Karooooo Ltd. Q4 FY2023 Earnings Call

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, and their employee expectations are also increasing. Everything needs to be in real time, new regulations keep popping up, and 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 have a strong track record of identifying trends early and understanding how we can build a solution that will benefit customers. We sold a large amount of independent as well as interconnected challenges for customers from fleet and equipment management and maintenance to delivery operations and field work management, from risk management and compliance to resource scheduling and vehicle procurement. By digitally transforming operations and offering tools that help guide our customers in navigating their challenges, we add strong value to their daily operations. Karooooo plays in massive interconnected and largely untapped global markets. According to analyst estimates, operations account for over 40% of global GDP. We have a huge runway ahead of us. Businesses are becoming more aware that IoT data is critical to improving their operations and operations are increasingly more cross-functional, meaning the interdependencies between the problems we solve are expanding along with the opportunity ahead of us. We are only at the start of a large long-term growth opportunity. Globally, Karooooo saw a 19% increase in the number of commercial customers using its cloud platform. As of Q4 FY 2023, we helped over 105,000 small to large businesses across diverse industries optimize their operations, and we continue to see no customer or industry concentration risk. Customers have adopted our solution in varying ways, but all rely on our platform for their operations. The vast diversity and geographies, customers, and applications of our platform speak to our strong ability to create a sticky solution localized to market needs in a scalable manner. Our strong track record of profitably growing at scale is best explained through an understanding of our fundamental business culture and principles that Zak took to market in 2004. Firstly, we are fully vertically integrated from sales to technical installations, R&D to customer care; we do it all ourselves. This has given us in-depth tangible knowledge of the day-to-day operational challenges our customers face. This means that we have been building operational software that links different business units and solves complex problems since we were founded. We also know that not all data is useful, and it's the ability to link data from different sources and manage to communicate that in a simple to understand and execute way that makes a difference. Most importantly, we ensure our technology is setting our businesses up for success today, tomorrow, and all days ahead. Our technology does not just focus on detecting problems and remedying the damages; it also focuses on tackling the root cause of challenges to prevent them from occurring in the first place. Secondly, we build scalable solutions. We went to market with a solution that solved 80% of all customers' problems and did not focus on developing a niche product for a specific industry or customer. This has helped us because building for scale rather than customizing forced us to learn how to distribute successfully at scale across different regions and through different macroeconomic environments. We've also learned that customers need to have everything in one place and understand that alone, we are unlikely to provide all the data needed to fully contextualize the business. So we've ensured our platform has open APIs and have built an ecosystem that truly addresses the needs of a business. This increases our platform stickiness and future-proofs our solution as customers' needs evolve. And finally, we focus on delivering a world-class customer experience. When we launched our fleet management solution, we went straight to cloud and we were the first to market, allowing customers the convenience of choosing a location and time for their IoT installations. This customer-centricity has helped build strong foundations for our business. Today, we consistently invest in and improve on our proprietary internal systems and tools that empower us to exceed our customers' expectations. We see many companies beginning to struggle once they reach a certain scale as they cannot efficiently manage so many moving parts. Our proprietary internal systems allow us to remain extremely streamlined in servicing our customers as we grow at scale, ensuring we maintain our strong customer centricity and efficiencies. Constant innovation is our status quo. We always ask, is there a better way to do this? We do not believe that because it was the right way to do things two years ago, it is still the right way of doing things today. And finally, we work with our customers to guarantee our solution fits into their business and is easy to implement across all stakeholders. This ensures strong uptake and long-term stickiness as customers very quickly feel the strong ROI of our solution. Fundamentally, our foundations have allowed us to successfully differentiate ourselves for strong execution, and we consistently build for the future. We are forward-looking and are building a sustainable business that will benefit stakeholders for generations to come. In summary, we win for the following reasons; we have unique go-to-market strategies that challenge the status quo and focus on solving problems. We place full focus on providing a great customer experience. Customers know they can rely on our solution as the backbone of their operations. Our culture is entrepreneurial, our teams take ownership, are innovative, and remain agile to adapt to different market conditions. We have a user-friendly end-to-end operations cloud, it's easy for customers to derive huge value from our platform. We have strong distribution channels; we can reach small to large customers across varying industries and geographies regardless of where they are in their digitalization journey. We have proprietary internal management systems; our teams and business units speak to each other to ensure we can continue to successfully scale at large. Our business is also vertically integrated. All components of our operation are aligned towards the same goal. Fundamentally, we deliver a high ROI for customers, and customers rely on our platform to run their month-to-month, day-to-day, hour-to-hour operations. For many, the uptime of our platform is more important than the uptime of any other software their business is using. Whilst there is a lot of noise in the world, there are three key trends that have gained strong sustained momentum and are driving huge need and adoption for our platform. Firstly, digitalization. Companies of all sizes and across all industries are looking