Karooooo Ltd. Q3 FY2026 earnings call

• ARR growth accelerated: Q3 SaaS ARR grew 22% compared to Q2 FY 2026's 20%, and in U.S. dollars, it grew 28% to reach USD 298 million.
• Subscriber momentum: Total subscribers increased 16% to approximately 2.6 million. CarTrack had record subscriber net additions of 111,000 in Q3.
• Regional performance: South Africa subscription revenue growth accelerated to 21%, Europe subscription revenue growth was 24%, and Asia and the Middle East subscription revenue growth was 14%.
• Capital allocation: Prioritizes organic growth and innovation, with consideration for returning capital to shareholders and strategic M&A when it aligns with growth.

Karooooo has two operating segments: Cortrak and Karooooo Logistics. In Q3, Cortrak delivered exceptional results. Cortrak's revenue increased 21% to ZAR 1,275 million, with subscription revenue increasing 20% to ZAR 1,236 million. ARR (Annual Recurring Revenue) increased 22% to ZAR 5,106 million, and on a U.S. dollar basis, it increased 28% to USD 298 million. Cortrak's operating profit margin was 28%. Karooooo Logistics reported revenue of ZAR 135 million in Q3, an increase of 24%, with an operating profit margin of 7%. Subscription revenue accounted for 97% of Cortrak's total revenue.

• Upgraded FY 2026 Cortrak subscription revenue outlook to between ZAR 4,785 million and ZAR 4,900 million, implying growth between 18% and 21%.
• Revised FY 2026 Cortrak operating profit margin outlook to between 27% and 30%.
• FY 2026 Karooooo adjusted earnings per share outlook remains unchanged at 32.5 to 35.5.

• Exchange rate fluctuations: Appreciation of the South African rand created a currency translation headwind on reported revenue as the company does not hedge foreign currency exposure.
• Regulatory and technical issues: Potential regulatory and technical challenges in rolling out products to other markets beyond current operating regions.

Q: How are we doing the 70% increase in head count in Asia?

A: A lot of the hires are coming in January and February, and it's all going according to plan.

Q: When will our investment in sales and marketing stabilize?

A: It depends on the efficiency of sales and marketing; as unit economics remain strong and the strategy works, investment may continue given the large addressable market.

Q: Who owns 35% of New Zealand?

A: Joan de bet owns 30% of the business in New Zealand, who immigrated from South Africa to New Zealand approximately 9 years ago.

Q: ARPU was up nicely again in the quarter and even more so for the business in South Africa, up 7% year-on-year. How far along in the cross-selling cycle, would you say we are in South Africa?

A: We are in the early stages and hope to get stronger momentum in the next financial year.

Q: Net new subscribers were record in the quarter with strength across all geographies. Now I do see half of the market and you win today relative to your sales execution in key markets. Are we getting huge productivity?

A: Unit economics remain very strong, and we are performing well in key markets, though some markets are a bit lagging overall it's going good into plan.

Q: Drivers of acceleration, how do you think about the uplift from pure capacity versus scale in productivity from recent high reps. -- given momentum in both subscriber and cross-selling.

A: We have good momentum and the outlook we gave in the beginning of the year is being upped, with good momentum continuing due to hiring, recruitment, and retention of key staff.

Q: Can you address adoption trends for AI camera penetration rates per region competitive landscape impact of 7% ARPU increase in the current quarter?

A: We've focused a lot on the South African operation, are building infrastructure in other countries, adoption of cameras is strong but early days, and we feel comfortable competing with peers.

Q: Is there any way to roll out to logistics to Europe or Southeast Asia? Or are those market saturated?

A: It's early days, the e-commerce space is growing, and we are developing technology to compete efficiently; the model may be slightly different outside Africa.

Q: What drove the strong pickup in South Africa subscriber growth versus plan?

A: Subscriber growth is going in accordance with plan, and cross-selling is also going as planned, it's about increasing footprint and execution.

Q: Where do you stand on sales in versus your specific geo plan Southeast Asia and Europe?

A: We are on track with sales across all regions.

Q: Given the magnitude of sales iron plants in Southeast Asia, do you expect subscriber growth to pick up from 20%, 21% level? Or is this a good durable rate?

A: Our ambition is to pick up on that 20%, 21% and compound on it, feeling positive for a strong FY '27 in the region.

Q: It seems there has been an increase in subscriptions in South Africa quarter-on-quarter. How has the shift from used vehicle sales to new vehicle and South Africa impacted subscriptions?

A: The impact is insignificant at this point in time as our customer acquisition is based on customers with vehicles, and the new vehicle market doesn't greatly affect our business.

Q: Is the current share price at level that management may consider share buyback?

A: It's very complex to do a share buyback as a listed entity due to SEC rules, and we are focused on growing the business and the quality of the asset.

Q: Once the ARPU interact only driven by Cantor also general price hikes that is driven by the Cameron ag. And what's our ARPU in Southeast Asia this quarter? How much dilution are you expecting?

A: Southeast Asia market will matter the ARPU of South Africa, and over time ARPUs will decrease as the business gets bigger, which we knew from the outset.

Q: What portion of sales are coming from existing customers, new cater customers -- can you describe examples of use cases for seeing for TAG.

A: Net additions are typically new customers, and TAG has various use cases like tracking equipment or vehicles outside the GSM network; the proportion from existing customers is not mainly shown in net additions.

Q: Are there any regulatory or other technical issues with rolling out tag to other markets beyond South Africa, Southeast Asia and Europe?

A: Not familiar with all markets and regulations, but typically every country has its own regulations.

Q: How much you expect in the improved South African macro conditions to accelerate fundamental performance going forward.

A: We've done well in South Africa in tough times, and the improved macro conditions give a tailwind, but it's mainly due to our ability to execute and build teams.

Q: Looking at the South Africa subscribers over the next 5 years, what proportion do you think could be could be interested in Catacora analytics?

A: Cannot answer specifically as it's hard to predict accurately.

Q: Is the subscriber growth in South Africa diluting ARPU growth -- on a group level, it remains rather 4% compared to the target of 6%.

A: We are slightly lagging the target but largely on track.

Q: What would you do diffi you were to a private company and not the public on here? What would be the difference in your strategies?

A: There would be no difference in our strategy as we are focused on building a long-term business, with the Mark family as majority shareholders intending to stay that way.