Q1 2022 Karooooo Ltd Earnings Call
Good day, and thank you for standing by woken up to the <unk> first quarter 'twenty 'twenty 2 earnings conference call. At this time, all participants are in listen only mode.
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SEC color too.
CEO founder.
Please go ahead Sir.
Thank you very much I want to thank everybody that's my tongue.
Cash in the Q1.
Why 22 results.
Our country that takes passion and kidney into all along for as many questions as I, possibly can.
And.
I founded the company in 2000, and why do we launch how that's good.
And Judy.
During April this year.
We've done at Cortez to senior pool, and we the the holding companies can do and it now.
15th of cadre.
That's a problem.
April including this first quarter.
Centuries picked out E E.
In the business in 2008.
Or at least have the view that all vehicles will be connected and data will drop all aspects of mobility in the future.
This has taken much longer than anticipated, but ambition is certainly to bolt the leidy mobility pet for that maximizes the value of data.
Yes.
With over 76000 commercial customers.
Approximately salt proprietary that consumes a pop into clinical customers.
Got it day to states and collect the episode for Ya.
Data points on a monthly basis, a comprehensive data from customers from different industries and different geographies using different types of vehicles different seat sizes and all of this type debt H E E on balance that.
To contextualize a lot of different businesses that a lot of different business practices and an all in debt allows us he's a comprehensive business intelligence report and predictive analytics to our customers and where do they eat in a day.
Just fleet management, and the insurance industry and index.
That's fundamentally what we do we collect data from proprietary E vehicles smart devices. We also collect data from credit cards and vehicles.
The box is being J codes.
For the data in front of that maintenance.
We didn't price it right that you create the value.
We have a pea is if you take on these systems, where we push and receive data from.
Okay.
And we've got a relatively consistent these chi we have year on year consistency quarter EBITDA quarter on quarter consistently increased our customer base on which card base. We've grown our revenue on a consistent and operating profit is also gone.
Consistency all EBIT from time to time Tycho.
You know a little bit apples down, but at the time of day the correlation there.
The law in a certain day.
<unk> upwards.
1 of the things we found ourselves ease the way, we allocate capital we've got a strong financial discipline.
And then we.
We continuously monitoring our process on a daily basis.
We're quite fortunate that our business is annuity based business you gotta be healthy subscription revenue growth, 97% of our revenue comes from annuity and debt, obviously keeps us quite a bit of it.
Quite a bit of confidence into the months to come on into the on what our revenue line would look like.
Subscriber growth if we compete at this quarter compared to the previous last year's quarter. We grew by 21% revenue grew by 17%.
All on on a car.
For currency, we grew by 22% on it.
I think it's important to note debt on a constant currency on a subscription revenue grew by 20%.
On.
We now are our assets by $2.5 begins on <unk>, which is up 18% and we did have quite a bit of play in terms of currencies over this last year. We saw the Rand appreciate substantially against the basket of currency debt you're operating at.
And if you look at all or are in U S. Dollars, you will see a 51% increase to 100.
$81 million a lot of debt is led by GCI team. So that's been great.
And.
We had a relatively weak Q1, <unk> compared to Q1 last year in terms of mid subscription.
760%.
Debt could be a little bit out of context, keeping debt in Q1 boss J Joseph really the beginning of Covid.
It is a difficult times that Tom just spoke that we called for assets as for the town, which we quite.
Quite a bit more used to trading in this current environment, but irrespective of debt. If you look back to Q1 FY 'twenty, our net quarterly subscriber additions is still more than on the St and.
I would say debt the last 3 quarters has been very good quarters and added subscribers and tips.
Typically our Q1 is not normally our strongest quarter given quite a lot of debt.
<unk> and Christian on the base and also the Asian holidays, So we quite content with the results and our achievements in Q1.
And we continue to see growth total customer base.
What we are experiencing with Covid Eads.
