NASDAQ:KARO Karooooo Q4 2024 Earnings Report $42.50 -0.31 (-0.72%) As of 03:10 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Karooooo EPS ResultsActual EPS$0.36Consensus EPS $0.33Beat/MissBeat by +$0.03One Year Ago EPSN/AKarooooo Revenue ResultsActual Revenue$57.64 millionExpected Revenue$55.54 millionBeat/MissBeat by +$2.10 millionYoY Revenue GrowthN/AKarooooo Announcement DetailsQuarterQ4 2024Date5/15/2024TimeN/AConference Call DateThursday, May 16, 2024Conference Call Time8:00AM ETUpcoming EarningsKarooooo's Q4 2025 earnings is scheduled for Tuesday, May 13, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Karooooo Q4 2024 Earnings Call TranscriptProvided by QuartrMay 16, 2024 ShareLink copied to clipboard.There are 3 speakers on the call. Operator00:00:00Hello, and welcome to Karoo's Financial Year 2024 Q4 and Full Year Earnings Call. On behalf of Karoo, we would like to thank you for joining us today. I'm Carmen, the Group's Chief Strategy and Marketing Officer and together with Hu Xin, our Group's Chief Financial Officer, we'll be taking you through our key business updates and robust financial performance. All investors are advised to read through the disclaimer. We will be reviewing all 3 of Karoo's business units in today's webinar, namely Kartrak, Kazuka and Karoo Logistics. Operator00:00:35Please note, this is the last earnings call in which we will report on Kazuka as a standalone segment as its remaining operations are integrated in supporting the Kartrak operations. Karoo remains committed to our mission of being the leading operations cloud. Our focus is to simplify the lives of operators and maximize the scale and efficiency of their operation. Our innovative platform goes far beyond connected vehicles and equipment to centralize and unify an entire operation into one single place. We continue to help customers conquer complex challenges around safety, compliance, productivity, service delivery, cost management, fuel, maintenance, routing, resource allocation, driver and worker retention and more. Operator00:01:22Our platform leverages our large data scale, AI and data analytics to offer customers pragmatic insights that simplify problem solving to ensure successful implementation. We are helping to pave the benchmark and future of efficiency, safety and impact for operational businesses and continue to believe we have a large runway for growth. We have comfortably met our financial year outlook targets in all categories and continue on our over 10 year track record of strong growth and financial performance. We ended the financial year with over 1,972,000 subscribers, Kartrak's subscription revenue of 3,523,000,000 XAR and an operating profit margin of 30%. We continue to focus on proving our ability to execute as we show strong growth whilst maintaining strong discipline in our capital allocation. Operator00:02:21We continue to see that our hard to replicate culture and fosters an owner orientated mindset throughout teams in our entire business. At the core of our culture lies transparency, a principle we uphold unapologetically. This is not for everyone, but it is how we continue to build loyal teams that achieve. We reject the idea of closed door meetings and instead choose open floor plans and candid communication. We are open about individual and team weaknesses so that we know what to expect from each other and how to work together to empower each other through our strengths in order to maximize our collective impact. Operator00:03:09Pragmatism defines our approach, emphasizing implementation and execution. We prioritize ease of use and practicality in everything we do to ensure seamless integration into our customers' workflows. Our focus remains on tangible outcomes. We are impact orientated, not fanciful and idea orientated. We also remain agile. Operator00:03:33We adapt, innovate and refine our processes with a sense of urgency. This mindset empowers us to break barriers, drive innovation and continuously enhance our platform and value proposition for customers. In embracing these principles, we continue to grow at scale with strong efficiencies. We continue to execute in different markets under varying macroeconomic environments. We continue to innovate and evolve our platform, embracing new technologies in practical ways. Operator00:04:04And we continue to do so whilst remaining disciplined with our capital allocation. Our commitment to product innovation and development remains and we continue to invest in our AI capabilities. We have witnessed the profound impact that our data enabled AI platform has on operational efficiency by empowering operators to address complex challenges head on. The key to our success with AI has been our unique ability to derive simple to use tools that harness AI to deliver tangible insights and practical applications for customers. Through the combination of our AI enabled cameras and easy to use and fully digitalized driver coaching tools, we have delivered an end to end solution to customers that ensures they conduct effective coaching that focuses on the right things and ensures change happens. Operator00:04:57A prime example of our solutions efficacy is showcased by a leading mine in South Africa who has flipped their standing on safety. Within just 1 month, they have achieved dramatic improvement in critical high risk driver behavior that often leads to accidents and fatalities. Fatigue driving incidents have decreased by 32%, mobile phone usage by 13%, seat belt non compliance by 35% and camera coverage, which is indicative of non compliance with safety or other protocols has plummeted by 40%. These transformative outcomes prove the power of our end to end solution in revolutionizing safety standards and operational efficiency. As we continue to innovate, we remain dedicated to driving positive change and fostering safer work environments globally. Operator00:05:50Karoo's leading operations cloud now drives the digital transformation of over 121,000 commercial customers. We consistently demonstrate high implementation success and maintain a 95% commercial customer retention rate across businesses of various sizes in all industries from logistics to construction and from emergency services to tourism. We continue to have low industry and customer concentration risk. We also continue to leverage our vast data set to empower our customers with full visibility and control of their operation by offering them meaningful insights and practical tools for simplified decision making. Our platform offers customers an undeniable value proposition with a high ROI within weeks. Operator00:06:40Karoo is positioned for growth. We have continued to strategically invest in infrastructure for customer acquisition, high customer service delivery and strong product innovation. We continue to believe that Southeast Asia will be our largest driver of growth in the medium to long term. We have added new members to our leadership team who are all focused on execution and growth and have continued to build out our sales and support infrastructure and have successfully increased our presence in new provinces. Our internal systems play a large role in our ability to deliver such strong customer service at scale, and we continue to improve on them to ensure we can adhere to our standards as we continue to grow. Operator00:07:23Our team is excited to move into our new head office building in South