Element Fleet Management Corp.

Q4 2022 Earnings Conference Call


spk_0: thank you for standing by this is the conference operator welcome to the element fleet management fourth quarter and full year two thousand and twenty two financial and operating results conference call as a reminder all participants are in listen only mode and the conference is being recorded after the prepared remarks they will be an opportunity for analysts to ask questions to join or rejoined the questions you you may press start and one on your telephone keypad should you need assistance during the conference call you may signal operator by pressing star and zero element wishes to remind listeners that some of the information into this call includes forward looking statements these statements are based on assumptions that are subject to significant risks and uncertainties and the company refers you to the cautionary statements and risk factors in it's year and and most recent em dna as well as the most recent a i have for description of these risks and uncertainties and assumptions although management believes that the expectations reflected in the statements are reasonable it can give no assurance that the expectations reflected in aadmi forward looking statements will prove to be correct elements earnings press release financial statements and dna supplementary information document quarterly investor presentation and to these call include references to non get measures which management beliefs are helpful to present the company and it's operations in ways that are useful to investors a reconciliation of these non gaap
spk_1: measures in i have for us measures can be found in the m dna
spk_0: i would now like to do nicole over to jay forbes president and chief executive officer of element please go ahead
spk_2: and you offer them are beholden into all of you joining a phone call got some strong for important lesson for you to to result from early successes in twenty twenty three of the organization capitalizes on the momentum of the previous year and or a your major issue food are going to friction in the businesses though the to deliver the volume of too much which for fall twenty twenty three results gardens join me on the polish one as usual users executive vice president and chief financial officer for a couple of for the first thoughts are preserved and future chief executive officer or the tories of the logical like everyone else that element i'm absolutely thrilled to have lawyers and actually job was dollars the time we spent together last month or so to boast more confident civil was told to leave the country do the execution of elements gonna growth structures as importantly the most your soul into our unique culture that mister inert substance in alignment with the cultural norms that of on doctor almost this and successes of these last five years so before we go any further boy wanna give you the for the thank you jane and good morning everyone
spk_3: i want to start by expressing how grateful i am she use jay and frank and to the board and to all my element calling sure the very warm and genuine welcome that i received upon my arrival i'm really honored to be a part of the elements team and well it's only been about three weeks and i'm still early and my learning jury me i'm really impressed with our people in our culture as really as corridor were being able to successfully deliver a consistent superior clients experience and to execute on our strategy the transparency with which we operate and then should really provide our investors with great comfort in their investments our strategies clear and it's really demonstrated strong performance today or strategies also enabled all that the elements team is accomplished over the last two years under jays amazing leadership we have everything and place strong business fundamental a clear strategy the right people a brilliant culture a scale of a lot region platform and a positive landscape of growth opportunity in the market research everything is in place for element to continue to deliver into the future not to mention the free cash flow profile and return a capital opportunities that continue to be incredibly compelling from where i sit and so finally i do look forward to meeting with you are investors that are analysts and learning from you and look forward to working with the team to deliver on our strategy and profitably grow our business and
spk_2: return to our shareholders the thank you jam packed you for do more it's been a real pleasure working shoulder to shoulder with you this past month so she was fabulous new relationship some is your understanding of a business afford more research comfortable or will be taken out of their an organization that continues form better than ever and moreover could not be better position to sustain and build on the success as you can imagine everyone wanted element is incredibly proud of the record year we deliver for all of our stakeholders and twenty twenty two commercial with in the unique attributes of a business model generated sixteen point two percent your your gross revenue the scale of dolby of are offered platform was evidenced by improvements both operational efficiency and effectiveness as measured by or global bell scorecard and translated the sixteen percent of revenue broke into a twenty two percent increase in adjusted offered a job a couple lighter business ball improved projects which are not common equity to are referred fifteen point six percent for two and twenty two and free cash for personal growth of twenty point six percent pure we're allowed us to increase your common dividends point nine percent last quarter lemonade or series our cultures the second quarter and return some one hundred ninety three million dollars cash to accomplish