Earnings call transcript: Element Fleet’s Q2 2025 sees record results

Element Fleet Management Corp., a $10.6 billion market cap company, reported record results for the second quarter of 2025, with significant year-over-year growth in both revenue and earnings per share (EPS). The company highlighted strong operational performance and strategic advancements, including the launch of a new division, Element Mobility. Despite a complex macroeconomic environment, Element Fleet remains optimistic about its future, expecting to meet or exceed its guidance ranges for the year. According to InvestingPro analysis, the company maintains a "GOOD" financial health score, supported by strong momentum and profitability metrics.

Key Takeaways

• Element Fleet reported a 6% increase in net revenue, reaching $290 million.
• Adjusted EPS rose to 30 cents, marking a 78% year-over-year increase.
• The company launched Element Mobility to drive innovation in fleet management.
• Partnerships with Samsara and Motus are expected to contribute to future growth.
• Element aims for 2-4% growth in vehicles under management in the latter half of 2025.

Company Performance

Element Fleet Management’s Q2 2025 performance underscores its robust business model, with net revenue climbing to $290 million, a 6% increase from the previous year. The company also reported a notable rise in adjusted EPS, reaching 30 cents—an impressive 78% increase from the same period last year. With an industry-leading gross profit margin of 97.64% and trading near its 52-week high, Element Fleet demonstrates strong operational efficiency. This growth reflects the company’s strategic focus on digital innovation and expanding its service offerings through key partnerships.

Financial Highlights

• Revenue: $290 million, up 6% year-over-year
• Adjusted EPS: 30 cents, up 78% year-over-year
• Free Cash Flow per Share: 40 cents, up 78% year-over-year
• Adjusted Return on Equity: 17.5%, up 120 basis points year-over-year

Outlook & Guidance

Element Fleet is optimistic about its future, anticipating to end the year at or above the high-end of its guidance ranges. The company expects improvements in originations as macroeconomic uncertainties ease. Additionally, Element targets a 2-4% growth in vehicles under management in the second half of 2025 and aims for $30-45 million in net revenue from its Dublin initiative by 2028.

Executive Commentary

Laura Dottori-Ottanasio, CEO of Element Fleet, emphasized the company’s continued momentum, stating, "Element delivered record results in 2025, extending the strong momentum that we established at the start of the year." CFO Heath Gerber added, "Our record second quarter results reaffirm the strength and resilience of our business model." The launch of Element Mobility was highlighted as a key strategic move to drive future innovation.

Risks and Challenges

• Macroeconomic Uncertainty: Continued economic volatility could impact client demand and growth projections.
• Competitive Pressure: The fleet management industry remains highly competitive, requiring ongoing innovation and strategic partnerships.
• Regulatory Changes: Potential changes in industry regulations could affect operational costs and compliance requirements.
• Technological Advancements: Rapid technological changes necessitate continuous investment in digital solutions and innovation.
• Supply Chain Constraints: Ongoing supply chain disruptions could impact vehicle availability and service delivery.

Q&A

During the earnings call, analysts inquired about Element Mobility’s strategy and the anticipated impact of partnerships with Samsara and Motus. Executives detailed the company’s net financing revenue yield expansion and discussed strategies for originations and growth in vehicles under management. With a consensus analyst recommendation of 1.7 (Strong Buy) and a modest dividend yield of 1.41%, Element Fleet continues to attract investor attention. For comprehensive analysis and valuation metrics, visit InvestingPro, where you’ll find detailed research reports and real-time financial data.

Full transcript - Element Fleet Management Corp (EFN) Q2 2025:

Conference Operator: Morning, and welcome to Element Fleet Management’s Second Quarter twenty twenty five Financial and Operating Results Conference Call. At this time, all participants are in listen only mode, and you are reminded that this call is being recorded. Following the prepared remarks, there will be an opportunity for analysts to ask questions. Element’s wishes to caution listeners that today’s information contains forward looking statements. The assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in the company’s year end and most recent MD and A and annual information form.

Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today’s call references certain non GAAP and supplemental financial measures. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non GAAP financial measures to IFRS measures can be found in the company’s most recent MD and A. I would now like to turn the call over to Laura Dottori Ottanasio, Chief Executive Officer.

Please go ahead.

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: Good morning, everyone, and thank you for joining us. Element delivered record results in the 2025, extending the strong momentum that we established at the start of the year. These results reflect the strength of our business model, the disciplined execution of our global strategy, and most importantly, the relentless commitments of our team members to serve our clients and create long term value for all stakeholders. In a macro environment characterized by elevated uncertainty and shifting global trade dynamics, our purpose and values continue to guide us with clarity and conviction. Our commitment to delivering value to our clients and stakeholders continues to be our top priority.

We made meaningful commercial progress this quarter and delivered healthy top line growth with strong contributions from both our services and net financing revenue. At the same time, we maintained disciplined expense management, which supported our performance. We welcomed 46 new clients in the second quarter, the majority of which converted from self managed fleets. This highlights our increased traction in this important growth segment. We also added 265 new service enrollments, a strong continuation of our share of wallet expansion further strengthening our recurring revenue base.

Our strategic advisory services team identified over $390,000,000 in savings opportunities for our clients, of which 43% was actioned. This is up significantly from last year’s rate, reflecting how clients are increasingly turning to us to help drive efficiencies in today’s dynamic operating environment, reaffirming the element value proposition. Our ongoing efforts have translated into solid year over year growth. Our committed order pipeline grew 6% and total client order volumes rose 9%. We also advanced our digital innovation agenda.

Last week, we launched Element Mobility, a new strategic division dedicated to shaping the future of intelligent mobility. Under the leadership of Kobe Eisenberg, Element Mobility represents a new chapter in how we anticipate the evolving needs of our clients. Our recently announced partnerships with industry leaders, Samsara and Modis, further enhance our ability to deliver more integrated tech enabled solutions for our clients. The creation of Element Mobility and these partnerships signal our intent to lead in intelligent mobility by deepening the breadth and functionality of our platform, allowing us to deliver more value and more insights for our clients. Lastly, we remain committed to advancing our sustainability agenda.

Earlier this quarter, we released our fifth annual sustainability report, which reinforces our focus on transparency, environmental and social responsibility and having a long term positive impact in all that we do. With that, I’ll hand it over to Heath to take you through the financials.

Heath Gerber, Chief Financial Officer, Element Fleet Management: Thank you, Laura, and good morning, everyone. Our record second quarter results reaffirm the strength and resilience of our business model and highlighted the continued progress we are making towards delivering on our financial objectives. We reported solid financial performance underpinned by healthy top line growth and disciplined expense management. This translated into adjusted earnings per share of 30¢ and free cash flow per share of 40¢, representing year over year growth at 78% respectively. Foreign exchange continues to be a headwind in q two, though the impact moderated relative to q one.

On a year over year basis, the Mexican peso depreciated 13% against the US dollar, contributing to a $10,000,000 reduction in net revenue and a $2,000,000 benefit to adjusted operating expense and a 2¢ decrease to diluted earnings per share. We anticipate the FX translation effect to continue raising in the second half of the year. Now let us turn to our q two financials, which I will speak to on an adjusted basis. We generated net revenue of $290,000,000, an increase of 6% year over year, driven by strong growth in both services and net financing revenue. When adjusted for foreign exchange, net revenue grew 9%, outpacing the 7% increase in adjusted operating expenses and resulting in positive operating leverage of 2.5%.

Services revenue increased 8% year over year to a $151,000,000, reflecting increased penetration and utilization of our expanding suite of offerings. Excluding a $3,000,000 FX headwind, services revenue grew a strong 10% year over year. Net financing revenue rose 4% year over year to a $127,000,000, driven by the ongoing benefits resulting from both our leasing business and funding initiatives, along with strong gain on sale in both ANZ and Mexico. This was partly offset by higher funding costs associated with our preferred share redemption and the auto fleet acquisition in October 2024. Excluding the $7,000,000 FX impact, NFI grew a solid 10% year over year.

