Element Fleet Management Aktie

Hello, and welcome to the Annual Meeting of Shareholders of Element Fleet Management Corp. Please note that today's meeting is being recorded. [Operator Instructions] I'd now like to hand the conference over to David Steinhauer.

Thank you. Good morning. My name is David Steinhauer. I am the Senior Vice President, Assistant General Counsel and Corporate Secretary of Element Fleet Management Corp. I would like to briefly read the forward-looking information statement before turning the meeting over to Kathleen Taylor as Chair of the meeting.

In the course of today's meeting, directors or officers of the corporation may, in their remarks or in response to questions, make certain statements which are forward-looking statements in our perspective. Forward-looking statements are neither promises nor guarantees but are subject to risks and uncertainties that may cause the actual results, performance or achievements of the corporation or developments in the corporation's business or its industry to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

A more detailed discussion of risk factors affecting Element's business and industry can be found in the corporation's most recent annual information form and management discussion and analysis. Forward-looking statements are based on management's beliefs and opinions at the time the statements are made, and undue reliance should not be placed on any of these forward-looking statements.

There should be no expectation that these forward-looking statements will be updated or supplemented as a result of changing circumstances or otherwise, and other than as required by applicable laws, the corporation disclaims any obligation to do so.

I will now turn the meeting over to Element's Chair of the Board, Kathleen Taylor.

Thank you, David. Good morning, ladies and gentlemen. Welcome to the 2026 Annual General Meeting of the Shareholders of Element Fleet Management. I'm Kathleen Taylor, Chair of the Board.

We're holding this meeting in virtual format, which provides easier access to our widespread shareholder base and avoids the time, cost and environmental impact of the travel required to attend in-person meeting.

All shareholders have the opportunity to participate, submit questions and vote at the meeting. If you have any questions during the meeting, please feel free to submit those at any time, and we will do our best to ensure that they are addressed at the appropriate time. Shareholders can submit questions by clicking on the message icon, typing in and submitting their questions. If for any reason, we're unable to address a question during the meeting. We will endeavor to follow up with shareholders after the meeting. Before proceeding with the formal business of the meeting, I'd like to take this opportunity to welcome Keith Taylor, who is standing for nomination to the Board.

Keith has a strong financial expertise and an impressive resume, and we are confident that she will be a tremendous asset to the company. I'd also like to thank our outgoing Board member, Joan Lamm-Tennant, for her valuable support and contributions to Element, including serving as Chair of the Compensation and Corporate Governance Committee through our period of transformation and more recently, our renewed strategic ambition. Joan has reached the end of her term as director and is not standing for reelection. We wish her all the best in the next chapter.

Now let us proceed to the business of the meeting. We have four matters of business to conduct today. First, the presentation of our 2025 financial statements, then the election of directors, followed by the reappointment of Element's auditor and then take on the advisory resolution on the company's approach to executive compensation. Once the formal business of the meeting has been completed, I'll turn the meeting over to Element's President and Chief Executive Officer, Laura Dottori-Attanasio, for her closing remarks.

I will now call the meeting to order. I'll act as Chair of the meeting, and David will be our Secretary. I also hereby appoint Computershare Trust Company of Canada to act as scrutineer for today's meeting. The scrutineer has provided me with their preliminary report on attendance. With over 87% of Element's common shares represented in person or by proxy, I declare that the requisite quorum of shareholders is present and that the meeting is duly constituted for the transaction of business. The confirmation of mailing of the notice of meeting and the scrutineers' report on attendance will be annexed to the minutes of the meeting.

Further, in order to expedite today's proceedings, I've requested that David make all of our motions, and we will dispense with the seconding of motions. He will also act as moderator for any questions.

Turning to voting procedures. Voting at today's meeting will be conducted by online ballot. If you are a registered shareholder or duly appointed proxy holder and use your control number to log into the meeting, you will be provided with the opportunity to vote by online ballot. If you have already voted by proxy and you vote again during the meeting, your online vote will revoke your previously submitted proxy. If you have already voted by proxy and do not wish to revoke your previously submitted proxy, please do not vote again during the meeting. The polls will be open for voting on all items of business at the same time. This will allow you to vote on each item immediately or if you prefer, you may wait until the conclusion of the discussion on each item prior to casting your vote.

The items of business to be voted on and your available voting options will be visible on the voting panel on your screen. To submit a vote, please click on the voting choice displayed on your screen. Once discussion has concluded on all items of business, we will provide a few additional moments to enter your votes. I will then declare voting closed on all matters of business. The results of the votes on each matter will be announced prior to the close of the meeting. The online voting polls are now open for all items of business.

Minutes. The Secretary has the minutes of the last meeting of shareholders of the corporation, and we will dispense with reading the minutes of the last meeting. Now on to the first item of our business, which is the presentation of the consolidated financial statements as at and for the year ended December 31, 2025, and the auditor's report thereon. We will dispense with the reading of the auditor's report. The next item of business is the election of directors. The Board has fixed the number of directors to be elected at 10. Pursuant to our advanced notice bylaw, there have been no director nominations put forward other than the directors nominated on behalf of management as set out in our management information circular. Accordingly, in the interest of expediency, I will ask David to make the nominations.

I nominate those persons specified in the management information circular delivered with the notice of meeting, namely Virginia Addicott, Laura Dottori-Attanasio, Paolo Ferrari, Keith Graham, Rubin McDougal, Tracey McVicar, Andrea Rosen, Kathleen Taylor, Keith Taylor and Luis Tellez to serve as directors of the corporation and to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed in accordance with the articles and bylaws of the corporation.

As noted, since there were no prior nominations under our advanced notice bylaw, I declare the nominations closed. I also request a motion that the 10 persons nominated as directors of the corporation be so elected.

I so move.

Thank you, David. Can you also please advise whether any questions have been received from the participants of this meeting?

There have been no questions.

Thank you. In accordance with the corporation's majority voting policy, we will have individual voting for directors to be conducted by way of online ballot. Registered shareholders and duly appointed proxy holders can vote by selecting the applicable voting options. I'll announce results of the vote at the conclusion of our meeting.

We'll now move to the reappointment of the auditor. May I have a motion that Ernst & Young LLP be reappointed as auditor of the corporation until the next Annual Meeting of Shareholders or until a successor is appointed and that the Board of Directors are authorized to fix the auditor's remuneration.

I so move.

Thank you, David. And can you please advise whether we have any questions on this topic?

There have been no questions.

Thank you. I will announce the results of the vote at the conclusion of the meeting. We'll now move to consideration of the advisory resolution on executive compensation. As described in the management information circular, shareholders are asked to approve the resolution on the corporation's approach to executive compensation. This vote is advisory only and nonbinding on the corporation and the Board. That said, it will influence how the Board and the Compensation and Corporate Governance Committee look at compensation in the future.

The Board believes that this say-on-pay vote is good governance and allows our shareholders to provide specific feedback on the corporation's compensation practices. May I have a motion that the advisory resolution be passed as an ordinary resolution of the shareholders of the corporation?

I so move.

Thank you, David. And do we have any questions on this topic?

There have been no questions.

We'll now briefly pause our proceedings while the polls close and the results are tabulated. I now confirm that the polls are closed and the scrutineers have tabulated the results. I'm pleased to confirm that all matters have passed with over 94% approval. As a result, I hereby declare the directors elected, the auditors reappointed and the advisory resolution on executive compensation approved.

The voting rights -- the voting results will be disclosed in a press release following the meeting. David, can you please advise whether any other formal business has been brought before the meeting?

There has been no other formal business brought before the meeting.

Thank you. That concludes the formal business to be brought before the meeting. I wish to thank you for attending today. I now declare this year's meeting terminated. It's my great pleasure to turn the meeting over to Laura for her remarks. Laura?

Thank you, Katie, and thank you to our shareholders for joining us today. In 2025, Element delivered record financial results while advancing the next phase of our growth in intelligent mobility.

Mobility is becoming more complex and strategic for organizations. Advances in AI, connectivity and automation are transforming vehicles into connected, data-rich assets and raising expectations for what fleet management can deliver. As these forces accelerate, clients increasingly need trusted partners who can help them reduce costs, remove complexity and operate with greater confidence. And that is where Element is strongest. Fleet is our foundation and intelligent mobility is how we lead. We combine the scale, the capital strength, the life cycle expertise and the operational excellence of an established fleet leader with the data, the software and intelligence that clients increasingly need to perform at the highest level. This enables us to help clients see, decide and act across the full mobility life cycle, delivering meaningful outcomes today and long-term advantage for the future.

Our refreshed brand unveiled in 2025 and grounded in intelligence in motion reflects this evolution and the integrated solutions we are building for our clients. In 2025, we continue to strengthen that advantage through disciplined execution, targeted investment and deeper client relationships as we modernized our platform, expanded digital capabilities and positioned Element to lead in a rapidly evolving mobility landscape. We built on our fleet foundation and advanced our leadership in intelligent mobility by focusing on three priorities: modernizing our core platform, deepening the digital client experience and expanding selectively into adjacent capabilities that increase long-term client value. Now what differentiates Element is not simply our global scale or breadth of capabilities, but how they come together.

Our clients are not looking for more vendors. They are looking for fewer, smarter partners who can help them remove complexity, turn data into action and improve performance at scale. That is the value we are building across our organization. Looking ahead, our focus is on executing the right priorities with speed and with discipline, strengthening client experience, scaling our digital platform, deepening client relationships and converting our capabilities into measurable growth and operating leverage.

Our acceleration office continues to drive alignment across these priorities, reinforcing accountability and coordination across the organization. This structure is helping us move faster, sharpen our focus and execute more consistently as we advance the next phase of our strategy. Client success, disciplined execution and long-term value creation remain at the core of Element. Delivering meaningful outcomes for our clients is how we fulfill our purpose to move the world to intelligent mobility. To you, our shareholders, we thank you for your confidence and support as we continue building a stronger, more resilient Element. We remain focused on delivering sustainable earnings growth and long-term value to our investors.

In closing, we are entering 2026 with momentum, with clarity and with confidence in our ability to create long-term value to our clients and to our shareholders. And with that, I'll turn it back to our Chair, Katie Taylor.

Thank you, Laura. We would now like to invite any supplemental questions from shareholders or proxy holders present at the meeting. If you wish to ask a question and have not yet done so, please type in and submit your question. David, can you please advise whether any questions have been received from the participants at our meeting?

There have been no questions received.

Thank you. As there are no additional questions, I would like on behalf of the Board and management of the corporation to thank all of our shareholders as well as others who have joined us today for your support and your attendance at this meeting. We appreciate you being with us and look forward to connecting again soon. Thank you.

This concludes the meeting. You may now disconnect.

Good morning, everyone, and welcome to Element Fleet Management's First Quarter 2026 Financial and Operating Results Conference Call.

You are reminded that this call is being recorded. [Operator Instructions]

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 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 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.

I would now like to turn the call over to Laura Dottori-Attanasio, 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 remained strong in the quarter. We added 44 new clients with about 1/3 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 CAR IQ 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%, an increase of 70 basis points year-over-year, with revenue growth underpinned by the combination of higher volumes, the reinstatement of bonus depreciation, a favorable 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 Car IQ acquisition as well as inflation, higher 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 of 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 $0.45 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 us well to deliver consistent execution and growth through the balance of 2026.

Thank you. Operator, we are now ready to take questions.

[Operator Instructions] We will hear first from John Aiken at Jefferies.

Post the meltdown in February with the market being concerned about AI disruption, I've had a lot of discussions with clients about your business operations specifically. Can you talk about what the potential threat for disintermediation from AI or Fintech start-ups are to your operations and how you plan to defend against that?

Yes. Thanks, John. Absolutely. I guess to that, I'll, before I just go into the AI piece, which I do see as a clear opportunity for Element, probably worth talking a bit about, if I could say, the great moat that we have that we seem to be forgetting about that is our leasing capabilities. So those are, as you know, almost half of our business. And so if you take that combined with our scale, our large network of suppliers, including the operational expertise that we have, we have a very solid moat.

