Earnings call transcript Q3 2023

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Richard Schubert

Welcome to the Karooooo 2023 results webinar. I am Richard, the group’s COO and we are pleased to present the Q3 results to our shareholders and investors.

We are excited to share our performance, growth, and future plans.

Our team led by our CEO and Founder, Zak, is committed to delivering on our strategic goals and creating long-term value for all of our stakeholders. With Hoeshin, our Chief Financial Officer and the rest of the team, we are confident in our abilities to continue driving growth and innovation in the future. are read investors disclaimer. and shareholders advised this to All

is within the Carzuka, Karooooo, Today, underground mobility review entities we to Karooooo, operations. that At we will Logistics. three mainly all Karooooo Cartrack, understand core and

are equipment, also and overall ecosystems. on connected the but improve not only to We about mobility vehicles thinking how

and more efficient. are new to ways them We use data make constantly exploring to optimize operations

daily workflows, operations enabling establishing one customers cloud to while the digitizing controls effective are platform. their We grade platform, and in enterprise leading develop connected

and Our vehicle, day cloud of platforms to more. day seamlessly driver, unprecedented embeds worksite cargo, into activities the of visibility our offers covering aspects varying of and their operations customers

understand these offer operations, their Our their industries. insights remain on platform enabling them to points to their within data and service higher contextualize level ultimately a and offering deliver competitive to streamline helps actionable customers their for challenges. This

committed and and possible offering. customers to our platform with our We constantly our ways improve best new are for we the providing to are support, service and service looking

across Karooooo's customers to Cargill. previous including in XX% compared multinationals their operations, is industries. We small well-positioned large quarter. successfully to optimizing underground service over This businesses Cola Coca is cloud and like global to support a platform the XXX,XXX increase, diverse

our base success customer continues, customer concentration diverse risk. Our and across ensuring our industry low

successful and experience maintaining cost and Investment. proven value an to skills, offering approach prudent passing solutions needs, entrepreneurial on allocation. proposition, strong execution, Karooooo hands while that through planning savings value of through track the] capital Innovating customer of on delivering customers adaptable and a in and enhanced execution [Highlights utilizes record being both prioritize

growth leading prices higher model the vertically scale, solid been regions. strong across at integrated business. and ability profit sustained proven contributor and business our throughout in and a headwinds a to Having significant and practically margins, thinking of creative foundation, growth has ownership at history management, financial This culture, strong multiple and of maintain track us record inspiring a the intraperitoneal control unit profitability economics to puts macroeconomic operating advantage by a varying our

and The Karooooo opportunity platform a well-positioned the to crew vehicles in to it area. XX% operations, GDP underground improve this over to all over connected are of challenges, of stage growing leverage Africa, based opportunity to leading the the large is using In customer and operations. at an grow. with are of this way on key continues South global early is as XX% is data to solving Mobility the we platform. Karooooo is

Karooooo has services. data large decision their experiences generated loyalty, billion their making are analytics increase with a us valuable data and from new but and XXX not products tools points generated untapped to to to effect improve are develop benefiting customer by over Customers Predictive and only of platform with efficiencies. monthly. historical improve personalizing its provided network allow leading

financial I Carmen the will now results Karooooo for present over hand to to QX.

Carmen Calisto

that note I Please performance FY QX stated. unless comparisons against XXXX talk all otherwise Richard. financial you, Karooooo's FY now will through for Thank are XXXX. QX

after per substantial earnings expected, share Year-to-date increased per to As was period all segments, ZARX.XX. growth ZARXX.XX. share for future earnings the investment XX% for in

acquisition, our on These a earnings cash quality Free and by a to achieved to basis. continues date and robust year custom increased this business that model XX% resilient generation cash strategic by for group's million expansion, quarter flow in generative. brand bolster despite is Our testament our were the to balance XX% sheet. building, to highly investment cash ZARXXX

growth scale revenue in growth a [X,XXX,XXX to million. Karooooo XX% rate, to at with a continues in ZARXXX and by Supported retention to high subscribers customer grow XX%

in customer prudent will operations high return culture, which key with our all-inclusive organic value. centric our Our we on drive remains customer and Karooooo’s and end-to-end to technology deploying success has short to be us that to largely capital opportunities is innovative investment and allocation, cloud. attributable offers IoT that through on led continue growth become capital partner long-term operational focusing an

integrated Even advanced empowers with our systems, us control large expanding full adaptable our and agile scale, network. and our remain over business vertically model with infrastructure, to internal distribution

growth and have We to execute proven ability a strong achieve at scale.

