Karooooo Ltd Aktie

Hello, and welcome to Karooooo's Q2 FY 2027 Financial Results Presentation. On behalf of Karooooo, 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 Zak Calisto, Founder and Group CEO; Hoeshin Goy, Chief Financial Officer; and Carmen Calisto, Chief Strategy and Marketing Officer.

I would like to remind everyone that some of the statements that we make 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 harbor statement in our Form 20-F, including the risk factors in the 6-K 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 6-K that we filed with the SEC yesterday. Our comments may refer to year-over-year comparisons unless we state otherwise.

I will now pass the call over to Carmen.

Thanks, Paul. Q2 was another quarter of acceleration. Cartrack subscription revenue accelerated to 20% from 19% in the prior quarter despite FX headwinds. Importantly, Cartrack constant currency subscription revenue growth increased 23% in Q2 compared to 21% in Q1 with constant currency growth acceleration across all regions.

Notably, South Africa subscription revenue growth accelerated to 25% compared to 24% in Q1 and Asia constant currency subscription revenue growth also accelerated to 25% compared to 17% in Q1. The acceleration demonstrates that our investments in sales capacity continue to drive tangible results as we balance new customer acquisition with building our cross-sell capabilities. ARR increased 22% in constant currency. Reported ARR growth was 19%, reflecting a strengthening ZAR and 30% in U.S. dollars.

In Q2, subscriber growth increased 18% as net subscriber additions increased 34%, a record for the second quarter as we continue to realize the benefits of our recent investments in sales capacity and capitalize on sales momentum with video solutions and Cartrack-Tag.

Our strong execution once again translated into record quarterly Karoo operating profit of ZAR 422 million despite foreign exchange headwinds, reflecting our ability to accelerate revenue growth while maintaining healthy profitability. Earnings per share also increased 18% in Q2. As we look forward to the rest of the fiscal year, we reiterate our FY 2027 outlook.

Before diving into the details, here is a quick introduction to Karooooo. We provide an operational intelligence platform for connected vehicles and mobile assets, helping businesses simplify decision-making and optimize their physical operations. We serve an expanding largely underpenetrated physical AI market, driven by digital transformation and the need for greater efficiency, safety and compliance. We are a founder-led business with a 2-decade track record of disciplined execution and capital allocation.

Our platform supports approximately 2.9 million subscribers across more than 125,000 businesses in diverse industries. Our financial model is anchored by accelerating high-margin subscription revenue, which was 98% of Cartrack revenue in Q2. Commercial customer ARR retention remained at 95% and lifetime value to CAC remains above 9x. We also now process more than 345 billion valuable data points monthly, a proprietary data asset that continues to scale and enables us to deliver value to our customers.

During today's presentation, we will review both of Karooooo's operating segments, Cartrack and Karooooo Logistics. Cartrack is our operational intelligence platform. Cartrack operates at scale and has a very attractive financial profile. Cartrack's operating momentum is the primary driver of Karooooo's growth and strong financial performance. Cartrack delivered exceptional Q2 results with acceleration across regions that reflect the returns from the strategic investments we have made in expanding our sales capacity and selling video and Cartrack-Tag to existing and new customers.

In Q2, Cartrack delivered approximately ZAR 1.42 billion in subscription revenue, an increase of 20% or 31% on a U.S. dollar basis. The 20% growth reflects an acceleration compared to 19% in Q1 despite a strengthening ZAR that negatively impacted reported Cartrack subscription revenue in Q2. Cartrack constant currency subscription revenue growth accelerated to 23% in Q2 compared to 21% in the prior quarter. Cartrack's operating profit margin was a healthy 28% in Q2.

Karooooo Logistics is our rapidly growing Delivery as a Service offering, which helps large enterprise customers scale their q-commerce or quick commerce operations. We report it separately because its financial profile differs from Cartrack subscription model. It is strategically important for us because it enables customers to grow with a capital-light model and deepens their relationship with us, supporting higher retention.

In Q2, Karooooo Logistics' Delivery as a Service revenue was ZAR 189 million, an increase of 36% or 49% on a U.S. dollar basis. Karooooo Logistics' operating margin was 6% and reflects investments to ensure drive availability and expansion into our network. In Q2, Karooooo delivered strong consolidated financial results. Total revenue increased 22% to ZAR 1,640 million. Subscription revenue increased 20% to ZAR 1,418 million. Operating profit increased 19% to a record ZAR 422 million and subscriber growth increased 18% to approximately 2.9 million subscribers.

Cartrack's 20% subscription revenue growth and 28% operating profit margin were the primary drivers of Karooooo's strong financial performance in Q2. Q2 continued our track record of profitable growth at scale. In Q2, Cartrack's 20% subscription revenue growth and 46% adjusted EBITDA margin made us a Rule of 60 company with no stock-based compensation add-back. It is important to underscore just how differentiated our financial model has become.

We believe we are among a select few companies operating at a Rule of 50 plus based on calendar year 2027 Gap Street estimates. Within a universe of approximately 170 companies, Karooooo is the only small to mid-cap company operating at this combined level of growth and profitability. With an essentially unchanged share count and no stock-based compensation, growth in free cash flow translates directly into higher per share value. Our rare financial profile reflects our unwavering commitment to profitable growth.

Now let's discuss our Q2 financial and operational highlights. In Q2, ARR increased 19% despite foreign exchange headwinds and constant currency ARR increased 22%. ARR in U.S. dollars increased 30%, reaching $354 million. Cartrack subscription revenue growth accelerated to 20% despite FX headwinds. Constant currency growth accelerated across regions, highlighted by South Africa subscription revenue growth accelerating to 25% and Asia constant currency subscription revenue growth also accelerating to 25%. Cartrack subscription revenue growth increased 31% in U.S. dollars and 23% in constant currency. Cartrack total subscribers increased 18%, reaching approximately 2.9 million.

Cartrack net subscriber additions increased 34% to 94,516, a record for the second quarter. Despite FX headwinds, Karoo delivered record quarterly operating profit of ZAR 422 million. Growth-oriented investments moderated in Q2 as consolidated sales and marketing expenses increased 16% compared to 33% in Q1. We were a Rule of 60 company in Q2 with subscription revenue growth of 20% and an adjusted EBITA margin of 46%.

Our balance sheet remains strong and unleveraged and reflects the $1.50 per share dividend payment in July and the investments in inventory classified as PPE, including memory to support our current accelerated subscription revenue growth. Our healthy subscription gross margin, efficient customer acquisition and attractive commercial customer ARR retention rate continue to drive our healthy unit economics.

In Q2, our subscription gross margin was 71%, our LTV to CAC ratio remained above 9x and our commercial customer ARR retention rate was 95%. Our unit economics remain healthy, and we remain committed to profitable growth as we pursue the expansive physical AI growth opportunity ahead. Q2 subscriber growth increased 18% and reached approximately 2.2 million subscribers in South Africa.

South Africa net subscriber additions increased 20% to 65,997 as we realized the benefits of our recent investments in sales capacity and capitalized on strong demand for the Cartrack-Tag and video solutions. Importantly, South Africa subscription revenue growth accelerated to 25%. This represents the seventh consecutive quarter of subscription revenue growth acceleration in South Africa.

The pace of growth reflects our deliberate strategy to cement our leadership position in South Africa through a balanced combination of subscriber additions and selling video and Cartrack-Tag to our existing and new customers in South Africa. Despite some macroeconomic stress in the South African economy, we continue to see a compelling market opportunity in South Africa and are excited about the potential ahead.

Q2 subscriber growth increased 21% and reached 367,000 subscribers in Southeast Asia and the Middle East, with most of the subscribers in Southeast Asia. Q2 subscription revenue growth accelerated to 12% compared to 6% in Q1 and increased 25% on a constant currency basis. The pace of reported subscription revenue growth in the region reflects foreign exchange headwinds.

As the second largest contributor to group revenue, Southeast Asia continues to present the most compelling growth opportunity for the group in the medium to long term. We plan to continue with a strong yet prudent drive to increase sales and marketing in Southeast Asia, and we anticipate our investments to have a positive impact on subscriber growth in the region.

Southeast Asia is a vast underpenetrated market for sophisticated fleet management and video-based solutions, and we are well positioned to capitalize on the physical AI opportunity in Southeast Asia. Q2 subscriber growth increased 13% and reached 245,000 in Europe. Q2 subscription revenue growth was 4% and 14% on a constant currency basis. The pace of reported subscription revenue growth in the region reflects foreign exchange headwinds. We continue to expand our customer base and drive our distribution capabilities in the region.

In Q2, Karooooo Logistics continued to build scale and delivered revenue of ZAR 189 million, an increase of 36% and a 6% operating profit margin. Q-commerce or quick commerce orders, a type of e-commerce focused on ultrafast delivery drove the exceptional performance. Q2 operating profit margin reflects costs associated with ensuring driver availability and network expansion. Karooooo Logistics supports our strong financial performance by immersing our platform into large customers' operations, contributing to strong customer retention.

Karooooo Logistics also enables us to learn about the operational and logistics challenges confronting our customers. In Q2, we continued to make progress with our FY 2027 priorities. First, we made progress cementing our leadership position in South Africa, our largest market, as evidenced by our 25% subscription revenue growth in the region. Our accelerating growth reflects the planned subscriber growth and the adoption of Cartrack-Tag and video solutions.

Second, we moderated our investments in sales and marketing in Q2 as evidenced by the 16% increase in sales and marketing expenses in Q2 compared to 33% in Q1 and 37% in FY 2026. Despite this moderation and foreign exchange headwinds, subscription revenue growth accelerated once again in Q2. We remain committed to optimizing our recent investments in sales capacity and growing our distribution footprint at a more moderate pace in FY 2027. Third, we are embracing AI across the organization to enhance our platform, improve efficiency and accelerate the pace of execution.

Before handing the call over to Hoeshin to discuss our financial results in more detail, we'd like to highlight the ROI our platform delivers to customers. Our success is built on delivering tangible value and ROI to customers. For one customer in Singapore's construction sector, deploying our operational intelligence platform delivered a 25% improvement in on-time delivery, a 23% increase in fuel efficiency and 100% driver accountability.

The customer combined real-time fleet visibility and fuel intelligence with geofencing alerts to coordinate efficient loading, driver identification and targeted coaching. It then added Cartrack AI vision for intelligent driver monitoring. Alongside these operational improvements, the customer reduced speeding by 43%, harsh driving events by 31%, phone usage by 65% and driver fatigue by 33%. Our operational intelligence platform goes beyond vehicle tracking. It helps customers reduce costs, operate more efficiently, improve safety and better serve customers.

With that said, I will now pass the call over to Hoeshin.

Thank you, Carmen. I will now discuss Karooooo's financial performance for quarter 2 FY 2027. Please note, my comments may refer to year-over-year comparisons unless we state otherwise.

Quarter 2 extended Cartrack's track record of durable and profitable growth at scale, driven by consistent executions, our resilient subscription revenue model and attractive historic retention rates. In quarter 2, subscriber increased 18% to approximately 2.9 million. Subscription revenue increased 20% to ZAR 1,415 million and operating profit was a quarterly record at ZAR 411 million.

Cartrack experienced strong customer acquisitions in quarter 2 with net subscriber additions of 94,516 subscribers, an increase of 34%. This represents record net subscriber additions for the second quarter. We delivered record net subscriber additions while successfully cross-selling Cartrack-Tag and video to new and existing customers. We note that when we cross-sell Cartrack-Tag or video to an existing customer, it does not contribute to an incremental subscriber in our subscriber count.

Subscription revenue momentum remain the engine behind Cartrack's strong financial performance. In quarter 2, Cartrack subscription revenue growth accelerated to 20% despite foreign currency headwinds and reached ZAR 1,415 million. Cartrack subscription revenue growth was 31% in U.S. dollars and 23% in constant currency. Subscription revenue comprised 98% of Cartrack's total revenue.

ARR increased 19% despite foreign currency headwinds and reached ZAR 5,708 million. ARR increased 30% in U.S. dollar and 22% in constant currency. Our proven and profitable subscription revenue model continued to deliver strong consolidated growth. In quarter 2, Karooooo's total subscription revenue increased 20% to ZAR 1,480 million. Operating profit increased 19% to a quarterly record of ZAR 422 million as we moderate our investment in sales and marketing.

Earnings per share increased 18% and adjusted earnings per share increased 12% to ZAR 9.28. Earnings growth moderated due to higher tax rate and finance expense. Prior year adjusted earnings per share excluded the effect of secondary offering costs, and there were no such costs in current year. Quarter 2 subscriber growth increased 18% to approximately 2.9 million subscriber. South Africa subscriber growth increased 18%, and Asia subscriber growth remained robust at 21%. Asia is our fastest-growing region in terms of subscriber growth.

Quarter 2 subscriber growth of 18% represents an acceleration compared to FY 2026 growth of 16%. In quarter 2, Cartrack's constant currency subscription revenue growth accelerated across all regions. South Africa subscription revenue growth accelerated to 25% compared to 24% in quarter 1. Asia and Middle East subscription revenue growth accelerated to 12% and 25% on a constant currency basis compared to 6% and 17% on a constant currency basis in quarter 1.

Subscription revenue growth accelerated despite an increase in subscriber from lower ARPU countries. Europe subscription revenue growth were 4% and 14% on a constant currency basis compared to 7% and 13% on a constant currency basis in quarter 1. Accelerating growth across regions reflects our strong executions and provide a solid foundation for continued durable growth.

In quarter 2, ARR increased 19%, reaching ZAR 5,708 million. ARR growth was 30% in U.S. dollar and 22% in constant currencies. This reflects the underlying momentum in the business and signals that our strategic initiatives are gaining traction. Karooooo's earnings per share increased 18% to ZAR 9.28 and adjusted earnings per share increased 12% compared to quarter 2 FY 2026.

Cartrack's earnings per share contribution increased 13% to ZAR 9.08 and Karooooo Logistics earnings per share contribution was ZAR 0.20. Quarter 2 free cash flow was ZAR 41 million and primarily reflects an increase in trade and other receivables due to increased subscription revenue and investment in in-vehicle IoT devices to support growth.

Given our accelerated growth, we increased our investment in in-vehicle IoT devices for both current and future use, including memory to create a buffer against rising RAM and memory prices. Our first half free cash flow reflects a ZAR 966 million investment in these IoT devices. Given our investment to date, we expect more robust free cash flow generation in the second half of the year.

As we pursue accelerated growth, we expect free cash flow to reflect our investment to drive growth. While quarterly fluctuations may occur due to working capital dynamics and growth-oriented investment, we remain confident in our ability to consistently generate meaningful cash flow to support growth and dividends. We have 2-decade track record of financial discipline and strong free cash flow generation that powers our disciplined capital allocation strategy and healthy return on invested capital and position us well for future growth.

During the quarter, we increased our bank short-term working capital facilities as we made upfront investment in both in-vehicle IoT devices and IoT devices for future use to maintain our current momentum. The significant and ongoing increase in memory chips also contributed to the increased level of IoT devices for future use. This investment increased 86% to ZAR 966 million during the first half of the year.

As a result, bank overdrafts are now considered part of our financing arrangements rather than cash management and will be classified within financing activities in the statement of cash flows. Our balance sheet reflects our track record of durable growth at scale, profitability and cash generation. Our cash and cash equivalent balances as at the end of quarter 2 was ZAR 649 million. The decrease was mainly due to dividends of ZAR 752 million paid in July 2026.

As we hold our cash reserve in U.S. dollar, the strengthening of the South African rand also reduced the rand value of our cash balances. Debtors collection days remained healthy at 33 days and are within our historical norm. Year-to-date, we have delivered record net subscriber addition and healthy retention, driving 22% Cartrack constant currency subscription revenue growth. We believe we are on track to accelerate Cartrack subscription revenue growth in FY 2027 as we realize the benefit of our recent investment in sales capacity.

We aim to drive our growth by balancing subscriber growth with the increased adoptions of video and Cartrack-Tag. We also believe increased sales efficiencies, coupled with realizing other efficiencies in the business due to scale and leveraging AI will support strong earnings per share expansion.

With that said, we reiterate our FY 2027 outlook that implies accelerating constant currency subscription revenue growth at the midpoint and healthy earnings per share growth. We expect to benefit in the second half from continued revenue momentum, continued sales and marketing efficiencies and a moderately lower tax rate. In closing, we delivered strong quarter 2 results with constant currency growth accelerating across regions and notable strength in South Africa and Asia. We also delivered record quarterly operating profit despite foreign currency headwinds.

Quarter 2 free cash flow reflects investment in growth, including memory, and we expect cash flow to strengthen over the coming quarters as we continue to deliver value to our shareholders. These results reflect the strength of our operating model and the returns on our sales capacity investment. As we look ahead to the rest of FY 2027, we are well positioned to accelerate growth and deliver meaningful earnings per share expansion while remaining committed to disciplined capital allocation and long-term value creation.

With that, I will turn the presentation over to Zak Calisto for Q&A.

Thank you, Hoeshin. Good afternoon or good morning to everybody. I will go through the questions that have been posted.

I'll start off with Dylan Becker from William Blair. Subscription revenue growth has picked up again and Q2 net adds were record. What is driving this? And how lasting do you think it is heading into the second half and FY '28?

Dylan, I think what's driving it is really our investment into product and into our distribution. And we're obviously executing and improving on that distribution. And we believe a similar momentum should continue for the remainder of FY '27. And depending how things are by FY '27 -- end of FY '27 by Q4, we'll then have a better visibility how we want to execute during FY '28.

Another question from Dylan. Cartrack's operating margin dipped slightly this quarter. How are you weighing reinvestment for growth against margin expansion? And what does it mean for profitability this year?

In terms of constant currency, I certainly believe the outlook we've given for the year, we will meet it. In terms of operating profit margin, we model our pricing on a unit economics model. And even if IFRS, the operating profit margin dips, it's not necessarily a true reflection of the underlying business given that so much of our customer acquisition costs are expensed upfront and the revenue is over the next couple of years. So that's not aligned.

So all of these operating profit margins, you nearly need to average it out over a period of 5 or 6 years to get our real operating profit margin. And obviously, to get the real operating profit margin, you've got to assume that we're not growing. And then our operating profit margin goes all the way up to around 40%. So we're more focused on our unit economics than actually the IFRS reporting.

Another question from Dylan. How is the competition in connected vehicles and fleet management changing as AI capabilities improve?

I think the AI capabilities are improving at a very rapid rate. We've started a strong adoption of our AI in terms of running our internal processes, the way we develop product and also building AI into our platform. So we are investing in these 3 pillars of AI. And I think all our competitors are doing the same. So I think like any business, it progresses and it adapts to the new reality. And I think we're doing -- I feel very comfortable that we are able to compete going forward.

A question now from Alex from Raymond James. You spoke to a continued increase in operating capacity in Southeast Asia. How much sales hiring is expected over the next year? What are you seeing in the region in terms of broader demand and ramping productivity in the sales force that you've hired over the last 12 months?

Alex, it's always a very tough thing to keep your sales force productive. And many people undermine the importance of salespeople. And it's a long journey to get salespeople to where they're supposed to be. And we certainly are improving in Asia and across all our other regions. And we believe in the model that if you've got 80% of your staff doing the minimum or an acceptable amount of sales, then you can start continue to hire. And we very much believe in that 80%, 20% ratio.

So given that, depending how quickly we can get people and get them to where they're supposed to be, that will determine the speed of hiring process. So we are getting quite a lot of higher productivity from our sales force, but we will continue with the same business model, which is to obviously increase our distribution.

