Welcome and thank you for joining Karooooo's Q4 and Full year's FY 2023 Results Webinar. I'm Carmen, the Group Chief Strategy and Marketing Officer, and together with Hoeshin, our Group Chief Financial Officer, will be taking you through our performance, growth and future plans. Our team, led by our CEO and Founder, Zak, is committed to delivering on our strategic goals and creating long-term value for all of our stakeholders. All shareholders and investors are advised to read this disclaimer. We will be reviewing all three of Karooooo's business units in today's webinar, namely Cartrack, Carzuka and Karooooo Logistics. Karooooo is not just embracing the future of operations, we are helping to find it. We understand that mobility is core to all operations and see the large value in not just connected vehicles and equipment, but in connected teams and data-driven decision-making. By leading the way with innovative solutions and bold new practices, we are on a mission to be the leading operations cloud. We envision a world where operational frictions are eliminated and businesses can operate in a seamless, efficient, and safe way that enables them to achieve more with less. But achieving this is becoming significantly more difficult for operators. They're running 24-hour operations, their customers' expectations are increasingly leading to more complicated jobs that span multiple teams and departments, their employee expectations are also increasing. Everything needs to be in real time, new regulations keep popping up, costs are skyrocketing. There's new technology emerging daily. Teams are using more tools than they can remember. There's an overwhelming amount of data available, a little of which is leading to actionable, real, tangible insights. Things have become complex and they are unmanageable without a simple but not simplistic, solution like ours. Throughout our 17 years in the industry, we…

We'll now talk through Karooooo's financial performance for quarter four FY 2023. Please note that all comparisons are against quarter four FY 2022, unless otherwise stated. The performance of quarter four has been strong, and our cash generation continued to bolster from our profitable SaaS business model. As expected, after substantial investment for future growth in all segments, operating profits and earnings per share for the quarter rose by 60% and 51%, respectively. Year-to-date operating profit increased by 26% to ZAR 882 million, and earnings per share increased by 27% to ZAR 19.29. This is the result of our prudent and strategic investment growth strategy. Free cash flow up by 54% in this quarter and 44% on a year-to-date basis. This result was achieved despite the group's strategic investment in the expansion, brand building, and customer acquisition for long-term growth. Considering the strong earnings and free cash flow, clean and unleveraged balance sheet, we are pleased to declare a record dividend of U.S. $0.85 per share. The dividend will be paid to the shareholders in July 2023. We are confident that this will not impact our growth. We view our business and report our performance into three segments, namely Cartrack, Carzuka and Karooooo Logistics. Our total revenue increased by 24% to ZAR 916 million at the end of Q4 and ZAR 3,507 million on a year-to-date basis. Cartrack grew its revenue by 16% to ZAR 796 million at the end of Q4 and 17% to ZAR 3,076 million on a year-to-date basis. Operating profit for the year increased by 28% to ZAR 915 million, and operating profit margin stood at 30%. Cartrack's year-to-date EBITDA margin at 47% is in line with Karooooo's planned investment for future growth and management guidance range for 2023. Carzuka’s steady expansion continued to justify our…

Good evening or good morning, wherever you are. It's Zak speaking over here. And I'm just going to read out the questions. So the first question I've got is from Kiran from William Blair.

Can you discuss the importance of the OEM partnerships with BMW and Mercedes and are there more in the pipeline?

I'd see the many occasions before that eventually their OEMs, they will have their own telematics solutions and they'll have their own platforms. Their own platforms will be very much about the diagnostics of the vehicle and the safety of the vehicle. And our platform is really about helping customers with the operations and with things outside the diagnostics, but clearly, we also do the diagnostics. And this is just an example where we now get the data from the OEM devices and that data then gets into -- goes into our platform. Are there any other in the pipeline? We are talking to all the other European motor manufacturers. We are in final testing with some. And I believe by the end of Q2, we'll probably be adding about another five OEM brands onto the portfolio. We do see as the go-to-market strategy with this only really adding value to us by FY 2025, as we're currently doing the integrations into BMW and Mercedes, but then we've also got to get the distribution right. And this obviously is a long-term project and a long-term partnership. Another question from Kiran at William Blair.

What are your expectations for Asia region in FY 2024?

