Q1 2022 Supplementary Information - as at March 31, 2022
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Q1 2022 Supplementary Information
as at March 31, 2022
This supplementary information should be read in conjunction with the
Company's Management Discussion & Analysis dated March 31, 2022.
In this document, the Company 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.sedar.com).
Element Fleet Management Corp. www.elementfleet.com/investorsFORWARD-LOOKING STATEMENTS DISCLAIMER The following pages provide information management believes is relevant to an assessment and understanding of the financial condition, results and operations of Element Fleet Management Corp. (the “Company” or “Element”) as at and for the three- month period ended March 31, 2022, and should be read in conjunction with the Company’s Q1 Management Discussion & Analysis and unaudited interim condensed financial statements and accompanying notes for the three-month period ended March 31, 2022. All monetary figures are in millions of Canadian dollars unless otherwise noted or for per share amounts. Additional information regarding the Company is available on SEDAR at www.sedar.com and on the Company’s website at www.elementfleet.com. CAUTIONARY STATEMENT THIS ANALYSIS HAS BEEN PREPARED TAKING INTO CONSIDERATION INFORMATION AVAILABLE TO MAY 9, 2022. CERTAIN STATEMENTS CONTAINED IN THIS REPORT CONSTITUTE “FORWARD- LOOKING STATEMENTS”. IN SOME CASES THE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY WORDS OR PHRASES SUCH AS “MAY”, "CAN", “WILL”, “EXPECT”, "GUIDANCE", “PLAN”, “ANTICIPATE”, "TARGET", “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 TRANSFORMATION PLAN, GROWTH PROSPECTS AND OBJECTIVES, EXPECTATIONS REGARDING SYNDICATION, ABILITY TO DRIVE OPERATIONAL EFFICIENCIES, ASSETS, BUSINESS STRATEGY, COMPETITIVE POSITIONING, ABILITY TO CREATE VALUE FOR SHAREHOLDERS, THE EVOLUTION OF ELEMENT’S BUSINESS, THE AVAILABILITY OF FUNDS FROM OPERATIONS, CASH FLOW GENERATION, BUSINESS INTEGRATION, STRATEGIC ASSESSMENT, BUSINESS OUTLOOK, ELEMENT’S DIVIDEND POLICY AND THE PAYMENT OF FUTURE DIVIDENDS, ELEMENT’S PROPOSED 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 AND OTHER EXPECTATIONS REGARDING FINANCIAL OR OPERATING PERFORMANCE AND METRICS. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO INHERENT RISKS, UNCERTAINTIES AND NUMEROUS ASSUMPTIONS, INCLUDING, WITHOUT LIMITATION, THE IMPACT OF THE COVID-19 PANDEMIC, GENERAL ECONOMIC CONDITIONS, OPERATIONAL CAPABILITIES, TECHNOLOGICAL DEVELOPMENT, RELIANCE ON DEBT FINANCING, DEPENDENCE ON BORROWERS, INABILITY TO SUSTAIN RECEIVABLES, COMPETITION, INTEREST RATES, REGULATION, INSURANCE, FAILURE OF KEY SYSTEMS, DEBT SERVICE, FUTURE CAPITAL NEEDS AND SUCH OTHER RISKS OR FACTORS DESCRIBED FROM TIME TO TIME IN REPORTS OF ELEMENT, INCLUDING HEREIN AND IN ELEMENT’S MD&A AND ANNUAL INFORMATION FORM, WHICH HAVE BEEN FILED ON SEDAR AND MAY BE ACCESSED AT WWW.SEDAR.COM. THE COVID-19 PANDEMIC HAS CAST ADDITIONAL UNCERTAINTY ON ELEMENT’S INTERNAL EXPECATIONS, ESTIMATES, PROJECTIONS, ASSUMPTIONS AND BELIEFS. THE DURATION, EXTENT AND SEVERITY OF THE IMPACT THE COVID-19 PANDEMIC, INCLUDING MESAURES TO PREVENT ITS SPREAD, WILL HAVE ON ELEMENT’S BUSINESS REMAINS UNCERTAIN AND DIFFICULT TO PREDICT AT THIS TIME. BY THEIR NATURE, FORWARD-LOOKING STATEMENTS INVOLVE NUMEROUS ASSUMPTIONS, KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES, BOTH GENERAL AND SPECIFIC, WHICH CONTRIBUTE TO THE POSSIBILITY THAT PREDICTIONS, FORECASTS, PROJECTIONS AND OTHER FORMS OF FORWARD-LOOKING INFORMATION MAY NOT OCCUR OR BE ACHIEVED. MANY FACTORS COULD CAUSE ELEMENT'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS AND READERS ARE CAUTIONED THAT THE LIST OF FACTORS IN THE FOREGOING PARAGRAPH IS NOT EXHAUSTIVE. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS INTENDED, PLANNED, ANTICIPATED, BELIEVED, ESTIMATED OR EXPECTED. ACCORDINGLY, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS OR INTERPRET OR REGARD FORWARD-LOOKING STATEMENTS AS GUARANTEES OF FUTURE OUTCOMES, AS NO FORWARD-LOOKING STATEMENT MAY BE GUARANTEED. EXCEPT AS MAY BE REQUIRED BY APPLICABLE CANADIAN SECURITIES LAWS, THE COMPANY DOES NOT INTEND, AND DISCLAIM ANY OBLIGATION TO UPDATE OR REWRITE ANY FORWARD-LOOKING STATEMENTS WHETHER ORAL OR WRITTEN AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. Q1 2022 | Element Fleet Management Corp. Supplementary Information | 2
TABLE OF CONTENTS
Section Content
FEATURED DISCLOSURES
1.1 Revised 2022 guidance
1.2 Global Order backlog
1.3 Free cash flow per share and adjusted operating income per share
1.4.1 1Q21 -> 1Q22 services revenue walk
1.4.2 4Q21 -> 1Q22 services revenue walk
1.5.1 1Q21 -> 1Q22 net financing revenue walk
1.5.2 4Q21 -> 1Q22 net financing revenue walk
1.6 Revenue units contracted in the period
1.7.1 Global vehicles under management (VUM)
1.7.2 Performance per VUM
STRATEGIC PRIORITIES
Aggressively pursue organic growth and demonstrate the scalability of our operating platform by growing
annual operating income in excess of the annual net revenue growth rate
2.1 Net revenue growth in the U.S. and Canada, Australia and New Zealand, and Mexico – in local currencies
2.2 Global net revenue growth
2.3 Global operating income growth and operating margin expansion
Advance a capital-lighter business model by growing services revenue and strategically syndicating fleet assets,
which enhance return on equity
3.1 Net revenue streams by geography, and services revenue by geography, nature and product
3.2 Syndication volume and pre-tax return on common equity
Achieve high single- to low double-digit annual free cash flow per share growth and predictably return excess
equity to shareholders by way of growing common dividends and share buybacks
4.1 Return of capital
4.2 NCIB activity
4.3 Common dividends
ELECTRIC VEHICLES
5.1 EV penetration of Element clients' fleets
5.2 Current estimates as to the timing of battery electric vehicles achieving total cost of ownership/operation
(TCO) and purchase price (PP) parity with internal combustion engine vehicles
ASSETS UNDER MANAGEMENT AND NET EARNING ASSETS
6.1 Global assets under management on a constant currency basis
6.2.1 4Q21 -> 1Q22 Assets under management
6.2.2 4Q21 -> 1Q22 End-of-period net earning assets
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 3Featured Disclosures this Period Q1 2022 | Element Fleet Management Corp. Supplementary Information | 4
FEATURED DISCLOSURES
1.1 Revised 2022 guidance
With the commercial success of 2021 adding (i) clients to our roster, (ii) vehicles under management and (iii)
services penetration; with client vehicle utilization returning to and, by many measures, surpassing pre-pandemic levels; and
with OEMs gradually ramping up production in the first half of this year, our multifaceted growth strategy
demonstrated sustainable traction in the first quarter, warranting the following revisions to our full-year 2022 results guidance.
