Amounts in US$ unless otherwise noted
- Record quarterly net revenue of US$274.6 million driving adjusted EPS of US$0.29 and adjusted free cash flow per share of US$0.38
- Robust net revenue growth of 14.1% year-over-year led by a double-digit increase across net financing and services revenues; and up 4.6% from a strong Q1 2024
- Reports record origination volume; up 28.2% from Q1 2024 and up 4.6% from Q2 2023
- Raises full-year 2024 guidance on most metrics as a result of robust first half 2024 performance
- Unveils first-ever Purpose statement: Move the World Through Intelligent Mobility
- Accelerates digitization and automation capabilities with the execution of a definitive agreement for the acquisition of Autofleet Solutions Ltd. ("Autofleet")
TORONTO, Aug. 13, 2024 (GLOBE NEWSWIRE) -- Element Fleet Management Corp. (TSX:EFN) ("Element" or the "Company"), the largest publicly traded, pure-play automotive fleet manager in the world, today announced strong financial and operating results for the three months ended June 30, 2024.
The following table presents Element's selected financial results in U.S. dollars unless otherwise noted.
| Q2 20241 | Q1 20241,2 | Q2 2023 | QoQ | YoY | ||||||
| In US$ millions, except percentages and per share amount and unless otherwise noted | US$ | US$ | US$ | % | % | |||||
| Selected financial results - as reported: | ||||||||||
| Net revenue | 274.6 | 262.5 | 240.6 | 4.6 | % | 14.1 | % | |||
| Pre-tax income | 135.2 | 123.0 | 118.9 | 9.9 | % | 13.7 | % | |||
| Pre-tax income margin | 49.2 | % | 46.9 | % | 49.4 | % | 230 bps | -20 bps | ||
| Earnings per share (EPS) [basic] | 0.26 | 0.23 | 0.22 | 0.03 | 0.04 | |||||
| Earnings per share (EPS) [basic] [$CAD] | 0.35 | 0.31 | 0.29 | 0.04 | 0.06 | |||||
| Adjusted results (excludes one-time strategic project costs in 2024)1 | ||||||||||
| Adjusted net revenue3 | 274.6 | 262.5 | 240.6 | 4.6 | % | 14.1 | % | |||
| Adjusted operating income (AOI)3 | 152.9 | 143.6 | 132.7 | 6.4 | % | 15.2 | % | |||
| Adjusted operating margin3 | 55.7 | % | 54.7 | % | 55.1 | % | +100 bps | +60 bps | ||
| Adjusted EPS3 [basic] | 0.29 | 0.27 | 0.25 | 0.02 | 0.04 | |||||
| Adjusted EPS3 [basic] [$CAD] | 0.39 | 0.36 | 0.33 | 0.03 | 0.06 | |||||
| Other highlights: | ||||||||||
| Adjusted free cash flow per share3 (FCF/sh) | 0.38 | 0.35 | 0.34 | 0.03 | 0.04 | |||||
| Adjusted free cash flow per share3 (FCF/sh) [$CAD] | 0.52 | 0.47 | 0.46 | 0.05 | 0.06 | |||||
| Originations (excluding Armada) | 1,976 | 1,542 | 1,889 | 28.2 | % | 4.6 | % | |||
- Q2 2024 and Q1 2024 included US$2.4 million and US$2.1 million, respectively, in one-time strategic project costs.
- Q1 2024 revenue benefitted from US$7.0 million in certain services revenue items which are unlikely to repeat in 2024.
- Adjusted results are non-GAAP or supplemental financial measures, which do not have any standard meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. For further information, please see the "IFRS to Non-GAAP Reconciliations" section in this earnings release. The Company uses "Adjusted Results" because it believes that they provide useful information to investors regarding its performance and results of operations.
"Our robust growth was driven by our continued commercial success," said Laura Dottori-Attanasio, Chief Executive Officer of Element. "Driven by our aspiration to take Element to new heights, we are delighted to unveil our very first Purpose Statement "Move the World Through Intelligent Mobility." We developed this brand promise with the collaboration of our team members. It is a reflection of our unwavering commitment to putting our clients first and embodies our dedication to intelligent, seamless mobility."
