• Total Revenue: ZAR1,159 million, an increase of 15% year-on-year.
• Subscription Revenue: ZAR1,032 million, an increase of 14% year-on-year.
• Cartrack Subscription Revenue: Approximately ZAR3 billion year-to-date, an increase of 15% year-on-year.
• Cartrack Operating Profit Margin: 30% year-to-date.
• Karooooo Logistics Revenue: ZAR310 million year-to-date, an increase of 38% year-on-year.
• Adjusted Earnings Per Share: ZAR7.67, an increase of 21% year-on-year.
• Subscribers: More than 2.2 million, an increase of 17% year-on-year.
• Net Cash and Cash Equivalents: ZAR856 million.
• Free Cash Flow: ZAR188 million.
• Dividend Per Share: Increased 27% to ZAR1.08.

• Warning! GuruFocus has detected 6 Warning Signs with KARO.

Release Date: January 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cartrack's subscription revenue increased by 15% year-on-year in local currency and 20% in US dollars, showcasing strong growth momentum.
• Karooooo logistics reported a 38% increase in delivery as a service revenue year-on-year, indicating robust growth in this segment.
• The company achieved a rule of 60 status, with a 14% subscription revenue growth and a 47% adjusted EBITA margin in Q3.
• Karooooo Ltd (NASDAQ:KARO) ended Q3 with over 2.2 million subscribers, a 17% increase year-on-year, demonstrating strong customer acquisition.
• The balance sheet remains strong and unleveraged, with net cash and cash equivalents of ZAR856 million, reflecting financial stability.

Negative Points

• Karooooo logistics operates at a structurally lower margin compared to Cartrack, which may impact overall profitability.
• Growth in Karooooo logistics was negatively impacted by customers focusing on in-store Black Friday promotions, indicating potential vulnerability to external factors.
• The company faces challenges in attracting and training high-quality salespeople, which could impact future sales growth.
• The stronger South African Rand has impacted ARR and subscription revenue from non-South African entities, affecting financial performance.
• The company is in the early stages of expanding its sales and marketing efforts, which may require significant investment and time to yield results.

Q & A Highlights

Q: What are the best sources of human capital for Karooooo, and what is the company's selling point to prospective employees? A: Isaias Calisto, CEO, mentioned that Karooooo does not outsource recruitment and uses various channels such as referrals and digital platforms. The company tailors its selling points based on the role, with senior positions being easier to fill due to the company's attractiveness. The challenge lies in recruiting quality salespeople, as Karooooo prefers to maintain a vertically integrated sales force without relying on third-party agents.

Q: How should Karooooo consider the impact of new generation vehicles with integrated self-driving technologies? A: Isaias Calisto, CEO, believes that self-driving technology is still in its early stages and not yet a significant factor for Karooooo. The company remains agile and adaptable, focusing on helping businesses run their operations efficiently. Karooooo expects to evolve significantly by the time self-driving vehicles become mainstream.

Q: With multiple regions performing strongly, what has been the contribution to ARR from each, and is this a good way to think about the breakdown going forward? A: Isaias Calisto, CEO, confirmed that ARR contributions align with subscription revenue growth in each region. The stronger South African Rand has impacted non-South African entities, but currency fluctuations are expected to balance out over time.

Q: Can you discuss your planned global sales and marketing hiring efforts and the magnitude of growth expected over the next 12 months? A: Isaias Calisto, CEO, stated that Karooooo plans to increase its sales and marketing headcount by 70% in Asia, 30% in South Africa, and 50% in Europe. The company is confident in achieving these targets, with Europe already showing positive growth results.

Q: Do you see the Africa Free Trade Agreement translating into positive opportunities for Cartrack in Africa? A: Isaias Calisto, CEO, noted that regardless of the trade agreement, opportunities in Africa are vast. Increased free trade would naturally enhance logistics, benefiting Cartrack's operations in the region.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.