News / Bullish Freightos says 'cost efficiencies' helping bring profitability in sight

Freightos plans to reinvest in its products this year, as it edges nearer to profitability after more than halving its operating expenses in 2024 and seeing revenue increase 17%. 

Its loss last year shrank 65% from 2023’s $65m, to a deficit of $22.4m, while revenues grew to $23.7m. Full-year adjusted ebitda grew to -$12.6m, a 33% improvement on the prior -$19m. 

Teresa Carreras, FP&A director, standing in for recently appointed CFO Pablo Pinillos, said: “These gains result from scale and from ongoing cost efficiencies, positioning us well for further margin expansion.” 

Now Freightos has plans to re-invest, after a year in which research and development spend fell more than 10%. CEO Zvi Schreiber told investors, in an earnings call yesterday, the company was planning a “major product upgrade” this year. 

“After reducing investment in mid-2023, we will reinvest in platform development, while maintaining a disciplined approach to costs. Results should materialise in 2026, when we scale our ‘go to market’ activities for Freightos.com.  

“We’re also rolling out the next version of our airline interlining solution, which enables airlines to book with other airlines and will later enable freight forwarders to instantly book multi-carrier routes, significantly expanding network reach. This is equivalent to codeshare in passenger airlines, and we’re leading the way in digitalising it.” 

Freightos spent more on sales and marketing than on R&D last year, $13.8m against $10.2m, and while R&D investment was down 10.7% on 2023’s spend, sales and marketing expenditure fell just 3.5%. 

As one close follower of the company said: “Some VC-backed companies are hiding behind the term ‘investment’ to justify non-profitability, which is fine when investment is made in the product and the technology.  

“But the issue is when a big portion of investment is, in fact, marketing and sales. This follows the typical VC strategy which is to “buy” customers and market share with heavily pricing discounts and marketing.” 

However, in Q4 24, perhaps a precursor of the new investment strategy, Freightos grew R&D spending by 12.6% on Q4 23, while sales and marketing spend was up 9.8%. But operating expenses were up 57%, against revenue growth of 25% – the overall Q4 loss up nearly 200% to $9.8m. 

However, it is betting on new products, and believes interlining will play a key part in its success this year. It has also launched an “AI-powered airline dynamic pricing tool”, called Skyway, which is “already showing promise in the market, with one airline seeing a 70% revenue increase during a test”, said Dr Schreiber. 

And it said SaaS Solutions subscriptions brought record quarterly revenue in Q4. Freightos will migrate all its products, including Shipster, to its unified Fusion platform, which is already operating Ocean SaaS products for forwarders. 

It plans to focus on growing subscription revenue this year, and it has also launched a toolkit for index-linking for freight contracts – common in other industries, but with less take-up in freight. 

Dr Schreiber added: “Complementing index linking, container shipping prices can be hedged via forward freight agreements, which are derivatives tied to our Freitas FBX index. And these derivatives are traded on the world’s leading derivative exchanges, CME in Chicago and the Singapore Exchange. While volumes are still minimal, there’s a lot of potential for this to grow, especially as index linking hopefully becomes more prevalent in the industry.” 

On bookings, Dr Schrieber said: “One of the key things I’m hoping to see this year is that the ocean lines finally fully create APIs, digital connections, like the airlines did, five years ago in many cases. So that’s one major milestone we’re looking for, having ocean API connectivity.

“Even within air, of course, Europe’s well along the way to digitalisation, but Asia is at a very early stage. So I think more air bookings out of Asia would be a key trend.” 

Questioned by analysts on the potential impact of incoming tariffs and a ban on de minimis exemptions into the US, Dr Schreiber was optimistic. 

“I think there’s two possible effects, a negative effect and a positive effect. The negative effect, of course, is that tariffs could dampen world trade. We don’t expect it to have a major impact on world trade; world trade is very robust.  

“Supply chains are very resilient because you can’t just move electronic manufacturing out of China. So in most cases, if there’s a tariff, then people pay the tariff … So prices go up. 

“There’s another respect, which we think will actually be good for us … cancelling the de minimis. Probably, it will get cancelled again once the [US] customs authorities are ready for it. That actually would only impact ecommerce…Temu and Shein and AliExpress, which send small parcels directly to consumers. We don’t see that business. So we actually think it could significantly help our volumes out of Asia if there’s a clampdown on ecommerce.” 

Freightos remains bullish for this year: forecasting revenues of between $29m and $30.6m, a rise of about 25%; while it says its ebidta loss for the year will be between $10.2m and $10.9m, around a 16% improvement on this year. It expects breakeven by the end of 2026. And, if it can keep its costs below forecast as it has this year, perhaps profitability is finally within reach. 

Freightos’ share price, meanwhile, began to reverse its declines in November, and has risen more than 30% since, closing yesterday at $3.77. 

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