for ways in which they can reinvent their business with technology. They understand that to remain competitive, they need full visibility of their operations. They know that they need to leverage data and contextualize insights to meet the speed of quick decision-making required in today's world. Then ESG, companies and consumers are looking to do better and companies are looking to go far beyond just reducing their carbon emissions. They're looking at increasing vehicle lifespans, switching to electric vehicles, and increasing their community impact with better service delivery. Customers are asking us to show them how to use our solution to bridge the historical divide between drivers, teams, and managers to boost morale and safety within their business. And lastly, compliance, businesses and regulators are looking for increased transparency and compliance spreading across all operations teams and industries. Governments are implementing and enforcing more laws around work times and other safety or well-being metrics, and penalties for noncompliance legislation are increasing. We have seen these shifts intensify over the years globally and now we see that companies are embracing change and determined to be great at them. Asia is full of rapidly growing emerging markets, making the opportunity for Karooooo huge. Each market remains largely underpenetrated and fragmented with no single large nor comprehensive provider. Populations in these markets are digitally savvy, and technology is widespread, even in small remote towns. Whilst the opportunity is large, it is important to note that Asia is full of strong cultures that vary dramatically between markets. It's a place where it is critical to have hands on the ground to understand all local nuances and localize effectively. We believe by positioning our global headquarters in Singapore, we are positioned well for success. Companies are also looking for partners they can rely on for their business, and they are learning quickly to think about return rather than just focusing on cost. We see many large and small businesses come to us for our reliable, easy-to-use platform as well as our strong customer centricity and support. Our advanced cloud platform and robust service delivery sets us up well to compete favorably in Asia. Whilst there is a portion of the market that is only beginning their digitalization journey, there is also a large portion of the market paving the way with sophisticated means. Companies understand the value our platform provides and rely on our analytics to deliver on their missions. These companies are doing much more than just looking at GPS. Companies care about their service delivery. A tourism company uses our solution to ensure their passengers are transported safely, on time, and also receive the full trip they were sold. Sophisticated reporting alerts managers when drivers deviate from their prescribed routes, leave tourism sites too quickly, or make any unexpected stops. With our platform, they have brought down their speeding events significantly and ensured all trips run according to schedule. They understand that our solution is a core product to their reputation, risk management, and brand. Businesses are also forward-thinking. A short-term rentals company has fully adopted EV and uses our solution to optimize their charging schedules, our advanced engine diagnostics, and other telemetry data to establish effective maintenance schedules that neither overshoot nor undershoot services, leading to a huge reduction in overall maintenance costs whilst extending vehicle lifespans. With vehicle productivity metrics, they know a way to house each vehicle and are better able to predict demand for their business, planning, and vehicle purchasing. They were able to effectively launch a vehicle delivery solution with our in-field service tools, giving them a game-changing differentiator, and they have redefined what customers expect from rental companies. Businesses are also data-driven. A FMCG business doing over 10,000 daily deliveries understands the value of data and contextualizing it across different business units. Using our platform, all teams now have full and unified visibility of the entire business process. Real-time analytics and communication have enabled them to slash the number of steps in the delivery process, saving them thousands of hours across their fleet daily. With sophisticated APIs into their ERP and other tools, they have connected their entire operation. The queuing downtime of a vehicle as a result of inefficient warehousing strategies has been minimized, driver wages are now accurately calculated, and safety has skyrocketed through gamified safe driving plans. Idling and unproductive fuel usage has been conquered. The business has seen dramatic savings from the increased productivity across their fleet and warehouses as well as peace of mind knowing their drivers are representing the company in a strong professional light. Karooooo has a large untapped network effect opportunity generated from its platform with over 125 billion valuable data points generated monthly. In South Africa alone, we have around 10% of all vehicles on the road, giving us a huge runway for adding increased benefits for our customers. Customers are benefiting as we are personalizing their experiences and providing them with tools to improve decision-making and increase their efficiencies. For example, a company can now benchmark their operations against others in their industries. Predictive analytics of historical data are not only leading to improved customer loyalty but allow us to develop new products and services to expand on our platform. To summarize, we believe our strong management, entrepreneurial culture, and vertically integrated business model have led to our proven track record of growth and profitability in varying macroeconomic headwinds across regions. We innovate through an entrepreneurial approach that prioritizes customer needs, utilizing our hands-on experience and skills, and being adaptable in both planning and execution. We offer a strong value proposition that is easy to prove to customers. Our customer churn remains low as customers see we are consistently delivering on new value-enhancing solutions whilst maintaining a stable ARPU. They trust us. We are able to pass on the benefits of economies of scale to our customers as we successfully execute whilst maintaining prudent capital allocation. Karooooo has a strong financial foundation; the ability to control prices and maintain high operating profit margins, solid unit economics, and a history of sustained growth at scale has resulted in a robust balance sheet and resilient business model. We have ample runway for growth. I will now pass over to Hoeshin, who will take us through our financial performance. Thank you.