Another question from Alex. Can you walk through the drivers of the sequential change in Cartrack gross margin? How much was tied to the higher hardware and other revenue? And how would you think about the impact of video and tags to gross margins?

So Alex, the way we do our pricing is based on our unit economics model. And depending on hardware, the cost of hardware is got a strong -- is a direct relation to what we're going to charge in terms of subscription revenue. So our margins are very consistent irrespective of what product. And for instance, if memory prices go up like they are going up, then our prices increase to make sure that our unit economics are unchanged. Gross profit margin for us really has 2 factors that can change it.

Typically, the one factor would be how much hardware that we sell to customers where it doesn't form part of subscription revenue. So the higher that is that we've got absolutely no margin when you sell just product because that's not our business. Our business is actually to sell the service. So if you sell hardware, your revenue and your cost of sales will be about the same. So that gives you a 0 gross profit.

So the higher that is, that will impact you. Then the other very important thing is if you slow down sales, then you'll have less of your customer base still in the depreciation part of -- let's say, we depreciate over 5 years. So it's only customers in the last 5 years that form part of that cost of sales and depreciating of PPE.

As you scale that up like we currently are, that puts pressure on your subscription revenue, although temporary pressure because you now are -- you've increased the amount -- the percentage amount of your base that's still depreciating PPE. So that puts pressure on your gross profit margin. But if you even it out over time and if you could do the IFRS a bit different, our gross profit margin would be very constant over time.

The next question comes from Scott from ROTH. Can you provide a quick update on the adoption of video-based services and how this is trending by the region?

Scott, throughout all the regions we operate, we are seeing an uptick in the adoption, and we're feeling very comfortable that we're in the very early days of this adoption. We also simultaneously are also bringing to the market more and more product in video as we realize the universe and how many different solutions and different customers' needs there are.

So we are continuing to developing and bringing product to the market, and we continue to also develop our sales skills to be able to get that product adoption. And I think we are making good progress.

The next question is also from Scott. How are the tags trending in the South African market? What is the growth outlook for the next 2 years?

I certainly believe we are making huge momentum with the tags. There's very strong customer demand for it. During Q1, we actually ran out of inventory because of the demand and we focus more on customer acquisition and cross-selling. In Q2, it was more cross-selling environment. And we believe that the uptake for both video and tag is strong.

Another question from Scott. What is the impact of fuel costs? Is it driving a more rapid adoption given the cost benefits or translating a pause in decision-making?

I don't believe it's translating to a pause in decision-making. And our platform allows our customers to deal with a lot of challenges, fuel being one of them. And one would be in terms of common sense, think that it's a tailwind. But I think it's our efforts in increasing our distribution that's driving the adoption. And I can't attribute our growth to the fuel prices.

Another question from Scott. OpEx was well controlled in the quarter. Is this expected to continue and drive further leverage into FY -- into the second half of FY '27 and FY '28?

Scott, I want to keep -- I don't want to commit to this because we've got to be quite agile in our thinking. And we've given outlook to the market. We believe we're going to meet the outlook, and we're going to keep ourselves quite agile. Over the long term, obviously, that OpEx needs to increase. And a lot of it is actually got to do with sales and marketing. So as we optimize sales and marketing, that's the biggest increase that we're possibly going to have.

Then I have another question. One moment, please. We have one more question from -- sorry, I've dropped my glasses, sorry, from Evely. Expected credit losses increased significant this quarter. Is this mainly due by subscriber growth? Or are you seeing changes in customer payment behavior?

I think if you compare it to Q2 of last year, then I agree with you. But if you compare it historically, it's very much our norm. What happened in Q2 last year, we had done -- we had gone through a progress where we received a lot of large payments. So it was a bit skewed last year. And then when we run our calculations on the debt, the provisioning for debt because a lot of the bad debt had paid, it skews the comparison.

So you've got to actually look at it into what has been our normal rate over the years. So it's in keeping. Are we seeing changes in the customer payment behavior? Because we've onboarded a lot of new customers. you normally find the first month or 2, it's the difficult part in getting money from your customers because you need to find out how they pay, is the contact person, who is the right person.

So we are having a little bit of that lag, but our collections still remain extremely healthy at 33 days. And I think it's got to do a little bit with our accelerated growth that you see the collections declining a little bit. Given the different margin profiles of logistics and Cartrack, how do you balance scaling logistics with maintaining the group's long-term profitability?

A, we look at these 2 businesses separately, and it's actually all sitting on the Cartrack platform, but we report on it separately. And the reason we report on it separately is it's very difficult to actually evaluate each part of the business given it's very different financial profiles. So we keep an eye on -- in 2 different segments. So we understand that they've got very different operating profit margins, but we manage it as if it's 2 different businesses, but actually, it's one business.

The next question, I'm going to go over to Joshua Reilly from Needham. It seems that your strong sustained subscriber growth, the current macro of sustained high oil prices and the around war is not seriously impacting your business. How is your differentiated to the market service strategy aiding growth and market share gains?

I think, Joshua, we're not an island, and I do believe the oil prices are impacting our customers. And it could be, in a way, a negative thing for us or a positive. But we've, over time, been able to deal with very, very macroeconomic environments. And quite frankly, at this point in time, I don't believe it's had an impact on us. It could have an impact in the future, but I don't see it. And I don't believe our market share has is unrelated to the petrol prices. I think our market share, the gain of market share, it really is about our ability to execute.

Another question from Joshua. As interest rates remain elevated, you have a strong capital position and balance sheet. Are you seeing any of your competitors pull back on their resources in the field or investments for growth given the current macro challenges?

Joshua, we are so focused on our own business and our own improvements that we need to do. And to be quite frank with you, I haven't really looked at the competitive environment and what exactly are they doing. So I cannot answer that. The next question, how is the tag and the video attach rate trending relative to internal plan and updated thoughts on countries for expansion and tag. What I can say is that Cartrack-Tag and video, we are exceeding our budget for the financial year.

Another question from Joshua. In the current macro, are you seeing trends around customers hesitant to add vehicles to their fleet? What specific things are you seeing with customers as they manage around macro headwinds?

Joshua, I think it's a bit early days. I mean the petrol prices, they spike up and down. There's a bit of uncertainty. But I think fundamentally, in the markets we operate in, everybody is more or less business as usual.

Then I've got 2 questions from [indiscernible]. With Cartrack operating in an exceptional 98% subscription annuity base, how is the rise of Tory embedded OEM telematics changing your long-term capital model? What we realize with the OEM telematics, they typically don't give our customers what they actually require. They very much focus on the safety and maintenance of the vehicle. So even we are getting a lot of OEM business, at the end of the day, we're having to put in our own hardware solutions to be able to really address the customers' challenges.

Okay. Then another question. Secondly, as you scale Karooooo Logistics, what operational guardrails are you in place to ensure these asset-heavy low-margin segment does not dilute your premium?

Karooooo Logistics is not asset heavy. And yes, it is a lower-margin business, substantially lower margin business. But like I said earlier, we are reporting these 2 segments separately, and we are looking at the business and the margins, and we don't -- the consolidated is not what we look at. We look at each segment separately.

And with that, that's all the questions for today. I thank everybody for joining us. Thank you. Bye-bye.

Hello, and welcome to Karooooo's Q1 FY 2027 Financial Results Presentation. On behalf of Karooooo, 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 Zak Calisto, Founder and Group CEO; Hoeshin Goy, Chief Financial Officer; and Carmen Calisto, Chief Strategy and Marketing Officer. I would like to remind everyone that some of the statements that we make 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 harbor statement in our Form 20-F, including the risk factors and the 6-K 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 6-K that we filed with the SEC yesterday. Our comments may refer to year-over-year comparisons unless we state otherwise.

I will now pass the call over to Carmen.

Thanks, Paul. Welcome to Karooooo's Q1 FY '27 Financial Results Presentation. FY '27 is off to a strong start, highlighted by Cartrack subscription revenue growth accelerating to 19% in Q1 despite foreign exchange headwinds associated with the strengthening ZAR. In constant currency, Cartrack subscription revenue growth accelerated to 21%. And despite the strengthening ZAR, ARR growth also accelerated to 19% in ZAR and 22% in constant currency. ARR growth increased 32% in U.S. dollars. We continue to cement our leadership position in South Africa, our most mature market, with subscription revenue growth accelerating to 24% in South Africa. The strong performance in South Africa demonstrates that our recent investments in sales capacity are driving tangible results.

The acceleration of subscriber growth to 18% from 16% in Q4 FY '26 underpinned our strong performance as we delivered record net subscriber additions of 142,472. South Africa's net subscriber additions increased 92% to 113,913 as we realized the benefits of recent investments in sales capacity and capitalize on sales momentum with video solutions and especially with Cartrack-Tag as a stand-alone product. Our strong execution also translated into record Karooooo operating profit of ZAR 410 million despite foreign exchange headwinds, reflecting our ability to accelerate revenue growth and profitability at scale. As we look forward to the rest of the fiscal year, we reiterate our FY '27 outlook.

Our focus remains on optimizing the investment we made in sales capacity during FY '26 whilst growing our distribution footprint at a more moderate pace in FY '27. Before diving into the details, we would like to provide a quick introduction to Karooooo. We provide an operational intelligence platform for connected vehicles and mobile assets.

Our platform enhances operational efficiency, reduces costs, mitigates risk, improves safety and customer service, ensures compliance and empower service delivery. We help businesses simplify decision-making to optimize their physical operations. We serve a large underpenetrated 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 2-decade proven track record of execution excellence and a cultural focus on disciplined capital allocation, operational efficiency and driving healthy returns on invested capital.

Our platform supports more than 2.8 million subscribers across more than 125,000 businesses, spanning a diverse set of industries with no customer or industry concentration risk. Importantly, our financial model is anchored by accelerating ARR growth, high-margin subscription revenue, exceptional commercial ARR retention and powerful unit economics. Despite the strengthening ZAR, ARR increased 19% to ZAR 5,432 million and on a U.S. dollar basis increased 32% to USD 335 million. In Q3, our commercial customer ARR retention rate remained at 95% and subscription revenue accounted for 97% of Cartrack revenue.

We continue to scale our proprietary data asset, now generating more than 330 billion data points monthly, which we leverage to deliver impactful innovation, insights and value to our customers. Finally, our LTV to CAC remains above 9x, underpinned by strong retention, disciplined capital allocation and efficient distribution, which are embedded in our vertically integrated business model and company culture. During today's presentation, we will review both of Karooooo's operating segments, Cartrack and Karooooo Logistics. Cartrack is our operational intelligence platform. Cartrack operates at scale and has a very attractive financial profile. Cartrack's operating momentum is the primary driver of Karooooo's growth and strong financial performance.

Cartrack delivered exceptional Q1 results that reflect the returns from the strategic investments we have made in expanding our sales capacity and selling video and Cartrack-Tag to existing and new customers in South Africa. In Q1, Cartrack delivered approximately ZAR 1.4 billion in subscription revenue, an increase of 19% or 32% on a U.S. dollar basis. The 19% growth reflects an acceleration compared to 18% in Q4 FY '26 despite the strengthening ZAR that negatively impacted reported Cartrack subscription revenue in Q1. Cartrack's constant currency subscription revenue growth was 21% in Q1.

Cartrack's operating profit margin was a healthy 28% in Q1. Karooooo Logistics is our rapidly growing Delivery as a Service offering that empowers large enterprise customers to scale and enable their Q-commerce or quick commerce. Karooooo Logistics continues to demonstrate strong growth and operating momentum while delivering real value to our enterprise customers. We report Karooooo Logistics separately as its Delivery as a Service financial profile differs from the financial profile of Cartrack subscription model. Karooooo Logistics is strategically important to us as it empowers our customers to scale their business through a capital-light model whilst driving high Cartrack customer retention.

In Q1, Karooooo Logistics' Delivery as a Service revenue was ZAR 177 million, an increase of 46% or 63% on a U.S. dollar basis. We are very excited about the value Karoo Logistics is adding to our customers and its long-term growth opportunity. In Q1, Karooooo delivered strong consolidated financial results. Total revenue increased 22% to ZAR 1,564 million. Subscription revenue increased 19% to ZAR 1,354 million. Operating profit increased 16% to a record ZAR 410 million and subscriber growth increased 18% to 2.8 million. Cartrack's 19% subscription revenue growth and 28% operating profit margin were the primary drivers of Karooooo's strong financial performance in Q1.

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 45%. We note that our EBITDA margin does not include any stock-based compensation or stock-based compensation add-back, a stark contrast to our peers. Our rare financial profile translates to healthy return on invested capital. It is important to underscore just how differentiated our financial model has become in the context of the broader software universe. We believe we are amongst the select few software companies operating at a Rule of 50 plus based on calendar year 2026 Gap Street estimates.

Within a universe of approximately 150 companies, Karooooo is the only small-cap company operating at this combined level of growth and profitability. Our financial profile is incredibly rare in public markets, especially among small cap companies. Being part of this elite group reflects our unwavering commitment to disciplined and profitable growth. In addition, with an essentially unchanged share count over the last several years and no stock-based compensation, growth in free cash flow translates directly into higher per share value given the absence of dilution. This is a key point of differentiation relative to many peers that fund growth with material equity issuance and stock-based compensation.

Now let's discuss our Q1 financial and operational highlights. In Q1, we accelerated our ARR growth despite foreign exchange headwinds. ARR growth accelerated to 19% and ARR growth in U.S. dollars increased 32%, reaching $335 million. Constant currency ARR growth accelerated to 22%. Cartrack subscription revenue growth accelerated to 19%, underpinned by accelerating growth of 24% in South Africa. Cartrack subscription revenue growth increased 32% in U.S. dollars and 21% in constant currency. Cartrack's total subscribers accelerated to 18%, surpassing 2.8 million, driven primarily by exceptionally strong performance in South Africa. Notably, Cartrack delivered record subscriber net additions of 142,000 with South Africa subscriber net additions increasing 92% to 113,913.

Despite foreign exchange headwinds, Karooooo delivered record operating profit of ZAR 410 million as growth-oriented investments moderated. Consolidated sales and marketing expenses increased 9% quarter-on-quarter compared to a 12% increase quarter-on-quarter in the equivalent quarters of the previous fiscal year. We were a Rule of 60 company in Q1 with subscription revenue growth of 19% and an adjusted EBITDA margin of 45%. Our balance sheet remains strong and unleveraged, and we ended the quarter with net cash and cash equivalents of ZAR 756 million. It's important to note that we keep our excess cash in U.S. dollars. And given the stronger ZAR, the net cash and cash equivalents translates into fewer ZAR. We declared a USD 1.5 dividend per share payable later this month, an increase of 20% compared to the prior year.

Our healthy subscription gross margin, efficient customer acquisition and attractive commercial customer ARR retention rates continue to drive our healthy unit economics. In Q1, our subscription gross margin was 73%, our LTV to CAC ratio remained above 9x, and our commercial customer ARR retention was 95%. Our unit economics remain healthy despite the increase in sales and marketing expenses during Q1, and we remain committed to profitable growth as we pursue the expansive growth opportunity ahead of us. Q1 subscriber growth accelerated to 18% and reached 2.1 million subscribers in South Africa. South Africa's net subscriber additions increased 92% to 113,913 as we realized the benefits of our recent investments in sales capacity and capitalize on strong demand for the Cartrack-Tag and video solutions. Importantly, South Africa's subscription revenue growth accelerated to 24%.

The pace of growth reflects our deliberate strategy to cement our leadership position in South Africa through a balanced combination of subscriber additions and selling video and Cartrack-Tag to our existing and new customers in South Africa. We are optimistic about the market opportunity in South Africa and believe there is a long runway to drive strong subscriber growth. Q1 subscriber growth increased 22% and reached 353,000 subscribers in Southeast Asia and the Middle East, with most of the subscribers in Southeast Asia. Q1 subscription revenue growth was 6% and 17% on a constant currency basis. The pace of reported subscription revenue growth in the region reflects the faster growth of certain countries that generate lower ARPU and foreign exchange headwinds. As the second largest contributor to group revenue, Southeast Asia continues to present the most compelling growth opportunity for the group in the medium to long term.

We plan to continue with a strong yet prudent drive to increase sales and marketing in Southeast Asia, and we anticipate our investments to have a positive impact on subscriber growth in the region. Southeast Asia is a vast underpenetrated market for sophisticated fleet management and video-based solutions, and we are well positioned to capitalize on the opportunity. Q1 subscriber growth increased 13% and reached 236,000 in Europe. Q1 subscription revenue growth was 7% and 13% on a constant currency basis. We continue to expand our customer base and drive our distribution capabilities in the region. We have partnered with leading OEMs to provide easy access to our platform, seamlessly integrating their connected vehicle data to our platform through application programming interfaces.

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 region as customers seek to simplify compliance with evolving legislation and enforcement. In Q1, Karooooo Logistics continued to build scale and delivered revenue of ZAR 177 million, an increase of 46% and an 8% operating profit margin. Q-commerce or quick commerce orders, a type of e-commerce focused on ultrafast delivery drove the exceptional performance. Karooooo Logistics supports our strong financial performance by immersing our platform into large customers' operations, contributing to strong customer retention. Karooooo Logistics also enables us to learn about the operational and logistics challenges confronting our customers.

In Q1, we made progress with our FY '27 priorities. First, we continue to cement our leadership position in our markets through continued prudent investments in sales and marketing. In South Africa, our results reflect our success driving the adoption of Cartrack-Tag and video solutions with existing customers as well as success selling Cartrack-Tag to new customers. The 24% subscription revenue and ARR growth in South Africa underscore our progress cementing our leadership position in South Africa. Second, we moderated our investments in sales and marketing in Q1 as evidenced by the 9% quarter-on-quarter increase in sales and marketing expenses in Q1 compared to 12% quarter-on-quarter growth in the previous fiscal year. Despite this moderation and foreign exchange headwinds, subscription revenue growth accelerated in Q1.

We remain committed to optimizing our recent investments in sales capacity and growing our distribution footprint at a more moderate pace in FY '27. We anticipate the rate of growth of sales and marketing expenses to be lower in FY '27 compared to FY '26. Third, we are embracing AI across the organization to enhance our platform, improve efficiency and accelerate the pace of execution.

With that said, I will now pass the call over to Hoeshin.

Thank you, Carmen. I will now discuss Karooooo's financial performance for quarter 1 FY 2027. Please note, my comments may refer to year-over-year comparisons unless we state otherwise. Quarter 1 extended Cartrack's track record of durable and profitable growth at scale, driven by consistent execution, our resilient subscription revenue model and attractive historic retention rates. In quarter 1, subscriber increased 18%, surpassing 2.8 million. Subscription revenue increased 19% to ZAR 1,351 million, and operating profit was a record of ZAR 395 million. Cartrack experienced record customer acquisition in quarter 1 with net subscriber additions of 142,472 subscribers, an increase of 70%. The record net subscriber additions reflects our strategic investment in sales capacity and success selling video and Cartrack-Tag to new and existing customers.

In quarter 1, we experienced noticeable sales momentum with Cartrack-Tag. Subscription revenue momentum remains the engine behind Cartrack's strong financial performance. In quarter 1, Cartrack subscription revenue accelerated to 19% despite FX headwinds associated with the strengthening ZAR and reached ZAR 1,351 million. Cartrack subscription revenue growth was 32% in U.S. dollar and 21% in constant currencies. Subscription revenue comprised 97% of Cartrack total revenue. ARR growth accelerated to 19% despite FX headwinds and reached ZAR 5,432 million and ARR growth increased to 32% in U.S. dollar and 22% in constant currency. Our proven and profitable subscription revenue model continued to deliver strong consolidated results in quarter 1.

