Welcome to Karooooo Limited E arnings presentation for the Third quarter of Karooooo's 2022 Financial Year. Today, Zak Calisto, CEO and Founder, will be presenting to you. Zak will take questions from participants after the presentation. Over to Zak to commence with the presentation. A good day to everybody that's taken the time to listen to our Q3 results. For the potential investors and investors that are not familiar with our structure, Karooooo is the entity, and Cartrack was where we originally started. It was founded in South Africa and now we are headquartered in Singapore. We've had the track record of being in the business for 15 years, and as we go, we've evolved over time. We certainly are investing a lot into R&D to accomplish our vision and our mission. We certainly see mobility as core to all the ground operations. What we also see is the customer needs are quickly evolving at a relatively fast pace and it's going far beyond connected vehicles and equipment. This is driven primarily by the technology where we've gone from GPRS to 2G to 4G to 5G. The speed of technology has evolved us to be able to see a much larger opportunity to drive much stronger value for our customers. Our mission is to establish the leading on-the-ground operations cloud. What we do is we solve problems by digitally transforming on-the-ground operations for our customers. We add value to the day-to-day operations of our customers. In that, we do the fleet and equipment management, the logistics, and delivery operations management. We assist our customers with their field workers and managing thereof. We do bigger safety. We certainly, and in today's day and age, there's more and more demand for ESG compliance and reporting. We play an important role in that. We do risk mitigation and we do integrations into the back office of customer systems and warehouses. Recently, we're in beta phase, and we will be launching hopefully towards the end of Q4, early Q1, which is our buying and selling platform of vehicles. That's why that's launching in beta phase at this point in time. We are certainly growing our insurance platform to add value to our customers. Can everybody hear me with cloud? So, okay. We fundamentally have open operations cloud with seamless integrations into our customer systems. We collect data from proprietary in-vehicle smart devices. We also collect data from third-party and OEM in-vehicle smart devices, AI, video telematics, and we certainly also do collect data and push data through APIs to third-party systems, software systems. We take the data and on our cloud, we do the data analytics. We do artificial intelligence. We do understand that we're in the very early stages of full potential of artificial intelligence. With that, we drive a whole fleet of verticals that exist on our one platform. Further, we help monetize. How we monetize the data is by adding fundamental value to our customers. We do not sell data to third parties. We see the real value of data is really how do we assist our customers and our future customers. We're certainly also very aware of the network effect of our platform. We are starting to invest in our R&D to be able to unlock all this value. At this point in time, we collect over 70 billion data points and we consider them as valuable data points because there are other data points that we disregard as not being valuable. We certainly believe, and as technology evolves, the opportunity seems to be get bigger and bigger, and we innovate e arly stage of this large and long-term growth opportunity. IoT data is certainly key to improving operations for our customers. If we look at our customers' operations, fundamentally, a majority of it is driven around their fleets, their vehicles. So any customer of ours that's actually got any on-the-ground operations, you will find that vehicles are key to those operations. If we look at the market size, South Africa's got about 10 million vehicles. At this point in time, we've got about 10% of all vehicles in South Africa on our platform. Southeast Asia, we estimate it to be over 100 million vehicles. We've got 138,000 vehicles so it's really a very small percentage. W e've got a huge growth opportunity in Southeast Asia. Europe, much the same as Southeast Asia, a large opportunity as well. We believe in South Africa, we can grow relatively fast for maybe another four years to six years. But I think in Southeast Asia and Europe, we've really got a long runway for growth. Africa's got about 10 million vehicles. It's not our major focus at this point in time and w e've got 67,000 vehicles in Africa. It is estimated that over 40% of global GDP actually is all about on-the-ground operations and fleet and what really gets spent to be able to generate economical value on the ground. For the last 15 years, we've had a robust and consistently profitable business model. If you look at our SaaS ARR growth over the last few years, we've averaged around 20%. We need to bear in mind that our currency fluctuations. As at November 2021, the30th of November, at the exchange rate of ZAR 16 to the dollar, that equated to $72.5 million. We have just over 78,000 commercial customers on our platform. We have vertically integrated business model, end-to-end, all-inclusive IoT cloud software platform, well-established infrastructure, expanding distribution network, and we certainly have proven over time that we have the ability to execute and to scale. If we just take the highlights of Q3, we grew our subscriber base by 18% to 1.47 million subscribers. We are quite proud to announce that we've actually gone, at this point in time, over 1.5 million subscribers. It's public information. On our subscription revenue on constant currency grew by 19%. 