Element Fleet Management Corp.

Good morning and welcome to Element Fleet Management's First Quarter 2025 Financial and Operating Results Conference call. At this time, all participants are in a listen-only mode and you are reminded that this call has been 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 you need assistance during the call, you may signal an operator by pressing star then 0. Element wishes to caution listeners that today's information contains forward-looking statements, the assumptions on which they are based, and the material risk and uncertainties that could cause them to differ are outlined in the company's year-end and most recent MD&A NAIF. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today's call references certain non-GAAP and supplemental financial measures. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP financial measures to IFRS measures can be found in the company's most recent MD&A. I would now like to turn the conference call over to Ms. Laura Sartori-Attenazio, Chief Executive Officer. The floor is yours, ma'am.

Good morning and thank you for joining us. Element is off to a strong start in 2025, building on the momentum of a record year in 2024. Our strong financial and operational resilience, combined with ongoing commercial momentum, resulted in solid net revenue growth year over year, even with meaningful movements in foreign exchange rates. And as we communicated last quarter, our adjusted operating expense growth moderated. We expect this trend to continue throughout 2025. Our business fundamentals remain strong. We believe that key elements of our business, such as the impact of capital cost inflation and our growing portfolio of services, help counterbalance potential economic pressures. The evolving global trade dynamic presents opportunities to deepen relationships with existing clients and establish new ones. Clients increasingly rely on Element's expertise and industry leadership to navigate complex challenges. In times of change, our purpose and value proposition become even more essential. We're committed to helping clients lower their total fleet operating costs while delivering an exceptional client experience. For example, our strategic advisory team identified over $1.5 billion in data-driven savings opportunities for clients last year and an additional $380 million this quarter. We remain confident in our ability to adapt, sustain momentum, and create lasting value for our clients and our shareholders. Several factors underpin this confidence. Our ongoing commercial momentum continues to grow, with 34 new clients added this quarter. These included converting self-managed fleets and gaining share from our competitors. Additionally, we saw another solid quarter of -of-wallet growth, adding 246 service enrollments. Our client order volumes have been strong over the past two quarters, which we expect will drive increased originations. Our Dublin-based leasing initiative remains on track to meet revenue and operating income targets. Early feedback on our recently launched insurance initiative has been promising, with clients actively engaging with our commercial team. Our digital strategy is progressing as planned, highlighted by advancements such as our digital driver app, enhanced client reporting portal, and continued investment in our ordering platform. Lastly, we are committed to investing in our digital capabilities to enhance existing service delivery, further elevate the client experience, and deepening digital engagement with clients. Before I turn it over to Heath, I want to acknowledge the continued efforts of our global team. Thank you all for your dedication and your commitment, as well as your consistent focus on delivering for our clients and our shareholders. Heath, over to you.