Net revenue growth
Element grew Q2 2024 net revenue 14.1% over Q2 2023 ("year-over-year") to US$274.6 million led largely by robust growth across all revenue line items. Net revenue increased US$12.1 million or 4.6% from Q1 2024 ("quarter-over-quarter").
Net financing revenue
Q2 2024 net financing revenue grew US$16.7 million or 15.8% from Q2 2023 and grew US$15.2 million or 14.2% quarter-over-quarter. Year-over-year growth was largely as a result of higher net earning assets associated with higher originations in the U.S., Canada, and ANZ regions. These increases were partly offset by higher funding costs year-over-year.
Gain on sale ("GOS") was largely unchanged year-over-year as higher GOS in Mexico was mostly offset by lower GOS in ANZ as prices continue to moderate but remain well above historic levels. Higher volume of vehicles available for sale in Mexico continue to mitigate used vehicle pricing headwinds.
Service revenue
Element's largely unlevered services revenue is the key pillar of its capital-light business model, which also improves the Company's return on equity profile.
Q2 2024 services revenue grew 10.8% year-over-year to US$140.1 million driven primarily by higher origination volumes, and higher penetration rates of our service offerings from existing clients. Also contributing to the year-over-year increase was growth in both Mexico and ANZ.
Q1 2024 services revenue benefitted from US$7.0 million in certain services revenue items that we do not anticipate to recur in 2024 (as previously disclosed). Excluding these amounts, services revenue was largely unchanged quarter-over-quarter.
Syndication volume
The Company syndicated a record US$955.2 million of assets in Q2 2024 - US$440.8 million or 85.7% more volume than Q2 last year and more than double that of Q1 2024. These increases are attributed to record originations and our ongoing focus on our capital lighter model. The Company expanded the number of names it syndicated, impacting the Company's syndication mix. Overall, pricing in the syndication market has improved from Q1 and client demand remains robust.
Q2 2024 syndication revenue grew US$3.6 million or 41.9% year-over-year and US$3.8 million or 46.4% quarter-over-quarter largely due to record volumes this quarter.
Adjusted operating income and adjusted operating margins
AOI was US$152.9 million this quarter, an increase of US$20.2 million or 15.2% year-over-year - amounting to adjusted EPS of US$0.29 for Q2 2024, which is a 4 cent increase year-over-year. Q2 2024 adjusted operating margin was 55.7%, representing margin expansion of 60 basis points year-over-year. This expansion is driven largely by positive operating leverage (i.e. net revenue growth outpacing growth in adjusted operating expenses). Adjusted operating margin expanded 100 basis points quarter-over-quarter.
Element expanded adjusted pre-tax return on common equity by 140 basis points year-over-year to 19.6% in Q2 2024.
Originations
Element originated US$2.0 billion of assets in Q2 2024 (excluding Armada), which is a US$87.2 million or 4.6% increase year-over-year and a US$434.1 million or 28.2% increase quarter-over-quarter.
The table below sets out the geographic distribution of originations (excluding Armada) for the three-month periods indicated.
| (in U.S.$000's) | June 30, 2024 | June 30, 2023 | Variance to Q2 2023 | |||||
| (Excluding Armada) | US$ | % | US$ | % | US$ | % | ||
| United States and Canada | 1,599,955 | 81.0 | 1,522,241 | 80.6 | 77,714 | 5.1 | % | |
| Mexico | 252,573 | 12.8 | 255,453 | 13.5 | (2,880 | ) | (1.1 | )% |
| Australia and New Zealand | 123,486 | 6.2 | 111,123 | 5.9 | 12,363 | 11.1 | % | |
| Total | 1,976,014 | 100.0 | 1,888,817 | 100.0 | 87,197 | 4.6 | % | |
Growing adjusted free cash flow per share and return of capital to shareholders
On an adjusted basis, Element generated US$0.38 of adjusted free cash flow ("FCF") per share in Q2 2024 - 4 cents more year-over-year driven primarily by an increase in net revenues and higher originations, while investing US$17.4 million in total capital investments this quarter.
Element returned US$37.7 million and US$75.9 million of cash to common shareholders through dividends and buybacks of common shares in Q2 2024 and first half 2024, respectively.
