cost-effective manner to stresses, such as wars, pandemics, weather problems, strikes, blockages of trade routes, such as the Suez Canal, and “trade wars.”
We operate our business in two segments. In our Platform segment, we connect Buyers and Sellers of freight services to provide digitalized price quoting, booking, payments and basic shipment management. In our Solutions segment, we provide software tools and data to help industry participants automate their pricing, sales and procurement processes. In addition to driving significant value for companies around the world, our SaaS products encourage adoption of our Platform. Other companies that have successfully deployed SaaS-enabled marketplace strategies include OpenTable, Zenefits and Carta.
Given the size, complexity and conservatism of the international freight industry, it took us a decade to achieve direct digital connections with multiple layers of the industry: carriers, freight forwarders (who are analogous to sophisticated travel agents for goods) and importers/exporters. Around 2020, we achieved a critical mass of airlines offering digital connections, and our Platform reached an inflection point. Since then, we have achieved rapid growth of our gross booking value (“GBV”, also referred to by some as “GMV”), which is equal to the total value of freight services and related services purchased on our Platform. In most cases, freight services are purchased by importers/exporters or by freight forwarders (as purchasers of services, “Buyers”) from carriers or freight forwarders (as sellers of services, “Sellers”) who meet, transact and often pay each other on our Platform.
Our growth in the number of transactions is illustrated by the following graphic (in thousands):
After four years of consistent and predictable rapid transaction growth, we believe we are well positioned to maintain our accelerated growth trajectory and establish ourselves as a leading platform in the years to come. We also believe that our deep technology and broad network provided us with a first mover advantage in the industry and allowed us to distinguish ourselves from our competitors. As the only vendor-neutral, end-to-end digital booking platform, connecting carriers, forwarders and importers/exporters for air and ocean freight, we are uniquely positioned to lead the international freight industry through a digital transformation that has already begun to gain momentum.
Our Business Model
Our Platform is a three-sided marketplace, digitally connecting freight carriers (primarily airlines, and also ocean liners and trucking companies), freight forwarders and importers/exporters. We also provide Solutions including software as a service (“SaaS”) and industry data to help market participants automate and optimize their buying, pricing and selling processes. As more market participants use our Platform, we are able to drive increased efficiencies throughout the highly-fragmented international freight industry.
We derive most of our revenue from (1) transaction fees and service fees through our Platform segment and (2) subscriptions and professional service fees through our Solutions segment, which includes SaaS solutions as well as data offerings such as price indexes. As of the date of this Operating and Financial Review and Prospects, the majority of our revenue is generated from our Solutions segment, but we anticipate that, driven by marketplace growth dynamics and increased monetization across a growing suite of features, our Platform segment will in the long term grow more quickly than our Solutions segment and eventually become our main source of revenue.
Platform Growth Dynamic
Currently, our primary business objective is scaling booking Transactions on our Platform. As our Platform grows and matures, expanding across more regions, carriers and modes, and as we increase value to users, we expect Buyers and Sellers will be willing to pay higher fees for our services, so that revenue growth will follow GBV and transactions growth after some time lag.
Key processes which we use to grow our Platform are:
| ● | Attracting and retaining Buyers and Sellers, thereby increasing supply and demand, respectively. |
| ● | Adding more types of transactions such as trucking and temperature-controlled goods. |
| ● | Adding more services such as enabling online payments that are reconciled automatically with actual shipment bookings, insurance and customs brokerage. |
| ● | Adding more Buyer-Seller combinations such as interlining and white label sales portals for freight forwarders. |
| ● | Providing benchmark data to increase transparency and optimize pricing for market participants. |
| ● | Delivering SaaS tools to help Sellers automate price quotes, which increases the supply that is available online, and tools to help Buyers organize and expand their online procurement. |
Significant Events and Transactions
Business Combination
On May 31, 2022, we entered into a Business Combination Agreement with Gesher I Acquisition Corp., a Cayman Islands exempted company limited by shares (“Gesher”), Freightos Merger Sub I, a Cayman Islands exempted company limited by shares (“Merger Sub I”) and Freightos Merger Sub II, a Cayman Islands exempted company limited by shares (“Merger Sub II”), pursuant to which, on the terms and subject to the conditions set forth therein, (i) Merger Sub I merged with and into Gesher, with Gesher surviving as a wholly owned subsidiary of Freightos (the “First Merger”), and (ii) Gesher merged with and into Merger Sub II, with Merger Sub II surviving as a wholly owned subsidiary of Freightos (the “Second Merger”, and together with the First Merger, the “Business Combination”). Those transactions closed (the “Closing”) on January 25, 2023 (the “Closing Date”).
