Good day and thank you for standing by. Welcome to Karooooo Ltd. Cartrack Fourth Quarter and Full Year 2021 Results Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Mr. Zak Calisto, Founder and CEO of Karooooo.

Good day to everyone. I want to thank everybody for taking the interest and the time to listen to our earnings presentation for FY21. It is our first time presenting as Karooooo, as a newly listed entity on NASDAQ and -- listed entity on the JSE. What we will be presenting today is the Karooooo numbers. As at February 2021, Karooooo was still a privately owned Company, owned by me. At that point in time, Karooooo owned 68.1% of Cartrack, and Cartrack was listed on the Johannesburg Stock Exchange. Subsequently to that, in April 2021, Karooooo listed on the NASDAQ and -- was listed onto the JSE and now owns 100% of Cartrack. Cartrack was founded in South Africa and is now headquartered in Singapore under the entity KARO, which is the listed entity. In our view, all vehicles will be connected and data will drive all aspects of mobility in the future. And it is certainly our mission to build the leading mobility SaaS platform that maximizes the value of data. We have a strong history of consistent organic growth and it's really important to stress that we've always grown organically. We have scaled, we have grown, and we've been profitable for many, many years. And our subscribers and we finished off as of February 2021 at 1,306,000. Our revenue was at ZAR616 million for quarter four; and our net income was ZAR128 million at Q4. You can see a consistent growth throughout the most recent quarters; and certainly, also the last seven years Cartrack was listed on the JSE. We have strong financial discipline and that's what's enabled us to grow and to be profitable at the same time. Our track record of execution, we have grown, despite COVID, 16% our subscriber base during 2021. Our revenue, we…

Hello, everyone. I just want to make a correction. On slide 9, I said cash flow from investing activities grew 43% -- 44%, actually 43%. And on slide 11, I said ZAR2.2 million in subscription revenues, actually ZAR2.2 billion. And the ARPU increased to ZAR154 and not ZAR 155. And sales marketing as a percentage of subscription revenue increased from 9% to 10 -- 11% as opposed to 10% to 11%. We're going to open up to the audience for questions. I've got the first question from David Everall [ph]. If you could give some detail on your APAC segment, what investments have been made over the last year to grow sales and installers? David, over the last 12 months it's been very difficult to trade in Asia. Pre-COVID our approach to growing Asia was very much a centralized approach where we had the management and we used Singapore as the head office as you'd use any big city in a big country. And we operated from Singapore into all the neighboring countries. When COVID came, it clearly hampered our ability to grow, specifically because none of our senior staffers were able to go into the territories. So, we've had quite a lot of the senior staff trying to run the business through Zoom calls and, obviously, that's not very effective. And given that, we've invested fully in growth in sales and installers, but nowhere as much as we had envisaged and we've done just critical staff. We're hoping that this will change in the near future. But I must let everyone know that Singapore has just changed their rules that if you travel out of Singapore and you come back into Singapore it's no longer a quarantine for two weeks, it is now going to three weeks. So, the…

[Operator Instructions]. Our first question comes from the line of Matt Pfau with William Blair. Please go ahead.

Congrats on the nice traction and subscriber additions, Zak. So, wanted to start off asking about that. Obviously we are two months into your first quarter. Did you see the momentum that you saw in the fourth quarter continue into the first two months of the first quarter that we are in now?

Sorry, I didn't get your name. Who is speaking? I'm getting used to the system…

Yes, Zak, it is Matt Pfau from William Blair.

Hi, Matt. So, we have now surpassed 1,350,000 subscribers. So, we continue to see the growth that we saw in the last few quarters. Traditionally our worst quarters are Q4 and Q1. And those quarters are traditionally the worst given all the holidays. And we've seen a very good Q1 in the first few months. We're quite happy with the growth in Q1.

Okay, got it. And then with the subscription revenue guidance that you gave for fiscal 2022, how should we think about the cadence of that from a growth perspective? Do you expect growth to improve throughout the year or should it be relatively the same quarter-to-quarter?