Full-year 2024 guidance
As a result of its robust first-half performance and positive outlook for the remainder of the year, Element is raising its full-year guidance on most metrics.
| In US$ unless otherwise noted | FY 2023 - U.S. Dollars | Prior 2024 Guidance - U.S. Dollars | New 2024 Guidance - U.S. Dollars |
| Net revenue | $959.1 million | $1.020 - 1.040 billion | $1.060 - $1.080 billion |
| Implied YoY Growth | 6-8% | 11-13% | |
| Adjusted operating margin | 55.3% | 55.0% - 55.5% | 55.0% - 55.5% |
| Adjusted operating income | $530.6 million | $560 - 575 million | $575 - 595 million |
| Implied YoY Growth | 6-8% | 8-12% | |
| Adjusted EPS [basic] | $0.98 | $1.05 - 1.09 | $1.07 - $1.11 |
| Implied YoY Growth | 7-11% | 9-13% | |
| Adjusted free cash flow per share | $1.24 | $1.31 - 1.34 | $1.32 - 1.36 |
| Implied YoY Growth | 6-8% | 6-10% | |
| Originations (excl Armada) | $6.3 billion | $7.0 - 7.4 billion | $7.0 - 7.4 billion |
| Implied YoY Growth | 11-17% | 11-17% |
Certain implied year-over-year growth amounts shown in this table may not calculate exactly due to rounding.
Element's full-year 2023 results and 2024 guidance exclude non-recurring setup costs associated with its previously announced strategic initiatives, non-recurring costs associated with the acquisition of Autofleet, and also prior to any material changes in foreign exchange.
Acquisition of Autofleet
Today, the Company announced it has entered into a definitive agreement to acquire Autofleet, an innovator in fleet and mobility solutions. Autofleet has a robust and highly scalable fleet optimization technology platform alongside optimized mobility solutions tailored for the fleet industry.
"Having previously worked with Autofleet and witnessed the common culture, commitment to clients, and focus on delivering impactful results that our two companies share, we are thrilled to welcome them to the Element organization as an integral part of our business," commented Dottori-Attanasio. "We are confident their expertise will enable us to fast-track the modernization of our digital capabilities, enhance our ability to scale our core business more quickly, and ultimately deliver increased value to our clients and shareholders."
Founded in 2018, the firm boasts a skilled team of approximately 70 professionals including developers, engineers, and data scientists. Element anticipates that the combination of its own scale, market leadership, and comprehensive fulfillment capabilities with Autofleet's digital, data, and cloud capabilities, will advance its purpose to Move the World Through Intelligent Mobility and unlock new revenue streams for both companies.
"This partnership represents a powerful alignment of two companies with shared aspiration and cultures, and enables us to leverage Element's commercial organization and leadership to accelerate new growth areas for the business," stated Kobi Eisenberg, Chief Executive Officer of Autofleet. "We are incredibly proud to join forces with Element, a company that shares our commitment to advancing intelligent solutions within the fleet and mobility industries."
The completion of the acquisition is subject to customary closing conditions, and the terms of the transaction remain undisclosed. The Company expects the transaction to close in early Q4 2024.
Strategic initiatives update
As previously disclosed, the Company plans to optimize its business further by centralizing accountability for its U.S. and Canadian leasing operations and establishing a strategic sourcing presence in Asia. The Company continues to expect these initiatives to generate between US$30 - $45 million (CAD $40 - $60 million) of run-rate net revenue, and between US$22 - $37 million (CAD $30 - $50 million) of run-rate adjusted operating income ("AOI"), by full-year 2028. The above initiatives require approximately US$22 million (total) (CAD $30 million) in non-recurring setup costs, of which US$2.4 million and US$2.1 million were incurred in Q2 2024 and Q1 2024, respectively (H1 2023 - nil). In 2023, the Company incurred US$13.7 million, in aggregate, in such costs. The remaining and final costs of approximately US$3.8 million will likely be recorded in Q3 2024.
In August, the Company commenced operations in Dublin, creating a global standard for leasing excellence. This Dublin-based team is currently comprised of 50 cross-functional professionals, growing to approximately 80 later this year. As previously communicated, centralizing our U.S. and Canadian leasing functions in Ireland provides the following benefits:
- Enhancing our consistent, superior client leasing experience to grow market-leading offerings across leasing lifecycle;
- Greater control over a broader leasing functions to better asses performance and optimize capital allocations;
- Aligning commercial sales and strategic alliances to leasing strategy; and
- A more disciplined pricing strategy.