Pursuant to related transactions, on May 27, 2022, Freightos HK completed a reorganization pursuant to which shareholders of Freightos HK exchanged shares in Freightos HK for shares in Freightos Limited, and Freightos HK became a subsidiary of Freightos Limited.
As a consequence of the Business Combination, the ordinary shares of Freightos, par value $0.00001 per share (the “Freightos Ordinary Shares”) were registered under the Exchange Act and listed on Nasdaq. For more information about the Business Combination, see the section titled “History and Development of the Company” in our Annual Report.
Recent Acquisitions
In August 2024, we acquired all of the shares of Shipsta, a leading freight tender procurement platform used by dozens of Global 1000 enterprises to procure freight at scale from leading freight forwarders and carriers. The acquisition was financed through a combination of cash and equity. The consideration included a cash payment of approximately €4.5 million and the issuance of approximately 640 thousand Freightos Ordinary Shares to a key Shipsta shareholder, subject to adjustment for working capital, and customary holdbacks.
Segment Reporting
We operate under two segments, Platform and Solutions.
Platform Segment
In our Platform segment, we generate revenue from facilitating transactions between Buyers and Sellers on our Platform based on flat fees per transaction and/or fees that are a percentage of transaction value. In addition to freight services, certain ancillary services offered by Sellers, such as insurance and customs brokerage, generate additional revenue. These services often have higher margins than freight services allowing us to generate a higher fee for introducing Buyers. In certain Platform transactions, with respect to U.S. and Canadian customs brokerage transactions only, a Freightos company is the Seller, while in all other cases the Seller is a third party. Buyers typically pay for access to, and the ability to compare, prices, shipping options and historical performance across multiple Sellers. Our services save Buyers time and money with instant freight quoting, convenient online payments through our payment processing partners, and online booking and management tools.
Our Platform revenue has evolved as our Platform grows and matures. In certain cases, Sellers may utilize our Platform without charge for a limited period of time or benefit from other special arrangements. Overall, our operational Platform revenue take rate ranges from zero to approximately 10% of booking value, with an average of approximately 1% during the first half of 2024.
Solutions Segment
In our Solutions segment, we generate revenue through our software-as-a-service offerings, which are typically recurring subscriptions priced per user per month or per site per month, depending on the type of product or based on a negotiated global license. This segment also includes subscriptions to our data products, such as FBX, FAX and custom market pricing data reports, which are priced per unit of time based on the number of users, granularity of data, number of data points and permitted data usage. We also generate some non-recurring revenue, including revenue from professional services such as data ingestion, engineering, customization and setup. SaaS fees are typically collected on a monthly, quarterly or annual basis. Our recently acquired Shipsta business will be accounted for in our Solutions segment.
Go-to-Market Strategy
Our go-to-market strategy focuses on:
| ● | Carriers: Direct sales. |
| ● | Multinational freight forwarding companies: Direct sales. Depending how centralized the freight forwarder is, this includes either direct sales to headquarters for global rollouts, or “land-and- expand” starting at a country or office level and often supported by marketing efforts. |
| ● | Small/midsize freight forwarding companies: Primarily digital advertising. Many small forwarders start by using our booking portal, which does not require a subscription fee, and then upgrade to paid SaaS. |
| ● | Enterprise shippers: Direct sales, augmented by significant brand marketing, including the marketing benefits of some free data we publish such as the weekly version of the FBX container shipping pricing index. |
| ● | SMB shippers: Inbound marketing, including content marketing, search engine optimization and digital advertising. |
We believe that our Platform compares favorably to the majority of marketplaces in other industries due to large transaction sizes and high retention of our business-to-business customers.
Geography
Given the nature of international shipping, we are an international business. Our Solutions revenue is strongest in Europe and North America. Importer/exporter bookings on our Platform are strongest in the United States, where we also have a customs brokerage solution. Our airline bookings on our Platform, which are strongest in Europe and the Middle East air hubs, are now growing fast in the United States, and we have begun to see traction in Asia too. We remain committed to being a truly global resource.
Key financial and operating metrics
Platform Segment
For our Platform segment, which is effectively a marketplace, we believe that certain KPIs are important to help understand our business. We monitor the KPIs listed in the table below to evaluate our Platform business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Certain numbers in the following table are presented on a pro forma basis to reflect the acquisitions of Clearit and 7LFreight, which were acquired during or after the periods presented.