Importantly, excluding gains on sale, our NFR yield for the 2025 increased 20 basis points year over year, a strong outcome, especially considering the funding headwinds from our preferred share redemptions acquisition in late twenty twenty four. Origination volumes totaled $1,900,000,000, down 4% year over year with foreign exchange contributing to the decline. Adjusted for FX, originations declined 2%, while on a quarter over quarter basis, originations grew 26%. We also saw continued momentum in client activity with our committed order pipeline of $1,700,000,000 reflecting strong year over year growth underpinned by resilient demand and commercial strength. Syndication revenue held steady at $12,000,000 despite a $418,000,000 reduction in volume year over year.

This decline was intentional driven by our decision to defer select syndication transactions to the second half of the year, aligning with the reinstatement of a 100% bonus depreciation under the new US tax legislation effective early July. As previously communicated, we expect this change to deliver a favorable uplift to signification yield, which we estimate could drive approximately $25,000,000 in incremental annualized revenue. We do note, however, that our first half twenty twenty five syndication yield has been strong due to client mix, and the uplift expected is relative to the syndication yields generated in 2024. Adjusted operating expenses of $128,000,000 maintained the trend of moderating growth at 5% year over year. When combined with our solid net revenue growth, this resulted in adjusted operating margin of 55.8%.

We remain focused on driving internal efficiencies and consistently generating positive operating leverage. Our adjusted return on equity rose to 17.5%, up a 120 basis points year over year, underscoring the strength of our capital life model and disciplined balance sheet management. In q two, we returned $61,000,000 to shareholders through dividends and share repurchases. Year to date, we have repurchased 3,100,000.0 common shares, representing 54,000,000 in capital deployed, reinforcing our commitment to share buybacks as a key pillar of our capital allocation strategy. As of June 30, our debt to capital ratio stood at 76.1% within our targeted range of 73% to 77%.

Looking ahead, we anticipate finishing the year at or above the high end of our guidance ranges across all key financial metrics with the exception of originations, which we expect will improve as macroeconomic uncertainty eases and businesses reengage in capital planning and allocation. Despite operating in a complex external environment, we delivered a record quarter, achieving new heights in revenue, adjusted operating income, return on equity, diluted earnings per share, and free cash flow per share. We remain confident in our ability to sustain this momentum and continue delivering meaningful value to our clients and shareholders in the coming quarters. Thank you. Operator, we are now ready to take your questions.

You.

Conference Operator: And our first question comes from Vasu Gavil from KBW. Congratulations

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: on a strong trend. I wanted to maybe start by asking about originations. I know that number grew sequentially pretty nicely, but on a year on year basis, even on a constant FX basis, it’s still down year on year, and February is typically your strongest quarter. So it would seem like you’re tracking towards the lower end of the guidance range at best. And even to get there, you’d have to see significant acceleration in the back half.

So just curious how much visibility you have in that acceleration. Thank you.

Heath Gerber, Chief Financial Officer, Element Fleet Management: Yeah. Good morning. So certainly, while the origination number for q two was down 2% year on year, FX adjusted, it’s important to note that excluding Armada, q two was actually the second highest quarter of originations in the company’s history, only behind q two of last year. And last year, you did have some tailwinds, I guess, from the supply chain normalization and pent up demand going through the system. So a a $1,900,000,000 that we delivered in q two still remains really strong in absolute terms.

Importantly, it’s also important to note that our committed order pipeline is actually up 13% year over year. That gives us confidence of our ability to have strong originations going into the future. We saw Mexico was was particularly strong, up 13% year over year and 33% quarter over quarter, which is important sign of of that that region, which has been impacted by macroeconomic uncertainty. So for all of those reasons, you know, we’re confident that we’ll still have strong originations. And then the only final point that I would make is while originations is a very important metric, it can be heavily influenced by the timing of client orders and client ordering patterns.

And it should be probably viewed alongside the net earning asset number, which again was very strong for q two and and drove strong net financing revenue.

