Karooooo Ltd. Earnings Call Highlights Growth and Expansion

Karooooo Ltd. ((KARO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Karooooo Ltd. recently held its earnings call, revealing a generally positive sentiment despite some challenges. The company showcased strong financial performance and subscriber growth, particularly through its Cartrack segment and geographic expansion. However, there were some concerns regarding free cash flow and subscriber additions in the APAC region. Overall, the highlights of the call outweighed the lowlights, suggesting a positive outlook for the company.

Strong Financial Performance

Karooooo’s Cartrack segment reported impressive financial results, generating ZAR4.1 billion in subscription revenue, marking a 15% increase or 19% on a US dollar basis. The operating profit margin stood at a robust 31%, and the company’s adjusted earnings per share saw a significant rise of 39% to ZAR9.48.

Continued Subscriber Growth

Cartrack’s subscriber growth was noteworthy, with a 17% increase for FY ’25, representing a 200 basis point acceleration compared to FY ’24. Net subscriber additions were particularly strong, rising by 25% in Q4 and 30% for the full fiscal year.

Robust Geographic Expansion

The company experienced accelerated revenue growth in Southeast Asia, with a 31% increase in constant currency revenue in Q4. Europe also saw strong subscriber growth at 20%, highlighting Karooooo’s successful geographic expansion efforts.

Successful Product Launch

Karooooo introduced the Cartrack Tag in Southern Africa, a product designed to offer advanced asset protection and operational oversight, further strengthening its market position.

Strong Balance Sheet

The company ended the quarter with a solid financial position, holding net cash and cash equivalents of ZAR838 million, maintaining a strong and unleveraged balance sheet.

Decline in Free Cash Flow

Despite the positive financial performance, Karooooo faced a decline in adjusted free cash flow due to increased capital expenditure and strategic investments.

Lower APAC Subscriber Additions

The APAC region saw a slight decline in net subscriber additions for FY ’25 compared to the previous year, indicating a challenge in this market.

No Immediate Dividend Declaration

Despite its strong cash position, Karooooo did not declare a dividend at the end of FY ’25, choosing instead to focus on reinvestment and growth.

Forward-Looking Guidance

Looking ahead to fiscal year 2026, Karooooo provided comprehensive guidance, anticipating Cartrack subscription revenue to grow between 16% and 21%, reaching ZAR4,700 million to ZAR4,900 million. The operating profit margin is expected to range from 26% to 31%, with earnings per share projected between ZAR32.5 and ZAR35.5. The company plans to sustain growth through strategic investments in sales and marketing, expanding its distribution footprint, and increasing platform adoption, particularly in Southeast Asia and Europe.

In conclusion, Karooooo Ltd.’s earnings call highlighted a strong financial performance and strategic growth initiatives, despite some challenges in free cash flow and regional subscriber additions. The company’s forward-looking guidance suggests continued growth and expansion, reinforcing a positive outlook for the future.