For more than normally what we see is that different sizes of customers, where you'll have for customer bad debt 30 vehicles, nice with 20 vehicles or <unk>.
But of more movement in the downsizing or increase sales vehicles throughout their customers.
On a commercial customer retention.
<unk> strong at 9.5%.
And we've had very low industry on customer concentration risk for car industry, which is considered to be quite risky given COVID-19.
It's listed on 1.1% about base and our largest customer is less than 1.7% of our revenue.
And also on that day, but the largest customer for 1.7 in terms of bottom line.
Due to the discounts at substantially less than 1%.
And in terms of cash flow.
Our operating activities, we actually apt 9.2% compared to Q1 on for you for 'twenty 1.
Clearly with the growth we've invested more into PPE. So we've seen a 77% growth in PPE and our free cash flow is down 12% primarily on the back of outright and investing in our credit business.
Sure.
We believe wasn't a valid for him to just be.
Open about their internal systems on our platform.
As the years suites.
We are increasing substantially in our ability to acquire.
Customers to acquire subscribers subscriber being the vehicle that belongs to that is I always tell out.
And that's.
We have a certain element of control on retaining customers, but the vehicles on the search car, but that's really our default we accomplished comp customers how long they retain their vehicles on our platform. So we do see customer selling the vehicles after they've been the platform for 12 months after 18 months and.
But all of these.
What's going on mix, we've taken to concentration to pull out on model.
So what we saw in Q1 the share compared to Q Q1 of last year, we saw on our could drop from 150.
South African grandchild within 51 grant.
Predominantly that drop is extra credit do what.
With the currency we are there.
Stronger.
The strong rate.
The negative impact on our <unk> and it's also got a day with quite a lot of customers in some Asian countries in Africa.
South Africa without getting holidays right. They are not actually using the vehicles. So that's had a negative impact, but I think overall on a constant currency, our actual arteries actually increased compared to last year, but it could trade in the range that we ponder out 10 guidance, which is between 150 and 160 <unk>.
Right.
Our subscriber contract lifecycle remains very consistent just 16 months, we depreciate any capitalization of <unk>.
Customer acquisition on subscriber acquisition.
60 minutes, it's more subscriber acquisition.
What you do see that huge decline in our cost of acquiring a subscriber from 2636 strength due to top line part is a little bit of noise in net in the same debt in Q1 last year, we had substantially less bids in terms of sales people.
But there were substantial matchless.
Activity is substantially less because of fear of Covid at this point in time, our productivity is still not where we wanted because we on board, there's a substantial amount of sales and marketing staff, but nevertheless, we've seen that improvement.
On <unk> 2636 set that's been great for 2008 funds.
In terms of what recapitalize bets.
Dropped from 1624 to 1000.
219 on and Thats got predominantly to do with our new generation telematics hardware.
Subscription revenue growth profit margin debt dropped to 72%.
As opposed to 74%, but once again that is also driven by the RP revenue on <unk>, which is lower because of that.
The currency.
Predominantly.
Exchange rates against the rate.
It's important to note on the slide debt.
The portion that we.
Expense upfront.
Is normally related strongly to customers that we've on boarded and these customers will have the second cycle of vehicles coming.
The fleet of vehicles, they bring on more vehicles that would normally we wouldn't be incurring debt that the south salaries again, nor the marketing costs.
Over time.
Stand to reason debt your cost of our clients subscribe on will decline. However, we see that debt could change.
<unk> units debt realized in the it probably within the next year or 2 and that could also have an impact on the unit economics.
We operate in a large underpenetrated market.
South Africa is just.
<unk>.
Channel.
Estimates and sometimes it's very difficult to get numbers with huge amount of accuracy and just over 10 million vehicles.
Some people talk about 12 million vehicles, we've got.
Just under $1.1 million vehicles, how we add at this point in time, we believe about 8% of the market and.
We believe that allows us to grow at very good rates, specifically store for another 5 years.