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: Thank you very much. And just a quick one for you, Laura, on Element Mobility. Congratulations on its launch. I know it’s really early days, but anything you can share on what type of interest you were seeing within your base of fleet that may sort of bode well for the cross sell opportunity there. Great.

Thanks, Scott. We’re very happy with our record quarter. So on Element Mobility, what we were really doing there is, I wanna say, setting up a blueprint for our organization. So it’s our commitment, if you will, to shaping the future of fleet where we stay grounded in, I’m gonna say delivering value today. So Element Mobility is gonna be our dedicated platform to drive innovation.

So with our innovation lab, we’re gonna be focused on whether that’s advancing next gen technologies, whether it’s forming strategic alliances like you saw where we announced our partnerships with, Samsara and Modus. So we’ll be looking at things from AI driven analytics, advanced telematics, autonomous fleets, robotics. So the division’s really gonna be focused on, I wanna say, solutions that can fundamentally reshape how fleets are managed. What’s important as a takeaway here is that Element Mobility, and as I said, it’s like a blueprint, so that’s going to lead on the transformation piece without our losing focus on execution. So Element Mobility is going to effectively drive what’s next, while the rest of the organization is gonna focus on, doing what we’ve been doing, which is delivering exceptional service to our clients and looking to continually improve how we service them.

Heath Gerber, Chief Financial Officer, Element Fleet Management: The

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: partnerships, we think are gonna be wonderful, for us. We’re super excited about them. And maybe if I can just a word on them because, for us, again, we’re all about delivering a real, I mean, hand to hand fleet offering, for our clients. So taking on Motus, so they’re the market leader in vehicle reimbursement. So that’s solutions for, people who drive their cars to work.

Samsara, they’re recognized in the market for their AI powered video telematics, the equipment tracking they do, and all of their operations workflow tools. So these partnerships allow us to, I’m gonna say, integrate what we see as best in class solutions into our broader ecosystem. So that just further strengthens us, and it really does what we’re looking to do, which is be that client first mobility solutions provider for our clients. Great. That’s great color.

Thank you so much. Thank you.

Conference Operator: The next question comes from Steven Poland from Raymond James. Please go ahead. Good morning, everyone. Or maybe you could just follow-up a little bit, especially with Suncera, you know, because, you know, they are well known. Is this just a solution that Sensera is offering into your fleets, or is there, like, a a counter there that you have access to their client base as well to offer other services that they don’t provide?

I’m just trying to is this a one way partnership that they are just providing a solution to to the million and a half vehicles that you have under management? And and what I know you’re not gonna give me very much specific specifics on this, but, obviously, there’s a split in in revenue. I’m not sure how much disclosure. I I couldn’t find it on from Sarah, but how much disclosure that if they were offering video, you know, video, you know, in vehicles, what they charge per vehicle, what the split is now between them and you.

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: Alright. Well, thanks for that question, Steven. And I I will give you some specifics. So it is indeed a real partnership. So we’re not exclusive in that.

Samsara does have a marketplace, and they’ll deal with others. Just as, we’re always open to, strategic tech alliances if we feel that it’s gonna enhance, I’d say, our ecosystem and if it aligns with our client first platform strategy. So with Pantera, I’d say that our partnership is highly complementary. So they talked about earlier, they deliver very specialized tech capabilities and essentially allows us to embed their tech into our ecosystem. So that just makes it easier for our clients.

I’m gonna say to adopt and scale their tools, and they can do it in a more unified efficient fleet solution. So that way they get, I’m gonna say, our deep fleet expertise and some of these specialized capabilities. So it’s a two eight three. We refer them to our clients if we feel that that’s the right solution for them, and they’ll be doing the same with their client base. So without going into the the details of the partnership agreement, I just say for elements on the revenue side for 2025, you can anticipate, I’d say, little to no impact on the revenue as a result of this initiative and the Modus partnership.

But in 2026, we’d expect that the partnerships are gonna contribute in that mid to single digit range. I can say what’s really important is, again, for us is we’re always client led. We’re doing what we need to for our clients, and we do think that these partnerships are gonna allow us to create some differentiated value. And then it’ll also help strengthen, I’d say, our long term growth profile. But thanks for the question.

