Element Fleet Management Corp.

Good morning, ladies and gentlemen, and welcome to Element Fleet Management's third quarter financial results for the 2024. At this time, all participants are in listen-only mode, and you are reminded that this call is being recorded. Following the prepared remarks, there will be an opportunity for analysts to ask questions. To join the question queue, press star, then 1 on your telephone keypad. In the event that you need assistance during the call, you may signal an operator by pressing star, then zero. Element wishes to caution listeners that today's information contains forward-looking information. The assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in the company's year-end and most recent MD&A, as well as its most recent AIF. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today's call references certain non-gap and supplemental financial measures. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP measures, financial measures to IFRS measures, can be found in the company's most recent MD&A. I would now like to turn the call over to Laura Dottorio-Atenasio, Chief Executive Officer of Element. Please go ahead.

Good morning, everyone, and thanks for joining us today. I want to start by thanking our Element team members for their hard work and dedication, which drove our strong financial and operational performance again this quarter. As we drive forward with our purpose to move the world through intelligent mobility for our clients, we are delivering solid results for our shareholders. Our strong results speak to the strength and resilience of our business, the commitment of our team members, and the trust our clients place in us. Our commercial success has allowed us to capitalize on our momentum. We added 38 new clients this quarter, 42% of which were self-managed conversions, and we added 330 share of wallet services while continuing to drive higher services penetration and utilization rates. Thanks to this momentum, we have delivered double-digit year-over-year growth in each of net revenue, adjusted EPS, and adjusted free cash flow per share while enhancing adjusted operating margins. We raised our annual common dividend to 52 cents Canadian, and with the completion of the redemption of our preferred shares, we intend to renew our normal course issuer bid in order to continue to be in a position to return capital to our shareholders in 2025. We also invested in our business. On October the 1st, we completed the acquisition of Autofleet. As we shared previously, this will enable us to serve our clients by accelerating our digitization and automation efforts in fleet management with optimized mobility solutions and will help us expand into new value-added services. We are doing this under the incredibly talented leadership of the Autosleep co-founders, Colby Eisenberg and Dor Shea, along with their world-class team. And of course, we are pleased to welcome Heath Valkenburgh as our incoming CFO, following Frank's decision to retire in March of 2025 after a very accomplished career. Frank, on behalf of Element, thank you for your leadership, your friendship, and your many contributions to Element. You have played an instrumental role within the company, and we will always be grateful. Keith's appointment is a testament to both the leadership of our outgoing CFO and the strength of our internal talent. Heath is here with us today, and he will share our initial 2025 guidance. He brings 20 years of finance experience and a wealth of industry expertise to the role, having most recently served as Senior Vice President and Corporate Treasurer, and prior to that, as CFO of our Australian New Zealand business. Under Heath's leadership, we anticipate continued financial success and a strong commitment to our purpose, our clients, and our shareholders. And with that, I will turn it over to Frank.

