Karooooo Ltd.

Hello, and welcome to Kourou's Q1 FY2026 earnings call. On behalf of Kourou, we would like to thank you for joining us today. I'm Paul Bieber, VP of Investor Relations and Strategic Finance. We are joined today by Zach Kalisto, Founder and Group CEO, Hoshin Goy, Chief Financial Officer, and Carmen Kalisto, Chief Strategy and Marketing Officer. I would like to remind everyone that some of the statements that we made 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 several risks and uncertainties. Our actual results could differ materially. Please refer to the Safe Harvest Statement in our Form 20F, 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. A reconciliation of non-IFRS to IFRS measures is included in the 6K that we filed with the SEC yesterday. Our comments will refer to year-over-year comparisons unless we state otherwise. I will now pass the presentation over to Carmen.

Welcome to Karu's Q1 FY26 financial results presentation. For those new to Karoo, We operate a SaaS platform for connected vehicles and mobile assets that enables businesses to enhance operational efficiency, reduce costs, improve safety, and ensure compliance. We help businesses simplify decision-making to optimize their physical operations. We serve a large under-penetrated market with strong sustained demand driven by digital transformation, a constant need to improve operational efficiency, and an increasing focus on safety and compliance. We are a founder-led business with a strong financial profile, a proven track record of execution excellence, and cultural focus on disciplined capital allocation and operational efficiency. Our platform supports more than 2.4 million subscribers across more than 125,000 businesses in South Africa, Southeast Asia, and Europe, spanning industries such as logistics, mining, agriculture, construction, retail, and the public sector. Our financial model is anchored by attractive growth, high margin subscription revenue, exceptional commercial ARR retention and powerful unit economics. Our Q1 FY26 annual recurring revenue, or ARR, increased 18% to 4.574 million ZAR, and on a US dollar basis, ARR increased 24% to 254 million US dollars. Subscription revenue accounted for 98% of contract revenue, and our commercial customer ARR retention rate remains at 95%. We continue to scale our proprietary data assets now generating over 220 billion data points monthly, which we leverage to deliver impactful insights and value to our customers. Finally, our LTV to CAC remained above nine times, enabled by strong retention, disciplined capital allocation, and efficient distribution, which are embedded in our vertically integrated business model and company culture. During our presentation, we will review both of Karoo's operating segments, Kartrak and Karoo Logistics. Kartrak is our operations management SaaS platform. Kartrak operates at scale and has a very attractive financial profile. Kartrak's operating momentum is the primary driver of Karoo's growth and strong financial performance. In Q1, CarTrack delivered strong results highlighted by accelerating subscription revenue growth across all regions. These results reflect the early returns from the strategic investments we've made in expanding our sales capacity in recent quarters. In Q1, CarTrack generated 1.1 billion ZAR in subscription revenue, an increase of 19% or 24% on a US dollar basis. Notably, Cartrax subscription revenue accelerated this quarter. Cartrax operating profit margin was a healthy 30%. Karoo Logistics is our rapidly growing delivery-as-a-service offering that empowers large enterprise customers to scale their e-commerce and logistics operations. Karoo Logistics is showing strong growth and operating momentum and driving real value for our enterprise customers. We report Karoo Logistics separately as the delivery-as-a-service offering differs from CarTrack SaaS financial profile. Karoo Logistics is strategically important to us as it empowers our customers to scale their e-commerce and logistics operations through a capital-light model while driving high contract customer retention. We continue to profitably scale the Karoo Logistics business. In Q1, Karoo Logistics' delivery-as-a-service revenue reached 121 million ZAR, an increase of 20% or 26% on a US dollar basis. Given Karoo Logistics' robust revenue growth, we are very excited about the long-term growth opportunity. In Q1, Karoo delivered total revenue of 1.277 million ZAR, an increase of 18%, subscription revenue of 1.141 million ZAR, an increase of 18%, earnings per share of 8.55 ZAR, an increase of 19%, and total subscribers of approximately 2.4 million, an increase of 17%. CarTrack's subscription revenue growth of 19% and operating profit margin of 30% underpinned our stellar financial performance in Q1. It's noteworthy that CarTrack's operating profit margin was stable at 30% despite the increased investment in sales capacity and infrastructure to drive accelerating growth. Q1 continued our track record of delivering profitable growth at scale. In Q1, we were a Rule of 60 company when adding our CarTrack subscription revenue growth of 19% and our CarTrack adjusted EBITDA margin of 46%. Before detailing our Q1 financial and operational accomplishments, 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. We believe we are among a select few SaaS companies