Africa in Q2 of FY 'twenty five, which will allow us to further unlock the impact of our culture. We have established innovative partnerships to leverage our data scale and AI enabled platform, which we will continue to nurture and we have a strong cash position and strong cash generation to fuel our growth. I will now hand over to Hu Xin who will take us through our financial performance. Speaker 100:07:53Thank you, Carmen. I will now talk through Karoo's financial performance for Q4 FY24. Please note that all comparisons are against Q4 FY23 unless otherwise stated. Financial year 2024 has been an exciting year for us. We delivered record subscription revenue and earnings while maintaining our momentum of growth and demonstrating our financial discipline. Speaker 100:08:21Our consistent strong result further extend our long standing track record of scalable growth providing us with multiple levels for continued expansion. In this quarter, our subscription revenue up 18% to R935 million and on a year to date basis up by 17% to R3556 1,000,000. Operating profit up by 25 percent to R296 1,000,000 and on a year to date basis up by 18% to R1043 1,000,000. Earnings per share up by 45% to R6.81 and on a year to date basis up by 24% to R23.85. We will maintain our robust business model with our focus remain on growing our subscription revenue as we continue our investment to scale the business. Speaker 100:09:23Earnings for this quarter were R215 1,000,000 and our free cash flow was R161 1,000,000. Our free cash flow has remained positive despite our investment in the development of our new South African Central Office. Up to this quarter we have invested R263 $1,000,000 in this development. Our results were achieved through strong financial discipline as we continue to make strategic investment for sustainable long term growth. Our high cash conversion demonstrate our focused capital allocation and we will remain focused in this approach. Speaker 100:10:03Our earnings are benefiting from our robust economies of scale. Karoo's earning per share in this quarter grew by 45% to R6.81 dollars The increase is the result of positive revenue growth and improved profitability despite our prudent and strategic investment for growth. On a year to date basis, our earnings per share accelerates to R23.85 Karoo Logistics started to see its traction contributing 0.48¢ of positive earnings per shares to the Group. Our year to date earnings per share was impacted by R1.40 for the provision we made for kazuka's reduced operations. Going forwardly, we will cease reporting kazuka as a standalone segment as it integrates into Kartrak's broader business operations. Speaker 100:10:57Our financial performance in this quarter showcased a strong cash position with net cash on hand plus cash in bank fixed deposit reaching R922 $1,000,000 Debtors turnover days improving to 29 days alongside with prudent provisioning to weather off strong economic headwinds in some of the markets we are operating. Given our strong cash position and cash generation, currently we expect to declare a dividend in Q2 FY25, a testament to our confidence in our robust business model that are backed by a strong and clean balance sheet. We will now focus on Cartrack, the underlying assets to Karoo's success. Our momentum continue in this quarter as car track extend its decade plus track record of growth at scale, profitability and cash generation ability. Overall subscriber grew at scale by 15% to 1,972,000. Speaker 100:12:00Subscription revenue grew by 17% to R930,000,000 while operating profit grew to R289,000,000. Cartrack has consistently proved its ability to scale in varying macroeconomic conditions and consistently beaten the rule of 40. Our compounded annual growth rate has proven to be strong and consistent over the past 10 years. Specifically our subscriber CAGR stood at 19% and subscription revenue CAGR at 22%, gross profit CAGR at 18% and operating profit CAGR at 15%. These results underscore our robust business model and strategic execution, Our commitment to disciplined financial management and strategic investment position us well for continued success and sustainable long term growth. Speaker 100:12:57CarsRad's strong subscriber drove its overall SaaS revenue growth. Total revenue growth in this quarter grew by 20% to R958 million. On a year to date basis, total revenue grew 17% to R3,614,000,000. Kartrak's total subscription revenue grew 17% to R930,000,000. On a year to date basis, Kartrak's total subscription revenue grew 17% to R3523 million. Speaker 100:13:30Kartrak's total subscription revenue represent 97% of total revenue in line with our SaaS business model. The strong performance of Kartrak was largely supported by demand of small to large enterprise to improve compliance Speaker 200:13:46function and to digitally transform their business to Speaker 100:13:46become more efficient and competitive. Transform their business to become more efficient and competitive. As Kartrak continues to have strong visibility of future SaaS revenue, our realization of economies of scale continue to expand our earnings and maintain our high margin. In group quarter, earnings per share stood at R6.52, up 27% comparing to previous quarter. Gross profit for quarter 4 up by 21% to R686 1,000,000 and on a year to date basis gross profit up by 18% to R2589 million. Speaker 100:14:28Gross profit margin has remained consistent at 72%. Operating profit for quarter 4 up by 17% to RMB289 1,000,000 and on a year to date basis operating profit up by 17% to R1069 1,000,000. Operating profit margin has remained consistent at 30%. Adjusted EBITDA up by 22% to R454 $1,000,000 and on a year to date basis, adjusted EBITDA up by 17% to R1710 million. Adjusted EBITDA margin has remained consistent at 47%. Speaker 100:15:12This results prove Cartrack's ability to maintain high margins and bolster our winning capability to be a leading operation cloud service provider in the market. Cars React low cost of acquiring a customer, high and retention rate as well as strong benefits from economies of scale results in our leading unit economics. Our LTV to CAG is over 9. We have strong profit margins with our gross profit margin on subscription revenue at 72% and commercial customer retention rate of 95%. Given our track record, we are well positioned to continue scaling our business. Speaker 100:15:57Over the years Cartrack has maintained a steady ARPU and average upfront cost of acquiring a subscriber. ARPU for the quarter was R160. Kartrak's average lifetime revenue per subscriber in this quarter stood at R9593. The average upfront cost of adding a subscriber to our cloud in this quarter was R2281. Mid cost mainly relate to self commission and telematic device which are capitalized and sales and marketing expenses that are expensed off. Speaker 100:16:33The havoom derived from the average lifetime revenue per subscriber after subtracting the average upfront cost of adding a subscriber was R7312 per subscriber. From the R7312 we incur the cost to service a subscriber over the contract life cycle of 60 months. The cost to service the subscriber decreased as we grow our subscriber base. Our unit economics have remained steady, allowing a strong operating profit. Cars Regs continue to grow its subscriber base and ARR to expand in all geographies. Speaker 100:17:13Our subscriber in South Africa grew by 14% despite challenging