Today's Presenters Earnings Presentation Q4 2025 and FY 2025 1 Zak Calisto Group CEO & Founder Goy Hoeshin Group CFO Carmen Calisto Group Chief Strategy & Marketing Officer 2 2 DISCLAIMER Forward-Looking Statements The information in this presentation (which includes any oral statements made in connection therewith, as applicable) includes "forward-looking statements." Forward-looking statements are based on our beliefs and assumptions and on information currently available to us, and include, without limit ...

Karooooo (KARO) Q4 2025 Earnings Call May 15, 2025 08:00 AM ET Speaker0 Hello, and welcome to Fourth Quarter and Full Year Fiscal twenty twenty five Financial Results Presentation. On behalf of Karoo, we would like to thank you for joining us today. I'm Paul Bieber, VP of Investor Relations and Strategic Finance. We are joined today by Zach Callisto, founder and group CEO Hoshin Goy, chief financial officer and Carmen Calisto, Chief Strategy and Marketing Officer. I would like to remind everyone that some o ...

Company Performance - Karooooo Ltd. reported quarterly earnings of $0.44 per share, exceeding the Zacks Consensus Estimate of $0.37 per share, and showing an increase from $0.36 per share a year ago, resulting in an earnings surprise of 18.92% [1] - The company achieved revenues of $66 million for the quarter ended February 2025, surpassing the Zacks Consensus Estimate by 4.93%, compared to $57.64 million in the same quarter last year [2] - Over the last four quarters, Karooooo has consistently surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Future Outlook - The immediate price movement of Karooooo's stock will largely depend on management's commentary during the earnings call and the sustainability of earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $64.77 million, and for the current fiscal year, it is $1.72 on revenues of $272.15 million [7] - The estimate revisions trend for Karooooo is currently mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Internet - Software industry, to which Karooooo belongs, is currently ranked in the top 35% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Group 1 - Karooooo Ltd. (NASDAQ: KARO) and Ituran Location (ITRN) share similarities in their product offerings and growth prospects [1] - Both companies operate in a market that is considered promising [1] - Henriot Capital emphasizes a quant-driven investment approach, prioritizing data-driven decisions over human bias [1] Group 2 - The investment philosophy at Henriot Capital is to "invest first, investigate later," focusing on model-driven stock selection [1]

Company Overview - Karooooo Ltd. is based in Singapore and its main business unit is Cartrack, which operates almost exclusively on a subscription revenue model [1] - Cartrack has developed a method to connect various services through its subscription model [1] Research Principles - Grassroots Trading focuses on providing objective, unbiased, and balanced research, supported by solid data and free from emotional influences [1] - The research emphasizes small- to mid-cap companies, offering compelling investment opportunities that are often overlooked [1] - The scope of research also includes identifying potential opportunities in large- and mega-cap companies, providing comprehensive coverage of the equity markets [1]

Financial Data and Key Metrics Changes - 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 [6] - In Q3, total revenue was ZAR1,159 million, an increase of 15% year-on-year, with subscription revenue of ZAR1,032 million, an increase of 14% year-on-year [8] - Adjusted earnings per share increased by 21% year-on-year to ZAR7.67, with a strong balance sheet ending the quarter with net cash and cash equivalents of ZAR856 million [16][56] Business Line Data and Key Metrics Changes - Cartrack's year-to-date subscription revenue increased 20% year-on-year on a U.S. dollar basis, with an operating profit margin of 30% [6] - Karooooo Logistics delivered revenue of ZAR310 million, an increase of 38% year-on-year or 45% year-on-year on a U.S. dollar basis [7] - Cartrack's total subscribers increased by 17% year-on-year, reaching over 2.2 million [9] Market Data and Key Metrics Changes - South African subscribers increased by 16% year-on-year, comprising 75% of total subscribers, while Southeast Asia saw a 20% year-on-year increase, making it the second largest contributor to revenue [51][52] - European subscribers increased by 19% year-on-year, with a 200 basis point quarter-on-quarter acceleration [53] Company Strategy and Development Direction - The company is focused on expanding its presence in Southeast Asia, viewing it as a compelling growth opportunity due to rapid urbanization and a growing middle class [13][37] - Investments in sales and marketing are ramping up, particularly in Southeast Asia, to capture significant growth opportunities [36][39] - The company aims to maintain a disciplined approach to capital allocation, prioritizing organic growth and product innovation [41][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic environment in South Africa and the potential for strong organic growth following the move to a new central office [52][56] - The company reaffirmed its financial outlook for FY '25, highlighting a commitment to durable and profitable growth driven by strong unit economics [16][60] Other Important Information - The company operates a unique SaaS platform that integrates various data sources to enhance operational efficiency for customers [19] - The platform's AI capabilities have shown significant results, such as a 32% reduction in fatigue-related driving incidents for a customer in South Africa [30][31] Q&A Session Summary Question: How does the company attract human capital? - The company handles recruitment internally through various channels, finding it easy to attract senior talent but more challenging for sales positions [62][64] Question: What is the impact of self-driving technologies? - Management believes self-driving technologies are still in early stages and does not see an immediate need to adapt business operations [65][68] Question: What is the contribution to ARR from different regions? - The ARR and subscription revenue were impacted by the stronger rand, but management sees potential for growth as currency dynamics change [70] Question: What are the global sales and marketing hiring plans? - The company plans to increase headcount by about 70% in Asia and 50% in South Africa and Europe over the next 12 months [72][73] Question: How does the Africa Free Trade Agreement impact opportunities? - Management sees vast opportunities regardless of the trade agreement, with logistics benefiting from increased free trade [74]