In quarter 1, Karooooo's total subscription revenue increased 19% to ZAR 1,354 million. Operating profit was a record of ZAR 410 million and earnings per share increased 11% to ZAR 9.53. We delivered record operating profit as we began to moderate our investment in sales and marketing in quarter 1. Quarter 1 subscriber growth accelerated to 18% compared to 16% in quarter 4 FY 2026, driven by accelerating subscriber growth in South Africa. South Africa subscriber growth accelerated to 18% and Asia subscriber growth remained healthy at 22%. Asia is our fastest-growing region in terms of subscriber growth. In quarter 1, Cartrack continued to grow its subscription revenue across geographies, highlighted by acceleration in South Africa. South Africa subscription revenue growth was 24%, an acceleration compared to 22% in quarter 4 FY 2026. We view this acceleration as a clear indicator that our efforts to extend our leadership position are translating into real measurable performance.

Asia and Middle East subscription revenue growth was 6% and 17% on a constant currency basis. The reported growth reflects an increase in subscriber from lower ARPU countries in the region, combined with the translation effect of a stronger ZAR. Europe subscription revenue growth was 7% and 13% on a constant currency basis. Healthy performance across regions reflects our strong execution and provide a solid foundation for continued durable growth. In quarter 1, ARR growth accelerated to 19%, reaching ZAR 5,432 million. ARR growth was 32% in U.S. dollar and 22% in constant currency. This reflects the underlying momentum in the business and signals that our strategic initiatives are gaining traction. Karooooo's earnings per share increased 11% to ZAR 9.53. Cartrack's earnings per share contribution increased 10% to ZAR 9.24 and Karooooo Logistics earnings per share contribution increased 61% to ZAR 0.29.

While the quarter-on-quarter growth in sales and marketing expense moderated relative to last financial year, earnings per share growth continued to reflect significant investment in sales capacity and customer acquisition, evidenced by the 33% increase in sales and marketing expense in quarter 1. Our upfront sales and marketing costs are not aligned with the lifetime value of customer recurring revenue and related earnings in our financial statements. Importantly, our powerful unit economics remain intact and our balance sheet remains strong as we invest in growth. Quarter 1 free cash flow was ZAR 60 million and primarily reflects proactive investment in IoT device to meet anticipated demand.

Free cash flow also reflects growth-oriented investment in working capital, given the underlying accelerations in the business. As our growth accelerates, it's natural that capital expenditure and strategic investment temporarily increase as a percentage of revenue to support the planned growth. To be clear, the year-on-year decline in quarterly free cash flow does not indicate a structural issue with our ability to generate strong free cash flow. The decline is a result of delivered investment made to support growth as evidenced by our accelerating growth in quarter 1 and our outlook for accelerating Cartrack subscription revenue growth in FY 2027 at the midpoint. As we pursue accelerated growth, we expect free cash flow to reflect our investment to drive growth. While quarterly fluctuations may occur due to working capital dynamics and growth-oriented investment, we remain confident in our ability to consistently generate meaningful free cash flow.

We have a 2-decade track record of strong free cash flow generation that powers our disciplined capital allocation strategy and healthy return on invested capital and position us well for future growth. Our balance sheet reflects our track record of durable growth at scale, profitability and cash generation. Our net cash on hand plus cash in bank and fixed deposits was ZAR 756 million because we hold our cash reserve in U.S. dollars, movement in the U.S. dollar and South African exchange rates may impact our reported rand balance. FY 2027 is off to a strong start with record net subscriber additions and healthy retention driving the 21% Cartrack constant currency subscription revenue growth. We believe we are on track to accelerate total subscription revenue growth in 2027 as we realize the benefit of our recent investment in sales capacity.

We aim to drive our growth by balancing subscriber growth with the increased adoptions of video and Cartrack-Tag by existing and new customers. We also believe increased sales efficiencies, coupled with realizing other efficiencies in the business due to scale and leveraging AI will support strong earnings per share growth. With that said, we reiterate our FY 2027 outlook that implies accelerating subscription revenue growth at the midpoint and healthy earnings per share growth. We expect sales and marketing expense to continue to increase for the remainder of FY 2027 as we continue to invest in growth. However, we anticipate the rate of increase will be lower than experienced in FY 2026.

In closing, we delivered strong quarter 1 result with SaaS ARR growth of 19% despite FX headwinds. Our record net subscriber additions propel our exceptional performance in quarter 1. We are also pleased that we delivered record operating profit in quarter 1. These results reflect the strength of our operating model, return on our investment in sales capacity and our ability to scale efficiently and profitably. As we look ahead to the remainder of FY 2027, we are well positioned to accelerate growth and delivered meaningful earnings per share expansion. We remain committed to disciplined capital allocation, strong unit economics and long-term value creation. And finally, we are confident in our ability to consistently generate meaningful free cash flow and healthy return on invested capital.

With that, I'll turn the presentation over to Zak Calisto for Q&A.

Thank you, Hoeshin. Good morning or good afternoon to everybody or good evening. I'll start off with a question from -- the first question is from Josh Reilly of Needham. How much of the strength of South African subscriber growth was due to strong cross-sell of [ Tag ] relative to customer or vehicle additions by existing customers?

Josh, I'm going to phrase it this way. We did a tremendous amount of sales as a tag as a stand-alone, only the Tag product. The Tag product obviously has got a much lower ARPU than our average ARPU. And also what we did do is also sell a lot of Tag into our existing base. And we did focus a lot of our efforts into selling Tag as a stand-alone to certain of our existing customers, new customers, given the new opportunity and the challenges that the Tag does address that our customers do have.

Second question, how do you currently feel about sales capacity? And will you be making incremental investments through the course of the current fiscal year?

Yes, we will make -- we will increase our sales and marketing spend, but at a much lower rate than we did last year. We want to drive more efficiencies last year. But over the long term, we intend to continue to increase our ability to distribute. But this year, we intend to grow it slower than the previous year.

Third question, do you plan to expand contract to any additional countries beyond South Africa in the current fiscal year? One of our biggest challenges is actually growing our headcount and training our headcount and our ability to distribute. And at the moment, we have our hands full, and we can only do so much. So we intend to remain still very much focused on the [ Cartrack-Tag ] in South Africa for this financial year.

The next question is from [indiscernible]. I'm not sure where [indiscernible] is from. [ Cartrack's ] gross margin reached 73% in Q1, above the full year guidance range of 70% to 72%. What factors do you expect to drive the margin lower over the remainder of the year?

Typically, [indiscernible], we like to give guidance that we believe we will meet. And if we beat it, then it's a plus. We've typically never in history have we actually given guidance that we've missed. And I believe given the strong ramping up in customer acquisition, it would be prudent for us to remain that it will be between 70% and 72%.

Second question from [indiscernible]. In the Asia Pacific and Middle East, subscribers increased 22%, while subscription grew [ 7% ] in constant currency. How should we think about the evolution of regional ARPU as lower ARPU countries become a larger part of the subscriber base? And can product cross-selling eventually close the gap between the subscriber and revenue growth?

[indiscernible] the reality is we first started in Southeast Asia in Singapore. Singapore is a very high ARPU country. And as we move into lower ARPU countries, we believe that the ARPU in the region will resemble South Africa. So we're expecting over time, the ARPUs in Asia will come down as Indonesia, Malaysia, Philippines, Thailand become a much stronger part of our business.

The next question is from, from Scott from ROTH. Zak, AR camera continues to gain market traction. Can you provide some additional detail around current attach rates in different markets, particularly South Africa?

Scott, we're very -- despite has been selling AR camera since about 2018, a camera that obviously looks very different to our current products. Our current product is much smaller, much cheaper and much better and much faster. we still believe we're in very early stages of the product adoption of the video and the AI video, given that we've only recently gone into the sort of broader customers, whereas before, we have focused very much on very specific high-end customers that the challenge was very detrimental to their business.

But today, at current prices, it can actually be something that can help all our customers. I think at the moment, we're running at about a 5% adoption rate in our full base. So we do believe there's a long way to increase our penetration into the market.

A second question from Scott. It remains early in the adoption of Tags, but could you provide an update on the adoption cycle in South Africa? How many Tags are currently in operation? And would you expect Tags to be meaningful over 5% of the portion of the Cartrack sales in FY '28?

FY '28 is the next financial year. I certainly think it will be more than 5%, and it currently is already more than 5% of our sales. And I would say that adoption is very strong.

Another question from Scott. Are you seeing macroeconomic headwinds impacting [ Tag ] deployment adoption of Cartrack services?

Scott, in the 20 years that our business at Cartrack, we started the business in 2004. I would say that we've been able to do well in both very difficult times and both good times. And today, I don't see the economic headwinds being any different to historical. There's always been economic headwinds. Some are more than others. But I think fundamentally, we're designed to operate in difficult times and good times, clearly not in times that it's a total catastrophe. But in the countries we operate in, I would say, besides Mozambique, most countries are intact and they've got good economies and the economies are growing. And I certainly believe that shouldn't be a problem.

Next question from Alex from Raymond James. With the record net adds in the quarter, any change in where you are picking up new subscribers from in terms of other vendors in your various regions versus greenfield first-time buyers?

Alex, a lot of the drive in the new net adds was actually the Tag because that really has opened up a whole market for us. And we continue -- we will continue to drive that. And in the first quarter, we really went to look for greenfield opportunities. But frankly, we are going to focus probably the next 3 quarters more on cross-selling into our base. So we are able -- we've got either to cross-sell or get new or cross-sell or acquire new customers. And I think the next 3 quarters, we want to actually focus again on cross-selling.

Another question from Alex. Record net subscriber growth in the quarter. Can you help reconcile the record subscriber growth and the commentary to slow down hiring plans in favor of sales force efficiency? What are you seeing below the surface on the rep productivity side and demand environment and any regions in particular for this efficiency focus?

I'm a great believer in culture. And culture is all about having systems, processes and having the ability to execute. And when you actually onboard so many people like we did in the last year, it was close to 2,000 people. If you're not careful, the culture can fall apart. So we want to tighten up the culture and then continue to grow. So we believe if we lose our culture, that's probably our biggest risk in being able in our long-term growth.

Next question from Jackson Bogli. I'm not sure where Jackson is from. Okay. Jackson is from Dylan Becker at William Blair. Okay. Sorry, Jackson, I wasn't quite sure. I didn't read the full question. Net subscriber additions accelerated to a record 142,000 in Q1, with particularly strong momentum in South Africa. Can you frame how sustainable these net add levels are through '27? -- how the pipeline and sales productivity have evolved as the last year's sales investment matures? What are the level quarter adds in the reaffirmed guidance?

So Jackson, we don't give guidance to our subscribers because we're going through a phase where we have to expand our distribution capabilities, but we've also got this huge opportunity to cross-sell. And we want to be able to move between these 2 opportunities swiftly without having to be guided by -- or be, if I could use the word, cornered by what we've told the market. So we prefer not to discuss this, and we prefer to -- as we go, we do what's best for the business.

The next question, another question from Jackson. Karooooo is increasingly the operational intelligence platform customers with AI, video intelligence and workflow automation becoming more central. How are customers' use cases evolving beyond traditional fleet management? And what are the implications for product investment, retention, ARPU and competitive differentiation?

Jackson, there's a lot to this question. I mean I could talk about it for about 30 minutes. But to keep it simple, we have got very strong product adoption, and we are very busy with developing and improving our current [ tech ], both in hardware and both in our software platform and also in our internal systems to run the business.

So I think it really is just a question of us continue to improve focusing on what we have and having total commitment to our customers to continue to evolve and develop more and give our customers more. And that will drive our differentiation. Our differentiation will be about customer service, our platform and our product. And to be able to differentiate, it's an ongoing process. It's not something that you do and then you can put it in the draw and go to sleep. It's a continuous effort. I think those are the questions for today. Thank you, everybody, for joining us today, and thank you. Bye-bye.

Hello, and welcome to Karooooo's Fourth Quarter and Full Year Fiscal 2026 Financial Results Presentation. On behalf of Karooooo, 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 Calisto, Founder and Group CEO; Hoe Goy, Chief Financial Officer; and Carmen Calisto, Chief Strategy and Marketing Officer.

I would like to remind everyone that some of the statements that we make today regarding our business, operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to several risks and uncertainties. Our actual results could differ materially. Please refer to the safe harbor statement in our Form 20-F including the Risk Factors and the 6-K 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 6-K that we filed with the SEC yesterday. Our comments may refer to year-over-year comparisons unless we state otherwise.

I will now pass the call over to Carmen.

Thanks, Paul. Welcome to Karooooo's Fourth Quarter and Full Year Fiscal 2026 financial results presentation. As planned, FY '26 marked another year of disciplined execution with Cartrack Subscription revenue growth accelerating to 19%, up from 15% in the prior year despite foreign exchange headwinds resulting from the appreciation of the ZAR. Annual recurring revenue, or ARR, increased 18% to ZAR 5,179 million and 38% to USD 325 million.

Notably, momentum in our most mature markets, South Africa, strengthened meaningfully with ARR growth exiting the year in February at 23%, reinforcing our market leadership. Our strong execution also translated to significant free cash flow generation. FY '26 adjusted free cash flow increased 90% to ZAR 809 million and reflects our ability to scale efficiently while delivering meaningful free cash flow and value to our customers. We also continued our track record of returning excess cash to shareholders as we declared USD 1.50 dividend per share, an increase of 20% payable in July 2026.

We achieved these results even as we made significant and planned upfront investments in sales and marketing to drive future recurring revenue, earnings and adjusted free cash flow. During the year, we invested in our distribution network to support accelerated growth, enhance our platform with AI-powered video capabilities and other additional features. And we commercially launched Cartrack. These initiatives further strengthen our differentiated value proposition.

Looking ahead to FY '27, we aim to accelerate subscription revenue growth once again while delivering strong earnings per share growth. Despite providing a contracting gross profit margin outlook for FY '27, the midpoint of our FY '27 EPS outlook implies growth of 21% when compared to our FY 2026 EPS, excluding the secondary offering costs. We envision a slowdown in hiring in FY '27 while we drive sales force efficiency and AI adoption.

Before diving into the details, we'd like to provide a quick introduction to Karooooo. We operate a SaaS platform for connected vehicles and mobile assets that delivers mission-critical operational intelligence to businesses. Our platform enhances operational efficiency, reduces costs, mitigates risk, improve safety and customer service, ensures compliance and empower service delivery. We help businesses simplify decision-making to optimize their physical operations.

We serve a large underpenetrated 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 founder-led business with a strong financial profile, a 2-decade proven track record of execution excellence and a cultural focus on disciplined capital allocation, operational efficiency and driving healthy returns on invested capital.

Our platform supports approximately 2.7 million subscribers across more than 125,000 businesses, spanning a diverse set of industries and with no customer or industry concentration risk. Importantly, our financial model is anchored by healthy ARR growth, high-margin subscription revenue and exceptional commercial ARR retention and powerful unit economics.

Despite the strengthening of the ZAR, ARR increased 18% to ZAR 5,179 million, and on a U.S. dollar basis, increased 38% to USD 325 million. Our commercial customer ARR retention rate remained at 95%, and subscription revenue accounted for 98% of Cartrack revenue.

We continue to scale our proprietary data asset now generating more than 300 billion data points monthly, which we leverage to deliver impactful innovation, insights and value to our customers.

Finally, our LTV to CAC remains above 9x, underpinned by strong retention, disciplined capital allocation and efficient distribution, which are embedded in our vertically integrated business model and company culture. During today's presentation, we will review both of Karooooo's operating segments, Cartrack and Karooooo Logistics. Cartrack is our operational intelligence SaaS platform. Cartrack operates at scale and has a very attractive financial profile. Cartrack's operating momentum is the primary driver of Karooooo's growth and strong financial performance.

As per our FY '26 outlook, Cartrack delivered exceptional results highlighted by accelerating subscription revenue growth. These results reflect the early returns from the strategic investments we've made in expanding our sales capacity and selling video and Cartrack tag to our existing customers in South Africa.

In FY '26 Cartrack generated approximately ZAR 4.8 billion in subscription revenue, an increase of 19% or 39% on a U.S. dollar basis. A strengthening ZAR negatively impacted reported Cartrack subscription revenue in FY '26. The 19% growth rate reflects a meaningful acceleration compared to 15% subscription revenue growth in FY '25. Cartrack's operating profit margin was a healthy 28% in FY '26.

Karooooo Logistics is our rapidly growing delivery as a service offering that empowers large enterprise customers to scale their e-commerce and logistics operations. Karooooo Logistics continues to demonstrate strong growth and operating momentum while delivering real value to our enterprise customers. We report Karooooo Logistics separately as its delivery as a service financial profile differs from Cartrack SaaS financial profile. Karooooo Logistics is strategically important to us as it empowers our customers to scale their e-commerce and logistics operations through a capital-light model whilst driving high contract customer retention.

In FY Karooooo Logistics delivery as a service revenue reached ZAR 540 million, an increase of 29% or 50% on a U.S. dollar basis. Given Karooooo Logistics' robust revenue growth, we are very excited about its long-term growth opportunity. Karooooo delivered strong consolidated financial results in FY '26. Adjusted free cash flow increased 90% to ZAR 809 million, underscoring the durability and cash-generating power of our business. We continued our strong track record of returning excess cash to shareholders as we declared a record USD 1.50 dividend per share, an increase of 20% payable in July 2026.

Total revenue increased 20% to ZAR 5,479 million. Subscription revenue increased 19% to ZAR 4,844 million, operating profit increased 8% to ZAR 1,415 million and adjusted earnings per share was ZAR 32.55. FY '26 operating profit was negatively impacted by growth-oriented investments to deliver accelerated growth, foreign exchange headwinds associated with the appreciation of the ZAR and a provision alignment in cost of sales.

FY '26 earnings per share was also negatively impacted by a higher tax rate due to the shift in timing of our dividend declaration. Hoe Shin will provide additional context on these items during the financial discussion. As per our FY '26 outlook, we accelerated subscription revenue growth from 15% to 19%, whilst growing earnings. Q4 continued our track record of delivering profitable growth at scale.

In Q4, we were a rule of 60 companies when adding our Cartrack subscription revenue of 18% and our Cartrack adjusted EBITDA margin of 44%. We note that our EBITDA margin does not include any stock-based compensation or SC add-back, a stark contrast to SaaS peers. Our financial profile translates to a healthy return on invested capital. It's important to underscore just how differentiated our financial model has become in the context of the broader SaaS universe. We believe we are among the select few SaaS companies operating at a rule of 50 plus based on calendar year 2026 GAAP Street estimates.

Within a SaaS universe of approximately 140 companies, there are less than 10 companies operating at this combined level of growth and profitability, and Karooooo is the only small cap company. Our financial profile is incredibly rare in public markets, especially among small-cap companies. Being part of this elite group reflects our unwavering commitment to disciplined and profitable growth.

In addition, with an essentially unchanged share count over the last several years and no SBC compensation, growth in free cash flow translates directly into higher per share value given the absence of dilution. This is a key point of differentiation relative to many SaaS peers that fund growth with material equity issuance and SBC.

