ELEMENT FLEET MANAGEMENT CORP. Q1 2024
Investor Presentation
Element Fleet Management (TSX: EFN)
Forward-looking statements and disclaimer
This presentation contains certain forward-looking statements and forward-looking information regarding Element Fleet Management Corp. ("Element") and its business which are based upon Element's current expectations, estimates, projections, assumptions and beliefs. In some cases, words such as "plan", "expect", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "target", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur are intended to identify forward-looking statements and forward-looking information. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements or information.
Forward-looking statements and information in this presentation may include, but are not limited to, statements with respect to, among other things, Element's future financial reporting; future cash flows, financial condition, financial performance, operating performance, financial ratios, projected asset base, capital structure and capital expenditures; Element's after-tax adjusted operating income per share and free cash flow per share; Element's expectations regarding revenue growth; Element's expectations in respect of its supply chain and the timing and volume of vehicle production; Element's EV strategy and capabilities; global EV adoption rates; Element's ability to achieve its sustainability objectives; Element's anticipated dividend policy and plans for future dividends; Element's ability to deliver returns and benefits from its initiatives; client acquisition, retention and experience; relationships with suppliers; anticipated cash needs, capital requirements, need for and cost of additional financing and ability to access such financing; future assets; demand for services; Element's competitive position; anticipated trends and challenges in Element's business and the markets in which it operates; Element's ability to generate pre-taxrun-rate operating income; expectations regarding syndication; Element's ability to increase total shareholder return; Element's ability to pre-fund redemption of its outstanding convertible debentures upon their maturity, if required; Element's plans and ability to redeems its preferred shares; Element's plans with respect to share purchases, including the number of common shares to be repurchased, the timing thereof and TSX acceptance of the normal course issuer bid and any renewal thereof; any impacts of pandemics or other health threats; and expectations regarding credit ratings.
By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Such forward-looking statements and information in this presentation speak only as of the date on the front of this presentation. The forward-looking information and statements contained in this presentation reflect several material factors, expectations and assumptions of Element including, without limitation: that Element will conduct its operations in a manner consistent with its expectations and, where applicable, consistent with past practice; acceptable negotiations with third parties; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax and regulatory regimes; certain cost assumptions; the continued availability of adequate debt and/or equity financing and cash flow to fund its capital and operating requirements as needed; Element's net interest margin; expectations regarding syndication; growth in lease receivables and service income; assumed rate of cost inflation; assumed applicable foreign exchange rates and applicable income tax rates; Element's funding mix; the extent of its assets and liabilities; and the impact of vehicle manufactures' ability to deliver vehicles;. Element believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct.
The forward-looking events and circumstances discussed in this presentation may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Element, including risks regarding the fleet management and finance industries, economic factors, regulatory landscape, risks related to the addition of new clients, risks related to the payment of dividends, risks relating to execution of strategic initiatives and many other factors beyond the control of Element. No forward-looking statement can be guaranteed and Element cannot guarantee future results, levels of activity, performance or achievements. Accordingly, readers should not place undue reliance on any forward-looking statements or information. A discussion of the material risks applicable to Element can be found in Element's most recent Management Discussion and Analysis document as well as the most recent such document in respect of a full calendar year, and Element's Annual Information Form, each of which have been or will be filed on SEDAR and can be accessed at www.sedarplus.ca. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element disclaims any intention and assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
An investment in the securities of Element involves significant risks. A discussion of some of the material risks affecting Element and its business appears under the heading "Risk Factors" in Element's Annual Information Form dated on February 27, 2024, and under the headings "Risk Management" and "Critical Accounting Policies and Estimates" in Element's Management Discussion and Analysis for the three-month period ended March 31, 2024, all of which have or will have been filed on SEDAR and can be accessed at Element's profile on www.sedarplus.ca. Prospective investors should carefully consider the risks associated with an investment in the securities of Element before deciding to purchase any such securities.
Unless the context otherwise requires, references to "$" are to millions of U.S. Dollars, except per share amounts, which are single U.S. Dollars.
Non-IFRS Measures
In this presentation, management presents measures that do not have a standardized meaning under IFRS and may not be comparable to similarly-named or any other non-GAAP measures presented by other organizations. Descriptions of the non-GAAP measures presented in this document can be found in Element's Management Discussion & Analysis that accompanies the financial statements for the most recent quarter or year, which have been filed on SEDAR (www.sedarplus.ca).
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Change in Element's Presentation
Currency to U.S. Dollars
Commencing Q1 2024, Element changed its presentation currency from Canadian dollars to U.S. dollars. This change more accurately reflects the predominant currency of its revenue, expenses, and cash flows and enhances comparability to its peers. All dollar amounts in this presentation are expressed in U.S. dollars unless otherwise specified.