As you know, we've been making all of the investments that are required, including the acquisition of Car IQ, and that was to allow us to digitize, to automate and to create the ecosystem that we have that has been, I'd say, somewhat traditional and then putting it all into a digital environment with Element ONE that I talked about in my prepared remarks.

So, I think we're moving at a really good pace, and we're well positioned to thrive in the AI environment. I did in my prepared remarks, share some of the things that we're doing from an AI perspective. As you know, what we do is built around managing a whole lot of complexity and at scale. And so, I believe that this is just going to help make our ecosystem even better. It's going to help us, and we're seeing that already with one of the examples I provided.

As we roll this out, it's going to help us respond faster to our clients. It's going to allow us to predict issues earlier. We're furthering the automation of what I'd say, routine work that we've been doing manually, improving decision-making. Again, the whole bit creating a better experience for our clients. So I do see it as a positive. I don't believe it's going to replace the need for a scaled fleet manager. In fact, I'd go as far as to say, I think it's going to increase the value of a partner like us that has the data, the relationships and that workflow integration and the operational scale so that we can apply it practically.

And I know we're going to talk about expenses and people feel they're high and everyone wants us to have higher operating margins, which we do too, and we are working towards. But as I did mention, I'm going to say in my prepared remarks, like we still have, there is a lot of complexity in how you bring your AI agents, A, you build them out, you bring them together. And you have to do that in a very thoughtful way to make sure it's done right. And so we do have important initiatives underway, and they will drive efficiency across our operations, but that will take time.

It doesn't happen in a quarter. And I think it's important to remember that, again, when I think of AI, I just think there's always going to be things that we're seeing in the market. And the differentiator is really not who can demonstrate, 'look at me, I got the first agent first or technology. ' It's really going to be for us who can deploy it into enterprise fleet operations, so at scale and then deliver those measurable outcomes.

And I think we're really well positioned based on not just the investments we made, but the work that we're doing. I just say it's going to take a little more time than I think everyone would like because we want to make sure when we do it, we do it right and our clients get a better experience and no bumpiness between implementation and delivery of our new tools.

I didn't misrepresent your position.

We'll hear next from Stephen Boland at Raymond James.

It seems, I guess your prepared remarks saying there's like one client origination to syndication that kind of cut off. But it seems materially, like are the originations really dependent on that one client for the decline? Like is it, I'm just trying to get an idea. It seems like very dependent on one client. But what about the rest of your clients and their activity? Are you seeing originations maybe just delayed for a quarter? Maybe just talk about that, please.

Steve, you actually cut out a little bit at the start there, but I believe your question was around the originations. So happy to give a bit of color in terms of what we're seeing. So, for Q1, we did see a strong sequential pickup in originations, so $1.5 billion, up 8% quarter-over-quarter and actually one of the better sequential increases we've delivered to start of new year. And that really follows the record order volume of $2 billion in Q4 of 2025.

And I would say that a portion of these orders are still converting. So, we've got approximately 40% of those orders still to be activated in coming quarters. From a year-over-year perspective, originations were down 4%, and that was primarily related to the reduction of an originate to syndicate client. Having said that, though, we are seeing some timing shifts in client ordering just given the current macro environment with certain clients opting to push orders later into the year.

That's sort of different from this time last year, where we actually saw some pull forward of activity as clients sought to get ahead of potential tariff-related price increases. So that dynamic, along with the reduction of the originate to syndicate client will likely carry into Q2. So, this is an area we're focused on. We're focused on driving orders, accelerating originations throughout the balance of the year. Importantly, we don't expect the timing of orders to have a material impact on our ability to deliver revenue and adjusted operating income growth, and that's reflected in Q1 where we delivered record results across both metrics.

Okay. And my second question is definitely on the service revenue. When I look at that waterfall quarter, the sequential from Q4 to Q1, it's flat. But the one metric in there is the utilization decline. I'm just curious, is that because of clients that are gone or have left the company? Or is it something that like clients have basically pulled back on services? I'm just trying to understand the metric there.

Yes. So, from a service revenue perspective, we were down $1 million quarter-on-quarter. That's standard. We do see some seasonality with Q4 always being the higher quarter of service revenue. There's some higher utilization in that quarter where clients change over winter tires and those sorts of things. So that decrease of $1 million and lower utilization is seasonality.

From a year-over-year perspective, service revenue was up 6%. So, we were pleased with the reacceleration of service revenue growth. And that was really on the back of the resumption of growth that we saw in the back part of last year. So, we're not seeing reducing services or anything like that, and there was seasonality from a quarter-over-quarter perspective.

So, the growth really comes from continued VUM growth, increasing product penetration across our existing client base and then the expansion of our service offering with things like a Car IQ that we're bringing into the platform. So, looking ahead, we expect there will be a convergence in growth rates across the different revenue lines. And that's really a function of the different profiles. So, we saw strong financing income and syndication income in Q1, really driven by factors that began in the back half of last year. And then on the services side, growth does tend to lag VUM onboarding. If you bring in VUM late in the quarter, the impact of the revenue is almost is low. And then you generally drive the product penetration into those over time as well. So, we expect that the services will grow over time.

Our next question will come from Bart Dziarski at RBC Capital Markets.

I wanted to ask around the higher PCL you called out related to a client item. Could you just give us a bit more details on what drove that? And maybe more importantly, how comfortable you are at the current provisioning levels?

Yes, absolutely. So in Q1, we did record a credit loss provision of $4.6 million, which brings our total allowance to $15.3 million, which is about 20 basis points of financing receivables. The increase is a single client item. So, it's not a broad-based change in credit performance across the portfolio. And as we've scaled and standardized our leasing operations, we've certainly maintained a disciplined approach to underwriting and monitoring, and there's been no change in our risk appetite or underwriting discipline.

So, it was one client, and it's the same client exposure that we identified and provisioned for in Q4. And as such, over the past two quarters, we've taken a conservative approach and provided for the bulk of this position. So, while there's a small remaining portion, and we'll continue to assess that through the coming quarters, we do view our overall credit performance is stable with no change to our overall sort of outlook for credit quality. So importantly, our NFR yield of 4.98% this quarter includes that provision and would have been 15 basis points higher. So, we're confident in our portfolio, and it remains strong.

Okay. Got it. Super helpful. Then just a follow-up on the origination question. So last quarter, you talked about $2 billion of orders and then a modest extension in the order to delivery cycle time. So could you just walk us through the time line now of what that order to delivery cycle time looks like, what the order level was for Q1 '26 and maybe tie that all into how you're feeling about the originations guidance for 2026 of $6.5 billion to $6.9 billion.

Yes, no problem. So, in terms of the order to delivery cycle time, there's been no sort of material change to that in the quarter. And we generally see it depends on whether the vehicles have upfit or not upfit, but it's anywhere sort of from 130 days to 250 days. And that's why we do have 40% of those originations, still to come.

In terms of the orders for Q1, they were approximately $1.5 billion for Q1. And as I said, we did see some delays with certain clients pushing orders into the later part of the year. In terms of guidance, though, we're pleased with the start of the year overall. We delivered strong results, and it does show the earnings power of our business. That said, it's early in the year. So, we're not, we wouldn't be changing guidance at this point. We continue to focus on execution, especially around originations and services, and we would update our guidance later in the year if we thought we needed to.

Our next question will come from Jaeme Gloyn at National Bank Capital Markets.

Question on new funding structures. It looks like there's been some onetime costs over the last couple of quarters totaling about $6 million related to the development of these new funding structures. Can you give us maybe a little bit of a preview of what's to come given that's given these charges and what can we expect here in the near term?

Yes, absolutely. So, as part of our continued focus on our capital-light business strategy, funding flexibility is a key component of that model. And we do have already a well-diversified cost-efficient funding platform. However, as part of that strategy, we're always looking to advance our off-balance sheet funding. And that's not to replace, but rather to supplement our existing tools, whether it's syndication or other off-balance sheet approaches. So, the objective really here is to increase our flexibility to support growth and supporting returns without materially increasing our leverage. So, we have been working and investing in this area and taking some costs in the last few quarters. We've made strong progress, and we've moved into an advanced stage. So, our intent is to provide an update once we've finalized the structure and completed the transaction.

We will hear next from Paul Holden at CIBC Capital Markets.

I have a few questions for you. Maybe first one, just to follow up on the discussion around originations. So first part of the question would be, was that roll-off of the originate to syndicate revenue incorporated into the 2026 guidance when you provided it? And two, I just want to go back, I think, Heath, you sort of inferred that maybe that roll-off of that client and some delayed activations could also impact Q2 originations. So I just want to clarify that. And then I guess that suggests sort of we should be expecting better year-over-year growth in sort of Q3 and Q4.

Yes, absolutely. So as part of the evolution of our leasing strategy, we've been optimizing the composition of our portfolio. Without getting into client-specific details, the originate to syndicate client is a single product relationship, so no services. Origination volumes were elevated in prior periods, and they're now normalizing as the program matures. And we were expecting that as part of our originations guidance for 2026.

What we did see in the quarter was, as I said, the, some shift in client ordering just given the macroeconomic environment with certain clients pushing orders later into the year. So that may impact our originations number for Q2, and we're really focused on driving orders to converting to originations for the back half of the year.

Okay. I got it. And then a question on the service revenue. Obviously, you made it clear that you want that to grow at somewhat a higher rate. I guess one of the things we haven't discussed on it because we don't see it, is the margin embedded in that revenue? I know it's a net number, is there anything that's changed in terms of the margins or costs that are incorporated into that line? Or is this really more of just as the top line has slowed and you expect that to resume? Or is there any kind of margin story here?

Yes. So in terms of the service revenue and products that we offer, there's been no change in the margins that are embedded in that number. And so there's no change in the margins. You'll recall in the first half of 2025 with the tariffs and the trade, we did have a slow start to the year from a VUM growth. That's now resumed. We saw service revenue reaccelerating in Q1, up 6% following the previous, so really, it's just about driving the VUM growth, driving the product penetration and then implementing the new products such as the Car IQ that we've acquired.

Okay. Understood. And then last question. I guess there was an update from Amazon. I can't remember it was earlier this week or last week, I think, earlier this week. And so there's been a number of client questions around that and if there's potential disruption for Element or not. So it would be great to get your thoughts on that.

Yes. Thanks for that question, Paul. We do see that announcement as a net positive for Element. So, for them, it's primarily about improving utilization of their existing logistics network. So not replacing the last mile delivery structure. So the initiative that they have underway actually works, the expectation is that's going to drive more volume through the last mile network. So that would mean more utilization, more capacity needs and essentially more demand for the Fleet Management Services that we provide. So that's why we see this as a net positive for Element. And I go a little further now that I have the mic to say as a validation as well of our Mobility Operations Solutions. So we do excel in last mile delivery, what we call our Mobility Operations Solutions now. And so we believe this places us quite well.

That's helpful. And then last one for me is just on expense growth, you're right, Laura, we're going to talk about expenses because it is a little bit higher for the year. So can you talk to like is this a similar growth rate we should expect through the rest of the year? And then I also note specifically, employee compensation is up 20% year-over-year. It looks like almost all of the year-over growth is from that line. So why is employee comp up as much as it is? Maybe talk to us about sort of the growth in FTE versus wage inflation and where that growth in FTE is coming from beyond Car IQ.

Yes, no problem. I'll take that one. And really, so in terms of the expenses for the quarter, it was up 13%, $142 million. The increase was driven by incremental headcount and costs associated with the Car IQ acquisition as well as inflation and higher depreciation. However, we do continue to reinvest a portion of our growth into key initiatives, so digitization, automation, new products. And these initiatives are intended to drive future revenue and also improve efficiency over time.