Now let's discuss our FY '26 financial and operational highlights. In FY '26, we accelerated our ARR growth. SaaS ARR accelerated to 18% and ARR growth in U.S. dollars accelerated to 38%, reaching $325 million. South Africa ARR growth accelerated to 23%. Cartrack subscription revenue growth accelerated to 19%, underpinned by accelerating growth of 20% in South Africa. Cartrack subscription revenue growth in U.S. dollars accelerated to 39%. Cartrack total subscribers increased 16% to approximately 2.7 million driven by healthy growth across all regions. Notably, Cartrack delivered record Q4 subscriber net additions of 94,000.

Also, Asia subscriber growth accelerated to 23% in Q4 and Asia net subscriber additions increased 41% in FY '26. Cartrack profitability was impacted by planned upfront sales and marketing operation expenses that delivered accelerated subscription revenue growth of 19% despite foreign exchange headwinds associated with the strengthening ZAR. For additional context, subscription revenue growth accelerated to 39% in U.S. dollars. We are a rule of 60 company and our adjusted free cash flow increased 90% to ZAR 809 million in FY '26.

Our balance sheet remains strong and unleveraged, and we ended the quarter with net cash and cash equivalents of ZAR 746 million. We also declared a dividend per share of USD 1.50, an increase of 20% payable in July 2026. Our healthy subscription gross margin, efficient customer acquisition and attractive commercial customer ARR retention rate continue to drive our healthy unit economics.

In Q4, our subscription gross margin was 71%, our LTV to CAC ratio remained above 9x, and our commercial customer ARR retention rate was 95%. Our unit economics remain healthy despite the significant increase in sales and marketing expenses during Q4, and we remain committed to profitable growth as we pursue the expansive growth opportunity ahead of us.

In FY '26, we secured significant enterprise customer wins across diverse industries and geographies underscoring the flexibility of our platform, the richness of our feature set and our ability to service a universe of industries. This broad-based adoption strengthens our conviction in the magnitude of our long-term growth opportunity. FY '26 subscriber growth increased 16%, and we surpassed 2 million subscribers in South Africa during Q4. This achievement highlights South Africa's 2-decade track record of sustained growth and operational excellence in South Africa, driven by its focus on product innovation, customer centricity and disciplined execution.

In FY '26, South Africa subscription revenue accelerated to 20% to ZAR 3,468 million, a significant achievement when compared to the growth rate of 15% in the prior year. Importantly, South Africa exited the fiscal year in February with ARR growth of 23%. South African subscriber and subscription revenue growth are a clear signal that our strategy continues to drive results. The pace of growth reflects our deliberate strategy to cement our leadership position in South Africa through a balanced combination of subscriber additions and selling video and Cartrack tag to our existing customers. We are committed to building our distribution capabilities to service the demand for our customers from both new customers and existing customers and we are confident that our investment in sales capacity this year will have a positive impact on Cartrack subscriber growth in FY '27.

We are optimistic about the market opportunity in South Africa and believe there is a long runway to drive strong subscriber growth. We ended FY '26 with approximately 336,000 subscribers in Southeast Asia and the Middle East, an increase of 23% with most of the subscribers in Southeast Asia. Importantly, our results demonstrate that our recent investment in sales capacity are beginning to yield tangible returns.

In Q4, subscriber growth accelerated, driving record net additions of 17,447, an increase of 82%. For the full year, net subscriber additions increased 41% reflecting the strengthening momentum of our customer acquisition engine in the region. FY '26 subscription revenue growth was 17% and 20% on a constant currency basis. The pace of subscription revenue growth in the region was impacted by the faster growth of certain countries that generate lower ARPU.

As the second largest contributor to group revenue, Southeast Asia continues to present the most compelling growth opportunity for the group in the medium to long term. We plan to continue with a strong yet prudent drive to increase sales and marketing in Southeast Asia and we anticipate our investments to have a positive impact on subscriber growth in the region. Southeast Asia is a vast under-penetrated market for sophisticated fleet management and video-based solutions, and we are well positioned to capitalize on the opportunity.

We ended FY '26 with approximately 228,000 subscribers in Europe, an increase of 14%. FY '26 subscription revenue growth was 22% and 19% on a constant currency basis. We continue to expand our customer base and drive our distribution capabilities in the region. We have partnered with leading OEMs to provide easy access to our platform, seamlessly integrating their connected vehicle data to our platform through application programming interfaces. We expect these partnerships to contribute to our results in the medium term.

In addition, we are experiencing encouraging demand for our proprietary compliance technology in the region as customers seek to simplify compliance with evolving legislation and enforcement.

In Q4, Karooooo Logistics continued to build scale and delivered revenue of ZAR 145 million, an increase of 32% and a 9% operating profit margin. Growth was driven by demand of e-commerce orders and the adoption of our service by our customers. Karooooo Logistics supports our strong financial performance by immersing our platform into large customers' operations contributing to strong customer retention. Karooooo Logistics also enables us to learn about the operational and logistics challenges confronting our large customers.

During Q4, Karooooo Logistics surpassed ZAR 1 billion in cumulative payments to drivers since Karooooo acquired it in 2021. This milestone highlights Karooooo Logistics' continued efforts to create sustainable economic opportunity for thousands of drivers in South Africa, while supporting the growing logistics ambitions of leading retailers fast food companies and e-commerce platforms in South Africa.

In addition, the thousands of drivers we have on the road, daily successfully executed more than 8 million deliveries in FY '26. We see a large opportunity for Karooooo Logistics going forward as large businesses seem to increase their e-commerce offerings and optimize their logistics capabilities through a capital-light model.

As we reflect on our FY '26 priorities, we believe we successfully cemented our leadership position in South Africa, expanded our distribution capabilities across regions and drove broader engagement with our platform, including the adoption of video and AI-assisted video. As we aim to accelerate our growth and deliver strong earnings per share growth in FY '27, our strategic priorities for FY '27 are as follows: First, we plan to continue to cement our leadership position in our markets by balancing new customer acquisition with broader adoption of video and contract tag.

Second, we intend to drive sales force efficiency while accelerating subscription revenue growth. And finally, we aim to harness AI to enhance the capabilities of our platform, drive operating efficiencies throughout the business and accelerate the speed of execution and pace of innovation. We've seen a lot of discussion around whether AI could disrupt SaaS models over the last few months, and it's a valid question for the broader SaaS sector, but our model is structurally differentiated from most SaaS companies. We believe our platform and financial model possesses unique resilience that will enable us to thrive in the AI era.

Our platform is built around a proprietary system of record that relies on IoT devices installed and maintained on customers' physical assets in the field. This is not data that can be sourced by an LLM. It's generated through physical hardware that our auto technicians install and actively service across more than 20 countries.

Our proprietary data asset collected from these IoT devices is large, vast proprietary and central to our differentiation. We have been collecting this proprietary data for more than 20 years, and we believe it provides us with a compounding data advantage. In addition, we tailor each IoT device installation to the individual requirements of our customers, enabling the collection of customer-specific data that helps solve their unique business and operational challenges.

Our platform is also deeply embedded in customers' day-to-day operations from ERP and CRM systems to logistics, safety and compliance workflows. This level of operational integration makes us an indispensable part of how these businesses function daily.

AI can assist decision-making, but it can't own fleet safety and physical logistics operations, install telemetry devices and physical assets and service telemetry devices in the physical world.

Our platform is mission-critical and keeps assets and people safe and productive, and that's not something that can currently be automated away by an AI agent. Furthermore, unlike most SaaS business models, our model is not seat-based. Growth is driven by penetration of physical assets, vehicles, equipment and machinery and by the continued expansion of those physical asset bases globally, that creates a durable long-term growth engine that is independent of head count or end-user licenses. This insulates us from the seat compression or user license risk that many software players face, particularly as AI automates knowledge worker tasks.

From a financial perspective, our business is difficult to displace. Our ARPU is roughly USD 10 per month, which is exceptionally low relative to the all-in cost of operating a vehicle or assets, inclusive of fuel, driver payroll, insurance and maintenance expenses and yet the ROI we deliver is high. That makes our offering both indispensable and uneconomic to disrupt, especially given that we are embedded in our customers' workflows and daily operations.

Add to this that our vertically integrated footprint across 20-plus countries, 95% commercial customer ARR retention, robust profitability, recent growth acceleration and strong free cash flow generation and you can see why we feel confident that AI will serve as a tailwind to our platform, enhancing automation, functionality and insights whilst accelerating innovation rather than being a threat to our business model.

With that said, I will now pass the call over to Hoe Shin.

Thank you, Carmen. I will now discuss Karooooo's financial performance for quarter 4 and the full year FY 2026. Please note, my comments may refer to year-over-year comparisons unless we state otherwise. Quarter 4 extended Cartrack's record of durable growth at scale, driven by consistent execution, our resilient subscription revenue model and attractive historic retention rates. In quarter 4, subscriber increased 16% to approximately 2.7 million. Subscription revenue increased 18% to ZAR 1,278 million, and operating profit was ZAR 324 million. Cartrack experienced record quarter 4 customer acquisition with net subscriber additions of 93,755, an increase of 19%. The record quarter for net subscriber additions reflects our strategic investment in sales capacity while cross-selling video and contracted to existing customer.

Cartrack's strong financial performance continued to be fueled by SaaS revenue momentum. In quarter 4, Cartrack's revenue increased 17% to ZAR 1,304 million, and Cartrack subscription revenue increased 18% to ZAR 1,278 million. Subscription revenue comprised 98% of Cartrack's total revenue. For FY 2026, Cartrack revenue increased 19% to a record ZAR 4,939 million, and Cartrack's subscription revenue increased 19% to ZAR 4,831 million. ARR growth increased 18%, reaching ZAR 5,179 million despite currency headwinds associated with the strengthening of ZAR.

In U.S. dollar, ARR growth accelerated to 38%, reaching $325 million. Our proven and profitable SaaS business model continued to deliver strong consolidated results in quarter 4 and FY 2026 with meaningful acceleration despite foreign currency headwinds. In quarter 4, Karooooo's total subscription revenue increased 18% to ZAR 1,281 million. Operating profit was ZAR 338 million and adjusted earnings per share was ZAR 0.78. For FY 2026, Karooooo's total subscription revenue accelerated to 19% to ZAR 4,844 million, operating profit was ZAR 1,450 million, and adjusted earnings per share was ZAR 32.55.

For additional context, our FY 2025 subscription revenue growth was 15%. FY 2026 adjusted earnings per share was ZAR 32.55. In U.S. dollar, the adjusted earnings per share increased 20% to $2.05. Quarter 4 adjusted earnings per share came in at ZAR 7.18 related to the following items we will discuss. The strengthening of ZAR against currency in our key markets, create a headwind to our reported revenue, while majority of our cost of sales reflects depreciation of the in-vehicle IoT device at prior year exchange rates, when ZAR is lower. The depreciation of the in-vehicle IoT device was a key component of our cost of sales.

On top of that, our accelerated growth this year expanded our in-vehicle IoT device to increase by 45%, and we align our provision in line with this accelerated growth. As a result, Cartrack gross profit margin was 70% compared to 75% in the same quarter in prior year, and subscription revenue gross profit margin was 71%.

Importantly, we did not experience a disproportionate churn rate in quarter 4 compared to other quarters. Finally, a higher effective tax rate in this quarter reflects withholding tax from dividend payment made by our subsidiary to the holding company.

Taken all together, these 3 items represented approximately ZAR 1.60 of earnings per share in this quarter. Excluding them, our quarter 4 earnings per share would have been stood at approximately 8.78. Karooo's adjusted earnings per share was 7.18. Cartracks earnings per share contribution was 6.89, and Karu Logistics earnings per share contribution increased 45% to 0.29.

Our adjusted earnings per share reflects our deliberate investment in sales capacity to accelerate subscription revenue growth and support durable long-term growth. In quarter 4, Karooooo consolidated sales and marketing expense rose 37%, reflecting this strategy. This upfront sales and marketing expense do not align with the lifetime value of the recurring revenue earnings and free cash flow that these customers will generate.

Importantly, our powerful unit economics remain strong and intact. Looking back, FY 2026 was a year focused on accelerating subscription revenue growth while maintaining our strong subscriber growth. Our total subscriber growth increased 16% in financial year 2026. South Africa subscriber growth rose 16% and Asia subscriber growth accelerated to 23%. Asia is our fastest-growing region in terms of subscriber growth.

Even if the strongest ZAR our financial year 2026 SaaS ARR growth was 18% and in U.S. dollar, our ARR growth accelerated to 38%. South Africa stood out with SaaS ARR growth accelerated to 23% as compared to 17% in 2025. This marked the third consecutive year of ARR growth acceleration despite foreign currency headwinds associated with the appreciation of ZAR. We believe the acceleration in ARR growth reflect the underlying momentum in the business and signals that our strategic initiatives are gaining traction.

Cartrack continued to grow its subscription revenue across geographies, highlighted by acceleration in South Africa. FY 2026 South Africa subscription revenue growth was 20%, an acceleration from 15% in FY 2025. We view this acceleration as a clear indicator that our efforts to extend our leadership position are translating into real measurable performance.

FY 2026 Asia and Middle East subscription revenue growth was 17% or 20% on a constant currency basis. The growth reflects an increase in subscriber from lower ARPU countries in the region, combined with the translation impact of a stronger ZAR. Europe subscription revenue growth was 22% or 19% on a constant currency basis. Healthy performance across region reflects our strong execution and provide a solid foundation for our continued durable growth.

We have a 2-decade track record of strong free cash flow generation and FY 2026 free cash flow generation was exceptional. FY 2026 adjusted free cash flow increased 90% to ZAR 809 million, underscoring the strength of our operating model. Several factors contributed to this performance. Our debtors book improved primarily due to strong collection in February 2026, improved supplier terms, timing of tax payments, disciplined management of uninstalled IoT device following a device buildup in the prior year and payments related to the construction of the South African head office reduced as the building was completed in previous years.

As we pursue accelerated growth, we expect free cash flow to reflect our investment to drive growth. While quarterly fluctuations may occur due to the working capital dynamics and growth-oriented investment, we remain confident in our ability to consistently generate meaningful free cash flow. Karooooo's consistent free cash flow generations powers our disciplined capital allocation strategy and healthy return on invested capital and position us well for future growth. Our balance sheet reflects our track record of durable growth at scale, profitability and cash generation. Our net cash on hand plus cash in bank and fixed deposit was ZAR 746 million that these collection days remain healthy at 27 days and are within our historical norm. We declared a record dividend of $1.50 per share, an increase of 20% and payable to our shareholders in July 2026.

We believe that our ability to generate healthy cash flow is sustainable, given our synergy business model, coupled with our track record of consistent execution. As we reflect on our financial performance in FY 2026, we delivered on our outlook with Cartrack subscription revenue at the higher end of our initial outlook even with stronger ZAR and adjusted earnings per share at the lower end of our initial outlook primarily due to the planned growth-oriented investment and foreign currency headwinds.

Moving on to our outlook for FY 2027. We intend to accelerate subscription revenue growth once again while delivering strong EPS growth. We are confident that our investment in sales capacity in FY 2026 will have a positive impact on subscriber growth in 2027 and we plan to drive our growth by balancing subscriber growth with increased adoption of video and Cartrack tech. We believe the increased sales efficiencies, coupled with realizing other efficiency in the business, due to scale and AI adoption will support strong EPS growth.

With that, our guidance for FY 2027 are as follows: Cartrack subscription revenue between ZAR 5,700 million to ZAR 6,000 million, which implies Cartrack's subscription revenue growth between 18% to 24%. Cartrack's gross profit margin between 70% to 72%, Cartrack's operating profit margin between 27% to 30% and Karooooo earnings per share between ZAR 38.5 to ZAR 40. Despite providing a contracting gross profit margin outlook for FY 2027, assuming current exchange rates and accelerated growth, the midpoint of our earnings per share outlook implies earnings per share growth of 21% in FY 2027, when compared to our FY 2026 earnings per share, excluding secondary offering costs.

We envisage a slowdown in hiring in FY 2027, while we drive sales force efficiencies. In closing, in quarter 4, we experienced strong momentum with SaaS ARR growth of 18%, even with foreign currency headwinds led by South Africa ARR growth of 23%. We also delivered record quarter 4 net subscriber additions, highlighted by accelerating growth in Asia. While quarter 4 operating profit and adjusted earnings per share were impacted by several items which we discussed earlier. The underlying business is performing well.

Our adjusted free cash flow generation was exceptional, increasing 90% to ZAR 809 million. We also continued our track record of returning excess cash to shareholders as we declare a $1.50 dividend per share, an increase of 20%. These results reflect the strength of our operating model, early returns on our investment in sales capacity and our ability to scale efficiently while generating durable cash flow.

As we look forward to FY 2027, we are well positioned to accelerate growth and deliver meaningful earnings per share expansion. We remain committed to disciplined capital allocation, strong unit economics and long-term value creation.

And finally, we are confident in our ability to consistently generate meaningful free cash flow and healthy return on invested capital.

With that, I will turn the presentation over to Zach Calisto for Q&A.

Sorry, I was having a bit of a problem, need to unmute myself. Thanks, everybody, for joining us today. I will now go into the questions. .

And I will now go into the questions, and I will answer the questions.

The first question from Josh from Needham. As you, As you slow hiring, how are you thinking about using AI to drive more internal efficiencies, particularly with customer support and voice AI applications.

Josh, we've been busy with this, I would say, for the last 18 months. At this point in time, we are using AI, but not quite at the point where we'd like to be using it. But quite frankly, it doesn't work as well as a lot of companies site working. And we've looked at -- we've got our own AI team that's working at it. We're continuously improving, and I certainly believe AI will get there.

But at the moment, it still makes too many misinterpretations and it still makes -- it basically frustrates customers. So we are using it, but not as much as we want to use it, but I believe over time, we'll just get at it and the AI tools will get better. And over time, this will be a big win for us.

The second question from Josh. What are you seeing in pricing trends in different markets do you have more pricing down on any particular region currently?

I think the pricing change, Josh, have been the same. They've been quite consistent, I would say, for the last 10 years. The markets we operate in, there isn't this a raising of ARPUs that you've seen in the North America market. It's very much about giving more to the customer as technology gets better and sort of retaining the same pricing.

And then it really is about your unit economics and your pricing model working. And we've got a track record that our pricing model is correct, and it gives us the desired operating profit margins that we look at getting. So I don't see any pressures at this point, but I also don't see an opportunity to just raise prices for the sake of raising prices.

Another question from Josh. What are the key focus regions for investment in FY '27. I think fundamentally, FY '27 is going to be really about a lot of focus and improving our platform, our products, our productivity of our people. I'm not saying it's not good. I think it's actually -- it's a more cleaning, but there's always room for improvement. And in FY '26, we hired a lot of people across lots of regions and we just need everybody to settle down a little bit more, and then we'll ramp up our human capital again.

And is APAC is still a key priority for incremental investments?

Definitely. We did a lot during the last financial year. And we continue not to slow down, specifically in Southeast Asia. The places where we'll do a lot of slowdown will be predominantly in South Africa.

I'll move on to Dylan. Thanks Dylan. Dylan from William Blair. Can you dig into the draft of strength in South Africa?

Notable reacceleration in largest region and outlook supports sustained momentum ramping reps, new products, lots of positive factors, such as. Dylan South Africa just before COVID, we had a building and we had to run out of space, and we're going to start building and building, then COVID came in, we couldn't build it. Then just when COVID finished, we built the building, we moved into this building approximately now 18 months ago, and this building is obviously designed in a way that we can operate in a much more efficient way than we've ever done in the past. It's also allowed us to add more head count and better systems and better processes, and we're starting to yield the results of that investment.

