Company: KARO
Filing Date: 2025-06-09
Form Type: 20-F
Source: 0001213900-25-052372
Chunk: 98

Company: Karooooo Ltd.
Filing Date: 2025-06-09
Form: 20-F
Item: Item 4A
Chunk 98
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 current and future growth contributed to the decrease in Free Cash Flow.
The Free Cash Flow (a non-IFRS measure) generated is in line with Karooooo’s disciplined capital allocation strategy and support
the Group’s growth objectives.

Components of Our Results of Operations Revenue

Revenue

Our revenue is substantially derived
from the provision of mobility data analytics solutions on a subscription-based model typically under monthly SaaS subscription contracts.
Our revenue is driven primarily by the number of assets subscribed to our SaaS platform and the price per asset under these subscription
contracts. Hardware sales, including sales to our licensees, and installation revenue and royalties we receive from our licensees, make
up a minimal component of total revenue. Our initial per subscriber (or mobile asset) contract terms are generally 36 months with automatic
monthly renewals thereafter and may not be cancelled without penalty prior to the completion of the initial term. The expected life cycle
of our subscription contracts is over 60 months. In some instances we charge our customers for a ratable portion of the contract on a
periodic basis, generally in advance on a monthly basis, and in certain regions we apply annual escalations to the contract pricing. Customers
may prepay all or part of their contractual obligations for the full initial contract term. Our revenue also includes Delivery-as-a-service
(“ DaaS”) revenue generated from last-mile delivery services, including subscription-based revenue associated with these delivery
services. Prior to FY 2025, our revenue also included revenue from selling second-hand vehicles via the Carzuka platform.

Cost of Revenue

Cost of revenue consists primarily
of costs related to the depreciation and amortization of capitalized subscriber acquisition costs, which includes the telematics device,
the cost of the installation and direct commissions paid to our sales staff. Other components of cost of revenue include non-capitalized
automotive technician costs, machine to machine (“ M2M”) network communications costs and the costs of delivering safety and
asset recovery services to our customers, including such costs incurred by our licensees. We capitalize the cost of installed telematics
devices and direct sales commissions and depreciate these costs over the expected useful life of the subscriber, which is currently over
60 months. We pay commissions to our sales teams only once a telematics device is installed and activated. If a customer subscription
agreement is cancelled prior to the end of the expected useful life of the subscriber, the depreciation period is accelerated, resulting
in the carrying capitalized value being expensed in the then