your holders to buy back to almost forty million common shares in two thousand and one or two under our and c or be program a remarkable results are not limited to elements income statement balance sheet of supplementary financial metrics or clients are receiving a consistent superior service spirit which is evident from the record high promoter scores from received a twenty in order two across or business as well as the ninety nine percent or retention rate we've changed our that same basis in fact element exceeded target on every one or so to normal score scorecard metrics for two one or twenty two and in doing so treat of one point nine billion dollars market value for a problem shareholders history of a performance on a global valves quarter and associated increased shareholder value is the elements three palmed organic growth strategy is delivering the intended results the given this tremendous level of success with a positive possible betemit is created elements will continue to execute the same winning strategy and twenty twenty three and for the foreseeable future thereafter on it a moment to elaborate on the momentum we've treated and the reason recites it will continue to build to rough twenty twenty three for starters momentum but we built a commercial as previously disclosed three months ago we secure the an entire fleet management services and financing mandate a run a joke to relax us please this was the last sixteen thousand five hundred vehicles to elements the office under management for one percent growth and been while retaining the forty seven hundred vehicles previously on to our management all with a single ply this is our largest mega of when says initiating after that growth strategy back and twenty twenty one it will establish a joke term relax as one of the elements top termed wife swap with august this was a great way to cap off twenty twenty two twenty two and sweet has begun with further notable commercial success first in january we were awarded the bandage be are modest official with management service provider in australia and new zealand as they expand are successful us program partnership into that region you may recall that a relationship or mother had already expanded into mexico last year for the fleet is growing as be on board to be a pulse flattered what recently and mexico we won the opportunity to provide free finances and services to optional the largest can be the store chain in the country which is currently salt managing the fleet of some ten thousand life and medium medium duty vehicles we started was one thousand vehicles on a look rhesus of services with the potential to grow a value added footprint with the naxos mega fleas over the next three years third we recently won the mandate to provide sweet management services to tell us a worldly the communications technology company jealous but add over four thousand asset store been kept them will become one of the top five laps on canadian soil this is another major fleet when for elements by local market standards one of killed of the us or bother in amc oxbow so in mexico and tolleson canada just for apple's a substantial commercial whims in the last three months and the show the coffin is a client have an element managing the large and complex fleets of mission critical vehicles and doing so at a lower told across operations that our competitors fourteen how self management we have every confidence in our commercial tubes building to sustain and build on this momentum and doing south continue to deliver for clients or business and our investors trump coming year and beyond i'm of our confidence and ongoing commercial success comes from the convergence of elements for battle of what had and beneficial trends in our industry and the broader economy on the other hand oh yeah production continues to improve their by reducing vehicle delivery delays as evidenced by or six point six billion dollars of a rich nations twenty twenty two and unexpected seven point five to eight billion dollars of a rich nations and twenty twenty three our competitors are distracted by new ownership structures and operational integration projects affording us opportunities to both steel structure and enjoy first mover advantage at converting self managed weights into element clients while our business benefits from inflation do not have lost revenue streams that's more importantly inflation makes our fleet cost saving value proposition all the more compelling a recession or environment increases the spy you start current and prospective clients especially self managed waste thereby providing us further opportunities to expand our business notwithstanding these externalities the core of my conviction and elements ability to sustain our success in twenty twenty three and beyond comes from the fundamentals or organization is the in the best shape it has ever been the actually operationally culturally and we've never been better equipped to position commercially we have the scale advantages of are unmatched server supplier networks and our best class operating platform which magnifies that revenue brought into superior operating income and cashflow girl we have competitive differentiate years most notably our strategic consulting services teams and up by elements or window when he be offering both what you heard about at or investor day last november i says you saw masson heard from at our best day we have the best executive a senior leaders in our industry all of them are blind on or three strategic growth fires sixty percent annual organic revenue growth achieved a topless animal operating platform thereby a and showing off the building and expanding operating margins a couple lighter business model driven by a focus on service revenue growth and strategically syndicated