Freightos Ltd (CRGO) Q1 2026 Earnings Call Transcript

Q1 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. My name is Anat Earon-Heilborn, and I'm joined today by Pablo Pinillos, Freightos' CEO and Interim CFO; and Ian Arroyo, Chief Strategy Officer. Following the prepared remarks, we'll open the call for questions. We are sharing slides during the call and using video, so 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'll be providing and referring to certain non-IFRS financial measures. You can find a reconciliation 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'd like to note our upcoming investor events. This week, Freightos will participate in the virtual Lytham Partners Spring Investor Conference. In September, management will attend the H.C. Wainwright Annual Investor Conference in New York. Links to the webcast when applicable and other event updates can be found on our website. Today's earnings call will begin with a business overview and outlook by Pablo, followed by Ian, who will deep dive into our strategy. Next, Pablo will present the financial results and the guidance for Q2 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. Before discussing the quarter, I would like to briefly acknowledge the leadership transition announced earlier this year. I'm honored to step into the role of CEO after joining Freightos as CFO a little over a year ago. During that time, I have developed a deep understanding of both the strengths of the business and the areas where we need to sharpen execution and operating discipline. We have initiated the search process for a permanent CFO, and we will provide updates as appropriate. Let me start summarizing a few things in regards to last quarter. First, while Q1 was a softer quarter than we expected, we continue making important progress across several strategic priorities, including expanding our carrier network, growing our solutions sales pipeline and advancing workflow integration across procurement, pricing and execution. Second, the freight market remained volatile during the quarter, particularly following the disruption across Middle East trade corridors. That volatility impacted capacity routing behaviors and transactions activity during the quarter. But it also reinforced the customer demand for procurement intelligence, multimodal visibility and more connected operational workflows. The broader direction of the industry continues moving exactly where we believe Freightos is positioning to win. Customers increasingly need faster procurement decisions, multimodal visibility, integrated operational workflows and better market intelligence across air and ocean freight. That trend directly supports our long-term strategy. Third, as discussed during the Q4 earnings call, 2026 is a transition year for Freightos and during the quarter, we continued executing on our priorities by improving go-to-market execution, sharpening operating discipline, and focusing R&D investments on the highest-return initiatives, deepening customer adoption and positioning the company for durable profitable growth. Importantly, this is not a change in strategy. It is a stronger focus on execution, accountability and scalability. During Q1, we took several important steps in that direction: tightening prioritization, simplifying organizational complexity, improving operational accountability and aligning resources more directly to our highest conviction growth opportunities. And finally, while near-term conditions remain challenging, we remain confident in both our long-term strategic positioning and our path towards adjusted EBITDA breakeven by the end of 2026. Now let me turn to solutions. Q1 performance was below our expectations, reflecting both a cautious enterprise environment and areas where we need to improve execution and consistency. Customers are expressing growing demand for benchmarking and forecasting capabilities, procurement intelligence and index-linked purchasing strategies designed to help customers manage volatility more dynamically across air and ocean freight. At the same time, we are seeing stronger commercial momentum in our solutions pipeline, which is currently approximately double what it was a year ago. As we outlined in February, our focus in 2026 is improving commercial execution, sharpening prioritization and increasing operating consistency across the business. On the product side, we continue aligning our R&D investments around integrating procurement, pricing, quoting, booking and market intelligence into a more connected operational environment. We believe this becomes increasingly valuable in volatile freight markets where customers need faster decision-making across transportation modes, suppliers and trade lanes. We are also continuing to expand our multimodal capabilities, including ocean and procurement management as part of the broader strategy. Importantly, we continue seeing the same structural dynamic across the platform. Customers that adopt our solutions transact approximately three times more, retain at higher levels and expand usage over time. That remains one of the clearest validations of our long-term strategy and why our focus remains on building stronger recurring customer value first, while transactions scale from a more durable foundation. Moving to transactions. Q1 revenue and platform activity reflected the shortfall we reported in our KPI update last month. We processed 425,000 transactions in the quarter, up 15% year-over-year, but below our 20% plus target. The shortfall was driven primarily by disruptions in the Middle East where capacity was unavailable for extended periods across important trade corridors. Outside that region, transaction growth was healthier, supported by continued activity across other markets and increased use of alternative routings. April improved relative to March, which is encouraging. However, activity in the Middle East remains below prior year levels. And while we expect conditions to improve gradually through the rest of the year, we do not expect to fully recover the shortfall already incurred in Q1. On the carrier side, our network reached a record of 79 active carriers in the quarter, up from 77 in Q4. Shortly after quarter end, we also secured a major carrier addition that we expect to further strengthen our position in APAC, a region where we continue to see meaningful room to expand relative to Europe and the Americas. We hope to announce this carrier formally soon. Gross booking value was $343 million in the quarter, up 24% year-over-year. While GBV has a limited direct impact on revenue, because much of our transaction monetization remains fee-based, it remains an important measure of platform scale, liquidity and customer relevance. Let me pass it to Ian to discuss our strategy in more detail.