- Unaudited interim condensed consolidated Statements of Operations, Comprehensive Income, and Cash Flows have been translated into U.S. dollars using average foreign currency rates prevailing for the relevant periods.
- Assets and liabilities in the unaudited interim condensed consolidated Statement of Financial Position, including goodwill, have been translated into U.S. dollars at the closing foreign currency rates on the relevant balance sheet dates.
- Equity in the unaudited interim condensed consolidated Statement of Financial Position and Statement of Shareholders' Equity, including share capital, preferred share capital, equity component of convertible debentures, retained earnings, and other reserves, have been translated into U.S. dollars using historical rates.
The Company's functional currency is the Canadian dollar.
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Contents
- Q1 2024 Highlights………………………………………………slide 5
- Executing on our growth strategy
- Vehicles under management
- A capital-lighter business model
- Growing adjusted FCF per share and return of capital
- Originations
- Looking Ahead…………………….………………………………..slide 14
- 2024 guidance
- Strategic initiatives
- Favourable market dynamics
- Ample growth opportunity
- Economics of transitioning to EV
- Sustainability ………………………………………………………………………..slide 22
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Q1 2024 Highlights
Q1 2024 HIGHLIGHTS
Q1 2024 Results (vs Q1/23)
(In US$ millions unless otherwise noted)
Q1 Key Drivers
Record net revenue growth
Net revenue
$262.5M 16.8%
Adj. operating income2
$143.6M 17.4%
Adj. Free Cash flow per share2
$0.35 | 7 cents | |
Services revenue1
$147.1M 27.3%
Adj. operating margin2
54.7% | 30 bps | |
Adj. EPS2 | |
$0.27 | 4 cents |
Continued strength in services
revenue
Favourable market dynamics and resilient client demand
Accelerated investments in the
business
- Q1 2024 services revenue includes $7.0 million of certain revenue items which are unlikely to repeat in 2024.
- Considered to be a non-GAAP financial that does not have a standardized meaning under IFRS and may not be comparable to similarly-named or any other non-GAAP measures presented by other organizations. Descriptions of the non-GAAP measures presented in this document can be found in Element's Management Discussion & Analysis that accompanies the financial statements for the three-month period ended March 31, 2024, which have been filed on SEDAR (www.sedarplus.ca)..
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Q1 2024 HIGHLIGHTS
Financial results
(US$millions, except per share) | Adjusted1 | |||
Key Metrics | Q1 2024 | QoQ | YoY | |
Services revenue | $147.1 | 13.4% | 27.3% | |
Net financing revenue | $107.2 | 4.9% | 9.1% | |
Syndication revenue | $8.2 | (38.0)% | (24.8)% | |
Net revenues | $262.5 | 7.1% | 16.8% | |
Operating expenses | $118.9 | 7.8% | 16.1% | |
Operating income | $143.6 | 6.4% | 17.4% | |
Operating margin | 54.7% | (30) bps | 30 bps | |
Originations (excl. Armada) $B | $1,542 | 3.5% | 9.8% | |
EPS [basic] | $0.27 | + 2 cents | + 4 cents | |
Free cash flow per share | $0.35 | + 6 cents | + 7 cents | |
EPS [basic] - CAD$ | $0.36 | + 3 cents | + 5 cents | |
Free cash flow per share - CAD$ | $0.47 | + 7 cents | + 10 cents | |
Reported | ||
Q1 2024 | QoQ | YoY |
$147.1 | 13.4% | 27.3% |
$107.2 | 4.9% | 9.1% |
$8.2 | (38.0)% | (24.8)% |
$262.5 | 7.1% | 16.8% |
$132.5 | (1.2)% | 15.0% |
$130.0 | 17.0% | 18.7% |
49.5% | 420 bps | 80 bps |
$1,542 | 3.5% | 9.8% |
$0.23 | + 3 cents | + 4 cents |
$0.31 | + 4 cents | + 5 cents |
1. Considered to be a non-GAAP financial that does not have a standardized meaning under IFRS and may not be comparable to similarly-named or any other non-GAAP measures presented by other
organizations. Descriptions of the non-GAAP measures presented in this document can be found in Element's Management Discussion & Analysis that accompanies the financial statements for the three-month | 7 |
period ended March 31, 2024, which have been filed on SEDAR (www.sedarplus.ca).. | |
Q1 2024 HIGHLIGHTS
Profitable net revenue growth, fueled by…
• Our continued focus on growing capital light |
services revenue by increasing penetration and |
utilization rates and driving greater volume |
through our comprehensive service-supplier |
Net revenue streams, and adjusted operating margin
Net financing revenue | Services revenue | ||
Syndication revenue | LTM adjusted operating margin (%) | ||
networks. |
• Q1 2024 capital light revenue as a percentage of |
total net revenue reached a new high of 59%. |
• Leveraging our deep OEM relationships, |
purchasing power and data analytics to help |
clients simplify their fleet operations and reduce |
total cost of ownership. |
• Ongoing investments in our business to elevate |
the client experience and support future growth. |
$300
$200
$100
$0
2022 | 2023 | |||
Net financing revenue | Capital-light revenue | |||
60%
55%
50%
2024
• | Digitization and automation initiatives. |
• | Explore and assess complementary revenue |
opportunities. |
We are growing net revenue and reliably delivering solid adjusted operating margin.