trading conditions. Given that we continuously pass on additional benefit to our customer and have a rich data pool, we believe we will continue to see strong customer demand in this region. In Asia, the Middle East and USA subscriber grew by 24% as the traction in Southeast Asia has been encouraging. Southeast Asia remain as the 2nd largest contributor to the group's revenue presenting the most compelling growth opportunity and deliver increasing and sustainable income to the group in medium to long term. Europe saw a healthy growth of 16% and remain a key focus area for our resource allocation. Speaker 100:18:01Leading OEMs have partnered with us providing their customer access to our platform and driving our growth. We are poised to leverage our extensive offering to further develop the connected vehicle ecosystem and expect this partnership to contribute to our results in medium term. In additions, we are experiencing encouraging demand for our proprietary compliance technology in the region. Africa Others maintained its growth with 12% increase in subscriber. At the end of quarter 4, our ARR increased 16% to R3749 million. Speaker 100:18:42This encouraging trends reflects our continued momentum in our subscriber growth and ARR. Carsrax continue to have robust operating margins and our trends are in line with the long term financial goal set out upon our listing in 2021. Our subscription revenue gross profit margin stood at 72% which is consistent with our expectation. Research and development expense as a percentage of subscription revenue are 6% as we focus on driving substantial benefit from our R and D capital allocation. Our planned investment in improving and reaching and expanding our operation cloud and internal management system aim to enhance our value proposition to our customers. Speaker 100:19:31Sales and marketing expand as a percentage of subscription revenue stood at 13%. We believe the strategic investment for customer acquisition position us well for continued growth and we expect to see future benefit from this investment. General and admin expenses as a percentage of subscription revenue are at 21%. The expenses has been relatively stable reflect our commitment to build strong support infrastructure to meet our future growth plan yet being pragmatic in our spending. Operating profit as a percentage of subscription revenue are 30% and adjusted EBITDA as a percentage of subscription revenue is at 49%. Speaker 100:20:17Karoo Logistics delivers significant growth generating R93,000,000 in revenue, up by 65% and a commendable operating profit of R7 1,000,000 up by 201% in this quarter. It focused on delivery as a service through selected 3rd party crowd truck drivers and logistic companies has been highly scalable and is delivering substantial growth. While it continue to integrate into Cartrack platform to expand its customer base, the Karoo Logistics stack is expected to deliver a long term revenue stream to the Group. We believe the benefits of our strategic investment in this segment are starting to manifest given its strong quarter to quarter revenue growth. We are pleased to have comfortably met our 2024 outlook and are satisfied with our performance. Speaker 100:21:12We are committed to maintaining this momentum and driving further growth in 2025. Our mission is to be a leading operation cloud service provider and we believe Karooz is well positioned for the growth. We operated in a growing and largely underpenetrated market with strong demand coming from customer needing to differentiate and digitalize themselves. We expect our continuous investment in our AI products, platform and customer experience continue to generate robust result in the future. Our outlook for FY 2025 are number of subscriber between 2,200,000 to 2,400,000 Kartrak subscription revenue between R3.9 to R4.15 million, Kartrak's operating profit margin between 27% to 31% and Karoo's earnings per share is between RMB 27.5 to RMB 31. Speaker 100:22:11I would like to thank everybody for joining us today And we will now open the floor to Q and A with our Group CEO and Founder, Mr. Zack Callisto. Speaker 200:22:26Thank you, Yixin. Good morning or good afternoon or good evening to everybody. I've got a few questions. So I will start off with Matthew from Confluence. What underpinned the improved effective of tax rate? Speaker 200:22:43There's 2 aspects to that. The one aspect is as certain of our operations were loss making and as they become profitable, that improves our tax rate. That is the one aspect. The other aspect is intercompany dividends, the amount of dividends we've flowed through all the way to Karoo, that also impacts the taxes we've paid. A question from David Everol. Speaker 200:23:19Congrats on the results, Zach. You announced in February that you you, your company, buying back, 1,000,000 shares, but only 50,000 purchased this quarter. David, the first thing is we said up to 1,000,000, not 1,000,000, but I get your point. Are you planning to buy the 1,000,000 shares? David, we continue to plan to buy shares, so we will definitely do that. Speaker 200:23:44And what's only allowed us to buy in the region of about 50,000 shares was really the strict SEC rules to buy shares on the open market so that we've got quite severe limitations given our low liquidity, but we rely heavily on being able to buy blocks. And our broker has reached out to our investor base. And we bought 2 very small blocks, and we weren't able to buy any and none of the other investors or sellers. Next question from Alex from Stifel. Can you comment if anything changed throughout fiscal Q4 in terms of linearity of subscriber additions. Speaker 200:24:35And now we have subscriber additions tracked thus far in fiscal Q1. We're seeing a very, very good Q1 at this point in time. It's public knowledge that we've surpassed 2,000,000 subscribers now, and we are expecting to have a good Q1 in this quarter. And I think last year, it's very much in keeping with our outlook. And given the outlook we're giving for this year, we certainly believe we all definitely meet it. Speaker 200:25:05But so far, the 1st 2 months of the year have been very encouraging. Another question from Alex from Stifel. Looks like the subscriber count guide implies a step up in quarter adds from about 60,000 this year to 80,000 throughout fiscal year 2025. So what gives you the confidence in the acceleration there? I think during the last 2 financial years and specifically in the last financial year, we've really allocated a lot of capital in growing and improving the way we guide and manage and educate internally our staff and our sales teams. Speaker 200:25:48And we believe that's certainly going to give us yield in FY 'twenty five and beyond. Question from Sandili. You are buying back 10% of your shares in Issu. Who is selling? Well, who is selling is initial days that's willing to sell. Speaker 200:26:09We are in the market buying. Secondly, on current investment in growth and current free cash flow run, what needs to happen under your control to double non IFRS free cash flow to over a €1,000,000,000 just as you have doubled EBIT over 4 years? I think our free cash flow is something that we definitely look at. But our main focus is not growing free cash flow. Our main focus is actually growing the business as such. Speaker 200:26:39And if we grow our business substantially faster than we grow in now, that