Karooooo (NASDAQ:KARO) reported accelerated subscription revenue growth and sharply higher adjusted free cash flow for fiscal 2026, while management said it expects further growth in fiscal 2027 despite near-term pressure on gross margins from foreign exchange and higher device-related costs.
During the company’s fourth-quarter and full-year fiscal 2026 results presentation, Carmen Calisto, Karooooo’s Chief Strategy and Marketing Officer, said Cartrack subscription revenue growth accelerated to 19% from 15% in the prior year, despite headwinds from the appreciation of the South African rand. Annual recurring revenue increased 18% to ZAR 5.18 billion and rose 38% in U.S. dollar terms to $325 million.
Subscription Revenue and Cash Flow Rise
Karooooo’s total revenue increased 20% to ZAR 5.48 billion for fiscal 2026, while subscription revenue increased 19% to ZAR 4.84 billion. Chief Financial Officer Hoe Shin Goy said adjusted earnings per share for the year were ZAR 32.55, while adjusted EPS in U.S. dollar terms increased 20% to $2.05.
The company also reported a substantial increase in cash generation. Adjusted free cash flow rose 90% to ZAR 809 million. Goy attributed the performance to several factors, including stronger collections in February 2026, improved supplier terms, timing of tax payments, disciplined management of uninstalled IoT devices and lower payments tied to the construction of the company’s South African head office.
Karooooo ended the quarter with net cash and cash equivalents of ZAR 746 million. The company declared a dividend of $1.50 per share, up 20%, payable in July 2026.
Calisto said the company continued to invest in its distribution network, AI-powered video capabilities and Cartrack-Tag, describing those investments as part of a strategy to drive future recurring revenue, earnings and free cash flow.
Cartrack Remains Core Growth Driver
Cartrack, Karooooo’s operational intelligence SaaS platform for connected vehicles and mobile assets, remained the primary driver of the company’s results. Goy said Cartrack revenue increased 19% to ZAR 4.94 billion for fiscal 2026, while Cartrack subscription revenue increased 19% to ZAR 4.83 billion.
In the fourth quarter, Cartrack subscription revenue increased 18% to ZAR 1.28 billion, accounting for 98% of Cartrack revenue. Subscribers increased 16% to approximately 2.7 million, and Cartrack recorded fourth-quarter net subscriber additions of 93,755, up 19%.
Management said subscriber growth was healthy across regions. South Africa surpassed 2 million subscribers during the fourth quarter, and fiscal 2026 subscription revenue in the country increased 20% to ZAR 3.47 billion. In Southeast Asia and the Middle East, subscribers increased 23% to approximately 336,000, with fourth-quarter net additions up 82%. In Europe, subscribers increased 14% to approximately 228,000, while subscription revenue rose 22%.
Calisto said Southeast Asia remains the company’s most compelling medium- to long-term growth opportunity and that Karooooo plans to continue investing prudently in sales and marketing there.
Margins Pressured by Growth Investments and Currency
Management said profitability was affected by planned sales and marketing investments, currency movements and device-related cost provisions. Goy said Cartrack’s gross profit margin was 70% in the fourth quarter, compared with 75% in the prior-year quarter, while subscription revenue gross profit margin was 71%.
Goy said the strengthening rand created a headwind to reported revenue, while much of cost of sales reflects depreciation of in-vehicle IoT devices at prior-year exchange rates. He also said accelerated growth increased the company’s in-vehicle IoT device base by 45%, leading management to align provisions with that growth.
Founder and Group CEO Zak Calisto addressed the issue during the Q&A, saying the provision was not requested by auditors and was instead a management decision. “We just don’t want surprises,” he said, adding that the company had not seen an increase in churn.
Karooooo also said fourth-quarter adjusted EPS of ZAR 7.18 was affected by foreign exchange, the provision alignment and a higher effective tax rate tied to withholding tax from dividend payments by a subsidiary to the holding company. Goy said those items represented approximately ZAR 1.60 of EPS in the quarter.
Karooooo Logistics Continues to Scale
Karooooo Logistics, the company’s delivery-as-a-service segment, generated fiscal 2026 revenue of ZAR 540 million, up 29%, or 50% in U.S. dollar terms. In the fourth quarter, revenue rose 32% to ZAR 145 million, with a 9% operating profit margin.
Calisto said Karooooo Logistics helps enterprise customers scale e-commerce and logistics operations through a capital-light model while supporting customer retention for Cartrack. She also said the segment surpassed ZAR 1 billion in cumulative payments to drivers since Karooooo acquired it in 2021, and that drivers completed more than 8 million deliveries in fiscal 2026.
Fiscal 2027 Outlook Calls for Growth
For fiscal 2027, Karooooo guided for Cartrack subscription revenue of ZAR 5.7 billion to ZAR 6.0 billion, implying growth of 18% to 24%. The company expects Cartrack gross profit margin of 70% to 72% and operating profit margin of 27% to 30%. Karooooo forecast EPS of ZAR 38.50 to ZAR 40.00.
Goy said the midpoint of the EPS outlook implies 21% growth compared with fiscal 2026 EPS, excluding secondary offering costs. Management said it expects hiring to slow in fiscal 2027 as the company focuses on sales force efficiency and broader AI adoption.
In the Q&A, Zak Calisto said Karooooo has been working on AI applications for about 18 months, particularly around internal efficiency and customer support, but said the tools are not yet performing at the level management wants. “It still makes too many misinterpretations, and it basically frustrates customers,” he said. “Over time, this will be a big win for us.”
Calisto also said pricing trends have been consistent across Karooooo’s markets for roughly a decade. He said the company does not currently see pressure on pricing, but also does not see an opportunity to raise prices “for the sake of raising prices.”
Management said the company remains focused on increasing adoption of video and Cartrack-Tag, improving productivity and continuing investment in Southeast Asia. Calisto said the company feels comfortable with its fiscal 2027 outlook after the first two months of the new year.
About Karooooo (NASDAQ:KARO)
Karooooo Ltd is a global provider of telematics software-as-a-service solutions for vehicle and fleet management. Through its flagship platform, the company delivers real-time GPS tracking, stolen vehicle recovery and driver behaviour analytics, enabling commercial fleets and automotive insurers to optimise operations, increase safety and reduce costs.
Karooooo’s SaaS platform integrates proprietary hardware devices with cloud-based analytics and mobile applications. Customers gain access to live vehicle location data, engine diagnostics, route planning tools and customizable reporting dashboards.