freeze assets both which and have return on equity ems growing you these free cash flow for share which are returning that were turning to shareholders first are increasing the common dividends seconds from the retiring costly at legacy preferred shares and third survey repurchasing of common shares pursuant to are rolling and see i be program let me turn it over to fight now to further discuss or que for and four year twenty two results as well as or of luck for twenty twenty three thanks chase and good morning everyone wait a very strong for a quarter capping off the record your for our as i walk you through our to for twenty twenty two result of an aside growth and a constant currency basis of to for twenty months to us dollar strengthen materially comes to canadian dollar and twenty twenty two which significantly benefit for twenty twenty two results in particular relative to queue for twenty twenty one casting currency eliminate those benefits making for cleaner copper doughty between purists net revenue brew twelve point two percent were thirty one point eight million dollars you're over here the biggest driver which was services revenue growth and thirteen point nine percent or eighteen point two million dollars from que for twenty twenty one the drivers a fourth quarter services revenue growth year over year are broken out and our supplementary information documents and and dna results commentary a scalpel operating platform magnified our net revenue growth in the fourth quarter and fourteen point nine percent growth in adjusted operating income operating margins expanded one hundred and twenty bleep basis points from she for of last year
spk_4: to fifty one point four percent for the fourth quarter this shit
spk_2: do for a ally translated into twenty seven cents of adjusted he asked which is five cents growth year over year free cash flow per share of thirty cents each you for twenty twenty two was a penny lasting thank you for last year as george seen in africa's full disclosure in the supplementary we couldn't hurt and above normal amount of cash cost in the fourth quarter twenty twenty two related upfront cost associated with a large number of commercial when we achieve as well as the timing of certain tax payments peace flows are typically more spread out across all four quarter do for twenty twenty two vs que three twenty twenty two or quarter over quarter there was also strengthening of the us dollar against the canadian doc some gonna say quarter over quarter growth for you in constant currency as well i'm also going to exclude the seventeen million dollars non recurring revenue that we urge into three of this year such that my comments really solely to work and a growth of the following metrics quarter over quarter again also on a constant currency basis net revenue per quarter over quarter sequentially eight million dollars for two point eight percent driven primarily by net financing revenue growth of four point three million dollars or three point five percent and syndication revenue growth of three point six million dollars or twenty five point nine percent adjusted operating income declined by four point seven million or three percent quarter over quarter with adjusted operating expense growth outpacing net revenue growth as expected and previously communicate as we said a last quarter's disclosures we embrace we reinvested into our commercial capabilities beginning in the fourth quarter to support or elevated six percent that eight percent long term organic annual net revenue growth target range and take advantage of both the momentum we are enjoying as well as the market opportunities that are being presented as the competitive landscape the boss we are continuing to invest in commercial capabilities throughout twenty twenty three which will moderate the operating margin expansion or scale of a platform is otherwise able to deliver given healthy net revenue growth which we fully expect and our guys thirty now to discuss four year twenty twenty two results controlling for fx tailwind and backing out the twenty five million of non recurring revenue earning twenty twenty two net revenue grew eleven point three percent from twenty twenty one driven by services revenue growth and seventeen point seven percent and a far growth of the point
spk_4: two percent
spk_2: twenty twenty two sept service revenue growth was powered by all three forms some share politics penetration with existing clients who are increasingly turning to elements services for help managing their growing fleet operating costs increase utilization of our services including are managed maintenance service which benefited from more costly repairs given the elevated average age of clients fleets to to new vehicle production delays and third inflationary increases in the cost of fuel parts and labor which benefit element as a function of our cost plus distance our scale of operating platform magnified eleven point three percent net revenue broke into fourteen point seven percent a oh i growth or one hundred and seventy basis points of operating margin expansion to fifty four point two percent for the strong growth in a wide combined with share repurchases under and see i be a producer just a dps grow up twenty cents in twenty twenty two two a dollar five percent and free cash flow per share growth and twenty four cents and twenty twenty two two dollar thirty one per share excluding nonrecurring nights
spk_4: twenty twenty two services revenue growth along with the continue strategic syndication of her assets contribute to the advancement of our capital later business model
spk_2: we syndicated two point eight billion of assets and twenty twenty two and generated fifty seven point three million of syndication revenue and nine point four million decrease your over here
