Element Fleet Management Reports Strong Financial Results in 2023

Element Fleet Management: Element Fleet Management (ticker: EFN) has announced robust financial results for the fourth quarter and full year of 2023, with record-setting net revenue of $1.3 billion and adjusted earnings per share (EPS) of $1.32.

Key Takeaways:

• Element Fleet Management reported a record net revenue of $1.3 billion for 2023.

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• The company achieved an adjusted EPS of $1.32, with a significant increase in adjusted operating income.

• 155 new clients were added, with 45% being self-managed conversions.

• $345 million was returned to shareholders through dividends, share repurchases, and preferred share redemptions.

• Strategic initiatives are in place, including a new sourcing presence in Asia and strides in digitization and automation.

Company Outlook:

• Element anticipates net revenue growth of 6-8% in the future.

• The company reaffirms its 2024 guidance, targeting net revenue between $1.365 billion and $1.390 billion.

• Adjusted operating margins are expected to be between 55% and 55.5% for 2024.

• Capital investment requirements should remain steady at around $110 million.

Bearish Highlights:

• A slight miss in the net promoter score target due to titling and registration delays.

• An expected decrease in gain-on-sale next year, impacting net finance revenue yields.

Bullish Highlights:

• Adjusted operating margin expanded by 110 basis points to 55.3% in 2023.

• Full-year adjusted EPS and free cash flow per share saw increases of $0.27 and $0.36, respectively.

• Syndication volume and service revenue are projected to grow, with syndication volume expected to align with origination growth of 11% to 17%.

Misses:

• The net promoter score fell short of the target, primarily due to process delays.

Q&A Highlights:

• The company clarified that originations are a better performance indicator than backlog.

• A significant backlog is expected to be carried into 2025, with a demand-supply equilibrium projected for Q1 2025.

• Element is establishing a strategic sourcing presence in Singapore to build relationships with Asian OEMs, which could potentially extend to the US and Canada markets in the future.

Laura Dottori-Attanasio: Element Fleet Management’s earnings call revealed a company in a strong financial position with strategic plans for future growth. The establishment of a sourcing presence in Asia and the focus on digitization and automation are key steps toward achieving their long-term goals. While the company faces some challenges, such as a decrease in gain-on-sale and titling delays, the overall outlook remains positive with confidence in meeting the projected guidance for the upcoming year.