Yahoo Finance

Participants

Paul Beaver; VP of Investor Relations; Karooooo Ltd

Carmen Calisto; Chief Strategy and Marketing Officer; Karooooo Ltd

Hoe Shin Goy; Chief Financial Officer; Karooooo Ltd

Isaias Calisto; Executive Chairman of the Board, Chief Executive Officer; Karooooo Ltd

Presentation

Paul Beaver

Hello and welcome to Karooooo's Financial year 2025 Q3 earnings call. On behalf of Karooooo, we would like to thank you for joining us today. I'm Paul Bieber, Karooooo's VP of Investor Relations and Strategic Finance. We are joined today by Zak Calisto, Founder and CEO, Hoe Shin Goy, Chief Financial Officer and Carmen Calisto, Chief Strategy and Marketing Officer.
Before handing the call over to Carmen, I would like to remind everyone that some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions. They are subject to a number of risks and uncertainties. Actual results could differ materially, please refer to the safe harbor statement in our form 20F including the risk factors and the 6K that we filed yesterday.
We undertake no obligation to update any forward-looking statements. During this call, we will present both IFRS and non-IFRS financial measures. The reconciliation of non-IFRS to IFRS measures is included in the 6K that we filed with the SEC yesterday.
With that, I'd like to hand the call over to Carmen.