Matt, to be brutally honest I'm not certain myself and that's why we've given quite a wide range. Every single time -- every month I wonder when is COVID -- how is that going to impact us, new variants coming. Everybody goes into lockdown, then out of lockdown, vaccinations. There's different news. Every morning I get up and there's something different on the news. Countries are being vaccinated, quarantines continue. So, that's why we've given quite a broad range. But fundamentally, over the years, the best way to look at or to predict our subscription revenue is to see our subscriber growth of this current year and add it to the subscriber growth of the previous year divided by 2, and that should equate to our subscription revenue growth. So, last year subscriber growth was 16%. Depending how much we grow our subscriber growth this year, you'd add the 2 divided by 2, and that should give you a very good indication. If we take our current growth in the last two months and if we take the current growth in the last two quarters of FY21 and you annualize that, we are growing currently in the region of about 23% year-on-year. So, it really depends how COVID plays out in the rest of the year. But we certainly have been employing and been optimistic that we can grow our business. And we've certainly taken the risk in employing people, because I think if you don't take the risk you also could lag behind. So, we have taken that risk that will definitely weigh in our OpEx. And hopefully we will get the benefit of COVID opening up, our senior management being able to get into regions where we are not that strong. And currently with the restrictions in -- we are focusing on our key markets.

Got it. And then in terms of the investment priorities for fiscal 2022, it seems like adding headcount in the Asia region is one. Any other areas to call out for your investment priorities for FY22?

So, we've invested a lot in R&D. We are investing a lot in our platform. We certainly believe that's a very important investment and we are continuing investing. You can see the increase in our investment. We will continue that increase in this financial year as well. But we've seen our headcount in all our segments -- Asia-Pacific, South Africa, -- Africa and also Europe. We certainly want to grow and get into an accelerated growth environment in all the regions and that's what we are attempting to do.

Got it. And last one for me, just on the prescription revenue growth versus the total revenue growth for the quarter, there was a bigger disconnect there than typical. Maybe you can just discuss the dynamics that drove that.

So, in Q4, we've got one really big mining house and -- bundled sales. So, they actually want the cash, they want to divorce the subscription revenue from the cash. The mining house is actually Anglo American De Beers. And in terms of -- in Q4. And that's obviously where the disparity comes in in our subscription revenue over total revenue. But I think if we take the first three quarters, that's a better reflection of what percentage of our revenue is subscription revenue. Thank you very much, Matt. I've got a question from Roy Campbell. Can you break the last quarter's growth out by region? Which segment did you grow in? And consumer or small/medium given that profile, is there any element of percent of demand? So, I think, first of all, we grew in all our enterprise customers, consumers, medium/small and we're growing in all of those segments. And the best thing to do, Roy, if you'll take our Q3 presentation, we did show you the amount of customers that we had in each of those verticals, and you can compare that to the Q4. These are public numbers and one can see our growth. We had over 70,000 commercial customers. We have now got over 75,000 commercial customers. Now I haven't got the exact number between the one and the other, but it appears that our -- reconcile exactly what those numbers are. I haven't got them in front of me at this point in time, Roy. Perhaps Susan can give you those numbers. I've got another question from Daniel Bolt [ph]. How should we think about ARPU going forward? He says Asia has higher ARPU. Daniel, we've always -- . We have been very consistent with our ARPU. I know a lot of our peers, they…

Certainly. Please ask your question, Mike.

Zak, just wanted to ask one question. Just on the industry, some of your competitors are struggling to source components for the connectivity piece to drive their businesses. Any comments on your ability to source components to get your new customers up and running? Are you seeing any impact from the global supply shortages?