|
| Q1 2022 PF |
| Q2 2022 |
| Q3 2022 |
| Q4 2022 |
| Q1 2023 |
| Q2 2023 |
| Q3 2023 |
| Q4 2023 |
| Q1 2024 |
| Q2 2024 | ||||||||||
| | (dollars in thousands) | ||||||||||||||||||||||||||||
#Transactions | | | 114,846 | | | 150,244 | | | 192,330 | | | 210,765 | | | 229,211 | | | 239,427 | | | 269,175 | | | 286,938 | | | 295,604 | | | 316,480 |
GBV | | $ | 126,225 | | $ | 155,343 | | $ | 159,230 | | $ | 169,967 | | $ | 168,701 | | $ | 154,810 | | $ | 160,658 | | $ | 187,545 | | $ | 192,416 | | $ | 203,388 |
#Unique Buyer Users | | | 12,601 | | | 14,936 | | | 14,938 | | | 15,646 | | | 16,226 | | | 16,438 | | | 17,312 | | | 17,586 | | | 17,992 | | | 19,088 |
#Carriers | | | 31 | | | 31 | | | 32 | | | 35 | | | 37 | | | 37 | | | 39 | | | 45 | | | 49 | | | 51 |
#Transactions
#Transactions represents the number of bookings for freight services, and related services, placed by Buyers across our Platform with third-party Sellers and with Clearit. Beginning in the third quarter of 2022, #Transactions include trucking bookings, which were added to the Freightos Platform following the acquisition of 7LFreight. The number of #Transactions in any given time period are net of transactions canceled during the same time period.
Gross Bookings Value
GBV represents the total value of #Transactions, which is the monetary value of freight and related services contracted between Buyers and Sellers on our Platform, plus related fees charged to Buyers and Sellers, and pass-through payments such as duties. That is, GBV represents the revenue derived by Sellers from our Platform. GBV is converted to U.S. dollars at the time of each transaction on our Platform. This metric may be similar to what others call gross merchandise value (GMV) or gross services volume. We believe that this metric reflects the scale of our Platform and our opportunities to generate Platform revenue.
#Unique Buyer Users
#Unique Buyer Users represents the number of individual users placing bookings, typically counted based on unique email logins. The number of Buyers, which counts unique customer businesses, does not reflect the fact that some Buyers are large multinational organizations while others are small or midsize businesses. Therefore, we find it more useful to monitor #Unique Buyer Users than the number of Buyer businesses.
#Carriers
#Carriers represents the number of unique air and ocean carriers who have been sellers of #Transactions. For airlines, we count the booking carrier, which includes separate airlines within the same carrier group. We do not count dozens of other airlines that operate individual segments of air cargo #Transactions as we do not have a direct booking relationship with them. Carriers include ocean LCL consolidators, but excludes trucking carriers.
Solutions Segment
We do not currently utilize supplemental KPIs for our Solutions segment, as we believe revenue provides a good indication of this segment’s performance.
Key Factors Affecting Our Performance
We believe our performance and future success depend on several factors, including those discussed below and in the section of our Annual Report titled “Risk Factors.”
World Trade and Industry Trends
International freight shipping helps to enable world trade, specifically the exchange of goods between countries. We believe that the size of the total addressable market for our Platform is positively correlated with world trade in goods. Since the early 1940s, world trade has increased dramatically in most decades, but the size of our addressable market could contract if world trade is reduced by recession, trade wars, reshoring/nearshoring and other factors. Historical trends indicate that even following major stressors, such as the 2008 financial crisis, global trade has continued to steadily expand, as presented in the following illustration of the global trade of goods by value, which we created from information available from UNCTAD.
Our business is seasonal and as a result, our revenues and profitability fluctuate from quarter to quarter. For example, the third and fourth calendar quarters are typically strong in our industry in the ramp up to the Western peak shopping season, while the first quarter is typically weakest.
Smaller importers/exporters tend to adopt our Platform more readily than larger enterprises. Therefore, our Platform may benefit if niche e-commerce vendors and other SMB importers/exporters continue to flourish, as they have over the past few years, and could potentially be impacted negatively if the industry becomes more consolidated.
We have also observed a trend of more short-term, or spot, bookings for freight services, compared to long-term fixed-price contracts. Our Platform, which focuses on matching Buyers and Sellers for spot transactions, has benefited from this trend.
Shipping Costs
Our GBV is impacted by market rates of air and ocean shipping. Some of our Platform revenue is generated as a percentage of GBV and directly impacted when price levels change, whereas some of our revenue is generated from flat per-transaction fees and not directly impacted by shipping costs, although it’s still impacted by shipping volumes. We believe that lower market rates may attract more small and medium business importers/exporters to our Platform and may therefore increase the volume of transactions on our Platform, partially offsetting lost GBV and revenue as a result of lower market rates.
The following graphic of our FBX01 index illustrates the volatility of an indicative price for shipping a 40- foot container Trans-Pacific from East Asia to North American West Coast. We view the FBX01 index as a bellwether trade lane. The graph from
Freightos Terminal shows clearly the dramatic price increases during the COVID-19 pandemic, the sharp slump due to dropping demand and excess capacity post-COVID, and the increase due to the Red Sea crisis.