In April 2024, the Company commenced operations in Singapore, marking a significant milestone in its ongoing strategic initiative to enhance its global procurement capabilities and strategic sourcing relationships in Asia. Concurrently, the Company entered into its first collaboration agreement with a strategic sourcing supplier.
The expected payback period from the Company's investments is anticipated to be less than 2.5 years.
The Company also remains focused on prioritizing digitization and automation initiatives to enable future growth, drive operational efficiencies and position itself as a leading industry player in the rapidly evolving mobility and vehicle connectivity landscape.
Capital structure
Redemption of all outstanding 6.21% Cumulative 5-Year Rate Reset Preferred Shares Series C
On June 30, 2024, the Company redeemed all of its 5,126,400 issued and outstanding 6.21% Cumulative 5-Year Rate Reset Preferred Shares Series C (the "Series C Shares") at a price of CAD$25.00 per Series C Share for an aggregate total amount of approximately US$91.2 million (CAD$128 million), together with all accrued and unpaid dividends up to but excluding the Share Redemption Date (the "Redemption Price"), less any tax required to be deducted and withheld by the Company.
Intention to redeem all its outstanding 5.903% Cumulative 5-Year Rate Reset Preferred Shares Series E
To further optimize the Company's balance sheet and mature its capital structure, the Company announced today its intention to redeem - in accordance with the terms of the 5.903% Cumulative 5-Year Rate Reset Preferred Shares Series E (the "Series E Shares") as set out in the Company's articles - all of its 5,321,900 issued and outstanding Series E Shares on September 30, 2024 (the "Share Redemption Date") for a redemption price equal to CAD$25.00 per Series E Share for a an aggregate total amount of approximately US$92.4 million (CAD$133 million), together with all accrued and unpaid dividends up to but excluding the Share Redemption Date (the "Redemption Price"), less any tax required to be deducted and withheld by the Company.
The Company has provided notice today of the Redemption Price and the Share Redemption Date to the sole registered holder of the Series E Shares in accordance with the terms of the Series E Shares as set out in the Company's articles. Non-registered holders of Series E Shares should contact their broker or other intermediary for information regarding the redemption process for the Series E Shares in which they hold a beneficial interest. The Company's transfer agent for the Series E Shares is Computershare Investor Services Inc. ("Computershare Investor Services"). Questions regarding the redemption process may be directed to Computershare Investor Services at 1-800-564-6253 or by email to corporateactions@computershare.com.
Following their redemption on September 30, 2024, the Series E Shares will be de-listed from and no longer trade on the Toronto Stock Exchange ("TSX").
4.25% Convertible Unsecured Subordinated Debentures Exchanged for Common Shares
On June 26, 2024, the Company redeemed all of its remaining outstanding 4.25% Convertible Unsecured Subordinated Debentures (the "Debentures") due June 30, 2024 (the "Redemption Date"). Prior to the Redemption Date, beneficial holders of the Debentures exercised their right to exchange an aggregate principal amount of approximately CAD$172.0 million for consideration of approximately 14.6 million Common Shares, issued from Treasury and delivered to beneficial holders. The Debentures were converted into Common Shares at a conversion price of CAD$11.77391 per Common Share. As a result, the Debentures were delisted from and no longer trade on the TSX (previous ticker TSX: EFN.DB.B).
As at June 30, 2024, total Common Shares issued and outstanding were 403.6 million.
Conference call and webcast
A conference call to discuss these results will be held on Wednesday, August 14, 2024 at 8:00 a.m. Eastern Time.
The conference call and webcast can be accessed as follows:
| Webcast: | https://services.choruscall.ca/links/elementfleet2024q2.html | |
| Telephone: | Click here to join the call most efficiently, | |
| or dial one of the following numbers to speak with an operator: | ||
| Canada/USA toll-free: 1-844-763-8274 | ||
| International: +1-647-484-8814 | ||
A taped recording of the conference call may be accessed through September 14, 2024 by dialing 1-855-669-9658 (Canada Toll Free), 1-877-344-7529 (U.S. Toll Free) or 1-412-317-0088 (International Toll) and entering the access code 2637551.