operating at a rule of 50 plus based on calendar year 2025 Gap Street estimates. Within a SaaS universe of approximately 160 companies, we believe we are the only small cap company operating at this level. Being part of this elite group reflects our unwavering commitment to disciplined and profitable growth. Moving on to our Q1 financial and operational highlights. In Q1, SaaS ARR accelerated to 18%. compared to Q4 FY25's growth of 17%. On a US dollar basis, Q1 SaaS ARR accelerated to 24%, compared to Q4 FY25's growth of 21%. CarTrack subscription revenue growth accelerated to 19%, compared to Q4 FY25's growth of 16%. On a US dollar basis, Cartrack's subscription revenue accelerated to 24% compared to Q4's growth of 20%. Cartrack's total subscribers increased 17%, highlighted by stable growth in South Africa and an acceleration of growth in Southeast Asia to 22%. We also delivered record Q1 net subscriber additions. Q1, average revenue per user, or ARPU, increased 2% in ZAR or 6% on a US dollar basis as we started to deliver on our aim to increase ARPU in South Africa in FY26. CarTrack's operating profit margin was a healthy 30% and benefited from disciplined expense management and modest ARPU growth. Karoo earnings per share of 8.55 increased 19%. We remained a Rule of 60 company and our balance sheet remained strong and unleveraged. We ended the quarter with net cash and cash equivalents of 1.103 million ZAR. Our healthy subscription growth margin, efficient customer acquisition, and attractive commercial customer ARR retention rate continued to drive our healthy unit economics. In Q1, our subscription gross margin was 74%, our LTV to CAC ratio remained above 9 times, and our commercial customer ARR retention rate was 95%. We are also experiencing attractive ARR growth with our retained customers. It's noteworthy that we accelerated our subscription revenue growth in Q1 while maintaining healthy unit economics. We are excited about our massive TAM and remain committed to profitable growth as we pursue the expansive growth opportunity ahead of us. We ended Q1 with approximately 1.8 million subscribers in South Africa, an increase of 16%. South Africa's subscription revenue comprised 70% of our total subscription revenue and South Africa's subscription revenue growth accelerated to 16%. We are encouraged by the strong teams that we are building in South Africa to accelerate organic growth broaden our customer base and increase subscription sales to existing customers in the region. We continue to see a compelling market opportunity in South Africa, driven by ongoing digital transformation rising demand for video solutions and the market expanding impact of contract tag. With a trusted brand and an experienced team, we continue to see a compelling market opportunity in South Africa. We ended Q1 with approximately 290,000 subscribers in Southeast Asia and the Middle East, with most of the subscribers in Southeast Asia. Southeast Asia and the Middle East subscriber growth accelerated to 22% and is now 17% of our total subscription revenue. Southeast Asia continues to present the largest growth opportunity over the medium to long term and is our fastest growing region. In Q1, Southeast Asia and the Middle East subscription revenue growth accelerated to 30%. We aim to increase our sales headcount by 70% by February 2026 compared to February 2025. Our differentiated SaaS platform, growing brand equity built on superior customer service, service delivery and distribution, and attractive regional macro trends should provide us with a solid foundation to drive continued growth and expansion in the region for many years to come. We believe Southeast Asia is a vast and under-penetrated market for sophisticated fleet management and video-based solutions, and we are excited about the vast growth for Runway ahead. We ended Q1 with approximately 210,000 subscribers in Europe, an increase of 20%. Europe is now 10% of our total subscription revenue and European subscription revenue growth accelerated to 22%. On a constant currency basis, European subscription revenue growth accelerated to 20%. We have partnered with leading OEMs to provide easy access to our platform, seamlessly integrating their connected vehicle data to our platform through APIs. We expect these partnerships to contribute to our results in the medium to long term. In addition, we are experiencing encouraging demand for our proprietary compliance technology in the area as customers seek to simplify compliance with evolving legislation and enforcement. We continue to accelerate our organic growth, expand our customer base and increase subscription sales to existing customers in the region. In Q1, Karoo Logistics continued to build scale and delivered revenue of 121 million ZAR, an increase of 20% and an 8% operating profit margin. Karoo Logistics supports our strong financial performance by immersing our platform into large customers' operations, contributing to strong customer retention. Karoo Logistics also enables us to learn about the operational and logistics challenges confronting our large customers. We see a large opportunity for career logistics going forward as large businesses seek to increase their e-commerce offerings and optimize their logistics capabilities through a capital light model. In Q1, we made good progress with our FY26 