Thank you, Laura, and good morning, everyone. We started the year with solid financial performance, driven by our resilient business model and strong balance sheet. Year over year, net revenue growth and positive operating leverage resulted in adjusted operating income of $151 million, free cash flow per share of $0.36, and earnings per share of $0.28. Additionally, our return on equity continues to expand, reaching .7% this quarter. Before turning to the financials, let me address two key factors influencing our Q1 results. First, significant foreign currency movements impacted our comparisons on many metrics. Year over year, the Mexican peso depreciated by 20% against the US dollar, while the Australian dollar declined 5%. This reduced net revenue by $17 million, operating expenses by $4 million, adjusted operating income by $13 million, and diluted EPS by $0.02. And second, in Q1 2024, services revenue benefited from $7 million in certain non-recurring items disclosed last year. Now, let's turn our focus to the key growth drivers for Q1. The figures discussed will be on an adjusted basis and exclude the impact of the $7 million in non-recurring services revenue from Q1 last year. Net revenue increased 8% year over year to $276 million this quarter, driven by growth across all categories. This compares favorably with the 5% growth in adjusted operating expenses over the same period, resulting in positive operating leverage of 2.9%. Services revenue grew 9% year over year to $152 million, driven primarily by higher penetration and utilization from new and existing clients. Excluding foreign currency translation, which had a $6 million impact, services revenue grew by a robust 13% year over year. Net financing revenue grew 4% year over year to $112 million, led by strong growth in financing income driven by pricing and funding initiatives. This was partly offset by higher funding costs associated with the increased interest expense from debt associated with our preferred share redemption and auto fleet acquisition. Gain on sale declined year over year due to the unfavorable currency translation, but higher unit volumes continue to offset used vehicle price normalization. The aggregate impact of foreign exchange translation reduced net financing revenue by 11 million year over year. While origination volumes were down year over year, this was largely a function of foreign currency translation impacts. Excluding FX, originations were up modestly. Origination activity in our largest region, the US and Canada, saw an impressive 13% quarter over quarter increase, an encouraging sign of our strength and business resilience. This growth was largely tempered by declines in Mexico and Australia, where activity stepped back from Q4 due to seasonal factors. Client order volumes have been strong over the past two quarters, which positions us well for higher originations and continued growth in net financing revenue in the coming quarters. In addition, our core vehicles under management increased 4% year over year, at the high end of our expected -4% annual range. Net financing revenue continued to benefit from improvements and diversification of our funding sources and pricing initiatives. In March, we completed a private offering of $650 million in senior notes. This will replace notes due to maturing due. Importantly, the spread we were able to achieve in this transaction represented a 247 basis point improvement versus our maturing notes, indicative of our reduced cost of funding. We syndicated 574 million assets this quarter, a 21% increase from Q1 last year, but down from Q4 due to the 346 million bulk syndication of a Canadian lease portfolio to Blackstone in December. Syndication revenue increased by 3 million, or 41% year over year, largely attributable to higher net yields and higher syndication volume. The higher net yield in Q1 reflects a favourable syndication mix, offsetting the scheduled reduction in bonus depreciation in 2025. This quarter, we strategically delayed certain syndication activity to the second half of the year, anticipating US tax legislation changes that could reinstate bonus depreciation back to 100%. Turning to expenses, Q1 adjusted operating expenses totaled $125 million, with year over year growth moderating to 5% as anticipated. This trend is expected to continue throughout the year. Solid net revenue growth and moderated expense growth resulted in an adjusted operating margin of .7% in Q1, which represents expansion of 125 basis points year over year. We remain focused on discipline expense management in order to deliver on our 2025 adjusted operating margin target range of between 55.5 and 56.5%. Our debt to capital ratio ended March at 74.9%, at the midpoint of our 73 to 77% target range. We returned $77 million to shareholders through common dividends and share repurchases. We repurchased 2.2 million shares in Q1 for total consideration of $40 million, with an additional 600,000 shares repurchased in April. It is worth noting that our heightened NCIB activity in 2025 reflects an opportunistic approach that is not indicative of the future quarterly run rate. Looking ahead, our momentum is strong. We remain ready to adapt, innovate and drive forward at pace to further enhance the client experience while consistently delivering value to our investors and clients. Thank you. Operator, we are now ready for questions.

Thank you, sir. Analysts who wish to join the question queue, you may press star then 1 under telephone keypad. You will hear a tone to acknowledge your request. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. We ask that you please deliver yourself to two questions, however you can to reach you to join. At this time, we will just pause momentarily to assemble a roster. The first question we have will come from Vasu Deville of KBW. Please go ahead.

Hi. Thank you for taking my question and good to be on the call. Congrats on the strong quarter. Just Lauren, he has one high-level question on macro and tariffs. Obviously, the situation seems to evolve every day. Just wanted to get a feel for your latest thinking on the impacts to your business, if any. We have also seen some macro weakening in the U.S. as well. Just curious what you are hearing from your clients, if they are taking any actions related to that. Wanted to gauge your confidence in the outlook, just given all that uncertainty.