Core Insights - Karooooo Ltd. (KARO) reported quarterly earnings of $0.43 per share, exceeding the Zacks Consensus Estimate of $0.38 per share, and showing an increase from $0.34 per share a year ago, resulting in an earnings surprise of 13.16% [1] - The company achieved revenues of $65.51 million for the quarter ended November 2024, surpassing the Zacks Consensus Estimate by 0.87% and up from $57.36 million year-over-year [2] - Karooooo has outperformed the S&P 500, gaining approximately 5.9% since the beginning of the year, while the S&P 500 has declined by 0.8% [3] Earnings Outlook - The future performance of Karooooo's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - Current consensus EPS estimate for the upcoming quarter is $0.40 on revenues of $66.9 million, and for the current fiscal year, it is $1.61 on revenues of $256.42 million [7] Industry Context - The Internet - Software industry, to which Karooooo belongs, is currently ranked in the top 14% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Subscriber Growth - Karooooo's subscribers increased 17% year-over-year to 2.22 million as of November 30, 2024[1] - Cartrack's net quarterly subscriber additions rose 15% year-over-year to 86,617[3] - Cartrack's subscriber base in South Africa increased by 16% to 1,675,473 as of November 30, 2024, with subscription revenue growth of 14%[56] - In the Asia Pacific, Middle East, and United States regions, subscribers grew by 20% to 264,342, resulting in a 21% increase in subscription revenue[59] - Cartrack's European subscriber count rose by 19% to 191,781, translating to a 14% growth in subscription revenue[61] - The number of subscribers in Africa (excluding South Africa) increased by 16% to 91,631, although subscription revenue remained stagnant due to billing suspensions in Mozambique[63] Revenue Growth - Karooooo's subscription revenue increased 14% to ZAR1,032 million compared to ZAR904 million in Q3 2024[5] - Cartrack's subscription revenue also grew 14% to ZAR1,029 million from ZAR900 million in Q3 2024[5] - Karooooo's total revenue increased 14% to ZAR3,348 million for the nine months ended November 30, 2024, compared to ZAR2,933 million in the previous year[25] - Total revenue for the three months ended November 30, 2024, was ZAR 1,159,390, compared to ZAR 1,080,143 for the same period in 2023, reflecting a growth of 7.3%[83] - Subscription revenue for the nine months ended November 30, 2024, reached ZAR 2,981,695 thousand, a 15% increase compared to ZAR 2,600,643 thousand in the previous year[102] Profitability Metrics - Adjusted EBITDA for Karooooo increased 17% to ZAR501 million, while Cartrack's Adjusted EBITDA rose 10% to ZAR491 million[21] - Operating profit for Karooooo increased 18% to ZAR325 million, with earnings per share rising 21% to ZAR7.68[18] - Adjusted EBITDA for Karooooo grew 17% to ZAR1,430 million, while Cartrack's Adjusted EBITDA rose 11% to ZAR1,397 million[37] - The profit margin for the three months ended November 30, 2024, improved to 21%, up from 18% in the same period of 2023[94] - Adjusted basic and diluted earnings per share for the nine months ended November 30, 2024, were ZAR 22.19, compared to ZAR 17.04 in the prior year, marking a 30.1% increase[96] Operating Expenses - Karooooo's operating expenses increased 15% to ZAR1,416 million, primarily driven by investments in infrastructure and headcount[30] - Cartrack's sales and marketing expenses increased 29% to ZAR453 million, reflecting a focus on customer acquisition[32] Cash Flow and Financial Position - At November 30, 2024, Karooooo reported a net cash balance of ZAR856 million, up from ZAR436 million in February 2024[49] - Total cash and cash equivalents at the end of the period were ZAR 855,926 thousand, an increase from ZAR 781,980 thousand at the end of the same period last year[91] - For the three months ended November 30, 2024, net cash flows from operating activities were ZAR 442,420 thousand, a slight decrease of 0.1% compared to ZAR 442,851 thousand in the same period of 2023[91] - Free Cash Flow for the three months ended November 30, 2024, was ZAR 187,609 thousand, representing an increase of 15.5% from ZAR 162,451 thousand in the prior year[93] Strategic Focus and Guidance - The company reaffirmed its FY25 outlook for subscribers, subscription revenue, and adjusted EPS[3] - Southeast Asia is identified as a key growth opportunity, with a strong focus on increasing sales and marketing efforts starting September 2024[60] - The company emphasizes the importance of acquiring new customers and retaining existing ones as a key growth strategy[124] - The company is focused on international expansion and the introduction of new solutions to increase sales to existing customers[124] Risks and Forward-Looking Statements - The company acknowledges risks related to geopolitical tensions, macroeconomic events, and competition from industry consolidation[124] - The company does not undertake any obligation to update forward-looking statements based on new information or future developments[125] Financial Metrics and Calculations - The company calculates the Lifetime Value (LTV) of a subscriber by multiplying the Average Revenue Per User (ARPU) with the expected contract life cycle months and the subscription revenue gross margin percentage[118] - The Cost of Acquiring a Subscriber (CAS) is calculated as the sum of sales and marketing expenses, sales commissions, and the cost of installing IoT equipment, divided by the average subscriber base for the period[118] - The Cost of Servicing a Subscriber (CSS) is determined by operating expenses excluding estimated general business expansion costs, plus costs of sales related to subscription revenue, less all costs used to calculate CAS, divided by the average subscriber balance for the period[119] - The long-term unit economics operational profit is estimated by multiplying the expected life cycle of a subscriber on the connected cloud by ARPU, minus CAS and CSS[120] Non-IFRS Measures and Market Data - Non-IFRS financial measures are included in the announcement, which may exclude significant items in understanding financial results[126] - The company relies on third-party sources for market and industry data, which may not be independently verified and are subject to uncertainty[127]