will actually have a negative impact on our free cash flow. So while free cash flow is definitely a very important measure to us, it's more important for us is the way we allocate capital. And we've got other metrics that we prioritize over the free cash flow metrics. And why is the share repurchase program more appealing to you over dividends? Whilst the share buyback is in itself a dividend to all the shareholders. Speaker 200:27:20And we believe that our share is undervalued, and that's why we have opted to also do share buybacks. Another question from David Everol. Just looking at your guidance, if we take this incremental revenue, incremental subs for the high scenario, The ARPU projected to account from a 160 to a 120. David, I haven't got the exact metrics, and I'm reading these questions as they come through. So I would have to look at that to see how you get to these numbers. Speaker 200:27:54But just looking at the question, something looks wrong. And, I don't believe that would be the case. So it just depends how you've calculated this, David. I will look at it, and I'll answer you via email to because I would have to look at how you did this arithmetic. Good call, Raj. Speaker 200:28:17How big can Corruges is getting 3 to 4 year time in a 3 to 4 year timeframe? What margins can the segment generate? I think the margins we're currently generating are really optimized profit margins. They could certainly improve, but we don't believe we must model our long term growth at higher margins than we currently have. I think these sort of margins is what we can expect. Speaker 200:28:45And how fast we can grow, I certainly believe in the next 4 years, we will see growth of no less than 25% year on year. And I'm being quite conservative, but it's very much my personal view. Then, Sebastian, what change are Cardiac seeing the South African competitive landscape? I think we have been in the market for 10 years less than our competitors. And we continue to grow our business, but both not only subscribers in subscription revenue. Speaker 200:29:32We don't rely on OEM low subscription revenue models, you know, to grow our subscribers. And, you know, and we not a company that's focused on white labeling. And you mentioned one of our competitors that's great growing, why, you know, growing subscriber, who are they taking the share? I think it's, I think the competitor you mentioning is very much around white labeling and not pushing through their brand. Could you please confirm whether the company will continue with the recently announced share power back program? Speaker 200:30:10Yes, we will. Sebastian, is CarCheck seeing the fleet size in South Africa growing, given the failure of the rail network? I think it's still very early days. And I think the transport industry in South Africa is also in a bit of a disarray. However, what we are seeing is courier companies getting larger. Speaker 200:30:37But in terms of long haul companies, we don't really see anybody getting bigger. Another question from Rudy Fanikelk. What is the scope of scaling Karoo Logistics? Do you think it could grow to a level where to I think I've answered that question, Rudy. So, yeah, I'm I'm reading the questions and answering yet. Speaker 200:31:00That's why. Patrick O'Reilly, Europe compromised 16% of your subscriber base. What countries have you penetrated in Europe, given that Europe has a massive number of telematics suppliers? Are any European I'm selecting projects that I'm offering? Is that happening in South Africa? Speaker 200:31:18So, Patrick, we've got the I would say, probably close to all the OEMs in Europe are dealing with us, and they've opted to use our platform. However, we're still in very early stages in doing that. And we believe in the medium term, that's definitely going to be it's gonna be a significant source of our business. Then a question from Dylan Becker. As you expand into new geographies, called out new provinces in the quarter, I think just Dylan, when we talk about the geography, we nearly we refer to a country. Speaker 200:32:02And when we refer to provinces, we refer to, you know, your we are, for instance, in a very large country like Indonesia. But we'd only have presence in maybe 2 or 3 of the provinces. But there's a substantial, there's a lot of large cities where we still have no presence, And that's what we refer to as provinces. With your quick ROI, are you seeing initial customer land serving as references that are driving additional customer acquisitions in the market as brand awareness grows? Certainly so, Dylan. Speaker 200:32:37As our brand gets stronger, we certainly get bigger momentum in the business. And in a lot of these geographies, we're starting to get a lot of brand recognition, but I still think we in a lot of them, we're still far from being a very strong brand. Clearly, in certain countries, we already are a very strong brand, but in some countries, still building the brand. Chris Logan, can you please provide some insight into what factors are necessary to 24%, possibly back towards the growth levers pre COVID pandemic severe, expect of 50% of 55% 58%. Chris, I think it's just really us building our distribution, which I believe we've made really good progress in FY 'twenty four. Speaker 200:33:35I think that progress is going to serve us well in FY25 and beyond. But we continue to expand into other provinces in the countries we operate. So as we build our capabilities to distribute, we will certainly get back to a much higher levels of growth. Another question from Ridi Vanirke. How does the gradual adoption of EVs impact car tax business? Speaker 200:34:05Our platform is able to deal with EV vehicles. We've integrated with a lot of EV vehicles. And in actual fact, we got 1 OEM sending us their vehicles. Actually, 2 OEM sending us their EV vehicles. So for us, it's well advanced with our EV technology. Speaker 200:34:26I want to thank everybody for joining. There's another question from Miles for you. Any acquisitions in the pipeline? No, Mars. Not at this stage. Speaker 200:34:39I want to thank everybody for attending. And we'll speak again at our Q1 results. Thank you. Bye bye.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallKarooooo Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Karooooo Earnings HeadlinesKarooooo: An Underestimated Company With A Rare Financial ProfileApril 16, 2025 | seekingalpha.comWith EPS Growth And More, Karooooo (NASDAQ:KARO) Makes An Interesting CaseApril 10, 2025 | finance.yahoo.comNow I look stupid. Real stupid... I thought what happened 25 years ago was a once- in-a-lifetime event… but how wrong I was. Because here we are, a quarter of a century later, almost to the exact day, and it’s happening again. April 25, 2025 | Porter & Company (Ad)3 Undiscovered Gems In The US Market To Enhance Your PortfolioMarch 24, 2025 | finance.yahoo.comIs Karooooo Ltd. (NASDAQ:KARO) Worth US$42.9 Based On Its Intrinsic Value?March 8, 2025 | finance.yahoo.comKarooooo to Present at The Raymond James 26th Annual Institutional Investors ConferenceFebruary 24, 2025 | businesswire.comSee More Karooooo Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Karooooo? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Karooooo and other key companies, straight to your email. Email Address About KaroooooKarooooo (NASDAQ:KARO) provides mobility software-as-a-service (SaaS) platform for connected vehicles in South Africa, rest of Africa, Europe, the Asia-Pacific, the Middle East, and the United States. The company offers Fleet Telematics, a fleet management SaaS platform that provides real-time insights; LiveVision, which offers pro-active risk management and fleet visibility; MiFleet advanced fleet administration and business intelligence that provides cost management and administration capability services; and Karooooo Logistics, a software application for management of last mile delivery and general operational logistics. It provides Cartrack Field Service, a software application for management of field and on site workers; Business Intelligence for high-level view of fleet statistics; asset tracking for tracking and tracing moveable assets; asset recovery services that assists vehicle owners and insurance companies with the recovery of vehicles and other assets; and insurance telematics that allows insurers to tailor premiums for commercial and consumer customers using analytics; Protector, a safety package for consumer vehicles; and Car Watch, a mobile application that lets users track and watch their vehicles. In addition, the company offers specialist mobility solutions that include Bike Track, a GPS-based solution for commercial motorbike fleets; Credit Management that predicts payment cycles and facilitate active credit management for asset-based vehicle finance; electronic monitoring services application that allows law enforcement agencies to monitor persons of interest; and mobility and monitoring solutions, such as Carzuka, cartrack insurance agency, and on-demand rideshare taxi application, as well as smart IoT products. It provides its solutions through direct sales force to consumers and sole proprietors, small and medium-sized businesses, large enterprises, and other connected devices. Karooooo Ltd. was founded in 2001 and is headquartered in Singapore.View Karooooo ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 3 speakers on the call. Operator00:00:00Hello, and welcome to Karoo's Financial Year 2024 Q4 and Full Year Earnings Call. On behalf of Karoo, we would like to thank you for joining us today. I'm Carmen, the Group's Chief Strategy and Marketing Officer and together with Hu Xin, our Group's Chief Financial Officer, we'll be taking you through our key business updates and robust financial performance. All investors are advised to read through the disclaimer. We will be reviewing all 3 of Karoo's business units in today's webinar, namely Kartrak, Kazuka and Karoo Logistics. Operator00:00:35Please note, this is the last earnings call in which we will report on Kazuka as a standalone segment as its remaining operations are integrated in supporting the Kartrak operations. Karoo remains committed to our mission of being the leading operations cloud. Our focus is to simplify the lives of operators and maximize the scale and efficiency of their operation. Our innovative platform goes far beyond connected vehicles and equipment to centralize and unify an entire operation into one single place. We continue to help customers conquer complex challenges around safety, compliance, productivity, service delivery, cost management, fuel, maintenance, routing, resource allocation, driver and worker retention and more. Operator00:01:22Our platform leverages our large data scale, AI and data analytics to offer customers pragmatic insights that simplify problem solving to ensure successful implementation. We are helping to pave the benchmark and future of efficiency, safety and impact for operational businesses and continue to believe we have a large runway for growth. We have comfortably met our financial year outlook targets in all categories and continue on our over 10 year track record of strong growth and financial performance. We ended the financial year with over 1,972,000 subscribers, Kartrak's subscription revenue of 3,523,000,000 XAR and an operating profit margin of 30%. We continue to focus on proving our ability to execute as we show strong growth whilst maintaining strong discipline in our capital allocation. Operator00:02:21We continue to see that our hard to replicate culture and fosters an owner orientated mindset throughout teams in our entire business. At the core of our culture lies transparency, a principle we uphold unapologetically. This is not for everyone, but it is how we continue to build loyal teams that achieve. We reject the idea of closed door meetings and instead choose open floor plans and candid communication. We are open about individual and team weaknesses so that we know what to expect from each other and how to work together to empower each other through our strengths in order to maximize our collective impact. Operator00:03:09Pragmatism defines our approach, emphasizing implementation and execution. We prioritize ease of use and practicality in everything we do to ensure seamless integration into our customers' workflows. Our focus remains on tangible outcomes. We are impact orientated, not fanciful and idea orientated. We also remain agile. Operator00:03:33We adapt, innovate and refine our processes with a sense of urgency. This mindset empowers us to break barriers, drive innovation and continuously enhance our platform and value proposition for customers. In embracing these principles, we continue to grow at scale with strong efficiencies. We continue to execute in different markets under varying macroeconomic environments. We continue to innovate and evolve our platform, embracing new technologies in practical ways. Operator00:04:04And we continue to do so whilst remaining disciplined with our capital allocation. Our commitment to product innovation and development remains and we continue to invest in our AI capabilities. We have witnessed the profound impact that our data enabled AI platform has on operational efficiency by empowering operators to address complex challenges head on. The key to our success with AI has been our unique ability to derive simple to use tools that harness AI to deliver tangible insights and practical applications for customers. Through the combination of our AI enabled cameras and easy to use and fully digitalized driver coaching tools, we have delivered an end to end solution to customers that ensures they conduct effective coaching that focuses on the right things and ensures change happens. Operator00:04:57A prime example of our solutions efficacy is showcased by a leading mine in South Africa who has flipped their standing on safety. Within just 1 month, they have achieved dramatic improvement in critical high risk driver behavior that often leads to accidents and fatalities. Fatigue driving incidents have decreased by 32%, mobile phone usage by 13%, seat belt non compliance by 35% and camera coverage, which is indicative of non compliance with safety or other protocols has plummeted by 40%. These transformative outcomes prove the power of our end to end solution in revolutionizing safety standards and operational efficiency. As we continue to innovate, we remain dedicated to driving positive change and fostering safer work environments globally. Operator00:05:50Karoo's leading operations cloud now drives the digital transformation of over 121,000 commercial customers. We consistently demonstrate high implementation success and maintain a 95% commercial customer retention rate across businesses of various sizes in all industries from logistics to construction