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 was 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, a 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 belief in the sustainability of its agile, data-enhanced, and highly scalable business model. It is also a testament of Karooooo's customer-centric innovation in solving unique mobility needs. Carzuka delivered ZAR 64 million in revenue at the end of Q4 and ZAR 251 million year-to-date. While it is at an operating loss as we continue to invest in the infrastructure and brand building, we will also focus on refining our internal processes to improve efficacy and being pragmatic in our spending. Once the revenue is more than $300 million per quarter, we believe the business will turn profitable. Karooooo Logistics delivered significant growth, generating ZAR 56 million in revenue at the end of Q4 and ZAR 180 million on a year-to-date basis. Karooooo Logistics showed an encouraging operating profit of ZAR 5 million and an operating profit margin of 3% for the year. Its focus on delivery as a service has gained momentum, while we continue to integrate into Cartrack platform to expand its customer base. All segments are seeing strong traction with the benefit of our strategic investment beginning to show. Our profitable SaaS business model continued to bolster our cash flow generation ability with net cash on hand up by 35% at the end of the year at ZAR 966 million. During the year, ZAR 72 million were invested in the development of South African Central Office and ZAR 50 million were invested in the working capital of Carzuka. In Q3, a cash dividend of $18.6 million was paid to the shareholders. Our turnover days continued to show improvement to 31 days alongside with prudent provisioning to weather strong economic headwinds in some of the markets we are operating. We have strong unit economics and robust operating margins, a strong balance sheet and cash position, and have consistently beaten the rule of 40. We remain confident that our track record of success, especially our ability to generate healthy cash flow is sustainable. Our earnings per share increased by 51% to ZAR 4.70 in Q4 and 26% to ZAR 19.29 on a year-to-date basis. The increase is the result of positive revenue growth and improved profitability during the year, despite the impact from the dividend withholding tax of ZAR 27 million. We will now focus on Cartrack, the underlying assets to Karooooo's success. Cartrack has continued to prove its ability to scale in varying macroeconomic conditions. Overall, subscribers grew at scale by 13% to 1,717,077. In this quarter, subscription revenue grew to ZAR 793 million, and operating profit rose to ZAR 248 million. Our track records of strong annual compounding growth and financial discipline can be seen in our performance. On a year-to-date basis, Cartrack's subscription revenue grew 17% to ZAR 3,004 million, and our operating profit grew 28% to a record ZAR 950 million. Our operating profit and operating profit margin were negatively impacted this financial year as we expense upfront a bigger portion of our cost of acquiring a subscriber in our cloud than in the previous year with mention that our SaaS ARR for the year grew by 19%. As Cartrack continued with strong sales revenue growth, Cartrack's total revenue grew 17% to ZAR 3,077 million. Cartrack's total subscription revenue represents 98% of total revenue, in line with our SaaS business model. The strong performance of Cartrack was largely supported by demand from small to large enterprises to improve compliance functions and to digitally transform their business to become more efficient and competitive. As Cartrack continues to have great visibility of future revenue, our realization of economies of scale continues to demonstrate our ability to expand our margin. Gross profit for Q4, up by 27% to ZAR 568 million, and gross profit margin improved from 65.4% to 71.4% compared to Q4 last year. On a year-to-date basis, gross profit is up by 22% to ZAR 2,222 million, and gross profit margin improved from 68.4% to 71.6% compared to last year. Operating profit for Q4 is up by 61% to ZAR 248 million, and operating profit margin improved from 22.5% to 31.1% compared to the same quarter last year. On a year-to-date basis, operating profit is up by 28% to ZAR 950 million, and operating profit margin improved from 27.1% to 29.7% compared to last year. Adjusted EBITDA is up by 23% to ZAR 371 million, and adjusted EBITDA margin improved from 44.2% to 46.6% compared to Q4 