priorities. First, we've begun strengthening our leadership position in South Africa by selling our video solutions and contract tag to our existing customer base. This initiative has demonstrated early traction as reflected in a 2% ARPU increase in Q1. However, the dynamics on the ground are more nuanced. While video and bundled car track tags are positively contributing to ARPU expansion, sales momentum with standalone car track tags, which carry a lower revenue per subscriber, is partially offsetting the ARPU uplift. We remain confident in our long-term ability to grow ARPU in South Africa, though reaching our 10% ARPU growth target for FY26 may take a little longer than initially expected as we continue to build our internal capabilities. Longer term, we believe there is potential to increase South African ARPU by significantly more than 10%. Second, We continue to expand our distribution footprint in Asia and Europe. We are seeing success in expanding our teams in the region. Finally, we continue to work with our customers globally to drive broader engagement with our platform and to capture the growing demand for video capabilities, including AI video. Capital allocation is a fundamental part of our culture, and we aim to remain disciplined with our capital allocation strategy rooted in a 20-year culture of profitable growth at scale and prudent financial management, key drivers of long-term shareholder value. Our capital allocation framework is unchanged and prioritizes organic growth and innovation. Our paramount priority is investing in organic growth and product innovation, given our strong unit economics, sustained profitability, and large market opportunity. Returning capital to shareholders. 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. Strategic M&A. We take a prudent and strategic approach to M&A. 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. M&A opportunities must offer clear strategic value or optionality to meet our criteria. 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 Q1 financial performance.

Thank you, Carmen. I will now discuss Carew's financial performance for Q1 FY2026. Please note, my comment will refer to year-over-year comparisons, unless we state otherwise. Our proven and profitable SaaS business model continues to deliver strong results in Q1. Karu's total subscription revenue increased 18% to RM1,141 million. On US dollar basis, Karu's subscription revenue increased 24%. Operating profit increased 17% to RM352 million and adjusted earning per share increased 19% to RM8.55. We will now focus on CarTrack's financial performance which is fueled by SaaS revenue momentum. In Q1, CarTrak's revenue increased 18% to RM1,156 million and CarTrak's subscription revenue increased 19% to RM1,138 million. Subscription revenue comprised 98% of CarTrak's total revenue. Q1 ARR increased 18% and 24% in RAND and USD respectively. Our ARR growth is slightly lower than CarTrack subscription revenue growth due to several factors including the impact of FX, timing and rounding. As you can see from the trend of the charts, CarTrack has a proven track record of scaling in varying macroeconomic conditions given our consistent executions, resilient subscription revenue model and attractive historic retention rates. In quarter one, CarTrack experienced healthy customer acquisition. Quarter 1 subscriber increased 17% to approximately 2.4 million. Subscription revenue increased 19% to 1,138 million rand. And operating profit increased 19% to a record 342 million rand. CarTrack experienced solid customer acquisition with record Quarter 1 net subscriber addition of 84,000. an increase of 11%. CarTracks continue to grow its subscription revenue across geographies, and subscription revenue growth accelerated across all regions. South Africa's subscription revenue growth accelerated to 16%, Asia and Middle East subscription revenue growth accelerated to 30%, and Europe's subscription revenue growth accelerated to 22%. The acceleration across regions reflects our execution track records and provides a solid foundation for continued growth. In Q1, total subscriber growth of 17% remained healthy while SAS ARR accelerated to 18% compared to 17% in Q4 FY2025. We believe the acceleration in SAS ARR reflects the underlying momentum in the business and signals that our strategic initiatives are gaining traction. Karoo's earning per share increased 19% to RM8.55 in Q1. Earning per share benefited from subscription revenue growth. In Q1, CarTrack's earning per share contribution increased 20% to RM8.37. Karoo's logistic earning per share contribution was 18 cents despite the increased investment in driver training and quality control to support growth. In Q1, we resume our significant free cash flow generation. Free cash flow was RM338 million and benefited from disciplined working capital management. The free cash flow generated is in line with KERU discipline capital allocation strategy and supports our future growth. Our balance sheet reflects our track record of growth at scale, profitability and cash generations. Our net cash on hand plus cash in bank fixed deposits was RM1,103 million. Debtors' collection days remain extremely healthy at 27 days and are within our historical norm. We are paying a total cash dividend of approximately $38.6 million to our shareholders in August 2025. That is a