Thanks, Vasu. I have to say, managing fleets is certainly becoming much more complicated in this environment, which of course is great from our perspective, given our value proposition, which is to help clients decrease their total cost of operation for their fleets. While the recent auto tariff relief, I would say, is a positive, I would also say that vehicle and repair costs are still likely to increase, and supply chains are still likely to experience some form of disruption. Our priority continues to be that we are going to support our clients, we are going to help guide them through all of this global trade dynamic. I would say of interest to your question, just a reminder, every year and sometimes more often, part of what we do is we propose actionable ways to our clients to decrease their fleet expenses. I would say historically our clients made action, let's say 30, maybe up to 35% of those savings that we would identify. This past quarter, given the pressures that are here now and on the horizon from a cost inflation perspective, what we have seen is that 30 to 35% in the last quarter actually increased to 52%. So what we are seeing is our clients are ready to take, I am going to say, more aggressive or more proactive action to look to trim their costs just given market outlook. I would probably like to share maybe before talking about elements, I think it is important that when I think of the OEMs, because they are very important partners to us and we are in constant communication with them for our clients. So they have confirmed that they are committed to delivering commercial vehicles that our clients require, not withstanding some of what you are seeing in the news where some models are being cut. Those are not the models that are being used by our clients. So I would say the overwhelming majority of our commercial clients have models that will continue to be produced. Our order to delivery cycle times that we are seeing, while they are up, they are up marginally, which is good. We are not seeing any order cancellations outside of historic norms. And again, unlike what you are seeing in the consumer space where there was a large pull forward that dealers were seeing of orders in that, I am going to say March, April period as people were worried about the future, we saw very little of that in our client base. So we are feeling good. That is why we reconfirmed our guidance. As we shared last quarter, the biggest potential impact of our company we felt would have been FX volatility. And as you have seen this quarter, that actually did impact our results. And if it wasn't for that FX volatility, our net revenue would have actually grown 14%. So I think it is worth highlighting that and also worth highlighting that our order volumes, as Heath was talking about, they remain strong. And we expect them to drive strong origination and net earning asset growth this year. So we are feeling good.

Great. Thank you for that, Gala. That was super helpful. And then just a quick follow-up on services revenue. I sort of got the comment on the one-timers, the FX headwinds. I know some of that was already contemplated in the outlook, but I just wanted to see if there was any variation versus what you were expecting. And then on a reported basis, should we still expect that you guys will be able to hit the low double digit for services revenue this

year? Yeah, good morning. I will take that one. So service revenue growth for the quarter, excluding the impact of those one-off items in FX, was 13% on an underlying basis year on year. So really strong growth. And it is actually our second highest service revenue number we have ever delivered. Q4 of last year was a really strong number and probably not indicative of a true run rate. So there was some timing related numbers in Q4. So if we think about services going forward, we still expect that the service revenue growth will be our fastest growing revenue line item. And given the sort of the pent-up demand from the orders that we have, some of the initiatives we implemented, whether it be the auto fleet acquisition and insurance, those sorts of things, coupled with just the general growth of the business, we expect it to continue to grow through 2025.

Thank you very much.

And next we have Stephen Bowling of Raymond James.

Thanks. Just the first question is just on, you mentioned, I don't know if it's margin, but basically some of the pricing adjustments. Is that part of the global initiative you announced last fall that you're kind of reviewing all the pricing for all your service products? I'm just wondering how that review is progressing.

Yeah. Good morning, Stephen. So if you're referring to sort of margin and how we increase margin, obviously part of it is appropriate expense management, the digitization of our operational function, which is a key reason for the auto fleet acquisition. I guess in addition to that, there's the optimization or continued optimization and standardization of our business. Primarily that's being driven out of our leasing business. So you'll recall we've got a targeted revenue of 30 to 45 million coming out of that initiative and translating to 22 to 37 million of AOI. That initiative is going really well. Chris Gittins is leading that function and we're starting to see the benefits of that coming through. The second thing that I would call out that's helping us to drive further margin is the continued evolution of our funding model. So in Q1, we implemented a commercial paper program that enables us to opportunistically reduce our cost of funds when that program is up and running. And then the other item that I would say, and while that hasn't yet hit Q1, it just shows the work we've done from a funding side of things. We actually raised our bond at a rate of 103 basis points in Q1. That will replace a maturing bond in June that was raised at 350 basis points five years ago. So that sort of just shows the impact we've made from a funding side of things to bring down rates over time.

Okay, that's good. And maybe just to follow up there, you mentioned the commercial paper, timing of that, and also the off-balance sheet securitization facility, not the bulk one, that was kind of announced last year. I'm just wondering the timing on that as well.

Yes, so the commercial paper program is in, it's up and running. We actually utilized that facility in Q1. We did pay it off by the end of the quarter, so you won't see it in the sort of the balance sheet at the end of the quarter. So we did get some benefit from that in Q1. In terms of other off-balance sheet structures, we are working through another structure. It's probably too early to announce anything from that side of things. However, we are making good progress and are on track to deliver that in the back half of the year.

Okay, thanks very much. The next question we have will come from John Agen of Jeffreys.

Good morning, Heath. In terms of the FX, I guess I'm going to try to squeeze in two for our question. First, philosophically, any thoughts in terms of hedging? And secondarily, you spoke to the revenue impact, but can you give us a sense in terms of how the FX volatility impacted expenses in the quarter?

