Karooooo .(US:KARO)2026-01-21 14:00Financial Data and Key Metrics Changes - In Q3 FY 2026, the company's Annual Recurring Revenue (ARR) increased by 22% to ZAR 5,106 million, and on a US dollar basis, it increased by 28% to $298 million [4][22] - Total revenue for Q3 increased by 22% to ZAR 1,410 million, with subscription revenue rising by 20% to ZAR 1,239 million [8][21] - Operating profit increased by 14% to ZAR 369 million, and earnings per share rose by 11% to ZAR 8.55 [21][24] Business Line Data and Key Metrics Changes - Cartrack, the primary operating segment, generated approximately ZAR 1.2 billion in subscription revenue, reflecting a 20% increase or 27% on a US dollar basis [6][22] - Karooooo Logistics reported Delivery-as-a-Service revenue of ZAR 135 million, an increase of 24% or 31% on a US dollar basis [8][17] - Cartrack's operating profit margin was 28% in Q3, while Karooooo Logistics had a 7% operating profit margin [8][17] Market Data and Key Metrics Changes - South Africa represented 72% of total Cartrack subscription revenue, with subscription revenue growth accelerating to 21% [12][23] - Southeast Asia and the Middle East saw a 14% increase in subscription revenue, while Europe experienced a 24% increase [15][16][24] - The company ended Q3 with approximately 318,000 subscribers in Southeast Asia and the Middle East, a 20% increase [15] Company Strategy and Development Direction - The company aims to strengthen its leadership position in South Africa by driving the adoption of video solutions and Cartrack Tag within its existing customer base [18][30] - There is a focus on expanding distribution capabilities in Asia and Europe, with ongoing investments in sales capacity expected to yield positive results [18][30] - The capital allocation framework prioritizes organic growth and innovation, with a commitment to returning surplus capital to shareholders when growth opportunities are limited [19][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market opportunity in South Africa, indicating a long runway for subscription growth [15][30] - The company noted that the appreciation of the South African rand has created a currency translation headwind on reported revenue, but underlying operating momentum remains strong [28] - The outlook for FY 2026 Cartrack subscription revenue has been revised to between ZAR 4,785 million and ZAR 4,900 million, implying growth between 18% and 21% [29] Other Important Information - The company reported a strong balance sheet with net cash and cash equivalents of ZAR 531 million [11][26] - The subscription gross margin was 73%, and the lifetime value to customer acquisition cost (LTV to CAC) ratio remained above nine times [12][25] - The company has a disciplined approach to capital allocation, focusing on sustainable growth and shareholder value [19][20] Q&A Session Summary Question: How is the headcount increase in Asia progressing? - The company is currently at around 40% of the targeted 70% increase, with many hires expected in January and February [32] Question: When will investment in sales and marketing stabilize? - The stabilization depends on the efficiency of sales and marketing strategies, with plans to continue increasing investment given the large addressable market [32] Question: How far along is the cross-selling of tag and video in South Africa? - The company is in the early stages of cross-selling and expects stronger momentum in the next financial year [33] Question: What are the drivers of acceleration in subscriber growth? - The acceleration is attributed to increased sales and marketing efforts, with strong productivity in key markets [34] Question: How does the company view the competitive landscape for AI camera adoption? - The company feels comfortable competing with peers and believes adoption will strengthen over time [36] Question: What impact does the strong South African rand have on operations? - The strong rand has a mixed impact, positively affecting production costs but negatively impacting reported revenue in rands [43] Question: Is the subscriber growth in South Africa diluting ARPU growth? - On a group level, ARPU growth remains on track, with slight lagging expected but overall performance is largely on target [51]