Q3 2025 Karooooo Ltd Earnings Call
Hello, and welcome to Kourou's Financial Year 2025 Q3 earnings call. On behalf of Kourou, we would like to thank you for joining us today. I'm Paul Beiber, Kourou's VP of Investment Relations and Strategic Finance. We're joined today by Zach Calisto, Founder and CEO, Ho Shin Goy, Chief Financial Officer, and Carmen Calisto, Chief Strategy and Marketing Officer.
Before handing the call out 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 20-F, 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. Reconciliation of non-IFRS to IFRS measures is included in the 6K that we filed with the SEC yesterday.
Carmen Calisto: With that, I'd like to hand the call over to Carmen.
Transcription by ESO. Translation by —
Carmen Calisto: During the call today, we will review both Carew's operating units, CarTrack and Carew Logistics.
Carmen Calisto: For those new to Karoo, Kartrack is our operations management SaaS platform. Kartrack operates at scale and has a very attractive financial profile. Kartrack's operating momentum has primarily driven Karoo's growth and strong financial performance.
Carmen Calisto: For FY25 year-to-date, Cartrac's subscription revenue was approximately $3 billion, an increase of 15% year-on-year or 20% year-on-year on a U.S. dollar basis. Cartrac's year-to-date operating profit margin was 30%.
Carmen Calisto: Career Logistics is our rapidly growing delivery-as-a-service business that empowers our large enterprise customers to scale their e-commerce and logistics operations. Career Logistics is a structurally lower-margin business and car track, showing good growth momentum.
Carmen Calisto: Career 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 contract customer retention.
Speaker Change: Given Carew Logistics' robust revenue growth, we are very excited about the long-term growth opportunity for the business. Carew Logistics is profitable at its current scale.
Speaker Change: Subscription revenue of 1,032 million ZAR, an increase of 14% year-on-year and adjusted earnings per share of 7.67 ZAR, an increase of 21% year-on-year.
Speaker Change: We continue to grow our data assets and our platform now generates more than 180 billion valuable data points monthly, which we leverage to drive actionable insights for our customers.
Speaker Change: 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.
Speaker Change: We believe we are amongst the select few SaaS companies operating at a rule of 50+, based on 2025 Gapstreet estimates.
Speaker Change: Notably, within a SaaS universe of approximately 200 companies, we believe we are one of only two small cap companies operating at this level.
Speaker Change: In Q3, Kartrack's total subscribers increased 17% year-on-year, highlighted by stable growth in South Africa and a 200-basis-point caught-on-court acceleration in Europe.
Speaker Change: 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 this strategic investment.
Speaker Change: Additionally, we continue to ramp up our investment in sales and marketing across Southeast Asia and are seeing early signs of success.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Finally, Kartrack delivered healthy subscriber additions in Q3 while maintaining strong unit economics with an LTV to CAC ratio greater than 9. Our commercial customer retention rate remains at 95% and we continue to grow the business at scale with discipline.
Speaker Change: Our Q3 financial highlights include CarTrack's year-to-date subscription revenue increased 20% year-on-year on a U.S. dollar basis.
Speaker Change: Contract subscription revenue increased 19% year-on-year on a US dollar basis.
Speaker Change: Contract surpassed $1 billion in quarterly subscription revenue, we remained a Rule of Sixty company and Carew's adjusted earnings per share increased 21% year-on-year to $7.67.
Speaker Change: Additionally, given our strong Q3 financial performance and operating momentum, we are reaffirming our previous FY25 financial outlook.
Speaker Change: 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.
Speaker Change: We offer an easy-to-use and differentiated enterprise SaaS platform that leverages our vast and proprietary data asset to provide our customers with actionable insights and analytics to simplify their decision-making.
Speaker Change: Our financial performance speaks for itself, underscored by a Rule of 60 financial profile and a healthy, unlevered balance sheet.
Speaker Change: 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.
Speaker Change: Our innovative platform goes far beyond connected vehicles and equipment. We simplify the decision making of physical operations.