I think as sort of Laura alluded to earlier, while these programs carry upfront investment before the sort of scale benefits are realized, we are being disciplined in our implementation. So we're making sure these new capabilities are fully integrated and operated as intended before we pursue more aggressive cost actions. And that's really in the lens of client experience. It's important for us to make sure we're delivering strong client experience. So that's what's driving the expense growth for Q1.

What I would say is even with that investment, we delivered positive operating leverage of 3.9%. Our margin is up 56.2%, up from 54.7% a year ago. In terms of your question about expense growth rate going forward, looking forward, we do expect the expense growth rate to moderate relative to Q1 levels, and we remain focused on growing our revenue faster than expenses. And you have seen that in previous years. So 2023, 2024 expense growth was double digit. It then moderated to 7% in 2025, and we expect the growth rates over the coming quarters to decline relative to Q1.

Our next question will come from Thomas MacKinnon at BMO Capital.

Just a question on what we should be looking at in terms of, there's a lot of discussion on originations. But if I look in the way you put your slides together, you actually have vehicles under management before originations in your slide show. So Vehicles Under Management were up, but originations were down. What do you guys deem as being the more important metric here?

Yes. So both important metrics. VUM is a metric that shows growth. So originations can be impacted by timing. So if you have, if your VUM is up, you're either bringing in new clients or your existing clients are increasing the size of their fleet. So that's why VUM growth, we were pleased with the VUM growth. Originations can be timing of replacement cycles of clients' fleets.

And so if a client returns the vehicle and get a new vehicle out, that doesn't drive growth, but it does drive originations. So both important metrics for us, but I would view VUM as a core driver of growth.

Then why didn't you give guidance on VUM as opposed to originations because origination stuff is harder to pinpoint.

Yes. So originations is still a key metric that then flows into your net earning assets and net earning assets combined with the yield will drive the financing revenue as well as what's available to syndicate. So we still see originations as a really key metric. And from a VUM perspective, we've always targeted 2% to 4% VUM growth.

Okay. And then one final one. If I look at the services per VUM, it's been kind of sitting around 3.7% for some time right now. How do you see that trending? What can you do to increase that? Some thoughts around that.

Yes. It's absolutely a key focus for us. In terms of that metric, what often happens and what you've seen in the last couple of quarters is often you'll bring in a new client and they'll have a lower service revenue number to begin with. And you have seen that in the last couple of quarters, which dilutes the average per se. And then as you build that relationship with the client over time, you then drive more services into the portfolio.

So really for us, our focus is the execution side of things, making sure we've got strong client experience, strong client relationships and driving further product penetration. And then additionally, it's making sure that we have really good best-in-market products such as our payments business through Car IQ, which will have, ideally have strong uptake from our client base to continue to drive that number higher.

And is the Car IQ into this services per VUM is that included in there? Probably not now since it's just new.

No, it's not. So that services per VUM number is our top nine products in the U.S. and Canada.

Okay. And then one final one is the buybacks picked up. I think you're running almost twice the rate in this quarter, in the first quarter than you were just in terms of number of shares than you were in the fourth quarter or significantly higher and certainly higher than the third. You've got a lot of room in this NCIB. What can you say about share buybacks, especially where your stock is now?

Yes, I'd say nothing has changed in terms of our overarching focus from a finance perspective. So we've always targeted growing revenue over the longer term at 6% to 8%. Obviously, we're going to deliver stronger than that in 2026. We look to drive revenue faster than expenses. And then we look to buy back anywhere from 1% to 2% of our stock. And given that there has been some volatility in the markets, we do like to step in when that happens.

[Operator Instructions] We'll go to Graham Ryding at TD Securities.

Maybe a question for Laura. Just Element Mobility, it's sort of been an area that you've been investing in and deliberately trying to build out. Is there anything you can point to date as evidence that this investment is starting to translate into revenue growth? Or is the benefit to date more about customer retention and operating efficiencies?

Thanks, Graham. I'd say all of the above, so that's a bit of a broad answer. But all of the above in terms of the things we've talked about with our ability to transform how we're doing business. And we've talked about this in the past that the fleet industry is undergoing some really rapid transformation. And so when I think of historically how things were focused more on, I want to say, vehicle financing, traditional services, we do see that the model is evolving fast. We're seeing it even more so today. We were talking about AI just a little bit earlier. And so that was why we went out.

We acquired Autofleet to help us really evolve our strategy and our ability to execute. So that Element Mobility division, if you will, that we talked about was really meant to drive that innovation across everything that we do. And you have seen some of it already. And again, I know everyone expects ourselves as well, and we're working towards that to take expenses down further as we roll these things out and scale.

But it will allow not just for us to continue with solid client retention, but it should also provide some new revenue unlocks and I think just help us continue to drive value creation.

So as a reminder, under that mobility umbrella, we had things like Autofleet, still relatively new. We acquired them back in October of 2024. And so not that long ago, and we've made phenomenal progress from my perspective. Car IQ, another one, very timely acquisition when you think of how that could decrease fuel spend for our clients by, call it, about 10% on average, pretty timely, but that also gives us some great ability from a payments capability, not just for our clients but for ourselves.

So all of that along with our innovation lab. And as we talked about, that's sort of focused on the technologies of autonomous vehicles, robotics, AI, and we've already rolled some out and Autofleet came with Nova, which already had AI embedded in it. So, all of that, I really do believe is going to transform how we manage our business and how we can deliver better service to our clients. Now again, some of which you're seeing. And I think as time goes on, you're going to see more of that over time, and it's going to represent, and sorry, I don't have numbers to give you, but it should represent in more revenue and in decreased costs over time.

And we have no further signals from our audience members today. I'm happy to turn the floor back over to our President and CEO, Ms. Dottori-Attanasio, for any additional or closing remarks.

All right. Thank you, operator, and thank you all for joining us today. As we shared, we remain confident in the trajectory of our business. We remain confident in our ability to deliver for our clients and for our shareholders. We do continue to see strong engagement from our clients and our team members. We want to thank for all of their hard work in making this all happen and to share with you that we remain very focused on advancing our strategic initiatives in 2026. With that, we look forward to speaking with you again in August for our second quarter earnings call.

Thank you. Ladies and gentlemen, this does conclude Element's Q1 earnings call, and we thank you all for your participation. You may now disconnect your lines, and we hope that you enjoy the rest of your day.

Good morning, and welcome to Element Fleet Management's Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. [Operator Instructions] You are reminded that this call is being recorded. [Operator Instructions]

Element wishes to caution listeners that today's information contains forward-looking statements, and the assumptions on which they are 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 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 Dottori-Attanasio, 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 2 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 million to $45 million in revenue and $22 million to $37 million in adjusted operating income by 2028 with a targeted 2.5-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 U.S. 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, road 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 Car IQ, 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 Motus that we announced earlier in 2025, Car IQ 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, deepen 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 finished 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 nonrecurring 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 totaled $623 million, up 5% from last year, primarily driven by increased penetration and utilization 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. Syndication 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 favorable 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 remains 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 nonrecurring items, the majority of which were noncash 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 Autofleet technology platform and $9 million of restructuring and acquisition-related costs related to the Car IQ 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 digitization, 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%, an 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 $0.33 was up a strong 24% year-over-year, underpinned by record quarterly revenue of $313 million. Top-line 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 totaling $71 million in 2025. In addition, we continue 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 the 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 million 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 billion and $6.9 billion. These ranges provided prior to any material foreign exchange fluctuations or adverse impacts related to changes in global trade agreements or broader political uncertainty.

In conclusion, 2025 was 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.

[Operator Instructions] We'll take our first question today from the line of Vasu Govil at KBW.

I guess, Laura, I first wanted to ask about the Car IQ acquisition. I know you mentioned briefly in your prepared comments, but if you could elaborate a little bit on how you think about strategic benefits of owning that asset and bringing some of the payment functionality in-house? And I know it's early days, but sort of any color on how you think about the contribution that this business could have over time on revenue and margins? And if anything is baked into the '26 outlook?

Yes, absolutely, Vasu. Thanks for the question. So super excited about the Car IQ acquisition that closed in December 2025. So Car IQ has this in-vehicle payment solution that effectively enables vehicles to act as payment nodes to help our clients reduce fraud, modernize their billing, and it can really deliver, I'm going to say, scalable solutions to our clients. So it's exciting for us in that it's going to enable us to embed payments into our digital ecosystem. It's going to allow us to transform what I'd say is a relatively outdated process into a really strategic one with better margins for us. And it's going to allow us to capture more spend.

And for our clients, it does many things, including removing the need for physical cards, embedding payments directly into the vehicles in their telematics environment. So it's going to be -- well, today, it can be used for fuel, tolls, violation and parking, and it has some really interesting future use cases that we're super excited about. Our plans to integrate it into our Element ONE, our client portal and to our driver app. We're super excited. I would tell you this is -- for the years that I've been here, this is the first time we have had a lot of reverse inquiries from prospects and clients that want to access this capability.

And so exciting when we did our due diligence, Car IQ had one case we saw with a client where they could cut their fuel spend by almost 14% just by eliminating card misuse. So we think this has a great capability for our clients. We did a few proof of concepts ourselves. And with one of the clients we did this with, it provided such great results that our client told us they didn't want to come off the platform and want to continue to use this. So we're feeling really optimistic and positive about what this can do, not just for us but for our clients.

And so from a financial impact perspective, I'd say a little dilutive in this year given that this is the year that we need to do implementation and conversion. We do expect it's going to have a meaningful impact for our clients, as I talked about, so to really help them reduce their total cost of operation. For us, it will be over time that we'd expect it to drive more profitability. So we are projecting some, I'm going to say, modest accretion that should come in 2027, and that would be on both an adjusted operating income and free cash flow basis.

Great. That's great color. And then maybe just my second one is on the services -- servicing income growth. That's obviously lagged a little bit. I know I caught your comments about the VUM growth and that should help us in '26. But maybe if you could talk a little bit more about what sort of fell short of expectations this year? And then, as we think to '26, what kind of growth should we be modeling for that piece of the business?

Yes. Vasu, I'll take that one. So from a service revenue perspective, in 2025, we delivered $623 million. Excluding FX and the onetime items we have announced, it's approximately 7% growth year-over-year. And Q4 reached a record level of $163 million. What we did see in the first half of the year with the macroeconomic environment, including tariff uncertainty and trade-related concerns, is we did see a slower growth rate in the first half of the year of VUM growth and that did moderate sort of the full year service revenue expansion.

Obviously, in the second half of the year, VUM growth resumed 6% -- 3% growth rather in the last 6 months, which gives us good momentum going into 2026. What we do see though is typically the incremental contribution of the VUM growth does build over time. So as we cross-sell additional products, as utilization on the vehicles increases over time. And also, many of the vehicles on board, especially in Q4, only contribute partial revenue for that period. So we expect over the medium term services will continue to remain the strongest part of our growth driver. And we're certainly focused on accelerating VUM, expanding our product penetration as well as continuing to enhance our product set, and Laura took us through the most recent acquisition in Car IQ.

Our next question today will come from the line of John Aiken at Jefferies.

Heath, just a couple of questions that followed from the guidance that you provided, which is not an argument. Thank you very much for that. But when we take a look at the anticipated originations, obviously, below the levels of the guidance that you had last year. What's impeding the outlook for originations? And then, what impact should we expect that to have under vehicles under management growth?

John, so maybe I'll touch on originations for 2025 more broadly, and then, we can talk about sort of impact to '26. So 2025, we delivered $6.5 billion in originations, and that was slightly down year-over-year and $200 million below our guidance range. It is important to contextualize this against 2024, which benefit from supply chain normalization and the backlog conversion that did elevate origination volumes.

What we also saw in Q4 was we had really strong demand. So we had $2 billion of orders in Q4. We did see a modest extension in the order to delivery cycle times for vehicles that required upfit. And that pushed some of those Q4 orders into 2026, but gives us a good starting point for 2026. So in terms of our guidance, we're guiding $6.5 billion to $6.9 billion. That implies 7% growth at the upper end of that range.