98% of our revenue comes from subscription revenue and our total revenue on a constant currency grew by 25%. If you look at our historical data in terms of scaling, you can see consistently that with every quarter, we've gone up in the amount of vehicles on our platform. Our subscription revenue has also consistently gone up over all the quarters. We're now at ZAR 664 million in Q3. The previous quarter was at ZAR 628 million. It was a healthy increase in Q3. In terms of profitability, our operating profit for the quarter was ZAR 205 million compared to the previous quarter of ZAR 178 million. That's primarily because in Q4, Q1, we invested substantially in sales and marketing. With COVID, we saw that we had to become a little bit more prudent with our capital allocation. We cut back a little bit on the sales and marketing costs and we've seen the increase in operating profit. Clearly, our intention is to grow subscription revenue and subscribers and we want to do it in a financially disciplined manner. If you look at our total revenue, our best quarter ever, we're at ZAR 720 million for the quarter. We've consistently grown our revenue every quarter historically. In terms of earnings per share, we had ZAR 4.72 for quarter three. In terms of unit economics, we believe we've got very strong unit economics. We've got robust operating margins and we've consistently beaten the rule of 40. Our balance sheet is unleveraged and we sit in a very strong cash position at this point in time. I think the most important takeaway for us and strategically what's important for us is that we have ample capacity to increase our investment in sales and marketing and still remain profitable. I think that, for us, is very important, and we have the balance sheet to back us up. Our net subscriber additions, if you look for the nine months, we had 164,000 net subscriber additions, compared to last year, the first nine months, it was 119,000. In the prior year, it was 128,000. If we look at Q3, we had 61,000 net subscribers. While last year, the same quarter, we had 71,000. The difference is around 9,000 subscribers. In terms of growth sales, we had a better quarter than last quarter. However, we had to have more churn in this quarter as we come to the tail end of customers that we hadn't been billing for. We didn't recognize any revenue and they had gone into financial difficulty because of COVID and we've churned these customers in Q3. We have very strong unit economics. Our lifetime value of customer relationships is very healthy. Here, we're sitting with a LTV to CAC of over 9x, and that really puts us in a very good position to be able to increase our investment for growth. It is often confused, the lifetime value of a customer and the lifetime value of a subscriber. I would just like to make the clarity in the differentiator between the two. A customer, you onboard a customer, but a customer will keep vehicles on our platform, but they'll churn the vehicles and buy new vehicles over time. One customer could remain with you for a few couple of years, but it is expected, given our historical data, that customers keep their vehicles on our platform for 61 months. We do the amortization over 60 months. What we do give every year is what does it cost us to acquire a subscriber, and put them onto our platform, and that we take into account the average of a new customer and an existing customer. Clearly, a new customer is more expensive than an existing customer, but we bundled them together to give one, just one number. In Q3 of FY 2022, it was ZAR 1,981, of which ZAR 697 gets expensed up front, and ZAR 1,284 gets capitalized and depreciated over 60 months. Our lifetime value of a subscriber is for Q3 of FY 2022, ZAR 6,334 comparable to ZAR 6,739. There is a bit of noise because of currency, but it is also because we've increased our sales and marketing, and we haven't actually derived the necessary value at this point in time given the headwinds of COVID, but nevertheless, still very healthy. Our Cartrack operating profit margin for the quarter was 31%. We have ample profit margin to really increase and ramp up our sales. In terms of our growth per region, South Africa saw a 19% increase in subscribers, Asia saw 20%, Europe 15%, and Africa 8%. I think overall we're content given the headwinds and