spk_4: the lower syndication revenue your that assets indicated this year is attributable to the volatile interest rate environment
spk_2: still relatively constrain origination volumes and the absence of any syndication of armada assets and twenty twenty two which historically commanded hires yours syndication remains a key enabler of our capital later business model which enhances our return on equity as j noted pre tax return on common equity improves your record eighteen point six percent a your and twenty twenty two which is three hundred and twenty basis point improvement over twenty twenty one hurting finally to our our for twenty twenty three as noted throughout our disclosures this quarter we have confidence in for your twenty twenty three results guidance ranges and growing conviction in the business his ability to meet the high end of certain of these range
spk_4: we will update our guidance ranges when we report to want results
spk_2: as stated last year last quarter we are guiding to one dot one for to one not one seven billion dollars of that revenue and twenty twenty three fifty four to fifty five percent operating margins six hundred and fifteen a six hundred and forty five million dollars adjusted operating income a dollar twelve
spk_4: our seventeen of adjusted dps and a dollar forty five to a dollar fifty a free cash flow percent
spk_2: this will be underpinned by seven point five to eight billion dollars of origination volume and between three and four billion dollars of syndication by this guidance is based on a canadian to us dollar exchange rate of one dot you nine which was the exchange rate at the time we issued guidance in november
spk_4: which we had knowledge is three the have to four percent below where the canadian dollars trading today opposite us dollars as always we do not take a view our teacher afraid fx race and therefore focus our performance and a constant currency basis
spk_2: she canadians us dollar exchange rate stay at current levels that will provide upside to a report of results relative to guidance on the topic of syndication volume and twenty twenty three we have reduced are expected volume level since we last published this outlook in november
spk_4: the range reduction from fort afford a half billion dollars of syndication volume for twenty twenty three now to three to four billion dollars for syndication volume this year reflects our strategic decision to hold on box in the short term some of the least as we would otherwise have plans a syndicate over the course of this year due to nepal our top rate environment and the desire for optimise syndication yields when we do bring assets marked these levels are consistent with our growth in originations and would also continue to represent representation by
spk_2: we think this is the best course of action for the time being given a powerful interest rate environment and expansion of corporate spreads in excess of historical norms recall that we price and originate our least as as a matter of policy on economic terms of we would be willing to hold on but for the entirety of their duration
spk_4: this is purely or pricing decisions as the man for assets in syndication market remains robots we believe this demand is likely to increase over the course of the year given our expectation of a decrease in alternative capitals employment opportunities for many of our syndication investors and the attractiveness of our lease assets
spk_2: we continue to expect growth and vehicles under management for twenty twenty three based on the growing number of commercial which we are scary that said we're likely to see a modest decline and fall but into for we have ended our provision of white label services to competitor and we'll see those vehicles with a relatively modest revenue per bomb low lost in the second quarter while commercial additions will be strong in the quarter
spk_4: they may not be large enough to offset those lower value units to part
spk_2: the economic impact to our business will be immaterial and was factored into the results guidance we provided in november lastly as you update your model for twenty twenty three you're a few items that should help
spk_4: we expect are adjusted effective tax rate to be somewhere between twenty four and twenty six percent again in twenty twenty three many external factors impact this on the marched including currency and the dispersion of earnings by geography amongst other barons we will let you know as we progress through the your party pr yards
spk_2: expectations change
spk_4: that being said as you know each yards and accounting construct in our actual cast tax obligations remained materially love we expect us taxes to be approximately fifty five million dollars and twenty twenty three and finally we expect sustaining capital investments to remain approximately fifty five million dollars and twenty twenty three
spk_2: would that let me turn back over check before we have a lot for questions said like to give credit for the company's outstanding performance too much twenty five hundred college across five countries who comprise what we refer to it truly is simply our people i've said it before you will hear in time and time again about elements are people are greatest source differentiation and the wellspring of our clients centric culture i want to take this opportunity to thank each and every one of them for the dedication their jovi their collaboration not just in two thousand and twenty two or three of my tenure here at element is organization would not be where it is today without them and element is what it is today because of them undisputed sweet management market leader in every geography we serve as a prepare to passes to kill the time to lauren two months time i could not be more excited for the company's future and have the ultimate confidence that element will continue it's momentum and success and twenty twenty three and beyond