Speaker Change: 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 single, centralized hub.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Field Management Tools. Our tools simplify daily operations with automated scheduling, dispatch management and work order coordination.
Speaker Change: Delivery management excellence. Smart route optimization enables faster, more efficient deliveries, helping customers exceed expectations with their logistics operations.
Real-time Mobile Asset Tracking
Speaker Change: Our asset tags that leverage a proprietary network powered by our vast contract subscriber base.
Speaker Change: 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
Fraud Mitigation Features
Speaker Change: Our advanced, rules-based cargo offloading functionality and automated fuel claim validation help reduce fraud. Vehicle sharing and scheduling. Features like vehicle sharing, scheduling and keyless access enhance fleet utilization and overall convenience.
Speaker Change: Driver Risk Analytics. Our platform provides powerful tools to assess and mitigate driver risk, ensuring safer fleet operations.
Speaker Change: By offering an integrated and feature-rich solution, we continue to support our customers in achieving operational excellence, scalability and sustainable growth.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Advanced route optimization and real-time dashboards support efficiency and utilization by enforcing designated home zones and improving fleet distribution.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Our control room integration helps maintain brand reputation by ensuring that emergency lights are used only when appropriate.
Speaker Change: 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.
Speaker Change: We remain deeply committed to investing in product innovation, particularly in AI-driven solutions that deliver ROI for our customers.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: For example, one of our customers in South Africa used our AI-powered cameras combined with our fully digitalized coaching platform and actionable analytics.
Speaker Change: to achieve a 32% reduction in fatigue-related driving incidents, a 13% drop in mobile phone usage, and improved seatbelt compliance, key contributors to preventing road fatalities.
Speaker Change: In Q3, we saw strong momentum in our AI camera business, and we are encouraged by the growing customer interest in our vision solutions.
Transcription by CastingWords
Speaker Change: Our customers choose us because we deliver tangible ROI by reducing costs.
Speaker Change: Mode, 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.
Speaker Change: For instance, one of our customers in Thailand achieved a fuel theft reduction of over 90% within just 3 months of adopting our platform.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Our platform drives a significantly higher all-in ROI for this customer when accounting for productivity, safety and compliance benefits.
Speaker Change: 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.
Speaker Change: This is a key driver of demand for Carew 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.
Speaker Change: During Q3, Karoo Logistics delivered revenue of 109 million ZAR, an increase of 20% year-on-year, and an 8% operating profit margin.
Speaker Change: Growth in Q3 was negatively impacted by our customer's strategic decision to focus on in-store Black Friday promotions. We see a large opportunity for Carew Logistics going forward.
Speaker Change: Our unwavering commitment to product innovation and a disciplined approach to profitable growth positions us to capitalize on a 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: In Q3, we continue 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?
Speaker Change: Rapid urbanization and the rise of a growing middle class are fueling increased demand for commercial vehicles.
to transport both goods and passengers efficiently.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: intensifying competition in logistics and the increasing focus on fuel efficiency and driver safety.
Speaker Change: 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 SaaS platform.
Speaker Change: Given our best-in-class full-stack operations management fast 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.
Speaker Change: Our healthy subscription growth margin, efficient customer acquisition, and attractive commercial retention rates continue to drive our leading unit economics.
Speaker Change: We maintain a sharp focus on capital allocation, a cornerstone of our business strategy.
Speaker Change: Over the past 20 years, we've cultivated a culture that prioritizes profitable growth grounded in disciplined capital management.
Speaker Change: Our top priority is investing in organic growth and product innovation, given our strong unit economics, sustained profitability and large market opportunity.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: M&A opportunities must offer clear strategic value or optionality to meet our criteria.
Speaker Change: 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 Hu Xin, who will discuss our Q3 financial performance.
Hu Xin: Thank you Carmen. I will now discuss Carew's financial performance for Q3 FY25. Please note that all comparisons are against Q3 FY24 unless otherwise stated.
