News / Freightos posts poor Q3 results, but this may be the least of its troubles

Photo: Freightos

Freightos has released fairly underwhelming results for its third quarter, as it continues to find a path to profitability – a path which may be even harder to tread since the outbreak of war in Israel, its home country.

In just the third set of full results since listing on the Nasdaq in January, the booking platform reported revenue up 9%, to $5.1m, with gross profit for the quarter at $2.8m, up 8.8% – but operating expenses rose 58%, year on year.

In Q3 22, much of the cost on the books was related to the listing and transactions, this quarter $884,000 was spent on ‘reorganisation’. In July it made 50 people, or 13% of its staff, redundant.

“We’re encouraged by the progress toward profitability in the third quarter, which confirms the effectiveness of our operational efficiency plan launched in July,” said Ran Shalev, CFO of Freightos. “The third quarter’s results are a testament to our strategic balance of driving growth and managing expenses. This trend together with our solid cash position, keeps us on course to reach profitability with the capital on hand.”

Its operating loss for Q3 23 was up 74%, year-on-year, at $9.3m, and over the nine months, it rose 78% to $15.3m. Total loss was $7.1m for the quarter and $62.1m for nine months, up some 300% year on year.

As usual, Freightos focused on booking value and number of transactions, which tends to give sunnier figures: transaction numbers in Q3 rose 40%, despite a weak market, while gross booking value went up 1%, “reflecting strong transactions growth but lower average freight prices”.

While booking platforms have taken off, particularly in the pandemic, there are still remnants of concern in the industry.

“Booking platforms are a good thing,” said Christos Spyrou, founder of Neutral Air Network. “But how neutral are they? If they appeal directly to importers and exporters there will be an issue in small markets, which won’t then need GSAs. It’s kind of a conflict. Market rates go to non-IATA agents, engines have created competition, and that’s a problem. If others get a special deal, I will see that in the system.”

The problem for Freightos, however, is how to push itself into profitability. But it faces another, and perhaps more serious, which it highlighted in its SEC filing. Freightos is Israeli, and many of its employees, including most of its management team, work in Jerusalem.

It faces loss of its staff to military call-ups. Since the Hamas attack on 7 October, the Israel Defence Force has called up more than 350,000 reservists. “One management and several non-management employees are currently subject to military service in the IDF and have been called to serve. In addition, the family members of many of our Israeli team members are currently serving in the IDF,” it said.

It added: “Shelter-in-place and work-from-home measures, government-imposed restrictions on movement and travel and other precautions taken to address the ongoing conflict may temporarily disrupt our management and employees’ ability to effectively perform their daily tasks. It is also possible that there will be further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labour and loss of institutional knowledge.”

And, as if that wasn’t enough, Freightos also has Palestinian employees, based in the West Bank, in Ramallah and Nablus.

“The current violence in the region has caused tension between our teams in Ramallah and Jerusalem. If the war with Hamas spreads to the West Bank, our team in Ramallah would likely be severely impacted. The Palestinian authority, which governs the areas where the Ramallah and Nablus offices are, has recently called several general strikes during which our teams did not perform their duties. Should our teams in Ramallah be unable or unwilling to continue to perform their functions, whether due to violence, strikes or otherwise, the company will suffer significant negative effects that could adversely impact our results of operations, liquidity and cash flows.”

Freightos noted insurance risks, as well as economic boycotts affecting Israeli companies.

“A campaign of boycotts, divestment, and sanctions has been undertaken against Israel, which could also adversely affect our business.”

It’s a tough time, and financial loss may not be the biggest problem Freightos faces.