I'll go to the next question from Alex from Raymond James. On gross profit margin, can you elaborate on the alignment of provision increase to cost of sales? Is this an accounting risk maintenance? And how long you amounted the devices cost. Or is there a fair market value adjustment that asked for?

So the first thing the auditors did not ask for it. They also picked up that there was an increase in the audit what we had picked the table or the auditors already. So it wasn't a request from auditors. It was more forward-looking because what happened during the acceleration of PPE went up substantially. And we just wanted to make sure we've made cautious provisions and probably in hindsight, we could have -- should have done this in Q2 but we didn't really know how acceleration was going to take shape. So we decided to do it in Q4. So maybe the best way to have answered that it would have been -- we could have done a bit in Q2, Q3.

But we only had the visibility of the power of our acceleration by Q4. So we as management, decided to do it in Q4. But there's been -- in actual fact, we've seen no extra churn than we've ever seen in the past. But our PPE substantially larger than it was. And we just done it on surprises. And that's why we've decided to do in Q4 just to make a bigger provision.

So the next question from Alex. Can you speak to the sales productivity you observed exiting FY '26 and early FY '27 gives you confidence of strong growth outlook despite the lower hiring plans?

So in our outlook, Alex, is we're basically saying we expect worst case to continue at this current rate or to increase it. Despite us saying that we're going to slow down the hiring that doesn't mean we're going to stop hiring. We're still going to continue hiring people and we certainly believe we've got sufficient momentum in sufficient people with a bit of hiring that we can accelerate further than the current growth.

So we feel very -- we've had 2 months in this current financial year, and we're feeling very comfortable that we will be able to deliver on this outlook. And historically, we've never found on our outlook.

The next question from Rudi van Niekerk. Please unpack Cartrack's Q4 cost of sales increase of 42% of to 392 and the related note, why the provision in vehicle IoT device increases 45%, while ARR increases 18%?

So Rudy, we've got the actuarial models to how we depreciate our PPE, and that aligns with the life cycle of revenue expected from that PPE. However, if you look at the amount because we've got a much stronger growth, the growth in our PPE and in our balance sheet, that's gone up substantially. And that's where you got to compare how much is the PPE on the balance sheet increased, and that's more comparable to how much depreciation has got. And that's the relation that you've got to look at as opposed to the relationship to subscription revenue because now you've got many more devices, IoT devices in the depreciation cycle.

And obviously, in our subscription revenue, there's a lot of devices they[indiscernible] And they don't contribute to cost of sales because it's been fully depreciated, yet they're still giving us revenue. But now with accelerated growth, you certainly have -- as a percentage of subscribers, there's a bigger percentage now that are still in the depreciation cycle. Hopefully, I articulated that in a way that's easily understood.

I'll move on to another question by Dylan from William Blair. Slight near-term margin headwinds make sense, especially as you see revenue acceleration paying out. But how should we think about leverage for some of the upfront investments in sales marketing they are likely to normalize a bit more in FY '27?

So Dylan, you will see it coming through on our operating profit margin. And clearly on our earnings per share. So with that slowdown, what we are definitely going to do is, and we're giving guidance to that to very healthy earnings per share growth in FY '27.

I'll now move to the next question from Dylan as well. Momentum with a, how much of ARPU uplift versus wedge of drive new logos and maybe initial contribution from TAG in FY '27 outlook?

I think I can't give you numbers to that, Dylan. I haven't got those in front of me at this stage. But I think fundamentally, there is a contribution from TAG to our growth and from video to our growth. And that's the level of contribution would probably be more significant in FY '27 than it was in FY '26 as we pick up momentum. And as our teams get better at selling these products and getting more familiar with the multiple applications that all these products do have.

I will now move over to Scott from ROTH. How is Cartrack progressing in South Africa, what's the current number of connected devices and what is the current thought process of commercial rollouts in other countries.

Scott, I do not have these numbers in front of me. I can always drop you an e-mail with these numbers. So at this point in time, we're now going to start rolling it out into Africa during FY '27. And so we expected by the end of FY '27 to have it throughout South Africa and the Rest of Africa.

Next question by Dylan from William Blair. Any impact from rising input costs to [indiscernible] in memory storage, higher navigating supply chain dynamics here? Yes, Dylan, we've seen significant increases in memory. When I say significant, we're talking about 200% increases. We've adjusted our pricing using our long existing pricing model that we do to cater for these memories. So it has been adjustment in our pricing. We don't believe this new pricing will slow down our ability to sell and nor do I believe it will accelerate our subscription revenue because it won't have that much of a meaningful impact into the bigger picture given our large base that we currently already have.

And a lot of our costs that we see in our P&L is actually depreciation and this depreciation is actually of devices and memories that have been bought in the past at old pricing.

I'll move over to Scott from ROTH. How is the macroeconomic overhang impacting demand and customer decisions, particularly related to rising gas prices?

I think, Scott, it's early days. It's very clear and very evident that there is substantial increases in fuel prices at this point in time. But we can't say we've now all of a sudden seen because of that. So I can't attribute any of our growth to that. But I'm sure if the prices do not come down, then that will start impacting demand for our products.

But at this point in time, it's not that obvious. It probably does exist, but it's not obvious.

Another question from Scott is the ongoing adoption of AI camera. What are the current attach rates. And is that the primary driver of the Q4 ARPU increased boost?

So think it's a multiple and it's a complex answer to that. In actual fact, our ARPU in Q4 was very negatively impacted because of the strong ZAR, specifically in Q4, the ZAR really strengthened. ZAR is definitely a positive contributor to ARPU. But like I've said many times before, higher ARPU for us because of our business model does not imply higher margins because it's all -- it's more equipment. It's more data costs, more ongoing costs, and that goes back to our pricing model, which still leaves us with very much the same operating profit margins.

The next question from Gokul Raj. With the float better with our offering last year, would you consider share buybacks over dividends. If yes, what is the valuation multiple thumb rule below which you buy back shares?

Gokul, we have been on NASDAQ, it's not always easy to buy shares back at this point in time. And we haven't got that in our radar at this point in time to share buyback. And if our investors do want the can take dividends and buy more shares for the dividends. But at this point in time, we haven't got buyback in mind.

The next question from Prashant Premkumar. What is the impact on the U.S. -- U.S.A. Iran war on the business. How much of your business is in the Middle East? And what is the impact of all these on fuel prices? Prashant I've answered part of your question in to previous questions. And the impact of the U.S. Iran war is, I think it impacts really the oil price. We have got a good business in the UAE, but I think that business has been impacted slightly and we can't measure at this stage how much impact it really has, but there is impact there. But it's a small part of our bigger business.

And in terms of fuel prices and demand for our products, I'm sure if this continues, we will see more demand. But at this point in time, it's not obvious.

Then the last question from Claire Gerdes. It seems like ARPU was an area of issue. Is this related to Southeast Asia? How can we think about ARPU growth potential for this year?

I'm not quite sure Claire for what you mean, but I will attempt to answer your question. So ARPU in Q4 was negatively impacted because of the translation of currencies. And our ARPU will increase based on increasing more product to our customers. However, having said that, it also depends what markets grow faster. And at the moment, in Southeast Asia, Philippines, Indonesia, Thailand are growing really very fast.

However, the ARPUs are similar to South Africa. And typically, our ARPU in Asia is substantially better than South Africa because of Singapore, which has got a very high ARPU but as Singapore becomes a smaller part of Asia, then the ARPU change would be for the in Asia to come down. But it really is just a geography dependent and it's not business dependent as such, your customer dependent, if I make sense of what I'm trying to say.

Anyway, that's the last question. I want to thank everybody for taking time to listen to Hoe Shin and to Carmen and to me. And thank you. Bye-bye.

Hello and welcome to Karooooo's Q3 FY 2026 Earnings Call. On behalf of Karooooo, we would like to thank you for joining us today. I am Paul Bieber, VP of Investor Relations and Strategic Finance. We are joined today by Zak Calisto, Founder and Group CEO; Hoeshin Goy, Chief Financial Officer. -- and Carmen Calisto, Chief Strategy and Marketing Officer.

I would like to remind everyone that some of the statements that we make today regarding our business, operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to several risks and uncertainties. Our actual results could differ materially. Please refer to the safe harbor statement in our Form 20-F, including the Risk Factors in the 6-K 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 6-K that we filed with the SEC yesterday. Our comments will refer to year-over-year comparison unless we state otherwise.

I will now pass the call over to Carmen.

Thanks, Paul. Welcome to Karooooo's Q3 FY 2026 Financial Results Presentation. Karooooo delivered outstanding results this quarter, highlighted by accelerating ARR growth, strong subscriber momentum with record net additions and continued robust profitability. We also made progress towards an important milestone and ended the quarter on the verge of USD 300 million in ARR. We achieved these results even as we made significant and planned upfront investments in sales and marketing to drive future recurring revenue and earnings.

These achievements underscore our ability to scale efficiently while delivering meaningful view to our customers and shareholders. Before diving into the details, we would like to provide a quick introduction to Karooooo. We operate a SaaS platform for connected vehicles and mobile assets that enables businesses to enhance operational efficiency, reduce costs, improve safety and customer service and ensure compliance.

We help businesses simplify decision-making to optimize their physical operations. We serve a large underpenetrated 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 2-decade proven track record of execution excellence and a cultural focus on disciplined capital allocation and operational efficiency.

Our platform supports approximately 2.6 million subscribers across more than 125,000 businesses spanning a diverse set of industries. Importantly, our financial model is anchored by accelerating ARR growth, high-margin subscription revenue, exceptional commercial ARR retention and powerful unit economics. In Q3, our ARR increased 22% to ZAR 5,106 million, and on a U.S. dollar basis, increased 28% to USD 298 million., Our commercial customer ARR retention rate remained at 95% and subscription revenue accounted for 97% of Cortrak revenue.

We continue to scale our proprietary data assets now generating more than 275 billion data points monthly, which we leverage to deliver impactful insights and value to our customers. Finally, our LTV to CAC remains above 9x and underpinned by strong retention, disciplined capital allocation and efficient distribution, which are embedded in our vertically integrated business model and company culture.

During today's presentation, we will review both of Karooooo's operating segments, Cortrak and Career Logistics. Katra is our SaaS operations management platform. Cortrak operates at scale and has a very attractive financial profile. Contract's operating momentum is the primary driver of Karooooo's growth and strong financial performance. In Q3, Cortrak delivered exceptional results highlighted by accelerating subscription revenue growth in South Africa. These results reflect the early returns from the strategic investments we have made in expanding our sales capacity in recent quarters and selling video and [indiscernible] tag to our existing customers in South Africa.

The results also underscore the continued growth potential in South Africa. In Q3, [indiscernible] generated approximately ZAR 1.2 billion in subscription revenue, an increase of 20% or 27% on a U.S. dollar basis, A strengthening ZAR negatively impacted reported Q3 Cortrak subscription revenue growth. Year-to-date, Cortrak subscription revenue has increased 20% to 15% in FY 2025, a material acceleration, Cortrak operating profit margin was a healthy 28% in Q3.

Karooooo Logistics is our rapidly growing delivery as a service offering that empowers large enterprise customers to scale their e-commerce and logistics operations. Karooooo Logistics continues to demonstrate strong growth and operating momentum while delivering real value to our enterprise customers. We report Karooooo Logistics separately as its delivery as a service financial profile differs from Cortrak SaaS financial profile.

Karooooo 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 [indiscernible] customer retention. We continue to profitably scale the Karooooo Logistics business. In Q3, Karooooo Logistics' delivery as a service revenue reached ZAR 135 million, an increase of 24% or 31% on a U.S. dollar basis. Given Karooooo Logistics' robust revenue growth, we are very excited about the long-term growth opportunity.

In Q3, Karooooo delivered strong consolidated financial results. Total revenue increased 22% to ZAR 1,410 million. Subscription revenue increased 20% to ZAR 1,239 million Operating profit increased 14% to ZAR 369 million and total subscribers increased 16% to approximately 2.6 million. [indiscernible] 20% subscription revenue growth and 28% operating profit margin were the primary drivers of our strong financial performance in Q3. Q3 continued our track record of delivering profitable growth at scale. In Q3, we were a Rule of 60 company when adding our Cortrak subscription revenue growth of 20% and our cartrack adjusted EBITDA margin of 45%. We note that our EBITDA margin does not include any stock-based compensation add-back.

Before detailing our Q3 performance, it is important to underscore just how differentiated our financial model has in the context of the broader SaaS universe. We believe we are among the select few SaaS companies operating at a rule of 50 plus based on calendar year 2026 Gap Street estimates. Within a SaaS universe of approximately 140 companies there are less than 10 companies operating at this level, and Karooooo is the only small cap company. Our financial profile is incredibly rare in public markets, especially among small-cap companies, being part of this elite group reflects our unwavering commitment to disciplined and profitable growth.

In addition, with an essentially unchanged share count over the last several years and no stock-based compensation growth in free cash flow directly translates into higher per share value given the absence of dilution. This is a key point of differentiation relative to many SaaS peers that fund growth for significant equity issuance and SBC. Now let's discuss our Q3 financial and operational highlights. In Q3, SaaS ARR accelerated to 22% compared to Q2 FY 2026 growth of 20% and ARR growth in U.S. dollars accelerated to 28%, reaching $298 million. Car track subscription revenue growth increased 20%, underpinned by 21% growth in South Africa. The 21% growth rate in South Africa represents a significant acceleration compared to FY 2026 Q2 growth of 18% and 14% in Q3 of the prior fiscal year.

Contracts total subscribers increased 16% to approximately 2.6 million, driven by healthy growth across all regions. Notably, CarTrack delivered record subscriber net additions of 111,000 in Q3. Also, year-to-date net subscriber additions increased 30% in Asia. Cartracks operating profit margin remained healthy at 28% despite a 47% increase in sales and marketing expenses in Q3. We were a rule of 60 company in Q3, and our balance sheet remains strong and unleveraged. We ended the quarter with net cash and cash equivalents of ZAR 531 million.

Our healthy subscription growth margin, efficient customer acquisition and attractive commercial customer ARR retention rate continued to drive our healthy unit economics. In Q3, our subscription gross margin was 73%, our LTV to CAC ratio remained above 9x, and our commercial customer ARR retention rate was 95%. Our unit economics remain healthy despite the significant increase in sales and marketing expenses during Q3. It is also noteworthy that we accelerated our subscription revenue growth from 14% in Q3 last year to 20% this quarter while maintaining our strong unit economics.

We remain committed to profitable growth and strong unit economics as we pursue the expansive growth opportunity ahead of us. We ended Q3 with approximately 1.9 million subscribers in South Africa, an increase of 16% and Q3 subscription revenue growth was 21%, a significant acceleration compared to Q2 FY 2026 growth of 18% and 14% in Q3 of the prior fiscal year. South Africa represented 72% of total [indiscernible] subscription revenue. The pace of growth reflects our strategy to drive [indiscernible] subscription revenue growth through a balanced combination of subscriber additions and selling video and contract tag to our existing customers.

South African subscriber and subscription revenue growth is a clear signal that our strategy is driving results. This accelerated growth reflects our deliberate strategy to cement our leadership position in South Africa by simultaneously growing our customer base and selling video and contract tag to customers in South Africa. Average revenue per user or ARPU in South Africa increased 7% to ZAR 162 November 2025 compared to November 2024. We are committed to continue building our distribution capabilities to service the demand for our products from both new and existing customers and we are confident that our investment in sales capacity this year will have a positive impact on Cartrack subscriber growth in FY 2027.

We are optimistic about the market opportunity in South Africa and believe there is a long runway to drive strong subscription growth. We ended Q3 with approximately 318,000 subscribers in Southeast Asia and the Middle East an increase of 20% with most of the subscribers in Southeast Asia. Year-to-date, net subscriber additions in the region increased 30%. And Southeast Asia and the Middle East comprised 15% of total subscription revenue, and Southeast Asia and the Middle East subscription revenue growth increased 14%. And -- the pace of subscription revenue growth in the region reflects an increase in subscribers from lower ARPU countries combined with the translation impact of the strengthening ZAR.

As the second largest contributor to group revenue, Southeast Asia continues to present the most compelling growth opportunity for our group in the medium to long term. Southeast Asia is a vast under-penetrated market for sophisticated fleet management and video-based solutions, and we are well positioned to capitalize on the opportunity. We ended Q3 with approximately 223,000 subscribers in Europe, an increase of 16%. European subscription revenue increased 24% and Europe comprised 10% of our total subscription revenue. We continue to expand our customer base and drive our distribution capabilities in the region. 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 region as customers seek to simplify compliance with evolving legislation and enforcement. In Q3, Karooooo Logistics continued to build scale and delivered revenue of ZAR 135 million, an increase of 24% and a 7% operating profit margin. Growth in e-commerce orders drove Karooooo Logistics' revenue growth. Karooooo supports our strong financial performance by immersing our platform into large customers' operations, contributing to strong customer retention.

Karooooo Logistics also enables us to learn about the operational and logistics challenges confronting our large customers. We see a large opportunity for Karooooo Logistics going forward as large businesses seek to increase their e-commerce offerings and optimize their logistics capabilities through a capital-light model. In Q3, we continue to make progress with our FY 2026 priorities. First, we continue to strengthen our leadership position in South Africa by driving the adoption of video solutions and cartrack tag within our existing customer base. The early results are promising with South African ARPU increasing 7% as of November 2025 compared to November 2024, highlighting growing customer engagement and product uptake.

In addition, we expect our ongoing investment in distribution capacity to create durable growth benefits that extend beyond the current financial year. Second, we continue to expand our distribution footprint in Asia and Europe, and we are seeing success in expanding our teams in the regions. 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. We are very excited about the momentum we are experiencing with our video solutions in the market, including AI video.

Capital allocation is a fundamental part of our disciplined culture 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 customer-centric culture and attractive unit economics, we set a high bar for any potential acquisitions. 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 it over to Hoeshin, who will discuss our Q3 financial performance.

Thank you, Carmen. I will now discuss Karooooo's financial performance for quarter 3 FY 2026. Please note, my comments will refer to year-over-year comparisons unless we state otherwise. Our proven and profitable SaaS business model continued to deliver strong results in quarter 3. Karooooo's total subscription revenue increased 20% to ZAR 1,239 million operating profit increased 14% to ZAR 369 million and earnings per share increased 11% to ZAR 8.55. Earnings growth remained robust despite significant and planned upfront investment in sales and marketing to drive future revenue and earnings. In other words, these investments are fully expensed as incurred while the associated recurring revenue benefits are expected to realize over time.

We will now focus on cartrack's financial performance, which is fueled by SaaS revenue momentum. In quarter 3, CarTrack revenue increased 21% to ZAR 1,275 million, and cartrack subscription revenue increased 20% to ZAR 1,236 million. Subscription revenue comprised 97% of CarTrak's total revenue. Quarter 3 ARR growth accelerated to 22%, reaching ZAR 5,106 million. In U.S. dollar, ARR growth accelerated to 28%, reaching $298 million. 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 execution, resilient subscription revenue model and attractive historic retention rates.

In quarter 3, subscribers increased 16% to approximately $2.6 million. Subscription revenue increased by 20% to ZAR 1,236 million and operating profit increased 14% to ZAR 359 million. Cartrack experienced record customer acquisition in quarter 3 with net subscriber additions of 111,478 subscribers. The record net subscriber additions reflects our strategic investment in sales capacity and success selling video and car tract tech. Total subscriber growth increased 16% in quarter 3, underpinned by record subscriber net additions. Importantly, South Africa subscriber growth also increased 16%, underscoring the growth potential in the region.