dividend of $1.25 per share. We believe that our ability to generate healthy cash flow is sustainable given our annuity business model, coupled with our track record of consistent execution and success. In FY2026, we aim to accelerate car track subscription revenue growth by further expanding our distribution footprint in the existing market, driving broader platform adoptions, and capitalizing on growing demand for our AI video solutions. We are encouraged by our positive momentum in Q1 FY2026, where subscription revenue accelerated to 19%, signalling that our strategic initiatives are gaining traction. With continued investment in sales, marketing and infrastructure, we believe we are well positioned to achieve our FY2026 growth ambitions. Accordingly, we are reaffirming our previously provided FY2026 outlook. A frequent question we receive from investors focus on the trade-off between growth and margin profile. Our FY2026 outlooks details a range of growth and margin outcomes as we aim to accelerate our growth this year. Equally important, we believe it's insightful to examine how our financial model could perform in a zero growth environment with stable customer retention. It is important to recognize that our current financial statements reflects the substantial upfront customer acquisition costs that appear in our sales and marketing expense line. While these costs are expensed immediately under IFRS, they support the acquisition of customer that typically remain with us for many years. The timing differential creates a meaningful mismatch between when we incurred customer acquisition costs and when we recognize the full revenue benefit or the lifetime value of our long duration customer relationships. Currently, our LTV to CAG is more than nine times. In a hypothetical no growth scenario with consistent ARR retention patterns, we believe we would have the flexibility to significantly reduce our sales and marketing expenditure. This level could potentially drive our operating profit margins higher to approximately 38%, a substantial improvement from current levels as growth-oriented marketing expense are eliminated. In addition, the approximately 38% operating profit margin could potentially improve as it does not account for the potential additional benefit accrued from reduced depreciation and expansion expense in a known growth environment. For additional context, our margin profile incorporates growth-related costs to increase our footprint and customer acquisition. Further, in a known growth scenario, depreciation would decline slightly, providing a further potential margin expansion opportunities. In closing, the underlying acceleration in the business reflects the strength of our operating model and early traction from strategic investment in sales capacity and customer acquisition. We have made deliberate choice to invest to enhance our distribution footprint, and we are beginning to see those efforts materialize. With continued execution, disciplined investment, and growing regional performance, we believe that we are well positioned to deliver consistent and profitable long-term growth. With that, I will turn the presentation over to Zach Callisto for Q&A.

Hello. Thanks, Sushin. Sorry, I was having problems with my phone. Thank you very much. I'll just go through the questions that we have. The first question is from Joshua at Needham. Hi, Joshua. If we look at the subscriber growth in South Africa, it was very consistent in the first quarter. Any color on the trajectory of the consumer growth for the balance of the year relative to the commercial subscriber growth? I think in South Africa, we're having really good traction, both with commercial and consumer customer growth. And I believe that will continue for the rest of the year. So I'm not certain I'm giving you the answer that you're actually asking, but I think fundamentally we're having very good traction on both, both consumer and commercial customers. Another question from Joshua. If we were to look at your Southeast Asia markets, are you seeing any impact to subscriber growth in these regions from the United States state of impact, as these are key sentiments for United States manufacturing, or is it the local economic growth driving trends or adoption? Joshua, in my opinion, I don't believe that... the tariff environment that the whole world is talking about is impacting our business at this point in time. And I think our growth in Southeast Asia is just because we're addressing the market and we're increasing our footprint. And fundamentally, I don't believe that will have an impact on us, but it might in the future, but I can't see it. Now, another question from Joshua. How should we think about the cross-sell of video and contract tech relative to expectations and subsequent impact on to ARR growth and ARPU growth for the balance of the fiscal year? We were hoping, Joshua, that we could actually increase our ARPU this year by around 6%, which would equate to about a 10% increase in South Africa. I think we've made good progress in Q1. and we are getting momentum on this, and we might miss that 10% initial outlook, but I believe we are building the teams, we are building the muscle to be able to execute on this. Another question from Joshua. It's not a question. These are my questions. Thank you. Okay, sorry, Joshua. A question