News / Freightos adapts fast as market bites, cutting headcount by 13%

© Kiattisak Lamchan

News that Freightos has moved to cut costs by making 13% of its staff redundant – about 50 people – in its bid to reach profitability quicker has underlined both the weakness in the market and the speculative nature of the company’s growth plan.

The recently Nasdaq-listed company said yesterday its cost-saving measure would boost adjusted ebitda by $1.4m per quarter, starting Q4.

CEO Zvi Schreiber said although market conditions were “challenging”, the company was still seeing transaction and revenue growth.

“However, given the persistently weak market conditions, we are refining our priorities to deliver on our plan to reach profitability with the capital already raised. This includes efficiency measures that should keep us on the path to long-term, sustainable growth. Unfortunately, these measures also include making the difficult decision to reduce headcount by approximately 50 employees, or about 13% of the team,” he added.

In May, Freightos recorded a Q1 operating loss of $58m, compared with a loss of $4.2m a year earlier, which it accounted for by “a one-time non-cash share listing charge of $46.7m incurred upon the business combination with Gesher I Acquisition Corp” – a number that some observers found high.

Dr Schreiber told The Loadstar the “actual cash expense of going public is around $15m”, explaining: “If you are asking about the non-cash one-time accounting expense for our acquisition of the SPAC, it’s around $47m, but that doesn’t affect our cash.

“Both numbers are on the low side for de-spac transactions.”

Meanwhile, the pace of growth in the number of transactions has slowed considerably. As Loadstar Premium noted in June, right ahead of the stock rally from the low of $3 a share, “it’s the incremental sequential quarter-on-quarter growth that matters now… That reads +8.8% Q1 on Q4, after +9.5% in Q4/Q3 and +28% in Q3 23 versus the previous quarter, around peak, and then +37.7% before that. So, while it’s growing, its incremental growth is nowhere near what it was a year ago, as the downturn bites”.

It said: “Adding transactions from a lower base, of course, was also easier than now and, gauging transaction growth isn’t necessarily a value-driver for a business which so far, for the steeper growth rate it enjoys, seems to be burning more cash to fund those operations.”

It is also undoubtedly a weak market, with freighters being parked and shipping lines seeing a “rates bloodbath” as carriers chase volume at the expense of profitability.

Internally, Freightos has also lost a director, Robert Mylod, chairman of Bookings Holdings and former Priceline executive and director, a Freightos investor on the board since 2014. The company was quick to quell any speculation as to the cause. It said: “Mr Mylod’s decision to resign did not arise or result from any disagreement with the company on any matter relating to the company’s operations, policies or practices, but as a result of competing demands on his time.”

Sources also indicate that director Guillaume Halleux, head of cargo for Freightos investor Qatar Airways, is also set to leave the airline, and therefore the board.

Alessandro Pasetti, head of Loadstar Premium, said Freightos, whose share price tanked on its IPO launch but which has started to creep up, should be treated as a penny stock. “But job cuts make sense,” he added. “It shows they know they must adapt quickly.”

“But clearly, its mid-term free cash flow targets and ebitda targets are merely speculative, as was its whopping $435m pro-forma enterprise value ahead of launch.”

CFO Ran Shalev said yesterday: “We believe this plan will enable us to reach positive free cash flow on existing cash reserves as planned, despite a tougher market. As a result of the changes, we are reducing our operating loss and raising our FY 2023 adjusted ebitda outlook on lower forecasted revenue, remaining on track to build and scale Freightos as a profitable, sustainable company.”