Net revenue AOI Free cash flow
1,050 550 530-550
1,015-1,035 Revised
Revised Prior
1,000 500
$M
Prior 455-475
Revised
950 450
Prior
900 400
Net2021
revenue 2022 Net2021
revenue 2022 Net2021
revenue 2022
Actual Guidance Actual Guidance Actual Guidance
Net revenue and operating margin Growth vs. 2021 FY22 range
Prior net revenue guidance 1-3% $975-995
Revised net revenue guidance 4-6% $1,015-1,035
Revised operating margin guidance 52.5-53.5%
Prior operating margin guidance 52-53%
AOI and adjusted EPS
Prior AOI guidance 1-3% $510-530
Revised AOI guidance 4.5-7.5% $530-550
After-tax* AOI attributable to common shareholders** $365-375
Weighted average outstanding common shares*** (millions) 390-400
Revised adjusted EPS guidance (dollars) 9-14% $0.92-0.96
Prior adjusted EPS guidance (dollars) 6-11% $0.87-0.90
* Adjusted effective tax rate range: 25.5-26.5%
** After preferred share dividends paid
*** Prior range was 395-405
Free cash flow and FCF per share
Prior free cash flow guidance 2-6% $435-455
Revised free cash flow guidance 3-7% $455-475
Revised free cash flow per share guidance (dollars) 10-15% $1.16-1.21
Prior free cash flow per share guidance (dollars) 8-13% $1.09-1.14
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 5FEATURED DISCLOSURES
1.2 Global Order backlog (excluding Armada, in constant currency (CC))
Orders represent OEM commitments to produce vehicles for Element, and client commitments to lease or purchase those
vehicles from Element, meaning Orders represent guaranteed future revenue, operating income and cash flow to Element.
Upon vehicle production, Element compensates the OEM, thereby "originating" an Ordered vehicle.
Continued robust client demand for new vehicles in all our operating geographies, coupled with ongoing OEM production
delays, kept our global Order backlog at $2.9 billion as of March 31, 2022. $2.9 billion is ~142% more backlogged Order value
than average at March 31 of the last three years.
We view the flat quarter-over-quarter global Order backlog as being quite favourable in respect of both demand and supply.
On the demand side, client Orders remained strong through the quarter reflecting both clients' need to replace aging
vehicles and the OEMs' ability to accept these orders. And on the supply side, we saw a 20% increase in Originations as
the OEMs added productive capacity, in line with our thesis for a return to full productive capacity by mid-2023.
~142%
Australia and New Zealand
Mexico
U.S. and Canada
4,000
3,600
Average global Order backlog at Q1, 2019-2021: $1,216
3,200
$2,900
2,800
2,400
$M
2,000
1,600
1,200
800
400
0
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 6FEATURED DISCLOSURES
1.3.1 Free cash flow per share
Free cash flow per share for the quarter grew 6 cents from Q1 2021 and 7 cents on a constant currency basis. Quarter-over-
quarter, free cash flow per share was flat (both "as reported" and in constant currency).
$ millions (except free cash flow per common share) Source 1Q20 2Q20 3Q20 4Q20 FY20 1Q21 2Q21 3Q21 4Q21 FY21 1Q22
Adjusted operating income (AOI) a. 129.3 111.1 129.0 132.1 501.5 137.3 126.5 125.6 122.6 512.0 142.9
Adjust for non-cash items in AOI:
Depreciation and amortization b. 10.7 10.9 10.6 10.4 42.5 10.5 10.4 15.9 13.7 50.5 13.9
Amortization of deferred lease costs c. 7.0 6.4 6.2 9.3 28.9 8.4 5.4 6.2 6.8 26.7 7.1
Amortization of deferred financing costs c. 9.5 11.2 8.2 11.1 40.0 5.3 6.1 5.7 5.1 22.2 3.9
Amortization of deferred convertible debenture costs d. 1.6 1.2 0.3 0.3 3.4 0.3 0.3 0.3 0.3 1.2 0.3
Provision for credit losses c. 12.1 1.1 (0.9) (0.6) 11.7 (3.5) (1.5) (1.9) 1.4 (5.5) 0.1
X. Amortization of deferred revenue
Adjust for cash items not included in AOI:
Y. Cash revenue received in the period, recognition of which is deferred
Z. Lease costs incurred in the period, recognition of which is deferred
X. + Y. + Z. = (12.4) (11.9) (5.7) (23.0) (53.2) (17.8) (7.0) (7.7) (2.7) (35.2) (13.3)
Cash from operations 157.7 130.0 147.6 139.5 574.7 140.5 140.3 144.0 147.2 572.0 154.9
Subtract required cash expenses:
Sustaining capital investments e. (10.5) (7.3) (9.5) (14.4) (41.7) (10.3) (11.0) (13.2) (14.5) (49.0) (14.1)
Preferred share dividends f. (10.9) (10.9) (10.9) (8.1) (40.8) (8.1) (8.1) (8.1) (8.1) (32.4) (8.1)
Cash taxes c. (10.0) (4.4) (19.6) (9.0) (43.0) (22.7) (9.1) (11.4) (5.1) (48.4) (17.4)
Free cash flow 126.3 107.3 107.6 107.9 449.2 99.3 112.1 111.3 119.5 442.2 115.3
Weighted avg. # of common shares outstanding (million) f. 437.3 437.8 438.8 440.2 438.6 438.5 428.6 416.4 409.2 423.1 401.6
Per common share outstanding 0.29 0.25 0.25 0.25 1.02 0.23 0.26 0.27 0.29 1.05 0.29
Free cash flow (constant currency) 119.6 100.4 102.3 104.3 426.6 97.7 113.7 111.0 120.2 442.6 115.3
Per common share outstanding (CC) 0.27 0.23 0.23 0.24 0.97 0.22 0.27 0.27 0.29 1.05 0.29
Sources
a. MD&A
b. Financial Statements - Statement of Operations
c. Financial Statements - Statement of Cash Flows
d. Financial Statements - Convertible debentures note
e. This Supplementary Information document
f. Financial Statements - Earnings per share note
1.3.2 Free cash flow and adjusted operating income per share
Q1 2022 free cash flow per share increased by 6 cents per share from Q1 2021 as reported and 7 cents in constant currency,
while adjusted EPS grew 2 cents per share both as reported and in constant currency. Q1 2022 free cash flow per share was
flat quarter-over-quarter as reported and in constant currency, while adjusted EPS increased 3 cents per share both as
reported and in constant currency (quarter-over-quarter). These differences between FCF/share and adjusted EPS highlight
how much lower Element’s real (ie. cash) tax costs are than the effective tax rate on our reported earnings.
FCF/share FCF/share (constant currency) Adjusted EPS Adjusted EPS (constant currency)
0.29 0.29
$0.30 0.29
0.27
0.27 0.27
0.26
0.25 0.25 0.25 0.24
0.23 0.24
0.23 0.23 0.23
0.22 0.22 0.22 0.22 0.22
0.21 0.21 0.21
0.20 0.20
0.19
0.18
$0.16
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 7FEATURED DISCLOSURES
1.4.1 1Q21 -> 1Q22 services revenue walk
Q1 2022 services revenue grew $17.4 million or 15.2% over Q1 2021. Services revenue benefited from the speed at which our
implementation teams have been converting SOW commercial wins into new active services (penetration), especially in the
U.S. and Canada. We also have more vehicles under management ("VUM") and have seen more client vehicle
activity (utilization) than we did in Q1 last year, driving revenue growth from maintenance and accident services. Ongoing
OEM production delays continue to create demand for long-term vehicle rentals (utilization), while the relative improvement
in Q1 originations year-over-year catalyzed a modest increase in remarketing revenue. Services revenue was also
increased by cost inflation across our network of supplier-partners.
15.2%
3.0
131.8
8.0
(0.8)
7.2
114.5
1.4.2 4Q21 -> 1Q22 services revenue walk
Q1 2022 services revenue grew $8.1 million or 6.6% over Q4 2021. Services penetration was strong across all three regions
as we quickly ramped up new service activations from SOW wins in 2021 and added VUM from winning market share and
converting self-managed fleets into Element clients. Utilization also stepped up quarter-over-quarter as client vehicle
activity has essentially returned to pre-pandemic levels. Finally, inflation raised the prices of parts, labour and fuel across our
network of supplier-partners.
