Freightos Limited Ordinary shares 2026 Q2 Earnings Call

Hello, and welcome to Freightos' Q2 2026 earnings conference call. A press release with detailed financial results was released earlier today and is available on the investor relations section of our website, freightos.com/investors. My name is Anat Earon-Heilborn, and I am joined today by Pablo Pinillos, Freightos CEO and interim CFO, and Ian Arroyo, Chief Strategy Officer. Following the prepared remarks, we will open the call for questions. We are sharing slides during the call and using video. We recommend using Zoom on a computer rather than dialing in by phone. The slides, as well as a recording of this earnings call, will be available on 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 will 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. The company undertakes no obligation to update any information discussed in this call at any time. Before we begin, I would like to note our upcoming investor events. This week, Freightos will participate virtually in the Sidoti Micro-Cap Conference. In September, management will attend the H.C. Wainwright Annual Investment Conference in New York. Links to webcasts, when applicable, and other event updates can be found on our website.

Today's earnings call will begin with a business and financial overview by Pablo, followed by Ian, who will discuss our product strategy in more detail. Next, Pablo will present the guidance for Q3 and full year 2026. We will conclude with Q&A. Questions can be submitted in writing during the call by using the Q&A feature in Zoom. With that, I will hand it over to Pablo.

Thank you, Anat, and thank you everyone for joining us today. We delivered record revenues of $7.7 million, ahead of our expectations. Adjusted EBITDA loss improved to a record low negative $2 million, primarily due to our tight cost discipline, and platform revenue grew 19%. At the same time, solutions revenue declined 4%, reflecting the execution gaps identified during 2025 in building a recurring revenue stream. However, with the discipline changes and sharper prioritization now in place, we expect results to begin showing in H2. The quarter demonstrated that our global offering remains resilient and increasingly vital to customers navigating industry headwinds, while our operating discipline continues to improve. As we said at the beginning of the year, 2026 is a transition year. Our focus this year is on disciplined execution, tighter prioritization, and building the foundation for long-term growth.

As we look at our progress in the second quarter, I would highlight three things. First, we continue to strengthen Freightos' position across the freight ecosystem, advancing our vision of becoming the infrastructure layer that connects the global freight industry. Second, we continue to execute against the plan we outlined earlier this year. In Q1, we focused the organization on alignment and prioritization. In Q2, that execution is increasingly reflected in the evolution of our product offering. While our updated full-year outlook reflects areas where execution needs to accelerate, we expect the crossover to adjusted EBITDA breakeven to occur at some point during the fourth quarter. We see the business exiting 2026 at a breakeven run rate, and from there, becoming cash generative by mid-2027, ensuring our financial stability and ability to fund future growth.

Before diving into the quarter, I would like to briefly note the appointment of Jerome Eldad as Freightos' new Chief Financial Officer, effective September 1st. Jerome brings more than 25 years of senior financial leadership experience, including significant public company and international operating experience. His appointment is an important step in our management transition and strengthens the leadership team as we remain focused on delivering against our goals. We are very pleased to have him joining Freightos. Now, let's discuss the results of the quarter. Total revenue for the second quarter was above our expectations and up 3% from Q2 last year. The outperformance was driven by platform revenue of $2.9 million, increasing 19% compared to last year. Whereas solutions revenue of $4.8 million was down 4% from last year. The platform outperformance this quarter reflects the breadth of our platform revenue base.

While the Middle East conflict continued to weigh on booking volumes in affected corridors, tariff-driven reimbursement activity through Clearit provided a meaningful offsetting tailwind. With one source of platform revenue under pressure and another exceeding plan, the net result was platform revenue above expectations. What we have seen in the Middle East routes were still disruptive through the second quarter, but recovery was stronger than what we had previously anticipated. Our platform facilitates 458,000 transactions, up 16% from Q2 last year. Excluding routes involving Middle East origin, destination, or airspace, transactions grew year-on-year at a rate well in line with the company's long-term model of 20%-30% transactions growth. The gross booking value of these transactions reached a record of $422 million, up 33% from Q2 last year.