Before we slowed down growth.
In Africa, we believe we've got 60 teeth assets.
We can really grow.
Africa, It hasnt been 1 of our priorities.
We'll focus on debt priority probably for you Tom once we believe South Africa has reached a certain level, where we've moved that 1 billion customers 2.2.
$2 million and then we can use our stronghold in South Africa, and the human capital in South Africa to moving to Africa.
In Southeast Asia, it's a huge opportunity.
Well over 100 million vehicles, it substantially more than <unk> hundred million dollars vehicles, we've only got I understand 2000, 4000 vehicles and we approximately 2 years ago, we're feeling very positive about growing Asia and we are now based in Covid came to achieve basically now.
15 months ago, 16 months ago, and that's really made it very difficult for us to be able to move around the Asia to be able to onboard people.
We were hoping if you asked me 5 months ago 6 months ago, how would the AGM to Clark.
We look forward by middle of this J code uplift the market sort of opened up much more the reality is the extra closing up more so.
East Asia is we see Singapore is coming to a relatively.
Debt closing most people working for them debt closing older restaurants from tomorrow. So the trading conditions don't seem to be very favorable.
But we're very well positioned to grow in Asia once the market opens up.
It employs about 150 people in this last quarter in Asia in the out of the market opening up and we are moving some of our staff that are sitting in Europe in America and in South Africa debt remains going to Asian countries.
We are bringing the Singapore and hopefully they will.
With the Singapore team and it will.
I'll start gathering momentum I hope for.
For the near future in Asia, because we certainly believe that's our biggest opportunity.
Europe also a massive opportunity for us.
<unk>.
Europe is what we why you call, we certainly want to start reading <unk> co.
For growth in Europe.
What we do see in Europe is.
They go from Lockdown to open up the market and it's quiet.
It fluctuates the policies seem to change.
Quite frequently and we would like to see Europe through this next winter and then off to that start investing substantially in Europe. Just the same way as we've invested for South Africa in the last 6 months for 7 months, we've actually employed in the region of about 700 people to 650 people.
So and we look forward to the opportunity we believe it's huge.
And we will focus on customer acquisition and as the markets become more penetrated in at that point in time, we can focus on.
Increasing on our 2 part charging for the value added services that we continuously adding on to our platform debt at this point in time, we're giving to our loyal customers.
Customer retention is per customer stickiness and to make our proposition very attractive.
If we look at our subscribers in this quarter quarter on quarter, South Africa grew by 23% Africa for a 5% Europe up 14% and Asia by 17%.
Hmm.
During this.
This quarter in actual fact, I would say actually for the last 6 to 7 months, we've been investing.
Italy for growth and if you look at the amount of capital debt, you've allocated to sales and marketing that's going on about 71% R&D by 44% and G&A at approximately 21%.
We are.
Did experience.
Great.
Growth in the G&A, but it is mostly expansion costs for Asia, and even for South Africa.
So we believe will reap the rewards of this investment in months to come.
We've on boarded a lot of people that will probably take a few months to become productive and given COVID-19, which obviously it slows down the process of debt.
Transfer of knowledge.
We believe for us it by Q4 of this year, we would get.
We'll get the results that we desire to add up all the staff that we've on boarded and we're very excited about the future debt almost flat.
Our operating metrics on our subscription revenue grew from $526 million for $606 million or to.
A drop from 155 to 151, our gross profit margin.
It dropped from 73% to 71% most of this is really.
And.
Yes.
Q2.
Cognex changed on the our credit it brings those margins down.
Search and development debt increased from 4% as a percentage of subscription revenue to 5% sales in Makati debt has been increased from 10% to 15% all in line with our clients and G&A, that's increased from 20% to 21%.
The EBITDA margin last year was 50% this year its 42%, it's really matching keeping what I.
Our expectations and we believe debt digest, the EBITDA margin will increase about 45% by the financial year.