Thanks, Pablo. One of the most important structural shifts we continue seeing across global freight is that procurement execution and market intelligence decisions are becoming increasingly interconnected across transportation modes and counterparties. Historically, many of these systems operated independently across air cargo, ocean freight, procurement and execution environments. This is rapidly changing. Our customers increasingly need to compare alternatives, reroute freight, adjust sourcing decisions and execute operational decisions dynamically across both air and ocean networks. A very recent example involved a Fortune 500 oil and gas services company with a major spare parts distribution hub in the Gulf region. During the Middle East disruption, they were able to rapidly shift operations to the Americas to maintain customer support and supply chain continuity. Moves like these create significant complexities across procurement, routing, capacity management and execution. That reinforces our view that the long-term opportunity is not simply digitizing freight transactions. The larger opportunity is connecting procurement, pricing, quoting, execution and market intelligence within a single operational environment, spanning multiple transportation modes and participants. That is the direction that Freightos is building. You can think about the platform as a reinforcing flywheel model: solutions drive transactions, transactions generate additional operational data and market intelligence, and that intelligence improves procurement, pricing and execution decisions across the broader network. We believe that model becomes increasingly valuable as freight markets become even more dynamic and operationally complex. This is also where we believe Freightos is strategically differentiated. There is obviously significant discussion across software markets around AI. But in fragmented industries like global freight, long-term value will not come from AI alone. It will come from combining live operational data, our carrier connectivity, integrated operational levels and deeply embedded customer relationships. The operational data and connectivity across carriers, freight forwarders and shippers create an infrastructure layer that is very difficult to replicate. In many ways, AI increases the value of connected platforms because customers increasingly need actionable intelligence embedded directly into live procurement and execution workflows. Going back to my earlier oil and gas example, Freightos recently launched predictive risk forecasting, and that could have identified the need for network adjustments before the disruption materially impacted operations, allowing procurement teams to proactively secure capacity and reduce downstream disruption. Over time, we believe increasingly intelligent and automated decision support can materially reduce friction across freight procurement and execution while improving responsiveness, efficiency and operational resilience. Overall, we continue seeing the market evolve in a direction that reinforces our strategic priorities: deeper multimodal connectivity, stronger procurement capabilities, integrated operational workflows, embedded market intelligence and more disciplined execution. With that, Pablo will go over our financial review.

