Element Fleet Management Corp.

Good morning and welcome to the Element Fleet Management Q2 2026 Financial Results Conference Call. My name is Sumit Mahotra, Senior Vice President and Head of Financial Performance here at Element. Presenting to you on our call this morning are Laura Dottori-Attanasio, President and Chief Executive Officer of Element, and Heath Valkenburg, Executive Vice President and Chief Financial Officer. Following our remarks, we'll be pleased to take your questions. Before we start, and on behalf of the executives speaking today, 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 our company's most recent MD&A and annual information forum. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. Element 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. And with that, I would now like to turn the call over to Laura.

Thanks Sumit. Good morning everyone and thanks for joining us. Element delivered another solid quarter, reflecting the resilience of our business model and the consistent execution of our strategy. Our adjusted net revenue increased 10%, our adjusted EPS grew 12%, and our adjusted return on equity expanded to 19.6%, demonstrating both the quality of our earnings and the strength of our recurring revenue model. Our first half performance reinforces that we are executing against the priorities that matter most, delivering greater value for clients, operating more efficiently and creating long-term value for shareholders. Three themes stand out. First, our core business continues to perform well. We delivered record first half revenue, Our services revenue re-accelerated during the quarter, and we advanced our capital light strategy through our inaugural equity residual transaction. Second, we continue to deepen client relationships by helping organizations lower fleet operating costs, improve vehicle uptime, and navigate an increasingly complex operating environment through data, technology, and strategic advisory services. and third, we're extending elements leadership and intelligent mobility by applying the capabilities we've built over the years to the next generation of fleet solutions. Turning to commercial performance, we added 42 new clients during the quarter, including 13 conversions from self-managed fleets, and we completed 247 additional service enrollments with existing clients. These results demonstrate the growing value clients place on our broad service offering. Our Strategic Advisory Services team remains a key differentiator. During the quarter, the team identified about $482 million in potential client savings, with 41% already being actioned. Those are meaningful outcomes for clients and an important driver of long-term client retention. We also announced a strategic partnership with Waymo, a powerful example of how our purpose, to move the world through intelligent mobility, is coming to life. And while autonomous mobility is an emerging market, the operational capabilities required to support it, including lifecycle management, maintenance, and operational execution at scale, it aligns closely with Element's core strengths. We are beginning our work with Waymo in San Diego and we expect to support future expansion as our partnership grows. And as you can appreciate, this is a measured and highly relevant extension of our core capabilities into an evolving mobility segment where Element has a clear right to win and can create meaningful value for clients and shareholders over time. We also continue to advance our digital and automation transformation. DigiAdvisor, our AI-powered decisioning platform, combines connected vehicle data, service information, and elements expertise to support faster, more consistent maintenance decisions. It's another example of how our technology advancements are improving the client experience while increasing our ability to scale efficiently. Over the past several quarters, we've invested in digitizing workflows, automating manual activities, strengthening our data infrastructure, and simplifying how work gets done across the organization. During the quarter, those investments enabled us to initiate targeted organizational actions representing 8% of our workforce, positioning us to deliver approximately $20 million of annualized run rate savings in 2027. This reflects our ongoing focus on building a simpler, more efficient, and more scalable organization while continuing to invest in future growth. And as we look to the second half of 2026, our priorities remain unchanged. We will continue to grow our core business. We will continue to deepen client relationships. Thank you, Laura, and good morning everyone. Element delivered solid financial results in a