6.6%
0.7 131.8
1.9
3.2
2.3
123.7
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 8FEATURED DISCLOSURES
1.5.1 1Q21 -> 1Q22 net financing revenue walk
Q1 2022 net financing revenue grew $4.2 million or 3.7% over Q1 2021. Strong gain on sale ("GoS") performance in
Australia and New Zealand and Mexico continued to drive growth while strengthening of the Canadian dollar against local
currencies in ANZ created mild FX headwind.
3.7%
10.1 --
115.2
(2.2)
111.0
(3.7)
1.5.2 4Q21 -> 1Q22 net financing revenue walk
Q1 2022 net financing revenue grew $7.9 million or 7.4% over Q4 2021. Further GoS outperformance and a step-
down in provisions for credit losses ("PCL") quarter-over-quarter were offset by lower NEA volume, itself moderated by
the continued beneficial geographic shift in our NEA mix.
7.4%
8.6
0.3 115.2
(2.2)
1.3
107.2
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 9FEATURED DISCLOSURES
1.6 Revenue units contracted in the period
This quarter is the final instance of revenue units disclosure. We initiated this disclosure as a means of illustrating the early
traction we were seeing in our pivot to growth, and as a means of better informing investors as to three of our five levers of
growth. Having conveyed the strong progress being made by our Commercial teams in deepening our share of wallet, stealing
market share and securing self-managed fleet wins, we are sunsetting revenue unit disclosure in favour of global vehicles
under management (VUM) disclosure – the inaugural instance of which is on the next page.
Our aggressive pursuit of organic growth is guided by our global strategy, three planks of which are (i) increasing client
profitability and service penetration (share of wallet), (ii) winning new clients from other FMCs (stealing market share) and (iii)
converting self-managed fleets into Element clients. Our commercial teams have been successful on all three fronts
throughout 2021 in each of our operating geographies. Every "Revenue unit" represents either a lease or a single service to
be provided to a specific vehicle. It's important to note that we often provide financing and more than one service to a single
vehicle. Therefore, a single vehicle can support multiple "revenue units". Revenue units will vary in their timing of
implementation and their timing and degree of contribution to net revenue, operating income, cash flow and return on equity.
(The figures in this table exclude Armada.)
1Q22 1Q22 1Q22 LTM 1Q22 LTM
△ to △ to 1Q22 △ to 1Q21 △ to 1Q20
1Q22 1Q21 1Q21 1Q20 1Q20 LTM 1Q21 LTM LTM 1Q20 LTM LTM
Revenue Revenue Revenue Revenue Revenue Revenue
% % % %
units units units units units units
Share of wallet
Australia and New Zealand 7,755 6% 7,313 78% 4,355 46,960 12% 41,997 70% 27,585
Mexico 7,501 161% 2,869 204% 2,469 28,783 114% 13,446 105% 14,014
U.S. and Canada 58,576 (2%) 59,793 152% 23,207 313,850 50% 209,721 87% 168,183
Subtotal 73,832 6% 69,975 146% 30,031 389,593 47% 265,164 86% 209,782
Market share
Australia and New Zealand 720 nmf 0 (92%) 9,113 10,963 78% 6,155 (64%) 30,577
Mexico 4,736 82% 2,609 (8%) 5,163 15,828 25% 12,670 (15%) 18,567
U.S. and Canada 44,799 12% 40,101 621% 6,214 107,439 84% 58,257 283% 28,053
Subtotal 50,255 18% 42,710 145% 20,490 134,230 74% 77,082 74% 77,197
Self-managed
Australia and New Zealand 330 (94%) 5,245 11% 298 9,872 (69%) 31,806 198% 3,315
Mexico 1,364 (48%) 2,636 (1%) 1,376 13,673 37% 9,972 166% 5,133
U.S. and Canada 4,381 11% 3,963 12% 3,910 40,133 192% 13,761 (10%) 44,632
Subtotal 6,075 (49%) 11,844 9% 5,584 63,678 15% 55,539 20% 53,080
Totals
Australia and New Zealand 8,805 (30%) 12,558 (36%) 13,766 67,795 (15%) 79,958 10% 61,477
Mexico 13,601 68% 8,114 51% 9,008 58,284 62% 36,088 55% 37,714
U.S. and Canada 107,756 4% 103,857 223% 33,331 461,422 64% 281,739 92% 240,868
Global 130,162 5% 124,529 132% 56,105 587,501 48% 397,785 73% 340,059
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 10FEATURED DISCLOSURES
1.7.1 Global vehicles under management (VUM)
We believe vehicles under management (VUM) is an important measure of Element's growth and future growth potential.
