Karooooo Ltd. Q1 FY2026 earnings call

• Karooooo operates a SaaS platform for connected vehicles, serving over 2.4 million subscribers across more than 125,000 businesses in South Africa, Southeast Asia, and Europe.
• Q1 annual recurring revenue (ARR) increased 18% to ZAR 4.57 million and 24% to USD 254 million on a U.S. dollar basis. Subscription revenue accounted for 98% of Cartrack revenue, and commercial customer ARR retention rate was 95%.
• Cartrack's subscription revenue grew 19% (ZAR) and 24% (USD) in Q1, with acceleration in growth across all regions. South Africa subscription revenue was 70% of total, growing 16%; Southeast Asia and Middle East subscriber growth accelerated to 22% and contributed 17% of total subscription revenue; Europe subscription revenue grew 20% and contributed 10% of total subscription revenue.
• Karooooo generated total revenue of ZAR 1.277 million in Q1, up 18%, earnings per share of ZAR 8.55, up 19%, and resumed significant free cash flow generation with ZAR 338 million free cash flow in Q1.

Karooooo has two operating segments: Cartrack and Karooooo Logistics. Cartrack generated ZAR 1.1 billion in subscription revenue in Q1, an increase of 19% or 24% on a U.S. dollar basis. Subscription revenue accounted for 98% of Cartrack's revenue, and its operating profit margin was 30%. Karooooo Logistics had Delivery-as-a-Service revenue of ZAR 121 million in Q1, an increase of 20% or 26% on a U.S. dollar basis, with an 8% operating profit margin. Cartrack's subscription revenue contribution to total Karooooo revenue is significant, and Karooooo Logistics is showing strong growth momentum.

• Reaffirmed FY 2026 outlook, aiming to accelerate Cartrack subscription revenue growth by expanding distribution footprint in existing markets, driving broader platform adoptions, and capitalizing on growing demand for AI video solutions.
• Hypothetical non-growth scenario could lead to operating profit margins potentially increasing to approximately 38% as growth-oriented marketing expense are eliminated.

Q: On subscriber growth in South Africa, any color on the trajectory of consumer growth for the balance of the year relative to commercial subscriber growth?

A: Paul Judd Bieber/Isaias Jose Calisto stated that they're having very good traction on both consumer and commercial customers in South Africa and believe it will continue for the rest of the year.

Q: Impact of US tariff impact on Southeast Asia markets?

A: Isaias Jose Calisto said he doesn't believe the tariff environment is impacting their business in Southeast Asia at this point.

Q: Why expansion in Southeast Asia rather than Africa?

A: Isaias Jose Calisto mentioned they've expanded into Africa to support South African customers and believe the market opportunity in Southeast Asia is far larger than in Africa.

Q: Mix between subscriber growth and cross-selling initiatives in accelerating subscription revenue?

A: Isaias Jose Calisto said cross-selling initiatives gave a 2% uplift, hoping it will rise to higher levels by Q4, mostly new subscribers with an element of cross-selling.

Q: Update on hiring capacity plans in Asia?

A: Isaias Jose Calisto said they're on target with hiring plans in Asia, with a correlation where increasing sales force should lead to more net sales, aiming for 28% subscriber growth with 70% increase in salespeople.

Q: Impact of ARPU growth from cross-selling on LT EBIT margins for Cartrack?

A: Isaias Jose Calisto said the increase in ARPU won't impact LT EBIT margins directly, but will increase revenue and come with additional cost of sales and OpEx expenses.

Q: Ownership of Karooooo Logistics?

A: Isaias Jose Calisto said they have the option to increase shareholding in Karooooo Logistics, which comes into place in February 2026 and will be evaluated then.

Q: Color on opportunity in Asia and ramp-up process?

A: Isaias Jose Calisto said he had covered the hiring and ramp-up process related to Asia earlier.

Q: Progress of Cartrack performance rollout in South Africa?

A: Roy Campbell was told the Cartrack tag is progressing phenomenally and is a game changer with good traction.

Q: Effective tax rate being low?

A: No specific detailed answer provided, but mentioned benefiting from entities becoming profitable and having tax losses