Element Fleet Management Corp.

Good morning, and welcome to Element Fleet Management's fourth quarter and full year 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 is being recorded. Following the prepared remarks, there will be an opportunity for analysts to ask questions. To join the question queue, press star and then one on your telephone keypad. In the event you need assistance during the call, you may signal an operator by pressing star and then zero. Element wishes to caution listeners that today's information contains forward-looking statements. The assumptions on which they're 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 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 features. 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 add to IFRS, pardon me, measures can be found in the company's most recent MD&A. I am now pleased to turn the floor over to Laura Dottore Atanasio, Chief Executive Officer. Welcome, and please go ahead.

Good morning, and thank you for joining us. The fourth quarter marked a year of record performance for Element, highlighting the disciplined execution that we applied in support of our long-term strategy. In 2025, we advanced our key focus areas, continued to invest in our capabilities, and delivered strong financial results. Our efforts translated into record net revenue and double-digit growth in both adjusted earnings and free cash flow per share. Adjusted return on equity was 17.9%, reflecting the strength of our Capital Light model. In recognition of our cash generation and confidence in our outlook, we increased our annual common dividend by 15% to $0.60 a share. Importantly, we achieved these results while successfully navigating a complex operating environment earlier in the year. This performance underscores the resilience of our business model, the dedication of our team, and the growing relevance of our solutions-led, tech-enabled platform. Throughout the year, we saw strong client engagement and building commercial momentum. In 2025, we welcomed 156 new clients. We continued to convert self-managed fleets and expanded relationships with existing clients through more than 1,000 share of wallet expansions. Our strategic advisory services team identified over $1.6 billion in cost savings opportunities across our clients' fleets, and approximately half of those opportunities have already been actioned, a testament to the tangible value that we provide. At the same time, we've been strengthening the foundation of our business. The investments we've made over the past two years are translating into measurable outcomes. Our Dublin leasing initiative continues to perform as expected, and we are firmly on track to achieve our previously communicated run rate targets of 30 to 45 million in revenue and 22 to 37 million in adjusted operating income by 2028 with a targeted two and a half year payback. Electrification is another area where we made meaningful progress in 2025. We increased electric vehicles under management by 36% year over year to approximately 129,000 vehicles. Our charging platform is now live in the US and Canada, and we plan to expand globally in 2026 through new partnerships across our markets. Alongside improvements in our core business, we continue to broaden our offering beyond traditional fleet management and accelerate our entry into mobility. Since launching Element Mobility, we have developed a clear go-to-market approach centered on connected mobility, including telematics, route optimization, and adjacent solutions. The integration of Autofleet has been central to our progress. By bringing development in-house, we are lowering structural costs and increasing our agility, accelerating product cycles, shortening time to market, and responding faster to clients. We expect this to be a sustained competitive advantage. We launched our Element One app for drivers in March, and feedback has been very positive as our adoption continues to grow quickly, and we expect a broader rollout throughout 2026. Our digital ordering platform remains on track, with the initial MVP targeted for release in the first half of 2026. In December, we completed the acquisition of CarIQ, adding embedded vehicle-initiated payment capabilities that enhance fleet operations and data connectivity. Together with Autofleet and our partnerships with industry leaders such as Samsara and Modus that we announced earlier in 2025, CarIQ meaningfully advances our digital strategy and our mobility platform. Collectively, these actions improve how we operate, enhance the client experience, and support scalable growth. Looking ahead, the steps we've taken in 2025 position us well to capitalize on future opportunities. We closed the year having made strong progress on our digitization agenda, deepened client relationships, and broadened our capabilities. The investments we've undertaken have resulted in a stronger operating model and position element for sustainable growth in the years ahead. And with that, I'll turn it over to Heath to cover the financials and take us through our 2026 guidance.