Hu Xin: Our proven and profitable SaaS business model continues to deliver strong results in Quarter 3.
Hu Xin: Karoo's total subscription revenue increased 14% to R1,032,000,000. On a US dollar basis, Karoo's subscription revenue increased 19% year-on-year.
Hu Xin: Operating profit increased 18% to RM325 million and adjusted earning per share increased 21% to RM7.67
Hu Xin: The two segments of Carooz, CarTracks and Carooz Logistics, complement each other by supporting our large enterprise customers as they scale their e-commerce operations.
Hu Xin: Overall, Carew's demonstrated strong quarter-on-quarter financial performance with a quarterly operating profit now at a record of R325 million.
Hu Xin: We will now focus on CarTracks, the underlying assets of Carew's success. In this quarter, CarTracks experienced healthy customer acquisition.
Hu Xin: Q3 subscriber increased 17% to 2.2 million Subscription revenue increased 14% to R1,029 million Operating profit was a record of R316 million
Hu Xin: CarTrack continues to prove its ability to scale in varying macroeconomic conditions and was a Rule of 60 company in Quarter 3.
Hu Xin: When adding our third quarter subscription revenue growth of 14% year-on-year and our third quarter adjusted EBITDA margin of 47%.
Hu Xin: CarTrack experienced solid customer acquisition with net subscriber addition of 86,617 in this quarter, an increase of 15% year-on-year.
Hu Xin: We operate in a massive addressable market and we believe that we have ample runway to accelerate our customer acquisition strategy while maintaining robust earnings. We will also prioritise our capital allocation in sales and marketing.
Hu Xin: Looking ahead, we are on track to surpass 2.3 million subscribers by year-end, and we are expecting a record quarter 4 net subscriber additions.
Caltracks continue to grow its subscriber base across geographies.
Hu Xin: South African subscribers increased 16% year-on-year in Q3 and comprise 75% of our total subscribers.
Hu Xin: We believe that the economic environment in South Africa is improving and we are confident that our move to our newly built central office
Hu Xin: Position us to support strong organic growth, as it will allow us to expand our customer base and increase subscription sales to existing customers.
Hu Xin: In Asia and the Middle East, subscribers increased 20% year-on-year in Quarter 3 with strong momentum in Southeast Asia. This region comprised 12% of our total subscribers.
Hu Xin: Southeast Asia remained the second largest contributor to the group's revenue, presenting the most compelling growth opportunity over the medium to long term.
Hu Xin: Europe subscriber increased 19% year-on-year in Q3 and comprised 9% of our total subscribers.
Hu Xin: European subscriber growth accelerated by 200 basis point quarter over quarter driven by our investment in distribution over the last few quarters.
Hu Xin: We remain focused on increasing our presence in this region, especially through OEM partnerships.
Hu Xin: In addition, we are experiencing encouraging demand with our propriety compliance technology as customers seek to simplify compliance with changing legislations.
Hu Xin: Africa Others maintain its growth with 16% increase in subscribers and comprise 4% of our total subscribers.
Transcription by CastingWords
Speaker Change: Carew's adjusted earning per share increased 21% to RM7.67 in this quarter. This is driven by higher subscription revenue and expanding gross margins.
Speaker Change: CarTracks earning per share increased 8% to RM7.51 and Karoo Logistics earning per share increased 23% to RM16.00
Speaker Change: As Carews continues to scale and grow, we are confident with our FY25 adjusted earning per share outlook.
Speaker Change: In this quarter, we continue to demonstrate high cash conversions as our earnings increase. Free cash flow was R188 million.
Speaker Change: We have now settled into our newly built South African central office and looking forward to strong economic growth in this region.
Speaker Change: Our balance sheet reflects our track record of growth at scale, profitability and cash generation.
Speaker Change: Last August, we paid a cash dividend of $33.4 million, or $1.08 per share to our shareholders. The dividend per share increased 27%.
Speaker Change: We have strong unit economics, robust operating margins, unleveraged balance sheet and strong cash conversion. We remain confident that our track record of success, especially our ability to generate healthy cash flow, is sustainable.