Carrier Digitalization
Our Platform is highly dependent on the availability of direct digital connections, known as application programming interfaces (“APIs”), to carriers, which enable instant binding price quotes and bookings. To our knowledge, prior to 2018, no air or ocean carriers had APIs for instant quoting and booking against actual capacity, and price quotes were rarely binding. This is now changing rapidly, first in air cargo transportation and, more recently, in ocean freight transportation.
To some extent, we are able to digitalize freight bookings even when carriers are offline by offering services from freight forwarding companies, without specifying the voyage, but our Platform provides better service and will grow faster if the digitalization of carriers continues.
Growth Strategy
We believe that our market opportunity is immense, and we will continue to invest significantly in scaling across all organizational functions in order to enhance our growth prospects. Our growth depends, in part, on our users’ experience, and we continue to invest heavily in research and development to create a modern, stable, fast-performing, user-friendly Platform. We have successfully introduced new features and capabilities on our Platform and plan to continue to do so. We intend to continue to invest in sales and marketing. We have also leveraged complementary acquisitions to expand our user base and improve our offerings.
We believe that investments in growth will have a strong positive impact on our long-term financial results. We intend to implement a responsible expenditure strategy, limiting our spending and therefore our negative free cash flow, while maintaining high gross profit margins and a goal to achieve positive free cash flow with the cash reserves on hand. The success of our efforts to enhance our long-term potential may be impacted by our competition. For additional information, see the section titled “Business — Competition” in our Annual Report.
Components of Our Results of Operations
Revenue
Platform Revenue
Platform revenue reflects fees charged to Buyers and Sellers in relation to transactions executed on our Platform. For bookings conducted by importers/exporters, our fees are typically structured as a percentage of booking value, depending on the mode and nature of the service. When freight forwarders book with carriers, the Sellers often pay a pre-negotiated flat fee per transaction. When Sellers transact with a Buyer who is a new customer to the Seller, we may charge a percentage of the booking value as a fee. When we handle payments for transactions on our Platform, Buyer and Sellers will typically pay a percentage fee for the payment handling.
Clearit customs brokerage fees are reported in our Platform segment. We charge flat fees for customs brokerage through Clearit, depending on the mode and complexity, and may charge additional fees for ancillary services.
Solutions Revenue
Solutions revenue is primarily subscription-based SaaS and data. It is typically priced per user or per site, per time period, with larger customers such as multinational freight forwarders often negotiating flat all- inclusive subscriptions. Revenue from our
Solutions segment includes certain non-recurring revenue from services ancillary to our SaaS products, such as engineering, customization, configuration and data services for digitizing offline data. We also recognize revenue from data subscriptions, including subscriptions to FBX and FAX indexes, and custom data reports.
Cost of Revenue
Cost of revenue consists primarily of customer service costs, which include salaries of team members directly involved in supporting our Platform and Solutions service delivery, cloud hosting costs, and direct financial costs, such as credit card processing fees and collection costs.
Research and Development Expenses
Research and development expenses consist primarily of personnel-related costs, third-party hosting costs and third-party software expenses related to development. Research and development costs are expensed as incurred. We make significant investments in research and development to create new product features and launch new products. We believe continued investments in research and development are important to achieve our strategic goals. As a result, we expect research and development expenses to increase in future periods.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of expenses related to personnel-related costs, including sales commissions and travel, which we expense as incurred, and advertising and marketing activities, including external public relations, trade shows, content and search engine optimization service providers. We make significant investments in sales and marketing to grow our business, including finding and acquiring new clients and driving brand awareness.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related expenses attributable to our finance, legal, human resources and operations functions. General and administrative expenses also include costs related to outside consulting, legal and accounting services, rent and insurance. We expect to continue to invest in our corporate infrastructure and to incur additional expenses associated with operating as a public company, including legal and accounting costs, investor relations costs, insurance premiums and compliance costs.
Share listing expense
Share-listing expense consists of a one-time, non-cash, share-based expense, calculated based on the excess of the fair value of shares and warrants issued by the Company to public investors over the identifiable net assets of Gesher that were acquired.
Transaction-Related Costs
Transaction Related Costs consist primarily of consulting and professional expenses related to the Business Combination that was signed in May 2022 and closed in January 2023.
Change in fair value of warrants
Change in fair value of warrants consists of changes in the fair value of the Company’s public warrants (the “Freightos Warrants”) that were issued as part of the Business Combination and are traded under the symbol “CRGOW”.
Finance Income
Finance income consists primarily of interest income on bank deposits and investments, changes in the fair value of contingent consideration and hedging income.
Finance Expenses
Finance expenses consist primarily of hedging expenses, financial expenses on severance provision, interest expense in respect of our lease liabilities, bank charges and foreign exchange rate differences, net.
