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Element Fleet Management Reports Resilient Q3 Results

November 12, 2021, 07:15 AM
Filed Under: Corporate Earnings

Element Fleet Management Corp. announced its financial and operating results for the three and nine months ended Sept. 30 showcasing the company’s resilient business model. Element’s market-leading platform generated adjusted operating income (AOI) of $100.9 million in Q3, flat to Q3 2020. Element reported net income of $68.2 million.

Net revenue rose 0.4 percent on a nominal basis and 4.4 percent in constant currency over Q3 last year, while year-to-date net revenue is up 1.7 percent and 7.0 percent on the same bases respectively.

Element's expanding year-to-date and last-12-month operating margins evidence the scalability of the company's platform, as does 5.4 percent year-to-date AOI growth versus prior year, which is 11.3 percent growth in constant currency. Advancing Element's capital-lighter business model through syndication and growing services revenue has enhanced pre-tax return on equity to 15.7 percent as of the end of the quarter.

“Our business has never performed better, nor have we been better positioned in the market,” said Jay Forbes, President and Chief Executive Officer of Element. “We significantly advanced our growth objectives in the third quarter, and we continue to steadily increase our free cash flow per share, which we view as the most important measure of Element’s performance.”

"Client demand for new vehicles remains robust, with global orders 34 percent above 2020 levels year-to-date in constant currency,” Forbes continued. “However, OEM production delays from the global microchip shortage persist. The consequence has been a $400 million net increase to our record order backlog since June 30. When OEM production capacity normalizes – which we expect to occur by mid-2023 – we anticipate enjoying a multi-quarter surge in net revenue, operating income and free cash flow as our excess order backlog is drawn down as quickly as production allows.”

“Looking ahead to 2022 against the backdrop of these OEM production delays, we see our great business having a good year, continuing to showcase Element’s resilience,” Forbes continued, outlining the company’s expectations for 2022:

  • Generating low single-digit net revenue growth, as strong services revenue growth offsets the impacts of continued OEM production delays;
  • Holding operating margins at 2021 levels, absorbing inflation increases through inflationary revenue benefits and operating productivity gains;
  • Growing adjusted earnings per share by 6 to 11 percent and free cash flow per share by 8 to 13 percent through a combination of modest AOI growth and fewer shares outstanding; and
  • Advancing Element’s capital-lighter business model by syndicating when it makes sense and growing services revenue, resulting in expected further enhancement of pre-tax returns on common equity towards the 16 to17 percent range.

See the full release here.

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