given that we've remained very, you know, with a tremendous amount of financial discipline over the quarter. We certainly are investing for the long term of the business, and evolving our platform, and building our customer base for the future. If you see sales and marketing spend, we have increased that by 23%. Our real increase is coming R&D. We've increased our R&D spend by 80%. A lot of that investment that we're doing today, we'll only reap benefits of that in the medium to long term. In terms of G&A, we've kept good and a tight discipline on that and that's gone up by 10%. Our operating margins for the quarter was research and development, 6%, very much in keeping with our long-term targets that we gave when we IPO'd in April on the Nasdaq. Our sales and marketing subscription is at 12% in keeping with the same quarter of last year. We certainly want to increase that to 17% to 19%, and we believe that will yield good results, and substantially foster growth in the current 20%. General and administrative as a percentage of subscription revenue, that's at 20%, down from 21%, and ideally, we want to see that at 12% to 16% over the long term. Our adjusted EBITDA margin as a percentage of subscription revenue for the quarter was 52% down from the 53% of last year, and we believe long-term targets would be between 50% and 55%. Fundamentally, the trends are in line with our long-term financial goals set up upon our listing. In terms of free cash flow, despite our strategic investment in customer acquisition and in R&D and our capital allocation during the pandemic, we still had what we believe is good free cash flow of ZAR 306 million range. Our operating activities, we generated ZAR 750 million range. We invested into PPE ZAR 445 million. We believe, given our strong revenue generation, a strong earnings growth, and strong cash flow, we believe that our balance sheet is where we feel very comfortable with it, and we've got an ample capacity to fund growth. Cash on hand, we were sitting with ZAR 799 million at the end of Q3, compared to ZAR 67 million in the same period in the previous year. Our debtors days is 34 days, which I believe is very healthy. That's been quite consistent for several years. We've traditionally been in the early 30 days to 35 days. This is clearly supported by internal proprietary systems that we manage our internal systems including our collection management of debtors. Our outlook for the year remains unchanged despite the pandemic. The number of subscribers that our initial outlook that we gave at the beginning of the financial year was ZAR 1.5 million to ZAR 1.6 million. We've already surpassed the ZAR 1.5 million, so we feel very comfortable that reaching a subscription revenue of between ZAR 2.5 million and ZAR 2.7 million so that should be easily accomplished. Our adjusted EBITDA margin, the outlook was between 45% and 50%, and the year- to- date we're sitting at 47%. We also feel comfortable that we'll be able to meet our outlook. Our ARR at the end of November was ZAR 2.76 billion and t hat's also showing good growth. I want to thank you for listening to this short presentation and I'll be taking questions. The first question I'll take is from Mark from Canaccord. Great. Thanks, Zak. Zak, I want to get your thoughts. Samsara is a recent IPO in the U.S. market getting a premium valuation. H ow do you compete with them? Do you compete with them? If you do, how do you fare head-to-head? Maybe you can talk about how their strategy is either similar or different from your strategy. The first thing that I would like to say, you know, I haven't really studied Samsara in huge detail, but from the literature that I've read, I think they're very much playing the same market as us and other competitors in America like Geotab. There's quite a few competitors that we have. We haven't really come across them in the market. From what I read, I think they're a worthy competitor. They certainly appear to be doing a really good job in terms of growing their business. I see their growth is 68%. They're allocating a tremendous amount of cash. They're not profitable but they're certainly growing at 68%. They're allocating a lot of cash into sales and marketing, which I think is quite a good strategy in America because I think America and South Africa have got similarities in the sense that COVID hasn't quite affected America the way it's affected Asia. Overall, I think, they're doing a good job. In terms of valuation, I'm going to be honest, I'm not really an expert on valuating companies. We'll just stick around, actually, I'll see what they're doing, and h opefully, we'll be out of COVID in Asia, and then we can start growing faster. Okay. Thanks. Follow-up question, just on the sales and marketing and in investment. H ow is the hiring opportunity and how should we think about modeling sales and marketing as it ramps towards your longer term product of 17% to 19% target? At this point in time, we've actually ramped up. If you go and you look at Q1, I got it wrong. I