Income Taxes
Income taxes consist primarily of income taxes attributable to our subsidiaries in Spain and the Palestinian Authority, which have been profitable in recent years, and, to a limited extent, certain other jurisdictions. Tax benefits consist mainly of an increase in deferred tax assets attributable to our subsidiaries in the US. Our subsidiaries in Hong Kong and Israel have accumulated significant carry-forward losses for tax purposes in past years, for which we do not recognize deferred tax assets because the utilization of such assets in the foreseeable future is not probable. As we expand our international business activities, any changes in the tax regime of the jurisdictions in which we operate may increase our overall provision for income taxes in the future.
Six months ended June 30, 2024, compared with the six months ended June 30, 2023
Results of Operations
The following tables summarizes Freightos’ historical results of operations for the six months ended June 30 2024 and 2023:
| | Six months ended June 30, | ||||
(dollars in thousands) |
| 2024 |
| 2023 | ||
Revenue | | $ | 11,013 | | $ | 9,916 |
Cost of revenue | |
| 3,989 | |
| 4,188 |
Gross profit | |
| 7,024 | |
| 5,728 |
Operating expenses: | | | | | | |
Research and development | |
| 4,901 | |
| 6,014 |
Selling and marketing | |
| 6,829 | |
| 7,081 |
General and administrative | |
| 5,342 | |
| 6,079 |
Share listing expense | |
| — | |
| 46,717 |
Transaction-related costs | |
| — | |
| 3,703 |
Total operating expenses | |
| 17,072 | |
| 69,594 |
Operating loss | |
| (10,048) | |
| (63,866) |
Change in fair value of warrants | |
| (1,040) | |
| 7,404 |
Finance income | |
| 1,275 | |
| 1,690 |
Finance expenses | |
| (137) | |
| (223) |
Financing income (expenses), net | |
| 1,138 | |
| 1,467 |
Loss before taxes on income | |
| (9,950) | |
| (54,995) |
Income taxes (tax benefit), net | |
| (20) | |
| 3 |
Loss | | $ | (9,930) | | $ | (54,998) |
Revenue
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentages) |
| 2024 |
| 2023 |
| Change $ |
| Change % |
| |||
Platform | | $ | 3,872 | | $ | 3,465 | | $ | 407 | | 12 | % |
percentage of total revenue | | | 35 | % | | 35 | % | |
| |
|
|
Solutions | | $ | 7,141 | | $ | 6,451 | | $ | 690 |
| 11 | % |
percentage of total revenue | |
| 65 | % |
| 65 | % |
|
|
|
| |
Total revenue | | $ | 11,013 | | $ | 9,916 | | $ | 1,097 |
| 11 | % |
Comparison of the Six Months Ended June 30 2024 and 2023
Revenue increased by $1.1 million, or 11%, to $11.0 million for the six months ended June 30, 2024, compared to $9.9 million for the six months ended June 30, 2023.
Platform revenue increased by $0.4 million, or 12%, to $3.9 million for the six months ended June 30, 2024, compared to $3.5 million for the six months ended June 30, 2023. The increase reflected growth of air cargo digital bookings and was primarily a result of an increase in GBV and the number of transactions..GBV growth stems mostly from the recovery in freight rates in the first quarter of 2024, and the sustained high freight rates in the second quarter of 2024, that continue to be driven by the Red Sea Crisis and the subsequent modal shift to air cargo.
Solutions revenue increased by $0.7 million, or 11%, to $7.1 million for the six months ended June 30, 2024, compared to $6.5 million for the six months ended June 30, 2023. The increase was primarily as a result of strong customer acquisition resulting in an increase in revenue from SaaS solutions as well as in Freightos Terminal data subscriptions during the six months ended June 30, 2024.
Cost of Revenue
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentages) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Cost of revenue | | $ | 3,989 | | $ | 4,188 | | $ | (199) |
| (5) | % |
Total gross margins | |
| 64 | % |
| 58 | % |
|
|
|
| |
Comparison of the Six Months Ended June 30, 2024 and 2023
Cost of revenue decreased by $0.2 million, or 5%, to $4.0 million for the six months ended June 30, 2024, compared to $4.2 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease of $0.3 million in labor costs as a result of the reorganization of the Company that was implemented in July 2023, which reduced our workforce, offset, in part, by an increase of $0.1 million in depreciation and amortization expenses.
Research and Development
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Research and development | | $ | 4,901 | | $ | 6,014 | | $ | (1,113) | | (19) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Research and development expenses decreased by $1.1 million, or 19%, to $4.9 million for the six months ended June 30, 2024, compared to $6.0 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease of $0.9 million in labor costs as a result of the reorganization of the Company that was implemented in July 2023, which reduced our workforce, and a decrease of $0.1 million in human resources expenses.