It's clearly -- we've got two months into the region. Clearly, Asia in March and April has outperformed in the other regions in terms of percentage growth. And we clearly are employing people and building our distribution capacity. And that is our focus at this point in time. It's just holding that capacity to distribute. And like everything, it's not always easy to build that capacity. It takes a lot of effort, a lot of energy, a lot of trial and error, and we're very busy with that, and we might content with the traction we've seen.

Next question from Miles Fury [ph]. What is Karooooo's current staff complement and what percentage do you expect to increase in FY 2024?

As at the end of February 2023, our staff was just over 4,000 staff. And we probably intend finishing off the year with about 4,800 staff members.

The next question also from Miles Fury. Why are you having any difficulty in filling staff vacancies in Southeast Asia and Europe?

The reality is filling staff vacancies is never easy. If you do find somebody that clients are easy, please, you know I mean really you can come and teach us what the recipe is, but it's always difficult, especially if you want to do it in the way we've traditionally grown our business, which is very much financial discipline, making sure that the staff are trained, that you build up the staff, and it's never easy, but that's what we've been doing for many years now.

The next question from Park Laine. Zak, how are you thinking about the seasonality of net subscriber additions throughout the coming year?

When you consider the change that you've seen to start in first quarter of FY 2024. So if we look at the first two months of Q1, it's very much in keeping with our expectations. We've added about over 40,000 net subscribers in two months. So I think we're having a relatively good Q1. And typically, over a decade plus of history, what we normally find is Q1 is traditionally a difficult quarter, and Q4 is a difficult quarter. And that's predominantly because of all the public holidays that you get at the end of the year and that you get in April, you, either the Christian holidays or the Jewish holidays or the Muslim holidays, but there's a tremendous amount of holidays and festivities in Q1. So it's normally a weaker quarter. And hopefully, we'll have a better Q2 and a Q3 quarter.

Next question from Mr. George. Can you give us more details on the partnership with BMW in [indiscernible]? What value -- what's value proposition has Cartrack due for both OEMs, and given that they've got their proprietary telematics service?

I think that question has been partially answered when -- on Kiran's question. Our value proposition is really that we, for instance, have got in Europe is compliance now. We -- every single vehicle, sedan vehicle, that is owned by a company they're going to have to have a -- graph holding to it. The purpose of that is that the governments do not want to see any company vehicle being driven by more than four hours by one person. And that was supposed to come into play in Q4 of last year. It's now been postponed to Q2 of this year. We're the only company in Europe that's actually been approved and that's why they have postponed it because they want to get more of our competitors to have that technology approved. And clearly, there will be plenty sedans, which will require this technology because a lot of these sedans belong to companies. And over and above that, there's other services that we can supply that the OEMs are not geared to supply certain services.

Next question from Rudy Funmicker [ph]. What threats, challenges and opportunities as the shift to electric vehicles post for Cartrack?

We're very fortunate really that we are at the moment that we are in Singapore. So Singapore is probably in the top five leading countries with electric vehicles, and we're very close to the infrastructure of electric vehicles, and we are developing technology to deal with this. This will give us the advantage that once it takes bigger momentum in Europe and specifically in South Africa, we will have the technology that today we really give in to the Singaporean customers, we will be able to scale that technology into other regions.

Next question from Alex. Can you talk about our subscriber growth ended in March, April relative to Q4, either to look on a geographic basis?

So I think, Alex, all the question has partially been answered. On a geographic basis, clearly, Asia continues to be our strongest region in growth. But what's encouraging is we saw a strong recovery in South Africa, predominantly as we have geared ourselves to operate in a more difficult environment. And predominantly, that's been caused by the power outages, the traffic lights that are not functioned, the delays. And so it's encouraging what we're seeing in Q1.

The next question from Matthew at Conference Impact Fund. Please can you comment on ARPU for Cartrack by regions?

We've been a very steady ARPU if you take Europe, South Africa, the rest of Africa very steady. Asia's ARPU is significantly higher than in any other region. But the reason for that is that we've got a huge base of customers in Singapore where doing business in Singapore is also much more expensive than in other regions. So as Indonesia, Philippines, Thailand, Malaysia gets bigger, those ARPUs will trend to be very similar to South Africa and the other -- in the other regions we operate in.