And to answer your question on impact in revenue, originations is an important metric, but it can fluctuate based on client behavior. And it should be viewed alongside other metrics, so VUM growth, net earning assets, yield, and the latter 2 are primarily the drivers of net financing revenue. And again, in 2025, we saw a really strong improvement across both of those metrics. NEA was up 3%. Our average yield was up 35 basis points, and that ultimately drove record net financing revenue of $498 million.

And then, in terms of the guidance, the free cash flow per share growth implied is a little bit lower than what you're forecasting for the EPS growth. Should we assume that we're looking at higher sustaining capital investments like we saw in the fourth quarter throughout 2026?

Yes. Maybe I'll take the sustained capital fourth quarter question first, and then, come back to the sort of the free cash flow growth. So Q4 was elevated. There's some timing in there. We continue to target approximately $80 million of spend across both sustaining and growth CapEx and nothing has changed from that perspective.

In 2025, we actually saw slightly lower spend, where we spent $71 million in CapEx across the 2, which is one of the reasons that impacted the free cash flow. So when we think about free cash flow relative to EPS, it's really mechanical. So nothing has changed in terms of our ability to generate cash from the business, and it is timing. So free cash flow actually outperformed EPS in 2025 and was really, really strong. And we just see that sort of flipping around in 2026.

We will hear next from the line of Stephen Boland at Raymond James.

I hate asking accounting questions, but Heath, I'm going to, can you explain what updated jurisdictional probability outlook of what that actually means on that charge?

Yes. No problem, Steve. I love accounting questions. So maybe I'll just give a bit of more color into sort of the key one-off items. So the first one, deferred tax asset, we recorded $130 million partial derecognition of a historical deferred tax asset. I want to stress that this does not reflect any deterioration in the operating performance of any of our geographies, and all of our regions continue to perform strongly. So the change really relates to some internal intercompany funding structure changes, as we look to optimize how we sort of fund the business internally.

And ultimately, from a funding perspective, this gives us increased flexibility to raise more local funding, particularly in areas like Mexico, where we're seeing strong growth. So it's important to note, it has no impact on our effective tax rate or cash tax rate. It's a noncash accounting adjustment, and it does not impact sort of global profitability, or importantly, impact our ability to utilize those tax losses in the future.

Okay. So this is really the jurisdictional is Mexico, that's kind of where it's focused?

Some of the focus is Mexico, but it's a realignment of our internal funding structures and intercompany funding structures globally.

I'm not sure who this question can go to. But I guess when we were -- a bunch of us were in Mexico, I don't know, 18 months, 2 years ago, there was a program that was talking about a global review of services, pricing, and there was going to be a net benefit that was talked about. I won't say the number, but I'm just wondering, has that global review been completed? And is that kind of baked into some of the results in '25, I don't think -- certainly, I hadn't asked this question. But -- and is that -- I guess, is that review completed at this point?

Yes. So the pricing and go-to-market strategy is something we continue to refine, not only for Mexico, but all locations across the globe. We set up the leasing business and have seen some strong output as we continue to mature that leasing business and the learnings that we have do get applied to Mexico. So yes, we continue to refine our strategy from that perspective across all locations.

Okay. I'll sneak one more in here. Just, Laura, you talked about the -- I'm probably a broken record here, the partnership with Samsara, you mentioned in your opening remarks. Can you just provide an update what that partnership is starting to look like? What services or cross-services that you're looking to add, referrals, et cetera? And would it be helpful, please?

Yes. Sure, Steve. I guess what we talked about these partnerships with Motus that do reimbursements for vehicle expenses for individuals, and then, Samsara, who have telematics camera productivity offering. And all of that was done really to add, I'm going to say, additional services for our clients. We wanted to work with some of the best in the industry, and that's what we're doing. And it's going pretty well. Again, early days, but everything has been quite, I'm going to say, positive in line with what we expected.

With both Samsara and Motus, we've already activated units and clients that have come through the referral program. And so, all looking good. Worth a reminder, we had said that in 2026 that we were expecting those partnerships to give us about mid-single-digit revenue. And so we're on track for that.

Our next question today will come from Tom MacKinnon at BMO Capital.

Two questions. First, just with respect to share buybacks, certainly more of an elevated pace year-to-date. You got the preferreds out of the way, converts out of the way. How should we be thinking about share buybacks? Should we sort of extrapolate a little bit about the accelerated pace you've had, and you do have a 10% NCIB that was launched mid-November 2025? And I have a follow-up.

Yes, so in 2025, we paid out 43% of our free cash flow in dividends and share repurchases, so $150 million and $120 million. For 2026, as Laura announced, we have increased -- a 15% increase in the dividend to $0.60 per share, which is approximately 28% of our trailing 12-month free cash flow. In the first 2 months of this year, we've already repurchased $34 million of shares. And so we do expect to continue to be active in share repurchases for the 2026 year.

Okay. And maybe you can talk a little bit about expansion in the services update on insurance services, and how should we be thinking about service attachment rates going forward?

Thanks, Tom. I'm -- I'll start off just maybe talking about insurance, and then, I'll let Heath take that broader question, services in general. So you'll recall, and we talked about this, we launched our insurance offering in January of 2025 under the banner of Element Risk Solutions, and we did that in partnership with Hub. So our plan was to combine insurance coverage placement. We're going to do that with claims management and safety services and do it in a modernized way.

As I believe I shared, we did miss the mark on this one in that we had some gaps in our product offering, some gaps in our go-to-market approach. And I guess I'd also say from a lessons learned perspective, we underestimated the complexity of standing up our insurance offering inside of our fleet ecosystem. So while we still believe there is a worthwhile opportunity for us in insurance, we remain committed to doing it. We have put it on the back burner given some of the things we talked about like our Car IQ acquisition that have some real benefits to us in the short term.

So on insurance, we're making some organizational changes. We're working with Hub, and we're looking at how we refine our approach and fill some of those gaps before we come back to market with the relaunch, but we are still selling the product. It's just not, I'm going to say, exciting enough to deliver what our expectations were when we first talked about this ideation.

And maybe with that, I'll hand it over to Heath to talk about the broader services offering.

Yes, absolutely. So we expect the VUM attachment rates to continue to migrate higher. It's important to note, though, that new clients that you onboard sometimes have a dilutive impact to that migration. And we saw that in Q4, where the new VUM we brought on had a lower attachment rate of 2.2 services per unit. Obviously, the Car IQ VUM came on, had 1 services per unit. So those items do dilute the broad portfolio. But we expect over time for that VUM per unit to migrate over -- up over time, which -- so increased VUM, increased product penetration, and services per VUM will continue to drive higher service revenue over time.

And then, maybe just to circle back on your previous question on the share buybacks, so we -- just to close that out, we generally target sort of a 1% to 2% of shares outstanding. I think we were 1.3% for 2025 and expect to sort of be at the higher range for 2026.

[Operator Instructions] Moving forward, we'll hear from Munish Garg at CIBC.

Just one question for me. So on the off-balance sheet structures, I was wondering if you could provide an update on the progress on the new off-balance sheet structures that you have been working on similar to the Blackstone that was announced last year?

Yes, absolutely. So during the quarter, we did incur some one-time costs to enhance and expand our funding structure. So we do already have a strong and diversified funding platform, but this initiative is designed to provide additional flexibility, as we grow the business while optimizing for yield and overall returns. So during the quarter, we made meaningful progress. However, we're not yet in a position to formally announce the associated transaction.

Our next question this morning will come from Graham Ryding at TD Securities.

Laura, this is probably for you. Just interested about the autonomous vehicle sort of area. It seems like it's developing quickly. Is this a fleet management opportunity for you? And how much of an area of focus is this for you relative to everything else you've got going on?

Yes. Graham, thanks for that question. Super important, which, in large part, we started doing all the digitization, automation, acquisition of Autofleet, all of that to ensure that we remain in the connected vehicle. So I'd tell you today, autonomous vehicles represents a great opportunity for our company. We're starting to see some of them going from, I'm going to say, pilots -- piloting to commercialization. And we know that in doing so, they're going to have to scale through fleet ownership. So all of that's going to require funding, branding, maintenance oversight, safety reporting, real-time monitoring, scheduling, you name it. Those are all the things that we offer today and that we'll be able to offer to autonomous vehicles. So I would say with everything we've been doing, we are incredibly well positioned to support autonomous vehicles. And I believe we'll be able to win in the space just given the operational expertise that we have, so a positive.

Okay. Perfect. Maybe on more of a sort of competitive macro question, just GenAI and the related competition, it seems to be sort of weighing on the markets and concerns in a lot of sectors. Can you talk about the durability of your business, where you could see some competition from AI-related competition? Or where do you see the business being more durable and positioned well?

Absolutely. Look, I think our stock did get caught up in all of that, and AI does have the potential to pretty much upend absolutely everyone's business models. That said, for us, I think AI is going to have a meaningful benefit for us, not just from an internal efficiency perspective, but also from a client experience perspective. So again, we're super excited about the opportunity that that's going to present. And I talked a bit about it, but we started a couple of years ago to digitize, to automate, and that's where we put all of our pretty much capital allocation. So it's been to transition this, I'm going to say, leadership position that we've had in fleet management to intelligent mobility that we talked about, so we could really transform, what I'd say, has been historically somewhat of an antiquated industry into intelligent mobility.

So with Autofleet in 2024, not only did we pick up, again, a phenomenal team of experts, but we picked up a great platform that we're building elements off of. And that platform, and this is important, and we never really talked about it a lot when we announced the acquisition, but it did come with AI already embedded in it. And it has, I'm going to say, an AI tool in it called Nova, one that can simulate whether it's supply-demand patterns and things in route optimization, improved fleet deployment, reduce downtime, et cetera. Nova was actually the first AI-powered large language model that was designed specifically for fleet management.

And it's so good that it actually won an AutoTech AI Innovation of the Year award back in 2024 at, I think it was, the AutoTech Breakthrough Awards. So we are in a really good place with some of the actions that we've taken over the years. And I'd just say for Element more broadly, we also went out and got AI licenses for our team members, did all the training. We had all of our functions come up with use cases that could help increase client experience and take out costs. And so now in 2026, I'd say we're moving from that broader experimentation we did in 2025 to a lot more implementation in 2026, that's going to allow us to reduce manual processes and just move even faster in terms of automating how we do things.

And I won't bore you with -- I find them exciting, but with the different use cases we have and the things we can do, I'd just say that pretty much every part of our business, when we look at it, AI can help us improve and do a lot better. And that's why we see it as a positive. And then, when you look at our broader business, and we talk a lot over the years about how resilient we are, we benefit from and -- we don't talk about it perhaps as much, but we've got some of the things that will allow us to continue to win. We've got scale with 1.5 million vehicles. We've got solid funding capabilities that can support all of our leasing, and again, leasing requires people, requires specialization and a balance sheet. And that's almost half of our business.

And again, we've got our strong OEM relationships, where we get preferred vehicle pricing, allocation for our clients and an incredibly large network of service providers that also help drive savings for our clients. So all that to say, I think we're really well positioned from a resiliency perspective and that AI, as it goes, is just really going to help further enhance our value proposition for our clients. So again, feeling very excited about this one. And looking forward to, as we go in 2026, delivering on more capability through our Element ONE platform.

[Operator Instructions] We'll move forward to the line of Bart Dziarski at RBC Capital Markets.

I wanted to ask around Element Mobility and the Autofleet. In your prepared remarks, Laura, you talked about lower structural costs and increased agility. And just hoping you can maybe help us out with some quantification or numbers around those 2 benefits?