Selling and Marketing
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Selling and marketing | | $ | 6,829 | | $ | 7,081 | | $ | (252) | | (4) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Selling and marketing expenses decreased by $0.3 million, or 4%, to $6.8 million for the six months ended June 30, 2024, compared to $7.1 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease in labor expenses of $0.3 million as a result of the reorganization of the Company that was implemented in July 2023, which reduced our workforce, and a decrease in digital advertising of $0.5 million, offset, in part, by an increase of $0.1 million in share based compensation expense and an increase non-cash marketing and promotion expense related to issuing shares to airlines as part of our Digital Air Cargo Council of $0.4 million.
General and Administrative
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
General and administrative | | $ | 5,342 | | $ | 6,079 | | $ | (737) |
| (12) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
General and administrative expenses decreased by $0.7 million, or 12%, to $5.3 million for the six months ended June 30, 2024, compared to $6.1 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease in labor expenses of $0.7 million (related to our reorganization implemented in July 2023, which reduced our workforce), a decrease in consulting expenses of $0.4 million, a decrease in directors and officers’ insurance premiums of $0.3 million and a decrease in bad debt expenses of $0.2 million, partially offset by the difference in the change in fair value of contingent consideration of $0.6 million (mainly related to the acquisition of Clearit ) and an increase of $0.3 million in share-based compensation expense.
Share-Listing Expenses
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Share listing expense | | $ | — | | $ | 46,717 | | $ | (46,717) |
| (100) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Share listing expense decreased by $46.7 million or 100% to $0.0 million for the six months ended June 30, 2024, compared to $46.7 million for the six months ended June 30, 2024 related to non-recurring, non-cash, share-based listing expense incurred in connection with the Business Combination that was completed in January 2023.
Transaction-Related costs
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Transaction-related costs | | $ | — | | $ | 3,703 | | $ | (3,703) | | (100) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Transaction-related costs decreased by $3.7 million, or 100%, to $0.0 million for the six months ended June 30, 2024, compared to $3.7 million for the six months ended June 30, 2023 due to the costs incurred in connection with the Business Combination that was completed in January 2023.
Change in Fair Value of Warrants
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Change in fair value of warrants | | $ | (1,040) | | $ | 7,404 | | $ | (8,444) | | (114) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Change in fair value of warrants decreased by $8.4 million, or 114%, in the six months ended June 30, 2024, as the fair value of our outstanding warrants decreased by $1.0 million in the six months ended June 30, 2023, compared to an increase in the fair value of the warrants by $7.4 million for the six months ended June 30, 2023.
Finance Income
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Finance income | | $ | 1,275 | | $ | 1,690 | | $ | (415) |
| (25) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Finance income decreased by $ 0.4 million, or 25%, to $1.3 million for the six months ended June 30, 2024, compared to $1.7 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease in change in fair value of contingent consideration of $0.3 million and a decrease in interest on bank deposits of $0.2 million.
Finance Expenses
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Finance expenses | | $ | (137) | | $ | (223) | | $ | 86 | | (39) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Finance expenses decreased by $0.1 million, or 39%, to $0.1 million for the six months ended June 30, 2024, compared to $0.2 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease in exchange rate difference of $0.2 million offset, in part, by an increase in hedging expenses of $0.1 million.
Income taxes (tax benefit), net
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2024 |
| 2023 |
| Change $ |
| Change % | | |||
Income taxes (tax benefit), net | | $ | (20) | | $ | 3 | | $ | (23) |
| (767) | % |
Comparison of the Six Months Ended June 30, 2024 and 2023
Income taxes were essentially even for the six months ended June 30, 2024 compared to income taxes for the six months ended June 30, 2023.
Non-IFRS Financial Measures
Our management team uses loss before income taxes, finance income, finance expenses, change in fair value of warrants, share-based payment expense, depreciation & amortization, share listing expenses, non-recurring expenses, change in the fair value of contingent consideration, operating expense settled by issuance of shares and transaction related costs (“Adjusted EBITDA”), a non-IFRS financial measure, to evaluate our operating performance and make strategic decisions. We believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results because it provides a supplemental measure of our core operating performance and offers consistency and comparability with both past financial performance and with financial information of peer companies.
However, Adjusted EBITDA is presented for supplemental information purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with IFRS.