Dividends declared
The Company's Board has authorized and declared a quarterly dividend of CAD$0.12 per outstanding common share of Element for the third quarter of 2024. The dividend will be paid on October 15, 2024 to shareholders of record as at the close of business on September 27, 2024.
Element's Board of Directors also declared the following dividends on Element's preferred shares:
| Series | TSX Ticker | Amount (CAD$) | Record Date | Payment Date |
| Series E | EFN.PR.E | $0.3689380 | September 13, 2024 | September 27, 2024 |
Note: This will be the final quarterly dividend payment on the Series E Shares prior to their planned redemption on September 30, 2024 as disclosed earlier in this press release. Holders will receive on the Redemption Date of the Series E Shares all accrued and unpaid dividends up to but excluding the Redemption Date.
The Company's common and preferred share dividends are designated to be eligible dividends for purposes of section 89(1) of the Income Tax Act (Canada).
Normal course issuer bid
On November 13, 2023, the TSX approved the Company's intention to renew its normal course issuer bid (the "2023 NCIB"). Under the 2023 NCIB, the Company has approval from the TSX to purchase up to 38,852,159 common shares during the period from November 15, 2023, to November 14, 2024. There cannot be any assurance as to how many common shares will ultimately be purchased pursuant to the 2023 NCIB.
During the first six months of 2024, we purchased 455,300 common shares for cancellation, for an aggregate amount of approximately US$7.3 million (CAD$10.0 million) at a volume weighted average price of CAD$21.95 per Common Share.
Element applies trade date accounting in determining the date on which the share repurchase is reflected in the consolidated financial statements. Trade date accounting is the date on which the Company commits itself to purchase the shares.
IFRS to Non-GAAP Reconciliations , Non-GAAP Measures and Supplemental Information
The Company's audited consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB and the accounting policies we adopted in accordance with IFRS. These audited consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly our financial position as at June 30, 2024 and June 30, 2023, the results of operations, comprehensive income and cash flows for the three-month periods-ended June 30, 2024 and June 30, 2023.
Non-GAAP and IFRS key annualized operating ratios and per share information of the operations of the Company:
| As at and for the three-month period ended | ||||||||||
| (in US$000's except ratios and per share amounts or unless otherwise noted) | June 30, 2024 | March 31, 2024 | June 30, 2023 | |||||||
| Key annualized operating ratios | ||||||||||
| Leverage ratios | ||||||||||
| Financial leverage ratio | P/(P+R) | 74.8 | % | 75.5 | % | 72.1 | % | |||
| Tangible leverage ratio | P/ (R-K) | 6.50 | 6.68 | 5.61 | ||||||
| Average financial leverage ratio | Q/(Q+V) | 74.9 | % | 73.8 | % | 71.4 | % | |||
| Average tangible leverage ratio | Q/(V-L) | 6.49 | 6.15 | 5.50 | ||||||
| Other key operating ratios | ||||||||||
| Allowance for credit losses as a % of total finance receivables before allowance | F/E | 0.07 | % | 0.08 | % | 0.10 | % | |||
| Adjusted operating income on average net earning assets | B/J | 7.47 | % | 7.34 | % | 7.80 | % | |||
| Adjusted operating income on average tangible total equity of Element | D/(V-L) | 34.22 | % | 32.37 | % | 30.28 | % | |||
| Per share information | ||||||||||
| Number of shares outstanding | W | 403,609 | 388,926 | 389,703 | ||||||
| Weighted average number of shares outstanding [basic] | X | 390,013 | 389,161 | 390,385 | ||||||
| Pro forma diluted average number of shares outstanding | Y | 390,163 | 404,118 | 405,505 | ||||||
| Cumulative preferred share dividends during the period | Z | 2,869 | 2,919 | 4,475 | ||||||
| Other effects of dilution on an adjusted operating income basis | AA | $ | - | $ | 1,222 | $ | 1,219 | |||
| Net income per share [basic] | (A-Z)/X | $ | 0.26 | $ | 0.23 | $ | 0.22 | |||
| Net income per share [diluted] | $ | 0.26 | $ | 0.23 | $ | 0.21 | ||||
| Adjusted EPS [basic] | (D1)/X | $ | 0.29 | $ | 0.27 | $ | 0.25 | |||
| Adjusted EPS [diluted] | (D1+AA)/Y | $ | 0.29 | $ | 0.26 | $ | 0.24 | |||
Management also uses a variety of both IFRS and non-GAAP and Supplemental Measures, and non-GAAP ratios to monitor and assess their operating performance. The Company uses these non-GAAP and Supplemental Financial Measures because they believe that they may provide useful information to investors regarding their performance and results of operations.
