Element Fleet Management Corp.

Good morning, everyone, and welcome to Element Fleet Management's first quarter 2026 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, then the digit one on your telephone keypad. In the event you should need assistance during the call today, you may signal for 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 and 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-GAAP and supplemental financial measures. Management measures performance on 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 call over to Laura DeTore Atanasio, Chief Executive Officer. Welcome. The floor is yours.

Good morning, and thank you for joining us. I'm pleased to report Element delivered a strong start to 2026, building on the record performance we achieved in 2025. In the first quarter, we generated record net revenue of $324 million, up 17% year-over-year, and we delivered record adjusted earnings per share and free cash flow per share. our return on equity reached 20.3%, the highest level we have ever achieved. These results reflect consistent execution across our business and the strength of our client relationships. They also reflect the ongoing investments we continue to make to advance our key focus areas, including digitization, mobility, and efficiency. Commercial momentum remains strong in the quarter. we added 44 new clients with about one-third of those wins coming from self-managed conversions. We also continued to expand within our existing base through 173 additional service enrollments. Our client revenue retention was 98%, underscoring the quality of our relationships, and our strategic advisory services team identified roughly $354 million in savings opportunities for our clients with about half of those actions during the quarter. Now, digital transformation continues to be a key differentiator for Element and a central pillar of our long-term strategy. In vehicle acquisition, we made great progress with our new vehicle ordering system, including the introduction of our existing AI-powered agent, Nova. Nova is designed to provide greater transparency and support more informed decision-making, as our clients identify the right vehicles for their needs. Select clients are already testing our platform, and we plan to roll it out to all clients in the coming months. And then we have element one for drivers, our driver app that we released in 2025. That continues to see growing adoption, supporting a more streamlined experience for drivers and day-to-day fleet interactions. This quarter, we implemented an AI support agent within the platform to help resolve support requests. And it can now resolve 53% of client chats, driving improved response times and service consistency. And in parallel, we're quickly advancing our Element One client portal, which we expect to launch later this year. It will serve as a more comprehensive digital front door, or a single pane of glass, for our clients to control their entire fleets from one platform. As you know, last year we acquired CarIQ to add embedded vehicle-initiated payment capabilities, and we closed that transaction on December 31. I'm happy to report that the integration is progressing well. Early client feedback has been positive, and we're seeing demand that exceeds our expectations. Early use cases for fuel, are delivering measurable cost savings for our clients. And over time, we expect vehicle-initiated payments to be an important addition to the element offering and a meaningful driver of future revenue growth through enhanced monetization. And while it's still early days for these important initiatives, they are already helping simplify the client experience and are expected to drive efficiency across our operations over time. We continue to build a business focused on growth and long-term value, and we're pleased with how the year has started as we continue to execute against our strategic priorities of delivering consistent growth, advancing our digital agenda, and maintaining a disciplined approach in all that we do. And with that, I'll turn it over to Heath to take you through the financials.

Thank you, Laura, and good morning, everyone. We delivered record financial results across several key metrics in the first quarter, including net revenue of $324 million, adjusted operating income of $182 million, adjusted earnings per share of $0.35, and adjusted free cash flow per share of $0.45. Overall, our performance reflects the stability of the business and the continued momentum across key drivers. I will now begin by reviewing our first quarter results on an adjusted basis. Starting with net revenue, we generated $324 million in Q1, up 17% year-over-year with growth across all revenue components. Services revenue was $162 million in the quarter, up 6% year-over-year, driven by continued growth in vehicles under management, which increased 3%. Turning to net financing revenue, we generated $138 million in the quarter. This reflects growth in net earning assets, continued benefits from our leasing initiatives, and higher gain on sale, partly offset by increased provision for credit losses related to a specific client item. More broadly, net financing revenue remains a key driver of growth, supported by a core NFR yield of 4.98%, representing 40 basis points of expansion compared to Q1 2025. Syndication volume was $867 million in the quarter and generated $24 million in revenue, up from $12 million a year ago. This resulted in a syndication yield of 2.8% and increase of 70 basis points year-over-year. with revenue growth underpinned by the combination of higher volumes, the reinstatement of bonus depreciation, a favourable client mix and strong investor demand across our syndication channels. In the quarter, originations were $1.5 billion, down 4% year over year and primarily reflecting the expected reduction in volume from an originate to syndicate client. Excluding this impact, Q1 underlying demand in our origination volume remained solid and was supported by a robust 26% lift in Mexico and our continued conversion of strong order volumes in Q4. Operating expenses in the first quarter were $142 million, up 13% year-over-year. This increase was primarily driven by incremental headcount associated with the CarIQ acquisition as well as inflation, player depreciation and our continued investment in new initiatives. However, we remain disciplined to managing expense growth and continue to focus on driving efficiencies as the business scales, which supported positive operating leverage at 3.9% in the quarter. From an operating margin perspective, we delivered 56.2% in the first quarter, up from 54.7% in the prior year. This performance helped to drive a record return on equity of 20.3%, up 360 basis points year over year, reflecting both our strong earnings growth and continued balance sheet efficiency. Free cash flow remains a key strength of Element and continues to support both business reinvestment and capital returns to shareholders. In the first quarter, we generated 45 cents of free cash flow per share, up 25% year over year. Consistent with our capital allocation priorities, we returned approximately $94 million to shareholders during the quarter, including $57 million used to repurchase 2.3 million common shares. Turning to the balance sheet, our debt-to-capital ratio ended March at 76.4% within our targeted range of 73% to 77%, reflecting continued discipline in how we fund our growth. Overall, we are pleased with the strong start to the year. Our performance in the quarter reflects the resilience of our business model throughout market conditions and positions as well to deliver consistent execution and growth through the balance of 2026. Thank you. Operator, we are now ready to take questions.