The following table provides a reconciliation of loss to Adjusted EBITDA for the time periods presented:
| | Six Months Ended | ||||
| | June 30, | ||||
(dollars in thousands) |
| 2024 |
| 2023 | ||
Loss | | $ | (9,930) | | $ | (54,998) |
Income taxes (tax benefit) | |
| (20) | |
| 3 |
Finance income | |
| (1,275) | |
| (1,690) |
Finance expenses | |
| 137 | |
| 223 |
Change in fair value of warrants | |
| 1,040 | |
| (7,404) |
Operating loss | | | (10,048) | | | (63,866) |
Share-based payment expense | |
| 1,594 | |
| 1,128 |
Depreciation and amortization | |
| 1,410 | |
| 1,362 |
Share listing expense | |
| — | |
| 46,717 |
Non-recurring expenses | |
| — | |
| 499 |
Transaction-related costs | |
| — | |
| 3,703 |
Changes in the fair value of contingent consideration | |
| — | |
| (642) |
Operating expense settled by issuance of shares | | | 351 | | | — |
Adjusted EBITDA | | $ | (6,693) | | $ | (11,099) |
Comparison of the Six Months Ended June 30, 2024 and 2023
Adjusted EBITDA increased by $4.4 million, or 40%, to $(6.7) million for the six months ended June 30, 2024, compared to $(11.1) million for the six months ended June 30, 2023. Adjusted EBITDA increased primarily due to a decrease in loss in the first half of 2024 and the difference in change in fair value of warrants, offset, in part, by there not being any adjustment for share listing expense or transaction related costs in the first half of 2024, as opposed to the first half of 2023.
Liquidity and Capital Resources
Current Liquidity Status and Capital Requirements
Our cash, cash equivalents, bank deposits and short-term investments were $47.4 million as of June 30, 2024, a decrease of $4.3 million, compared to $51.7 million as of December 31, 2023. In addition, we had restricted deposits to secure payments to airlines, to support currency hedging activity, a bank guarantee and credit cards, that amounted to $1.6 million in the aggregate as of each of June 30, 2024 and December 31, 2023.
The development and commercialization of our Platform and Solutions segments will continue to require substantial expenditures and we are reliant upon continued investments from existing and new shareholders to fund operations.
Our primary requirements for liquidity and capital resources are to finance research and development and selling and marketing expenses that drive growth, as well as improve working capital, capital expenditures and general corporate purposes.
Our capital expenditures consist primarily of computers, peripheral equipment and leasehold improvements from time to time on our leased offices. Capital expenditures were $0.02 million for the six months ended June 30, 2024, compared to $0.1 for the six months ended June 30, 2023.
Sources of Financing
Since our inception, we have financed our operations primarily through equity financing.
In March 2021, we issued 4,178,094 Series C preferred shares for an aggregate amount of $26.4 million. In January 2023, we raised approximately $82.4 million in connection with the Closing of the Business Combination, after expenses.
We may receive proceeds from the exercise of our outstanding Freightos Warrants (each of which is generally exercisable for $11.50 per share). However, given the recent price volatility of Freightos Ordinary Shares and relative lack of liquidity in our stock, there is no certainty that warrant holders will exercise their warrants and, accordingly, we may not receive any proceeds in respect of our outstanding warrants. We believe that the likelihood that warrant holders determine to exercise their warrants, and therefore the amount of cash proceeds that we would receive is dependent upon the market price of Freightos Ordinary Shares. If the market price for our Freightos Ordinary Shares is lower than the exercise price of the warrants (on a per share basis), we believe that warrant holders will be very unlikely to exercise any of their warrants, and accordingly, we will not receive any such proceeds. There is no assurance that the warrants will be “in the money” prior to their expiration or that the warrant holders will exercise their warrants. As a result, we do not expect to rely on the cash exercise of Freightos Warrants to fund our operations and cannot depend on such proceeds to support working capital and capital expenditure requirements for the next twelve months. We will continue to evaluate the probability of Freightos Warrant exercises and the merit of including potential cash proceeds from the exercise of the Freightos Warrants in future liquidity projections. We currently expect to rely on the sources of funding described in this Operating and Financial Review and Prospects, and any future financings, if available on reasonable terms or at all. As of September 16, 2024, the closing price of our Freightos Ordinary Shares was $1.40 per share.
Despite the possibility that Freightos Warrant holders may choose not to exercise their Freightos Warrants for so long as the Freightos Warrants remain out-of-the money, we believe that our sources of liquidity and capital resources will be sufficient to meet our business needs for at least the next 12 months.
Our ability to raise additional funds via future equity financings may be negatively impacted by the large number of Freightos Ordinary Shares and Freightos Warrants that may be resold by certain of our securityholders (the “Selling Securityholders”) on an ongoing basis pursuant to a registration statement on Form F-3 (SEC File No. 333-280302) (the “Resale Registration Statement”). Those securities registered for resale represent approximately 65.9% of the outstanding Freightos Ordinary Shares as of the date of this Operating and Financial Review and Prospects, assuming the exercise of all Freightos Warrants. Given the substantial number of Freightos Ordinary Shares registered for potential resale by Selling Securityholders pursuant to the Resale Registration Statement, the sale of shares by the Selling Securityholders, or the perception in the market that the Selling Securityholders intend to sell such a large number of shares, could increase the volatility of the market price of the Freightos Ordinary Shares or result in a significant decline in it, even if our business is doing well. That, in turn, could harm the prevailing market price of the Freightos Ordinary Shares, thereby making it more difficult for us to sell equity securities at a time and at a price (and upon other terms) that we deem appropriate or acceptable.
