Hello and welcome to Karooooo's Financial Year 2025 Q3 Earnings Call. On behalf of Karooooo, we would like to thank you for joining us today. I'm Paul Beaver, Karooooo’s VP of Investor Relations and Strategic Finance. We are joined today by Zak Calisto, Founder and CEO; Hoeshin Goy, Chief Financial Officer; and Carmen Calisto, Chief Strategy and Marketing Officer. Before handing the call over to Carmen, I would like to remind everyone that some of the statements that we make today regarding our business, operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions. They are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to the Safe Harbor statement in our Form 20-F, including the risk factors and the 6-K that we filed yesterday. We undertake no obligation to update any forward-looking statements. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in the 6-K that we filed with the SEC yesterday. With that, I'd like to hand the call over to Carmen.
During the call today, we will review both Karooooo’s operating units, Cartrack and Karooooo Logistics. For those new to Karooooo, Cartrack is our operations management SaaS platform. Cartrack operates at scale and has a very attractive financial profile. Cartrack’s operating momentum has primarily driven Karooooo’s growth and strong financial performance. For FY ‘25 year-to-date, Cartrack subscription revenue was approximately ZAR3 billion, an increase of 15% year-on-year or 20% year-on-year on a U.S. dollar basis. Cartrack’s year-to-date operating profit margin was 30%. Karooooo Logistics is our rapidly growing delivery-as-a-service business that empowers our large enterprise customers to scale their e-commerce and logistics operations. Karooooo Logistics is a structurally lower margin business than Cartrack, showing good growth momentum. Karooooo Logistics is strategically important to us as it empowers our customers to scale their e-commerce and logistics operations through a capital light model, whilst driving high Cartrack customer retention.
For FY ‘25 year-to-date, Karooooo Logistics delivery-as-a-service revenue was ZAR310 million, an increase of 38% year-on-year or 45% year-on-year on a U.S. dollar basis. Given Karooooo Logistics' robust revenue growth, we are very excited about the long-term growth opportunity for the business. Karooooo Logistics is profitable at its current scale. In Q3, Karooooo delivered another strong quarter with total revenue of ZAR1,159 million, an increase of 15% year-on-year, subscription revenue of ZAR1,032 million, an increase of 14% year-on-year, and adjusted earnings per share of ZAR7.67, an increase of 21% year-on-year. Q3 continued our long track record of delivering profitable growth at scale. In Q3, we were a rule of 60 company when adding our Q3 subscription revenue growth of 14% and our Q3 Cartrack adjusted EBITDA margin of 47%. We ended Q3 with more than 2.2 million subscribers, an increase of 17% year-on-year, and more than 125,000 businesses across all industries trusting us to power and improve their daily operations.
We continue to grow our data asset and our platform now generates more than 180 billion valuable data points monthly, which we leverage to drive actionable insights for our customers. Before diving into our Q3 business and operational highlights, we want to take a moment to underscore our distinctive financial profile, something that is exceptionally rare in the public markets, particularly among small-cap companies. We believe we are amongst the select few SaaS companies operating at a rule of 50 plus, based on 2025 GAAP Street estimates. Notably, within a SaaS universe of approximately 200 companies, we believe we are one of only two small cap companies operating at this level. Being part of this elite group reflects our unwavering commitment to disciplined and profitable growth. We are proud to stand out as a leader in financial performance amongst our SaaS peers. In Q3, Cartrack's total subscribers increased 17% year-on-year, highlighted by stable growth in South Africa and a 200 basis point quarter-on-quarter acceleration in Europe.
In September, we successfully completed the move to our newly built central office in South Africa. This move bolsters our operational capacity and positions us to support higher levels of organic growth. We are already seeing positive early results from this strategic investment. Additionally, we continue to ramp up our investment in sales and marketing across Southeast Asia and are seeing early signs of success. We remain confident that Southeast Asia represents the most compelling growth opportunity for the group over the medium to long-term. We will have more to say about the Southeast Asia opportunity later in this presentation. With our ongoing investments in sales, marketing and infrastructure to support future growth, we believe we have ample runway to accelerate customer acquisition, whilst maintaining robust earnings. Finally, Cartrack delivered healthy subscriber additions in Q3, while maintaining strong unit economics with an LTV to CAC ratio greater than 9.