Our outlook debt.
We gave at the end of FY 'twenty..1 we maintained the same outlook and that is to get subscribers to be between 1.5 to $1.6 million.
Our subscription revenue between 2.5 and $2.7 billion and adjusted EBITDA margin between 45 day, 50%.
Important to note that on I O R is actually at $2.5 billion.
Mike.
On that note I would like to thank everybody for pool.
Taking the time to listen to us and I will open up for questions.
Question number 1 for.
On repo Biloxi could dissect what do you honestly think about price of prosper.
Prospects for about expanding into mature markets on Europe, and the U S. Don't you think it's too risky or do you think for competitive advantage. We have is strong enough to compete in such markets and if yes, what makes you think.
It's quite a long question so.
But when we put a very small office on the U S. I think the U S market is a very exciting market.
Opportunity.
But we just haven't got the day Julien.
We haven't got enough.
We haven't split to debt.
Tackle the U S. We in Europe, we compete very favorably with our competitors day in actual fact, we wouldn't a lot of the business over there and we believe debt that's definitely an area, where we want to certainly invest in Europe, and I think for U S overtime to come with credit left on our plight that probably the best solution.
For us would be an acquisition.
All our merger in the U S. At a later time to come I don't think right now right now I think we've got enough on applied and a lot to do.
The next question from predefined need cash.
What was the impact of Covid restrictions during the day. It out do you think your net adds to compete.
<unk> logistics since Youre operating regions.
Really.
Obviously, I haven't got a crystal ball, but my gut feel is in the way we've prepaid is to obviously be growing much faster than luxury growing at.
I think under the circumstances, we had to focus on the market debt. We believe was the easiest to trade on the Covid.
South Africa, but the open market just on the U S and Europe was half open Asia was really closed because of a closed market. So we focus we could you best and this is the results. We achieved obviously on the code, but we believe and our targets into for our management with our strength.
Maybe to be doing better than we're currently doing.
Anthony get Isaac Great subscriber growth can you provide more color on the geographic split of sales and marketing spend please.
You're spending the extra money and when do you think the fruit of this investment will be every day also the travel restrictions and so most of the assets and why now is your team able to travel on the reagents.
The temporary restrictions if anything that intensified.
Difficult to travel in the region and I think E.
Anthony quite frankly output, but now it seems to be very different but it's really I would say, it's even tougher now than it was 3 months ago.
Weighted we spend most of our sales allocation of sales and marketing it does predominantly South Africa and for Asia.
Asia.
We wanted 2 things paint debt the growth in Europe, just I would say in about 2 quarters. Tom We just wanted to see after the summer holidays of Europe, what debt with good Clark.
And but the minute, we see Asia will open up that's why we redo on allocate a lot of capital, we see Asia as the big opportunity.
But at the moment pretty tough to do business, there, especially if you haven't cut.
The strong presence on the ground and you're busy growing the business is quite difficult.
Daniel Bartus.
Okay. Okay.
Daniel since you asked the question of on average.
Okay, I'll just ask Dave Roy Campbell could you talk through the seasonality embedded in your full quarters in a normalized environment. So how business is luxury fee growth, although our 2 weakest quarters is Q4 in Q1.
And those quarters on normally quiet.
Quite 3 quarters, but given all the holidays.
Specifically in South Africa in December and then obviously with the Easter and the Jewish holidays.
And some Asian holidays around the first quarter.
<unk> traditionally because for us it's all about trading days.
Trading days, we had.
Debt tied to impact us it fluctuated with.
It's more of a trading day people on that to take it directly.
I'm not sure if up on <unk> question, but I think on that.
Okay.
Hey, Jay can you can you asked a question for Mike.
From Canaccord.
Perfect.
Mike Your line is open that you can ask questions.
Great.
Congratulations on a strong start to fiscal 'twenty 2 despite.
Probably some of these markets.
