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 also 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…

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 in 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 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, and it was great seeing you last week. Yes, in terms of solutions revenue, it's not directly tied to transactions as you correctly guessed. It's subscriptions. It's tied to the number of users. But take into account that most of our revenue is selling to freight forwarders. And freight forwarders, I don't need to tell you, are reporting revenue down tens of percent, profit down tens of percent, losses in some cases, so it just makes it much harder to sell software to them. I think we did well to preserve and start to increase our revenue when our customers are hurting quite badly. There's not a direct connection, but there's certainly a strong indirect connection with the macro. In terms of sales and marketing to the -- Ran, do you want to comment about sales and marketing costs?

Yes, sure. I think -- hi, Jason. I think it's in line with our expectations in terms of how we've budgeted it originally. We are balancing between the need to grow the revenues and the need to grow transactions, and we are hiring based on needs only. And only when we see incremental growth in both of the KPIs, that's when we are hiring; same will apply for 2024. We're not anticipating, obviously, increases in S&M versus revenues on the contrary. So my guess is that you will see noted continuations of growth in all parameters.

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, sure. So when we're looking at solutions, which comprises of tools that we're giving to freight forwarders as well as data subscriptions that we sell to forwarders and to shippers as well, we are seeing nice growth coming from both. We're not anticipating any slowdown there. We're thinking that the growth and the momentum would continue. We just launched several months ago the terminal and the indexes. Therefore, we think that now, there's a lot of traction there, and you should see our momentum of sales continue together with our SaaS tools that the team are managing to increase both the upsell of existing forwarder solutions we give, as well as new customers that are coming along all the time. As for the second question, as for G&A, for the three months that just passed, there was no one-time special expense as far as nothing else. We were looking at the adjusted EBITDA from our perspective, which eliminates some one-time expenses such as share-based compensation or depreciation, amortization, or reorganization cost that we have had. When you're taking all those and stripping them down, I think the data -- the EBITDA shows improvement versus the previous quarter and continue to improve also 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 seeing you as well. Thanks for the event. Yes, I mean, the increased passenger travel in air creates increased capacity but doesn't affect transactions one way or another. But it obviously puts downward pressure on the price because there's more supply for the same demand. Fortunately, quite a lot of our booking -- quite a lot of our transactional revenue is flattened transaction. Also, a big part of it is percentage, but at least part of it is flat, which doesn't get affected when the rates are down. It's only affected by transaction volumes. But when we're tied to the price, then of course, we are affected by excess supply, which reduces the prices. For next year, of course, tricky to predict the future. We've had quite a lot of turmoil this year in the industry. We see some signs that things are sort of bottoming out. We think next year will be -- the prices will be low, but hopefully sort of stable as far as we can tell. So we're planning based on the assumption that things stay the same, not assuming a recovery, but also not assuming any further reduction in rates.

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. I mean, for sure, AI is a very important transformative technology in all industries, including us. I'm not ready to give details of the features that we're releasing with AI. I hope we will be announcing some of those soon, but just to say that we are well on top of that. And our engineers are following closely the new technologies that are available, generative AI and other AI, and starting to put that to good use. I'm not expecting any big dramatic changes for us or for others. I think AI in our industry is more of an incremental tool. We think it will help us to innovate in our products, but we're not expecting some huge change to our business anytime soon as result of AI. In terms of One Stack, that's our project -- we've still got development, still has a history of -- we've made some acquisitions. Years ago, we acquired WebCargo and more recently, 7LFreight. We do have different software stacks, a piece of that history of successful acquisitions, and we're now getting quite serious about the project to bring this altogether. We already have integrations, so those products can really talk to each other. We have started a process, which internally, as you said correctly, internally is called One Stack to literally merge those technologies over the next year or so and really end up with one coherent platform.

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 very significant sooner in the medium term. Now we're just at the beginning, just doing our signing up of the first airlines as buyers and the first airlines as sellers. Interlining is a bit like [codeshare] for those who are familiar. We're getting our first transactions dealing with this, so very, very early-stage. In the -- and even next year, the numbers will be small. But when you look two or three years ahead, I think there's two important significances to interlining. One is that it's incremental transactions and potential transactions with a higher take rate. And the second significance is that interlining allows us to create unique supply on our platform because by combining airlines, we create some routes or routes which other platforms simply don't have. And that's always very important in terms of creating a moat to competition. You really want not just to have -- we talked -- and I talked in my comments earlier about being a one-stop shop, but we want not just a one-stop shop for all different airlines, but even beyond that, to create some unique combinations and create some routes that nobody else has.

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 from -- 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 more than -- we are in more than 50% of their digital bookings and perhaps order of magnitude, 15% -- 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. Regarding the first question, we definitely see the take rate, the dollars or the percentage per transaction growing in the long term. There are some factors which means you won't see that for a while, and that's mainly a mix. It kind of relates a little bit to your second question. I'm not going to be able to fully answer your second question because we don't provide a breakdown. But I can say that the airline bookings are relatively newer, and our transactional -- without giving you -- I can't disclose the number, but our transactions off the airline bookings is a lot less, and that segment is growing faster. So the revenue per transaction is growing in all our segments, but the mix is such that actually, the segment where we have the lowest revenue per transaction is growing faster. So that hides the fact. You may see that the dollars per transaction are not increasing, but in fact, in each segment, they are increasing. And the mix is such that you don't see that in the average, and you won't for a while. Eventually, you will. The second segment, we do not disclose air versus ocean in detail. I can tell you that a good majority of the transactions are air cargo. I can also tell you that we make still more money, as I mentioned before, on some of the ocean and indeed multi-modal door-to-door transactions on freightos.com. So those are -- that's been around for longer, that's better monetized. But unfortunately, we've chosen not to disclose the exact breakdown because it's very competitively sensitive, so please understand that.

Thank you.

Thanks, Michael.

Okay. We have no more questions, so thanks, everyone, for joining. Feel free to reach out to us at any time at ir@freightos.com. Have a good day.