The following table provides a reconciliation of certain IFRS to non-GAAP measures related to the operations of the Company and other supplemental information.
| For the three-month period ended | |||||||
| (in US$000's except per share amounts or unless otherwise noted) | June 30, 2024 | March 31, 2024 | June 30, 2023 | ||||
| Reported results | US$ | US$ | US$ | ||||
| Services income, net | 140,123 | 147,053 | 126,433 | ||||
| Net financing revenue | 122,409 | 107,178 | 105,698 | ||||
| Syndication revenue, net | 12,045 | 8,226 | 8,491 | ||||
| Net revenue | 274,577 | 262,457 | 240,622 | ||||
| Operating expenses | 131,581 | 132,499 | 115,233 | ||||
| Operating income | 142,996 | 129,958 | 125,389 | ||||
| Operating margin | 52.1 | % | 49.5 | % | 52.1 | % | |
| Total expenses | 139,393 | 139,478 | 121,692 | ||||
| Income before income taxes | 135,184 | 122,979 | 118,930 | ||||
| Net income | 102,698 | 93,817 | 89,374 | ||||
| EPS [basic] | 0.26 | 0.23 | 0.22 | ||||
| EPS [diluted] | 0.26 | 0.23 | 0.21 | ||||
| Adjusting items | |||||||
| Impact of adjusting items on operating expenses: | |||||||
| Strategic initiatives costs - Salaries, wages, and benefits | 475 | 485 | - | ||||
| Strategic initiatives costs - General and administrative expenses | 1,883 | 1,640 | - | ||||
| Share-based compensation | 6,775 | 10,731 | 6,534 | ||||
| Amortization of convertible debenture discount | 724 | 793 | 756 | ||||
| Total impact of adjusting items on operating expenses | 9,857 | 13,649 | 7,290 | ||||
| Total pre-tax impact of adjusting items | 9,857 | 13,649 | 7,290 | ||||
| Total after-tax impact of adjusting items | 7,442 | 10,305 | 5,504 | ||||
| Total impact of adjusting items on EPS [basic] | 0.02 | 0.03 | 0.01 | ||||
| Total impact of adjusting items on EPS [diluted] | 0.02 | 0.03 | 0.01 | ||||
| For the three-month period ended | |||||||
| (in US$000's except per share amounts or unless otherwise noted) | June 30, 2024 | March 31, 2024 | June 30, 2023 | ||||
| Adjusted results | US$ | US$ | US$ | ||||
| Adjusted net revenue | 274,577 | 262,457 | 240,622 | ||||
| Adjusted operating expenses | 121,724 | 118,850 | 107,943 | ||||
| Adjusted operating income | 152,853 | 143,607 | 132,679 | ||||
| Adjusted operating margin | 55.7 | % | 54.7 | % | 55.1 | % | |
| Provision for income taxes | 32,486 | 29,162 | 29,556 | ||||
| Adjustments: | |||||||
| Pre-tax income | 5,381 | 5,390 | 3,533 | ||||
| Foreign tax rate differential and other | (418 | ) | 632 | (584 | ) | ||
| Provision for taxes applicable to adjusted results | 37,449 | 35,184 | 32,505 | ||||
| Adjusted net income | 115,404 | 108,423 | 100,174 | ||||
| Adjusted EPS [basic] | 0.29 | 0.27 | 0.25 | ||||
| Adjusted EPS [diluted] | 0.29 | 0.26 | 0.24 | ||||
The following table summarizes key statement of financial position amounts for the periods presented.