Our disclosure of and regarding VUM will evolve in future quarters to provide increased insight into our business
performance as it relates to this metric.
Every VUM is a unique vehicle (a) receiving or subscribed for one or more Element services, and/or (b) financed by
Element, whether or not subsequently syndicated.
A vehicle (only) financed by Element is one VUM. If that vehicle's finance receivables are syndicated by Element, it
nonetheless remains one VUM. A vehicle receiving only Element services – whether 1 or 12 services – is one VUM. A
vehicle financed by Element, subsequently syndicated, and all-the-while subscribed for 10 Element services, is one VUM.
It follows from the foregoing that not all VUM generate equal amounts of net revenue, operating income, cash flow or return
on equity. However, almost invariably, each VUM represents some degree of 'white space' into which we can sell
incremental services and solutions.
Serviced only
Serviced & financed
Financed only
1 1,486,000
1,417,000 1,447,000
1,500,000
850,000
777,000 810,000
1,200,000
900,000
600,000
611,000 608,000 607,000
300,000
28,000 29,000 29,000
0
Sep. 30 Dec. 31 Mar. 31
2021 2021 2022
1. We present VUM counts herein rounded to the nearest thousand vehicles.
1.7.2 Revenue and AOI per vehicle under management
4Q21 1Q22 QoQ △
2
Average VUM for the period 1,430,000 1,466,000 2.5%
Net revenue ($ million) $ 246.3 $ 260.8
Net revenue per vehicle under management $ 172 $ 178 3.3%
Adjusted operating income ($ million) $ 122.9 $ 142.9
Adjusted operating income per vehicle under management $ 86 $ 97 13.4%
2. Average VUM for the period is (a) the sum of the VUM counts on (i) the last day of the prior period and (ii) the last day of each month during the period; (b)
divided by (the number of months in the period, plus 1); and then (c) rounded to the nearest thousand vehicles.
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 11Strategic Priorities Q1 2022 | Element Fleet Management Corp. Supplementary Information | 12
STRATEGIC PRIORITY: Aggressively pursue profitable organic net revenue growth
2.1.1 Net revenue growth quarter-over-same-quarter-prior-year (YoY) in the U.S./Canada – in U.S. dollars
YoY growth (decline) (0.3%)
180 (0.2%) (3.9%)
140
US$M
100
60
20
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Start of growth strategy
2.1.2 Net revenue growth YoY in Australia and New Zealand – in local currency (Australian dollars)
24.2%
65 YoY growth
39.6%
55
19.0%
AU$M
45
35
25
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Start of growth strategy
2.1.3 Net revenue growth YoY in Mexico – in local currency (Mexican pesos)
23.7%
27.3%
440 YoY growth
1.9%
360
280
MX$M
200
120
40
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Start of growth strategy
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 13STRATEGIC PRIORITY: Grow operating income at a higher rate than net revenue
2.2 Global net revenue growth in constant currency
Global net revenue grew 6.2% YoY for Q1 2022 on a constant currency basis. Quarter-over-quarter (QoQ), global net
revenue grew 5.9% on a constant currency basis.
Net revenue
5.9%
YoY growth
6.2%
QoQ growth
4.1%
1.9%
250
230
$M
210
190
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
2.3 Global operating income growth and operating margin expansion, all in constant currency
Q1 2022 adjusted operating income (AOI) grew 5.7% YoY and 16.3% QoQ, and operating margin for the last 12 months (LTM
AOI Margin) contracted by 20 basis points from Q1 2021 and was flat QoQ. The contraction was due to (i) 2H-loaded STIP
accrual last year and (ii) 1Q21 benefiting from a $3.5 million PCL release and high syndication volume and revenue.