Thanks, Ian. Revenue in the first quarter was $7.2 million, up 3% year-over-year. Within platform, Cargo by Freightos remained healthy, partially offset by softer activity within WebCargo and the customs transaction segment, and lower-than-expected transaction activity related to Middle East disruptions. Within solutions, data products performed well, while SaaS solutions underperformed relative to our expectations. Non-IFRS gross margin was 73.5%, remaining within our long-term target range of 70% to 80%. Adjusted EBITDA was negative $2.8 million during the quarter, in line with our expectations. During the final week of the quarter, we began executing the cost optimization plan announced in March. These actions are designed to align organizational structure with the strategic priorities, improve execution focus, simplify complexity and support our path towards adjusted EBITDA breakeven by the end of 2026. Importantly, this is not just a cost reduction initiative. It is about building a more disciplined organization capable of executing in a more predictable way and scaling more efficiently over time. We expect these actions to generate approximately $4.5 million in annualized savings beginning in Q4 2026. We closed the quarter with $23.5 million in cash and short-term bank deposits, which we believe provides sufficient liquidity to support our operating plans. Turning to guidance. We are updating our full year outlook to reflect softer-than-expected first quarter performance, continued impact from Middle East disruptions and a more cautious enterprise spending environment. Relative to our prior outlook, transactions growth expectations have moved lower, primarily due to the Q1 shortfall and the continued Middle East disruption, as said before. Revenue expectations have been moderated. And at the same time, we remain committed to achieving adjusted EBITDA breakeven during Q4 2026. The cost reduction actions, combined with tighter prioritization and improved operating discipline, support that path even as revenue expectations moderate. While near-term conditions remain volatile, we remain highly confident in the long-term opportunity ahead. Freightos has built an increasingly connected global freight platform, supported by a broader carrier network, deep ecosystem integrations, growing adoption across procurement and execution and increasingly valuable operational data and market intelligence capabilities. As freight markets become more digital, interconnected and intelligence-driven, we believe the strategic importance of a neutral infrastructure platform capable of supporting procurement, execution and interoperability across the ecosystem will continue increasing. Our long-term vision remains unchanged, and we continue expecting to return to a 20% plus growth trajectory in 2027 and beyond. Thanks for joining us today and sharing your time.

Thank you, Pablo. We can now take questions. So the first question will come from the line of George Sutton. George, you can unmute now.

This is Logan hopping on for George. So Ian, it was interesting to hear your comments about recently launching predictive risk forecasting. It sounds like, in general, you're trying to move to more intelligent and automated solutions. I wondered, first, if you could just go into more detail on that predictive risk forecasting. And then in general, where do you see the biggest opportunities to launch some of these more automated solutions? Are these built on AI? Or how should we think about the level of automation here?

Yes, it's a great question, Logan. Thanks for asking. Predictive risk forecasting takes into account many factors. One thing that Freightos' terminal has been doing for quite some time is pulling data that could impact freight capacity and pricing globally. Over the last nine months, we've distilled that into about five key areas that can predict risk on capacity and pricing in ocean and air. And yes, that is built off an enormous amount of data that we have accumulated and that has been used in various contexts. We use AI to combine that data plus client input on their key risk factors and the areas where they're operating, to provide risk forecasting around pricing, capacity and disruption in their network. Regarding where we see more opportunities, if you look at our strategic priorities, it's very much around automated procurement and actionable intelligence — not only providing data outputs but providing recommendations and even automated execution against preset inputs coming from clients. For example, in a procurement event where there could be disruption in a key region in the next six weeks, ensuring they have the right backups in place from a pricing and capacity perspective and the ability to execute against that. So we see opportunities across market intelligence, procurement and network design.

Okay. Helpful. And then, it sounds like solutions was a bit weaker this quarter, but the pipeline has developed nicely. Can you help us square those things? Is your sales cycle a little bit longer right now? Is the progression of AI in general having any impact on budgets? Just help us understand what you're hearing from customers right now compared to six months or a year ago and then the visibility into the reacceleration.

Yes, sure. Let me take this one, Logan. Sorry that George couldn't join us. We saw solutions perform lower than we expected. The platform transaction shortfall is entirely market related and is the cause of the revenue shortfall versus our guidance this quarter. Q1 is also the first quarter of our execution focus change, so we didn't expect solutions sales execution to immediately deliver at higher levels. As you said, uncertainty in the market is delaying some customer decisions. In order for us to have full control and understand how the sales cycle evolves, we've made changes to our execution. We expect to have full visibility and control over the rest of the year, and we are starting to see that in the pipeline we built in Q1, which doubled year-over-year.