More locked down than you anticipated when you when you gave the initial guidance.
Can you just talk longer term just shed some of these regions such as southeast Asia start to reopen how do you think the business might reaccelerate in terms of longer term growth, particularly with the sales and marketing head count additions you've made over the past year.
So, let's a sales pace altitude, all case with actually in South Africa.
Total debt at about 157 people.
Total new last few months in Asia in anticipation of the market opening.
We believe we will get really volume iPhone, we feel very comfortable to MSR management feels very comfortable and.
But we'll have to bolt on expansion in terms of distribution our distribution is quite limited given.
Sure.
Shifting from to allocate capital and we believe we will do well.
We have got traction we believe we are winning on the ground.
Actually can you believe that all cash.
For superior cost for Pena.
And our solution is very comprehensive obviously growth is really volume.
Great. Thanks, and just a follow up question for me and I'll pass the line.
Is that creating any change in competitive dynamics in South Africa, Sego soldiers C track business mix telematics made some.
Head count reductions last year, and then Theres company, such a sense are moving in there. So could you just talk about competitive dynamics as it looks like you guys continue to do very well on the South African market.
Okay.
For the server market is very competitive.
It's also 1 of the most highly penetrated markets in the bolt.
It's very competitive unbound really OLED at on that.
On what our peers are doing.
Okay.
But we're winning on the ground and we're growing our business.
I think that's a 90.
Maybe the most.
The thing we really focused on and then at the end of the day, we've only got 8% for the full markets for <unk>.
Indeed.
We will continue growth.
Okay.
Just 1 quick follow up to just on South Africa.
Theres been some social unrest in the news there any impact to your business in the current quarter or do you feel like trends remain pretty strong in that region. Thank you.
That's how it was between the App and impacting this quarter.
So what is the social unrest.
If losses.
<unk> saves me correctly about 2 weeks.
Is that it's all on down.
Back to normal.
Lastly on that would be 7 day situations like this.
Bulk assets.
So we have the great men and kids aren't we probably index.
<unk>.
That would have normally done.
However in August.
We will have another aggressive on piano that assume.
June was the.
For the best Eli the Sciences, probably for you still do more than more than off on.
So on.
Under the circumstances I think equally in first quarter.
Good luck.
Obviously some of that.
Okay.
Okay.
Small medium businesses.
Right.
Bob.
Okay.
Luke on us in terms of the loss of customers for that.
With Covid.
But nevertheless auditing.
We already have many of the debt.
Okay.
With them in difficult times on deliveries.
Yes.
Okay. Thanks for taking my questions.
As for ongoing success.
Yes.
And in net for.
William Blair.
Sure sure.
<unk>.
Next question your line is open.
You can ask your question.
Thanks for taking my questions just wanted to follow up on your supply chain and how you feel about your inventory levels and ability to source new inventory and is there any sort of concern about that being a constraint from a growth perspective.
At this point and upon net are done beliefs.
And we've got certainly enough inventory at this point in time to conduct business as normal.
And if we did if they're getting into a situation, where we haven't had in vinci.
It's probably in the next financial year should something that we cannot think about go wrong in terms of the.
Supply chain.
We believe this foundation here, we certainly feel very comfortable we can have no issues.
Great and then and then just 1 more question for me just wondering if you could provide some detail on some of your newer growth initiatives, such as <unk> or the insurance initiatives that you have.
What's caused Rica, we are hoping to launch in Q4 this year.
With Covid, we opinion, we've always put out that we will launch in the latter part of this financial year.
We are doing.
Yes, we do.
Cash at this point in time, and we feel free.
Confident we're going to do well and we're going to build this business over the next 2 to 3 years and I believe we will credit interest rate business and I don't want to promise a marketer promise anybody expectations create expectations, but myself and management Peel debt. If we deem the right thing and we believe that's going to create a tremendous amount of value.
Not only for us, but for our customers as well.
Great. Thanks, a lot for taking my questions.