Core Insights - The fleet management systems in Southeast Asia are projected to grow at a CAGR of 13.7%, increasing from 2.8 million units in 2023 to 5.4 million by 2028 [3][6] - The penetration rate of fleet management systems among business fleet vehicles is expected to rise from 15.7% in 2023 to 25.7% in 2028 [3] Market Overview - The fleet management market in Southeast Asia has shown resilience and growth following setbacks during the pandemic, driven by economic growth, competition in transportation and logistics, and increased awareness of fleet telematics [2][4] - Key markets in Southeast Asia include Indonesia, Malaysia, Singapore, Thailand, and the Philippines, with varying regulations and economic growth impacting market dynamics [4] Adoption Trends - A significant portion of fleet management deployments consists of basic tracking systems, but there is a growing trend towards the adoption of more advanced fleet management solutions across the region [5] - Singapore is noted for its higher adoption of advanced fleet management solutions compared to other countries in the region [5] Key Players - Major providers of fleet management solutions in Southeast Asia include Jimi IoT, Cartrack (Karooooo), and TransTRACK, each with over 100,000 active units [6] - Other notable vendors with significant market presence include Katsana, GPSiam, EasyGo, Astrata Group, and V3 Smart Technologies, along with international players like Gurtam, Geotab, and SquareGPS [7][8] Market Insights - The report includes insights from interviews with market leaders, data on vehicle populations, and a comprehensive overview of the fleet management value chain [9] - Key questions addressed in the report include the leading local and international providers, market hurdles for foreign players, pricing levels, and future industry trends [10] Key Topics Covered - The report covers various aspects of fleet management solutions, including infrastructure, vehicle management, driver management, operations management, and regulatory compliance [11] - Market forecasts and trends are analyzed, focusing on commercial vehicle fleets, vendor market shares, and future industry developments [12]

Company Overview - Karooooo (NASDAQ: KARO) was founded in South Africa and has experienced significant growth over the past five years, increasing subscribers in four key regions [1] - The company expanded into Asia in 2016, building on its success in South Africa [1] Analyst Background - The analyst has a strong educational background in accounting, holding both a bachelor's and a post-graduate degree, and has completed the necessary exams to qualify as a chartered accountant [1] - The analyst has experience in various industries, including pharmaceuticals and financial due diligence, and currently focuses on equity analysis across multiple regions including the US, South Africa, Australia, and Israel [1] - The current industry focus is on renewable energy, with additional interests in technology, financial, and utilities sectors [1] Investment Strategy - The analyst invests in both large-cap value stocks and smaller growth stocks, particularly on the Johannesburg Stock Exchange (JSE) [1] - The analyst is also a director of an agricultural company in South Africa, indicating a diverse investment portfolio [1]