There's definitely a supply shortage coming through, Mike. We certainly are seeing that. If you look at our inventory, which we now have -- reported and -- , you'll see a substantial increase in the inventory. And we already started planning for this I would say in the last six months or so, or even maybe right at nine months. So, we have seen an increase. We are talking to certain of our suppliers; they're telling us that our lead times are not going to be -- . They are now looking at 18 to 24 months in lead times. But fortunately we have got sufficient stock for the next 9 to 12 months. And hopefully in a year's time we will be in a better situation. So, for FY22 we believe -- we have reason to believe that we're not going to have stock shortages.

Okay, great. Yes, with that type of stock you should be able to maybe take some share from these competitors. Just switching gears on competitive dynamics. If you look at the South Africa market, you have Inseego selling their seat track business, and you have maybe AMIX Telematics who lowered some headcount while you're still investing for growth. Maybe you could talk about the competitive dynamics in that market and if you think you are poised to maybe gain some market share.

So, all of South Africa our competitors are sophisticated, they've all got a good product. We believe that we gave our position to compete with all our peers in South Africa and we see the market is largely underpenetrated. We certainly believe we've got a good management team on the ground and we continue to make progress. And I believe we will continue to see growth and I'm hoping to push or accelerate its growth in South Africa. So, I feel quite confident we're going to do well. But there's no reason for our peers also not to do well.

Thanks. Last question for me, kind of an open-ended one here and then I'll pass the line. But as you look at fiscal 2022 and beyond, and with the areas you're investing in, are there certain markets -- I know it's hard with COVID, but are there certain markets you are more bullish about in terms of demand trends, whether it be from some of your new technology solutions going into those markets or just some areas where the economies might be reopening faster than others?

So, I think in all the markets we operate in there is demand. It really is at the end of the day -- of our teams and to the way we allocate capital into these different geographies. Clearly we can't -- there's a limitation of how much we can do at any given time. And we're certainly striving to grow as quickly as we can. And even under COVID I think the fact that we grew 16% despite all these restrictions I think is a good outcome. I certainly believe would have done a better had that not been the case. And we currently have also vetted quite a lot through COVID. Our biggest restriction now is not really even COVID; it's our ability to get senior executive -- senior management onto the ground to interview, to train and to guide and that's really important. And you try and do it through a Zoom call and it's not that effective. So, I think all markets are exciting that we are in. And obviously we will continue to focus on our key markets under COVID because that's the easiest because we've got already strong management on the ground.

It certainly seems like you grew much faster than your peers from our work during the fiscal 2021 challenging year. So, congrats on the execution and best wishes for continued success. I'll pass the line.

Operator, if you could move to Daniel from Bank of America to ask a question, please.

Daniel, please ask your question.

Congrats on the IPO and thanks for taking my call here. I just have a couple questions for you. The first one is a bit of a clarification perhaps. You are seeing good strength in 4Q. It sounds like it's extending into 1Q so far. Can you just go back and dissect for us what's driving this? How much of it is the COVID situation improving versus how much of it is maybe the recent investments that you're making are already bearing fruit? Or maybe it's just something else. But if you can walk through the components driving the growth that would be helpful.

So, Daniel, we've got at the moment over 3,000 employees. At the yearend we had 2,999. So, we've now over 3,000 employees. To bolt the teams that we bolt we vertically integrated. We do everything ourselves. It has taken us many years to get to where we are today. Given -- and if you can just recap the fundamental part of your question, sorry, I lost because I started talking. If you can just give it to me, please, again. Sorry, Daniel.

Yes, I'm just curious -- recently it looks like the net subscriber trend is improving, you guys are seeing it picking up. Is it more the COVID situation getting better or is it more you guys did some recent investments and you're starting to execute better around those?