The next question from Alex. How are you thinking about sales and marketing in FY 2024 within the context of your outlook?

Clearly, this is a focus area. It's the hiring, it's the training, it's the retention, it's what we've been doing. And it hasn't been easy. I think what we saw in FY 2023, it was post-COVID. It was like the world that's been reshuffled in terms of talent, whether it's R&D talent, whether it's sales stock, whether it's administrative staff. So that's all starting to settle quite nicely. And hopefully, we'll be able to find our feet and be able to expedite the hiring and the training and get stronger year by year.

The next question is from Kudsia. In relation to the unit accounts, we marked time revenue less cost of acquisition of its allowance you reference 7,000 excess of acquisition. What is the current lifetime cost to service the customer has at this rate between administration and sales and marketing to resell rolling over customers…?

So I'm not going to read your question twice or three times, so I'm just going to speak because sometimes you got to read these questions a few times to fully understand what you're asking. Fundamentally, if we look at the unit economics of a subscriber, what we got the ARPU, we've got the average life cycle expectancy, which is 60 months, you multiply those two and you get the revenue that you envisage or estimate to get from one vehicle on your platform. From where you deduct your cost of getting that vehicle into the cloud, and that gives you the 7,000 range. Then we've got what we call the average cost to service a customer, which is in the region of about ZAR 60, which gives you ZAR 60 times 60, it's another ZAR 3,600. And that gives you an estimated numbers to give you and that will lead you then to your operating profit. Obviously, with that, there's also the technical operating profit is an amount of money that you are investing in the expansion of your distribution. But fundamentally, that is the unit economics. And that's one of the tools that we use in measuring the unit economics per subscriber -- per vehicle on the platform.

The next question from Abdul Hakim. You have guided that once that you achieved here in Carzuka quarterly, revenue will be able to achieve breakeven. When do you expect to achieve this, could you provide us a time line?

Abdul, the reality is that we've developed a good technology, but we are still facing quite a lot of teething problems, operational problems, and just the normal problems that most businesses have as startups. So while I would like to feel that we will get to about ZAR 300 million relatively quickly in the bigger scheme of things over the next four to six or seven quarters, it could be earlier. It's very difficult for me to give you a time line at this stage.

Carzuka revenue dropped up 11% in Q4, what were the reasons behind this?

The reasons behind those is the long holidays, the increase in interest rates. So what affordability did drop. But I think fundamentally, our real issue there was us just slowing down the amount of staff, fixing our mistakes, and to get ready to rebuilding Q1 that we're currently doing. So it's a little bit of growing, fixing, growing, fixing. It's just a part and parcel of the way we've organically always pulled our businesses.

The next question from Muhammad. What is the real impact from power out logistic business?

I think fundamentally, we're not an island. So we rely heavily on the telecom infrastructure. And as all South Africans now, telecoms, the quality of telecoms has dipped because of the outages. Traffic lights becoming also a very big part and a problem not only for us but for our customers. We've got -- just in South Africa, we've got approximately 2,000 people on the roads between salespeople and technical people and all of that really impacts our operations. Then obviously, we've got the diesel that we use on a monthly basis because we're not getting electricity from Eskom. In our new building that is going to be totally environmentally friendly. We're going to be running on solar and on gas. And our waters are also going to be from wells [ph]. So hopefully, we're going to be more self-sufficient in the next building.

Next question from Sebastian. As the business pivots to ex South Africa markets, will you try to maintain the ARPU in U.S. dollar terms or would you be targeting the ZAR 150 price points?

I don't think we necessarily intentionally target any price point. The way we really price ourselves is really about unit economics. So the ZAR 150 that we talk about in 2023 is a very different ZAR 150 that we spoke about in 2005. And so fundamentally, it's all really is how don't we get our business to have great operating profit margins without being too greedy. And I think our current operating profit margin range is very healthy. And if we can get those at continuous at ZAR 150, then so be it. So we run our business model really about operating profit given our unit economics and given our LTV to CAC. Those are two of our fundamental tools that we use to measure our business.

Next question from Rudy Famica [ph]. Regarding Carzuka in Q4 revenue was lower than prior quarters. Was it deliberate?