spk_5: with that was turned over to your questions operator
spk_0: thank you we will now begin the analyst question and answer session in order to afford all analysts the opportunity to ask questions element kindly request that analyst limit themselves to two questions and live dialogue with management shouldn't analyst have additional questions please rejoin the queue to join the or rejoin the question you you may press star than one on your telephone keypad your hear a tone acknowledging your request if you're using a speaker phone please pick up your handset before pressing any cheese to withdraw your question please press star been to
spk_6: our first question comes from graham riding of td securities please go ahead tiger morning
spk_7: maybe to start with the update on those mega flea wins you to date
spk_2: any color that you can provide a what you think those will contribute in terms of revenue growth in twenty twenty three the monogram yeah works cited the your closing radicals from an extra and them quickly falling with their model off so jealous and and many others the commercials translated from prospect to why are some really some up well for a strong on board of these new clients from a services perspectives road twenty twenty three and then lady and the fleas the financing of those are such as the existing with begins to turn over ah and those new originations are done by our company and and funded by our company so he'll as we that explained in the past october sherwin gives an opportunity for an immediate on boarding of services as a generation of service revenue is typically were able to on board these fleets begin to producers revenue within quarter no more than to have successfully signing a contract with these large clients and then i say the finance revenue will begin to be can and will be old over the course of three or four years as the existing fleet to the hands of or competitors august serve
spk_7: matures and gets replaced by new vehicles on our books
spk_2: okay perfect so sound like with och so and tell us your winning these mandates from competitors and supposed to these being this isn't the conversion of a self and fleet and is it those two samples are perfect illustration the both concept so tall thomas was a steal from a competitor and oxbow so was a self managed fleet and in the opposite was a great example of the strategy that we successfully deployed in mexico over the years one of land and expand so they will enter into a company like so who is ten thousand plus vehicles and their fleet or but the company will will offer an opportunity for us to enter take up a smaller portion of that fleet and demonstrate or value as through the provision of bulls financing and services and as with damage straight the values that we can break through lowering their total cost of operations of the segment of the fleet we are inevitably award it was more and more of oh sweet mandate for those companies so yeah those are perfect examples of those stealing show from our competitors capitalizing on a full strength of our value proposition and some disarray that's taken place in the marketplace ah and and continue to version of the self managed lead says we have them understand that
spk_7: the authors fifteen to twenty percent annualized savings available in interesting their fleets to an organization like herself
spk_0: okay that's good only with area where you're in trouble for asking to have questions like
spk_8: our next question comes from paul holden of see i b c please go ahead thank you
spk_9: good morning so just wanna ask about the guidance on the lower it syndication volume and my question is
spk_2: he didn't change the net revenue guidance or earnings guidance despite expecting lower syndication so assuming there some kind of offset set a near how expecting higher servicing revenue or higher net financing revenue just wondering what the ah said is to lower syndication yeah so so good question of our business is very strong and we continue to see strong momentum coming out of twenty two and going in to twenty three which gives us great confidence the commercial success continue and new clients cross or portfolio of be seen and services or and we are on board in several make a to stay discussed the also continue see the economic backdrop as conducive to our business of to when we look at that we've also discussed as many times or billion or business has significant resiliency and offsetting countermeasures when we see these things and as we make proactive decisions to wait on syndicating some of the lease assets optimise are ya so we're benefiting in the other recipe streets as you pointed out both their financing revenue or and in the service revenue in general based on or outlook here and the made to be positively impacted by the same economic conditions in which were pulling back some of the syndication to optimize the deal us and i just want to reiterate the demand remains high and are access to the syndication market is deep so this is a proactive decision decided to hold back on certain syndication volume in toa more opportune time of we do believe the second half of twenty three will provide an opportunity for higher volumes of more attractive yields as rate expectations begin to settle and our investor partners with more aggressively for assets to invest it and just remember and in in their shoes of there's pressure on other asset classes such as mortgages corporate loans and consumer vehicle loan volumes which will benefit our assets isn't available source of investment as well as the added benefit of the tax benefits derived from our product as we can towards europe