Our commercial customer retention rate remains at 95% and we continue to grow the business at scale with discipline. Our Q3 financial highlights include, Cartrack’s year-to-date subscription revenue increased 20% year-on-year on a U.S. dollar basis. Cartrack subscription revenue increased 19% year-on-year on a U.S. dollar basis. Cartrack surpassed ZAR1 billion in quarterly subscription revenue. We remained a rule of 60 company and Karooooo adjusted earnings per share increased 21% year-on-year to ZAR7.67. Our balance sheet remained strong and unleveraged and we ended the quarter with net cash and cash equivalents of ZAR856 million. Additionally, given our strong Q3 financial performance and operating momentum, we are reaffirming our previous FY ‘25 financial outlook. We believe we are well positioned to deliver durable and profitable growth driven by our strong unit economics, disciplined capital management, and consistent track record of execution.
We offer an easy-to-use and differentiated enterprise SaaS platform that leverages our vast and proprietary data asset to provide our customers with actionable insights and analytics to simplify their decision making. Our financial performance speaks for itself, underscored by a Rule of 60 financial profile and a healthy, unlevered balance sheet. Additionally, as a founder-led organization, we bring long-term vision, strategic focus, and an entrepreneurial approach to an expansive total addressable market with significant growth opportunities still ahead.
Thank you, Carmen. I will now discuss Karooooo’s financial performance for quarter three FY ‘25. Please note that all comparisons are against quarter three FY ‘24 unless otherwise stated. Our proven and profitable SaaS business model continues to deliver strong results in quarter three. Karooooo’s total subscription revenue increased 14% to ZAR1,032 million. On a U.S. dollar basis, Karooooo’s subscription revenue increased 19% year-on-year. Operating profit increased 18% to ZAR325 million and adjusted EPS increased 21% to ZAR7.67. The two segments of Karooooo’s Cartrack and Karooooo Logistics complement each other by supporting our large enterprise customers as they scale their e-commerce operations. Overall, Karooooo demonstrated strong quarter-on-quarter financial performance with a quarterly operating profit now at a record of ZAR325 million. We will now focus on Cartrack, the underlying assets of Karooooo's success.
In this quarter, Cartrack experienced healthy customer acquisition. Quarter three subscribers increased 17% to ZAR2.2 million, subscription revenue increased 14% to ZAR1,029 million, and operating profit was a record of ZAR316 million. Cartrack continues to prove its ability to scale in varying macroeconomic conditions and was a rule of 60 company in quarter three when adding our third quarter subscription revenue growth of 14% year-on-year and our third quarter adjusted EBITDA margin of 47%. Cartrack experienced solid customer acquisition with net subscriber additions of 86,617 in this quarter, an increase of 15% year-on-year. We operate in a massive addressable market, and we believe that we have ample runway to accelerate our customer acquisition strategy while maintaining robust earnings. We will also prioritize our capital allocation in sales and marketing. Looking ahead, we are on track to surpass 2.3 million subscribers by year-end and we are expecting a record quarter four net subscriber additions.
Cartrack continues to grow its subscriber base across geographies. South African subscribers increased 16% year-on-year in quarter three and comprise 75% of our total subscribers. We believe that the economic environment in South Africa is improving and we are confident that our move to our newly built central office positions us to support strong organic growth as it will allow us to expand our customer base and increase subscription sales to existing customers. In Asia and the Middle East, subscribers increased 20% year-on-year in quarter three with strong momentum in Southeast Asia. This region comprised 12% of our total subscribers. Southeast Asia remains the second largest contributor to the Group's revenue, presenting the most compelling growth opportunity over the medium to long-term. Europe's subscribers increased 19% year-on-year in quarter three and comprised 9% of our total subscribers.
European subscriber growth accelerated by 200 basis points quarter-over-quarter, driven by our investment in distribution over the last few quarters. We remain focused on increasing our presence in this region, especially through OEM partnerships. In addition, we are experiencing encouraging demand with our proprietary compliance technology as customers seek to simplify compliance with changing legislations. Africa others maintain its growth with a 16% increase in subscribers and comprise 4% of our total subscribers. Karooooo’s adjusted EPS increased 21% to ZAR7.67 this quarter. This is driven by higher subscription revenue and expanding gross margins. Cartrack's earnings per share increased 8% to ZAR7.51 and Karooooo Logistics Earnings Per Share increased 23% to ZAR0.16. As Karooooo continues to scale and grow, we are confident with our financial year 2025 adjusted earnings per share outlook.
