Good day and thank you for being here. Welcome to Karooooo Ltd. Cartrack Fourth Quarter and Full Year 2021 Results Call. Please note that today's conference is being recorded. I would now like to pass the call to Mr. Zak Calisto, Founder and CEO of Karooooo.

Good day to everyone. I want to thank everyone for their interest and time in listening to our earnings presentation for FY21. This marks our first presentation as Karooooo, following our new listing on NASDAQ and the JSE. Today, we will present the Karooooo numbers. As of February 2021, Karooooo was a privately owned company, fully owned by me. At that time, Karooooo held 68.1% of Cartrack, which was listed on the Johannesburg Stock Exchange. In April 2021, Karooooo became listed on NASDAQ and the JSE, now owning 100% of Cartrack. Cartrack, founded in South Africa, is now headquartered in Singapore under the listed entity KARO. We envision a future where all vehicles will be connected, and data will drive all aspects of mobility. Our mission is to create the leading mobility SaaS platform that maximizes the value of data. We have a proven track record of consistent organic growth and emphasize that our growth has always been organic. We have scaled, grown, and remained profitable for many years. As of February 2021, our subscriber base reached 1,306,000. Our revenue for the fourth quarter was ZAR616 million, with a net income of ZAR128 million. We saw consistent growth in our most recent quarters and throughout the last seven years that Cartrack was on the JSE. Our strong financial discipline has allowed us to grow while being profitable. Despite the impact of COVID, we managed to increase our subscriber base by 16% in 2021. Revenue grew by approximately 18% during this financial year, with 96% of our revenue being annuity-based. Our annual recurring revenue as of February 2021 stood at USD163 million, or ZAR2.4 billion. The operating profit margin remained unchanged from FY20 at 32%, while our EBITDA margin improved from 48% to 49%, with earnings per share growing by 19% for Karooooo. Our EBIT profit per share increased by 20%, with the variance attributed to transaction-related costs. We closed the year with over 75,000 commercial customers. Throughout the financial year, we experienced fluctuations in our quarterly net subscriber additions, primarily due to the effects of COVID. In the first quarter, our subscriber additions dropped to 7,000, a 76% decrease from the previous year, and a downturn in comparison to the Q1 where we added 41,600 subscribers. However, Q3 and Q4 proved to be record-setting quarters; Q3 saw an addition of 71,000 net subscribers, while Q4 added 60,000 net subscribers. We gained solid momentum in the latter half of the financial year, leading to an annualized growth rate of 23%. As mentioned, our annual recurring revenue for FY21 was USD163 million. Our operating profit continued to rise, increasing by 15% during these challenging COVID times to ZAR727 million, approximately USD50 million. Our adjusted EBITDA was around USD77 million, considering an exchange rate of ZAR14.62, indicating a 21% growth in EBITDA. Despite the effects of COVID, we believe we had a successful year. Our net cash flow from operating activities improved by 10% this financial year to ZAR931 million. Cash flow from investing activities rose by 44%, mainly due to scaling our business in the latter half of the financial year. While our free cash flow decreased by 12% as anticipated, we maintained a low subscriber acquisition cost. The cost to acquire a subscriber has improved over time, with capitalized amounts decreasing from ZAR1,488 to ZAR1,433, while non-capitalized costs due to sales and marketing rose to ZAR660 from ZAR520. This increase is linked to staffing growth, particularly in Q4 and late Q3, with new hires who are still ramping up productivity, providing a future sales pipeline. We have solid operating metrics, with annual subscription revenue growing from ZAR1.9 million to ZAR2.2 million, reflecting a subscription growth of 17% in FY21, down from 24% the prior year, largely due to COVID's impact on first-half growth. Our average revenue per user increased marginally from ZAR151 to ZAR155, remaining consistent over the past 15 years, as our focus has been on customer acquisition rather than increasing ARPU given the market's attractiveness last year. Gross margins remained stable, with FY20 at 70% and FY21 at 71%. We have significantly increased investment in R&D, which rose as a percentage of subscription revenue from 2% to 5%. Sales and marketing expenses as a percentage of subscription revenue increased from 10% to 11%, while general administration costs decreased from 24% to 22%. We expect these trends to persist long-term. The operating profit margin held steady at 32% for both years, and our adjusted EBITDA margin saw an increase from 48% to 49%. Fundamental metrics indicate a large customer base across various vehicle types, enabling