spk_9: or for some of these institutions products and second questions related to operating expenses there is as he jump in a this quarter you just some of it's i guess when trying to get it in a specifically is
spk_2: where they're sort of some abnormal expenses as quarter or really what is a good runaway going forward and as you think about those investments for future growth you've highlighted is this a result of some of those mega sequins you talk about or to facilitate further windsor props the answers both so are or model is is very focused on the scale ability aspect right so we always and ten to grow our revenues in excess of archie and egg or blood she in a cap backs or overall effect and therefore expand margins when you look at our guidance we are against dissipating back to continue next year albeit not at a level of you know a hundred and seventy basis points that we realized in twenty twenty two and the reason is exactly as stated we are continuing to invest in our commercial row because we see significant opportunities in the commercial market based on the competitive landscape and the economic backdrop that should try clients to look for ways to lower their overall total cost of ownership of as we move forward year are going there and so what that means is a in particular investment into the commercial organization getting in front of cars hi i'm surprised me more quiet interactions is a big component of this to get to that higher growth rates of six to eight percent that we raised last quarter from the long term few of four to six percent so what we factor all that together
spk_4: when i would take away as growth of growth and je ne or affects consistent with a harder push into the commercial arenas up to drive that higher growth rates that we put forward there but secondly and very importantly a to focus on the scale ability of the business so that we can continue to expand margins
spk_9: as that rubbed begins to generate
spk_0: okay thank you
spk_10: our next question comes from jamie glint of national bank financial please go ahead
spk_2: yeah like say good morning the first question is on the ad again on sale results in this corner at picking up corner of a quarter said as long ago that more color as to whether that sad volume driven if prices your home in in the mexico markets seventy below that more collarbone all that stuff progress in in your thoughts on that collects quarters does born jeremy and yeah we've been very pleased with the pricing dynamics in the agency marketplace specifically and to a lesser extent in mexico in terms of use the of the pricing holding up well through the cycle and early indications as we enter twenty twenty three years but that will largely continue we do expect some moderation in potential for a smallish declines in a and ups wrote twenty twenty three and that has been factored into or of luck that is frank is dedicated and pass on feel a degradation that we might see him price per unit should also be accompanied with great originations which will turn create greater remarkably opportunities more volume and an opportunity for us to the continue to sustain this level again on sale much through twenty twenty three so yeah see the continued dynamics both the oil production in economic outlook on are combining to keep use be a full pricing robust in both pansy and mexico and allowing us to enjoy this extraordinary games on sale that got it and then there's second question as sam you're looking at that service revenues specifically ah and they're against vehicles under management for service only suicide or something about a service revenue per vehicle under management that metric is is that gonna like fourteen sixteen percent in the last couple of quarters are you will that a break that down in terms of like how much as inflationary impacts are watches that he is penetration impacts and that and are these like growth rates on a revenue per vehicle level that that are sustainable relax three quarters and so there's are a number of different dimensions to that some maybe be if i can help break it down so firstly in the supplementary would give you a good build a nice walked in terms of the drivers behind service revenue growth them give you an idea from the us canada perspective and in terms of the success of we have enjoyed and penetrating six just a client base with additional services the utilization of those services are by drivers and classed as well as pricing actions and inflation and was that has added to the u s comedian profile and then we provide you kind of an aggregate service revenue increase spore mexico in nz so i think that provide you with some interesting data points settle have few kind of reverse engineered you will have some of that servers revenue for vehicle increase on secondly the oh is this we talked about joe the power of introducing metrics like fun is it is to purchase the organization to
spk_11: embrace the data have begun to intervene that data to better understand
spk_2: see the appeal origins of the the the data and how we might be able to better manage or the performance of the businesses as we deepen our understanding of some the key for drivers of the business as those with the of vehicles under management one of the key learning centers come out of it for organization is it's not all clients are created equal and as we thought of there are like profile as we look at earth contributions operating margins we have found organizations that have been longstanding fine said frank with just haven't paid before place and as we start to identify those were those play i'm of that has given us an opportunity to increase the revenue for a client through price increases are some situations as resulted in those clients leaving the organization given that the economics were satisfactory for us and and and have the evolution of that both bomb as a as a number and patrick itself but also revenue gone and the increases that you're saying so expect us to again i can to work with this concept to drive it is under undersea damn again utilization as a means of furthering and deeply the knowledge of the business or employees have and with that yeah when expectations of they will take actions