Carmen Calisto

During the call today, we will review both Karooooo's operating units. Cartrack and Karooooo logistics for those new to Karooooo. Cartrack is our operations management SAS platform. Cartrack operates at scale and has a very attractive financial profile. Cartrack's operating momentum has primarily driven Karooooo's growth and strong financial performance. For FY25 year-to-date, Cartrack subscription revenue was approximately ZAR3 billion an increase of 15% year-on-year or 20% year-on-year on a US dollar basis. Cartracks year-to-date operating profit margin was 30%.
Karooooo logistics is our rapidly growing delivery as a service business that empowers our large enterprise customers to scale their e-commerce and logistics operations. Karooooo logistics is a structurally lower margin business and car track showing good growth momentum.
Karooooo logistics is strategically important to us as it empowers our customers to scale their e-commerce and logistics operations through a capital light model. Whilst driving high culture customer attention for FY25 year-to-date Karooooologistics delivery as a service revenue was ZAR310 million. An increase of 38% year-on-year or 45% year-on-year on a US dollar basis. Given Karooooo logistics' robust revenue growth, we are very excited about the long term growth opportunity for the business. Karooooo logistics is profitable at its current scale. In Q3 Karooooo delivered another strong quarter with total revenue of ZAR1,159 million. An increase of 15% year-on-year subscription revenue of ZAR1,032 million an increase of 14% year-on-year and adjusted earnings per share of ZAR7.67 an increase of 21% year-on-year Q3 continued our long track record of delivering profitable growth at scale. In Q3, we were a rule of 60 company when adding our Q3 subscription revenue growth of 14% and our Q3 Cartrack adjusted EBITA margin of 47%.
We ended Q3 with more than $2.2 million subscribers, an increase of 17% year-on-year and more than 125,000 businesses across all industries, trusting us to power and improve their daily operations. We continue to grow our data asset and our platform now generates more than $180 billion valuable data points monthly which we leverage to drive actionable insights for our customers.
Before diving into our Q3 business and operational highlights. We want to take a moment to underscore our distinctive financial profile, something that is exceptionally rare in the public markets, particularly among small cap companies. We believe we are amongst the select few SAS companies operating at a rule of 50 plus based on 2025 GAAP Street estimates notably within ASA universe of approximately 200 companies. We believe we are one of only two small cap companies operating at this level.
Being part of this elite group reflects our unwavering commitment to disciplined and profitable growth. We are proud to stand out as a leader in financial performance amongst our SASS peers in Q3, Carres total subscribers increased 17% year-on-year highlighted by stable growth in South Africa and a 200 basis point quarter on quarter acceleration in Europe. In september, we successfully completed the move to our newly built central office in South Africa. This move bolsters our operational capacity and positions us to support higher levels of organic growth. We are already seeing positive early results from the strategic investment.
Additionally, we continue to ramp up our investment in sales and marketing across Southeast Asia and are seeing early signs of success. We remain confident that Southeast Asia represents the most compelling growth opportunity for the group over the medium to long term, we will have more to say about the Southeast Asia opportunity. Later in this presentation with our ongoing investments in sales, marketing and infrastructure to support future growth, we believe we have ample runway to accelerate customer acquisition whilst maintaining robust earnings. Finally, Cartrack delivered healthy subscriber editions in Q3 while maintaining strong unit economics with an LTV to CAC ratio greater than nine, our commercial customer retention rate remains at 95% and we continue to grow the business at scale with discipline.
Our Q3 financial highlights include Carres year-to-date subscription revenue increased 20% year-on-year on a US dollar basis. Cartrack subscription revenue increased 19% year-on-year on a US dollar car track surpassed ZAR1 billion in quarterly subscription revenue. We remained a rule of 60 company and Karooooo's adjusted earnings per share increased 21% year-on-year to ZAR7.67.
Our balance sheet remained strong and unleveraged and we ended the quarter with net cash and cash equivalents of ZAR856 million. Additionally, given our strong Q3 financial performance and operating momentum, we are reaffirming our previous FY25 financial outlook.
We believe we are well positioned to deliver durable and profitable growth driven by our strong unit economics, disciplined capital management and consistent track record of execution. We offer an easy to use and differentiated enterprise SAS platform that leverages our vast and proprietary data asset to provide our customers with actionable insights and analytics to simplify their decision making.
Our financial performance speaks for itself underscored by a rule of 60 financial profile and a healthy unlevered balance sheet. Additionally, as a founder led organization, we bring long term vision, strategic focus and an entrepreneurial approach to an expansive total addressable market with significant growth opportunities. Still ahead our innovative platform goes far beyond connected vehicles and equipment. We simplify the decision making of physical operations.
Our platform transforms decision making by seamlessly unifying and contextualizing data from a wide range of sources including OEM devices and proprietary devices as well as open APIS. By consolidating business operations into a centralized hub. We enable our customers to overcome complex operational challenges related to safety compliance, productivity service delivery, cost control, fuel management maintenance, routing resource allocation and workforce retention.
Powered by our extensive data asset advanced AI and robust analytics. Our platform delivers actionable insights that drive meaningful improvements to our customers physical operations. We are deeply committed to continuous innovation, ensuring our platform remains intuitive, fast and adaptable to the ever evolving business needs of our customers. Simplicity is at the core of our solution from implementation to daily use, helping customers make smarter decisions faster. Whilst driving ROI our end to end operations cloud delivers a robust all encompassing suite of advanced features that go well beyond traditional telematics providing unmatched value by enhancing safety, optimizing operations and driving cost savings for our customers.
Key highlights of our platform include AI powered cameras, these cameras proactively improve driver behavior and reduce operational risks leading to safer and more efficient fleet management field management tools. Our tools simplify daily operations with automated scheduling, dispatch management and work order coordination, delivery management excellence. Smart route optimization enables faster, more efficient deliveries helping customers exceed expectations with their logistics operations. Real time. Mobile asset tracking, our asset tags that leverage a proprietary network powered by our vast car subscriber base, ensure real time visibility and control of mobile assets, enhancing operational oversight in areas with limited mobile network coverage such as mines, scalable e-commerce, logistics career logistics empowers our customers to scale their e-commerce operations effortlessly through a capital light model fraud mitigation features.
Our advanced rules based cargo floating functionality and automated fuel claim validation help reduce fraud, vehicle sharing and scheduling features like vehicles sharing, scheduling and keyless access, enhance fleet utilization and overall convenience, driver risk analytics. Our platform provides powerful tools to assess and mitigate driver risk ensuring safer fleet operations.
By offering an integrated and feature-rich solution. We continue to support our customers in achieving operational excellence, scalability and sustainable growth. A prime example of the impact and power of our end to end operations cloud is its deep integration into the daily operations of an emergency service provider. This seamless integration significantly enhances response times, patient care and overall operational efficiency through API integrations with the dispatch control room. Our platform enables automated dispatch of the closest available ambulance, reducing dispatch time and ensuring faster on scene arrival live tracking provides peace of mind to patients and their families.