I think that's been answered really. So I think I agree this question has been answered. I'll move average to David Ebral.

Could you give us a sense of the Q4 2023 balance sheet investment in Carzuka inventory PB obligations, what do you expect this to go and get this?

So at Carzuka, we put in during the whole financial year, we're putting ZAR 50 million and it's predominantly working capital, which obviously includes inventory. We believe that once we get scale and even if we have invested ZAR 1 billion into it, we've got two things we can easily get financed, banks to finance us, which all banks are willing to do, but we've decided to use our own cash. And we believe that given the ability for us to trade the vehicles at the speed we can trade them up and the gross profit margins will have a great return on investment for the shareholders, so for Carzuka. The lease obligations, we obviously will do that in a very prudent manner. And as we scale, we'll analyze each lease obligations. But I think fundamentally, we've been mindful of our investment, and we're very mindful of our investment and the return on the investment for our shareholders.

The next question from Gregory. Is growth through acquisition to build a network and network effect possible and something you would entertain?

Clearly, we have been to paying anything that makes sense. So if there was something that we could purchase or acquire to build on to our business or bolt-ons our business, we would do it. But we're also very conscious that our strength is to be -- to grow through organic growth. And we are also very cautious to a lot of opportunities to land out on our table, which we turned down because the effort to get the culture right in that target company could actually derail us and make us lose focus for many months or even years to get the integration right. So we have turned down quite a few opportunities.

The next question is from Dan Balis. How impactful were power outages in Q1, please, will you focus on dividends rather than another acquisition?

So I think partly that question Dan has been answered. Will we focus rather on dividends or acquisition? I think fundamentally, at this point in time, if it was actually up to me, we've actually the best way to delever value to our shareholders is actually to do share buybacks. But given our low liquidity, it doesn't make sense. So -- and given our balance sheet and given that we are still able to grow, we're generating a substantial amount of free cash flow on a monthly basis, we thought it was just prudent to return to shareholders U.S. $0.85 per share.

The next question from Kwan Ho. Do you see the impacts of challenger macroeconomic conditions on your additions of subscribers, the number of new additions in South Africa in February quarter 2023 is only 25k. Is it sustainable additions going forward and will the additions in South Asia start to ramp up?

So as I've mentioned before, we've had a very good two months. In the first two months, we've gone over additional 40,000 just in the first two months. We've seen good growth also in South Africa and Southeast Asia and Europe. And clearly, all these macroeconomic conditions do affect us and a lot of the time, it's really just about us adapting to the new challenges. And while we are agile and we're quite fast, sometimes it does take a bit longer than what we expected. So I see as we've given guidance for FY 2024, I feel very comfortable that even with these current macroeconomic conditions that we should be able to meet those -- the guidance that we've given.

Next question from Chris. With South Africa continued at 76 project subscriber base how are you managing the load-shedding challenges?

I think I've addressed that.

Next question Miles Fury. What volume of subscribers are required to reduce G&A to drop to 16%?

Well, I think Miles to answer that is we could drop our G&A relatively quickly. The reality is we continue to build on our back office to be able to deal with future growth. So it's not going to happen just yet. But as we get more and more market penetration, then I believe it will be very quickly that we will drop from current levels down to 12% to 16%, and that can easily happen over a period of four to five years, and it happens relatively quickly. But at this stage, we are more focused on building the backbone, the support infrastructure for growth.

And then I've got a question from Cornelius. On your returns on capital have been declining over the past five years, COVID played the part. What's management’s long-term return on capital?

Well, it depends how you measure this, Cornelius. So we could take all the cash that we've got on our balance sheet and pay it all out there's a dividend. And then all of a sudden, our return on equity will be extremely high. So it really is we could easily -- we could easily pay a much higher dividend and get a better return. I think the ROE that we've got frankly is extremely healthy, and we're very conscious of it. In terms of having no cash on our balance sheet, which is traditionally what we did have when we were only under JSE, we used to give out all the cash, then our returns would be very much in line with those days.

The next question from Prashant. How do you view our ecosystem shifting with a huge investment line to go into AI in the next year, will the ecosystems become more favorable or less for us?