Heath Gerber, Chief Financial Officer, Element Fleet Management: Okay. That’s great. Thanks for

Conference Operator: the color. And then it’s probably for Heath. I’m a broken record on this, but we talked a while ago about, maybe every quarter, just about the off balance sheet securitization facility. Just wondering around the progress of that. And and big within disclosure, sorry, it’s a big unite.

The Blackstone, was there any Blackstone securitization done in the quarter as well?

Heath Gerber, Chief Financial Officer, Element Fleet Management: Yeah. Good morning, Steven. So to take the second part of that question first, no. There was no Blackstone transaction in in the quarter, and and that was the the quarter was just standard syndication. In terms of the other off balance sheet structures that that we’re working on, nothing to report at this point in time.

We are making progress. We’ve we’ve got a a term sheet that we’re now actively progressing. So hoping to have something to announce in in the back half of the year. Okay. That’s great.

Thanks.

Conference Operator: The next question comes from Bart Zarski from RBC Capital Markets. Just wanted to touch on core VUM, up 1% year over year, and you called out market share gains and conversion of self managed fleets. So wondering if you could unpack that a little bit more. And then sort of as we go from here, what are some of the initiatives that could lead to that core VM growth going back to the two to 4% range? Thanks.

Heath Gerber, Chief Financial Officer, Element Fleet Management: Yeah. Good morning, Bart. So from a bump perspective, it’s up 1% year on year and and slightly down for the quarter. I’d say the the the quarter on quarter movement is more of a reflection of of timing and onboard cape cadence. So for example, we’ve actually recently signed a a large contract for a client, and that one client will drive approximately 1% fund growth alone.

And then we have another a number of other material opportunities we’re actively working on. And and in fact, our new business pipeline is is very, very strong. And we also think with increased visibility around the the trade environment, actually, should be beneficial for for clients and potential clients to to make capital allocation decisions and and move forward. So, you know, our long term view is still anchored to the two to 4% range. And with with that, you know, large client that we have signed that we’ll onboard in the second half of the year, coupled with the material opportunity we’re actively working on.

We’re confident of getting back to that 2% to 4% range in in the back half of the year.

Conference Operator: Super. Thank you. The next question comes from Graham Ryding from TD Securities. Please go ahead. Hi, good morning.

Laura, you flagged some self managed wins driving business this quarter. How would this quarter’s number of wins sort of compare to your typical run rate on that front?

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: Well, thanks, Graham. It continues to represent a good share of our new wins. So I think as we’ve been sharing, it’s about 40% to, say, 50% each quarter. Momentum, again, it remains consistent. We’re seeing some really strong engagement and activity in the self managed space, both from a pipeline and a conversion perspective.

So I think as we’re looking at market conditions that are out there, I think we’re seeing our companies that were previously managing their fleets in house. I’d say that they’re increasingly looking for some expert led solutions. And, you know, as we shared in previous conversations or calls, that’s kinda right in our, I’d say, right in our wheelhouse where we’re really there and can help our clients navigate complexity, deliver some cost effective solutions for them when times are are somewhat, I’d say, uncertain like they are these days. So the self managed segment is doing really well.

Conference Operator: Okay. Great. And then just to follow on your theme of, you know, just your emphasis on tech initiatives with, I guess, last year’s auto fleet and then your Sensera partnership and others. And then I guess you’ve launched the Element Mobility. What should we be looking for in some of this area to sort of gauge if these investments are translating in into growth?

Should we be looking for service revenue growth to pick up? Should we be looking for margin upside? Should we be looking for bond growth? Like, what how are you expecting these investments to translate into into your business?

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: Well, I’d like yeah. I guess I’d like to say all of the above. I guess from a if I could say financial perspective, I’d be looking at Element Mobility as as soon as a natural extension of the investments that we’ve we’ve already been making and things like digitization and automation. So you’ll see I’m gonna say returns that we get, like, whether that’s in client experience where we should start to see, you know, improvements in our NPS scores, operational efficiencies, and margin improvement as we’ve I’d say as we’ve been showing, that would be the expectation. I think we’d also see client retention.