Quarter 3 SaaS ARR accelerated to 22% compared to quarter 2 growth of 20% and quarter 3 FY 2025 growth of 14%. In U.S. dollar, Quarter 3 SaaS ARR increased 28%, reaching $298 million. This marked the fourth consecutive quarter of ARR growth acceleration. We believe the acceleration in ARR growth reflects the underlying momentum in the business and signal that our strategic initiatives are gaining momentum. Cartrack continued to grow its subscription revenue across geographies, highlighted by an acceleration in South Africa. South Africa subscription revenue growth accelerated to 21% compared to quarter 2 growth of 18% and quarter 3 FY 2025 growth of 14%. The accelerations indicates that our efforts to cement our leadership decision are driving measurable results.

Europe subscription revenue growth increased 24% and 19% on a constant currency basis. Asia and the Middle East subscription revenue growth increased 14% and 18% on a constant currency basis. Asia and the Middle East reported subscription revenue growth reflects an increase in subscriber from lower ARPU countries in the region, combined with the translation impact of a strengthening South African rand. Healthy growth across regions reflects our strong execution and provide a solid foundation for continued growth. Peru adjusted earnings per share increased 11% to ZAR 8.54. Cartracks earnings per share contribution increased 11% to ZAR 8.35. Karooooo Logistics earnings per share contribution increased 25% to ZAR 0.20. Adjusted earnings per share growth reflects significant planned investment in sales capacity and customer acquisition, evidenced by the 47% increase in sales and marketing expense by Karooooo in quarter 3.

Our upfront sales and marketing costs are not aligned with the lifetime value of customer recurring revenue and related earnings in our financial statements. Importantly, our powerful unit economics remain intact and our balance sheet remains strong as we invest in sales capacity. On a year-to-date basis, our adjusted free cash flow increased 37% to ZAR 597 million underscoring the strength of our operating model. Quarter 3 adjusted free cash flow increased 28% to ZAR 239 million. As we pursue accelerated growth we expect free cash flow to reflect our investment to drive growth, while quarterly fluctuations may occur due to working capital dynamics and growth-oriented investment, we remain confident in our ability to consistently generate meaningful free cash flow.

Karooooo's consistent free cash flow generation powers our disciplined capital allocation strategy and position us well for future growth. Our balance sheet reflects our track record of durable growth at scale, profitability and cash generation. our net cash on hand plus cash in bank fixed deposit was ZAR 531 million. Debtors collection days remain healthy at 31 days and are within our historical now. In August, we paid a total cash dividend of approximately $38.6 million to our shareholders, which equates to a dividend of $1.35 per share. We believe that our ability to generate healthy cash flow is sustainable given our energy business model, coupled with our track record of consistent execution.

We believe Karooooo remains strongly positioned for growth as we operate in an expanding and largely underpenetrated market, fueled by robust and sustained customer demand. This demand is driven by heightened focus on digitalization, lead to improved operational efficiencies and reduce costs and an increasing attention to safety in physical operations. Year-to-date in FY 2026, we have accelerated Tatra subscription revenue growth by expanding our distribution footprint in existing markets, driving broader platform adoptions and capitalizing on growing demand for video solutions, including AI videos. We are encouraged by our positive performance evidenced by CarTrack Quarter 3 subscription revenue growth of 20% and ARR growth of 22%. Kazak delivered a 29% operating profit margin, reflecting strong execution while investing in sales and marketing capacity to support future growth.

While we have delivered strong year-to-date results, the appreciation of the South African rand has created a currency translation headwind on our reported revenue, constraining the flow-through of our strong performance to our FY 2026 outlook. We do not hedge our foreign currency exposure. So fluctuation in exchange rates may create some variability in our reported results despite our underlying operating momentum. Given our momentum year-to-date, we are increasing our FY 2026 cartrack subscription revenue outlook to between ZAR 4,785 million and ZAR 4,900 million, implying growth between 18% and 21%. As compared to our previous outlook of 4,700 million, and ZAR 4,900 million, implying growth between 16% and 21%.

We are also revising our FY 2026 cartrack operating profit margin outlook to between 27% and 30%. And as compared with our previous outlook of 26% and 31%. Our FY 2026 Karooooo adjusted earnings per share outlook remained unchanged at 32.5 to 35.5. As we work towards closing the financial year, we are executing on 2 fronts: expanding our sales capacity to drive new customer acquisition, and strengthening our relationship with current customers through increased adoption of video and tartrate. While the business is accelerating, we remain people constrained and will continue to build the sales capability to meet these goals. At this stage, we believe the right strategy for the long-term health of the business is to lean into driving adoption of video and cartrack tech with our existing customer base to further cement our leadership decision in South Africa.

With that said, we are also confident that our investment in sales capacity this year will have positive impact on subscriber growth in FY 2027. In closing, Karooooo delivered an outstanding result this quarter highlighted by accelerating ARR growth, strong subscriber momentum with record net additions and continued robust profitability. We also made progress towards an important milestone and ended the quarter approaching USD 300 million in ARR. We achieved this result even as we make significant and plan upfront investment in sales and marketing to drive future recurring revenues and earnings. These achievements underscore our ability to scale efficiently while delivering meaningful value to our customers and shareholders.

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. As we continue to enhance our distribution footprint, we expect our ongoing investment in distribution capacity to create durable advantage that extend beyond the current financial year. with continued execution, disciplined investment and growing regional momentum, we believe that we are well positioned to deliver profitable and durable long-term growth.

Finally, we remain firmly committed to thoughtful capital allocation, strong unit economics and our vertically integrated and open operating culture. With that, I will turn the presentation over to Zak Calisto for Q&A.

Good evening or good morning to everybody. Thank you very much, Rishi. I'll start off by reading the questions. I've got -- the first question is from it's just simply labeled as investor. I'm not quite sure that is. How are we doing the 70% increase in head count in Asia.

Currently, at the end of Q3, we were at around 40%, but a lot of that hires coming in, in January and February. So do you believe we will end up with that 70% that we initially targeted for the year. And a lot of it really is happening this Q4 simply because a lot of -- in these countries, a lot of the people are willing only to change in January. So it's all going according to plan.

When will our investment in sales and marketing stabilize? I think to answer that, it's really about how efficient is our sales and marketing. And as we keep our strong unit economics, and our sales and marketing strategy is working, and we're stable, we will continue to increase that given the -- as a large addressable market. So hopefully, I've answered you in a different way.

Who own study is the 35% owner of New Zealand? When I initially started the business in 2004, our first employee was actually under bid. -- and Joan de bet owns 30% of the business in New Zealand and immigrated from South Africa to New Zealand approximately 9 years ago. I might be wrong with the number of years, but approximately.

We now go over to Joshua Reilly from Nidar. 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 canned cycle, would you say we are in South Africa? Joshua, I would say that we're in the early stages and we are hoping that in the next financial year will get even stronger momentum.

And then the next question, 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. We've increased our sales and marketing substantially this year. as we had set out in the beginning of the year? And are we getting huge productivity? Our unit economics remain very strong. And we believe that we're really performing in the key markets. In some markets, we outperform in budgets. Others we are a bit lagging, but overall, it's going good into plan.

Then the next question from Telenet William Blair. -- drivers of acceleration, how do you think about the uplift from pure capacity versus scale in productivity from recent high reps. Now this supports your view durable 20% growth prospects. -- given momentum in both subscriber and cross-selling. Delen in the outlook that we gave in the beginning of the year, we expect it to house and we basically have the outlook that our subscription revenue would be around these ranges. We're actually on the upping of the range we gave. And our peso believe that we've got good momentum and it will continue with the momentum.

And our hiring recruitment retention of key staff, I think we're doing pretty well this year. And I believe in get better at it.

Next question from Scott Ross. Can you address adoption trends for AI camera penetration rates per region competitive landscape impact of 7% ARPU increase in the current quarter? We've really focused a lot of this in our South African operation. We moved into new offices approximately 18 months ago. We've got the space to hire to build out the infrastructure. we're busy building out the infrastructure in most other countries to be able to build out the call centers required to be -- to really execute on this. And the adoption of Cannes is strong at this point in time. But we certainly believe it's early days in adoption and will only get stronger over time.

The competitive landscape, we feel very comfortable to compete with our peers, and I believe we'll continue to get stronger in this space.

A question from Cornils Maari. Is there any way to roll out to logistics to Europe or Southeast Asia? Or are those market saturated? I think it's very early days when we're talking long term of the e-commerce space and what our large enterprises customers require -- and I don't believe the market is saturated. I believe the market is only going to grow bigger. And we are developing our technology in order to be able to go into Europe and Southeast Asia. -- and to compete efficiently.

It must be said that we don't necessarily need to roll out the driver network in every geography. We've done that in South Africa, but it's more for us to learn. What our platform allows us to do is we can integrate with various and multiple e-commerce service providers that have rolled out fleets. And all we do is we become the aggregator to be able to -- our customers to be able to use any of the service providers that can service them. So the model when we go outside of Africa, it might be slightly different. And as we develop the South African market, we also might change our current model despite it's working very well, but we are learning every day. And the market is changing every day.

A question from Alex Cole from Raymond Changes. What drove the strong pickup in South Africa subscriber growth versus plan? I think the subscriber growth is going in accordance with plan. and the cross-selling is going in accordance with planned. And I think it's really just about increasing our footprint and our ability to execute. Where do you stand on sales in versus your specific geo plant Southeast Asia and Europe? I think we are on track with all the mining across all regions. 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? We certainly -- our ambition is certainly to pick that 20%, 21% and to compound on that -- but it's like everything. We -- it's all about the execution, but we feel positive that we're going to have a very strong FY '27 in the region.

A question from the [indiscernible]. It seems there are -- 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 that does not impact our business. We get -- our customer acquisition is based on customers that have got vehicles. Now the only time when a new vehicle comes into play, it might be when our customers, they basically trade in or sell their vehicles and buy new vehicles. So the impact of new vehicle sales has got an impact on our business, but it's an insignificant impact at this point in time.

Is the used vehicle market in states still under pressure given the affordable new vehicles entering the market? We don't really specialize in that. So and that's whether the market is under pressure or not. We don't really look at that. We will more -- we are focused on the services we provide. And does a stronger new vehicle market have a more positive impact on the subscriptions? Not necessarily.

Another question from Scott from Roth. Can you provide an update on asset tracking sales connections in South Africa, the ongoing rollout employment and plans for additional markets. At the moment, we don't plan any additional markets. The rollout is going put into plan, but we are looking at expanding into Europe cautiously. So we are adding our annual discussions now in February where we're going to approve the rollout plan or not approve the rollout plan. But fundamentally, there's a huge opportunity to go outside our key markets in Europe that we're currently in. But at the same time, there's also a huge opportunity to grow within the markets and to cement our leadership in the markets we are already operating.

Another question from Belle from Regal. How are you thinking about growth versus margin trade-off? I think in the bottom line in the way we look at it, there's actually the IFRS, will you see a bit of a compression in operating profit margins because of the increase in sales and marketing -- but I think that's really a temporary thing and the minute you stop allocating money to the site marketing, then you just get this huge margin expansion. And the reality is all these upfront costs of getting customers, these customers stay with us for a very long time. So there's a huge alignment of these expenses against future revenue.

So we're more focused on the long term of the business as opposed to 1 quarter or 1 financial year we're looking at it rather from perspective of what value all we bringing to our shareholders over the 5 years. So we look at it a little bit different. Impressive ability to accelerate growth to extend or with a minimal margin impact that has got to do a lot with the way we run the business and economies of scale. How does this validate both completion and overall opportunity, opportunity for healthy leverage as the impact from upfront investments continue to discount. I think I've probably answered that latter part of your question.

Another question from Dannecker. Here is the double down on strategy clearly working. Any areas you feel confident you could step up investment further. I think fundamentally, it's -- our unit economics continues to be very, very strong. So we -- while we -- I mean right now busy approving our budget for the FY '27. We probably are going to push to continue with the current trend we've got and to continue investing in our footprint in the markets we're in and to continue to grow and accelerate the top line. But we've got to conclude our budgets, and we just got to get more the approval before that happens.

And a question from [indiscernible]. How does the Volkswagen AM integration tangibly accelerate your European growth compared to your traditional sales-led expansion? It's -- it's in a simple way, it allows us to get vehicles onto the platform rather quickly. The real challenge we have is that the OEM telemetry devices on most occasions, do not talk to what our customers do. So you get a lot of data, but it doesn't help our customers because the data that they require and the data points that are needed to be collected you typically cannot get it off the OEM devices. So we're getting -- closing close to the OEMs in making sure this relationship works and only the practicalities of using these devices. And I believe over time, this will be sorted out. But the good thing is we've integrated with most of the providers in Europe and in Gestao that's all been integrated. So we've got a great platform. We're in the game but there's a lot of operational issues and data points that we are unable to collect through the OEM to limited devices.

More questions. question coming from Colin Smith from or Africa Partners. In November, you announced a partnership with Volkswagen is our case. I think we've answered that question. Colin the -- there are another question from Colin Smith from all African partners. Does the materially strong South African rand over the last year at any positive or negative impact on the underlying operations? The positive impact is probably in the production of our [indiscernible] equipment. But fundamentally, that becomes a very small part of the business. The biggest -- the positive impact is if you report in dollars, then obviously, that's a very strong impact. or however report, then it's a negative impact in terms of subscription. So our operations outside South Africa or a negative -- they are negatively impacted towards our revenue.

So our revenue in rands as we reported in U.S. dollars would have been up because we report in rands, the lower they've been negatively impacted.

Next question also from Colin Smith. -- in existing subscriber chooses to add video Cortec does the sanitary 6-month contract reset? The answer to that is complex, but I think the best way to look at that is that the 36-month contract we signed is nearly not material to us. What's more material to us is how long will that customer stay with us as opposed to the 36-month contract. And what we find with customers they don't really -- we know the contract we sign it, but it sort of goes into the bottom draw. It's more -- can we keep the customer and can we keep the vehicle on the platform while the customer still owns it. And that's what we measure.

And we're more reliant on customer service and customer retention than actually trying to enforce a 36-month contract. And that's been our policy since they 1 of starting the business. We take a much more pragmatic way of looking at the business as opposed to trying to get our customers to stick to their agreement when we know the gain the customer is going to stay with us for very long.

Next question from Colin. Is the current share price at level that management may consider share buyback? -- on the reality of doing a share buyback in the marketplace as a listed entity, it's very complex. And I think at this point in time, we are just not trying to second-guess the market. We will just continue being focused on growth of the business and the quality of the asset. We're not -- we'll try to do that about 2 years ago, and it's really, really difficult all the SEC rules around that. meta very complex to do that. And if we do that, we might as well just delist.

I have another question from [indiscernible]. 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? We've always said over time, Southeast Asia market will matter the ARPU of South Africa. And that is as countries like Philippines and Indonesia, and Thailand start to become a bigger portion of the business, these are typically lower ARPU countries compared to New Zealand or the UAE or Singapore. So that over time, we believe that the Southeast Asia [indiscernible] warmer South Africa. So we do believe ARPUs will decrease as the business gets bigger, but that we knew from outset. And we've consistently told the market that.

A question from Matthew at conference. What portion of sales are coming from existing customers, new cater customers -- can you describe examples of use cases for seeing for TAG. And I'm not going to go through the presentation now that our users to take is it's basically really, it allows us to track -- to track equipment or vehicles outside the GSM network. And for that, there's lots of use cases. There's no shortage of these cases where that requirement is needed. And what proportion of sales are coming from existing customers. The -- this well to look at that is that your net adds, which we present that's typically new customers. And when you sell into existing customers, typically, what happens is when you do a fleet very pure fleet owners if they got 70 vehicles down into 10 vehicles or if they got 12 vehicles in 3 case typically fleet owners to the full fleet.

So typically, when you are selling in the future to these fleet owners, it's really because they've sold vehicles and they've got new vehicles. And that would be basically not showing on net additions. So your net additions is typically most of that business is new customers. And then your churn business, a lot of that is really customers selling vehicles and buying new vehicles. I hope that explains and answers your question.

Are there any regulatory or other technical issues with rolling out tag to other markets beyond South Africa, Southeast Asia and Europe? I'm not come with all the markets, but all the markets we're basically rolling out, no. But once again, I say that I'm not familiar with all the markets and all the regulation and typically, every country has got its own regulation.

Let me just see if there's any more questions. Williams. How much you expect in the improved South African macro conditions to accelerate fundamental performance going forward. [indiscernible] is done well in South Africa in really tough times and in good terms. And I think us staying well now is really on our ability to scale, our ability to add more people or new building the infrastructure we're developing. And I think the fact that the economic environment is looking good, gives us a tower wind. But I think mono is not because of the economic situation right now, I think it's really just because of our ability to execute in the way we've been building teams.

Matthew from conference. Looking at the South Africa subscribers over the next 5 years, what proportion do you think could be could be interested in Catacora analytics. Matt, to be honest with you, I cannot answer that because whatever I say I might be wrong. So I prefer not to answer that.

Next question from Max Sure. Is the subscriber growth in South Africa diluting ARPU growth -- on a group level, it remains rather 4% compared to the target of 6%. The target of 6% would be at February 2026 as a to be at year-end. And I think we might be lagging slowly -- slightly what we expected, but we're largely on track.

A question from [indiscernible] . 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, there would be actually no difference in our strategy. we are focused on building a business. We're not building a business so that we can pipe on it, and we can sell it. We build in the business One, in terms of my succession planning. Mark family is a majority shareholder. We intend to stay that way. And we fundamentally are looking long term and at the business on a long-term perspective. So we're running the business as with its private or whether it's a public company, our Modelo branding remains the same.

A question from Prashant [indiscernible]. Can you share a little more color on your bullishness for subcagon ARPU growth in South Africa? What are the distributions tavern growth? -- on net check such an online news record retailers, payers. Okay, the question -- answer to that present, we're not seeing anything different to what we've been doing over the last year and that is continuously improvements, whether it's our technology, whether it's our software platform, whether it's the training of the people, -- so frankly, there's no changes. It's just doing the same thing but consistently improving with what we've done in the past. And we've got a 20-year track record of continuously improving on the past June.

Another question from GB. You say you've got another question, but I don't see it. So I'm not quite sure [indiscernible]. Okay. Typically, what is the cost of your subscription as a percentage of the annual revenue for your customer? Typically, what is the cost of your subscription as a percentage of annual revenue for your customers? GB, I don't really understand the question. I apologize for that.

And with that, I answered all the questions. I want to thank everybody for attending, and I look forward to speaking to everyone in 3 months time again.

Thank you. Bye-bye.

All right. Welcome, everyone. We're approaching the end of day 3. I hope you've been enjoying the conference. I'm Claire Gerdes. I'm one of the analysts on our software team. And with me today from Karooooo are Richard Schubert, the COO; and Paul Bieber, the Vice President of Investor Relations and Strategic Finance. So thank you both for being here.

Thanks for having us.

Thank you.

Of course. Well, maybe to start, for those in the audience who are a little less familiar with Karooooo, maybe you can give just a brief introduction on the company.

Okay. Thank you, Claire. Thanks for hosting us. So we operate Cartrack, which is a software SaaS platform, really focusing on the telematics, fleet management, AI, vision and various logistics industries. At this point in time, we have 2.5 million subscribers across 24 countries. Within the last quarter, we had a very good healthy 20% subscription revenue growth, revenue of a 29% operating profit. We're a founder-led company with a strong track record of execution, specifically with very disciplined capital allocation as well as good free cash flow generation.