thought another three months to six months. Even when we gave our outlook, my view on that was that we will have COVID for six months. Then in the last six months of the year, we'll probably be sitting with no COVID or little COVID effects. I got it wrong. It seems like we're going to have 12 months of full COVID effects, but despite that, we're still going to meet our outlook. In terms of sales and marketing, we went and because I got it wrong, we started spending quite a lot of money on sales and marketing, and realized that we were allocating capital not to the same financial discipline that we had had in the past. If you look at Q2 and Q3, we cut back on the sales and marketing spend. We're still getting the growth. Clearly, if we want to start growing at over 30% or 40%, we're going to have to increase that. We've got to do it when the market is tailwinds, once we're able to travel, we're able to deploy the people, we're able to execute. At this point in time, the fact that we're executing at 30% in the markets we are, I think that we feel comfortable that we're doing a relatively okay job while still keeping good unit economics. I think there is an argument for us to weaken our unit economics and start growing faster despite that in the pandemic. This is something management is continuously evaluating whether we should just compromise on our unit economics so that we can get better growth. Hopefully, in the short term, we will see the pandemic being less restrictive. Okay. Well, congrats on keeping your full year guidance and the results despite the COVID restrictions more than you thought. I'll pass along to the next caller. Thanks very much, Mark. The next caller, Alex from Raymond James. Thanks. Zak. L aast quarter, you talked about the record adds in September. I'm curious about if you can talk about how linearity played out through the rest of the quarter. With that, you called out some of the retention from some of the early customers that you kind of subsidized during the pandemic. Any update on how much of that is left? That's basically since the start of subsidizing customers so i t's really at the tail end. Even in this last Q3, we churned in the region of about 11,000 vehicles or 12,000 vehicles. I haven't got the exact number, but we churned between 11,000 and 16,000 vehicles. That was really vehicles that we had been subsidizing. We hadn't been invoicing for a good six months but we've actually switched them off. We probably have another 20,000 or so of those vehicles that we'll probably do in Q4. Then after that, I think it's business as normal. We won't have any of those where we're still having the cost of sales while we're doing no revenue on the back of COVID. Despite that, we still got very good net adds in the quarter. Got it. Okay. On the messaging evolution now to kind of the on-the-ground operations cloud, what can you tell us in terms of where you're investing today and what kind of going into core telematics offering versus kind of the everything else in the platform? With that longer term, how do you think about monetization of that broader platform? There are various ways of looking at this. The first thing is we've got great operating margins. We've got great unit economics. We are investing substantially more in R&D, as you could see, compared to a year ago. We've increased R&D spend by 80%. That's quite material. A lot of that investment is for the medium and the long term. Having said that, where are we spending the money? A lot of it is going to the video safety. It's going into the integrations into customer systems. It's going into software to help our customers in terms of last mile delivery, in terms of consigning, consignment centers where different customers can send consignments to one center, and then we can distribute it for them using third party carriers or using crowd sourced drivers. We're driving all of that innovations into the stores of large retailers, into their warehouses, in terms of the management of fleets that are on the ground, in terms of the administration, where we have lots of customers doing things on various systems or manually or on Excel. We're helping them digitalize that whole process of all the vehicles, the equipment that they use in their operations. We're doing a tremendous amount of work over and above the fleet management that we have traditionally done in the past. What's allowing us to do this is clearly technology. When we first started out in the business, there was only SMS. Then came GPRS and 2G, 3G, 4G, and what we can do with data today is substantially more than what we could do years ago. Approximately 18 months ago, that's when we started developing all these extra verticals onto our platform. We launched our latest platform towards the end of last year, and we believe we've got a long way to go to improve on our platform, to improve on our offering, and we see us investing for quite a long time into the future to be able to deliver a world-class product for our customers. Great. Thank