Yes. Happy to talk about both. And I'll ask Heath maybe to clean up my answer because I might not give you the answer that you're looking for, but from an Autofleet perspective, and I know this isn't what you're looking for, but from a payback period, from where I stand, this paid back in spades already like almost from the first month. So -- for Autofleet, very specifically, the company as a stand-alone, its ARR was up, I think, almost 50% over last year. So that's a positive. But more importantly, it's really everything it's been doing for Element or what we're calling Element Mobility. It's allowed us to bring in, and I had some of that in my prepared remarks, but bringing in all of our development in-house or a lot of it, I should say, we're just much more agile, and we can bring products to market sooner, so just shorter time to market.

So I really see that as a sustained competitive advantage for us and that it's got just intrinsic value that is hard to quantify, although Heath is doing a pretty good job of that, where we're looking at the amount of cost avoidance we have, savings and reduced cycle times and whatnot. And that's what allowed us to create this Element Mobility that we talked about. And so it's really an umbrella, or if I could call it, a division that's meant to drive innovation across our fleet landscape. And so sitting under this, I can call it an umbrella, we have things we've talked about, our innovation lab, that's going to be focused on next wave technologies. So that will include some of the things we talked about earlier, whether it's autonomous vehicles, AI, we'd also look at robotics.

So all the things that are really going to dynamically transform, I'd say, how businesses manage their fleets. And so that would sit there, would have our intelligent routing, ride-hailing, telematics, in-vehicle payments, et cetera. And so in setting that up for sort of what comes next, we think that will allow us to lead on, I'm going to say, transformation without losing focus on execution and the day-to-day stuff that we have that we do so well when it comes to leasing and different services that we provide. And so, for mobility, there is no real number as we sort of put things under this umbrella. And we're going to take 2026 to think through what that looks like.

And I know I've over-talked, but I'll hand it over to Heath to see if he has what you're looking for, which are numbers.

Bart, I'd probably break it down into 2 components. So the first one would be from a CapEx perspective and the spend that we had to incur to deliver some of our key projects that Autofleet have delivered. We saw a meaningful reduction in the cost of those. So a number of those projects we had scoped up with external parties prior to the transaction with Autofleet taking them on, we saw upwards of a 60% cost reduction. And that was partly -- or one of the reasons why we saw reduced CapEx spend of $71 million for the year relative to the $80 million target. So that is one benefit.

The other benefit is on the operating expense side of the equation. You do see in the investor presentation, we break out the $9 million of efficiencies achieved during the year. What I would say is that most of our spend is really focused on digitization, product expansion and focused on growth, but that does have an added benefit on automating some internal processes and those sorts of things that do have an OpEx benefit as well.

And I think you saw that in 2025, where our expense rate normalized from what was a double-digit expense growth rate in prior years to 7% in 2025. So looking forward, we expect our expenses will continue to grow as we do invest in the business, so new products, new capabilities, digitization, but we expect those efficiencies will continue to drive positive operating leverage.

Awesome. That's very helpful color. And then one thing that jumped out this quarter was we saw continued VUM acceleration despite originations declining. And so I think there is an underlying trend there where maybe you're not as reliant incrementally on originations needing to drive VUM growth. And if that's the case, where are you seeing some other benefits or wins, if you will, on the VUM side?

Yes. So it's a great question. The VUM and the originations don't necessarily move in unison. We can grow VUM by bringing on service only VUM, and we can also have origination growth without actually driving VUM growth, where it's just clients returning an old vehicle and taking out a new vehicle at a higher cap cost. So they are somewhat decoupled. But over time, we expect growth in both originations and VUM.

And as I sort of spoke on the top, we did see a slow start to the year on the VUM growth with macroeconomic environment. But pleasingly, we saw a strong increase in the back half of the year. And with things like Laura has spoken about, so Autofleet, Motus, Samsara, Car IQ, we expect that those things will also help us drive VUM growth and service revenue growth into the future.

Our next question will come from Jaeme Gloyn at National Bank Capital Markets.

Just wanted to maybe dig in on the syndication a little bit, another quarter of greater than 3% yields. Is that something we should kind of expect here going forward? Or are there some other factors that's driving that for the past couple of quarters?

And then, in terms of the volumes, thinking back to 2024, it was well over $3 billion. But outside of that, kind of in that $2.5 billion range. So just kind of want to get a sense as to how that -- you should expect that to flow from originations through to either average earning assets or syndications?

Yes. Jaeme, so I'd kick it off by saying syndications, first and foremost, is a balance sheet management tool, so we ended the year at a debt-to-capital ratio of 67.9%, which is at -- 76.9%, I should say, which is in our target range of 73% to 77% and well below our debt covenant, which is 80%.

In terms of the volume in 2025, we were deliberate in pacing syndications as we deferred transactions while we waited for the reinstatement of bonus depreciation. Since that's come in, we've seen sequential increases in volumes in both Q3 and then in Q4 again.

What we also did in 2025 is we've really prioritized client level funding optimization, which, coupled with bonus depreciation has seen really strong results in syndication yields. Having said that, client mix does contribute to the strong yields. And we expect from an ongoing run rate perspective, it'd probably be more in line with the full-year average as opposed to what we saw in Q3 and Q4.

Okay. Great. And then, as we think about the Autofleet, I guess, penetrating more of the Element business, there is an ordering platform shuffling this quarter. What other -- are there other aspects of the business here that are right for that Autofleet to overtake? And, yes, I guess, maybe a little bit of color on some of those potential items that we could see down the road.

Well, maybe, Jaeme, I'll kick it off and hand over again to Heath just for some numbers and to talk about the write-off, but with Autofleet, as I mentioned, we bought not just -- and we have great people there with their innovation, but the platform that we're looking to put all of our capabilities on to just given what a great platform that it is. And so, as time goes, that is the expectation that we will be on one platform, and it's all going to sit on Autofleet as the direction that we're headed on.

And so for maybe this piece, Heath, if you want to talk just a bit about what we've done.

Yes. So when we announced the Autofleet acquisition, part of the rationale was no doubt to enhance -- to acquire an enhanced tech platform, which would drive sort of client experience and those sorts of things, which Laura has touched on. So the announcement today really to move away from our legacy ordering platform really just reflects the efforts of the Autofleet team and the continued adoption of their technology. So we took a one-off write-down of a historical amount, $52 million noncash impairment, as we really move to a new technology that will drive meaningful improvements in the client experience and our business. And that's a one-off item that we don't expect to happen in the future.

Yes. I guess, what I'm getting at is like -- this is the ordering platform today, is there -- what -- is the entire Element business now on the new Autofleet ordering platform is -- maybe if I kind of extrapolate a little bit, like is there a mobile app where something similar, we see everybody move over to that new mobile app, something along those lines? Is there any additional color you can kind of dig into on that or am I just getting a little ahead of myself?

No, it's great. Look, I want everything for yesterday also. But we're moving everything onto this new platform. And so parts of ordering are going there. We do have other platforms. So we've written this one off. There are smaller other things. So I don't want to say never from other write-downs perspective, although we wouldn't expect anything like this, I'm going to say, size into the short term in the future. But yes, everything would move on to this platform eventually, and so, we would have our Element ONE client portal, and there is an Element ONE driver app, and the 2 speak to one another.

And so the -- both the portal and the app, and as you know, our app is out there, our portal will be releasing soon, has taken some time because we do have some existing technology that's out there, and we wanted to ensure we were very thoughtful about how we were coming up with the new platform. So essentially, all the change we've done have sat on both, I want to say, old and new platform, and that is to ensure integrity of data and information that we have so that when the new platform, if you will, is being utilized that no information, no data integrity is compromised, et cetera. And so that's why this has taken us longer. But I think that's your question, directionally, yes, everything is going to sit in this one place.

[Operator Instructions] We'll hear from Stephen Boland at Raymond James.

Sorry, I'll be quick here. Just in terms of the Car IQ, you mentioned that there has been some test cases with existing clients. Is the plan to just introduce this to new clients or start rolling out to the existing client base as well? Sorry, I just want to clarify that.

Yes. Stephen, our plan is to offer it to our existing clients and to our new clients. So we're going to be looking at both. We -- well, I would say, we could do a forced conversion. That's not how we operate. Our plan is to offer it to our client base, and we will allow our clients to determine what they would prefer, if you will, to use. And so when I think of our partner there, Wex, we have had a long-standing and a really successful partnership with him. What we're doing here is, I'm going to say, we're really focusing just on making sure our clients are in the -- if I could say, in the right solution for them.

And so I think of it kind of as, forgive us, a grocery store, where you think that you've got both trusted brands and your own high-quality store brand. And so that's sort of what our approach is going to be. And so we're really going to be providing our clients with choice and putting them in what we believe is the best offering. And as you know, all clients are different. And so, for some, it will be one option; for others, it will be a different one. But I'd just say that our priority is just going to be to ensure that we put our clients in the best offering for them.

Ladies and gentlemen, that was our final question from our audience. This concludes the question-and-answer session. I am pleased to turn the conference back over to Laura Dottori-Attanasio for any closing or additional remarks.

Great. Thank you, operator, and thank you all for joining us today and for your continued interest in Element. I do want to thank our investors and our analysts for their ongoing support and engagement and want to really thank our team members for their dedication because our achievements wouldn't be possible without their focus and commitment. So thank you, and we look forward to speaking with you again on our next quarterly call in May.

Ladies and gentlemen, this does bring to a close today's conference. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, and welcome to Element Fleet Management's Third quarter 2025 Financial and Operating Results Conference Call. [Operator Instructions] And you are reminded that this call is being recorded. [Operator Instructions]

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 the company's year-end and most recent MD&A and annual information form. 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 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 at the company's most recent MD&A.

I would now like to turn the call over to Laura Dottori-Attanasio, Chief Executive Officer. Please go ahead.

Good morning, everyone, and thank you for joining us. Q3 was another strong quarter for Element with double-digit net revenue growth year-over-year and record financial performance across key metrics. This outcome underscores the ongoing success of our strategy and the commitment of our team to deliver meaningful outcomes for our clients and shareholders. We deepened relationships with existing clients and won new mandates across all regions, adding 38 new clients in the third quarter and expanding share of wallet with 278 new service enrollments. As more clients turn to Element to unlock efficiencies, our strategic advisory services team delivered by identifying $349 million in fleet cost savings opportunities this quarter, 46% of which were actioned demonstrating the tangible value that strengthens client loyalty.

We continue to accelerate our digital transformation and deliver a more connected client experience. Earlier this year, we launched a new Element mobile app, simplifying fleet operations and enhancing the driver experience. Pilot feedback has been extremely positive, and we're preparing for a broader rollout in the coming months. Our new digital ordering platform is also progressing well marking an important step in automating key client processes. Since establishing Element Mobility, our division focused on next-gen fleet solutions, we've advanced partnerships that showcase our technology leadership. For example, we announced a new partnership with InDrive, one of the world's fastest-growing ride-hailing companies to help optimize their fleet operations globally. This collaboration demonstrates how Element's digital capabilities and partnerships are shaping the future of intelligent mobility.

Additionally, our technology platform, Autofleet earned industry recognition as Fleet Management Solution of the Year in the 2025 AutoTech Breakthrough Awards, a well-deserved honor highlighting our team's innovation and impact. We passed the 1-year milestone of our Dublin leasing center that was launched in August of 2024, and the results have been strong. By streamlining processes and automation, we've achieved greater efficiency and scalability in our leasing operations, enhancing the client experience and contributing to strong net financing revenue in recent quarters. This is a clear example of how our strategic initiatives like Dublin and Autofleet are driving financial benefits and service improvements.

In summary, we made exciting progress on the digital front, improving client experience and financial performance, all thanks to the dedication and collective effort of our global Element team. Our third quarter achievements put us on solid footing to close out 2025 with continued strength.

And with that, I'll now turn the call over to Heath to cover our financial results.