Disciplined Execution and Continued Progress of our Capital Light Strategy We achieved double-digit year-over-year growth in adjusted net revenue and earnings per share with return on equity expanding to 19.6% demonstrating the capital efficiency in our business model I will now walk through the components of our performance on an adjusted basis Net revenue was $318 million, up 10% year-over-year, with solid contributions from each of our categories. Service revenue was $164 million, continuing the expected re-acceleration and increasing 8% from the prior year. The year-over-year increase was supported by growth in vehicles under management and higher services revenue per VUM. Vehicles Under Management ended the quarter at $1.56 million, an increase of 3% year-over-year. Consistent growth in VUM remains a key attribute in driving our top-line performance, and we continue to target annual VUM growth of 2-4%. We remain encouraged by this performance, and continued growth in VUM and services further strengthens the recurring and capital-like nature of our earnings profiles. Net financing revenue was $136 million, up 7% from the prior year. The increase reflected growth in average net earning assets, benefits from our leasing initiative and the continued evolution of our funding platform. The solid NFR growth was achieved despite the provision for credit loss associated with the client-specific matter we discussed last quarter. We are now fully provided for that exposure and due to the high quality of our lease portfolio, we expect annual credit losses will remain within our historical range of approximately one to two basis points over time. Core NFR yield increased 35 basis points to 5.12%, demonstrating continued expansion while absorbing higher PCL. Syndication revenue was 18 million, an increase of 58% year over year, The increase was supported by higher syndication volumes, continued investor demand and the reinstatement of 100% bonus depreciation. Syndication remains an important balance sheet management tool and our new equity residual structure adds complementary funding channels. As the structure scales, Element can allocate volume across channels to enhance funding capacity, capital efficiency and our return profile over time. I'll touch on that in more detail when I discuss our balance sheet. Originations were $1.7 billion in the quarter, down 9% year-over-year and up 19% sequentially. The year-over-year decline primarily reflected the expected normalisation in activity from the originate to syndicate client we discussed last quarter. Excluding the impact of this client, originations increased 4% during the first six months of 2026 compared to the prior year period. As this client's activity peaked in the second quarter of 2025, the year-over-year comparison is expected to become more favourable through the balance of 2026. Sequentially, originations increase across all regions, reflecting continued commercial momentum and the conversion of our order pipeline into funded assets. It is also important to view originations in the context of our broader business model. Approximately 60% of our vehicles under management are service only and do not require our element to provide financing. In addition, quarterly originations can fluctuate based on the timing of client purchasing decisions, whereas our earnings are supported by a much broader set of drivers, including growth in our vehicles under management. While variability in originations can occur, We would note net financing revenue has continued to consistently increase year over year, benefiting from higher net earning assets and ongoing expansion in NFR yield. Turning to expenses, the $141 million total in Q2 was slightly down quarter over quarter and up 10% from the prior year. The year over year change reflected continued investment in CarIQ, Waymo and our digital capabilities. Together with inflation and higher depreciation. As Laura noted, we initiated organisational actions in Q2 that were supported by prior investments in digitisation, automation and process simplification. Once fully implemented, these actions are expected to generate approximately $20 million in annual run rate savings. Helping moderate expense growth in 2027 while supporting a more scalable cost structure, enhancing service quality and enabling continued investment in strategic growth priorities. Adjusted operating income was $177 million, an increase of 9% year-over-year and adjusted operating margin was 55.6%. For the first six months of 2026, Adjusted operating margin increased 60 basis points to 55.9%, reflecting positive operating leverage across the first half. Adjusted free cash flow per share was $0.39 in the quarter, down 3% year over year, reflecting higher cash tax payments in certain jurisdictions. Cash tax payments can vary between quarters, as demonstrated by adjusted free cash flow per share increasing 11% year-over-year during the first six months of 2026. Turning to the balance sheet, we ended the quarter with a debt-to-capital ratio of 76.5% within our targeted range of 73% to 77%. This reflects continued discipline in managing leverage and ties back to the broader funding initiatives discussed earlier. Our inaugural equity residual transaction with CBP Investments and Blackstone represents an important evolution in our funding strategy. It adds a complementary channel alongside traditional syndications and provides greater flexibility in how we deploy capital. Importantly, we're already seeing the benefits of this enhanced flexibility. In Q2, we returned $163 million to shareholders. including 120 million allocated towards the repurchase of 5.8 million common shares. In the first half of 2026, we repurchased 8.1 million common shares representing 2% of shares outstanding and above the 5.4 million shares that we repurchased in all of 2025. We will continue to deploy capital with discipline using our enhanced flexibility to be opportunistic during periods of market dislocation. In summary, our first half results demonstrate the resilience and strength of the Element business model. In the first six months of the year, revenue grew 13% on a year-over-year basis, EPS increased 18%, and free cash flow per share rose 11%. Services revenue continues to re-accelerate and as our partnership with Waymo launches in early 2027, we expect that our entry into the autonomous vehicle sector will add to our services growth. At the same time, our investments in technology and growth initiatives are now providing us with the ability to further improve our organisational efficiency and support positive operating leverage as the business scales. Our new funding structure also provides us with greater balance sheet flexibility that we will utilise on behalf of our shareholders. With a solid first half behind us, continued momentum in the core business and enhanced capital life funding capabilities, we remain well positioned to deliver within our full year 2026 guidance ranges. Thank you.