Company: KARO
Filing Date: 2025-06-09
Form Type: 20-F
Source: 0001213900-25-052372
Chunk: 99

Company: Karooooo Ltd.
Filing Date: 2025-06-09
Form: 20-F
Item: Item 4A
Chunk 99
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-current period. If an installed telematics device requires replacement for
defect, the cost is taken as an expense in the replacement period. Less significant cost of revenue items includes expenditures incurred
in connection with an asset recovery warranty program (offered by a third-party service provider), which is determined based on historical
loss data observed over a period of at least the past five years, and mapping costs. Our cost of revenue is generally driven by the number
of assets under subscription and solutions provided. We expect the cost of revenue in absolute terms to increase with subscriber growth.
Cost of revenue also includes cost of last-mile delivery services, and, prior to FY 2025, also included the cost of vehicles bought for
and sold via the Carzuka platform.

Other Income

Other income substantially consists of the government grants
and gain on sale of property, plant and equipment and other less significant items.

Operating Expenses

Other operating expenses consist of sales and marketing,
research and development, general and administration and expected credit losses on financial assets.

Sales and Marketing

Sales and marketing expenses
consist primarily of wages and benefits for sales and marketing employees, and other marketing, advertising and promotional costs. Advertising
costs consist primarily of pay-per-click advertising with search engines, social media advertising and other online advertising platforms,
as well as the costs to create and produce these advertisements.

Our strategic investment in brand-building
positions us well for growth. Sales and marketing expenses are expensed upfront, while the life time value of a customer is recognized
over a prolonged period. Sales and marketing expenses may fluctuate as a percentage of subscription revenue and will continue to remain
one of the largest components of our operating expenses.

General and Administration

General and administration expenses
consist primarily of wages and benefits for administrative services, human resources, internal information technology support, executive,
legal, finance and accounting employees; professional fees; expenses for business application software licenses; non-income related taxes;
other corporate expenses, such as insurance and general office related expenses, such as rent and utilities.

In addition to the above, general
and administration expenses consist of depreciation relating to other property, plant and equipment, excluding those related to subscriber
acquisition costs, which are included in cost of revenue, and the amortization of intangible assets relating to purchased computer software
infrastructure.

We expect that general and administration
expenses will increase as we continue to scale. However, our long-term target is to reduce general and administration expenses as a percentage
of subscription revenue.

Research and