100% | |||||||||
80% | 56% | 57% | 57% | 57% | 56% | 56% | 58% | 58% | 59% |
60% | |||||||||
40% | |||||||||
20% | 44% | 43% | 43% | 43% | 44% | 44% | 42% | 42% | 41% |
0% | |||||||||
2022 | 2023 | 2024 | |||||||
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Q1 2024 HIGHLIGHTS
Share of wallet expansion…
(In US$ millions unless otherwise noted)
• Increased penetration - providing more financing and/or services to more of our existing clients' vehicles - deepens our value proposition (by further lowering Total Cost of Operations ('TCO') and reducing fleet-related administrative burden) and increases client retention.
- Increasing utilization is a key driver of share of wallet growth, as 2/3rds of services revenue is vehicle
usage-based; the remaining 1/3rd is recurring subscription fee-based. We offer clients insights to improve service utilization, which benefits clients' TCO.
1Q23 -> 1Q24 services revenue
27.3%
13.7 147.1
6.7 1.0
10.2
115.5
1Q23 | VUM & | Utilization | Inflation | ANZ, | 1Q24 |
Penetration | Mexico, | ||||
& other 1 |
U.S. & Canada
4Q23 -> 1Q24 services revenue
13.4%
14.2 | 147.1 | ||||
2.0 | 1.1 | 0.1 | |||
129.7 |
4Q23 | VUM & | Utilization | Inflation | ANZ, | 1Q24 |
Penetration | Mexico, | ||||
& other 1 |
1. Includes $7.0 million in certain revenue items not likely to recur in 2024.
U.S. & Canada
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Q1 2024 HIGHLIGHTS
…across our global fleet
Over the long term, Element drives growth in vehicles under management ('VUM') through:
- high client revenue retention;
- 'Internal' growth: earning incremental business from clients whose fleet needs are increasing;
- New clients: earning market share, converting self-managed fleets, and winning government and 'mega' fleets.
End-of-period global VUM (in thousands)
Financed only | Serviced & financed | Serviced only | ||
1,000 | 1,486 | 1,463 | 1,467 | 1,523 | 1,541 | 1,500 | 1,501 | 1,485 | 1,490 |
850 | 881 | 893 | 846 | 842 | |||||
822 | 827 | 826 | 834 | ||||||
607 | 611 | 608 | 606 | 612 | 616 | 621 | 620 | 615 | |
500 | |||||||||
29 | 30 | 32 | 36 | 36 | 38 | 39 | 39 | 40 | |
0 | |||||||||
2022 | 2023 | 2024 |
The majority of the decline in VUM from 2Q23 through 1Q24 was due to our ending the provision of white-label services to competitors.2 These were largely low margin and one service only VUM which contributed immaterially to our financial results.
End-of-period 4Q23 -> 1Q24 VUM (in thousands)
Avg. Services | 1 | Avg. Services | Avg. Services | Avg. Services |
per VUM: 3.6 | per VUM: 4.0 | per VUM: 1.4 | per VUM: 3.7 | |
1,485 | 11.0 | 32.6 | 1,490 | |
(38.6) |
- U.S. and Canada only. Services being tracked include Collision, Fleet Partnership Solutions, Fuel, Insurance, Maintenance & Roadside Assistance, Tax Benefits, Telematics, Title & Registration and Tolls & Violations. Excludes Acquisitions, Remarketing, Driver Safety and End of Contract services. Commencing Q1 2024 the Company excludes Financing from its total services count (previously included in total services count).
- We released approximately 73,800 VUM in 2Q23, 68,000 VUM in 3Q23, 33,000 VUM in 4Q23 and 31,400 VUM in 1Q24 (in aggregate 206,200 VUM) in relation to our move to end the provision of white-label services to competitors.
4Q23 VUM | New VUM | Lost VUM | Net | 1Q24 VUM |
from new | from | "internal" | ||
clients | departing | growth | ||
clients | 10 | |||
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Disclaimer
Element Fleet Management Corporation published this content on 14 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 May 2024 21:28:33 UTC.
