Karooooo Ltd.

Hello and welcome to Karoo's FY2024 Q3 Earnings Call. On behalf of Karoo, we'd like to thank you for joining us today. I'm Carmen, the Group's Chief Strategy and Marketing Officer, and together with Hu Xin, our Group Chief Financial Officer, we'll be taking you through our strong business updates and financials. All investors are advised to read through the disclaimer. We will be reviewing all three of Carew's business units in today's webinar, namely CarTrack, Carzuca and Carew Logistics. Carew remains committed to our mission of being the leading operations cloud. Our focus is to simplify the lives of operators and maximize the scale and efficiency of their operation. Our innovative platform goes far beyond connected vehicles and equipment to centralize and unify an entire operation into one single place. We are helping to pave the benchmark and future of efficiency, safety and impact for operational businesses. Fundamentally, every operation wants to achieve safety targets and compliance targets and well-being targets. But historically, these have come at the compromise of the core survival and success targets of a business, productivity and efficiency. Having a tool that solves complex problems in simple ways is no small feat. And this is a constant driver for our strong growth at scale. Everything is embedded together. The tool that automatically flags potential fuel fraud to save thousands is the same tool that automates carbon emission tracking. The tool that optimizes routes to slash mileage and fuel consumption also makes driver's lives easier and puts them at ease to ensure they get paid for every minute they worked. When burdens like maintenance are well managed, they become strong differentiators for operators, and this is easily done through our automation and integrations. Karoo's platform allows operators to prioritize safety and compliance with heightened productivity. Karoo's AI-powered cameras are redefining the boundaries of visibility. These cameras stand as safety pioneers, revealing hidden risks and enabling proactive responses. From slashing accidents to exonerating innocent drivers, their profound impact transcends industries. A key factor contributing to the success of our platform is its smooth integration into our customers' various operational workflows. In challenging environments like mines, traditional methods such as sit-down discussions on driving styles may not be feasible. Recognizing the significance of training, our innovative approach involves utilizing our risk management control room tool and two-way in-cab communication tools for on-the-spot training and immediate action. The generated alerts ensure prompt intervention and risk mitigation, such as directing drivers to rest when fatigued. The outcome has been transformative with a remarkable 59% reduction in fatigued or distracted driving in just four months, resulting in an overall decrease in accidents. In other industries, establishing formal training is feasible and driver incentives are based on safety scores. A leading mass bus company transporting around 1 million passengers daily has revolutionized an industry and made significant impact on community safety with a 41% decrease in fatigue and distracted driving in just three months. Not only has this led to positive branding as commuters see the change and feel safer, but it has also boosted operational efficiencies by reducing accidents and minimizing the associated downtime. Accidents involving company vehicles often result in substantial maintenance and insurance expenses, protracted legal disputes and employee disgruntlement. Our cloud-based footage has revolutionized the way companies address accidents, providing a straightforward means to investigate incidents and exonerate their teams. This approach enables companies to establish clear mandates around liabilities, streamlining compliance and boosting employee morale. Workers appreciate a tool that prevents unwarranted blame, leading to increased employee retention, whilst businesses benefit by avoiding unwarranted bills that often rack up to tens of thousands of dollars. In an era where safety is taking center stage, our cameras are reshaping how we approach risk management, worker well-being, community safety, and operational efficiency. Our operations cloud drives digital transformation for over 113,000 commercial customers with a 95% retention rate across businesses of varying sizes in diverse markets and industries. We continue to empower the day-to-day operations of our customers with our data-enhanced platform, enabling them to make informed decisions with actionable intelligence about their own fleet as well as others in their industries. The continuous evolution of our platform ensures ongoing enhancements, driving increased returns for our customers whilst we keep our ARPU stable. The value proposition of our platform is massive and we have a huge runway for growth. Our culture, founded on customer centricity, transparency and solution-orientated thinking, sets us apart. We attract top talent that thrives on challenges and values hard work over frills, fostering a team that leads by example. From infield technicians to decision makers, Our team's curiosity, ingenuity, and diverse experience results in a powerhouse of innovation and successful execution. Our unique culture, while not for everyone, cultivates resourceful individuals driven to efficiently solve complex problems. I will now hand over to Hu Xin, who will take us through our financial performance.

Thank you, Carmen. I will now talk through Karu's financial performance for Q3 FY24. Please note that all comparisons are against Q3 FY23 unless otherwise stated. Q3 has proven to be an exciting period for us. Our well-established and profitable SaaS business model and robust financial position provide us with multiple levels for growth, and our primary focus remains on growing our subscription revenue. Our subscription revenue grew 17% to R904 million and our ARR demonstrated an increase of 20% to RM3,711 million. Operating profit increased by 31% to RM275 million and our earnings per share grew 35% to RM6.34 despite our prudent provision made in a quarter relating to Kazuka's reduced operations. All segments continue to see strong tractions with the benefits of our strategic investment beginning to show. Earnings in this quarter stood at R199 million and our free cash flow are at R162 million. Our free cash flow has remained positive over the last eight quarters, despite our investment in the development of our new South Africa central office. Up to this quarter, we had invested R231 million in this development. Our high cash conversions are demonstrated through our strong financial discipline as we continue to invest for our future growth. Our net cash on hand stood at R782 million in this quarter. That does turn over days improving to 30 days alongside with prudent provisioning to weather off strong economic headwinds in some of the markets we are operating. We have strong unit economics robust operating margins, unleveraged balance sheet and a strong cash conversion. We remain confident that our track records of success, especially our ability to generate healthy cash flow, is sustainable. Despite our provision in a quarter for Kazooka, our earnings per share increased by 35% to R6.34. The increase is the result of positive revenue growth and improved profitability not withstanding with our prudent and strategic investment for growth. Kazuka has negatively impacted our earnings per share by $0.75, in line with the provision we make in a quarter as Kazuka reduces its operations. Based on our estimates, we believe we have made adequate provision, and going forwardly, we do not expect Kazuka to have significant impact on our earnings per share. We will now focus on CarTrack, the underlying assets to Karoo's success. Our momentum continued in this quarter as CarTrack extends its decade-plus track record of growth at scale, profitability and cash generation ability.

Overall, subscribers grew at scale by 14% to over 1.9 million.