Clearly, so at the moment, AI is a big buzzword and AI will continue to grow in leaps and bounds. We will be well we have got quite a lot of machine learning in our algorithms that we do with our data. We have got AI as well. Clearly, the AI we see at the moment is really good and it's very impressive. And obviously over time, a lot of this AI will filter into companies like ourselves, and we certainly have quite a road map for it. But we're also not rushing into it because we want to understand it a bit better, so that our investment in AI is done correctly. So I think we will speed up or invest further into AI. We just need the dust to settle. And I think in the next 12 to 24 months, we will be evaluating how we will use some of the AI that's in the market in our own business intelligence reports. So we are discussing it and I don't believe it will be a difficult thing to incorporate onto our platform.

The next question is from Corno [ph]. Can you discuss more about the economics of logistics business pick up, what's the market size, who are the competitors, and what's the long-term goal of profitability margin?

So at this point in time, we saw profitability margin of about 3%. We believe that can come up to 5%, 6% -- but I think the real play is actually to get the logistics platform on to the logistics stack onto our platform, where our customers can do all their long distance and their last miles through using one single platform. And that's what we're working on, and that is what I believe is really scalable and really profitable because that takes us to a SaaS environment as opposed to a delivery as a service environment. So at the later stage, our customers won't necessarily use pickup. They can use any of these cloud source delivery platforms. We're not very specific that they use pick up. We're more about looking at our customers so that they can leverage on all these other technologies to help them grow their businesses.

The next question is from David Abraham. What are you going to do with cash, isn't the time to do buybacks?

I think I have answered that. Buybacks aren't really for us at this point in time given our low -- we haven't got a high liquidity. So it doesn't make sense.

Next question coming from Patrick O'Reilly. What is your opinion on South Africa as a viable investment destination, given the many adverse challenges the country is facing?

So Patrick, my view, I am South African, I was brought up in South Africa. Since a child, I've always seen headwinds, I've always seen South Africa in turmoil. I mean nothing we see today is that different to when I was a child, 14 years old. I think the problems are different, but there are still problems. We got with other headwinds. These are other headwinds. But I think we've got a resilient economy. I will strongly recommend that anybody that understands South Africa and wants to invest in South Africa, it's a good destination to invest. Clearly, South Africa has got a lot of nuances and it's best suited for people like ourselves, South Africans to deal with these headwinds. But certainly strong governance, corporate governance, a strong economy, despite all these other challenges.

Next question from Sun Beale. Can you maintain the current payout ratio into 2024?

Well, if we -- Sun Beale, our free cash flow conversion to earnings per share conversion is extremely high. The factor of that is predominantly how fast we grow. The guidance we've given for FY 2024 was base that we are expecting macroeconomic headwinds. And given that it's still very much a guidance that we'll still grow at double-digit numbers, which is very healthy. And I certainly believe that our payout ratio could be maintained at 2024. But clearly, I don't make a decision. That is a Board decision whether we pay dividends or not. But in my mind, we certainly believe we will have the cash to do it.

The next question from Sun Beale. At which point can we expect investment in growth to seize.

Sun Beale, given a large opportunity and given all -- it's really -- sometimes I get up in the morning and I feel that we really are just a startup. There's so much opportunity. There's so much to do. I really cannot answer that question at this point in time. I think that was the final question. I want to thank everybody for joining us.

There's a question that just came through, Kotsu. How did you manage the Capex relatively low while growing at this rate?

Kotsu, so we've got quite a strong history of looking at our capital allocation in a very disciplined way. And I think it's -- sometimes it's -- we are so disciplined that we could be growing much faster, had we've not been so disciplined and I think we have thrown more money at sales and marketing and just grown a bit more wildly. So it really is our discipline. It's our organic way of growing that's allowed us the CAPEX to be quite low. Having said that, what we also saw in FY 2023 is that -- which obviously affected our operating profit negatively was that in the bundle sales, a bigger portion than we had seen in prior years was actually expensed upfront, unless was capitalized. In other words, the shareholders will get the benefit over the next four years, and they took a bigger punch in operating expenses this year. But despite that, we still got 30% operating profit, and we still did in Cartrack ZAR 915 million in operating profit. I think that's the last question. I want to thank the audience for listening in. And please feel free to contact Investor Relations should you have further questions. Thank you.