Karooooo Ltd. Q3 FY2025 earnings call

• Cartrack's operating momentum drove growth, with 17% YOY subscriber increase, stable growth in SA, and 200 basis point QoQ acceleration in Europe. Moved to new central office in SA boosting operational capacity. Ramping up sales/marketing in SE Asia with early success.
• Karooooo Logistics is a growing delivery-as-a-service business with 38% YOY revenue growth, profitable at current scale, and strategically important for customer retention.
• Q3 financial highlights: Total revenue ZAR1,159 million (+15% YOY), subscription revenue ZAR1,032 million (+14% YOY), adjusted EPS ZAR7.67 (+21% YOY). More than 2.2 million subscribers, platform generates over 180 billion data points monthly.
• Platform features include AI-powered cameras, field management tools, delivery management, real-time asset tracking, fraud mitigation, etc., with deep integration into customers' operations.
• AI-driven solutions for fatigue driving, fuel fraud, etc., with examples of customer impacts like 32% reduction in fatigue-related incidents.
• Southeast Asia seen as significant growth opportunity with over 600 million people and $4 trillion economy, low fleet management penetration, and favorable macro trends.
• Capital allocation focus on organic growth, product innovation, returning surplus capital to shareholders via dividends, and strategic M&A.

Cartrack: For FY ‘25 year-to-date, Cartrack subscription revenue was approximately ZAR3 billion, an increase of 15% year-on-year or 20% year-on-year on a U.S. dollar basis. Cartrack’s year-to-date operating profit margin was 30%. In Q3, Cartrack subscription revenue was ZAR1,029 million, an increase of 14% year-on-year, operating profit was ZAR316 million, and total subscribers increased 17% year-on-year to more than 2.2 million. Karooooo Logistics: For FY ‘25 year-to-date, Karooooo Logistics delivery-as-a-service revenue was ZAR310 million, an increase of 38% year-on-year or 45% year-on-year on a U.S. dollar basis. In Q3, Karooooo Logistics delivery-as-a-service revenue contributed to the total revenue of ZAR1,159 million, an increase of 15% year-on-year.

• Reaffirmed FY ‘25 financial outlook. On track to surpass 2.3 million subscribers by year end. Expecting record Q4 net subscriber additions. Focus on capital allocation for organic growth and product innovation, with strong unit economics and disciplined capital management.

Q: What is a unique selling point for hiring senior people?

A: I think that really depends whether you are hiring a technical person, a developer or a salesperson, you know those we would have selling points that talk to the respective jobs in the business, but fundamentally hiring senior people to the business, it's very easy for us. We have very attractive business. So if we want a senior person, we find those hires are extremely easy. Where it becomes more challenging is actually on the distribution front, which is actually salespeople. There's very really good quality salespeople and attracting the right people and training them is not always the easiest.

Q: Should we think of the impact of the new generation vehicles that have integrated or have integrated full self-driving technologies?

A: I think we're in the very early stages of self-driving technologies. I think there's one or two smaller cities in America that are doing it. There's a few running around Singapore. But I think we're still quite a long way away from self-driving becoming a way of life. And obviously things do change between now and where that becomes an absolute reality. I think we could probably see UFOs before we see full self-driving vehicles in some parts of the world. I'm not sure. But I think fundamentally, the way we operate our business and see our business is that when we agile and we adapt, there's no need to adapt right now. It's too early in the curve to start planning for that.

Q: With multiple regions performing strongly, what has been the contribution to ARR from each? Is this a good way to think about the breakdown going forward?

A: Yes, I think that's a good way to look at it, but it's very much in keeping with the growth in subscription revenue in the region. And obviously at the moment, our ARR and our subscription revenue was impacted by the stronger rand, which obviously the non-South African entities, whether it's Europe or Southeast Asia, they were dealing with a stronger rand. I see since November, since year end, that's corrected quite a bit with the South African rand is weakened. But I think the other currencies probably have weakened against the dollar as well. So I haven't quite looked at the impact for Q3, the potential impact for Q3.

Q: Can you talk about your planned global sales and marketing hiring efforts? What is the magnitude you're looking to grow the sales organization over the next 12-months in some of your core regions?

A: In Asia, our target is to grow that by about 70% of our current headcount and we believe that we will comfortably be able to do that 70% increase. We're also increasing in South Africa, we're just settling down in a new building, but we're probably going to increase headcount in South Africa by about 50% on the sales and marketing side. And in Europe, we're also looking at increasing it by about 50% this year. We've been increasing Europe consistently over the last six or eight quarters and we can see already the results where we're starting to get 19% growth.

Q: There's a lot of noise around the Africa Free Trade Agreement. Do you see the noise translating into positive opportunities for car track in Africa?

A: Patrick, with the trade agreement or no trade agreement, the opportunities are very vast and huge for us. Clearly the more free trade there is, the more logistics there is that obviously acts in our favor. I think those are the questions for today. I want to thank everybody. Should there be any other questions, you're welcome to email me. Thank you. Bye-bye.