Great. And since many investors might be familiar with Samsara in the U.S., maybe you can give us just kind of some of the similarities and differences between you and them because you do similar things in South Africa, Europe and Southeast Asia. So you're going to go ahead and maybe share some cruise competitors as well.

Okay. So Samsara is very close, and we operate in a very simple market. However, Samsara's business is really North American focused, which is a very high ARPU region. We don't see Samsara directly in any of the areas we compete in. But we're offering similar solutions. The solutions are enhancing safety, improving efficiency and saving our customers' costs.

If we look at the geographic areas we operate, South Africa is still our largest area with approximately 70% of our revenue generated in there. The competitors there are companies like Geotab, Powerfleet and local companies like Netstar and Ctrack. So it's sophisticated competitors within this region. We came to the market approximately 10 years after all our competitors. But at this point, we've got a 40% market share within South Africa.

One of our other benefits is we've fully vertically integrated. We have a lot of our competitors outsource various parts of their businesses in those specifically industries. We also have a strong founder-led culture. If we look at other regions, for example, Asia. Asia is our fastest-growing segment. However, we compete a little bit differently in Asia. Most of our competition is smaller companies that have less feature-rich platforms. However, we provide one of the only regional providers there, providing a much more sophisticated next-generation platform.

Then if we have a look at Europe. Europe, we've got our entities operating in Portugal, Poland and Spain. And there, we also compete against geotab and power fleet and a couple of smaller local telematics companies that were typically bought by the tire industries.

Great. Well, you mentioned the majority of your revenue, over 70%, is in South Africa. And 1.85 million subscribers are there as well. So one of the key questions is just kind of what runway remains for growth there, especially in the recent quarter that did decelerate a little bit, right, by 150 basis points-or-so. So yes, I guess, how would you respond to that? And what the maturity is there?

So we still see South Africa has significant runway. At this point in time, we've got 1.9 million subscribers out of a vehicle car pool of approximately 13 million, okay? So there's still plenty of runway. But in recent times, Cartrack has launched 1 of our new products called the Cartrack Tag. The Cartrack Tag is an asset monitoring system that we install on generators and trailers and any other fixed equipment. And that has really helped us grow within that market.

So one important thing is, historically, we've provided guidance on both subscriber growth and revenue growth. However, in recent times, we've only provided guidance on the revenue. This is because we spent time cementing our leadership position within South Africa. And we've really taken these new products, firstly, the Tag and the AI video, and we're selling it into the current customer base. So you will see there's a good -- there's been a good upsell opportunity to really look after our current customers and make sure that we've got that long customer adoption of our products.

So if we look at the sales team and especially within the last quarter, we're very happy with the performance of the sales team. They have been delivering, but we also continue to expand the sales team because there's still lots of benefits within the region. So we do expect within quarter 3 that our subscription -- our subscriber numbers will lag the revenue slightly, but we believe firmly that within the next financial year, '27, that we'll really reap the benefits. So I think the most important thing for me is that we have had a very good quarter 2, we had a very healthy growth of 15% within our subscriber numbers and 18% on the revenue. So we're going to continue to accelerate and really focus on South Africa and make sure we continue to be #1 in the region.

Great. And yes, maybe we can turn to some of the other regions. Those are more -- a couple of hundred thousand subscribers there, a bit newer, but you've been spending a lot of time investing in sales resources, so could you share an update on the progress you're making in those 2 regions and particularly regarding the pace of customer adoption?

So we communicated to the market that we're going to increase our sales headcount by about 70% within Asia. We've had very good progress on that. We were at approximately 38% at the end of quarter 2. So our target of the 70% means that if we can achieve the 70% increase in sales revenue, we're expecting our subscription revenue to increase into the mid to high 20s, that's really the focus on the additional sales.

One of the important challenges that we must take into consideration specifically in Asia is it's a mixed ARPU region. We've got certain countries that are generating relatively high ARPUs in certain countries, especially the larger, faster growing ones that are generating a smaller ARPU. So over time, we expect that ARPU to decrease within the region and become more in line with what we see in South Africa because South Africa is also a much more scaled entity. And within the other regions, for example, Europe, we're continuing to build that sales muscle to increase that sales adoption throughout the region.

Yes. And maybe just if you can provide just additional like range of subscriber growth for those. I know you don't officially guide to them, but for Southeast Asia and Europe, would you be able to bracket any of that?

I think as you think about the growth in the region, if we grow our head count by 70%, that 70% as of February versus February of last year, that should drive an acceleration of subscription revenue growth into kind of the high -- mid- to high 20s, I think, on a constant currency basis, it's around mid-20s last quarter. So we're very optimistic that the investments in headcount will drive an accelerating growth in the region.

Great. And as we come to the close of the calendar year, how do you characterize the demand environment, probably differs between each region, right? But any headwinds or tailwinds that you might see?

I'll take that one. I mean, we don't have anything really new to share in terms of the demand environment. What I will say is we're not seeing any macro headwinds in the business. And as you know, we guided to 16% to 21% subscription revenue growth for FY '26, and we actually printed 20% in Q2. So we're on track to deliver against the guidance, we're on track to deliver against acceleration. And I think it's important just to note that, that 20% growth rate, it's a material acceleration year-over-year. For context, the FY '25 subscription revenue growth was 15%, so through Q2, our growth rate has accelerated by 500 basis points year-over-year.

Yes. Great. I want to go back to something you mentioned earlier, which is just the newer offerings with Tag and the Video solutions. Well, maybe if you want to just provide some context on what Tag is, but you've had an increased focus on cross-selling opportunities, right? So can you just elaborate on the significance of the cross-sell initiatives? And what kind of uplift that might add to the average Cartrack deal?

Sure. So what I would say is we've been very focused on growing our sales teams to drive both subscriber growth and sell Tag and Video to our existing customers. But right now, we're people constrained, and we're still building the necessary muscle to drive both accelerating subscriber growth and to sell Tag and Video to our existing customers in South Africa. Over -- and kind of the near term and the last 2 quarters-or-so, we've been really focused on leaning into selling Tag and Video to our existing customers in South Africa, where we think it's very important in terms of just the long-term health of the business to cement our leadership position in South Africa by selling these products, especially given the demand tailwinds in the market with Video.

So you may have asked about uplift, did you...

Yes.

So in terms of the uplift, for Video, it's about a 2x to 4x uplift at a similar operating profit margin to the core business. Again, I think it's important to note that similar margins of the core business is a misconception that Video and Tag are dilutive to operating profit margin, and that's not the case.

For Cartrack-Tag, it really depends if we're selling it to an existing customer, or if we're selling stand-alone. So that one depends. But it might be helpful. Do you want to just talk about what Cartrack-Tag actually is because...

So the Cartrack-Tag is an asset-tracking device. So in a typical application, for example, a customer might have a vehicle but a construction customer would have generators, they would have trailers, they would have other equipment. And managing and looking after this equipment has been a challenge over time. Firstly, it's about is it being used? And secondly, it's about where it is. So these devices are attached to the generator or the various equipment and it allows a customer to really understand where their nonvehicle assets that they're using on a construction site or a building site are and how they're being used.

Yes, perfect. And you mentioned you're selling right now into the existing customer base. So what portion of that base would you see as like the addressable market?

I mean we just started really focusing on Tag and Video early this year. We've had a video product in the market for many years, but the cost of hardware and data have come down, so it's become a lot more addressable to a larger part of the customer base. So it's been a strategic focus for the last 2 or 3 quarters. The penetration rates are low single digits right now. I think it's too early for us to tell where that may land. But obviously, we're very excited about the potential for us to drive those penetration rates higher from low single digits. There's lots of runway for us to grow by selling those products to our existing customers.

Great. Maybe switching to ARPU and ARR growth. So ARR growth accelerated last quarter, your 2Q, due to the improvement in ARPU. You have shifted some resources, as you mentioned, from the new logo sales to cross-sell opportunities. So maybe do you want to just start by sharing why this trade-off makes sense for the business in the medium term?

Yes. I'll take that question. First, let me just level set for everyone in the room in terms of some of the numbers. So subscriber -- subscription revenue growth increased 20% in Q2. ARR increased 20% in Q2. Subscriber growth was 15% and ARPU growth was about 4%. So 15% subscriber growth, that still has a -- is a big impact on the overall growth trajectory of the company. So I just want to give that context with people. But as I mentioned, we're kind of in the early stages of selling Tag and Video to our existing customers in South Africa. We think that's very important for the long-term health of the business. Why is that? Well, if we don't do it, it could leave us competitively exposed as other potential competitors may start selling those products. So we think it's essential that we continuously deliver innovation to our customers. We have to continuously solve for the operational problems and right now, we see a big opportunity with Tag and Video. And as I mentioned, there are just a lot of demand tailwinds in the market with video.

Yes. And are there any like data points or ways that you could help us just quantify the magnitude of the opportunity and how it could be impactful to growth over time?

It's a good question. I mean it's too early for us to tell. We're low single-digit penetration rate currently and that will go over -- that will increase over time, obviously. Whether we'll land at 10% or 20%, we've only been doing it for a few quarters, so it's really too early for us to tell. But obviously, it's having a positive impact on the business given the uplift in ARPU.

Yes. Well, sticking with ARPU. The guidance that you've given, is that -- it's up 4% now, as you mentioned, but it could end the year exiting around 6% or 7% in South Africa, specifically up to 10% year-over-year. So this seems doable, but what is it going to take to get there?

Yes. Just to level set with everyone, we put out a goal of 10% ARPU growth exiting the year in South Africa that would translate to 6% on a consolidated basis for the company. In Q1, we were probably running behind. We were about 2%-or-so. In Q2, we made a lot of progress. We landed around 4% ARPU growth. And at 4%, we're really on track to deliver on that 6%. So what needs to happen? We need to continue to hire people, train them, really just focus on building teams and sales execution. So I think it's really about sales execution, but we feel good that we're kind of on target to hit that goal that we put forth early in the year.

Yes. You've been making those sales investments like you said. And there was a slight deterioration in margin last quarter that may be garnered some scrutiny. So maybe we can unpack that a little. So as mentioned, there's the investment in sales capacity, but also a shift to the lower margin hardware business with Tag and Video. But maybe you can just provide a bit more color on the impact that those had?

Yes. I'll take that one. And again, I'm going to level set some numbers. We reported 20% subscription revenue growth in Q2. That was a 500 basis points year-over-year acceleration for Cartrack. Cartrack operating profit margin was around 29%. The margin deteriorated by 50 basis points year-over-year. So essentially, we're trading off 500 basis points of acceleration for a pretty modest impact on the Cartrack margin, and we think most companies would take that trade-off.

But to your question, as you kind of look at the P&L, there are a few things in the consolidated P&L. Sales and marketing increased by, I think it was 34% in Q2. That really reflects our investments in sales capacity, customer acquisitions. So obviously, on a consolidated basis, that shows that we're investing in our sales capacity and reflect some of the acceleration in terms of customer acquisition.

Also on the gross margin line, gross margins were down on a consolidated basis year-over-year. I think that reflects some incremental depreciation costs, sales commission costs. You also get the impact of the growth of crew logistics, which we haven't really touched on, but it's another business segment, a business that we operate that drives a lower gross margin profile. So there are a few different moving parts in the P&L, but essentially, we were very happy with the acceleration in the 29% margin.

And to your question about the margin on Video and Cartrack-Tag, it's actually a similar margin to the conventional business. It's not lower margin. So we kind of approach pricing for that in a similar way to our conventional business. We look at the hardware cost, the installation cost, the data cost and then the service delivery costs over the lifetime of the customer, which is about 60 months. And then we actually try to drive a 40% operating profit margin from that customer, but you don't see that in our -- right now IFRS financial statements because of the misalignment with some of the expenses in the period versus the kind of lifetime value of the revenue. So they're not lower margin. And just another point, if we actually stop growing tomorrow, our gross margin -- operating profit margins will go from about 30% to close to 40% as some of those investments are not reflected in the P&L.

Yes. No, it's helpful context. So just to kind of round it out. So if Tag and Video becomes a bigger portion of the revenue, that shouldn't really have a large impact on margins.

It shouldn't have a large impact on the margins, but it all kind of depends if we're still accelerating growth. Because if we're accelerating growth, there is some trade-off, you can kind of see the range of outcomes we guided to 16% to 21% subscription revenue growth for the year, and then we guided to 26% to 31% operating profit margin. The first couple of quarters were kind of at the high end of the range. But theoretically, if we continue to accelerate, there is a modest impact to operating profit margin. Once you kind of normalize at the new growth rate, the margin should kind of return to historical 30-ish percentage range.

Yes. Makes sense. Maybe going back to your hiring efforts, you gave the update earlier of where you are now. But what geos are you specifically still leaning into? And when do you expect productivity to really begin to ramp?

So I mean we're hiring in all geographies. All the geographies that we operate in, we believe that all of them have great potential. And our focus is to increase staff in all regions, especially the sales headcount. If you have a look at South Africa, there's really aggressive push within South Africa to increase the headcount there. As we've already discussed, the potential upsell versus greenfields opportunity in South Africa is great. And we're really short of staff there. That's our challenge there, sales staff specifically. And by increasing them, we'll also be able to carry on with our greenfield subscriber growth and include the upsell opportunities. Within Asia, as we've mentioned, we had a target of about 70% to increase throughout the year from February to February. And on quarter 2, we're at 38%, so we see that as very positive. And as Asia is our greatest trading -- it's in our fastest-growing area, we can see the benefit that it's really having there. And then lastly, in Europe, we still continue to build the sales muscle in that area. It's also a very profitable area. And as we grow, all of the areas should see that expansion over time.

I'll just add that we've obviously been investing in sales capacity, and we feel good that the investments in sales capacity will have a positive impact on overall subscriber growth.

Yes. Is there a like timeline to where OpEx might stabilize? I know you've got the February to February goal, but just as we think about that.

I mean, we have guidance out there, and you can see the range of outcomes depending on the acceleration. And I would say it just really depends going forward the extent to which we kind of grow at the current rate or if we continue to accelerate.

Maybe just one quick one on...

And on that point, really, there is a misalignment in terms of in-period expenses or customer acquisition and the benefit we get over the lifetime of the revenue stream from the customers. So the faster you grow, there is an impact on margins over the short term. But as I said, as you normalize at a new normal growth rate, we should see leverage over time.

Yes, it's a good clarification. Maybe just a quick one on cash flow. You don't disclose the full financials on the quarterly basis, but 2Q was a bit lighter than 1Q, though it was still up year-over-year. So just anything you would want to note there?

Yes. I'll say 2 points. One is we've heard the investor feedback and the analyst feedback, and we're looking to publishing quarterly cash flows with our financial results in FY '27. So we've heard the feedback. I would say the -- on free cash flow, there's working capital fluctuations that impact free cash flow. I think the best way to look at it is on a year-to-date basis. On a year-to-date basis, free cash flow, I think it was up 44%, 45% on a year-to-date basis. And we actually feel very good about the -- our ability to generate very strong free cash flows while investing in the business and accelerating the overall growth rate. So yes, I think the best way to look at it is on a year-to-date basis.

Got it. I appreciate the feedback too on potentially in the future. But this seems a bit broader and maybe a little bit further out, but how should we think about the potential impact to Karooooo's business with autonomous vehicles? Do you view that more as disruptive and a risk or a potential opportunity?

So I mean, we don't really see autonomous vehicles as disruptive. We believe it will have -- give us tailwinds at that point in time. So with autonomous vehicles, you still need monitoring tools. You still need to integrate to different partners to use these -- this equipment correctly at the end of the day. So we're going to focus on innovating, providing features and solving our customers' needs. However, our platform, we see our platform changing continuously. And in the next 5 to 10 years as the autonomous vehicle fleets and solutions become more available, we'll provide those solutions and integrate them with our platform and give our customers the benefit of these kinds of technology.

Okay. Great. Going back to the last quarter, you reported solid results, accelerating growth. The stock has faced some volatility since then, which could, in part be due to some investor scrutiny over the slower subscriber growth. So obviously, the higher revenue growth as we talked about. So just are there any areas you want to provide further clarity on or areas you think that investors are missing?

Yes. I'll highlight 2 points. One, the subscriber growth to decelerate, I think it's like 150 basis points quarter-over-quarter. And I think some investors read into that, that as a reflection of the macro environment or intensifying competitive landscape. And we don't see that. We're not seeing macro headwinds. We're not seeing a more intense competitive landscape in South Africa. That modest acceleration is purely a reflection of our allocating resources to sell Tag and Video to our existing customers in South Africa. So I think that's important. And as I mentioned, we're obviously hiring a lot of people. So we're optimistic that our investments in sales capacity will have a positive impact in the number going forward.

And then the second thing I'd just like to highlight is a couple of times, you've mentioned that the hardware -- the Tag and Video is margin dilutive. And I just want to reiterate that it is not margin dilutive, it's actually a similar operating margin to our existing platform or offering.

Yes. No, helpful clarification. Maybe just going back to cross-sell. There's Tag and there's Video solutions. But are there any other cross-sell opportunities that Karooooo is considering?

I don't think we have anything really new to share there. I think it's important to just note that our strategy is a little bit different than most SaaS companies in the U.S. We don't lead with landing and expanding. We -- when it comes to new features on the platform, we actually have different pricing tiers and then we give those features to our customers so they derive more value for the product at the same subscription cost that helps drive -- we're solving their operational problems. It helps drive retention. We have very strong retention. So we think that's the right thing to do for our business right now.

The Tag and Video are a little bit of exceptions because they're new hardware devices, and you actually have to install them. So they have to be a sales process associated with it. So I think for now -- and there's no real change to our strategy in terms of giving new features to customers and then when it comes to hardware because it does require installation, we are working to sell that to our existing customers.

Yes. Makes sense. Well, maybe in our last minute-or-so, we could end with a fun one. Karooooo is spelled with five Os, is there a reason for the #5?

So Zak, our Founder and CEO, has a love for the -- an area in South Africa called the Karooooo, it's a desert area that's quite famous. When Cartrack moved from the Johannesburg Stock Exchange and we listed on NASDAQ, we had to have a name change due to various regulatory requirements. And he really got set on the Karooooo name. However, at that point in time, we needed to purchase the domain, the [ Karooooo2.0.com ] domain and the person who owned at that time wanted ridiculous amounts of hundreds of thousands of dollars for us to buy it. And after some haggling, it became a -- let's be something a little bit disruptive. Let's be different. Let's find something that's new and unique and it became Karooooo with 5 Os. But it didn't just become 5 Os. You can now go to Karooooo with 5 Os, 4 Os, 6 Os, 7 Os, 8 Os, 9 Os, 10 Os, just to make sure that no one ever has to count as long as you get a rough number, you're going to go to the right place. And that's where the Karooooo name originated.

And I think it's interesting because it kind of speaks to the culture. I mean, Zak bootstrapped the company because there's always this focus on profitable growth and disciplined expense management that kind of just that speaks to that.

Well, great. I appreciate it. Well, thank you both for being here. Thanks for sharing.

Thank you very much.

Thanks, Claire.

Hello, and welcome to Karooooo's Q2 FY 2026 Earnings Call. On behalf of Karooooo, 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 Zak Calisto, Founder and Group CEO; Hoeshin Goy, Chief Financial Officer; and Carmen Calisto, Chief Strategy and Marketing Officer.

I would like to remind everyone that some of the statements that we make 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 harbor statement in our Form 20-F, including the Risk Factors in the 6-K 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. Reconciliation of non-IFRS to IFRS measures is included in the 6-K 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 call over to Carmen.