XXXX hand SaaS bolster paying cash million, despite business to net by on end US$XX.X model with of continues period. cash at in million up Our of a cash dividend November generation flow at the X% the profitable ZARXXX

Debtor’s turnover days days. to improved XX

and We robust report a unit strong and the sheet, margins, by year cash and increased our Karooooo segments: [ZARXXX total revenue performance Carzuka, end Cartrack, operating quality to at basis. the have on have Rule balance XX% to business and beaten Logistics. million] three QX by We [ph] position ZARX.X economics, consistently billion a Karooooo's strong XX. of of date key

X% by is XX%, Karooooo’s the its guidance million year-to-date EBITA margin for is was unaltered by grew investment in in-line and this EBITA to XX%, Cartrack EBITA million, future XX%. and adjusted Cartrack's profit to and for in quarter. planned ZARXXX Cartrack's at revenue by quarter. grew operating operating comparably by ZARXXX XXXX. with profit grew management's XX% growth This

sustainability the model. million the expansion XXX million business in our year. steady highly revenue prior Carzuka’s its justifies to and Carzuka’s belief agile, of scalable enhanced, grew XX from in data

building, to continue return our the good improving in in to spending pragmatic processes. we of Similarly, mindful infrastructure, brand invest are investment. on and ensure and We being our losses are

service delivery momentum. strong focus delivered an encouraging as revenue quarter. growth ZARXX and a in operating million million ZARX gain Logistics Karooooo to of Its profit this continues generating on in

Cartrack’s largest lifetime result cost from healthy focus customer, derived cost asset customer low the acquiring a of high a benefits Karooooo. economics now retention and rate, high Cartrack, scale strong unit on of in and customer of value. economies attractive underlying will We ARPU

cost value of over is lifetime a customer Our to acquiring X.

of materially allocation, growth. We whilst is with remain to to the increase compared is large small margin to capital competitive. subscription any by quarter our digitalize gross net profit Our and for reflecting prudent to to margin XX%, their for demand record revenue we customers on over XX,XXX our additions and this from healthy as investment well-positioned become businesses are This historical quarter. enterprises, saw was XX% compliant, supported as profit other a efficient, subscriber operating more largely we demand

revenue Cartrack a revenue total continues On to have ZARXXX great of XX% visibility revenue. basis, revenue up up and to revenue the total million with XX% in to future of total ZARXXX SaaS quarter. million subscription remains year-to-date XX%

our record X% despite to market grew [ph], subscribers significant for conditions. extends growth. Our profit ZARXXX and in we execution varying to a by operating decade, investment scale grew track million, a Total to [X,XXX,XXX] of and ability over proven have XX%

In geographies. Asia, ahead. continued South USA, adverse Cartrack Middle to subscribers by Asia economic by despite into expand In grew in Southeast subscribers XX% grew and expansion the moves East, still the Africa, pace as Cartrack’s all factors, of XX%.

the Southeast we opportunity in medium long-term Asia to the greatest to grow continue the focus to presents as region.

Europe X%. we ARPU aim saw resources Cartrack’s gaining in and region although healthy allocate In the growth a was increased is Africa, FY to of this some XX% XXXX. ZARXXX. to subscribers by quarter, a and more traction

strong retaining pricing value are on while proposition customers, our power. We offering to focused a

are NASDAQ long-term revenue targets remains trends of with X%. set our has our as out Cartrack XXXX. X% our X%, current in long-term a Research and at in-line upon in margins subscription with of development financial in-line listing robust operating to the and goals percentage

of allocation target of increase within to expect into be expect marketing we as from to XX% to a XX%. and growth sales We XX% percentage revenue long-term to our sales whereby marketing current increase capital and drive subscription the to

revenue, Despite will expect G&A to our in subscription long-term. XX% drop that we of XX% to continued investments a percentage in the G&A, as

expected, quarter. EBITDA was at revenue as As subscription our of a adjusted in XX% the percentage

long-term to XX%. Our targets for XX% the are

we we with will progress the to Cartrack’s have are retain year for and FY content XXXX. made We outlook date

and Cartrack’s segments Number of strong million XX% growth. Karooooo EBITDA X.X ZARX.X Karooooo’s between million. and good between subscribers revenue Both and billion XX%. Cartrack’s of respectively. showed margin and scale X.X progress XX%, and and growth subscription adjusted XX% revenue Logistics continue quarter-on-quarter positively impact billion and between to Carzuka with ZARX.XX

continuing in quarter, progress its expanding e-commerce Carzuka with made combination and presence. has platform, grow brand its into intuitive showroom to In by second physical this significant the

add brand. Africa platform support to Logistics continue Karooooo continues customers. integrate Cartrack’s will South strategic to Carzuka’s steadily across hubs build to Cartrack and into We

per managing Carzuka’s share on to remain ZARXX.XX, while investing year-to-date losses, grew earnings XX% being Karooooo’s despite this focused We Carzuka. segment. impacted in by pragmatically negatively

We are content with the results so far.