Thank you, Laura, and good morning, everyone. Q3 marked another quarter of strong performance for Element and highlights the solid progress we've made on our strategic priorities in 2025. Notably, in the quarter, we delivered double-digit growth in net revenue, adjusted operating income, earnings per share and free cash flow per share and once again produced record results in each of these important metrics. With that, let's turn to our Q3 financials, which I'll speak to on an adjusted basis.

Net revenue reached $306 million, up 10% from last year, supported by strong contributions across all revenue categories. Services revenue was up 6% year-over-year, reaching $156 million. This growth is attributable to higher utilization from new and existing clients and solid growth in all of our geographies. Net financing revenue grew 12% year-over-year to $130 million due to the combination of higher net earning assets in the U.S. and Mexico and the solid performance of our leasing portfolio. Results were further bolstered by funding efficiencies in the quarter, which absorbed a higher cost associated with our preferred share redemptions and Autofleet acquisition.

Continuing the momentum that has been demonstrated in 2025, our core NFR yield, which excludes gain on sale, expanded to 4.85% in Q3, up a further 8 basis points quarter-over-quarter and 41 basis points year-over-year, highlighting the strong execution of our leasing business and funding initiatives. We syndicated $632 million of assets this quarter, down 37% from last year. Despite the reduction in volume, syndication revenue totaled $20 million, an increase of 20% year-over-year. Our syndication yield of 3.2%, expanded more than 150 basis points versus last year, a reflection of the demand for our syndication products, favorable mix and the benefits from the reinstatement of 100% bonus depreciation in July.

We originated $1.7 billion of assets in the quarter, in line with the results from Q3 2024. The sequential dip in originations reflects normal seasonality tied to OEM retooling ahead of a new model year production in the U.S. and Canada. Importantly, originations in Mexico were at a record level of $342 million in the quarter, a clear reflection of the strength of our franchise in the country. Our momentum in vehicles under management resumed in Q3 with VUM increasing 1% quarter-over-quarter and 2% year-over-year, led by growth in service-only category. This increase is expected to further support services revenue in the coming quarters.

As Laura mentioned, new client acquisitions in the quarter were steady to last year, reflecting stable underlying demand that we expect will translate into higher order volumes ahead. Adjusted operating expenses remained well contained at $129 million, flat quarter-over-quarter and up 9% year-over-year or 6% excluding Autofleet. The year-over-year increase reflects continued investment into our business to advance our intelligent mobility ecosystem, enhance digital capabilities and maintain our leadership position in the industry. This resulted in an adjusted operating margin of 58% and earnings per share of $0.33, with these key metrics expanding by 30 basis points and 14% year-over-year, respectively. We remain focused on driving internal efficiencies and sustaining positive operating leverage as our business continues to scale.

In Q3, we generated an adjusted return on equity of 18.8%, up from 16.9% in 2024, demonstrating the continued progress of our capital-light strategy. With respect to capital management, we returned $61 million to shareholders through dividends and share repurchases during Q3. Year-to-date, we have repurchased 4.1 million common shares, representing $87 million of capital deployed. Looking ahead, we intend to renew our normal course issuer bid in 2026 reaffirming our commitment to returning capital to shareholders. These actions were underpinned by continued strong free cash flow generation with adjusted free cash flow per share of $0.42, up a robust 17% year-over-year. Our ability to consistently generate growing free cash flow continues to support our reinvestment into the business and the ability to deliver meaningful return of capital to shareholders. As of September 30, our debt-to-capital ratio stood at 75.7%, well within our target range of 73% to 77%.

In summary, we delivered strong financial results this quarter, consisting of robust revenue growth, positive operating leverage and record profitability. We are entering Q4 with positive momentum and a clear line of sight to finish 2025 at or above the high end of our guidance ranges in all metrics with the exception of originations as was communicated last quarter. We look forward to providing our 2026 financial guidance and dividend outlook alongside our Q4 results release in February.

Thank you. Operator, we are now ready to take questions.

[Operator Instructions] And your first question comes from Stephen Boland with Raymond James.

I've said this a couple of times. I guess to know Jeff Kwan, people move up the list here a little bit. So just the first question is, Laura, you usually pretty good about giving new client wins. You mentioned in the -- I think you said in the deck, the conversions of self-administered fleets. I'm just wondering if you can give a little more detail.

Yes, absolutely, Steve. Thanks. As I mentioned, this quarter, we did see some great commercial traction once again with 38 new clients and share of wallet, we had 270 new enrollments. We continue to go after the various segments that are in the self-managed space and winning market share. And I'd say, once again, this quarter, it's pretty evenly mixed where we're winning market share. So it's about 50-50 again this quarter from winning market share and self-managed fleet. So we're feeling good about not just what we've won, but the opportunities that are before us as well.

Okay. Great. And the second question is really on syndications. A great return on the yield. I'm just curious about how you managed the syndication volumes this quarter. I mean in the first half, you talked about deferring for the bonus depreciation to kick in. So could more have been done this quarter? I mean are you managing the amount that you're doing right now? And should we expect a similar yield in Q4 and maybe volumes?

Yes. Steve. So we -- our approach to syndication remains unchanged. Primarily, we use syndication as a tool to manage our balance sheet. And with our debt-to-capital metric coming in at 75.7%, which is well right in the middle of our targeted range, we've syndicated enough to manage our balance sheet. And then what we do is we look to focus on optimizing economic value. And you can see that with an increase in the yields in the assets that we hold on book with the core yield being up 8% this quarter. And then also, as you said, really strong syndication yields on the assets that we have syndicated. In terms of what's driven this -- the higher yield, the demand for our product is still very, very strong and the return of the bonus depreciation coming in clearly gave us an uptick on the yield, which we expect will continue on. And then there was also some product mix benefit that we had in the quarter.

And your next question comes from Jaeme Gloyn with National Bank Financial.

Yes. Good results on the net financing revenue yield. Just wanted to get maybe some of your perspectives on the sustainability. Can it continue to tick higher from here? Or this is, I think, almost, if not the all-time high for this net interest margin effectively. Just trying to get a sense as to where that could potentially go with some of the moving parts.

Jaeme. So you're correct in that the net financing revenue we delivered for the quarter was a record and the yield is -- or on the core yield is a record. Excluding the impact of any gain on sale, we do see that there is further increase that we can drive through that number. The leasing business that we set up to maximize our returns continue to perform well. And then on the financing side of things, we continue to see opportunity for us to decrease our cost of funding as we continue to mature our platform.

And then the Mexico business that grew strongly in the quarter had some strong yield as well, which drove that up. So really pleased with the result. And we expect that there is more to do on that line.

Okay. Great. And then in terms of the order backlog shrinking this quarter, your commentary in the press release suggesting that you have pretty high confidence and client momentum coming back. What are some of the underlying, I don't know, metrics or drivers or conversations you're having that gives you that confidence that we'll see order volumes pick up in the upcoming quarters? And is it -- is that sort of timing like a 2026 event? Or are you already seeing that flowing through today?

Yes. So in terms of the client order backlog, the reduction in Q3 is cyclical. So we always see a reduction in Q3 with strong originations higher than orders. And that's with the OEM model changeover. So we always see a drop in the auto volume during that period in Q3, and then it does pick up in Q4. In terms of why we're confident of that to continue to expand, it's the comments from Laura at the top in terms of the new client wins. We saw VUM return to growth this quarter with a 1% increase in the quarter, 2% increase year-over-year. And the -- those things will combine to drive higher orders or set that are to pick up in Q4.

[Operator Instructions] Your next question comes from Graham Ryding with TD Securities.

Maybe I could start with just Autofleet. Anything you can quantify around the potential impact here of that InDrive win, either revenue or just would you expect this to build over time? And then maybe just commentary Autofleet broadly, are there some tangible sort of revenue contributions coming in from that acquisition now that you're -- you have that in the business more than 1 year?

Sure, Graham. Happy to take that one. So I won't comment specifically on revenue per client, which we wouldn't normally do that. But it is, I'd say, a great sign for us. I mean, from where I said, it's like a proof point of how Element Mobility that we talked about last quarter is really going to allow us to, I'm going to say, broaden our scope beyond traditional fleet management. And so this will help strengthen us as a global leader in intelligent fleet management. So from where I said it's going to help amplify, I'm going to say, our digital moat. So that is good with InDrive, we expect to see more of these types of things with Element Mobility or Autofleet. And for Autofleet, it's been just a little over a year now that we acquired the team. It really has been a home run for us. Not only did we pick up, honestly, phenomenal team and a great tech platform. We are going to be able to drive things, and we've seen it. So for Element, we have been able to really move forward with more speed, more cost efficiency.

So it's been great as it relates to decreasing our cost of technological digitization, automation advancement. So that's a positive. And then for Autofleet on its own. It's doing really well, not only with win like InDrive but others that it is profitable on its own. And so we are very happy with where we're at and feeling very confident about where we can go together.

Okay. Great. And then maybe I could pivot to just the Services revenue growth. You flagged that higher utilization in the quarter was driving some growth, but it seemed like growth from sort of VUM and penetration on the services side is not there right now. So maybe what do you see the business needs to do to sort of get that back to double digits like you were previously?

Yes, Graham. So the first thing I'd say is on a year-to-date basis, excluding FX and one-off items, revenue is up 10%. So we are still driving double-digit growth. Specifically for Q3, while we saw an uptick in the VUM, a lot of those vehicles are actually onboarded in September. So the revenue they contribute for Q3 was relatively modest. And we expect that those vehicles that we onboarded will see an uptick in Q4 as long as -- as well as rather additional VUM we expect to bring in Q4. So last quarter, I raised 1 large client win that we had that represents approximately 1% of VUM growth. That's actually not in our Q3 numbers. So we'll likely see that come into Q4. So 1% VUM growth in Q3, minimal impact to service revenue, but we'll see that come through in Q4, plus additional clients that we're onboarding in Q4 will set ourselves up to continue to grow our service revenue.

This concludes the question-and-answer session. I would like to turn the conference back over to Laura Dottori-Attanasio for closing remarks.

Thank you, operator, and thanks, everyone, for joining us today. Looking ahead, our strategic priorities remain clear. So that's to provide exceptional value to our clients, advance our digital leadership and deliver sustainable growth for our shareholders, all while we stay true to our purpose and to our values. And so I really want to take this time to thank our global team members for their commitment and to thank our shareholders, our analysts and our stakeholders for your continued support. We look forward to speaking with you again on our next quarterly call in February.

This brings today's conference call to a close. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, and welcome to Element Fleet Management's Second Quarter 2025 Financial and Operating Results Conference Call. [Operator Instructions] and you are reminded that this call is being recorded [Operator Instructions]

Elements wishes to caution listeners that today's information contains forward-looking statements, the assumptions on which they are based in 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 annual information form. 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's 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.

I would now like to turn the call over to Laura Dottori-Attanasio, Chief Executive Officer. Please go ahead.

Good morning, everyone, and thank you for joining us. Element delivered record results in the second quarter of 2025, extending the strong momentum that we established at the start of the year. These results reflect the strength of our business model the disciplined execution of our global strategy and most importantly, the relentless commitment of our team members to serve our clients and create long-term value for all stakeholders. In a macro environment characterized by elevated uncertainty and shifting global trade dynamics, our purpose and values continue to guide us with clarity and conviction. Our commitment to delivering value to our clients and stakeholders continues to be our top priority.

We made meaningful commercial progress this quarter and delivered healthy top line growth with strong contributions from both our services and net financing revenue. At the same time, we maintained disciplined expense management, which supported our performance. We welcomed 46 new clients in the second quarter, the majority of which converted from self-managed fleets, this highlights our increased traction in this important growth segment. We also added 265 new service enrollments, a strong continuation of our share of wallet expansion, further strengthening our recurring revenue base. Our Strategic Advisory Services team identified over $390 million in savings opportunities for our clients, of which 43% was actioned. This is up significantly from last year's rate, reflecting how clients are increasingly turning to us to help drive efficiencies in today's dynamic operating environment, reaffirming the Element value proposition.