AOI (CC)
YoY growth
QoQ growth
LTM AOI margin (%) (CC)
16.3%
150 5.7%
10.2%
5.4%
130
60%
110
$M
53.8% 53.3%
52.1% 52.7% 52.5% 52.5%
90 51.6% 52.0% 51.8% 51.9%
50%
49.2%
47.3%
70 46.3%
50 40%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 14STRATEGIC PRIORITY: Advance a capital-lighter model by growing services revenue
3.1 Net revenue streams by geography, and services revenue by geography, nature and product
We earn varying degrees of services revenue in different geographies, and the nature of that services revenue (usage-based
versus recurring) varies by both geography and product across our business. Globally, we have ample opportunity to
generate more and a higher proportion of services revenue, which is aligned with our advancement of a capital-lighter
business model. Services revenue requires little capital to generate – typically only the net working capital required to pay our
outsourced service providers until we are reimbursed by our clients – making services revenue highly accretive to return on
equity.
Services revenue (in constant currency through 2018)
Net financing revenue
Services revenue by geography, nature and product
Syndication revenue
2022 2021 2020 2019 2018
YTD Usage-based Recurring
U.S. and Canada
Note: In most cases, services have both usage-based
and recurring components to their revenue. Globally
overall, approximately two thirds of our service
revenue is usage-based and one third is recurring.
Accident Accident
Acquisitions Driver safety
Fuel Fuel
Long term rentals Fleet Partnership Solutions
Maintenance Maintenance
Taxable benefits End of contract
Remarketing
Roadside assistance
Telematics Telematics
Titling & registration Titling & registration
Tolls & violations
Australia and
New Zealand
Accident Accident
Fuel Fuel
Maintenance Maintenance
Roadside assistance Insurance
Telematics Telematics
Tires Peace of Mind
Tolls & violations
Mexico
Accident Accident
Fuel Fuel
Maintenance Maintenance
Telematics Telematics
Titling & registration Titling & registration
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 15STRATEGIC PRIORITY: Advance a capital-lighter model through strategic syndication
The role of Syndication in our growth strategy
Our sale of fleet assets to financial buyers with a lower cost of capital advances several aspects of Element’s profitable
growth strategy:
• Syndication generates a highly profitable, recurring revenue stream for the Company;
• Syndication accelerates revenue recognition (while improving economics), increasing the velocity of cash flow; and
• Syndication facilitates a capital-lighter business model. Selling these assets alleviates the need for Element to take on
additional leverage – and set aside additional equity – to fund the assets on our balance sheet. This has allowed us
to significantly lower Element's tangible leverage ratio and, at the same time, return $644 million to shareholders in 2021
and $105.9 million thus far (as of March 31) in 2022.
Importantly, syndication has no impact on VUM; a financed vehicle remains a financed vehicle whether on Element's balance
sheet or syndicated. Syndication also has no impact on services revenue. We keep that revenue stream from a vehicle
independent of its lease being syndicated, and we preserve the opportunity for share-of-wallet growth in respect of that
vehicle.
3.2 Syndication volume and pre-tax return on common equity
As part of our capital-lighter strategy, we syndicate U.S. and, as of Q1, Canadian leases when the economics of doing so are
superior to holding the assets on our balance sheet. We plan to expand our syndication activities to Mexican leases later this
year or early in 2023.
Syndication volume
pROcE 18%
1,000
800 15.7% 15.8% 16%
15.3% 15.4%
pROcE
600 14.6% 14.6% 14.3%
14.1% 14.3% 14%
$M
13.9% 14.0%
400
12.3%
12%
200 11.7%
0 10%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Definition
pROcE The sum of (before-tax adjusted operating income, minus preferred share dividends) for each of the current and
three preceding quarters; divided by (average total equity for the current quarter and same-quarter prior year,
minus current quarter preferred share capital).
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 16STRATEGIC PRIORITY: Predictably return excess capital to shareholders
4.1 Return of capital
Common buybacks
Common dividends
250 Preferred redemptions
Preferred dividends 225.6
197.4
200 (tbd)
14.0
157.9
151.5
150 141.1
189.2
$M
114.0
100 172.5 122.3
104.4 116.6
150.0
74.5
50
32.0
10.0 28.6 28.3 27.4 31.4
26.8
13.9
0 10.9 8.1 8.1 8.1 8.1 8.1 8.1 8.1
3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
4.2 NCIB activity
Element has returned $143.0 million to common shareholders as of March 31, 2022 by way of buybacks since renewing our
normal course issuer bid (NCIB) in late 2021. We have repurchased over 27% of the common shares authorized for
repurchase under the NCIB – and approximately 2.7% of our common shares issued and outstanding.