| Selected statement of financial position amounts | For the three-month period ended | ||||||
| (in US$000's unless otherwise noted) | June 30, 2024 | March 31, 2024 | June 30, 2023 | ||||
| US$ | US$ | US$ | |||||
| Total Finance receivables, before allowance for credit losses | E | 7,775,035 | 7,478,974 | 7,005,218 | |||
| Allowance for credit losses | F | 5,351 | 5,794 | 7,613 | |||
| Net investment in finance receivable | G | 5,525,306 | 5,349,038 | 4,680,188 | |||
| Equipment under operating leases | H | 2,589,411 | 2,685,015 | 2,383,189 | |||
| Net earning assets | I=G+H | 8,114,717 | 8,034,053 | 7,063,377 | |||
| Average net earning assets | J | 8,186,031 | 7,825,155 | 6,801,141 | |||
| Goodwill and intangible assets | K | 1,583,634 | 1,587,465 | 1,591,966 | |||
| Average goodwill and intangible assets | L | 1,584,972 | 1,588,981 | 1,589,673 | |||
| Borrowings | M | 8,711,416 | 9,021,567 | 7,587,282 | |||
| Unsecured convertible debentures | N | - | 126,108 | 125,653 | |||
| Less: continuing involvement liability | O | (101,075 | ) | (87,199 | ) | (56,390 | ) |
| Total debt | P=M+N-O | 8,610,341 | 9,060,476 | 7,656,545 | |||
| Average debt | Q | 8,757,365 | 8,239,147 | 7,274,728 | |||
| Total shareholders' equity | R | 2,908,420 | 2,944,588 | 2,956,533 | |||
| Preferred shares | S | 92,404 | 181,077 | 263,380 | |||
| Common shareholders' equity | T=R-S | 2,816,016 | 2,763,511 | 2,693,153 | |||
| Average common shareholders' equity | U | 2,782,534 | 2,747,716 | 2,646,122 | |||
| Average total shareholders' equity | V | 2,934,053 | 2,928,793 | 2,909,503 | |||
Throughout this press release, management uses the following terms and ratios which do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures presented by other organizations. Non-GAAP measures are reported in addition to, and should not be considered alternatives to, measures of performance according to IFRS.
Adjusted operating expenses
Adjusted operating expenses are equal to salaries, wages and benefits, general and administrative expenses, and depreciation and amortization less adjusting items impacting operating expenses. The following table reconciles the Company's reported expenses to adjusted operating expenses.
| For the three-month period ended | ||||
| (in US$000's except per share amounts or unless otherwise noted) | June 30, 2024 | March 31, 2024 | June 30, 2023 | |
| US$ | US$ | US$ | ||
| Reported Expenses | 139,393 | 139,478 | 121,692 | |
| Less: | ||||
| Amortization of intangible assets from acquisitions | 6,966 | 6,979 | 6,982 | |
| Loss (gain) on investments | 846 | - | (523 | ) |
| Operating expenses | 131,581 | 132,499 | 115,233 | |
| Less: | ||||
| Amortization of convertible debenture discount | 724 | 793 | 756 | |
| Share-based compensation | 6,775 | 10,731 | 6,534 | |
| Strategic initiatives costs - Salaries, wages and benefits | 475 | 485 | - | |
| Strategic initiatives costs - General and administrative expenses | 1,883 | 1,640 | - | |
| Total adjustments | 9,857 | 13,649 | 7,290 | |
| Adjusted operating expenses | 121,724 | 118,850 | 107,943 | |
Adjusted operating income or Pre-tax adjusted operating income
Adjusted operating income reflects net income or loss for the period adjusted for the amortization of debenture discount, share-based compensation, amortization of intangible assets from acquisitions, provision for or recovery of income taxes, loss or income on investments, and adjusting items from the table below.
The following tables reconciles income before taxes to adjusted operating income.
| For the three-month period ended | ||||
| (in US$000's except per share amounts or unless otherwise noted) | June 30, 2024 | March 31, 2024 | June 30, 2023 | |
| US$ | US$ | US$ | ||
| Income before income taxes | 135,184 | 122,979 | 118,930 | |
| Adjustments: | ||||
| Amortization of convertible debenture discount | 724 | 793 | 756 | |
| Share-based compensation | 6,775 | 10,731 | 6,534 | |
| Amortization of intangible assets from acquisition | 6,966 | 6,979 | 6,982 | |
| Loss (gain) on investments | 846 | - | (523 | ) |
| Adjusting Items: | ||||
| Strategic initiatives costs - Salaries, wages and benefits | 475 | 485 | - | |
| Strategic initiatives costs - General and administrative expenses | 1,883 | 1,640 | - | |
| Total pre-tax impact of adjusting items | 2,358 | 2,125 | - | |
| Adjusted operating income | 152,853 | 143,607 | 132,679 | |
Adjusted operating margin
Adjusted operating margin is the adjusted operating income before taxes for the period divided by the net revenue for the period.