Yeah, absolutely. So from a revenue standpoint, it was $17 million reduction. And then from an expense side of things, it was $4 million. So your expenses did benefit from the FX side of things. Having said that, even adjusting for FX year on year, expenses are up 6%, of which $3 million was actually acquisition of auto float. In terms of your first question around hedging of the P&L, obviously the impact of FX doesn't impact our business model or our value proposition or anything like that. It really is just the translation of those revenues from a peso and an Aussie dollar and New Zealand dollar perspective. 65% of our revenues are in US dollars, so the bulk of our business has no impact. And it really is just those other currencies. The main one is the peso, which has been highly volatile over the last 12 months or so. In terms of hedging, it does create a level of volatility if you hedge your P&L. We do look to do infra-quarter hedging to lock in rates from a peso perspective, which we did in Q1 and Q2. And that just helps to reduce some of the volatility. But from an overarching principle, the rates are at relatively all-time high levels, and we expect that they'll normalise over time towards the main. Great. Thank you. I'll read you.

The next question we have will come from Tom McKinnon of BMO.

Yeah, thanks very much. Good morning. First question, just on this deferral of the syndication that you're talking about right now. I assume that the demand remains robust, but if we don't get any volume for syndication in the second quarter, we would add all that volume would be moved into the third and into the fourth quarter. Is that the way we should be looking at your decision to delay syndication here?

Yeah, morning, Tom. So the first thing that I would say is that the reason why we delay syndication volume is that there's a potential that the 100% bonus depreciation gets reinstated in the back half of the year. That will increase our syndication yield. So that's the reason why we've delayed it. In terms of appetite for our paper, it remains really robust. So we could have absolutely done more syndication volume if we wanted to in Q1. So it was purely a strategic reason to delay it to the second half of the year. Now, regardless of what happens from a tax legislation perspective, we can absolutely have the capacity to do more syndications in the back half of the year. So if you look at Q2, Q3 of 2024, we syndicated the best part of a billion dollars. So we have the capacity to ramp it back up in the second half of the year, regardless of what the outcome is of the bonus depreciation.

But are you suggesting there's going to be hardly any syndication volume in Q2 of 2025, just given the fact that you've decided to delay it?

No, so we'll continue to syndicate some volume in Q2. We don't want to do nothing and then have a huge amount that we need to do for Q3 and Q4. So we'll continue to do some syndication in Q2, just like we did in Q1. But we're strategically delaying some portion of our normal volume to the back half of the year.

Okay, that's great. And if you could just let us know a little bit more about the insurance solution that you've done in strategic partnership with HUB now. Is it largely just getting a sheriff commission here? Are you taking any insurance risk? Are you taking any claims risk here? Like just if you can flesh that out a little bit for us, please.

Yeah, good morning, Tom. It's Laura. I'll take that one. Give you some comfort. We are not taking any underwriting risk. It is more of a referral program in terms of our partnership with HUB. So we are off to, I would say, a good start. So you'll recall we announced in January that we had launched what we're calling our Element Risk Solutions. We went, I'm going to say live into the market on March 31st, so it's been one month. So still incredibly early days, but we're seeing some strong interest from our clients. For those, I should say how we've chosen to go at the market is looking at clients that have insurance renewals that are coming up within the 60-day window. So we've got a strong pipeline in this last month, and we've got about, I'm going to say, perhaps this isn't the right term, but a 20% conversion rate into active negotiation, meaning our clients have signed a consent form and we've moved to quote. So early days, and quite frankly, still too early to tell how well this one will go, but we are off to a good start, and we're very happy with our partnership with HUB.

That's great.

Thanks. Next we have Paul Holden of CIBC.

Thank you. Good morning. I want to ask a question on the strong customer orders to start the year. I think Laura probably already addressed the original question, which I wanted to ask, which is, is this simply a pull forward of demand as a result of the anticipation of higher vehicle prices due to tariffs? And it sounds like the answer is no, but throw it out there anyways. And if it's not, does that suggest then obviously there's other drivers behind the strong demand, that there is good probability that strong demand continues throughout the year?