you. Thank you. Thanks. Next, Matt from William Blair. Hey, Zak. Thanks for taking my questions. I wanted to first ask about impact of Omicron and what you've seen so far from that in the fourth quarter. I happened to be in South Africa at the time that Omicron sort of surfaced. What we saw at that point in time, Asia just started opening up their borders approximately for two weeks into the neighboring countries like Thailand, Malaysia, Philippines, Indonesia. They were opening it up. Omicron surfaced and then all the borders got closed again. All the flights got canceled from South Africa. It was a nightmare getting back into Singapore. My family was supposed to come out to South Africa. We couldn't do that. I think that's on the one side where I'll call the immediate reaction by different governments and different policies. On the ground, what we saw in South Africa is that the hospitals, you know, the hospital beds, there's nobody in hospital there. I speak to doctors, that it doesn't seem to be a huge problem, Omicron. I think that makes me feel that it's just a question of time where the markets will open up again and I'm hopeful of that. Clearly, it's certainly, I was getting very hopeful and everything went into lockdown again. I'm not sure if I've answered your question. Yeah, I think that does. Y ou mentioned ramping up sales and marketing and investments as in into next fiscal year. Maybe you can just give us some idea about what the priorities are in terms of where you're going to allocate some of those investments. I think we've got to do it in a bit of a prudent way and, certainly, as far as our biggest priority is Asia. W e've got to be able to execute, otherwise we're just burning money, if that makes sense. Asia is our top priority and certainly Europe as well. We want to get investing because I think that's the real opportunity, t he biggest opportunity for us with the longest runway is clearly Asia and Europe. South Africa, we've already got 11% of the vehicles on the road or 10%. We believe we could grow really well for maybe another five years, six years, seven years. After that, the only way we're going to generate growth is revenue growth by starting to charge for the additional verticals on our platform. It's something that we can start looking at that probably in South Africa in about two years' time, three years' time, to increase revenue and ARPU. Once we believe we've got a lion's share of the customer or the potential market. I think Asia and Europe is still very early stages with a lot of opportunities, specifically Asia. Okay, great. Thanks for taking my question, Zak. Thanks. Luke from Morgan Stanley. Thanks, Zak. A quick question on your the other growth opportunities. Can we maybe focus just a little bit on Carzuka? We've recognized a little bit of revenue over this. Perhaps how profitable is that revenue recognition? And from here, what would you expect the growth and the opportunity to be with the likes of that Carzuka? M aybe you can touch on the insurance and the logistics acquisition as well. Thank you. The Carzuka is in beta phase. In Q2, I think we did about ZAR 9 million revenue. In Q3, we did about ZAR 24 million. I'm estimating that we'll probably do over ZAR 14 million in Q4. We're hoping to go live towards the end of Q4. We might be a little bit late, launching live in Q1, and then we'll have a platform where we can really start scaling the business. At this point in time, it's more about getting our tech ready and it's more about us getting the model right in terms of processes and procedures. I feel comfortable we'll be able to execute and have a very good business within the two years to three years. I'm feeling very comfortable about that. We're deriving a lot of value to our work, a lot of value for our, to our customers and that opportunity. In terms of insurance, we're doing over 1,000 policies a month. That's been quite flat for the last two years to three years, t wo quarters to three quarters rather. We're hoping to start scaling that also in the beginning of the next financial year. In terms of Picup, we have been working with Picup for over two years, and a lot of the subscription revenue that they were generating came through the Cartrack platform already. They were more focused on the integrations into the warehouses and into the retail stores of customers and into doing the crowdsourced drivers and the professional couriers. We're now, at this point in time, merging their side of the technology to our technology, and then we're going to bring all of it into one single platform, which is our platform. At that point in time, then we're obviously going to spend time and money investing in scaling that business. I believe that is an important part for the long-term drive of what we're doing in terms of assisting our customers with their operations. Thank you, Zak. Next question, Parker Lane from Stifel. Yeah. Hey, Zak, thanks for taking the questions. I wanted to talk about the unit economics of the business. Obviously, very