us to process and contextualize billions of data points for exceptional customer value. Currently, we gather over 50 billion data points each month, sourced from our proprietary devices and third-party systems. Utilizing AI and data analytics allows us to produce intelligence reports and insights that enhance insurance value for our customers. With this data, we can provide insights into the quality of the vehicles our customers drive and assist them in achieving the best resale values. Our platform allows customers to manage administrative tasks efficiently, consolidating various records and information through the Cartrack platform. Our communicator ensures visibility and communication with drivers and staff, which has become increasingly vital in a more e-commerce-focused environment. We operate in a large, underpenetrated market, with expected annual growth of 26% from 2018 to 2026. As of 2018, our global sales were USD12.2 billion, indicating significant market potential as we aim for a total addressable market of USD77 billion by 2026. We are well-positioned for growth across segments, including consumers, small, medium, and large enterprises, with consistent year-on-year growth across all. Our customer concentration risk remains low, with the car rental sector making up less than 1.2% of our revenue, while our largest customer contributes less than 2.3%. Our commercial customer retention rate is 95%, showcasing growth across all segments. South Africa continues to be our strongest market, though we faced challenges elsewhere in Africa, especially in Q4 due to COVID. Still, we are seeing growth in Europe and Asia, although travel for our senior staff in Singapore has faced obstacles. Subscriber data reflects that in South Africa, subscribers rose from 869,000 to 1,014,000, a 17% increase, matching the growth in subscription revenue. In Africa-other, subscriber growth was at 3%, but subscription revenue decreased by 12%, largely due to credit extended to struggling customers. In Europe, we saw a 12% increase in subscribers with a 27% rise in subscription revenue, largely driven by a weaker Rand. In Asia, the Middle East, and the USA, subscribers grew by 20%, with a 22% increase in revenue. Looking ahead, we believe we are poised for growth, expecting our subscriber base to reach between 1.5 million and 1.6 million by FY22. For subscription revenue, we forecast between ZAR2.5 billion and ZAR2.7 billion. Our adjusted EBITDA margin is anticipated to be between 45% and 50%, reflecting increased staffing and expansion costs, alongside COVID-related uncertainties. A reconciliation of the Karooooo and Cartrack EBITDA and net income information is available for anyone to review at their leisure. Thank you very much, and I now welcome any questions. Morné, our CFO, is here with me, so please feel free to ask any questions. Hello, everyone. I would like to clarify some information. On slide 9, I stated that cash flow from investing activities increased by 43%, but it was actually 44%. On slide 11, I referred to ZAR2.2 million in subscription revenues, but that figure was actually ZAR2.2 billion. Furthermore, the average revenue per user rose to ZAR154 instead of ZAR155. The sales and marketing expenses as a percentage of subscription revenue increased from 9% to 11%, rather than from 10% to 11%. Now we'll take questions from the audience. The first question comes from David Everall. Could you share some details about your APAC segment? What investments have been made over the past year to enhance sales and the number of installers? David, over the last 12 months, trading in Asia has been quite challenging. Pre-COVID, our approach to growing Asia was very centralized, utilizing Singapore as our head office. However, when COVID hit, it hampered our ability to grow because senior staff were unable to enter territories. We've primarily relied on Zoom calls for management, which isn’t as effective. Despite this, we've invested fully in growth in sales and installers, although we're unable to invest as much as originally planned and have only employed critical staff. We hope to see improvement in the near future. Singapore’s recent travel rule change, where quarantines have increased from two weeks to three, has added to our challenges. What was the growth in subscribers in APAC in Q4? I don’t have that information at hand but can provide it later. When do you anticipate accelerating growth? I believe for APAC, acceleration in growth hinges on overcoming COVID challenges. We're uncertain when that will happen. However, I maintain that even under current circumstances, we are poised for good growth. Regarding monetizing data, it's important for us to use this data for the benefit of our customers. While many peers may pursue selling data, we're focused on delivering value to our subscribers instead. We’re not quite ready to commercialize this data yet, but we will explore it in the future given the data volume we have.