Yeah, good morning Paul. It's Heath, I'll take that one. So you're writing Q4 2024, we had really strong order volume. So in the USA and Canada, that was up over 25% from year on year perspective. And that momentum has translated through the first half of this year. So our order backlog is up to $2 billion at the end of March. And then in terms of April, we still see strong order volumes. We did see some pull forward in numbers in April, but in the grand scheme of things, it is marginal and it's more of a pull forward from things that would have been ordered later in 2025 into the April month. So orders are very strong. In terms of how we expect to see that translate into originations, we did see some of that start to translate in Q1. So USA and Canada originations was up 13% quarter on quarter. That was partly offset by Mexico and ANZ, which is just seasonal. So it's the summer period in ANZ, there's always lower originations in JAN, and then it builds from there just as an example. So from all of our metrics, we expect those order volumes to translate into higher originations in Q2 and Q3, which will in turn drive our NFR and various service revenues.

Okay, thanks for that. And then second sort of somewhat related question, I specifically want to better understand any potential change in customer behavior in Mexico in particular. I mean, even if I adjust for FX originations year over year, or maybe sort of flatish. And obviously with the investor data last year, we're expecting relatively high growth rates in Mexico over time. So is there being kind of any positive activity because of, let's call it, elevated or heightened tariff risk for that geography in particular?

Yes, so specific to Mexico, you're right that adjusting for FX year on year, the originations were largely flat. At this point in time, we don't see any major concerns coming through from our clients, and growth and volume continues to be robust there. Having said that, it is probably the area that potentially could be impacted the most by tariffs and those sorts of things from a growth perspective. But at this point in time, the business continues to perform strongly.

Okay, that's it for me then. Thank you.

Next we have Graham Ridin of TV Securities.

Good morning. Laura, you mentioned that you're not seeing any orders being canceled. Can you just remind us that $2 billion that's sitting in your backlog, are those contractually guaranteed? How would orders be canceled actually flow through your business if that were to happen?

Yeah, so as I mentioned before, we haven't seen anything outside of normal course. And so when orders are placed, I would tell you they can be canceled up until the time they are accepted by the OEM. Once they're accepted by the OEM, our clients are contractually obligated to purchase the vehicles. And so when we talk about orders or what we've been referring to here today are orders that have been accepted by the OEM.

Okay, I understand that's helpful. My next question would just be on the bonus depreciation. If that does move back to 100%, can you give us or can you remind us what the expected impact would be on your syndication revenue, either in annualized dollar amounts or that syndication yield?

Yeah, absolutely. So from an annualized dollar amount perspective, the impact would be a positive $25 to $30 million. So if that comes in in the back half of the year, obviously you're not going to get the full amount of that. But it is a material upside to us, which is why we've taken the decision to delay syndications.

That's it for me. Thank you.

Hey, once again, analysts with any further questions may press star, then 1 on a touchtone phone. Again, add a star, then 1 to ask a question. The next question we have will come from Jamie Gline of National Bank Financial. Please go ahead.

Yeah, good morning. First question is just on the moderating OPEX growth guidance. I just want to make sure I understand that. Is that moderating on a quarter to quarter basis or just relative to the prior year's quarter? So, for instance, we should we see growth below 5% that was reported in Q1 in the next few quarters?

Yeah, good morning, Jamie. So from an OPEX perspective, the moderation we talked to is based on or versus the 2024 growth rate. So we will continue to invest in the business based on the growth that we're seeing. So you shouldn't expect that each quarter expenses will come down. But certainly from a year on year perspective, the growth rate will moderate versus 2024. Yeah, OK,

got

that.

And then my next question, just looking at the bump growth, I obviously understand clients coming in, clients coming out, just wanted to get a little bit more color as to perhaps what's going on with the 6000 vehicles that declined with existing clients. Is that just a case they can't get their vehicles in and replaced or are they what kind of decision process is going on there? I know it's small, but just curious.

Yeah, so from a bump perspective, nothing really material to call out from that perspective. It is a metric that we look at more on a longer term trend. And if you look at from a year on year perspective, core bump is up 4%, which is at the higher end of our target range of 2 to 4. You always have some quarterly volatility, which is normal in terms of the specific 6000 that you referred to. No real major call out there. Clients will sell a business or something like that. And therefore they might have a reduction in their fleet. So no real call out from there. And our focus really is continuing to have strong client retention and then converting our new business wins to grow throughout 2025.

OK, great. And then lastly, obviously the auto fleet acquisition is still pretty new. But what can you tell us about some of the new client wins or new service products rolling out from auto fleets and how that's contributing in this quarter?