Again, the better services per VUM, that would increase too. So the focus really is on on, I’m gonna say, the capital light services that we can offer as Heath had highlighted earlier. And maybe it looks a bit further because we’ve talked a lot about, you know, what we would look at from an acquiring capabilities perspective. And I think what Element Mobility will give us is really a more structured way to assess the best approach. So whether that means we we build something in house to go faster for delivering returns in client experience or for our shareholders or whether that’s partnering with best in class players like we’ve done with Samsara and Modus.

Or it could be just acquiring capabilities if we think that it makes strategic sense. So it’d be all of those. And, I guess, what I’d just say is, at this point, we’re gonna keep being really selective. We’re gonna focus on quality. And, of course, we’re gonna wanna make sure that it’s got some long term value creation for our shareholders.

So, again, not a specific answer, but hopefully one that gives you a sense of the direction that we’re in.

Conference Operator: Great. That’s it for me. Thank you. The next question comes from Jane Gloyn from National Bank Financial. Please go ahead.

Heath Gerber, Chief Financial Officer, Element Fleet Management: Yeah. Thank you. First question, just on the on the servicing revenues. Don’t wanna adjust to say it’s a bad result. We’re in the post 8% growth and 10% on constant currency, but a little bit slower than maybe what we, I guess, were accustomed to from last year’s results and a little bit of a dip quarter over quarter on an absolute dollar basis.

Can you shed a little bit more light as to maybe some of the factors that might have been driving that sequential decline or perhaps a little bit slower growth rate in this quarter versus maybe, I guess, what we got used to? Yeah. Good morning, Jamie. So I guess my overarching comment would be we continue or continue to expect that the service revenue line will be our largest contributor of growth for 2025 and and into the future. And we still have a lot of white space in terms of new client wins, increasing product penetration with existing clients, bringing new products and services to market as as Laura has touched on, as well as continue continuing to sell the product we acquired through Autosport.

In in terms of the results for the quarter, so, yes, FX adjusted was up 10% year on year. And while it was flat quarter on quarter, we did sort of see the same thing happen last year driven by a slight reduction in in utilization for the quarter. So certainly, it’s a key focus area of us, and and and I guess I would refer back to my previous comments on on BAM. The the focus for us as a business is really converting the the opportunities that we’ve got there plus those material contracts that we’ve signed, get them onboarded, and continue to sell the product into our, you know, our client base. And we’ll we’ll see, you know, continued growth in in service revenue as we action that.

K. And, Keith, while I while I have you here, on the on the net financing revenue yield and thinking about this on the on the core basis, sub tax, which has increased almost 20 basis points quarter over quarter, a pretty good result. Can you it looks like it’s driven by both the revenue and lower funding costs. But can you describe some of the what’s been driving that growth in your top line revenue yields driving that expansion in margin? Is that geographic mix?

Is there something you’re doing from a pricing perspective that maybe we talked about in Mexico last year? What’s what’s helping to push that ahead? Yeah. So it’s certainly driven by two key things. And also the what I would note is the 20 basis point improvement for the first half of the year is is also particularly happy we’re happy with it given that we also absorbed extra debt from the preferred share redemptions in the auto split acquisition.

In terms of what’s driving the strong performance, it’s really really two things. One is is the the leasing initiative that we set up, and we are starting to see the benefits of that come through from centralizing and standardizing our our leasing business and really ensuring we’re generating an appropriate risk adjusted return on our leasing. And then the second element will be the funding, and we continue to evolve funding structure. We we implemented the commercial paper program, which had a a significant reduction in our in our cost of funds. We also generated a really strong result on our most recent bond transaction, reducing the the the the rate by about 247 basis points versus what was what was maturing.

So those those parts of initiatives are helping to drive down with the the funding rate, and then the leasing business and and all of the focus we’ve got there is is driving the the top line growth. K. And if I can just stay on that team, you know, speaking about the the gain on sale on Goth, looks like more of a step up in in the Mexico region this quarter from gain on sale, also in in Austria and New Zealand. Anything in particular in in Mexico with was this just a lumpy quarter for vehicles coming off lease? Is there or is there something else coming through?

