Freightos has a plan and they have no influence over its success.
I could leave this title and publish the article without any other content than a single quote from the soon-to-be infamous Zvi Schreiber: "the tailwind when the market recovers".
So, what is Freightos' big plan for success, and will the market help them get there?
A man of many quotes.
And excuses.
Here's the thing with the current freight market: it stinks.
Rates are back down in the never regions. Demand is still hit and miss (more miss than hit for the most part). And socioeconomic and geopolitical issues are reaping havoc on supply, demand, purchasing power, and supply chains.
Zvi Schreiber knows this all too well and has already played the excuses card, just before the IPO. His words?
"If the share goes up or down in the short term, it doesn't matter that much."
- Zvi Schreiber, Founder and CEO of Freightos
What he failed to mention in that sentence is that he already knew the share price was going down. See there is a reason why companies have put off their IPOs, and continue to do so. An IPO right now, especially via SPAC, is the best way to provide your shareholders with a bad deal. But with his back against the wall, a lack of funding, and no sign of profitability in sight, it was the only choice.
Fast forward a month or so, and the stock seldom ventures past $4.4 for a market cap of $65mn and some change. A far cry from the $500mn valuations of yesteryear. Either we were overly generous in our valuations in the past, or we've actually figured out that we were overvaluing the notion of "hype".
Quote number 2 is a personal favorite of mine:
"Public investors can rely on comparisons to technology stocks in other sectors."
- Zvi Schreiber, Founder and CEO of Freightos
Ah yes, the famous apples-to-oranges theory. Why compare Freightos to other Logistics Technology players when we can compare them to the likes of Tesla, Apple, and Shopify? I joke of course, but you get the point. Using external factors such as the overall state of Wall Street as an excuse for your poor performance is not a good look and one that should not be perpetuated.
And yet...
"The tailwind when the market recovers"
- Zvi Schreiber, freight whisperer and fortune teller
This last one really is a punch to the gut of anyone who takes logistics and especially logistics technology seriously. There are a number of great companies out there giving it their all today to make things work. Overhaul and their recent success springs to mind, after a successful acquisition and raising more funds. Others managed to get acquired at decent price points such as Blume Global by WiseTech Global. I see many names on LinkedIn with excited staff pushing their company's vision and product: Gnosis, CargoSense, Shippeo, Nowports... There seem to be things happening, and they seldom blame the market for their shortfalls.
If you're looking at Freightos and wondering what is next, it is not profitability when the market recovers. They barely grew during the pandemic compared to how the market evolved, and are one of the companies that benefitted the least from the "valley of plenty" moment that we had.
Freightos may reach profitability. They may manage to build something that works. But it will never be the innovative and disruptive Logistics Technology that our industry needs.
Stop the count.
Will we ever see some real metrics that mean something?
When a business shares numbers, you always need your thinking cap and an accounting dictionary. We've had some great ones dropped on us recently such as project44's "contracted revenue", but Freightos take the cake when it comes to trying to look good. I particularly like their instance on Gross Booking Value, which seems to have nothing to do with their numbers.
Of course, admitting a $28.5 average transaction value for the year, down to $23 average per transaction in Q4 doesn't look as good as a $611m Gross Booking Value that has increased 102%. Here are the key numbers:
$19.1m revenue, up 71%
$24.3m operating loss down from $16.3m operating loss
-$14.6m EBITDA, also down on -$12.4m
This translates into anything but a healthy picture as they try to find some kind of profitability. The numbers show something that we're all too familiar with amongst struggling companies: increased customer acquisition cost, inflated sales and marketing spending, and cutting special deals resulting in decreased transaction value.
What Zvi Schreiber calls a "strategic decision during the growth stage" others may perceive as a weak product market fit and issues creating value. The high sales and market spending and dip in average transaction value do not bode well for the future. Each transaction on the platform in FY22 cost $19.5 to acquire. That doesn't leave much more room for Freightos to manoeuvre unless they are planning on operating at an even worse loss in the future.
We're going to need some tailwind to carry this company out of the red.
Or maybe we'll see a CEVA and have Freightos acquired by someone who is ready to acquire them for the convenience of what they have built on the air carrier side.
IPO LinkedIn post: https://www.linkedin.com/posts/anthonymlr_logistics-shipping-supplychain-activity-7024330099202125824-9ia6?utm_source=share&utm_medium=member_desktop
Entertaining Loadstar post by Alex Lennane on the subject: https://theloadstar.com/freightos-fairlytale-earnings-call-are-you-sitting-comfortably-children/
I'm Anthony, ex-WiseTech'er and Logistics Technology nerd.
You can find me on LinkedIn: https://www.linkedin.com/in/anthonymlr/
And I may start using Twitter if Elon doesn't kill it first: https://twitter.com/Anthonymlr1
My opinions are my own, although I'm sometimes told they are shared by many, yet voiced by few.
My goal is to make Logistics Technology a healthier place and to provide everyone with the kind of information they need to decrypt this magical and mad industry we either love or hate depending on the day and if someone has blocked the Suez Canal again.