Thank you.
Yeah.
The next question is Daniel Barclays.
So somebody who is actually on your launch.
Open.
Okay great.
Hey, Jack Thanks for taking the question.
First I noticed the low.
Large fleets continue to grow as well.
Can you just talk a little bit about what youre thinking in terms of second half for next year.
Much of the growth should be coming from larger fleets versus the smaller fleets.
Are you changing strategy at all to go after that opportunity more.
So.
Net module Daniel that you said.
Large fleets.
Actually a very small percentage of the vehicle park in the world.
So we've taken the view debt.
We go for the small medium enterprises and then after part of the guidance for the lodge for it so it's called the Gainesville obsolete.
The penetration rates in large fleet is larger than in the small and medium enterprises.
We certainly all guidance quality for large fleets and we're already starting to see.
A lot of quite a few of the large fleets switching from the current provides us for us.
And but I think there's a long runway for growth and my views on given all of that I think we might just.
And focus on large fleets as our core business I believe the way we've got in the business.
Net.
On our call today.
Yes, yes that makes sense and then.
Just wondering exactly if you could talk a little bit about what youre seeing Africa outside of south assets.
That's kind of the 1 area where.
<unk> seen a little bit of weaker growth, but are there things that you see that you can.
Levers you can pull to improve growth outside of South Africa in the African region.
I think it's on a core focus to grow at this point in time to grow Africa. It hasn't been a focus for the last for years, we have put in a bit more focused but with COVID-19 and the traveling restrictions, it's become a bit more difficult.
I think we need to focus on Asia, Europe, and South Africa, and obviously, we will focus on Africa, and it's not that we're not focusing on net.
And we are driving the Africa business, but its not our major focus although we all interest.
We've now done quite a comprehensive deal with Toyota for the all of Africa.
All investing net relationship.
And then but I think fundamentally the real growth.
Right now in the next 2 to 3 years, it's not going to come from Africa.
From other segments.
Gotcha.
Efficacy at this point in time is also be in each quite a odds with COVID-19.
Specifically Q4 of last year, and we see Q1 this year COVID-19, even taking a more deadly toll in Africa way.
<unk>.
Medical assistance is not the greatest.
And so that's the case.
Cope with these different campaign for a strong impact on it on Africa, specifically our thoughts on that.
Gotcha Gotcha.
Just quickly lastly.
<unk> restrictions.
They have been hurting you guys in certain regions.
We've talked a lot about it its holding back your growth to some degree in certain pockets on the world.
Are there ways that you can adjust the business to.
To operate more efficiently.
<unk> and not needing to travel on the ground I'm wondering if you could just give us some color on is it sales and marketing that's being hurt.
By the travel restrictions is it more G&A and getting management on the ground or is it mostly related to the implementation for the devices.
And I think it's a combination of everything but I think fundamentally if you get to the bottom line is if you're there.
Asia.
In fact day strong team in Singapore, We've got a relatively strong premium pilot that out teams on strong and that in a lot of countries and approximately 2 years ago, we had a lot of managers.
Think we withdrawn we at American South African Singaporeans Europeans to go.
In these countries and <unk> on that side.
And localize the business. The reality is that we have allows us if people aren't allowed to get into the countries, it's very difficult to get them in and even if they do get into get out interest the families. It is very difficult so we need to.
It's very difficult to onboard people trained them through soon.
I'll share 1 let's get to distribution.
Distributions quantitative equal.
Edwin that Asia was still going to be a little bit difficult market. Today, we would have probably put that focusing on which is placed.
Much less risk picture.
And what we will see now you'll probably find that you for Asia continues looks like we're just going to pick up within 2 years into credit yet.
So but.
The real opportunity with free of the Asia Asia is a net about the total let's say is Europe and we just don't want to allocate capital at this point in time until after the summer.