Thank you, Laura, and good morning, everyone. Our results this quarter and throughout 2025 reflect the continued disciplined execution of our strategy. We delivered strong performance across key metrics including record levels of net revenue, adjusted operating income and margins, and adjusted EPS and free cash flow per share. These measures all finish the year within or above our 2025 guidance ranges. I'll begin with a review of our full year performance on an adjusted basis and then discuss some of the non-recurring items that impacted our results in Q4. In 2025, net revenue was $1.2 billion. an increase of 9% year over year, reflecting strength across all of our revenue streams. Services revenue totalled $623 million, up 5% from last year, primarily driven by increased penetration and utilisation across our client base. While VUM increased 3% during the year, the revenue impact builds over time as onboarding and implementation progress. We expect this will support continued service revenue growth in the coming quarters. Net financing revenue was $498 million, up 11% year-over-year, driven by ongoing efficiencies from our leasing and funding initiatives, higher gain on sale in Mexico and growth in net earning assets. This resulted in the core NFR yield of 4.73%, an expansion of 35 basis points versus 2024. Indication revenue for the year was $64 million, up 50% from last year despite a reduction of $1.1 billion in assets syndicated. This was largely driven by favourable mix, the reinstatement of bonus depreciation and continued demand for our syndication product. Full year originations were $6.5 billion, down 4% year over year and below guidance as previously communicated. This primarily reflects seasonal softness in client ordering during the summer months combined with later year model availability that pushed deliveries into future periods. Importantly, underlying demand remained strong. Order volumes reached record levels of $2 billion in the fourth quarter and $6.2 billion for the year, providing good visibility into originations for the first half of 2026. As mentioned, our reported fourth quarter results were impacted by several non-recurring items, the majority of which were non-cash in nature. Most significant items included a $130 million deferred tax asset adjustment related to updated jurisdictional profit expectations, a $52 million write-off of our legacy ordering platform resulting from the continued transition to the auto fleet technology platform, and $9 million of restructuring and acquisition-related costs related to the CarIQ transaction which closed on December 31. We do not believe these items are indicative of our underlying operating performance and therefore have been excluded from our adjusted results. On an adjusted basis, operating expenses totaled $520 million, up 7% year-over-year, reflecting continued investment in digitisation, scalability and product expansion. A combination of solid revenue growth and disciplined expense management generated positive operating leverage of 2.1% and resulted in adjusted operating margin of 56.2% and expansion of 90 basis points year over year. Our performance translated into strong bottom line results with adjusted earnings per share of $1.24, an increase of 13% year over year and adjusted return on equity of 17.9%, up 190 basis points, from 16% in 2024. Briefly, on the fourth quarter, our adjusted EPS of 33 cents was up a strong 24% year-over-year, underpinned by record quarterly revenue of $313 million. Topline growth of 16% reflected contributions from all revenue components, including service revenue, which rose 4% quarter-over-quarter to reach a record level of $163 million. Operating leverage in Q4 was a robust 7.3% and we generated adjusted return on equity of 18.5%. Turning to capital allocation, we repurchased 5.4 million common shares in 2025 at an average price of $32.10 per share. In total, we returned $269 million to shareholders through dividends and share repurchases. This represented 43% of our adjusted free cash flow and was supported by strong cash generation, with adjusted free cash flow per share increasing 15% year-over-year to $1.57. Capital expenditures remained well contained, totalling $71 million in 2025. In addition, we continued to manage leverage within our target range, ending the year with a debt-to-capital ratio of 76.9%. As Laura mentioned, we have enacted a 15% increase in our common dividend to $0.60 per share annually and have remained active on share repurchases thus far in 2026. I will now turn to the year ahead and our 2026 financial guidance. We expect 2026 will be another year of solid financial performance with Element, highlighted by revenue growth in the range of 8% to 10% and a combination of positive operating leverage, and share repurchases driving strong growth rates in adjusted EPS and free cash flow per share. Specifically, we expect to deliver net revenue of $1.28 billion to $1.305 billion, adjusted operating income in the range of $720 to $745 million, adjusted operating margin in the range of 56.3% to 57.3%, adjusted EPS between $1.40 and $1.45, adjusted free cash flow per share of $1.67 to $1.72, and originations between $6.5 and $6.9 billion. These ranges provided prior to any material foreign exchange fluctuations or adverse impacts relating to changes in global trade agreements or brought up political uncertainty. In conclusion, 2025 is another year of solid performance across the Element business. We entered 2026 with strong momentum and a resilient financial position, giving us confidence in our ability to continue executing our strategic priorities and delivering value for our clients and shareholders. Thank you. Operator, we are now ready to take questions.