Karooooo Q2 Operating Profit Hits Record as Subscription Growth Reaches 20%

Karooooo (NASDAQ: KARO) reported faster subscription revenue growth and record quarterly operating profit for the second quarter of fiscal 2027, supported by subscriber gains across its core Cartrack markets. The operational-intelligence provider reiterated its full-year outlook even as foreign-exchange headwinds weighed on reported growth and investment in connected devices reduced near-term free cash flow.

Group revenue rose 22% year over year to ZAR1.64 billion, while subscription revenue increased 20% to ZAR1.42 billion. Operating profit reached a quarterly record of ZAR422 million, up 19% from ZAR356 million a year earlier. Karooooo reported earnings per share of ZAR9.28, compared with ZAR8.28 in the prior-year quarter.

Cartrack, the company’s main subscription business, generated ZAR1.42 billion of subscription revenue, up 20% as reported and 23% in constant currency. Subscription revenue represented 98% of Cartrack’s revenue. Its adjusted EBITDA margin was 46%, while its operating profit margin was 28%.

Annual recurring revenue, a non-IFRS measure, increased 19% to ZAR5.71 billion. On a constant-currency basis, ARR rose 22%. The presentation also translated ARR to $354 million, a 30% year-over-year increase, using the exchange rate specified by the company.

Subscriber growth broadens across regions

Cartrack’s subscriber base expanded 18% to approximately 2.9 million. Net additions rose 34% to 94,516, which the company described as a record for a second quarter.

South Africa remained the largest market, with about 2.19 million subscribers, up 18%. Subscription revenue in the country increased 25%, compared with 24% growth in the preceding quarter. South Africa accounted for 73% of Cartrack’s subscription revenue, and net subscriber additions in the region rose 20% to 65,997.

Asia and the Middle East ended the quarter with about 367,000 subscribers, an increase of 21%. Reported subscription revenue grew 12%, while constant-currency growth was 25%, reflecting the effect of a stronger South African rand on translated results. Europe’s subscriber base increased 13% to approximately 245,000; subscription revenue rose 4% as reported and 14% in constant currency. Other African markets had about 101,000 subscribers, up 16%.

The company said customers responsible for 95% of commercial-customer ARR in August 2025 remained customers one year later. Subscription revenue gross margin was 71%, compared with 72% in the prior-year quarter, while the ratio of customer lifetime value to acquisition cost remained above nine times.

Logistics revenue rises 36%

Karooooo Logistics generated ZAR189 million in revenue, up 36% year over year, as demand increased for its business-to-business last-mile delivery services, including quick-commerce operations. The segment posted a 6% operating profit margin.

The logistics platform connects business delivery demand with vetted third-party drivers. Karooooo said the business also gives it greater exposure to large customers’ operational challenges and embeds its platform more deeply in their workflows.

Investment weighs on free cash flow

Free cash flow was ZAR41 million in the quarter and ZAR100 million for the first half. Investment in IoT devices increased 86% to ZAR966 million during the first half as the company built inventory, including memory components, to support subscription growth.

Cash and cash equivalents stood at ZAR649 million as of Aug. 31, down from ZAR1.15 billion at the end of February. Karooooo attributed most of the decline to ZAR752 million of dividends paid in July. Because cash reserves are held in U.S. dollars, the strengthening rand also reduced their reported value in rand terms. The company described its balance sheet as unleveraged.

Full-year outlook maintained

Karooooo reiterated its fiscal 2027 outlook for Cartrack subscription revenue of ZAR5.7 billion to ZAR6.0 billion, representing growth of 18% to 24%. It continues to expect a Cartrack gross profit margin of 70% to 72% and an operating profit margin of 27% to 30%.

Full-year earnings per share are expected to range from ZAR38.50 to ZAR40.00, implying growth of 18% to 23% on the company’s stated basis. At the midpoint, that would represent 21% growth compared with fiscal 2026, excluding secondary-offering costs.

Management’s fiscal 2027 priorities include strengthening the company’s position in its existing markets, improving salesforce efficiency while pursuing subscription growth, and applying artificial intelligence to its platform and internal operations.

The outlook remains subject to currency movements, execution on growth investments and the timing of returns from higher spending on IoT inventory and customer acquisition. Karooooo also cautioned that forward-looking statements depend on assumptions and may differ materially from actual results.