I'll, let price because just judging by what happened last year suffered for all of Europe, pointing total lockdowns because it seems thats getting hold so.
I'm not a specialist on this.
Anyone.
Just wanted to be quite frequently for why we allocate that capital.
Mhm.
Great that's really helpful. Thanks Zack.
Thank you.
And suddenly for Alex from Raymond James.
Alex Your line is open up.
Great. Thanks Zack.
2 questions on the pricing environment, you mentioned, some pricing uplift constant currency I'm. Just wondering if you could can you talk about what drove that increase absent the FX impact and then you also talked about providing some support still to certain customers that were impacted in the quarter could you just help us quantify that impact is at 5% of the base and how that level of support kind of trended over.
The past 16 months thanks.
So in terms of the <unk>.
It's really difficult to keep you ought to extra loopy consistent so we believe at between 150 to 160 is really consistent with on.
Otherwise you start thinking about your RFP, if that makes any sense and I think it just.
Yes.
It's really a it's.
It's gone up by approximately a few rain.
I think in constant currency, it's gone up by about 3 range, if I'm not mistaken with growth.
Debt material, but that gets offset the guidance for currency and the gang.
The customers I think people on them.
EBIT discounts or allowed in 2 months for treatment.
We do debt, we have visibility of the piece about the outcome.
All of our customer vehicles.
And if we see the customer losses in the vehicles on the vehicles up off the Nikola and labor.
Issues for the vehicles came on.
Obviously, we cooperate with them.
Interest to get the goodwill and then.
I believe in the long term, we create great relationships and with that.
Approximately outside for clinical pump about Paul to cost at all.
Bye.
On the level of discounts.
I would take approximately 4 to possibly pull back most of that would be.
Hello.
Some in Africa, and quite a lot in Asia.
Okay, that's great that's great color.
1 thing I don't think we've talked about as much and you've kind of teased us when talking about customer acquisition costs, but could you just talk about the 5 day refresh cycle, what it's going to mean for the business down the road in terms of course on what are some of the incremental revenue opportunities that youre working on.
I think the best place to look at.
And sometimes it's quite difficult to differentiate between customer acquisition and <unk> acquisition.
Our customer acquisition.
Once you have the customers.
The customer safe, we decided that tomorrow, we're not going to acquire any more customers than you.
Really about customer service entertaining and looking after those relationships.
<unk> different things necessarily.
Marketing Pal salaries.
But when it's IV will be net south heritage of marketing, but it will be substantially different in terms of debt.
The amount of money that it seemed on San Jose market and obviously the subscriber cost is really when someone 1 of our customers safely.
And that's really what can be capitalized.
It's the vehicle the technology that goes into vehicles for customer acquisition.
Such debt.
I think thats correct.
Customers you have the negative effect on your P&L today that you could have debt cutoff for the next 2030.40 years, where you've got very little debt.
Okay.
<unk> thousand marketing for Rick.
Does that make sense.
Yeah, Yeah that makes sense, but I guess.
A little bit.
More specifically I'm just curious what the <unk> going to mean in terms of the refresh the refresh cycle.
On the incremental revenue opportunities that youre at Youre already working on now for 5 years. He comes on to your base.
So.
It's all really about diet and it's all about evolving our platform to be able to deal with much more day to day much quicker.
Leave before we have the debt sort of environment.
Probably.
<unk> before we'd be if debt thanks anything.
We were busy getting.
Yes.
Strung out on it.
We are busy improving our business would be busy building out our data capabilities.
And I believe with debt, you'll be able to drop more credit.
Estimates, but it's fundamentally at the end of the day, just going to be a faster and more comprehensive service going on.
You touched about debt and you've got the answer.
We see it the debt, we're going to take a little bit of time to get debt level way.
We've got a total.
G base.
At this point into albeit at low spot.
Then debt obviously willing thank you that's it.
To me would impact your cost of acquiring a customer or subscriber.
If I didn't say debt to what we also expect that the 5 D. A.