In this quarter, we continue to demonstrate high cash conversions as our earnings increase. Free cash flow was ZAR188 million. We have now settled into our newly built South African Central Office and looking forward to strong economic growth in this region. Our total development cost for the new building excluding the land was ZAR322 million and we do not expect significant capital allocation to the building going forward. Our balance sheet reflects our track record of growth at scale, profitability and cash generation. Our net cash on hand plus cash in bank fixed deposit was ZAR856 million. We expect our disciplined approach to capital allocation, coupled with our earnings and free cash flow growth, to continue and bolster our strong balance sheet. That the collection days remain extremely healthy and within our historical norms at 27 days. Last August, we paid a cash dividend of ZAR33.4 million or ZAR1.08 per share to our shareholders.
The dividend per share increased 27%. We have strong unit economics, robust operating margins, unleveraged balance sheet and strong cash conversion. We remain confident that our track record of success, especially our ability to generate healthy cash flow, is sustainable. Given our strong Q3 results, we are reaffirming our financial outlook for FY ‘25. In closing, we are excited about the operating momentum in the business and our year-to-date financial performance. Looking forward, we believe our attractive SaaS business model, robust cash generation, and strong balance sheet position us to capitalize on the expansive growth opportunity in front of us.
I think the best sources of human capital, we don't outsource our recruitment, we do it all internally. And there are various channels, whether it's referrals or whether it's actually just on digital platforms. So we have different ways of attracting people and we also post, and we have incoming queries or applicants for the jobs. What are our unique selling points? I think that really depends whether you are hiring a technical person, a developer or a salesperson. You know those we would have selling points that talk to the respective jobs in the business, but fundamentally hiring senior people to the business, it's very easy for us. We have a very attractive business. So if we want a senior person, we find those hires are extremely easy. Where it becomes more challenging is actually on the distribution front, which is actually salespeople. There are very few really good quality salespeople and attracting the right people and training them is not always the easiest.
So that's really probably where it's the most difficult: building out that ability to sell, while being vertically integrated and not looking for agents and third parties to sell for us. The next question is from Rudy Fanickak. Now, should we think of the impact of the new generation vehicles that have integrated or have integrated full self-driving technologies? I think we're in the very early stages of self-driving technologies. I think there's one or two smaller cities in America that are doing it. There's a few running around Singapore. But I think we're still quite a long way away from self-driving becoming a way of life. And obviously things do change between now and where that becomes an absolute reality. I think we could probably see UFOs before we see full self-driving vehicles in some parts of the world. I'm not sure. But I think fundamentally, the way we operate our business and see our business is that when we agile and we adapt, there's no need to adapt right now.
It's too early in the curve to start planning for that. But I think in itself, because we're helping businesses run the operations. Quite frankly, I think whether the vehicle is self-driven or not, the whole ecosystem of the supply, the distribution, you know, there's a lot more that we do. And like I said, we're probably a couple of years away from this. And by the time that has happened, we will look like a very different business to what we are currently today. In actual fact, I think we today are quite a different business to what we were four years ago, and certainly a very big difference in the business that we were 10-years ago. The next question is from Jackson from William Blair. With multiple regions performing strongly, what has been the contribution to ARR from each? Is this a good way to think about the breakdown going forward? Yes, I think that's a good way to look at it, but it's very much in keeping with the growth in subscription revenue in the region.
And obviously at the moment, our ARR and our subscription revenue were impacted by the stronger rand, which obviously the non-South African entities, whether it's Europe or Southeast Asia, they were dealing with a stronger rand. I see since November, since year-end, that's corrected quite a bit with the South African rand now weakened. But I think the other currencies probably have weakened against the dollar as well. So I haven't quite looked at the impact for Q3, the potential impact for Q3. The next question comes from Alex from Raymond James. Can you talk about your planned global sales and marketing hiring efforts? What is the magnitude you're looking to grow the sales organization over the next 12 months in some of your core regions? In Asia, our target is to grow that by about 70% of our current headcount and we believe that we will comfortably be able to do that 70% increase. We're also increasing in South Africa, we're just settling down in a new building, but we're probably going to increase headcount in South Africa by about 50% on the sales and marketing side.
And in Europe, we're also looking at increasing it by about 50% this year. We've been increasing Europe consistently over the last six or eight quarters and we can see already the results where we're starting to get 19% growth. The next question is from Patrick O'Reilly from Fleetwatch. There's a lot of noise around the Africa Free Trade Agreement. Do you see the noise translating into positive opportunities for Cartrack in Africa? You know, Patrick, with the trade agreement or no trade agreement, the opportunities are very vast and huge for us. Clearly the more free trade there is, the more logistics there is that obviously acts in our favor. I think those are the questions for today. I want to thank everybody. Should there be any other questions, you're welcome to email me. Thank you. Bye-bye.