And, you know, how sustainable should we look at GOP where, you know, it stepped up quite materially this quarter?

: Yeah. Absolutely. Strong strong quarter on

Heath Gerber, Chief Financial Officer, Element Fleet Management: the gain on sale. And really, it’s a function of of price and and volume. So, firstly, on the volume side of the equation, the the vehicles we’re selling today are generally the vehicles we originated four years ago. So given the fact we’ve been growing, we are seeing and continue to expect to see growth in the number of vehicles we have available to sell. So that’s that’s been a a driver, and we expect that that will continue to be a driver.

In relation to price, the the price is partly driven by market dynamics, and and we still expect that the price will continue to normalize over time on on the back of sort of the jump we saw from the supply chain issues. Having said that though, we have put a lot of effort and work into our remarketing processes and optimizing our remarketing processes, making sure we’ve got multichannel re remarketing platform and driving high quality vehicles. So, you know, good condition, low low mileage vehicles direct to the consumer where we can we can command a higher price rather than going through a dealer. So that’s sort of thing that helping us to to offset the the the price decline from from the market normalization. So in terms of of a go forward position on on GOS, we we expect that the volume will continue to increase, offset by by price normalization.

Conference Operator: Great. Thank you.

Heath Gerber, Chief Financial Officer, Element Fleet Management: And

Conference Operator: our next question comes from Munish Garg from CIBC. Please go ahead.

: Hi. Good morning, everyone. Thanks for taking my question. So first one on Dublin, just an extension from last question on financing yield expansion. So could you please provide some more color on how the doubling initiatives are benefiting net financing revenue and pricing trends?

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: Sure. Thanks, Munish. I’ll I’ll start maybe more broadly and then I’ll hand over to Keith if he feels like handing out some specifics. We are firmly on track to achieve our target. So we shared some while back that we generate 30,000,000 to $45,000,000 in net revenue by the 2028.

And that actually we are progressing towards and it’s part of what contributed to that increase in in NSR. So we started in Dublin or, I guess, back in August 2024. Just like to say this because we did complete this one on time and below budget. So on track, not just for the amount that I had mentioned, but we talked about a two and a half to three year payback. So we’re we’re doing really well in that regard.

And as Heath had mentioned, some of that relates to our improved pricing discipline by having centralized, if you will, and started to standardize how we service our clients. And what we’re seeing and it’s early days, but we’re seeing better client leasing experience. We’re seeing, I’m gonna say, operations, and we’re just getting started. And so that is some of that incremental value for our shareholders that’s, I guess, now representing in in NFR. But, Keith, maybe you wanna provide some details.

Heath Gerber, Chief Financial Officer, Element Fleet Management: Yeah. So I guess the only thing that I would add is the the margin or the yield rather for the first half year was up 20 basis points, and that actually also absorbed approximately $10,000,000 of additional debt cost from the preferred share redemption and the auto fleet acquisition. So that sort of gives you some of the magnitude of the improvements that we’ve made. Some of that is is driven by the leasing business. Some of that is driven by the the funding initiatives that we spoke of before.

I I guess the the final thing I’d say is the the beauty of our business is we do have a lot of revenue raises. So increasing the the yield, working on our funding, driving all of our many service offerings, obviously, the syndication of balance sheet financing. So we’re highly focused on on getting all of those leaders going in the right direction to to keep delivering strong results.

: Thank you. Just one more for me. So Element is generating a lot of free cash flow right now. So what would be the top capital deployment priorities in, say, next twelve to twenty four months?

Heath Gerber, Chief Financial Officer, Element Fleet Management: Yeah. So nothing has changed in terms of key priorities. So priority number one is to continue to reinvest in the business for the long term growth of of the company, and and that that number hasn’t changed, the the $80,000,000 that that we refer to. So that is is key the, you know, the key focus for us to to sustain our performance over the long term. In addition to that, we’ve also got our our dividends that we pay out, and then we have been active in in our shared repurchases during the period.