Our ongoing efforts have translated into solid year-over-year growth. Our committed order pipeline grew 6% and total client order volumes rose 9%. We also advanced our digital innovation agenda. Last week, we launched Element Mobility, a new strategic division dedicated to shaping the future of intelligent mobility. Under the leadership of Kobi Eisenberg, Element Mobility represents a new chapter in how we anticipate the evolving needs of our clients. Our recently announced partnerships with industry leaders, Samsara and Modis further enhance our ability to deliver more integrated tech-enabled solutions for our clients. The creation of Element Mobility and these partnerships signal our intent to lead an intelligent mobility by deepening the breadth and functionality of our platform, allowing us to deliver more value and more insights for our clients.

Lastly, we remain committed to advancing our sustainability agenda. Earlier this quarter, we released our fifth annual sustainability report, which reinforces our focus on transparency environmental and social responsibility and having a long-term positive impact in all that we do.

With that, I'll hand it over to Heath to take you through the financials.

Thank you, Laura. And good morning, everyone. Our record second quarter results reaffirm the strength and resilience of our business model and highlighted the continued progress we are making towards delivering on our financial objectives.

We reported solid financial performance underpinned by healthy top line growth and disciplined expense management. This translated into adjusted earnings per share of $0.30 and free cash flow per share of $0.40, representing year-over-year growth of 7% and 8%, respectively. Foreign exchange continues to be a headwind in Q2, though the impact moderated relative to Q1. On a year-over-year basis, the Mexican peso depreciated 13% against the U.S. dollar, contributing to a $10 million reduction in net revenue and a $2 million benefit to adjusted operating expense and a $0.02 decrease to diluted earnings per share. We anticipate the FX translation effect to continue easing in the second half of the year.

Now let us turn to our Q2 financials, which I will speak to on an adjusted basis. We generated net revenue of $290 million, an increase of 6% year-over-year driven by strong growth in both services and net financing revenue. When adjusted for foreign exchange, net revenue grew 9%, outpacing the 7% increase in adjusted operating expenses and resulting in positive operating leverage of 2.5%.

Services revenue increased 8% year-over-year to $151 million reflecting increased penetration and utilization of our expanding suite of offerings, including a $3 million FX headwind, services revenue grew a strong 10% year-over-year.

Net financing revenue rose 4% year-over-year to $127 million, driven by the ongoing benefits resulting from both our leasing business and funding initiatives along with strong gain on sale in both ANZ and Mexico. This was partly offset by higher funding costs associated with our preferred share redemptions and the Autofleet acquisition in October 2024.

Excluding the $7 million FX impact, NFR grew a solid 10% year-over-year. Importantly, excluding gains on sale, our NFR yields for the first half of 2025 increased 20 basis points year-over-year, a strong outcome, especially considering funding headwinds from our preferred share redemptions and the Autofleet acquisition in late 2024.

Origination volumes totaled $1.9 billion, down 4% year-over-year with foreign exchange contributing to the decline. Adjusted for FX, originations declined 2%, while on a quarter-over-quarter basis, originations grew 26%. We also saw continued momentum in client activity with our committed order pipeline of $1.7 billion, reflecting strong year-over-year growth underpinned by resilient demand and commercial strength.

Syndication revenue held steady at $12 million despite a $418 million reduction in volume year-over-year. This decline was intentional driven by our decision to defer select syndication transactions to the second half of the year, aligning with the reinstatement of 100% bonus depreciation under the new U.S. tax legislation effective early July. As previously communicated, we expect this change to deliver a favorable uplift to syndication yield which we estimate could drive approximately $25 million in incremental annualized revenue. We do note, however, that our first half 2025 syndication yield has been strong due to client mix and the uplift expected is relative to the syndication yields generated in 2024.

Adjusted operating expenses of $128 million maintained a trend of moderating growth at 5% year-over-year. When combined with our solid net revenue growth, this resulted in adjusted operating margin of 55.8%. We remain focused on driving internal efficiencies and consistently generating positive operating leverage.

Our adjusted return on equity rose to 17.5%, up 120 basis points year-over-year, underscoring the strength of our capital-light model and disciplined balance sheet management. In Q2, we returned $61 million to shareholders through dividends and share repurchases. Year-to-date, we have repurchased 3.1 million common shares, representing $64 million in capital deployed, reinforcing our commitment to share buybacks as a key pillar of our capital allocation strategy. As of June 30, our debt-to-capital ratio stood at 76.1% within our targeted range of 73% to 77%. Looking ahead, we anticipate finishing the year at or above the high end of our guidance ranges across all key financial metrics, with the exception of originations which we expect will improve as macroeconomic uncertainty eases and businesses reengaged in capital planning and allocation.

Despite operating in a complex external environment, we delivered a record quarter achieving new highs in revenue, adjusted operating income, return on equity, diluted earnings per share and free cash flow per share. We remain confident in our ability to sustain this momentum and continue delivering meaningful value to our clients and shareholders in the coming quarters.

Thank you. Operator, we are now ready to take your questions.

[Operator Instructions] And our first question comes from Vasu Govil from KBW.

Congratulations on a strong trend. I wanted to maybe start by asking about originations. I know that number grew sequentially pretty nicely. But on a year-on-year basis, even on a constant FX basis, it's still down year-on-year and 2Q is typically your strongest quarter. So it would seem like you're tracking towards the lower end of the guidance range at best. And even to get there, you'd have to see significant acceleration in the back half, so just curious how much visibility you have in that acceleration?

Yes. So certainly, while the origination number for Q2 was down 2% year-on-year, FX-adjusted. It's important to note that excluding Armada, Q2 was actually the second highest quarter of originations in the company's history only behind Q2 of last year. And last year did have some tailwinds, I guess, from the supply chain normalization and pent-up demand going through the system. So a $1.9 billion that we delivered in Q2 still remains really strong in absolute terms.

Importantly, it's also important to note that our committed order pipeline is actually up 13% year-over-year. So that gives us confidence of our ability to have strong originations going into the future. We saw Mexico was particularly strong, up 13% year-over-year and 33% quarter-over-quarter, which is important sign of that region, which has been impacted by macroeconomic uncertainty. So for all of those reasons, we're confident that we'll still have strong originations.

And then the only final point that I would make is while originations is a very important metric, it can be heavily influenced by the timing of client orders and client ordering patterns. And it should be probably viewed alongside the net earning asset number, which again was very strong for Q2 and drove strong net financing revenue.

And just a quick one for you, Laura, on Element Mobility, congratulations at its launch. I know it's really early days, but anything you can share on what type of interest you are seeing within your base of fleets that may sort of bode well for the cross-sell opportunity there?

Great. Thanks, Vasu. We're very happy with our record quarter. So on Element mobility, what we were really doing there is, I'm going to say, setting up a blueprint for our organization. So it's our commitment, if you will, to shaping the future of fleet. While we stay grounded in, I'm going to say, delivering value today.

So Element mobility is going to be our dedicated platform to drive innovation. So with our innovation lab, we're going to be focused on whether that's advancing next-gen technologies, whether it's forming strategic alliances like you saw where we announced our partnerships with Samsara and Modis. So we'll be looking at things from AI-driven analytics, advanced telematics, autonomous fleets, robotics. So the division is really going to be focused on, I'm going to say, solutions that can fundamentally reshape how fleets are managed.

What's important as the takeaway here is that Element Mobility. And as I said, it's like a blueprint. So that's going to lead on the transformation piece without our losing focus on execution. So Element Mobility is going to effectively drive what's next while the rest of the organization is going to focus on doing what we've been doing, which is delivering exceptional service to our clients and looking to continually improve how we service them.

The partnerships we think are going to be wonderful for us. We're super excited about them. And maybe if I can just a word on them because for us, again, we're all about delivering a real, I would say, in end-to-end fleet offering for our clients. So taking on motive, so they're the market leader in vehicle reimbursement, so that solutions for people who drive their cars to work. Samsara, they're recognized in the market for their AI-powered video telematics, the equipment tracking they do and all of their operations workflow tools. So these partnerships allow us to -- I'm going to say, integrate what we see as best-in-class solutions into our broader ecosystem. So that just further strengthens us. And it really does what we're looking to do, which is be that client-first mobility solutions provider for our clients.

Next question comes from Stephen Boland from Raymond James.

Laura, maybe you could just follow up a little bit, especially Samsara because they are well known. Is this just a solution that Samsara's offering into your fleet? Or is there like a counter there that you have access to their client base as well to offer other services that they don't provide? I'm just trying to -- is this a one-way partnership that they are just providing a solution to the 1.5 million vehicles that you have under management?

And what -- I know you're not going to give me very much specifics on this, but obviously, there's a split in revenue. I'm not sure how much disclosure I couldn't find it on Samsara, but how much disclosure that if they're offering video in vehicles, what they charge per vehicle, what's the split is now between them and you?

All right. Well, thanks for that question. Stephen, and I will give you some specifics. So it is indeed a real partnership. So we're not exclusive in that Samsara does have a marketplace and they'll deal with others just as we're always open to strategic tech alliances if we feel that it's going to enhance, I'd say, our ecosystem. And if it aligns with our client-first platform strategy.

So with Samsara, I'd say that our partnership is highly complementary. So as I talked about earlier, they deliver very specialized tech capabilities and essentially it allows us to embed their tech into our ecosystem. So that just makes it easier for our clients. I'm going to say, to adopt and scale their tools and they can do it in a more unified efficient fleet solution. So that way they get -- I'm going to say, our deep fleet expertise and some of these specialized capabilities. So it's a 2-way street. We refer them to our clients if we feel that, that's the right solution for them, and they'll be doing the same with their client base.

So without going into the details of the partnership agreement, I'd just say for Elements on the revenue side for 2025, you can anticipate, I'd say, little to no impact on the revenue as a result of this initiative and the Modis partnership. But in 2026, we'd expect that the partnerships are going to contribute in that mid- to single-digit range. So I'd say what's really important is, again, for us, is we're always client-led, we're doing what we need to for our clients. And we do think that these partnerships are going to allow us to create some differentiated value. And then it will also help strengthen, I'd say, our long-term growth profile.

Okay. That's great. And then probably for Heath. I'm a broken record on this, but we talked a while ago about maybe every quarter, just about the off-balance sheet securitization facility. Just wondering on the progress of that. And maybe it was in the disclosure, sorry, it was a busy night -- the Blackstone was there any Blackstone securitization done in the quarter as well?

So to take the second part of that question first. No, there was no Blackstone transaction in the quarter, and that was -- the quarter was just standard syndications.

In terms of the other off-balance sheet structures that we're working on, nothing to report at this point in time. We are making progress. We've got a term sheet that we're now actively progressing. So hoping to have something to announce in the back half of the year.

The next question comes from Bart Dziarski from RBC Capital Markets.

I just wanted to touch on core VUM, up 1% year-over-year, and you called out market share gains and conversion of self-managed fleet. So wondering if you could unpack that a little bit more? And then sort of as we go from here, what are some of the initiatives that could lead to that core VUM growth going back to the 2% to 4% range?

Yes. So from a bond perspective, it's up 1% year-on-year and slightly down for the quarter. I'd say the quarter-on-quarter movement is more of a reflection of timing and onboard cadence. So for example, we've actually recently signed a large contract for a client and that one client will drive approximately 1% VUM growth alone. And then we have another -- a number of other material opportunities we're actively working on. And in fact, our new business pipeline is very, very strong. And we also think we've increased visibility around the trade environment, that should sort of be beneficial for clients and potential clients to make capital allocation decisions and move forward. So our long-term view is still anchored to the 2% to 4% range. And with that large clients that we have signed that will onboard in the second half of the year, coupled with the material opportunities we're actively working on, we're confident of getting back to that 2% to 4% range in the back half of the year.

Next question comes from Graham Ryding from TD Securities.

Laura, you flagged some self-managed wins driving your business this quarter. How would this quarter's number of wins sort of compare to your typical run rate on that front?