and from emergency services to tourism. We continue to have low industry and customer concentration risk. We also continue to leverage our vast data set to empower our customers with full visibility and control of their operation by offering them meaningful insights and practical tools for simplified decision making. Our platform offers customers an undeniable value proposition with a high ROI within weeks. Operator00:06:40Karoo is positioned for growth. We have continued to strategically invest in infrastructure for customer acquisition, high customer service delivery and strong product innovation. We continue to believe that Southeast Asia will be our largest driver of growth in the medium to long term. We have added new members to our leadership team who are all focused on execution and growth and have continued to build out our sales and support infrastructure and have successfully increased our presence in new provinces. Our internal systems play a large role in our ability to deliver such strong customer service at scale, and we continue to improve on them to ensure we can adhere to our standards as we continue to grow. Operator00:07:23Our team is excited to move into our new head office building in South Africa in Q2 of FY 'twenty five, which will allow us to further unlock the impact of our culture. We have established innovative partnerships to leverage our data scale and AI enabled platform, which we will continue to nurture and we have a strong cash position and strong cash generation to fuel our growth. I will now hand over to Hu Xin who will take us through our financial performance. Speaker 100:07:53Thank you, Carmen. I will now talk through Karoo's financial performance for Q4 FY24. Please note that all comparisons are against Q4 FY23 unless otherwise stated. Financial year 2024 has been an exciting year for us. We delivered record subscription revenue and earnings while maintaining our momentum of growth and demonstrating our financial discipline. Speaker 100:08:21Our consistent strong result further extend our long standing track record of scalable growth providing us with multiple levels for continued expansion. In this quarter, our subscription revenue up 18% to R935 million and on a year to date basis up by 17% to R3556 1,000,000. Operating profit up by 25 percent to R296 1,000,000 and on a year to date basis up by 18% to R1043 1,000,000. Earnings per share up by 45% to R6.81 and on a year to date basis up by 24% to R23.85. We will maintain our robust business model with our focus remain on growing our subscription revenue as we continue our investment to scale the business. Speaker 100:09:23Earnings for this quarter were R215 1,000,000 and our free cash flow was R161 1,000,000. Our free cash flow has remained positive despite our investment in the development of our new South African Central Office. Up to this quarter we have invested R263 $1,000,000 in this development. Our results were achieved through strong financial discipline as we continue to make strategic investment for sustainable long term growth. Our high cash conversion demonstrate our focused capital allocation and we will remain focused in this approach. Speaker 100:10:03Our earnings are benefiting from our robust economies of scale. Karoo's earning per share in this quarter grew by 45% to R6.81 dollars The increase is the result of positive revenue growth and improved profitability despite our prudent and strategic investment for growth. On a year to date basis, our earnings per share accelerates to R23.85 Karoo Logistics started to see its traction contributing 0.48¢ of positive earnings per shares to the Group. Our year to date earnings per share was impacted by R1.40 for the provision we made for kazuka's reduced operations. Going forwardly, we will cease reporting kazuka as a standalone segment as it integrates into Kartrak's broader business operations. Speaker 100:10:57Our financial performance in this quarter showcased a strong cash position with net cash on hand plus cash in bank fixed deposit reaching R922 $1,000,000 Debtors turnover days improving to 29 days alongside with prudent provisioning to weather off strong economic headwinds in some of the markets we are operating. Given our strong cash position and cash generation, currently we expect to declare a dividend in Q2 FY25, a testament to our confidence in our robust business model that are backed by a strong and clean balance sheet. We will now focus on Cartrack, the underlying assets to Karoo's success. Our momentum continue in this quarter as car track extend its decade plus track record of growth at scale, profitability and cash generation ability. Overall subscriber grew at scale by 15% to 1,972,000. Speaker 100:12:00Subscription revenue grew by 17% to R930,000,000 while operating profit grew to R289,000,000. Cartrack has consistently proved its ability to scale in varying macroeconomic conditions and consistently beaten the rule of 40. Our compounded annual growth rate has proven to be strong and consistent over the past 10 years. Specifically our subscriber CAGR stood at 19% and subscription revenue CAGR at 22%, gross profit CAGR at 18% and operating profit CAGR at 15%. These results underscore our robust business model and strategic execution, Our commitment to disciplined financial management and strategic investment position us well for continued success and sustainable long term growth. Speaker 100:12:57CarsRad's strong subscriber drove its overall SaaS revenue growth. Total revenue growth in this quarter grew by 20% to R958 million. On a year to date basis, total revenue grew 17% to R3,614,000,000. Kartrak's total subscription revenue grew 17% to R930,000,000. On a year to date basis, Kartrak's total subscription revenue grew 17% to R3523 million. Speaker 100:13:30Kartrak's total subscription revenue represent 97% of total revenue in line with our SaaS business model. The strong performance of Kartrak was largely supported by demand of small to large enterprise to improve compliance Speaker 200:13:46function and to digitally transform their business to Speaker 100:13:46become more efficient and competitive. Transform their business to become more efficient and competitive. As Kartrak continues to have strong visibility of future SaaS revenue, our realization of economies of scale continue to expand our earnings and maintain our high margin. In group quarter, earnings per share stood at R6.52, up 27% comparing to previous quarter. Gross profit for quarter 4 up by 21% to R686 1,000,000 and on a year to date basis gross profit up by 18% to R2589 million. Speaker 100:14:28Gross profit margin has remained consistent at 72%. Operating profit for quarter 4 up by 17% to RMB289 1,000,000 and on a year to date basis operating profit up by 17% to R1069 1,000,000. Operating profit margin has remained consistent at 30%. Adjusted EBITDA up by 22% to R454 $1,000,000 and on a year to date basis, adjusted EBITDA up by 17% to R1710 million. Adjusted EBITDA margin has remained consistent at 47%. Speaker 100:15:12This results prove Cartrack's ability to maintain high margins and bolster our winning capability to be a leading operation cloud service provider in the market. Cars React low cost of acquiring a customer, high and retention rate as well as strong benefits from economies of scale results in our leading unit economics. Our LTV to CAG is over 9. We have strong profit margins with our