So we have repurchased 3,100,000.0 shares for the first half of the year, and we expect to continue re repurchasing shares over over the coming quarters and and and for the rest of the year. And then, obviously, we also need to manage our leverage and make sure that our our leverage is is within our targeted range to to continue to to have our investment grade rating, which is is critical from a funding perspective.

: Thank you. That’s all for me.

Conference Operator: And the next question is a follow-up from James Gloyn from National Bank Financial. Please go ahead.

Heath Gerber, Chief Financial Officer, Element Fleet Management: Yeah. Thanks. I just wanted to follow-up on on the Modus announcement. And if you could just sort of dig into what that market looks like, the market for vehicle reimbursement. This is, you know, something that would be new for Element.

You know, how many players are in there? What how many vehicles potentially? What size that market maybe compared to the traditional fleet management market?

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: Yeah. Sure, Jamie. I can give you some of, I guess, some of that information. So modus in vehicle reimbursement, they play in the market that we refer to as the gray fleet. So really for those who wanna bring their their cars to work, which is not an area that that we actually play in.

And so when we looked at, you know, is this something that we want to build on our own, go out and buy something, or set up a partnership, We did go out and look at the market. It’s a I’d say a pretty solid market and it is growing. We looked at a lot of the players there and there are, of course, some really good players. What we thought would make the most sense, not just for our company, but more importantly for our client base, is if we partner with someone like Modus, who is the market leader in this particular space so we can bring the the very best to the clients that they require. And we’re seeing, I would say, probably more thought that’s being given to this space just given, you know, the macroeconomic landscape.

So and we work with clients that we see some of them just and we do this with them whether they wanna reassess, I’m gonna say, the reimbursement route versus the acquisition strategies and fleet. And so normally, we would advise on where to go, and now we have the ability to to do that all, I would say, within the ecosystem with this partnership with Motive. So we would expect to see some growth in this space. And I’m sure if you spoke with our partner, they would confirm saying that they see space. And and I just say that this partnership, like the other one, Sansera, it’s a a two way partnership where we will each be referring one another’s clients to each other.

And again, all with the purpose of offering the best solution for a client for their their needs. We do have a whole lot of information on TAM, etcetera, that I’m sure we can share with you or anyone who’s of interest afterwards. Maybe not on this call because it would make for a very long call.

Heath Gerber, Chief Financial Officer, Element Fleet Management: K. Fair enough. And then if I if I just go back to your comment around the the partnerships with Samsara and Lotus, I believe you you said that it could could add mid single digits to revenue growth in 2026. I I, you know, just wanna get some clarity on that and make sure I understand. I’m not maybe getting too over my skis.

Is that something that we would think of as incremental to the traditional six and a half to eight and a half percent revenue guide that we’re that we’re used to? And then, I guess, you know, what would be the makeup of that? Is it mostly Sansera or, you know, is there a bit of a split you can share? Yeah. May maybe I’ll take that one.

So I I think what Laura was referring to was from a dollar perspective. So not not a not a percentage perspective. So I don’t think you should take mid mid single digit percentage and and overlay that to the six and a half to eight and a half. It’s it’s a dollar number.

Conference Operator: That makes more sense. Thank you. This concludes the question and answer session. I would like to turn the conference back over to Laura Dottori Tarnazio for closing remarks.

Laura Dottori-Ottanasio, Chief Executive Officer, Element Fleet Management: All right. Thanks, Jason, and thanks everyone for joining us today. So as we look ahead, our strategic priorities will remain unchanged. We’re gonna deliver sustainable growth, deepen digital leadership, and provide exceptional client experience, all while we stay true to our purpose and values. So I’d like to thank our global team members for their commitment and their contributions.

And I also wanna take this time to thank our shareholders, our analysts, and our broader stakeholders for your continued support and your interest in Element. We look forward to reconnecting with you at our next quarterly call in November.

Conference Operator: This brings today’s conference call to a close. You may disconnect your lines. Thank you for participating, and have a pleasant day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.