last year. On a year-to-date basis, adjusted EBITDA is up by 19% to ZAR 1,456 million, and adjusted EBITDA margin improved from 46.6% to 47.3%. Cartrack's low cost of acquiring a customer, high customer lifetime value and retention rate, as well as strong benefits from the economy of scale result in our leading unit economics. Our LTV to CAC is robust. We have strong profit margins with our gross profit margin on subscription revenue being 73%, and our operating profit margin being 30%. While we will remain prudent with our capital allocation, we are well positioned to continue to scale our business. Over the years, Cartrack has maintained a steady ARPU and average cost of acquiring a subscriber. ARPU for the year was ZAR 155. Cartrack's average lifetime revenue per subscriber increased to ZAR 9,323 this year. The average cost of adding a subscriber to our cloud in this year was ZAR 2,264, and in Q4, it was ZAR 2,148. Taking ZAR 9,323 and subtracting ZAR 2,264 gives us a headroom of ZAR 7,059 per subscriber. From the ZAR 7,059, we incurred the cost to service a subscriber over 60 months, which allows us to derive a very strong operating profit margin. The headroom has remained steady. Cartrack continued to expand in all geographies. In South Africa, despite challenging trading conditions due to national power outages, subscribers grew by 11% as we’ve seen strong customer demand for our value proposition. In Asia, the Middle East, and the U.S.A., subscribers grew by 28% as the pace of Cartrack's expansion into Southeast Asia moved ahead of historical growth rates. Considering that Southeast Asian economies only began to open up towards the end of Q1, we are pleased with the traction gained in this region. As the second largest contributor to the group revenue, Southeast Asia presents the group's most compelling growth opportunity in the medium to long term. Europe saw a healthy growth of 13% and remained efficient. We aim to allocate more resources in order to drive more rapid growth. Africa and others maintained their momentum with an 8% increase in subscribers. On a year-to-date basis, our ARR increased 19% to ZAR 3,235 million, which is trending positively as we continue to grow our subscriber base and ARR. Cartrack continues to have robust operating margins, and our trends are in line with the long-term financial goals set upon our listing in 2021. Research and development as a percentage of subscription revenue is 6%, in line with our long-term target of 4% to 6%. We will be increasing capital allocation into sales and marketing to drive growth, whereby we expect sales and marketing as a percentage of subscription revenue to increase from the current 13% to be within our long-term target of 17% to 19%. We also expect general and admin as a percentage of subscription revenue to drop from 22% as we experienced increased economy of scale, and it will fall in line with targets of 12% to 16%. Our adjusted EBITDA as a percentage of subscription revenue at 48% will continue to improve to be in line with our targets of 50% to 55% as we remain pragmatic in our operating expenses. We have met our 2023 outlook with the number of subscribers standing at ZAR 1.7 million, Cartrack's subscription revenue recorded at ZAR 3,004 million, and an adjusted EBITDA margin of 47%. We are happy with the progress we have made for the year. Our guidance for Cartrack's outlook for year 2024 is for the number of subscribers to be between ZAR 1.9 million and ZAR 2.1 million. The wide range is because of the volatility in the macroeconomic environment. As you may be aware, we published our subscriber numbers on our website, and as at the end of April, we reported the subscriber count to be over 1.75 million. The subscription revenue outlook for 2024 is between ZAR 3,400 and ZAR 3,600 million and operating profit margin between 28% and 31%. Carzuka and Karooooo Logistics continued to scale and bolster Karooooo's revenue growth. Both segments showed good progress with strong year-to-date revenue growth of 273% and 154%, respectively. In combination with its intuitive e-commerce platform, Carzuka has made significant progress, expanded its physical storeroom, added steadily strategic hubs across South Africa, and built its brand. Karooooo Logistics will continue to integrate into Cartrack’s platform, enabling Cartrack customers to manage and enhance their logistic capacity with ease. I would like to thank everybody for joining us today, and we'll now open the floor to Q&A with our Group CEO and founder, Mr. Zak Calisto.