spk_12: on in the best interests of not only our clients whether busters as well
spk_0: great thanks once again if you have a question please press star than one
spk_13: our next question comes from tom mckinnon as the ammo capital please go ahead yeah thanks very much just to follow the question with respect to servicing revenue it was flat quarter over quarter and that's even with the benefit of currency helping us and corner recorder you just remind us a bit on the seasonality i would have thought the fourth quarter would have had their some additional services perhaps snow tires or something like that that would have that
spk_2: out with servicing rubber revenue on a quarter over quarter basis or was there anything unusual in the third quarter that may have a upset to and it's you just remind us a little bit of vinnie seasonality with respect to servicing revenue thanks you could born it time was like that exact same question back in the in the january twenty nine traders the as i surveyed the landscape been in and thought twenty at the fourth quarter should have been a young of a fairly significant quarter for the company in terms of expenditures like that and and living in canada yup the snow tires were were front of mind as well as it turns out the fourth quarters actually obviously a flattered down quarter services revenue for us pasta currency basis on and we really do mess that proud of two weeks of the holiday season spend ah in december and is reflected in kind of that black order yup as we look at year over year of obviously brock forty percent on across a currency basis twenty one percent before i adjusted for act fx south were seen the benefits of our penetration utilization and pricing strategies a cold in terms of this as well as the increase in the vehicles under management and the service attachments says we gain as consequence of that so year over year at kiss a better way to look at the day services revenue for the fourth quarter and certainly as we think about entering twenty twenty three and one fourth quarter service revenue is telling us the a big thumbs up by a very encouraged by the commercial actions that we've been able to take to deepen the sheriff wallet
spk_13: we're excited by the increases and vehicles under management that stuff that we're seeing the and have to a new kids a few examples of those today and so very bullish in terms of service rep new profile for twice twenty three okay thanks and then there's follow up to with respect to the yeah and decision on syndication at least temporarily the own how do you balance that with sir are an eye on leverage i think when we initially yeah embarked on this said syndication strategy was to help decrease the leverage and to ah that tangible leverage metric to remind us where it is we wanted to be and dad is there any yeah danger that if you keep lab putting off this says syndication the and keep it on both that you might have ah
spk_2: get into a an area where that becomes a little bit higher and we should maybe think about it more
spk_4: yeah thanks for the question i what i'd say a couple things one is the internal your last part of question is are concerned that the leopard's will creep up the answer is now we can we can manage that as i pointed out jail
spk_2: syndication you know a huge benefit and of to syndication piece is just the velocity to cash in able to put an entity just like managed elaborate so that's a great observation as well as you know i impact and the capital later component of it however the market demand is deep so this is a choice on us to hold the assets on if we ever wanted to sell the assets are we believe they're starting job bible and open market do that we accept the man will continue to improve over the course of the year our leverage target six start to five to six dodge seven five on and as we have plans indication on a scale back for spat what we've done is said we're going to make sure syndication keeps up with a piece of originations and in doing so that will naturally manage and hold our leverage levels relatively in line with our guidance on an hour are two
spk_14: our goal posts i and regards to not that syndication not so we've got a lot of levers but even up with this reduce volume of we get sell up with and with i on the tangible leverage component of it to i'm sure that we just stay within those boundaries that we've set forth for the investors
spk_13: enraged okay thanks yeah okay thanks and oh sorry to sound the rating agencies do they look at this metric or to they are they more it's that's a total kappa
spk_2: yeah how do the have they interpret this tangible leveraged a metric that's new get they look at a host of different metrics depending on which i'm rating agency it as but i would tell you are are tangible leverage in those that do look at and below average were well inside even at our target range well inside any ratings actions by by a significant amount so yeah we'd like to stay in that it's in that i'm the i'm very comfortable sound are safe zone of of radiance leverage because we know that key business and value driver for a proposition are but we have we do have i'm material room
spk_15: relatives were the rating agencies whenever i even consider have any any issues with the yeah a leopard public
spk_0: okay thanks

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.