We've grown to 3,000 stocks, so that took quite a lot of investment. Before FY21, in other words in December 2019 when we did our budget for FY21, we were at our best. We had planned to add -- to employing in the region of 750 people. And then COVID came in the beginning of February and started really adding an impact on us in about the middle or end of February last year. That obviously -- we then froze hiring people and we froze all capital allocation into growth. And we saw that was the right decision, specifically for the first two quarters. We then decided to start investing that money that we anticipated starting to invest around March. And we started doing it I would say around September/October. So, we started seeing that, but the capital allocation itself wouldn't just get you there. You'd also have to have more open market and more less restrictions around COVID. So, we believe that in FY21 we'll have certainly done much better without COVID. And I certainly believe that all the investment we are doing is -- although there is an element of risk because if COVID goes into severe lockdowns like it did 12 months ago, that would be -- it would be -- it would sort of -- our bottom line because it will be carrying operating expenses. But I certainly believe had it not been COVID, it just really is our organic growth. And us being able to grow our distribution, grow our business, improve on what we bought. And we continue improving on our distribution, on operations, on our platform. It is really like a garden. We're continuously improving on our business. So, I think it's just a product of us improving.

Sounds good. And clearly you want to invest more for faster growth and operating margin coming down a little bit. Is there a floor for operating margin that you are comfortable with? Or kind of draw the line of how you would grow in terms of increasing the investment for higher growth.

My view, Daniel, is that when I look at the business I don't really look at the margins as being my key driver. Our key driver for us is are we allocating capital, is it being used prudently, are we going to see the rewards? And for as long as we believe we've got things under control, we've got the right management in place, we will continue to invest in allocating capital. The more you allocate, because of the nature of the business that a lot of the expenses in acquiring new customers, they basically go through your income statement on year one, in actual fact on the day you acquire those customers on the month. Obviously those expansion costs and those customer acquisition costs will ever drain on your P&L in the short term or in the current year. But our customer retention is 95% -- to retain a customer is 95%. So, we will get that -- for many years to come we will get the reward of acquiring those customers. So, given this philosophy and way of looking at business, I would say that we don't put a bottom to that. It's more about our ability to prudently allocate capital. And that's for us the most important thing. And for that you need the right staff and the staff needs to be trained as well to be able to grow fast. Does that make sense?

Yes, yes, sounds good. And just last one from me. The Carzooka [ph] opportunity is pretty interesting. I know it's super early, but it sounds like you guys have an interesting hybrid strategy where you may look into buying some used cars and also help aggregate or connect the sellers to the buyers as well, more of a platform approach. So, just hypothetically, if Carzooka does really well coming out of beta, how much more investment is required to support Carzooka and would that be pretty capital-intensive as well?

So, we are quite excited about the Carzooka opportunity. We are still in our beta phase and we -- I'm very excited and so is my team. There's many ways of the capital that you require. Banks are very much willing to finance us. So, if we wanted to take bank debt, it is easily available. Or we could go to the markets and raise capital. We can go either way. The reality is, I believe, worth $200 million. We can do really a lot. And for us to raise $200 million, whether it's through finance through bank or whether it is through raising capital, we can certainly do that. But we'll always do it in a very prudent way where we'll get a good return on capital. So, initially it might be an expense for us while we break out the model. But once we've got the model and we've got the right people in place, I certainly believe it's going to be a very good business. And I think it's coming on really well. I'm very proud of the R&D team, what they're delivering. Each day I just see improvements. And we're also growing -- starting to grow our operational staff in terms -- our -- experimenting. And I'm feeling very good about the business. But I certainly believe this is 12 to 24 months before we see real business coming out of it. Operator, if you could let Parker from Stifel ask questions, please.

Certainly. Parker, please go ahead.

Great quarter. Just wondered if you could discuss the live video solution for a second. How mature that is from a product standpoint? And maybe give us a sense of how many of your customers have adopted that solution and where you expect that to trend maybe throughout the rest of 2021.

So, on that solution, the actual hardware is third-party hardware. And on top of that hardware we put in our firmware. So, we've got two different providers of hardware. We asked -- telematics department. And we believe that the video telematics department will become a very important part of the business and it will be something that we will see grow over the coming years. At this point in time, we've got it with strategic customers. And we actually have run out of stock and we haven't got inventory at this point in time. But -- we've got back orders for the video telematics -- for the video telematics. And we certainly believe that's also going to be an important part of the business, but it will never be as big as the traditional telematics.