Thanks, Laura, and good morning, everyone. In Q3, business performance was strong as we continued to deliver for our shareholders by building on our strengths and capturing the growth opportunities available to us. This quarter, we delivered strong results with double-digit year-over-year growth in each of revenue, adjusted operating income, EPS, and free cash flow per share. Our revenue growth and focus on cost controls allowed us to expand operating margins. We anticipate Q3 operating margin to reflect a high point in the current year, and we remain on track to modestly improve full-year 2024 operating margin within our current guidance. As in prior quarters, all dollar amounts cited today will be on an adjusted basis, excluding final costs associated with our Ireland leasing function of $2 million and $7 million in acquisition-related costs in connection with the completion of the auto fleet acquisition, which includes severance accruals. Since the auto fleet purchase closed on October 1st, after the quarter end, their operating results will be reflected in our consolidated results starting in Q4. This morning, I'll review in more detail our results for the third quarter before turning it over to Heath to discuss 2025 guidance. For the quarter, our adjusted operating income reached $161 million, up 15% year over year. This translates to an adjusted EPS of 29 cents, which is a 12% increase from the same period last year. Additionally, our free cash flow per share grew 13% to 36%. These increases were driven by robust revenue generation and positive operating leverage of over 300 basis points, partially offset by the increase of our common shares outstanding as a result of the conversion of our convertible debentures at the end of Q2. Net revenue grew 12% year-over-year to $280 million. This increase was driven by robust year-over-year growth across all revenue categories. Thanks to our strong commercial momentum and capital lighter business models, Service revenue rose by 16 million or 12% compared to Q3 last year, reaching $147 million. This increase is mainly due to sustained higher penetration and utilization rates. Although VUM was relatively flat, due predominantly to the loss of two single service clients across geographies, the new clients we are acquiring have higher service attachment rates and greater profitability compared to the lower revenue single service clients. Growth in Mexico services also contributed to the year-over-year increase. Net financing revenue grew $11 million, or 11 percent year-over-year. This growth is largely attributable to higher net earning assets in the U.S. and Canada. We also saw higher year-over-year gain on sale, particularly in Australia and New Zealand, contributing to overall increase. The higher volume of vehicles for sale in ANZ more than offset a decrease in used vehicle pricing Mexico GAS was relatively flat year over year. These increases were somewhat mitigated by higher funding costs, including higher standby fees to support growth and originations, and the higher interest expense arising from the redemption of our preferred shares. Recall that replacing these preferred shares with debt, while economically beneficial, moves the cost of capital from below the pre-tax income line to the net financing revenue line, affecting revenue growth and creating modest compression to net finance revenue margins for the remainder of 2024 and into 2025. Shifting to syndications, we syndicated $1 billion of assets for the second consecutive quarter, highlighting the depth of this funding source. Syndication volumes were up 32% year over year, largely attributable to higher originations and our capital lighter model. In addition, Syndication yields rose 40 basis points quarter over quarter, mostly due to a favorable mix and beneficial rate volatility during the quarter. In terms of expenses, adjusted operating expenses for Q3 were $118 million, a 9% increase year over year. This increase mainly stems from higher salaries and wages associated with increased headcount to support business growth, along with higher professional fees. We will continue to invest in our business to maintain our leadership position in the industry, while committing to generating positive operating leverage and expanding our operating margins going forward. Continuing on growth, we originated $1.7 billion of assets this quarter, up 10% year over year. This increase was primarily driven by the U.S. and Canada, with higher 2024 vehicle prices playing a role. As expected, Q3 originations were down versus Q2 as OEMs reduced production to retool for the next model year in the U.S. and Canada. Before handing it over to Heath, I want to touch on a few other notable items about our capital structure, leverage ratio, and taxes. On the capital structure side, we redeemed our Series E preferred shares this September for $95 million, and as such, we no longer have any preferred shares outstanding. which optimizes our capital structure. Our strong performance and outlook led us to increase our annual common share dividend by 8 percent to 52 cents Canadian, which represents approximately 27 percent of our free cash flow per share over the last 12 months. Additionally, we renewed our NCIB and intend to be more active on our share repurchase program in 2025, as we no longer need to redeem preferred shares. Striking the right balance between dividends and share repurchases will continue to be a focus of ours now with our simplified capital structure. At September 30, our tangible leverage ratio was at seven times, consistent with our strong investment grade ratings as we redeemed our final series of preferred shares this quarter. Now let's briefly discuss our effective tax rate, which was elevated this quarter at just under 26% due to year-to-date adjustments. The increase in the quarter is due to a catch-up of the full-year rate from 24.5 to 25%. We expect our effective tax rate for Q4 and for full-year 2024 to be approximately 25%. Looking at the rest of 2024, we expect most of the financial metrics at or above the high end of such guidance before initial Ireland leasing and auto fleet acquisition-related costs. I will now hand it over to Heath to take us through 2025 guidance.