Element Fleet Management Corp.

Good morning and welcome to Element Fleet Management's third quarter 2025 financial and operating results conference call. 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 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 statements. 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 and annual information form. 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 at the company's most recent MD&A. I would now like to turn the call over to Laura DeTore Atanasio, Chief Executive Officer. Please go ahead.

Good morning, everyone, and thank you for joining us. Q3 was another strong quarter for Element, with double-digit net revenue growth year over year and record financial performance across key metrics. This outcome underscores the ongoing success of our strategy, and the commitment of our team to deliver meaningful outcomes for our clients and shareholders. We deepened relationships with existing clients and won new mandates across all regions, adding 38 new clients in the third quarter and expanding share of wallet with 278 new service enrollments. As more clients turn to Elements Unlock efficiencies, our strategic advisory services team delivered by identifying $349 million in fleet cost savings opportunities this quarter, 46% of which were actioned, demonstrating the tangible value that strengthens client loyalty. We continue to accelerate our digital transformation and deliver a more connected client experience. Earlier this year, we launched a new Element mobile app simplifying fleet operations and enhancing the driver experience. Pilot feedback has been extremely positive and we're preparing for a broader rollout in the coming months. Our new digital ordering platform is also progressing well, marking an important step in automating the client processes. Since establishing Element Mobility, our division focused on next-gen fleet solutions, We've advanced partnerships that showcase our technology leadership. For example, we announced a new partnership with Indrive, one of the world's fastest growing ride hailing companies to help optimize their fleet operations globally. This collaboration demonstrates how elements digital capabilities and partnerships are shaping the future of intelligent mobility. Additionally, our technology platform, Autofleet, earned industry recognition as Fleet Management Solution of the Year in the 2025 Auto Tech Breakthrough Award, a well-deserved honor highlighting our team's innovation and impact. We passed the one-year milestone of our Dublin Leasing Centre that was launched in August of 2024, and the results have been strong. By streamlining processes and automation, We've achieved greater efficiency and scalability in our leasing operations, enhancing the client experience and contributing to strong net financing revenue in recent quarters. This is a clear example of how our strategic initiatives, like Dublin and Nautilus, are driving financial benefits and service improvements. In summary, we made exciting progress on the digital front, improving client experience and financial performance. all thanks to the dedication and collective effort of our Global Element team. Our third quarter achievements put us on solid footing to close out 2025 with continued strength. And with that, I'll now turn the call over to Heath to cover our financial results.

Thank you, Laura, and good morning, everyone. Q3 marked another quarter of strong performance for Element and highlights the solid progress we've made on our strategic priorities in 2025. Notably in the quarter, we delivered double-digit growth in net revenue, adjusted operating income, earnings per share, and free cash flow per share, and once again produced record results in each of these important metrics. With that, let's turn to our Q3 financials, which I will speak to on an adjusted basis. Net revenue reached $306 million, up 10% from last year, supported by strong contributions across all revenue categories. Services revenue is up 6% year-over-year, reaching $156 million. This growth is attributable to higher utilisation from new and existing clients and solid growth in all of our geographies. Net financing revenue grew 12% year-over-year to $130 million due to the combination of higher net earning assets in the US and Mexico and the solid performance of our leasing portfolio. Results were further bolstered by funding efficiencies in the quarter which absorbed the higher costs associated with our preferred share redemptions and auto fleet acquisition. Continuing the momentum that has been demonstrated in 2025, our core NFR yield, which excludes gain on sale, expanded to 4.85% in Q3, up a further eight basis points quarter over quarter and 41 basis points year over year, highlighting the strong execution of our leasing business and funding initiatives. We syndicated $632 million of assets this quarter, down 37% from last year. Despite the reduction in volume, syndication revenue totaled $20 million and increased 20% year-over-year. Our syndication yield of 3.2% expanded more than 150 basis points versus last year, a reflection of the demand for our syndication products, favourable mix, and the benefits from the reinstatement of 100% bonus depreciation in July. We originated $1.7 billion of assets in the quarter, in line with the results from Q3 2024. The sequential dip in originations reflects normal seasonality tied to OEM retooling ahead of a new model year production in the US and Canada. Importantly, originations in Mexico were at a record level of $342 million in the quarter, a clear reflection of the strength of our franchise in the country. Our momentum in vehicles under management resumed in Q3, with VUM increasing 1% quarter over quarter and 2% year over year, led by growth in the service-only category. This increase is expected to further support services revenue in the coming quarters. As Laura mentioned, new client acquisitions in the quarter were steady the last year, reflecting stable underlying demand that we expect will translate into higher order volumes ahead. Adjusted operating expenses remained well contained at $129 million, flat quarter over quarter, and up 9% year over year, or 6% excluding auto fleet. The year over year increase reflects continued investment into our business to advance our intelligent mobility ecosystem, enhance digital capabilities, and maintain our leadership position in the industry. This resulted in an adjusted operating margin of 58%, and earnings per share of $0.33, with these key metrics expanding by 30 basis points and 14% year-over-year, respectively. We remain focused on driving internal efficiencies and sustaining positive operating leverage as our business continues to scale. In Q3, we generated an adjusted return on equity of 18.8%, up from 16.9% in 2024, demonstrating the continued progress of our capital light strategy. With respect to capital management, we returned $61 million to shareholders through dividends and share repurchases during Q3. Year to date, we have repurchased 4.1 million common shares, representing $87 million of capital deployed. Looking ahead, we intend to renew our normal course issue of bid in 2026, reaffirming our commitment to returning capital to shareholders. These actions were underpinned by continued strong free cash flow generation. with adjusted free cash flow per share of 42 cents, up a robust 17% year over year. Our ability to consistently generate growing free cash flow continues to support our reinvestment into the business and the ability to deliver meaningful return of capital to shareholders. As of September 30, our debt-to-capital ratio stood at 75.7%, well within our target range of 73% to 77%. In summary, we delivered strong financial results this quarter consisting of robust revenue growth, positive operating leverage and record profitability. We are entering Q4 with positive momentum and a clear line of sight to finish 2025 at or above the high end of our guidance ranges in all metrics with the exception of originations as was communicated last quarter. We look forward to providing our 2026 financial guidance and dividend outlook alongside our Q4 results release in February. Thank you. Operator, we are now ready to take questions.