This is for also substantially drop as it did.
Just the same way as <unk>.
<unk>.
We don't believe that's going on.
Okay very helpful. Thanks.
Thank you very much Alex.
We've got 1 Qualcomm corker from thoughtful.
Secondly talk to your line is open now.
Great. Thanks for taking my question Zach just just 1 for me today, if I look at the consumer and sole proprietor aspect of your business can you remind us how your go to market there or is that primarily a self service approach where.
Consumers are buying your platform on line and do you see any heightened levels of churn and contraction right now in that area of the business relative to small enterprise medium enterprise on those large fleets.
With foreign debt.
Operating strategies.
2 months.
We see the business not very different to what it was quantity of Zika.
Hey.
Also improved down systems internal systems to deal with the reality of the economic headwinds that we are seeing.
That's part of the business.
It would have price as we not feel it.
We've really invested a lot in total systems in the last 3 years and I think also allowing it.
You kind of customer service for customers on.
Can you put on in the mall.
They are all answered your question, Paul Quinn I might have missed the point.
Yes, I'm just trying to figure out when.
When we think about the opportunity for you to sell to a large fleet that seems like a very involved sales process, but if it is just a person that is buying your technology for 1 car or their families vehicles.
Process seems quite different in those situations I'm just wondering if theres been any change in a more distributed world where salespeople can't be on the ground in the way youre actually selling to those smaller customers.
So what we find is happens for instance in South Africa.
In America as you know.
There's a lot of the business can be done over the telephone and logged gamers have ethical was not that's why clients that things have changed substantially in the last 2 years and today, we can do quite a lot of business with standardized on the science.
And we are becoming quite successful and we sickening preaching on month on month, and we're getting better at it so.
I would say most all of ourselves today give sanjay mesh on the way they give conducted in EMEA, which is lot demos and over this time.
Got it.
Congrats on the quarter on thanks for taking my questions. Thank.
Thank you for taking that.
1 question from Chris <unk>.
And it.
It was a big decrease on the unit cost of appliances, Canada from 2072 is this sustainable.
More decon cost.
Because I think.
I think I'll answer that and unlocks for what I'll do.
Our mind I'll give you a call after this.
To take you through more detail in case that did not pick it out myself.
Yes.
Yes.
Absolutely.
Hey, it's Anthony EMEA, then can you provide a bit more color on the tobacco on subscriber growth or you're doing particularly well in gaining corporate clients or for corporate clients add new vehicles.
It does seem like a really strong results so well done thanks.
Anthony what we seen in South Africa is we're winning both on debt on the business strength and on the consumer front and we will equally on both trends what react.
The amount of customers that we <unk>.
Boarding with debt all business pessimist debt in terms of the St. Francis is starting to increase substantially quicker than consumers.
I agree with cause it could you foresee expanding that business lagged into some of the rebound cause or did you take on a shovel vehicles make a margin side in late June.
And we foresee it being a more sophisticated online market size.
It really does.
We see the our business in terms of Zika.
Much of Blue model, they make and model.
We take and we buy the vehicles from their own customers, we actually keep the inventory and we sell them on.
And I think the day, it's all about convenience.
Just the platform the way it used to be in the olden days I think that's an old model I don't believe it's got legs anymore to day, you've got it.
Everybody wants convenience and debt once certain level of warranties, we in a very strong position that we now use on the vehicle way debt from the vehicle the top of day.
<unk> debt.
The vehicle is being driven so that gives us some quite a strong position. So for us, it's all about bringing value to the seller into the buyer and to give them a level of comfort and debt swayed the industry the extra day.
I think thats all the questions for today.
I want to thank everybody on the call.
Thank you very much and look forward to talking you again in approximately 18 months.
Thank you.
Bye.
Thank you, ladies and gentlemen that does conclude your conference for today. Thank you for participating you may all disconnect now thank you.
Okay.
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