Karooooo Stock Jumps 13% on Q1 Revenue Beat, Record Subscriber Additions

Shares of Karooooo (NASDAQ: KARO) surged as much as 13% in Thursday trading after the Singapore-based fleet management and connected vehicle company delivered a fiscal first-quarter earnings beat that featured record subscriber growth and accelerating revenue from its Cartrack platform.

Revenue rose 34% year over year, well above the average analyst estimate of roughly 28% growth, according to Nasdaq. Bottom-line earnings jumped 11%, compared with expectations of around 3% growth. Earnings per share came in at ZAR 9.53, Chief Financial Officer Hoe Shin Goy said during the company's earnings call.

The stock was up 12.8% by 2:30 p.m. ET and later extended gains to 13%, Nasdaq reported.

**Record Subscriber Growth Led by South Africa**

Karooooo's Cartrack service surpassed 2.8 million subscribers in the quarter, adding a record 142,472 net new subscribers — an 18% growth rate. Management said South Africa was the primary driver, with net additions in that market rising 92% to 113,913. South Africa subscription revenue increased 24%, accelerating from the prior quarter.

Chief Strategy and Marketing Officer Carmen Calisto attributed the performance to recent investments in sales capacity and demand for video solutions and the Cartrack Tag product, including sales of Tag as a standalone offering. Founder and Group CEO Zak Calisto said during the Q&A session that the company sold "a tremendous amount" of Cartrack Tag as a standalone product and also sold it into the existing customer base. He noted that Tag carries a much lower average revenue per user than the company's overall average, but said it has opened a new market opportunity.

When asked about expanding Tag beyond South Africa this fiscal year, Zak Calisto said the company remains focused on the South African market for now, citing the challenge of growing and training headcount and expanding distribution capacity.

**Recurring Revenue and ARR Increase**

Total subscription revenue rose 19% to ZAR 1.35 billion, while total revenue increased 22% to ZAR 1.56 billion. Annual recurring revenue increased 19% to ZAR 5.43 billion, or 22% in constant currency. In U.S. dollar terms, ARR increased 32% to $335 million, the company said.

Cartrack subscription revenue grew 19% in the quarter, or 21% in constant currency, according to Carmen Calisto.

**Logistics Segment Posts Strong Growth**

Karooooo Logistics, the company's delivery-as-a-service business, generated revenue of ZAR 177 million, up 46% from the prior year, or 63% in U.S. dollar terms. According to Nasdaq, the segment posted a 48% sales jump. It reported an 8% operating profit margin.

Carmen Calisto said quick-commerce orders drove the segment's performance. Management described Karooooo Logistics as strategically important because it helps large enterprise customers scale through a capital-light model while increasing customer retention and giving Karooooo insight into customers' operational and logistics challenges.

The logistics business accounted for 13% of total revenue in the quarter.

**Profit Margins, Cash Flow, and Dividend**

Cartrack's operating profit margin was 28% in the quarter, while its adjusted EBITDA margin was 45%. Management said the company was a "rule of 60" business in the quarter when adding Cartrack subscription revenue growth of 19% to the adjusted EBITDA margin. Subscription gross margin came in at 73%, above the full-year guidance range of 70% to 72%.

Operating profit increased 16% to a record ZAR 410 million.

Free cash flow was ZAR 60 million, primarily reflecting proactive investment in IoT devices to meet anticipated demand and growth-oriented working capital investments, Goy said. He said the year-over-year decline in quarterly free cash flow did not indicate a structural issue with the company's ability to generate cash.

Karooooo ended the quarter with net cash and cash equivalents of ZAR 756 million. Management noted that excess cash is held in U.S. dollars, so movements in the dollar-rand exchange rate can affect the reported rand balance.

The company declared a dividend of $1.50 per share, a 20% increase from the prior year.

**Regional Performance**

In Southeast Asia and the Middle East, subscriber growth increased 22% to 353,000 subscribers, with most subscribers in Southeast Asia. Subscription revenue in the region increased 6% as reported and 17% in constant currency. Management said reported revenue growth was affected by faster growth in lower-ARPU countries and by a stronger rand. Zak Calisto said the company expects regional ARPU in Asia to decline over time as Indonesia, Malaysia, the Philippines, and Thailand become larger contributors compared with Singapore, where ARPU is higher.

In Europe, subscriber growth increased 13% to 236,000 subscribers, while subscription revenue rose 7%, or 13% in constant currency. Carmen Calisto said the company continues to expand its customer base and distribution capabilities, including through partnerships with leading OEMs that allow connected vehicle data to be integrated into the platform via APIs. She also cited demand for compliance technology as customers respond to changing legislation and enforcement.

**Outlook and Sales Investment**

Management reiterated its fiscal 2027 outlook, expecting accelerating subscription revenue growth at the midpoint and healthy earnings per share growth. Goy said sales and marketing expenses are expected to continue increasing during the year, but at a lower rate than in fiscal 2026. Carmen Calisto said Karooooo is focused on optimizing the sales capacity investments made during fiscal 2026 while expanding its distribution footprint at a more moderate pace in fiscal 2027.

Zak Calisto said the company onboarded close to 2,000 people in the prior year and wants to improve salesforce efficiency while preserving its culture. When asked about the sustainability of record net subscriber additions, he said Karooooo does not provide specific guidance on that metric.