In addition, if we would opt for debt financing (or, in certain cases, equity financing), if available, that may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our operations. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in “Item 3.D– Risk Factors” included in our Annual Report.
Cash Flows
The following table summarizes our cash flows for the periods presented:
| | Six Months Ended June 30, | ||||
(in thousands) |
| 2024 |
| 2023 | ||
Net cash used in operating activities | | $ | (4,505) | | $ | (18,809) |
Net cash provided by (used in) investing activities | |
| 5,508 | |
| (51,470) |
Net cash provided by (used in) financing activities | |
| (108) | |
| 73,272 |
Exchange differences on balances of cash and cash equivalents | | | (59) | |
| (191) |
Increase in cash and cash equivalents | | $ | 836 | | $ | 2,802 |
Net Cash Used In Operating Activities
Six months ended June 30, 2024, compared with six months ended June 30, 2023
Net cash used in operating activities was $4.5 million for the six months ended June 30, 2024, a decrease of $14.3 million compared to the net cash used in operating activities of $18.8 million for the six months ended June 30, 2023. The decrease primarily resulted from a decrease in loss of $45.1 million, as well as the difference of $8.4 million in change in fair value of warrants from a non-cash gain of $7.4 million in the six months ended June 30, 2023 to a non-cash loss of $1.0 million in the six months ended June 30, 2024, the decrease in non-cash gain from changes in the fair value of contingent consideration of $0.9 million, the increase in non-cash share-based compensation of $0.5 million, the decrease in non-cash finance income, net of $2.0 million, and the net difference of $3.9 million in the changes in asset and liability items, all of which were offset in part by the decrease in non-cash share-listing expense of $46.7 million.
Net Cash Provided By (Used In) Investing Activities
Six months ended June 30, 2024, compared with six months ended June 30, 2023
Net cash provided by investing activities was $5.5 million for the six months ended June 30, 2024, an increase of $57.0 million, compared to the net cash used in investing activities of $51.5 million for the six months ended June 30, 2023. The increase primarily resulted from: a withdrawal of a short term investment, which provided $11.5 million of cash in the first six months of 2024; an investment in a short term investment that used $30.9 million of cash during the six months ended June 30, 2023; and a decrease in investment in short- term bank deposits of $14.0 million from the first six months of 2023 to the first six months of 2024, which increased net cash provided by investing activities by that amount.
Net Cash Provided By (Used In) Financing Activities
Six months ended June 30, 2024, compared with six months ended June 30, 2023
Net cash used in financing activities was $0.1 million for the six months ended June 30, 2024, a decrease of $73.4 million, compared to the net cash provided by financing activities of $73.3 million for the six months ended June 30, 2023. The decrease primarily resulted from a decrease in proceeds from the issuance of share capital and warrants of $76.0 million, which had been realized in connection with Business Combination in the first six months of 2023 but not the first six months of 2024, offset, in part, by the repayment of short-term bank loan and credit of $2.5 million, which used that amount of cash in the first six months of 2023 (but was not repeated in the first six months of 2024).
Contractual Obligations and Other Commitments
We have various contractual obligations and commercial commitments that are recorded as liabilities in our financial statements. In addition, we may pay the sellers of Clearit up to $1.0 million, subject to the Clearit business achieving certain operating and financial milestones in 2024. As of June 30, 2024 the fair value of this contingent consideration was $0.0 million.
As of June 30, 2024 Freightos has contractual, undiscounted lease liabilities of $1.0 million, as shown in the below table:
|
| (dollars in thousands) | |
Remainder of 2024 |
| | 294 |
2025 |
| | 481 |
2026 |
| | 245 |
Total | | $ | 1,020 |
Off-Balance Sheet Arrangements
As of June 30, 2024, we had outstanding unfulfilled orders placed with our Platform Sellers of approximately $0.7 million (compared to $0.5 million as of December 31, 2023) for which Buyers’ funds were not yet collected and, therefore, no liability was recorded in our financial statements. These amounts will be recorded as liabilities once the shipments are delivered, at which time we will also record receivables from the respective Buyers.
Recently Issued Accounting Pronouncements
For information on recently issued accounting pronouncements, refer to Note 3 to our audited consolidated financial statements in our Annual Report and Note 2c to our interim unaudited consolidated financial statements, included in Exhibit 99.1 to the Report.