Thanks, Paul. Welcome to Karooooo's Q2 FY '26 Financial Results Presentation. For those new to Karooooo, 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 underpenetrated 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 a cultural focus on disciplined capital allocation and operational efficiency.

Our platform supports approximately 2.5 million subscribers across more than 125,000 businesses in South Africa, Southeast Asia and Europe, spanning a diverse set of industries. Importantly, our financial model is anchored by accelerating growth, high-margin subscription revenue, exceptional commercial ARR retention and powerful unit economics.

Our Q2 FY '26 annual recurring revenue, or ARR, increased 20% to ZAR 4,806 million and on a U.S. dollar basis, increased 21% to USD 272 million. Our commercial customer retention rate remains at 95% and subscription revenue accounted for 98% of Cartrack revenue.

We continue to scale our proprietary data assets, now generating more than 275 billion valuable data points monthly, which we leverage to deliver impactful insights and value to our customers. Finally, our LTV to CAC remains above 9x, enabled by strong retention, disciplined capital allocation and efficient distribution, which are embedded in our vertically integrated business model and company culture.

During today's presentation, we will review both of Karooooo's operating segments, Cartrack and Karooooo Logistics. Cartrack is our SaaS operations management platform. Cartrack operates at scale and has a very attractive financial profile. Cartrack's operating momentum is the primary driver of Karooooo's growth and strong financial performance.

In Q2, Cartrack delivered strong results, highlighted by accelerating subscription revenue growth in South Africa and Europe and robust growth in Southeast Asia. These results reflect the early returns from the strategic investments we've made in expanding our sales capacity in recent quarters.

In Q2, Cartrack generated approximately ZAR 1.2 billion in subscription revenue, an increase of 20% or 21% on a U.S. dollar basis. Notably, Cartrack subscription revenue accelerated again this quarter. Year-to-date, Cartrack subscription revenue has increased 19% compared to 15% in FY '25. Cartrack's operating profit margin was a healthy 29% in Q2.

Karooooo Logistics is our rapidly growing delivery as a service offering that empowers large enterprise customers to scale their e-commerce and logistics operations. Karooooo Logistics continues to demonstrate strong growth and operating momentum, while delivering real value for our enterprise customers. We report Karooooo Logistics separately as the delivery as a service financial profile differs from Cartrack SaaS financial profile.

Karooooo 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 Cartrack customer retention. We continue to profitably scale the Karooooo Logistics business. In Q2, Karooooo Logistics Delivery as a Service revenue reached ZAR 139 million an increase of 38% or 39% on a U.S. dollar basis.

Karooooo Logistics revenue growth accelerated in Q2 due to an increase in e-commerce orders. Given Karooooo Logistics' robust revenue growth, we are very excited about the long-term growth opportunity. In Q2, Karooooo delivered strong consolidated financial results. Total revenue of ZAR 1,344 million increased 21%, subscription revenue of ZAR 1,182 million increased 20%. Operating profit of ZAR 356 million increased 18% and total subscribers of approximately 2.5 million increased 15%.

Cartrack subscription revenue growth of 20% and operating profit margin of 29% underpinned our stellar financial performance in Q2. Q2 continued our track record of delivering profitable growth at scale. In Q2, we were a rule of 60 company, when adding our Cartrack subscription revenue growth of 20% and our Cartrack adjusted EBITDA margin of 46%.

Before detailing our Q2 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 amongst 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 150 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. In addition, with an essentially unchanged share count over the last few years and no stock-based compensation growth in free cash flow translates to higher per share value given the lack of dilution. This is another important factor that distinguishes Karooooo's financial profile from many peers.

Moving on to our Q2 financial and operational highlights. In Q2, SaaS ARR accelerated to 20% compared to Q1 FY '26 growth of 18%. Cartrack subscription revenue growth accelerated to 20% compared to Q1 FY '26 growth of 19%, highlighted by 18% growth in South Africa and 27% growth in Europe.

Cartrack's total subscribers increased 15%, driven by continued healthy growth in South Africa, Europe and Asia. We also delivered net additions of 71,000 in Q2. Cartrack's operating profit margin was a healthy 29% and benefited from disciplined expense management. We remained a rule of 60 company and our balance sheet remains strong and unleveraged.

We ended the quarter with net cash and cash equivalents of ZAR 393 million. Our healthy subscription gross margin, efficient customer acquisition and attractive commercial customer ARR retention rate continue to drive our healthy unit economics. In Q2, our subscription growth margin was 72%, our LTV to CAC ratio remained above 9x 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 from 15% in Q2 last year to 20% this quarter, while maintaining strong unit economics. We remain committed to profitable growth as we pursue the expansive growth opportunity ahead of us.

We ended Q2 with approximately 1.9 million subscribers in South Africa, an increase of 15%. South Africa subscription revenue comprised 71% of our total subscription revenue and South Africa subscription revenue growth accelerated to 18%. We are encouraged by the strong teams that we are building to accelerate organic growth broaden our customer base and increase product adoption in the region.

We are starting to see an acceleration in subscription revenue growth, driven by the strong adoption of video and Cartrack tag by our existing customers and customer expansion. We remain committed to building our distribution capabilities to service the demand for our products from both new and existing customers.

We continue to see a compelling market opportunity in South Africa and are excited about the value we will deliver to our customers. We ended Q2 with approximately 303,000 subscribers in Southeast Asia and the Middle East with most of the subscribers in Southeast Asia. Southeast Asia and the Middle East comprised 16% of total subscription revenue, and Southeast Asia and the Middle East subscription revenue growth increased 26%.

As the second largest contributor to group revenue, Southeast Asia continues to present the most compelling growth opportunity for the group in the medium to long term and is our fastest-growing segment on a constant currency basis. In September 2024, we started a drive to increase sales and marketing in Southeast Asia, and we intend to increase our sales head count by 70% by February 2026 compared to February 2025.

The Southeast Asia is a vast under-penetrated market for sophisticated fleet management and video-based solutions, and we are very well positioned to capitalize on the opportunity. We ended Q2 with approximately 216,000 subscribers in Europe, an increase of 19%. Europe comprised 10% of our total subscription revenue and European subscription revenue accelerated to 27%.

We continue to accelerate our organic growth, expand our customer base and increase our distribution capabilities. We have partnered with leading OEMs to provide easy access to our platform, seamlessly integrating their connected vehicle data to our platform through application programming interfaces. 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 region as customers seek to simplify compliance with evolving legislation and enforcement. In Q2, Karooooo Logistics continued to build, scale and delivered revenue of ZAR 139 million, an increase of 38% and an 8% operating profit margin.

Growth in e-commerce orders drove the acceleration in Karooooo Logistics' revenue growth. Karooooo Logistics supports our strong financial performance by immersing our platform into large customers' operations, contributing to strong customer retention. Karooooo Logistics also enables us to learn about the operational and logistics challenges confronting our large customers, we see a large opportunity for Karooooo Logistics going forward as large businesses seek to increase their e-commerce offerings and optimize their logistics capabilities through a capital-light model.

In Q2, we continued to make good progress with our FY '26 priorities. First, we continue to strengthen our leadership position in South Africa by selling our video solutions and Cartrack tag to our existing customer base. This initiative continues to demonstrate early traction. 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 generated significant excess cash. With our strong balance sheet and net cash position, we aim to return surplus cash 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, customer-centric culture and attractive unit economics, we set a high bar for any potential acquisitions.

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 Hoeshin, who will discuss our Q2 financial performance.

Thank you, Carmen. I will now discuss Karooooo financial performance for quarter 2 FY 2026. Please note, my comments will refer to year-over-year comparisons unless we state otherwise. Our proven and profitable SaaS business model continued to deliver strong results in quarter 2.

Karooooo's total subscription revenue increased 20% to ZAR 1,182 million. Operating profit increased 18% to ZAR 356 million and adjusted earnings per share increased 13% to ZAR 8.28. In this quarter, our earnings were impacted by withholding tax from dividend payment made by the subsidiaries to the holding company and our continued investment in sales and marketing.

We will now focus on Cartrack's financial performance, which is fueled by SaaS revenue momentum. In quarter 2, Cartrack revenue increased 20% to ZAR 1,204 million, and Cartrack subscription revenue increased 20% to ZAR 1,180 million. Subscription revenue comprised 98% of Cartrack's total revenue. Quarter 2 ARR increased 20% in rand and 21% in U.S. dollar.

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 execution, resilient subscription revenue model and attractive historic retention rates. In quarter 2, Cartrack experienced healthy customer acquisition. Quarter 2 subscriber increased 15% to approximately 2.5 million. Subscription revenue increased 20% to ZAR 1,180 million, and operating profit increased 18% to ZAR 344 million.

Quarter 2 SaaS ARR accelerated to 20% compared to 18% in quarter 1 FY 2026. We believe the acceleration in SaaS ARR reflects the underlying momentum in the business and signals that our strategic initiatives are gaining traction. Total subscriber growth also remained healthy at 15%. Cartrack experienced solid customer acquisition with healthy net subscriber addition of 70,740 in this quarter.

The pace of net subscriber additions reflects our focus on selling video and Cartrack tag to existing customers, while we also build our distribution capabilities to execute on the full market opportunities. Cartrack continued to grow its subscription revenue across geographies with growth acceleration in South Africa and Europe.

South Africa subscription revenue growth accelerated to 18%. Europe subscription revenue growth accelerated to 27%. Asia and Middle East subscription revenue growth increased to 26%. This region was our fastest-growing region on a constant currency basis. The healthy growth across regions reflects our execution track records and provide a solid foundation for continued growth.

Karooooo delivered strong operating profit growth of 18% in quarter 2 FY 2026. While earnings in this quarter include higher tax expense related to dividend withholding tax and our continued investment in sales and marketing, our adjusted earnings per share increased 13% to ZAR 8.28.

Cartrack increased its earnings per share contribution by 13% to ZAR 8.07. Karooooo Logistics earnings per share contribution increased 17% to ZAR 0.21. On a year-to-date basis, our adjusted free cash flow increased 44% to ZAR 358 million, underscoring the strength of our operating model as we pursue accelerated growth, we expect free cash flow to reflect our upfront investment for growth. While quarterly fluctuations may occur due to working capital movements and growth-oriented investment, we remain confident in our ability to consistently generate meaningful free cash flow.

Karooooo's consistent free cash flow generation show our disciplined capital allocation strategy and position us well for future growth. Our balance sheet reflects our track record of growth at scale, profitability and cash generation. Our net cash on hand plus cash in bank fixed deposits was ZAR 393 million. Debtors collection days remain healthy at 31 days and are within our historical norms. In August, we paid a total cash dividend of approximately $38.6 million to our shareholders, which equates to 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. We believe Karooooo's remains strongly positioned for growth as we operate in an expanding and largely underpenetrated market, fueled by robust and sustained customer demand. This demand is driven by a heightened focus on digitalization, the need to improve operational efficiencies and reduce costs and increasing attention to safety in physical operations.

So far, in FY 2026, we have accelerated Cartrack subscription revenue growth by expanding our distribution footprint in existing markets, driving broader platform adoptions and capitalizing on growing demand for video solutions. We are encouraged by our positive performance as evidenced by Cartrack subscription revenue growth of 20% in quarter 2 and is in line with our guidance for the year.

On a year-to-date basis, Cartrack subscription revenue growth has accelerated to 19% and the business has delivered a 29% operating profit margin reflecting strong execution, while investing in sales and marketing capacity to support future growth. With continued investment in sales, marketing and infrastructure we believe we are well positioned to achieve our FY 2026 growth ambitions.

Accordingly, excluding the cost of secondary offering, our FY 2026 outlook remain unchanged. 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 and enhance our distribution footprint, and we are beginning to see those efforts materialize. With continued execution, disciplined investment and growing regional momentum, we believe that we are well positioned to deliver profitable long-term growth.

With that, I will turn the presentation over to Zak Calisto for Q&A.

Hello, everyone. I just have a problem with my platform here. Good morning and good afternoon to everybody. Thank you, everybody, for joining us. I'll just go through all the questions. The first question is from Dylan Becker from William Blair.

You talked about safety -- safety adoption and expansion and helping drive acceleration. Subscriber additions remain healthy, but can you talk about the tax rates you're seeing on some of your newer offerings, if you're seeing greater willingness for customers to adopt multiple products upfront. And how is the supporting in the ARPU piece of the growth algorithm?

So, Dylan, we've grown our ARPU by 4%, and that's our full ARPU across all the different geographies. Our initial target was to be able to grow ARPU this year in South Africa by 10%, which should lead to around 6% for the group. And if you take -- if we take it on a monthly basis at the end of Q1, I think we are behind, but as at the end of Q2, we're more or less in line with our expectations.

And the key factor in the bottleneck to adoption is our ability to have sufficient teams to deal with onboarding both new customers and to be able to cross-sell our new products. So I think all in all, we are pleased with the progress we've made.

Next question from Dylan. Maintaining healthy unit economics while adding capacity across territories remind us how to think about new rep ramp contribution as well as your views on where sales capacity sits today versus demand?

I think, Dylan, it talks a little bit back to the previous question. And I think at the end of the day, I think we're experiencing much more demand than we can deliver. And it really is -- the bottleneck really is about building our teams to be able to deliver. And we're getting good momentum. But as you know, Dylan, it's never good enough. I think, there's definitely room to build teams faster.

Another question from Dylan. South African subscription revenue remains impressive, given the scale of business there. Maybe a sense of how you think about drivers of momentum in the market and now that supports conviction in the overall subscription durability, opportunity to lean more in the multiple product cross-sell in markets outside of South Africa?

I think fundamentally, Dylan, we ran out of space just before COVID, then we had plans to build a new building, so we could build out teams. Then COVID came we couldn't build the building, and we only moved into the new building in September last year. And we have been in the last year really focused in recruiting and building teams and we are building the teams in South Africa quite quickly.

I think we've got a really good team in both training and in both recruitment. And I think we're making really good momentum, and we need these teams for new customer acquisitions and to cross-sell and add additional products to our customers. So I think we've still got a long way to go before these teams mature.

And hopefully, with the new initiatives that we're dealing with AI, we will probably be able to allocate a lot of jobs already to AI and be able to be under less pressure to add more people and just to relocate the current people, which have already got a lot of business knowledge into new departments.

And the next question comes from Alex from Raymond James. What do you see from vision attach rate by [ geo ]? And how does this look for the new customers versus back to base sale? Are you landing with video with a higher percentage of new subscribers?

And I think it's still quite early days, Alex, and I think we still have a lot to build. But I think most of our sales at this point in time are really coming from our existing customer base. But -- I would say that we're only getting about video sales today is probably only about 10% of our sales. We have a lot to build in terms of teams, and it goes back to what I said to Dylan. We're not there in terms of being able to have the proper distribution that we want to have, but the building of our teams is going according to plan.

On Cartrack gross margin, how is -- how is the change in mix shift towards videos cross-sell impacting gross margins?

So our gross margin has typically been in the region of about 70% to 74%. And if you look at in this specific quarter, you'll see our cost of sales actually went up a bit higher than our subscription, and that brought our margin down compared to the previous margin that we had a year ago of 74%. I think this year, it was at 72%, and that's going to be because we had increased cost of sales.

But nothing out of our historical norm, but it does -- there is this adjustment between the 30% growth and the 20% in the top line. But our gross profit margin is in keeping with our historical past. I'm hoping, I've actually answered your question.

So with that, I don't believe is having an impact on gross profit margins because of the way we do our pricing the way our unit economy -- and what we typically do have is if the 1 factor that can affect the top line is, if there's expenses in the unit economics to talk a bit further about this, is whether you're paying out in salaries or whether you're paying it out in commissions.

But the unit economics is the same. So what we've seen is an increase in payments and commissions that affects your cost of sales, but your fundamental unit economics has remained the same. Hopefully, I've answered the question, but I can talk you through it if necessary after this.

A question from Sinan from Amber Road. You mentioned improving your sales force productivity in the earnings release. How did the new sales reps compared to the existing base of sales reps today? And how fast are they improving?

Fundamentally, Sinan, we're always bringing on new people. And clearly, newcomers never performed as well as the well-established salespeople that have been with us for many years. So nothing has changed. We expect newcomers to go through a learning curve.

A question from [ Clay ]. Great performance. It's good to see the improved Cartrack ARPU growth. The Cartrack subscriber net adds was below last year. What contributed to the slowdown?

I think fundamentally, Clay. We are more focused on growing our subscription revenue as opposed to subscribers because we're busy cross-selling. And we haven't got sufficient people to do both. So there's been quite a lot of focus of our salespeople dealing with our cross-selling to our customers with the new products, and it really is just -- it really just boils down to having sufficient people to execute at all the opportunities that we do have. And our bottleneck is people at the end of the day.

Was it -- then the next question from [ Avery ]. How long do you expect the elevated operating expenses related to geographic expansion and increased headcount to persist before normalization?

I think the reality the word normalization doesn't really exist in our business, not at this stage because we believe there's a huge TAM opportunity. And we will be investing in infrastructure and OpEx in sales. And it's just -- we all have different levers, where we'll expense and invest at different times and it all depends how fast we're executing where we need to spend the money.

But I think fundamentally, we've got a very strong track record of disciplined capital allocation. We're very prudent with our money and the unit economics have remained very strong. And I personally look more at our unit economics than the IFRS here now. So I think fundamentally, nothing has changed in terms of the way we allocate capital, I would say, for the last 20 years.

The next question from Roy from Morgan Stanley. Estimated market penetration in each region?

I think, South Africa everybody, it's always a [ thumbs stack ]. I'm not certain about these numbers. South Africa is probably a market penetration of about 35%. If you look at Europe, I think penetration rates there could be around 20%, 25%. I'm not sure, Roy. So whatever I give you, it really is a personal view I don't think it's necessarily factual.

And when we look at Asia, I think the penetration rate there is probably low, probably under 10%. That's what I believe. But we've got 3 levers and opportunity, right? The 1 is to grow our customer acquisition. The other 1 is to be able to sell new features on our SaaS platform, which we typically do not do. We don't -- every time we do it, we add a new stack to our platform or new features we don't then go try and raise ARPU based on new features.

And the third one is to actually add new products, which we'd be busy doing right now with the Cartrack tag and the video, that's obviously new hardware with different costs. And obviously, we work out the unit economics behind these new products. And clearly, on adding these products, that does increase the ARPU on the customer based on -- but at the same time, it does come with additional costs, both in cost of sales and operational cost, but majority is cost of sales.

I've got another question from Sinan from Amber Road. If your bottleneck is people, can AI be scaling your go-to-market efforts?

And I think it's -- AI, it's a bit of eye put -- and there's a lot of things where AI can be used, and it's extremely efficient. But you normally find that the downside when AI doesn't work can cause you more damage than when it does work. So there's a lot of -- we're obviously playing around with a lot of tools. We're doing a lot of things ourselves in terms -- and when I talk about AI, I talk about the broad market products that are existing and are coming to market.

So there's a lot of really impressive stuff. We've tried a lot of stuff. We've had to pull it back because -- it's not -- when it works, it's fine, but when it doesn't work, it creates havoc and can actually create quite a lot of customer unhappiness. And the markets we're in typically have got a very low tolerance to be speaking to machines. In some markets like the U.S., people are quite used to not speaking to humans. But in a place like South Africa or Europe, people really do not want to be talking to machines.

And so it's a process. I think we'll get there. And I will definitely get there.

I think that's all the questions for today. I want to thank everybody, and thank you for attending. Goodbye. Bye-bye.