Inaugural Renewed NCIB
Units NCIB Nov. 2021 Dec. 2021 1Q22
Shares repurchased Millions 34.4 2.0 3.3 5.8
Weighted avg. share price CAD 13.77 12.96 12.76 12.81
Cost of repurchases CAD, millions 473.9 26.3 42.3 74.5
Cumulative shares repurchased… Millions 34.4 2.0 5.3 11.2
…as a % of shares authorized for repurchase under NCIB 78.4% 5.0% 13.0% 27.2%
…as a % of shares issued and outstanding at commencement of NCIB 7.8% 0.5% 1.3% 2.7%
Shares issued in the period on exercise of options Millions 4.1 0.1 0.4 0.4
Shares issued and outstanding at period end Millions 410.0 408.0 405.1 399.7
4.3 Common dividends
On November 10, 2021 we announced a 19% increase to Element’s common dividend, from $0.26 to $0.31 annually per
share. With this increase, as of March 31, 2022 our common dividend represents approximately 28% of the Company’s last
twelve months’ (LTM) free cash flow per share, which is within the 25% to 35% payout range we plan to maintain going
forward.
Units 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Common dividend per share CAD 0.065 0.065 0.065 0.065 0.0775 0.0775
Annualized common dividend per share as a % of LTM FCF per share 25.4% 27.0% 26.6% 26.0% 29.6% 28.0%
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 17Electric Vehicles Q1 2022 | Element Fleet Management Corp. Supplementary Information | 18
ELECTRIC VEHICLES
5.1 EV penetration of Element clients' fleets
Element is well positioned to support our clients and lead our industry through the gradual electrification of automotive fleets.
Although EV and hybrid penetration of our clients’ fleets is currently immaterial, we are excited by both the economic and
environmental benefits of EVs, and believe that the complexity and risk of gradually transitioning mission-critical automotive
fleets from ICE-powered vehicles to EVs will increase demand for outsourced fleet management services and expertise. To
this point, we recently announced Arc by Element – our comprehensive, integrated end-to-end EV offering that will enable us
to ensure consistency for our global clients and to develop our offering to be seamless across our geographies.
U.S. and Canada New Zealand Australia Mexico
Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31
EV penetration at
2021 2022 2021 2022 2021 2022 2021 2022
0.07% 0.09% 1.98% 3.19% 0.27% 0.46% 0.45% 0.36%
Gasoline vehicles
Diesel vehicles
Hybrid vehicles
Electric vehicles
(BEV & PHEV)
5.2 Current estimates as to the timing of battery electric vehicles achieving total cost of
ownership/operation (TCO) and purchase price (PP) parity with internal combustion engine vehicles
Vehicles TCO Parity PP Parity Variables
Light duty (10,000 Purchase incentives/subsidies
Mid-2020's ~2030 Use case (range, access to charging infrastructure)
lbs. GVWR)
Maintenance and repair costs
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 19Assets Under Management
&
Net Earning Assets
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 20ASSETS UNDER MANAGEMENT & NET EARNING ASSETS
6.1 Global assets under management on a constant currency basis
Syndicated assets
Interim funded assets
Net earning assets
20
16.8
15.9 15.5
16 15.2 15.0 14.6 14.3 14.2 14.4
4.0
4.1
4.3 4.4
12 1.5 5.0 5.2 5.2 5.4 5.8
$B
1.4 0.8 0.6
0.5 0.5 0.5 0.6
8 0.7
11.3 10.5 10.4 10.2 9.4
4 9.0 8.7 8.2 7.9
0
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
6.2.1 4Q21 -> 1Q22 Assets under management
1.4
(1.0)
14.3 14.4
(0.3)
(0.1)
6.2.2 4Q21 -> 1Q22 End-of-period net earning assets
1.2
(0.5)
(0.3)
8.2
7.9
(0.7) (0.0)
Q1 2022 | Element Fleet Management Corp. Supplementary Information | 21You can also read