Speaker Change: Given our strong Q3 results, we are reaffirming our financial outlook for FY25.
Speaker Change: In closing, we are excited about the operating momentum in the business and our year-to-date financial performance.
Speaker Change: Looking forward, we believe our attractive sales business model, robust cash generation and strong balance sheet position us to capitalise on the expensive growth opportunity in front of us.
Speaker Change: I would like to thank everybody for joining us today and will now open the floor to Q&A with our group CEO and founder, Mr. Zac Calisto.
Unknown Speaker 1. Yeah, congratulations folks. Unknown Speaker 2.
Unknown Speaker 0h10. Thanks.
Speaker Change: Hi, everyone. Good evening. Good morning. Good afternoon. I want to thank everybody for taking the time and joining us.
Speaker Change: I'll go through the questions. There's a question from Jackson from William Blair. Looking at attracting the necessary talent, what have been the best sources of human capital and what has been the company's selling point to prospective employees?
and
Speaker Change: I think the best sources of human capital, we don't outsource our recruitment, we do it all internally. And, you know, these various channels, whether it's referrals, or whether it's actually just on digital platforms. So we have different ways of attracting people. And we also post and, you know, we have incoming
queries or applicants for the jobs.
Speaker Change: What is P&I's unique selling points? I think that really depends whether you are hiring at
Speaker Change: 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. Unknown Speaker
Speaker Change: We are a very attractive business, so if we want a senior person, we find those hires extremely easy. Where it becomes more challenging is actually on the distribution front.
which is actually salespeople.
Speaker Change: Now there's very really good quality salespeople and attracting the right people and training them is not always the easiest. So that's really probably where
Speaker Change: It's the most difficult is building out that ability to sell while being vertically integrated and not looking for agents and third parties to sell for us.
The next question is from Rudi Van Akerk.
vehicles that have integrated or have integrated full self-driving technologies.
Speaker Change: 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.
Speaker Change: between now and where that becomes an absolute reality, I think.
is that when we agile and we adapt.
Speaker Change: There's no need to adapt right now, it's too early in the curve to start.
Speaker Change: planning for that. But I think in itself, because we help in businesses run the, you know, how do we help businesses run the operations.
Speaker Change: quite frankly I think whether the vehicle self-driven or not the whole ecosystem of the supply the distribution you know there's a lot more that we do and like I said we probably a couple of years away from this
Speaker Change: and by the time that has happened we will look like a very different business to what we are currently are today. In actual fact I think we today are quite a different business to what we were four years ago and certainly a very big a big difference in the business that we were ten years ago.
Speaker Change: The next question is from Jackson, from William Bley. With multiple regions performing strongly, what has been the contribution to AR from each?
Speaker Change: Is this a good way to think about the breakdown going forward? 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 subscription revenue was impacted by the stronger rent.
Speaker Change: which obviously the non-South African entities, whether it's Europe or Southeast Asia, they were dealing with a stronger rent. I see since November, since year-end, that's corrected quite a bit with the South African rent is weakened.
Speaker Change: But I think the other currency is probably a brick against the dollar as well. So I haven't quite looked at the impact for Q3 and the potential impact for Q3.
The next question comes
From Alex.
From Raymond James.
Speaker Change: Can you talk about your planned global sales and marketing hiring efforts? What is the magnitude you are looking to grow the sales organization over the next 12 months in some of your core regions?
Speaker Change: In Asia, our target is to grow that by about 70% of our current headcount, and we believe that we'll comfortably be able to do that 70%.
increase.
Speaker Change: We're just settling down in a new building, but we're probably going to increase headcount in South Africa by about 30% 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.
Speaker Change: Next question, Patrick O'Reilly from Fleetwatch. There's a lot of noise around the Africa Pre-Trade Agreement. Do you see the noise translating to positive opportunities for carjack in Africa?
Speaker Change: You know 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.
Speaker Change: 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.