Good evening or good morning, wherever you are. It's Zak here, and I'll be reading out the questions. The first question is from Kiran at William Blair. Can you discuss the significance of the OEM partnerships with BMW and Mercedes and whether there are more partnerships in the works? I've mentioned before that eventually, these OEMs will develop their own telematics solutions and platforms focused on vehicle diagnostics and safety. Our platform is designed to assist customers with their operations beyond diagnostics, although we certainly handle diagnostics as well. We now gather data from the OEM devices, which integrates into our platform. Are there additional partnerships in development? We're currently in discussions with other European car manufacturers and are in final testing with some. I anticipate that by the end of Q2, we’ll likely add about five more OEM brands to our portfolio. We expect our go-to-market strategy to significantly enhance our value by FY 2025, as we are integrating with BMW and Mercedes, and we also need to optimize distribution. This is clearly a long-term project and partnership. Another question from Kiran at William Blair. What are your outlook expectations for the Asia region in FY 2024? We've been focusing on Asia for the past two months, and March and April have shown stronger growth compared to other regions. We’re currently prioritizing hiring and building our distribution capacity, which can be challenging and requires considerable effort, but we're satisfied with the progress we've made. Next, from Miles Fury. What is Karooooo's current staff size, and what percentage increase do you foresee for FY 2024? At the end of February 2023, we had just over 4,000 employees and plan to finish the year with approximately 4,800 staff members. Next question, also from Miles Fury. Why are you encountering difficulties filling staff vacancies in Southeast Asia and Europe? Filling vacancies is always a challenge, and if you find it easy, please share your tactics with us. It's especially tough when trying to maintain our traditional growth method, which emphasizes financial discipline and comprehensive staff training. Next question from Park Laine. Zak, how do you anticipate the seasonality of net subscriber additions for the coming year? Looking at the first two months of Q1, we've added about 40,000 net subscribers, aligning with our expectations for a good Q1. Historically, Q1 and Q4 tend to be challenging quarters, primarily due to numerous public holidays throughout these periods, which generally impacts growth. Next question from Mr. George. Can you elaborate on the partnership with BMW? What value does Cartrack provide to OEMs, considering they have their own telematics services? I've partially answered this earlier. Our value proposition includes compliance in Europe that requires all company-owned vehicles to utilize a specific tracking system, which is aimed at ensuring no vehicle is driven by one person for over four hours. This requirement has been delayed to Q2 this year, and we’re the only approved company for this in Europe. There will be a substantial demand from sedans owned by businesses for this technology, and we offer additional services that OEMs are not currently providing. Next question from Rudy Funmicker. What challenges and opportunities does the transition to electric vehicles represent for Cartrack? We are fortunate to be operating in Singapore, a leading country in electric vehicle adoption. We are closely involved with the electric vehicle infrastructure and are developing relevant technology, which positions us well to scale this in Europe and South Africa as the market grows. Next question from Alex. Can you discuss subscriber growth at the end of March and April compared to Q4, especially on a regional basis? I've touched on this, but to reiterate, Asia is currently our fastest-growing region, and there’s been notable recovery in South Africa, where we've adapted to a tougher operating environment. Next question from Matthew at Conference Impact Fund. How does ARPU vary by region for Cartrack? Our ARPU is consistent across Europe, South Africa, and other parts of Africa. Asia's ARPU is much higher largely due to the higher cost of doing business in Singapore. As our presence grows in Indonesia, the Philippines, Thailand, and Malaysia, I expect their ARPUs to align more closely with those in other regions. Next question from Alex. What is your approach to sales and marketing for FY 2024 in light of your outlook? This remains a priority, focusing on hiring, training, and retention, which has proven challenging in the post-COVID talent landscape. We are optimistic that conditions will stabilize, allowing us to enhance our hiring and training processes. Next question from Kudsia. Regarding unit economics, what is the current lifetime cost to service customers, factoring in administration and sales marketing? If we examine subscriber unit economics, we consider ARPU and an average lifecycle of 60 months to estimate revenue from each vehicle. From that, we subtract the acquisition costs, leading us to the average cost to service a customer, which hovers around ZAR 60 per month. This results in a comprehensive view of operating profit. Next question from Abdul Hakim. You've indicated that once you reach ZAR 300 million in quarterly revenue, Carzuka will achieve