Karooooo .(US:KARO)2026-01-21 14:02Financial Data and Key Metrics Changes - In Q3 FY 2026, Karooooo's ARR increased by 22% to ZAR 5,106 million, and in U.S. dollars, it increased by 28% to $298 million [4][20] - Total revenue for Q3 increased by 22% to ZAR 1,410 million, with subscription revenue rising by 20% to ZAR 1,239 million [7][19] - Operating profit increased by 14% to ZAR 369 million, and earnings per share rose by 11% to ZAR 8.55 [19][22] Business Line Data and Key Metrics Changes - Cartrack's subscription revenue grew by 20% to ZAR 1,236 million, comprising 97% of its total revenue [20][22] - Karooooo Logistics' revenue reached ZAR 135 million, an increase of 24%, with a 7% operating profit margin [15][20] - Cartrack's operating profit margin was 28% in Q3, reflecting strong financial performance [6][8] Market Data and Key Metrics Changes - South Africa represented 72% of total Cartrack subscription revenue, with a growth rate of 21% in Q3 [11][12] - Southeast Asia and the Middle East saw a 14% increase in subscription revenue, while Europe experienced a 24% growth [13][14][22] - The total subscriber base increased by 16% to approximately 2.6 million, with record net additions of 111,000 in Q3 [10][21] Company Strategy and Development Direction - The company aims to strengthen its leadership position in South Africa by increasing the adoption of video solutions and Cartrack Tag among existing customers [16][27] - Karooooo is focused on expanding its distribution capabilities in Asia and Europe, with a strong emphasis on capitalizing on the growing demand for video capabilities, including AI video [16][28] - The capital allocation framework prioritizes organic growth and innovation, with a commitment to returning surplus capital to shareholders when growth opportunities are limited [17][24] 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 [12][27] - 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 [25][26] - Management remains focused on long-term growth, emphasizing the importance of customer retention and service over strict adherence to contract terms [43][50] Other Important Information - The company reported a strong balance sheet with net cash and cash equivalents of ZAR 531 million [10][24] - Year-to-date adjusted free cash flow increased by 37% to ZAR 597 million, reflecting the strength of the operating model [23][24] Q&A Session Summary Question: How are we doing with the 70% increase in headcount in Asia? - The company is currently at around 40% and expects to reach the target by the end of Q4 as many hires are planned for January and February [30] Question: When will our investment in sales and marketing stabilize? - The stabilization will depend on the efficiency of sales and marketing strategies, which will continue to be increased given the large addressable market [31] Question: How far along are we in the cross-selling tag and video cycle in South Africa? - The company is in the early stages and anticipates stronger momentum in the next financial year [32] Question: How do you see market demand today relative to sales execution in key markets? - Sales and marketing have been substantially increased this year, and the company is seeing strong productivity in key markets [33] Question: Can you address adoption trends for AI camera penetration rates per region? - Adoption is strong in South Africa, but the company believes it is still early days for broader adoption [34] Question: Is the market saturated for Carelli in Europe or Southeast Asia? - The company believes it is early days in the e-commerce space and does not consider the market saturated [35] Question: How has the shift from used vehicle sales to new vehicle sales in South Africa impacted subscriptions? - The impact is considered insignificant as customer acquisition is based on existing vehicles [37] Question: How do you think about growth versus margin trade-off? - The company focuses on long-term value for shareholders, viewing upfront costs as temporary and necessary for future revenue [38] Question: What are the drivers for subscription ARPU growth in South Africa? - Continuous improvements in technology and service have been key drivers, with no significant changes in strategy [49]