gross profit margin on subscription revenue at 72% and commercial customer retention rate of 95%. Given our track record, we are well positioned to continue scaling our business. Speaker 100:15:57Over the years Cartrack has maintained a steady ARPU and average upfront cost of acquiring a subscriber. ARPU for the quarter was R160. Kartrak's average lifetime revenue per subscriber in this quarter stood at R9593. The average upfront cost of adding a subscriber to our cloud in this quarter was R2281. Mid cost mainly relate to self commission and telematic device which are capitalized and sales and marketing expenses that are expensed off. Speaker 100:16:33The havoom derived from the average lifetime revenue per subscriber after subtracting the average upfront cost of adding a subscriber was R7312 per subscriber. From the R7312 we incur the cost to service a subscriber over the contract life cycle of 60 months. The cost to service the subscriber decreased as we grow our subscriber base. Our unit economics have remained steady, allowing a strong operating profit. Cars Regs continue to grow its subscriber base and ARR to expand in all geographies. Speaker 100:17:13Our subscriber in South Africa grew by 14% despite challenging trading conditions. Given that we continuously pass on additional benefit to our customer and have a rich data pool, we believe we will continue to see strong customer demand in this region. In Asia, the Middle East and USA subscriber grew by 24% as the traction in Southeast Asia has been encouraging. Southeast Asia remain as the 2nd largest contributor to the group's revenue presenting the most compelling growth opportunity and deliver increasing and sustainable income to the group in medium to long term. Europe saw a healthy growth of 16% and remain a key focus area for our resource allocation. Speaker 100:18:01Leading OEMs have partnered with us providing their customer access to our platform and driving our growth. We are poised to leverage our extensive offering to further develop the connected vehicle ecosystem and expect this partnership to contribute to our results in medium term. In additions, we are experiencing encouraging demand for our proprietary compliance technology in the region. Africa Others maintained its growth with 12% increase in subscriber. At the end of quarter 4, our ARR increased 16% to R3749 million. Speaker 100:18:42This encouraging trends reflects our continued momentum in our subscriber growth and ARR. Carsrax continue to have robust operating margins and our trends are in line with the long term financial goal set out upon our listing in 2021. Our subscription revenue gross profit margin stood at 72% which is consistent with our expectation. Research and development expense as a percentage of subscription revenue are 6% as we focus on driving substantial benefit from our R and D capital allocation. Our planned investment in improving and reaching and expanding our operation cloud and internal management system aim to enhance our value proposition to our customers. Speaker 100:19:31Sales and marketing expand as a percentage of subscription revenue stood at 13%. We believe the strategic investment for customer acquisition position us well for continued growth and we expect to see future benefit from this investment. General and admin expenses as a percentage of subscription revenue are at 21%. The expenses has been relatively stable reflect our commitment to build strong support infrastructure to meet our future growth plan yet being pragmatic in our spending. Operating profit as a percentage of subscription revenue are 30% and adjusted EBITDA as a percentage of subscription revenue is at 49%. Speaker 100:20:17Karoo Logistics delivers significant growth generating R93,000,000 in revenue, up by 65% and a commendable operating profit of R7 1,000,000 up by 201% in this quarter. It focused on delivery as a service through selected 3rd party crowd truck drivers and logistic companies has been highly scalable and is delivering substantial growth. While it continue to integrate into Cartrack platform to expand its customer base, the Karoo Logistics stack is expected to deliver a long term revenue stream to the Group. We believe the benefits of our strategic investment in this segment are starting to manifest given its strong quarter to quarter revenue growth. We are pleased to have comfortably met our 2024 outlook and are satisfied with our performance. Speaker 100:21:12We are committed to maintaining this momentum and driving further growth in 2025. Our mission is to be a leading operation cloud service provider and we believe Karooz is well positioned for the growth. We operated in a growing and largely underpenetrated market with strong demand coming from customer needing to differentiate and digitalize themselves. We expect our continuous investment in our AI products, platform and customer experience continue to generate robust result in the future. Our outlook for FY 2025 are number of subscriber between 2,200,000 to 2,400,000 Kartrak subscription revenue between R3.9 to R4.15 million, Kartrak's operating profit margin between 27% to 31% and Karoo's earnings per share is between RMB 27.5 to RMB 31. Speaker 100:22:11I would like to thank everybody for joining us today And we will now open the floor to Q and A with our Group CEO and Founder, Mr. Zack Callisto. Speaker 200:22:26Thank you, Yixin. Good morning or good afternoon or good evening to everybody. I've got a few questions. So I will start off with Matthew from Confluence. What underpinned the improved effective of tax rate? Speaker 200:22:43There's 2 aspects to that. The one aspect is as certain of our operations were loss making and as they become profitable, that improves our tax rate. That is the one aspect. The other aspect is intercompany dividends, the amount of dividends we've flowed through all the way to Karoo, that also impacts the taxes we've paid. A question from David Everol. Speaker 200:23:19Congrats on the results, Zach. You announced in February that you you, your company, buying back, 1,000,000 shares, but only 50,000 purchased this quarter. David, the first thing is we said up to 1,000,000, not 1,000,000, but I get your point. Are you planning to buy the 1,000,000 shares? David, we continue to plan to buy shares, so we will definitely do that. Speaker 200:23:44And what's only allowed us to buy in the region of about 50,000 shares was really the strict SEC rules to buy shares on the open market so that we've got quite severe limitations given our low liquidity, but we rely heavily on being able to buy blocks. And our broker has reached out to our investor base. And we bought 2 very small blocks, and we weren't able to buy any and none of the other investors or sellers. Next question from Alex from Stifel. Can you comment if anything changed throughout fiscal Q4 in terms of linearity of subscriber additions. Speaker 200:24:35And now we have subscriber additions tracked thus far in fiscal Q1. We're seeing a very, very good Q1 at this point in time. It's public knowledge that we've surpassed 2,000,000 subscribers now, and we are expecting to have a good Q1 in this quarter. And I think last year, it's very much in keeping with our outlook. And given the outlook we're giving for this year, we certainly believe we all definitely meet it. Speaker 200:25:05But so far, the 1st 2 months of the year have been very encouraging. Another question