Advanced route optimization and real time dashboards support efficiency and utilization by enforcing designated home zones and improving fleet distribution safety is a priority. Our AI powered cameras help reduce risk while integrated daily medical inventory checklists ensure ambulances are fully prepared for any emergency. A single click route optimization feature adapts to real time traffic conditions and digital vehicle inspections combined with preventative maintenance, improve fleet reliability and uptime. Our control room integration helps maintain brand reputation by ensuring that emergency lights are used only when appropriate. Additionally, remote video access supports training incident management and risk mitigation. By embedding deeply into our customers daily operations. We enhance emergency care delivery, strengthen patient trust and minimize operational risks.
We remain deeply committed to investing in product innovation particularly in AI driven solutions that deliver ROI for our customers. Our platform leverages AI to provide actionable insights in critical areas such as fatigue, driving, unscheduled stops, fuel fraud detection and driver risk profiling key factors that directly impact our customers' operational performance by addressing these challenges. We believe our AI solutions enable customers to mitigate risks, enhance service delivery, reduce costs and most importantly help save lives.
For example, one of our customers in South Africa, our AI powered cameras combined with our fully digitalized coaching platform and actionable analytics to achieve a 32% reduction in fatigue related driving incidents. A 13% drop in mobile phone usage and improved seat belt compliance, key contributors to preventing road fatalities. In Q3, we saw strong momentum in our AI camera business and we are encouraged by the growing customer interest in our vision solutions.
Our customers choose us because we deliver tangible Roy by reducing costs, boosting productivity and enhancing safety all through a user friendly platform backed by a best in class service team. The value proposition of our platform is significant with a proven ability to create meaningful business impact.
For instance, one of our customers in Thailand achieved a fuel theft reduction of over 90% within just three months of adopting our platform by automating fuel claim validation and pinpointing theft locations through advanced analytics and other features of our platform. Our solution provided unparalleled visibility and control enabling our customer to eliminate almost all fuel theft across their fleet.
As a result, this customer reported a remarkable 70% return on investment across their entire fleet driven solely by the significant reduction in fuel theft. Our platform drives a significantly higher all in Roy for this customer. When accounting for productivity, safety and compliance benefits, as businesses look to increase their e-commerce offerings and optimize their logistics capabilities. Many companies are also looking to move away from online marketplaces to better serve their customers and reduce the risk of losing control of the customer within a marketplace context.
This is a key driver of demand for Karooooo logistics which connects businesses to an elastic supply of third party drivers and continues to gain adoption by our large enterprise customers seeking to scale their e-commerce capabilities on their own terms. During Q3 Karooooo logistics delivered revenue of ZAR109 million an increase of 20% year-on-year and an 8% operating profit margin growth in Q3 was negatively impacted by our customers' strategic decision to focus on instore Black Friday promotions. We see a large opportunity for career logistics going forward.
Our unwavering commitment to product innovation and a disciplined approach to profitable growth positions us to capitalize on the large and growing market opportunity. We believe we have ample runway for growth as businesses across industries seek to leverage technology to optimize their physical operations as we continue to execute and scale. We believe we are only getting started. We believe there is ample opportunity for growth over time. We plan to expand our customer base, increase subscription sales to existing customers, expand the scope of our operations in newer geographies and expand our operations platform and services. We plan to invest in all geographies to expand our sales and support infrastructure to drive growth and maintain our customer Centricity and we continue to see Southeast Asia as the most compelling growth opportunity for the group over the medium to long term.
In Q3, we continued to expand our sales and marketing investments in Southeast Asia, positioning ourselves to capture the significant and growing opportunity in this dynamic region. Why are we so optimistic about Southeast Asia's potential collectively, Indonesia, the Philippines, Thailand, Malaysia, Vietnam, Singapore and Hongkong represent over $600 million people and a thriving $4 trillion economy. Rapid urbanization and the rise of a growing middle class are fueling increased demand for commercial vehicles to transport both goods and passengers efficiently.
Moreover, the adoption of data driven supply chain management is accelerating globally. And Southeast Asia's logistics sector accounts for a larger share of GDP compared to markets like the US and Europe underscoring its strategic importance. Given these favorable trends, we see significant long term potential in Southeast Asia driven by relatively low fleet management penetration and ongoing tailwinds such as robust economic growth, intensifying competition in logistics and the increasing focus on fuel efficiency and driver safety. While competitive dynamics vary by country, the landscape is broadly fragmented with most players offering basic track and trace solutions. Very few competitors provide a comprehensive feature-rich SASS platform given our best in class, full stack operations management, SASS platform, strong brand for high service delivery and the favorable macro trends. We believe we are in a strong market position and set up for sustained growth in the region for years to come.
Our healthy subscription gross margin, efficient customer acquisition and attractive commercial retention rate continue to drive our leading unit economics. In Q3, we maintained an LTV to CAC ratio of more than nine. We are excited about our massive TAM and remain committed to profitable growth as we pursue the expansive growth opportunity ahead of us, we maintain a sharp focus on capital allocation, a cornerstone of our business strategy. Over the past 20 years, we've cultivated a culture that prioritizes profitable growth grounded in disciplined capital management. We are committed to continuing this disciplined approach which we firmly believe will drive long term shareholder value. With that in mind. We'd like to share our capital allocation framework. Our top priority is investing in organic growth and product innovation. Given our strong unit economics, sustained profitability and large market opportunity.
Over time, we've developed robust operational capabilities to assess unit economics by both country and customer acquisition channel. Enabling us to focus on maximizing return on incremental capital invested by geography at current growth rates. Our business generates significant excess cash with our strong balance sheet and net cash position, we aim to return surplus capital to shareholders when we cannot efficiently invest it for growth primarily through an annual dividend as to avoid doubt management prioritizes growth over dividends.
In addition, we have shareholder authorization to repurchase up to 10% of our outstanding shares. While share repurchases remain an option. Our near to medium term focus is on enhancing market liquidity. Finally, we take a prudent and strategic approach to M&A we view M&A as a tool to accelerate time to market in key geographies, expand our product portfolio or strengthen our competitive position. However, given our compelling organic growth profile, customer centric culture and attractive unit economics, we set a high bar for any potential acquisitions. M&A opportunities must offer clear strategic value or optionality to meet our criteria.
Ultimately, we see it as our responsibility to allocate capital thoughtfully. Always with the goal of maximizing long term shareholder returns. I will now hand over to Hoe Shin who will discuss our Q3 financial performance.