Alex

Alex from Raymond James asked how the changing mix shift towards video cross-selling is impacting Cartrack's gross margins.

Answer

CEO Zak Calisto explained that gross margin was 72% in the quarter, a slight decrease from 74% a year ago, primarily due to increased cost of sales. He clarified that video itself is not negatively impacting gross profit margins due to strategic pricing and unit economics, but an increase in commission payments, which are part of cost of sales, was observed.

Alex from Raymond James asked about the vision attach rate by Jira, how it compares for new customers versus back-to-base sales, and whether Karooooo is landing with video solutions with a higher percentage of new subscribers. He also inquired about the impact of the changing mix shift towards video cross-sell on CARTRACK's gross margins.

Answer

Zak Calisto, Founder and Group CEO, stated that it's still early days for video solutions, with most sales currently coming from the existing customer base, representing only about 10% of total sales. He reiterated that the bottleneck is building proper distribution teams. Regarding gross margins, he noted that the current 72% (down from 74% a year ago) is due to increased cost of sales, primarily commissions, but clarified that video itself is not impacting gross profit margins due to the company's pricing and unit economics model.

Alex from Raymond James asked how the changing mix shift towards video cross-selling is impacting Cartrack's gross margins.

Answer

CEO Zak Calisto explained that gross margin was 72% in the quarter, a slight decrease from 74% a year ago, primarily due to increased cost of sales. He clarified that video itself is not negatively impacting gross profit margins due to strategic pricing and unit economics, but an increase in commission payments, which are part of cost of sales, was observed.

Alex inquired about the factors contributing to the strong performance in H.B. Fuller's Engineering Adhesives (EA) segment, specifically asking if anything accelerated in the quarter or if acquisitions played a role in EA's volumes and margins.

Answer

Celeste Mastin, President and Chief Executive Officer, highlighted that the electronics business returned to double-digit organic growth globally. She also noted significant improvement in the U.S. EA business, moving from negative mid-single-digit to positive mid-single-digit organic growth, driven by share gains and new customer wins.