After-tax adjusted operating income
After-tax adjusted operating income reflects the adjusted operating income after the application of the Company's effective tax rates.
Adjusted net income
Adjusted net income reflects reported net income less the after-tax impacts of adjusting items. The following table reconciles reported net income to adjusted net income.
| For the three-month period ended | ||||||
| (in US$000's except per share amounts or unless otherwise noted) | June 30, 2024 | March 31, 2024 | June 30, 2023 | |||
| US$ | US$ | US$ | ||||
| Net income | 102,698 | 93,817 | 89,374 | |||
| Amortization of convertible debenture discount | 724 | 793 | 756 | |||
| Share-based compensation | 6,775 | 10,731 | 6,534 | |||
| Amortization of intangible assets from acquisition | 6,966 | 6,979 | 6,982 | |||
| Loss (gain) on investments | 846 | - | (523 | ) | ||
| Strategic initiatives costs - Salaries, wages and benefits | 475 | 485 | - | |||
| Strategic initiatives costs - General and administrative expenses | 1,883 | 1,640 | - | |||
| Provision for income taxes | 32,486 | 29,162 | 29,556 | |||
| Provision for taxes applicable to adjusted results | (37,449 | ) | (35,184 | ) | (32,505 | ) |
| Adjusted net income | 115,404 | 108,423 | 100,174 | |||
After-tax adjusted operating income attributable to common shareholders
After-tax adjusted operating income attributable to common shareholders is computed as after-tax adjusted operating income less the cumulative preferred share dividends for the period.
About Element Fleet Management
Element Fleet Management (TSX: EFN) is the largest publicly traded pure-play automotive fleet manager in the world, providing the full range of fleet services and solutions to a growing base of loyal, world-class clients - corporations, governments, and not-for-profits - across North America, Australia, and New Zealand. Element's services address every aspect of clients' fleet requirements, from vehicle acquisition, maintenance, accidents and remarketing, to integrating EVs and managing the complexity of gradual fleet electrification. Clients benefit from Element's expertise as one of the largest fleet solutions providers in its markets, offering economies of scale and insight used to reduce fleet operating costs and improve productivity and performance. For more information, visit elementfleet.com/investor-relations.
This press release includes forward-looking statements regarding Element and its business. Such statements are based on management's current expectations and views of future events. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements, including, among others, statements regarding Element's financial performance, enhancements to clients' service experience and service levels; improvements to client retention trends; reduction of operating expenses; increases in efficiency; Element's ability to achieve its sustainability objectives; the ability to satisfy all closing conditions related to the Autofleet acquisition; Element achieving its digital platform ambitions; the Autofleet acquisition enabling the Company to scale its business more quickly, achieve operational efficiencies, increase client and shareholder value and unlock new revenues streams; EV strategy and capabilities; global EV adoption rates; dividend policy and the payment of future dividends; Element's expectation and ability to redeem its preferred shares and convertible debentures; the costs and benefits of strategic initiatives; creation of value for all stakeholders; expectations regarding syndication; growth prospects and expected revenue growth; level of workforce engagement; improvements to magnitude and quality of earnings; executive hiring and retention; focus and discipline in investing; balance sheet management and plans with respect to leverage ratios; and Element's proposed share purchases, including the number of common shares to be repurchased, the timing thereof and TSX acceptance of the NCIB and any renewal thereof. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause Element's actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Such risks and uncertainties include those regarding the fleet management and finance industries, economic factors, regulatory landscape and many other factors beyond the control of Element. A discussion of the material risks and assumptions associated with this outlook can be found in Element's annual MD&A, and Annual Information Form for the year ended December 31, 2023, each of which has been 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 undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