Okay. The next question is from the line of an analyst. You can unmute.

Sorry. Hopefully, you can hear me okay. Can you talk about the cost savings program you implemented in March? Will we see anything in the second quarter? Can you give us an idea of the cadence of that cost savings target of $4.5 million by the end of the year?

Sure. We executed the cost optimization plan at the end of March. Of course, in Q1 we didn't benefit much from that. We will start to benefit in Q2 going forward. The majority of that benefit will come during Q2 and partially in Q3, with the full run-rate realized in Q4. So in Q4, the $4.5 million annualized savings run rate will be materialized, mainly starting in Q2.

Okay. Great. And then if you could just talk about your cash position? It dropped $5 million in the first quarter. Is that equivalent to your cash burn? And could you talk about the path over the rest of the year as far as how your cash burn looks?

The cash decline this quarter was affected by the cost optimization plan we executed at the end of March, and we incurred some one-time cash costs for that. Normally, our cash burn is closely aligned to our adjusted EBITDA, and that's the expectation for the rest of the year. Our guidance for Q2 is similar to our expected cash burn in Q2. Our cash burn for the year is expected to be in the same range as the guidance we put for adjusted EBITDA, with the caveat that the cost optimization actions added roughly $1.3 million of one-time costs. Otherwise, cash burn should be closely aligned with adjusted EBITDA.

Okay. Let's now take a few questions from the chat. So the first one is, how should we think about monetization per transaction in the current environment of elevated freight rates and lower volumes? Are you seeing any meaningful change in take rate or pricing mix?

Ian, do you want to take this one?

Sure. Monetization per transaction, as we've discussed on these calls over the last couple of years, is largely driven by the contractual terms with carriers and is generally flat on a per-transaction basis. Therefore, the revenue mix doesn't necessarily change significantly as freight rates move up or down. If volumes are lower, you can see softer transaction-driven revenue, which is what we experienced with the Middle East disruption. GBV can rise if freight rates are higher, as it did this quarter, but take rate and transactional revenue depend on transaction count as well as contractual structures.

Thanks, Ian. Another question, which I think we partly answered, but maybe it's worth fine-tuning. You mentioned that solutions represent the majority of revenue and are less directly tied to platform KPIs. Given the software transaction environment in the Middle East, how did solution revenue perform relative to your internal expectations? And are you seeing any delays in enterprise spending or deal closures?

So let me take this one. As I mentioned earlier, in Q1 solutions revenue was softer than we expected. Q1 was the first quarter where we implemented our change in focus, and internally we did not expect solutions sales execution to immediately be at the higher level we aim for in subsequent quarters. This shortfall versus guidance is 100% related to the platform transaction shortfall in Q1. Enterprise customers, given the uncertainties, are delaying some decisions, but we are communicating with them day-to-day, demonstrating value and tightening our approach. We now have more control over the sales cycle and closer engagement with customers. All future guidance will be related to the activities that we are executing.

Thanks, Pablo. So another question is referring to the long-term vision: can you remind investors of the five-year view in terms of business mix, revenue targets and margins?

From a long-term perspective for 2027–2030, we see a framework of transactions and GBV growth in the 20% to 30% range year-over-year. Revenues returning to over 20% growth, targeting roughly 25% to 30% per year. Gross profit margin is expected to remain in the 70% to 80% range on a non-IFRS basis. We expect adjusted EBITDA improvements in the range of 8 to 12 percentage points year-over-year. That's our current view for the next three years.

Thank you. And our last question, I believe, refers to one of the comments that you already made, Pablo. Someone is asking for clarification: is cash going to be enough to reach cash flow positive?

Yes, we are confident that with the burn we expect and with $23.5 million in cash right now, we have sufficient liquidity to support our operating plans for the rest of the year and to achieve adjusted cash positivity around two to three months after we become breakeven.

Okay. I see no further questions. So thanks, everyone, for joining. Have a good day.

Thank you, everyone.