Our first question comes from Matt Pfau with William Blair. Please go ahead.

Congrats on the nice traction and subscriber additions, Zak. I wanted to ask about the momentum in the first quarter. Did you see the sustained growth from the fourth quarter into the first two months of this quarter?

Sorry, I didn't catch your name. Who is speaking?

Yes, Zak, it’s Matt Pfau from William Blair.

Hi, Matt. We have now surpassed 1,350,000 subscribers. We continue to see growth from the last few quarters. Traditionally, our weaker quarters are Q4 and Q1 due to holidays. However, we are pleased with our Q1 performance thus far.

Understood. For the subscription revenue guidance for fiscal 2022, how should we think about its growth cadence? Do you expect growth to improve throughout the year or remain relatively stable quarter-to-quarter?

Matt, to be honest, I'm not certain myself, which is why we've given a wide range. Each month, I contemplate COVID impacts and the emergence of new variants. Everyone goes into and out of lockdown, with varying news of quarantines and vaccinations. Hence, our wide range for guidance. Fundamentally, the best way to forecast our subscription revenue is to average our subscriber growth from this year and the previous year. Last year's subscriber growth was 16%. Depending on our current growth, one could anticipate around 23% year-on-year growth. However, COVID's implications will dictate actual outcomes. We've taken the risk of hiring personnel, believing that a lack of investment could hinder our growth.

Thank you. Can you also discuss the investment priorities for fiscal 2022? Is adding headcount in the Asia region a priority?

Yes, we are heavily investing in R&D and our platform. That remains a critical area for our continued growth. We're increasing our headcount across all regions, including Asia-Pacific, South Africa, and Europe in pursuit of accelerated growth.

Lastly, can you explain the larger disconnect between subscription revenue growth and total revenue growth this quarter?

In Q4, we had significant bundled sales with a large mining company, Anglo American De Beers. They preferred a cash arrangement, which created a disparity between our subscription revenue and total revenue. Typically, the first three quarters provide a clearer reflection of our subscription revenue's percentage of overall revenue. Thank you, Matt. I now have a question from Roy Campbell. Can you break down last quarter's growth by region? Which segments did you see growth in? We experience growth in all our segments including enterprise customers, consumers, and small/medium enterprises. For specifics, I recommend looking at our Q3 presentation which outlines the number of customers across those verticals. We now have over 75,000 commercial customers, growing from more than 70,000. I don't have the exact figures right now, but I can obtain them for you.

How should we consider ARPU moving forward? I’ve heard that ARPU is higher in Asia.

We’ve maintained consistency with our ARPU. Many of our peers focus on increasing ARPU, but our aim is to provide value without altering ARPU at this stage. Current market conditions are underpenetrated, and peaking ARPU early may be premature. Once the market matures, we will adjust accordingly. Our immediate focus is on acquiring more customers.

Any commercial progress on insurance and used car sales projects?

Yes, we're making good progress there. I believe we will provide independent reporting on these segments by the second half of FY22, although we're still in the initial stages and optimistic about it.

Zak, regarding the industry, some competitors are struggling to source components for their connectivity solutions. Can you share your ability to source components for new customers? Are you experiencing any impacts from global supply shortages?