This reflects both the transaction volume and the fact that the average air freight rates remain high, about 25% above their pre-conflict levels. Platform revenue benefits from higher than expected contribution from Clearit, our custom transactions business line. Clearit processed many refund claims following tariff policy changes. This activity carries higher revenue per transaction and typical customs transactions, and was a meaningful, largely temporary contributor to Q2 outperformance. We expect a moderate contribution in Q3 and a smaller contribution in Q4. Nevertheless, it is a reminder of the importance of having a broad platform revenue base. We announced the addition of Korean Air to the Freightos network. This is the major Asian cargo airline, whose addition we referred on our Q1 quarter call.

We have said for some time that expanding airline participation in Asia is a strategic priority for us, so confirming Korean Air as part of the network is an important milestone. As we continue adding leading carriers across key geographies, we strengthen network connectivity, increase the depth of the network, and create more opportunities for better procurement and decision-making across the platform. Every leading carrier we add helps increase the data flow through the network, and that cumulative effect of building a larger, more connected network over time is really the bigger story here. Active carrier count, active meaning that they have received more than five transactions each in the quarter, was 75, compared with 79 in Q1 and 75 a year ago. The quarter-on-quarter decrease reflects some carriers failing down below the threshold, partially offset by the addition of other carriers.

The active carrier count can fluctuate quarter-on-quarter as individual carriers move above or below the threshold. But we are focused on the long-term trajectory and customer value, adding leading carriers, expanding geographic coverage, deepening the network, increasing available capacity. Turning to solutions, revenue for the second quarter was down year-on-year, reflecting the execution gap identified during 2025. New bookings were not sufficient to cover for the shortfall, and we are seeing some pricing pressure on renewals. We are not satisfied with this performance, and we are being direct about that. We continue to build a strong pipeline, up 30% quarter-on-quarter, that is progressing correctly through the sales cycle, but the pipeline is not the outcome. Bookings and revenue are. We are measuring progress through conversion rates, sales cycle duration, renewals, and customer go-lives.

We will judge ourselves on those outcomes, and we expect it to start converting during H2. The strategic logic connecting solutions to the rest of the offering hasn't changed. Our solutions become embedded into customers' procurement, pricing, and booking workflows, driving increasing platform activity, which in turn generates richer data and market intelligence that makes the solutions themselves more valuable. That reinforcing dynamic is intact, but for it to work, we need to convert more effectively on deal velocity, on demonstrating clear ROI to customers in a market where procurement budgets are under scrutiny, and on closing the gap between pipeline strength and bookings. Part of what we have done to sharpen that customer value is to bring our product portfolio together under a single Freightos identity. Ian will walk through the product implications in a moment. But at the strategic level, here is why it matters.

This is an evolution in how we present the company and how we operate, both internally and externally. Over the years, we have built multiple products serving different parts of the freight ecosystem. As those capabilities have become increasingly integrated, it became important that our brand reflects that reality. Our ambition is not simply to offer great logistics software. Our ambition is to build a connected platform where procurement, pricing, booking, payment, data, and decision intelligence work together to help customers move freight more efficiently. A unified identity makes it easier for customers to understand the breadth of the Freightos platform and how our solutions work together. We received positive customer feedback on the move and believe that clarity will support solutions adoption over time. Before I hand it over to Ian, let's discuss our profitability and cash position.

Non-IFRS gross margin was 74.1%, up from 73.5% in Q2 last year, demonstrating efficiency gains. Adjusted EBITDA was negative $2 million, reflecting primarily the disciplined cost management and focused investment approach we outlined at the beginning of the year. The cost optimization actions we announced in March are on track. We are beginning to see the operational benefit of those actions that will continue during Q3 to get full benefit on the financial impact in Q4, as we indicated. We ended the quarter with $21.4 million in cash and short-term deposits. We are on track to cross the adjusted EBITDA breakeven point by the end of the year. Once we reach breakeven, we expect to begin generating positive cash flow within one or two quarters after that.

We are not only well-capitalized to execute our strategy to breakeven, we have the resources to continue investing in the business we own it. With that, I will pass it over to Ian.