Zak. would to CEO us the I joining today our and to thank Group for and like open everybody Founder, Q&A now we'll with floor

Zak Calisto

be X% in at that We're to There probably region We've to yet. for or We're we expecting depreciation need margin XX% get the of in margin that margins. XX%. prices few got to gross quite Carzuka iron-out. operating over profit very the region a little we're Carzuka. we'll store long-term not looking And X% there in will quite EBITDA profit the of

gross about X%. as very the the to profit in On to region expect of be would we little Karooooo EBITDA Logistics, margins expect we as we of similar in expect XX% depreciation profits, And there’s operating be which that well. region and about the

to time already. this We’re at X% close point in

was from negatively well, [relate] Alex. and was degree operating cash a to recurring? can down Next [ph] OpEx investment question you if number Question down is the higher this as items D&A quarter-on-quarter, of line but X, income here,

in we in Africa, increasing to of during this foreign we this South see was [ph] growth and don't into it of want we future. as And the the markets know, but [headcount] was higher it think growth existing And expensed to well as a One actually I you quite Southeast debt more mature we clearly [drive] lot there [ph]. continue could OpEx amount that like given drive as of Asia losses. substantial that one the And, happen. was recurring, exchange year.

as We are looking this at containing grow spend sales. we

about Free question. capital going capital lower you're is strong, very as think timing we cash improvements more should intensity working the conversion flow and Second related?

it's as we or becomes last words, years, we when clearly, stronger. only in then XX% stronger see I the it’s subscriber flow lower than timing And other is obviously a had growth. the been growth think In two growth. free three substantially subscriber more related cash

the start than XX%, obviously free faster or XX% will the So, XX%, less. growing cash if flow be then we

question from Alex. Another

you record retention subscriber are growth, seeing retention long-term [outlook] the the [ph]? growth Within right challenging growth What churn? any is

first two quite our still were than I suffering see, We seen QX, the quarters, especially also first but in believe had of is solid. the did retention quarters a impact two better I rate from in COVID. the we retention think

saw better churning. In we retention other a less words, rate. certainly customers' So,

to it expect better levels. I at So, these be

Matthew from from continuing this movement] December and question A William – [ph] third into [subscriber from the Did January? Blair.

activity quarters quarter. and of biggest business our see take three we into The that quarter it, Africa, our is geography low. January. And think Matthew, we is in January, continue weak which It's traditionally, that segment, our is tradition if South to than probably fourth be causes weakest for December the and third you would quite the quarter. a fourth But because the the fourth which of to quarter, quarter. obviously if one is very the half into weaker strength same say I a I quarters factor that

Matthew. plan Which is your in? invest to in

Matthew, momentum with do Portugal, Spain, Richard into we're start the to we’re And that to operating. countries in expansion next next a to Europe certainly got country, a – to know. the fundamentally, to get we've we go still to France Poland, and like but off now actually three need I'm of we way our lot in, you but in the there's we real to [indiscernible]. countries currently to we’re as go work current certainly and long currently would believe going we're in week as and

accidents [indiscernible] make [load generally demand [ph]. in effect able are [Kaul] you shedding] either negatively? transit addition, Can times? Karooooo from effect or [ph] question In either increased to terms which traffic in of any patterns, the any share comment degree Next on positively that on or

we not obviously, in [Ireland] we're see, What [ph].

less there’s in our the more business South than affecting structure. be more Africa in times It it's become I affected we respects, as will but a is us a also, strong. run business see very expensive. at The momentum. very [ph] And us. at Our customers to And we believe load to whether affected [a we negative lucky irrespective [indiscernible] we're impact we positive business demand economic – in it's is very become the on think fundamentally, continues always environment, Clearly, continue efficient, there’s catastrophe, that seen] negative to is cost economy. ability evolution I think shedding many our see the our

longer are In congestion. traffic terms affects lights load generally, traffic, of haven't out, or Eskom the the when affect patterns traffic we except obviously seen obviously the that a the shedding

would are in have how I go find [ph] the doing clearly, out of with kilometers answer [traffic I time. a are think think that customers kilometers. our fuel same So, But more this long to but terms using look the closely more people driven, are to question, probably lights] it period at that many we for given of I

[Roy access from of [ph]. supply you challenges? to what see Campbell] recent question your Can talk A can chain you the regions? inflation in through on through update given you Also, inventory terms

are clearly run region, We whether inflation the all seeing it's to Europe.

think probably that Europe region with inflation. I the see we being highest

also we and seeing in also we're in inflation Africa see Asia, and clearly Africa. South it

this to inventory] you [access Can on update [ph]?

increased And our continuously that's as the a We you been portion more. that, keep our our quite long of large for time. part shortage we've know, of increasing of even components, inventory quite and We've inventory. inventory given PPE, increased a

So, we any shortages. haven't seen

our with [ph] the more market. we do short redesigned to customers. that devices developers deal to acquire that be able be in have [inventory] Our have able were And telematics to parts to

are inventory. We of out not

A [Isaac] say, [indiscernible], question [indiscernible]. you Have from shedding? [ph], direct from or impact load experienced indirect it's recent it's the any from actually,

answered that. I think I've

us. day. should anybody for presentation, attending email I have any questions, thank Thank much. all that's think welcome everybody the to for I you're very and you want the to

Karooooo (KARO) 20 Jan 232023 Q3 Earnings call transcript