strong today at 9x LTV to CAC. What does that look like when you enter some of these newer markets in Southeast Asia and Europe? Is that typically a fair bit lower and scales over time o r do you really see those unit economics hold true regardless of the location you're trying to acquire customers from then? At the moment, it's 9x. I certainly believe that we could certainly drop that when we initially start scaling. I believe if we're able to keep our unit economics once we've taken any fat away from, b ecause what we find is when you start scaling, there's always a bit of fat and a bit of spillage. Once you're able to work out the spillage, then I think provided the pricing remains where it is today, I certainly believe we can keep very similar LTVs to CAC. Got it and then j ust thinking about the broader strategy here of on-the-ground operations, how much will tuck-in acquisitions play a role in expanding the platform going forward? Obviously, you did the Picup deal, but can we expect that to be, you know, a normal cadence of a deal or two each year going forward as you widen the scope of the platform? The reality is this is our first acquisition that we have done. Traditionally, we're very much a vertically integrated business. Even if you look at our internal systems, the way we run the business internally, that's all proprietary software. What led to this acquisition was that we had been working with Picup for over three years. We know the management very well. We know what they're building, and we realized the value on bringing it to one single platform like ours, the real value that that can generate over time. That's what made us buy this asset and then to integrate it into one single platform. I don't believe we are wired to go grow by acquisition. We're not against it but we're certainly not on the trail to do acquisitions in order to grow. I believe we've got enough tailwinds to be able to get the growth that we want, organically. Appreciate the feedback. Thanks again. Thank you. I'm just reading out a question here from Gregory. What do you see as the largest challenge to your growth? Is it internal/external capacity, competition, exposure or something else? I think, you know, Gregory, I always say the biggest challenge is normally what you don't know and, because you don't know, what to do about it. At this point in time, the real challenge is human capital. I think all businesses face the same challenge. It's the human capital, whether it's for sales and marketing, G&A, R&D. It's never easy. It's always difficult. Obviously, there are challenges that will come. What we do find is being in business is, there's always something that you couldn't think of that's just around the corner. I think what's important is, over time, we're a very agile team, and we're able to address the challenges as they come. We've got Mwaki Mlondola. Isaac, given the strong and under-leveraged balance sheet and healthy cash and cash equivalents, can you give an indication of the company's inorganic growth strategy? Are there M&A opportunities you are pursuing currently, bolt-on acquisition partnerships to diversify the business? I f so, what sort of business are on the radar? I think fundamentally, we're not, like I said earlier, looking for businesses to acquire or to bolt on or do M&A. Clearly we're very pragmatic and being so, and we're very realistic. There will certainly be, I believe, a great opportunity to do an M&A at some time or another, given that I think the market is large enough for there to be multiple winners. There could certainly be an opportunity for M&A. If we were to acquire any business, it would have to be very strategic, if that makes any sense. We've got another question from Gregory. Wh at does the ideal customer look like and what services do they subscribe to and what is the opportunity embedded in them? I think fundamentally we don't have an ideal customer. If you look at our customer portfolio at this point in time, we've got customers ranging from consumer to large enterprises. Our smallest customer has got one vehicle. Our largest customer has got 37,000 vehicles. The type of vehicles they've got, it goes from motorcycles to large trucks in mines that weigh 600 tons, 500 tons, 600 tons. In terms of industries, we've got a range of industries, from tourism to logistics to oil and gas, mining, retailers, wholesalers. You name it, we've got the customer. We don't have an ideal customer. We don't have that. Each customer has got their very own unique needs. At this point in time, I believe we can cater for 99% of most customers' needs in terms of fleet management, and we certainly are now investing far beyond fleet management to be able to assist the customers in getting more value, and integrating all the data that we collect into their day-to-day operations. Thank you, everybody, for attending. We'll see you in three months time. Thank you very much. Bye-bye. Well, that does conclude our conference for today. Thank you for participating. You may all disconnect.