Got it. Makes a lot of sense. And then core assets have really been driving a lot of the growth in the story for a long time here. But as we think about emerging opportunities, areas like bikes and scooters and micro mobility, how well suited is the platform for those assets today? And how substantial, I guess, do you think that opportunity could be as we look out over the three- to five-year horizon?

So, our platform allows -- -- even do prisoner tracking. So, the Singapore prisoners that are able to stay at home, we've got that contract in Singapore. So, our platform allows us to check any tracking device. And then we take the data, we contextualize it and we can do quite a lot of the data whether it's motorcycles, whether it's boats, whether it's big lorries, it doesn't really matter for us. So, I think the opportunity is huge and the way we're developing our platform it's really to deal with mobility as a whole, irrespective whether it's a large truck delivering mining equipment or whether it is an engine or whether it's a passenger vehicle. And we're driving our platform to be a solution for -- irrespective whether it's for passengers or whether it's for cargo and it's for multiple use. And we've got a very comprehensive platform that we believe is very easy to use whether it's enterprise customers or consumers.

Got it. And then maybe a last one for me. You mentioned a lot of different COVID lockdowns and restrictions in some of the key markets, particularly APAC. Is that something that could potentially delay installation of the subscribers that you're bringing onto the platform? Or do you think that you are largely insulated from any potential risk there?

No, we've got -- , just to give you a bit of color. We've got one customer now that's signed up -- 350 vehicles. Just to go and install these vehicles all -- technicians have to do COVID tests. They've got to do swabs. The logistics around COVID, specifically in a place like -- I'm talking a Singaporean company, it's -- just to get your technicians to work and to be able to do it and to do all the COVID tests in itself is already quite stressful from an operations perspective. So, COVID is having an impact on us even on our day-to-day operations in different geographies in different ways. Operator, if you could allow Anthony from Investec in, please.

Certainly. Anthony, please ask a question.

Congratulations on a good quarter and congratulations on your listing. I just want to ask philosophically -- I mean clearly COVID is still around and any headwinds that you are navigating are unfortunate and very restrictive. But it kind of feels like the business was operating in third gear and you've been knocked back a little bit. But you said 12 to 24 months out you hope to be running at full throttle. Can you just give us a sense, without necessarily attaching numbers to it, just around your ambitions? To go from third gear to about sixth, seventh gear, how much faster can the business expand? And then what does that mean in terms of marketing, R&D, expense? What's the capacity of the business to -- or in order to drive that top line?

So, Anthony -- thanks for making time for us, Anthony. So, the thing is the way we've grown our business -- and you'd be familiar with us and our story for quite a long time. We've always grown our business in a way that -- we were very focused about margins because most investors in South Africa there really looked at about -- our margins, our profitability and about our dividends. And if you recall, two or three years ago I started to accelerate growth. And we got subscriber growth to nearly 30%. And most investors were very unhappy that I started growing the business so fast, because there was a disalignment between top-line growth and bottom-line growth. And what our thought was starting to be a great result for us to accelerate. Actually our shareholder base wasn't -- didn't really appreciate it. So, for us to grow in the high 20%s, we've done that already before COVID. And if you look at our average unit growth, it has been 22% pre-COVID in terms of -- pre-COVID for five years it was 22%. Where clearly some years just before COVID or the year before COVID we saw growth close to 30%. So, ideally what we'd like to do is to grow and double our business every two years. That's what we'd like to do as management. But I think if COVID is out of the way that's when we can really allocate capital for that type of growth. But obviously even that type of growth doesn't come overnight. We certainly have also invested a lot, specifically in the last Q4, in HR. In terms of recruiters, I think our headcount -- in the HR department is one of the departments that's increased the most. I think our team has tripled…

There are currently no questions. Please continue, sir.

If there are no more questions, I thank everybody for joining us today wherever you are. And thank you very much for supporting us. Thank you. Bye-bye.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.