from Per Jenster. Please explain why you have chosen expansion in Southeast Asia rather than Africa, which I would suspect has less competition. I think we've expanded into Africa mostly on the back to support our South African customers. And we believe that the market opportunity in Southeast Asia is far larger than in Africa. A question from Dylan Becker. Hi, Dylan. On the accelerating subscription revenue, can you give us color on the mix between subscriber growth and cross-selling initiatives? I think we are getting the cross-selling initiatives, but probably the best way to look at it, that's given us an uplift of 2%. We're hoping that that will rise by Q4 to higher levels. And it's mostly new subscribers with an element of cross-selling. And I believe this cross-selling is going to pick up momentum as we build the muscle to execute. Further, early validation of success as customers look to land more multi-product and what can mean for broader stickiness retention throughout the platform. I think fundamentally our customers, if you look at our retention rates, they are relatively high compared to our peers. So I do believe we've got a significant stickiness. And I think what it really means for us is that if we don't add this extra level of service, then we might lose customers. So it really is not really about improving retention. It's more about keeping our retention rates. Another question from Dylan Becker. Update on our incapacity plans. What does the typical RAM process look like for reps and how it can contribute to sustained levels of elevator subscription growth? Fundamentally, Dylan, as we increase the number of sales staff in a perfect world, you should have a correlation of one. And that is that if you increase your sales force by 50% or by 100%, then you should get 100% more net sales. And that would then trickle off into a lower percentage in your base subscriber growth. So in Asia, typically, if you're able to increase your salespeople by 70%, we then should get a subscriber growth of about 28% this year. And that's what we're working towards. Another question from Dylan Becker. impressive data mode as this continues to grow and expand and you continue to go deeper with customers with more products how do you think about the ability to continue innovating developing new products and driving even deeper value insights for customers uh dylan um that's fundamentally what we've been doing for years the more data we have the more the more information we can give our customers. And clearly what we are offering today is much better than it was five years ago and substantially better than 10 years ago. And I believe in five years' time, we'll be in a much better position than we're currently in as well. Thank you. The next question from Alex, from Raymond James. Hi, Alex. Can you talk about how the Southeast Asia island plans are trending here today so far, relatively to the 70% growth target? Alex, we're very much on target. with our hiring plans. In some countries we're a little bit behind, in other countries we're ahead. So overall, I think we're on target. Are you expecting any change in productivity, six to 12 months following these hiring efforts versus the past year? We certainly are, otherwise we wouldn't be doing it. And I believe we'll be able to deliver. Another question from Alex. How will the growth in ARPU from cross-selling video asset tags analytics impact the LTE bit margins for the car track business? Fundamentally, the way we do our pricing is very much based on our operating profit margin. And we believe this ARPU that we increase in ARPU is not to increase productivity, profitability margins. It will just increase our profits and increase our revenue. But it won't have an impact on the margins. It will just increase the ARPU and the RV. But with that comes additional cost of sales and the OPEX expenses. All Africa partners, would you like to increase the company's ownership of Karoo Logistics? And if so, is there a route to doing so? Our agreement, our shareholders agreement, we have the option to increase our shareholding. And that option comes into place in February 2026. And we'll evaluate it in 2026. And if we don't do it in February 2026, we will keep on evaluating it. A question from Yaakov Schlaver. Isaac, can you please give us some color around the opportunity in Asia? You mentioned the press release, you are growing the headcount there by 70%. Can you talk about the ramp-up process? Yaakov, I think I've covered this question. Roy Campbell from Morgan Stanley. How is the contract performance rollout in South Africa progressing? Roy, the tag. is phenomenal progress. It really is a game changer for us in the marketplace. And we really are getting lots of traction with the car track tag. And we believe it's early days in the bigger picture. So we're very excited about this product. It's working really well at this stage. And I believe it's going to be a game changer. Another question from Roy. The effective tax rate is quite low. Can you please detail the reasons and how this looks for the balance of the year? Roy, I haven't got the answer quite at my age, but fundamentally we are benefiting from entities that are now becoming profitable and which have tax losses. I think those are the questions. Thank you very much for everybody for joining us today. Thank you. Bye-bye.