Well, Jamie, it's Laura. I'll take that. I might be able to talk us even past the nine o'clock time slot. So everything I would tell you is not only progressing as expected, but better than expected. So we acquired auto fleet October the 1st of 2024. And I have to say that we thought we were doing and we are we picked up a world class team. They've got the scalable digital platform built on a modern stack. And so what we're starting to see is how bringing auto fleet into element. We are starting to see those new revenue streams and more importantly, the efficiencies within our business. So auto fleet, more specifically, that's going really well. They've got a solid pipeline of sales. So we're expecting a very positive outcome from them by the end of 2025. So that's progressing really well. And on the element front, again, going really well, not only are we spending less than I would say we had previously planned on spending or would have had to have spent had we dealt with third parties. We've managed to be out. If you haven't seen it, we've got our driver app. That's out. It's called element motion. It's live on Apple and Google Play stores. I'll just point out that it is an MVP, minimal viable product. So it's some of the basics there now and there'll be more to come. But in it, it's if I could call it a one stop shop to carry out sort of all the tasks that are required for a driver or fleet manager to manage their fleet in a very digital way. So we're just getting started, but it has mileage reporting, a supplier locator, fleet management, inspection reports, and we can even do pool vehicle capability. So that's going really well. And before the year is out, we will have launched a new digital vehicle ordering capability. And then there's other things sort of inside the organization that they're helping us just move faster on the digitizing and automating. So it's going much better than than expected.

Thank you. And next we have Graham Ridin of TV Securities.

Hi, Laurel. I'll come back to you. You mentioned earlier on the call that you're seeing clients uptake of actionable items that reduce their cost of fleet management. Can you give us some examples of what would be sort of key ideas that you would propose that they're responding to?

Yeah, all kinds of things. So we look at again, how can we decrease downtime for them? So it includes everything from whether it's taking on road optimization, whether we get them to do more what we call in network spend from a maintenance perspective, might do less up fitting, different vehicles, changing the colors on the vehicles, you know, racks, tires, types of vehicles, those types of things are where some of the, I'm going to say more aggressive decisioning has been happening. I'd say historically, you know, when times are good, we tend to like we do with our own personal vehicles, we go for all the bells and whistles in the vehicle. And what we're seeing is things we tend to recommend is that some of these things are not required. And we're seeing that our clients are much more prepared to take action and to pull back on some of that spend to decrease their total cost of operation.

Okay, helpful. And one more, if I can just follow on the auto fleet, you mentioned their pipeline is building in 2025. Would that be more on a standalone basis? You know, auto fleet services going to the market? Or is there any sort of cross selling into EFN clients that's driving that pipeline?

So both. As you know, we said auto fleets, we acquire them, but they are still a separate platform. And so others can use them, including competitors, if they would like to use their services, as we don't see the data that they have, if that takes place. So their sales on their own are going very well. And we are getting a lot of interest and a strong pipeline from our existing client base in terms of interest for the services that they offer. So we're seeing it on both fronts.

Great. Thank you.

And next with Paul Holden, CIBC.

Thanks for a couple follow up sort of more boring modeling questions. But I want to ask about the sustaining capex this quarter, five million, the lowest we've seen in a while. Just want to see if that's a timing issue and no change to full year expectations.

Yeah, that's it's largely timing Paul. So just scheduling of various products or projects that we've got going on. So still committing to an 80 million dollar amount annually.

Thank you. And then also on that sort of that same free cash flow statement, I think the cash tax rate was a little bit higher this quarter. Again, there can be some timing issue there. So again, just trying to figure out whether that's just higher in Q1 and probably lower in future quarters or if anything's changed in terms of how we should model the cash tax rate.

Yes, so nothing's changed. Again, timing on that one. So Q1 had some state taxes that were paid and it was higher than the sort of normal amount. We expect that that will trend back down to average out closer to that OECD minimum amount of 15 percent.

Perfect. All right. Those are my boring questions. Thanks.

This brings us or this concludes the question and answer session. I would now like to turn the conference call over to Ms. Laura Dottori-Atenasio for closing remarks. Ma'am.

Thank you very much and thank you everyone for joining us today. We remain focused on generating consistent and sustainable long term growth for our shareholders. We also continue to invest in innovation while maintaining a disciplined approach to capital allocation. These efforts will keep us agile and forward thinking, enabling us to adapt our clients evolving needs and really strengthening elements, leadership and shaping the future of mobility. We look forward to reconnecting on our Q2 call in August. And until then, thank you once again and enjoy the rest of your day.

And thank you ma'am for your time and the rest of the management team. This does now bring us to the close of today's conference call. You may now disconnect your lines. Thank you all for participating and have a pleasant day.