CEO Zak Callisto outlines Karooooo's strategy for accelerating subscription growth

Karooooo, in its second quarter, began to meet a commitment it made to its investors to accelerate subscription revenue growth, said the CEO and founder Zak Callisto.

The AI-driven vehicle logistics and asset utilisation systems group that has Cartrack as its main subsidiary on Wednesday reported a 20% increase in subscription revenue to R1.182 billion. Callisto said in an interview that this growth figure was 15% last year, and the group had made a commitment to accelerate this growth.

“We accelerated Cartrack subscription revenue growth, year-to-date, by further expanding our distribution footprint in existing markets, driving broader platform adoption, and capitalising on growing demand for video solutions,” said Callisto in an interview.

The group's main revenue driver, Cartrack, provides fleet management systems; stolen vehicle recovery, a key differentiator in its business in emerging markets; insurance telematics; video AI solutions, a fast-growing business being expanded to service a wider base of the group’s customers; and IoT-enabled vehicle data connected through 2.4 million vehicles across 23 countries.

The number of Cartrack subscribers increased 15% to 2 456 989 compared with the second half of 2022.

“We continue to demonstrate our ability to accelerate subscription revenue growth at scale, deliver strong earnings, drive innovation, and increase our distribution capabilities, while maintaining a strong, financially disciplined, agile, innovative, and owner-orientated culture,” Callisto said.

Cartrack’s subscription revenue increased 20% to R1.18bn. Cartrack’s SaaS (Software as a Service) annualised recurring revenue increased 20% to R4.81bn.

Subsidiary Karooooo Logistics’s B2B delivery-as-a-service revenue increased 38% to R139 million from R101m in the second quarter last year.

Karooooo’s adjusted earnings per share increased 13% to R8.28. Karooooo’s operating profit increased 18% to R356m. Karooooo’s operating expenses increased 17% to R563m. Sales and marketing expenses increased 34% to R210m.

Callisto said their investment in customer acquisition, including sales headcount and training, was already yielding the desired results and this was positioning the group well for further organic growth.

“We believe that our strong unit economics - we have shown consistent growth in profitability over the past decade - coupled with a clean balance sheet, positions us favourably to continue to scale,” he said.

Cartrack’s general and administration expenses increased 13% to R249m, reflecting an ability to prudently manage costs while building the infrastructure to support future growth. “We expect to gradually increase these costs on an ongoing basis to drive growth.” Cartrack’s R&D operating expenses increased 10% to R56m.

Cartrack’s gross profit margin remained strong at 72% (74%), and Cartrack’s subscription gross profit margin was 72% (75%).

“We operate in an expanding and largely underpenetrated market, fueled by sustained customer demand. This demand is driven by a heightened focus on digitalisation, the need to improve operational efficiency and reduce costs, and increasing attention to safety in physical operations. We believe our continuous investment in AI products, platform, and customer experience will generate robust results in the future,” he said.

“Our liquidity position remains solid, underpinned by disciplined financial management and sustained operational cash generation.”

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