Yes, there are indeed supply shortages affecting us. Our inventory levels have risen significantly as we anticipated these shortages in the last six to nine months. Our suppliers have indicated lead times are moving to 18-24 months, but we currently have sufficient stock for the next 9 to 12 months. Hence, we don't expect shortages for FY22.

With that stock availability, should you be able to capture market share from competitors? Regarding South African competitive dynamics, since some competitors are reducing headcount while you’re investing for growth, can you provide insights into this?

In South Africa, while our competitors are sophisticated with solid products, we believe we are uniquely positioned to compete. The market remains largely underpenetrated, and we have a competent management team driving our progress. We will continue to see growth while hoping to accelerate it.

As you plan for FY22 and beyond, are there any particular markets you find more promising in terms of demand trends, considering your new technological solutions and areas with faster economic reopening?

We see demand in all markets we operate in. Ultimately, it’s about our team's capacity and efficient capital allocation in different geographies. There's a natural limit to how much we can operate simultaneously. Despite COVID, achieving 16% growth reflects good outcomes. Our current challenge primarily revolves around getting senior management into different regions for interviews, training, and guiding our efforts, as remote management via Zoom is not as effective.

Congrats on the IPO and thanks for taking my call! It sounds like you're seeing solid strength in Q4, extending into Q1. Can you detail what's driving this? Is it more due to an improvement in the COVID situation or recent investments bearing fruit?

As of now, we’ve surpassed 3,000 employees, up from 2,999 at year-end. We've integrated our teams vertically and developed our capabilities over several years. To recap your essential question: our subscriber trend improvements are a combination of both the easing COVID situation and the recent investments we've made.

Great! Looking ahead, as you plan to invest for faster growth, is there a floor for operating margin that you're comfortable with in terms of the balance between growth and expense?

When evaluating our business, I don’t prioritize margins as a driving factor. Instead, I focus on the prudent allocation of capital and ensuring effective management. So long as we have these aspects under control, we will persist in capital allocation, even if it temporarily impacts margins. Our customer retention rate is at 95%, so customer acquisition costs will yield long-term rewards. The Carzooka opportunity also looks exciting. Although we're still in beta, we see potential for both buying and facilitating used cars as part of a hybrid strategy. Depending on how well Carzooka performs post-beta, we may explore capital-intensive opportunities. We can easily finance through banks or market raises as needed. We expect significant progress within the next 12-24 months.

How mature is your live video solution from a product standpoint? Can you give me a sense of how many customers have adopted it?

Our live video solution relies on third-party hardware integrated with our firmware. We believe this sector is important and will see substantial growth. Currently, we have strategic customers utilizing this solution, but we have run out of stock and have back orders due to high demand.

Considering the emerging opportunities like bikes and scooters, how well does the platform cater to those assets? What could the opportunity look like in a three- to five-year time frame?

Our platform is adaptable for various vehicles, including motorcycles and micro-mobility solutions. We have the capability of adding functionalities for diverse tracking applications. The market potential is significant, and our development strategy focuses on addressing the entire mobility landscape, whether for personal or commercial needs. We do face delays in installations for new subscribers due to COVID restrictions. Implementing our service requires compliance with various health protocols, including testing compliance for our technicians, adding logistical challenges to our installation processes.

Congratulations on a good quarter and your listing. Without attaching specific numbers, can you speak to your ambition for a rapid expansion? What does your capacity for growth depend on for accelerating revenue?

Thanks for your time, Anthony. Historically, we have prioritized margins as different investors have held us accountable for profitability. I've previously mentioned our drive to accelerate. Our goal has been to double our business every two years. If COVID doesn't hinder our operations, we can allocate capital for that growth focus. But we may pause hiring in the immediate term to evaluate vaccination outcomes on operations. Nevertheless, I'm content with our current trajectory. If there are no further questions, I'd like to thank everyone for joining us today and contributing to our discussion. We appreciate your support. Thank you everyone, and goodbye.

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