Well, thanks, Graham. It continues to represent a good share of our new wins. So I think as we've been sharing, it's about 40% to, say, 50% each quarter. just say that, that momentum, again, it remains consistent. We're seeing some really strong engagement and activity in the self-managed space, both from a pipeline and a conversion perspective. So I think as we're looking at market conditions that are out there, I think we're seeing our companies that were previously managing their fleets in-house. I'd say that they're increasingly looking for some expert-led solutions. And as we've shared in previous conversations or calls, that's kind of right in our -- I'd say, right in our wheelhouse, where we're really there and can help our clients navigate complexity deliver some cost-effective solutions for them when times are somewhat, I'd say, uncertain like they are these days. So the self-managed segment is doing really well.

Okay. Great. And then just to follow on your theme of -- just your emphasis on tech initiatives with, I guess, last year's Autofleet and then your Samsara partnership and others and I guess, you've launched the Element Mobility. What should we be looking for in sort of this area to sort of gauge if these investments are translating into growth? Should we be looking for service revenue growth to pick up? Should we be looking for margin upside? Should we be looking for bond growth? Like what -- how are you expecting these investments to translate into your business?

Well, I'd like -- Yes. I guess I'd like to say all of the above. I guess, from, if I could say, a financial perspective, I'd be looking at Element Mobility as -- I'm just going to say a natural extension of the investments that we've already been making in things like digitization and automation. So you'll see -- I'm going to say returns that we get like whether that's in client experience, where we should start to see improvement in our NPS scores, operational efficiencies and margin improvement as we've I'd say, as we've been showing, that would be the expectation. I think we'd also see client retention, again, the better services per pump that would increase to. So the focus really is on -- I'm going to say the capital-light services that we can offer a heat that highlighted earlier. And maybe go just a bit further because we've talked a lot about what we would look at from an acquiring capabilities perspective. And I think what Element Mobility will give us is really a more structured way to assess the best approach. So whether that means we build something in house to go faster for delivering returns in client experience or for our shareholders or whether that's partnering with best-in-class players like we've done with Samsara and Modis or it could be just acquiring capabilities if we think that it makes strategic sense. So it'll be all of those. And again, I guess, what I'd just say is at this point, we're going to keep being really selective. We're going to focus on quality. And of course, we're going to want to make sure that it's got some long-term value creation for our shareholders. So again, not a specific answer, but hopefully, one that gives you a sense of the direction that we're in.

Next question comes from Jaeme Gloyn from National Bank Financial.

Yes. First question, just on the servicing revenues. I don't want to suggest, let's say, it's a bad result were in you post 8% growth and 10% on constant currency, but a little bit slower than maybe what we I guess, we're accustomed to from last year's results and a little bit of a dip quarter-over-quarter on an absolute dollar basis. Can you shed a little bit more light as to maybe some of the factors that might have been driving that sequential decline or perhaps a little bit slower growth rate in this quarter versus maybe, I guess, what we've got used to.

Yes, Jaeme. So I guess, my overarching comment would be we continue or continue to expect that the service revenue line will be our largest contributor of growth for 2025 and into the future. And we still have a lot of white space in terms of new client wins, increasing product penetration with the existing clients, bringing new products and services to market, as Laura has touched on, as well as continuing to sell the products we acquired through Autofleet.

In terms of the results for the quarter, so yes, FX adjusted was up 10% year-on-year. And while it was flat quarter-on-quarter, we did sort of see the same thing happened last year driven by a slight reduction in utilization for the quarter. So certainly, it's a key focus area of us. And I guess I would refer back to my previous comments on VUM. The focus for us as a business is really converting the opportunities that we've got there, plus those material contracts that were signed, get them onboarded and continue to sell the products into our client base and we'll see continued growth in service revenue as we action that.

Okay. And Heath, while I have you here, on the net financing revenue yield and thinking about this on the core basis, [indiscernible] would suggest an increase of almost 20 basis points quarter-over-quarter. A pretty good result. Can you -- it looks like it's driven by both the revenue and lower funding costs. But can you describe some of the -- what's been driving that growth in the top line revenue yield driving that expansion in margin. Is that geographic mix? Is there something you're doing from a pricing perspective that maybe we talked about in Mexico last year. What's helping to push that ahead?

Yes. So it's certainly driven by two key things. And also the -- what I would note is the 20 basis point improvement for the first half of the year is also particularly happy -- we're happy with it given that we also absorbed extra debt from the preferred share redemptions in the Autofleet acquisition.

In terms of what's driving the strong performance, it's really two things, One is the leasing initiative that we set up and we are starting to see the benefits of that come through from centralizing and standardizing our leasing business and really ensuring we're generating an appropriate risk-adjusted return on our leasing. And then the second element will be the funding, and we continue to evolve our funding structure. We implemented the commercial paper program, which had a significant reduction in our cost of funds. We also generated a really strong result on our most recent bond transaction, reducing the rate by about 247 basis points versus what was maturing. So those types of initiatives are helping to drive down the funding rate and then the leasing business and all of the focus we've got there is driving the top line growth.

Great. And if I can just stay on that theme, speaking about the gain on sale and GOS, looks like more of a step-up in the Mexico region this quarter from gain on sale also in Australia and New Zealand. Anything in particular in Mexico with -- is this just a lumpy quarter for vehicles coming off lease? Is there -- was there something else coming through? And how sustainable should we look at GOS where it stepped up quite materially this quarter.

Yes, absolutely. Strong quarter on the gain on sale. And really, it's a function of price and volume. So firstly, on the volume side of the equation, the vehicles we're selling today are generally the vehicles we originated 4 years ago. So given the fact we've been growing, we are seeing and continue to expect to see growth in the number of vehicles we have available to sell. So that's been a driver, and we expect that, that will continue to be a driver.

In relation to price, the price is partly driven by market dynamics, and we still expect that the price will continue to normalize over time. on the back of sort of the jump we saw from the supply chain issues. Having said that, though, we have put a lot of effort and work into our remarketing processes and optimizing our remarketing processes making sure we've got multichannel remarketing platform and driving high-quality vehicles. So good condition, low-mileage vehicles direct to the consumer where we can command a higher price rather than going through a dealer. So those sorts of things are helping us to offset the price decline from the market normalization. So in terms of a go-forward position on GOS, we expect that the volume will continue to increase, offset by price normalization.

[Operator Instructions] And our next question comes from Munish Garg from CIBC.

So first one on Dublin. Just an extension from last question on financing yield expansion. So could you please provide some more color on how the Dublin initiatives are benefiting net financing revenue and pricing trends?

Sure. Thanks, Munish. I'll start maybe more broadly, and then I'll hand over to Heath, if he feels like handing out some specifics.

We are firmly on track to achieve our targets. So we shared some while back that we generate $30 million to $45 million in net revenue by the end of 2028. And that actually, we are progressing towards, and it's part of what contributed to that increase in NFR. So we started in Dublin or I guess, back in August of 2024, just like to say this because we did complete this one on time and below budget. So on track, not just for the amount that I had mentioned, but we talked about a 2.5- to 3-year payback. So we're doing really well in that regard. And as Heath had mentioned, some of that relates to our improved pricing discipline by having centralized, if you will, and started to standardize how we service our clients and what we're seeing, and it's early days, but we're seeing better client leasing experience. We're seeing, I'm going to say, optimized operations and we're just getting started. And so that is some of that incremental value for our shareholders that's I guess now representing in NFR.

But Heath, maybe you want to provide some detail?

Yes. So I guess the only thing that I would add is the margin or the yield rather for the first half of the year was up 20 basis points. And that actually also absorbed approximately $10 million of additional debt costs from the preferred share redemption and the Autofleet acquisition. So that sort of gives you some of the magnitude of the improvements that we've made. Some of that is driven by the leasing business. Some of that is driven by the funding initiatives that we spoke of before.

I guess the final thing I'd say is the beauty of our business is we do have a lot of revenue levers. So increasing the yield, working on our funding, driving all of our many service offerings, obviously, the syndication and off-balance sheet financing. So we're highly focused on getting all of those levers going in the right direction to keep delivering strong results.

Just one more for me. So Element is generating a lot of free cash flow right now. So what would be the top capital deployment priorities in, say, next 12 to 24 months?

Yes. So nothing has changed in terms of key priorities. So priority #1 is to continue to reinvest in the business for the long-term growth of the company. And that number hasn't changed of the $80 million that we referred to. So that is key a key focus for us to sustain our performance over the long term. In addition to that, we've obviously got our dividends that we pay out. And then we have been active in our share repurchases during the period. So we have repurchased 3.1 million shares for the first half of the year and we expect to continue repurchasing shares over the coming quarters and for the rest of the year. And then obviously, we also need to manage our leverage and make sure that our leverage is within our targeted range to continue to have our investment grade rating, which is critical from a funding perspective.

And the next question is a follow-up from Jaeme Gloyn from National Bank Financial.

Just wanted to follow up on the Modis announcement. And if you could just sort of dig into what that market looks like, the market for vehicle reimbursement. This is something that would be new for Element. How many players are in there? What -- how many vehicles potentially -- what size that market maybe compared to the traditional fleet management market?

Yes. Sure, Jaeme. I can give you some of -- I guess, some of that information. So Modis in vehicle reimbursement, they play in the market that we refer to as gray fleet. So really for those who want to bring their cars to work, which is not an area that we actually play in and so when we looked at -- is this something that we want to build on our own, go out and buy something or set up a partnership, we did go out and look at the market. It's -- I'd say, a pretty solid market, and it is growing. We looked at a lot of the players there, and there are, of course, some really good players.

What we thought would make the most sense, not just for our company, but more importantly, for our client base is if we partner with someone like Modis, who is the market leader in this particular space, so we can bring the very best to the clients that they require. And we're seeing, I would say, probably more thought that's being given to this space, just given the macroeconomic landscape. And we work with clients like we see some of them just -- and we do this with them, whether they want to reassess, I'm going to say the reimbursement route versus acquisition strategies in fleet and so normally, we would advise and where to go. And now we have the ability to do that all, I would say, within the ecosystem with this partnership with Modis.

So we would expect to see some growth in this space. And I'm sure if you spoke with our partner, they would confirm saying that they see space. And I'd just say that this partnership, like the other one, Samsara, it's a 2-way partnership where we will each be referring one another's clients to each other. And again, all with the purpose of offering the best solution for a client for their needs. We do have a whole lot of information on TAM, et cetera, that I'm sure we can share with you or anyone who's of interest afterwards. Maybe not on this call because it would make for a very long call.

Okay. Fair enough. And then if I just go back to your comment around the partnerships with Samsara and Modis. I believe you said that it could add mid-single digits to revenue growth in 2026. I just want to get some clarity on that and make sure I understand and I'm not maybe getting too over my skis. Is that something that we would think of as incremental to the traditional 6.5% to 8.5% revenue guide that we're used to? And then, I guess, what would be the makeup of that? Is it mostly Samsara? Or is there a bit of a split you can share?

Yes, maybe I'll take that one. So I think what Laura was referring to was from a dollar perspective, so not a percentage perspective. So I don't think you should take mid-single-digit percentage and overlay that to the 6.5% to 8.5%. It's a dollar number.

This concludes the question-and-answer session. I would like to turn the conference back over to Laura Dottori-Attanasio for closing remarks.

All right. Thanks, Jason, and thanks, everyone, for joining us today. So as we look ahead, our strategic priorities will remain unchanged. We're going to deliver sustainable growth deep in digital leadership and provide exceptional client experience, all while we stay true to our purpose and values. So I'd like to thank our global team members for their commitment and their contributions and I also want to take this time to thank our shareholders, our analysts and our broader stakeholders for your continued support and your interest in Element. We look forward to reconnecting with you at our next quarterly call in November.

This brings today's conference call to a close. You may disconnect your lines. Thank you for participating, and have a pleasant day.