from Alex from Stifel. Looks like the subscriber count guide implies a step up in quarter adds from about 60,000 this year to 80,000 throughout fiscal year 2025. So what gives you the confidence in the acceleration there? I think during the last 2 financial years and specifically in the last financial year, we've really allocated a lot of capital in growing and improving the way we guide and manage and educate internally our staff and our sales teams. Speaker 200:25:48And we believe that's certainly going to give us yield in FY 'twenty five and beyond. Question from Sandili. You are buying back 10% of your shares in Issu. Who is selling? Well, who is selling is initial days that's willing to sell. Speaker 200:26:09We are in the market buying. Secondly, on current investment in growth and current free cash flow run, what needs to happen under your control to double non IFRS free cash flow to over a €1,000,000,000 just as you have doubled EBIT over 4 years? I think our free cash flow is something that we definitely look at. But our main focus is not growing free cash flow. Our main focus is actually growing the business as such. Speaker 200:26:39And if we grow our business substantially faster than we grow in now, that will actually have a negative impact on our free cash flow. So while free cash flow is definitely a very important measure to us, it's more important for us is the way we allocate capital. And we've got other metrics that we prioritize over the free cash flow metrics. And why is the share repurchase program more appealing to you over dividends? Whilst the share buyback is in itself a dividend to all the shareholders. Speaker 200:27:20And we believe that our share is undervalued, and that's why we have opted to also do share buybacks. Another question from David Everol. Just looking at your guidance, if we take this incremental revenue, incremental subs for the high scenario, The ARPU projected to account from a 160 to a 120. David, I haven't got the exact metrics, and I'm reading these questions as they come through. So I would have to look at that to see how you get to these numbers. Speaker 200:27:54But just looking at the question, something looks wrong. And, I don't believe that would be the case. So it just depends how you've calculated this, David. I will look at it, and I'll answer you via email to because I would have to look at how you did this arithmetic. Good call, Raj. Speaker 200:28:17How big can Corruges is getting 3 to 4 year time in a 3 to 4 year timeframe? What margins can the segment generate? I think the margins we're currently generating are really optimized profit margins. They could certainly improve, but we don't believe we must model our long term growth at higher margins than we currently have. I think these sort of margins is what we can expect. Speaker 200:28:45And how fast we can grow, I certainly believe in the next 4 years, we will see growth of no less than 25% year on year. And I'm being quite conservative, but it's very much my personal view. Then, Sebastian, what change are Cardiac seeing the South African competitive landscape? I think we have been in the market for 10 years less than our competitors. And we continue to grow our business, but both not only subscribers in subscription revenue. Speaker 200:29:32We don't rely on OEM low subscription revenue models, you know, to grow our subscribers. And, you know, and we not a company that's focused on white labeling. And you mentioned one of our competitors that's great growing, why, you know, growing subscriber, who are they taking the share? I think it's, I think the competitor you mentioning is very much around white labeling and not pushing through their brand. Could you please confirm whether the company will continue with the recently announced share power back program? Speaker 200:30:10Yes, we will. Sebastian, is CarCheck seeing the fleet size in South Africa growing, given the failure of the rail network? I think it's still very early days. And I think the transport industry in South Africa is also in a bit of a disarray. However, what we are seeing is courier companies getting larger. Speaker 200:30:37But in terms of long haul companies, we don't really see anybody getting bigger. Another question from Rudy Fanikelk. What is the scope of scaling Karoo Logistics? Do you think it could grow to a level where to I think I've answered that question, Rudy. So, yeah, I'm I'm reading the questions and answering yet. Speaker 200:31:00That's why. Patrick O'Reilly, Europe compromised 16% of your subscriber base. What countries have you penetrated in Europe, given that Europe has a massive number of telematics suppliers? Are any European I'm selecting projects that I'm offering? Is that happening in South Africa? Speaker 200:31:18So, Patrick, we've got the I would say, probably close to all the OEMs in Europe are dealing with us, and they've opted to use our platform. However, we're still in very early stages in doing that. And we believe in the medium term, that's definitely going to be it's gonna be a significant source of our business. Then a question from Dylan Becker. As you expand into new geographies, called out new provinces in the quarter, I think just Dylan, when we talk about the geography, we nearly we refer to a country. Speaker 200:32:02And when we refer to provinces, we refer to, you know, your we are, for instance, in a very large country like Indonesia. But we'd only have presence in maybe 2 or 3 of the provinces. But there's a substantial, there's a lot of large cities where we still have no presence, And that's what we refer to as provinces. With your quick ROI, are you seeing initial customer land serving as references that are driving additional customer acquisitions in the market as brand awareness grows? Certainly so, Dylan. Speaker 200:32:37As our brand gets stronger, we certainly get bigger momentum in the business. And in a lot of these geographies, we're starting to get a lot of brand recognition, but I still think we in a lot of them, we're still far from being a very strong brand. Clearly, in certain countries, we already are a very strong brand, but in some countries, still building the brand. Chris Logan, can you please provide some insight into what factors are necessary to 24%, possibly back towards the growth levers pre COVID pandemic severe, expect of 50% of 55% 58%. Chris, I think it's just really us building our distribution, which I believe we've made really good progress in FY 'twenty four. Speaker 200:33:35I think that progress is going to serve us well in FY25 and beyond. But we continue to expand into other provinces in the countries we operate. So as we build our capabilities to distribute, we will certainly get back to a much higher levels of growth. Another question from Ridi Vanirke. How does the gradual adoption of EVs impact car tax business? Speaker 200:34:05Our platform is able to deal with EV vehicles. We've integrated with a lot of EV vehicles. And in actual fact, we got 1 OEM sending us their vehicles. Actually, 2 OEM sending us their EV vehicles. So for us, it's well advanced with our EV technology. Speaker 200:34:26I want to thank everybody for joining. There's another question from Miles for you. Any acquisitions in the pipeline? No, Mars. Not at this stage. Speaker 200:34:39I want to thank everybody for attending. And we'll speak again at our Q1 results. Thank you. Bye bye.Read morePowered by