breakeven. What is your timeline for this? We’ve developed strong technology but face various operational challenges typical of startups. While I hope to reach ZAR 300 million quickly, it may take us four to seven quarters—it's difficult to predict precisely. Next question regarding Carzuka, which saw an 11% revenue decline in Q4. What were the causes? This was primarily due to extended holidays and increasing interest rates affecting affordability, along with operational adjustments we made to ensure readiness in Q1. Next question from Muhammad. How do power outages affect your logistics business? We depend on telecommunications infrastructure, and the outages have compromised service quality for us and our customers. With around 2,000 personnel in the field, these issues significantly affect our operations. Additionally, reliance on diesel for power exacerbates the situation, although our upcoming environmentally friendly new building will allow us to operate on solar and gas. Next question from Sebastian. As you pivot towards markets outside South Africa, will you aim to maintain ARPU in U.S. dollar terms or target a ZAR 150 price point? We don’t specifically target arbitrary price points; we focus on unit economics. The ZAR 150 discussed today differs vastly from what it was in 2005. We aim to ensure healthy operating profit margins without being excessively greedy, and if maintaining ZAR 150 is achievable, we will do so. Next question from Rudy Famica. Was the revenue drop for Carzuka in Q4 intentional? This question has been addressed, so I’ll move on to the next from David Ebral. Could you provide insights on the Q4 2023 balance sheet in relation to Carzuka's inventory and obligations? We invested ZAR 50 million this fiscal year in Carzuka, mainly for working capital and inventory. We believe that with scale, we can finance that investment efficiently, even if we were to invest ZAR 1 billion. We've opted to use our cash currently, ensuring we manage vehicle operations efficiently to provide a good return for shareholders. Next question from Gregory. Is growth through acquisitions possible, and is it a strategy you would consider? We are open to exploring opportunities that make sense. If there's a viable acquisition that complements our business, we would consider it. However, we are aware of the need to grow organically and have sidestepped many opportunities that could lead us off-course due to cultural mismatches. Next question from Dan Balis. How impactful were power outages in Q1? Will you prioritize dividends over acquisitions? Part of this question has already been answered. If it were my decision, I believe the best value delivery to shareholders would be through share buybacks. Given our liquidity situation, that doesn't seem prudent right now, but with a robust balance sheet, we felt it was reasonable to declare a U.S. $0.85 per share dividend. Next question from Kwan Ho. Have challenging macroeconomic conditions affected your new subscriber growth? We recorded 25,000 new subscribers in February Q2 2023. Is this sustainable? Will additions in South Asia increase? As previously mentioned, we’ve had a positive start to the year, adding over 40,000 subscribers in the first two months. We've observed strong growth across South Africa, Southeast Asia, and Europe. While macroeconomic factors do have an impact, I’m optimistic that we will meet our FY 2024 forecasts. Next question from Chris. With South Africa maintaining a project subscriber base of 76, how are you managing load-shedding challenges? I believe I have addressed that question. Next question from Miles Fury. What subscriber volume is needed to reduce G&A to 16%? To answer that, we could decrease G&A relatively quickly; our back office is evolving to accommodate future growth, but it won't happen immediately. As market penetration grows, I foresee a reduction to 12% to 16% within the next four to five years. Final question from Cornelius. Your return on capital has been declining over the past five years, partly due to COVID. What is management's long-term target for return on capital? It depends on the measurement, Cornelius. We could distribute all cash, resulting in high return on equity. Our ROE is healthy and sustainable, and we are aware of it. Historically, our practices might dictate a higher return if we kept cash on the balance sheet. Next question from Prashant. How do you view the ecosystem as it shifts with significant investments in AI planned for next year? Are these changes favorable or unfavorable for us? AI is a trending topic gaining immense traction. We’ve integrated machine learning and AI within our algorithms. While it's exciting, we need to approach it cautiously to fully understand its implications. Our investment in AI will be methodical, with more integrations expected in the next 12 to 24 months. Final question from Corno. Can you discuss the economics of the logistics side? What is market size, who are the competitors, and what are the long-term profit margin goals? We are currently experiencing margins around 3%, which we believe can grow to 5% or 6%. The real objective is to incorporate our logistics platform into our ecosystem, allowing customers to manage their long-distance and last-mile logistics on a unified platform. We are concentrating on achieving scalability and profitability through this strategy.