Element Fleet Management Stock

Good morning and welcome to the Element Fleet Management Q2 2026 Financial Results Conference Call. My name is Sumit Malhotra, Senior Vice President and Head of Financial Performance here at Element. Presenting to you on our call this morning are Laura Dottori-Attanasio, President and Chief Executive Officer of Element; and Heath Valkenburg, Executive Vice President and Chief Financial Officer. Following our remarks, we'll be pleased to take your questions.

Before we start and on behalf of the executives speaking today, Element wishes to caution listeners that today's information contains forward-looking statements. The assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in our company's most recent MD&A and annual information form. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially.

Element also reminds listeners that today's call references certain non-GAAP and supplemental financial measures. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP financial measures to IFRS measures can be found in the company's most recent MD&A.

And with that, I would now like to turn the call over to Laura.

Thanks, Sumit. Good morning, everyone, and thanks for joining us. Element delivered another solid quarter reflecting the resilience of our business model and the consistent execution of our strategy. Our adjusted net revenue increased 10%, our adjusted EPS grew 12% and our adjusted return on equity expanded to 19.6% demonstrating both the quality of our earnings and the strength of our recurring revenue model. Our first half performance reinforces that we are executing against the priorities that matter most; delivering greater value for clients, operating more efficiently and creating long-term value for shareholders.

Three themes stand out. First, our core business continues to perform well. We delivered record first half revenue, our services revenue reaccelerated during the quarter and we advanced our capital-light strategy through our inaugural equity residual transaction. Second, we continue to deepen client relationships by helping organizations lower fleet operating costs, improve vehicle uptime and navigate an increasingly complex operating environment through data, technology and strategic advisory services. And third, we are extending Element's leadership in intelligent mobility by applying the capabilities we've built over the years to the next generation of fleet solutions.

Turning to commercial performance. We added 42 new clients during the quarter, including 13 conversions from self-managed fleets, and we completed 247 additional service enrollments with existing clients. These results demonstrate the growing value clients place on our broad service offering. Our strategic advisory services team remains a key differentiator. During the quarter, the team identified about $482 million in potential client savings with 41% already being actioned. Those are meaningful outcomes for clients and an important driver of long-term client retention.

We also announced a strategic partnership with Waymo, a powerful example of how our purpose to move the world through intelligent mobility is coming to life. And while autonomous mobility is an emerging market, the operational capabilities required to support it; including life cycle management, maintenance and operational execution at scale; it aligns closely with Element's core strengths. We are beginning our work with Waymo in San Diego and we expect to support future expansion as our partnership grows.

And as you can appreciate, this is a measured and highly relevant extension of our core capabilities into an evolving mobility segment where Element has a clear right to win and can create meaningful value for clients and shareholders over time. We also continue to advance our digital and automation transformation. DigiAdvisor, our AI-powered decisioning platform combines connected vehicle data, service information and Element's expertise to support faster, more consistent maintenance decisions. It's another example of how our technology advancements are improving the client experience while increasing our ability to scale efficiently.

Now over the past several quarters we've invested in digitizing workflows, automating manual activities, strengthening our data infrastructure and simplifying how work gets done across the organization. During the quarter, those investments enabled us to initiate targeted organizational actions representing 8% of our workforce, positioning us to deliver approximately $20 million of annualized run rate savings in 2027. This reflects our ongoing focus on building a simpler, more efficient and more scalable organization while continuing to invest in future growth.

And as we look to the second half of 2026, our priorities remain unchanged. We will continue to grow our core business. We will continue to deepen client relationships and invest selectively in capabilities and mobility opportunities. And maintain disciplined execution to create long-term shareholder value.

And with that, I'll turn the call over to Heath to discuss our financial results in more detail.

Thank you, Laura, and good morning, everyone. Element delivered solid financial results in the second quarter supported by the durability of our business model, disciplined execution and continued progress of our capital-light strategy. We achieved double-digit year-over-year growth in adjusted net revenue and earnings per share with return on equity expanding to 19.6%, demonstrating the capital efficiency in our business model. I will now walk through the components of our performance on an adjusted basis.

Net revenue was $318 million, up 10% year-over-year with solid contributions from each of our categories. Service revenue was $164 million, continuing the expected reacceleration and increasing 8% from the prior year. The year-over-year increase was supported by growth in vehicles under management and higher services revenue per VUM. Vehicles under management ended the quarter at 1.56 million, an increase of 3% year-over-year. Consistent growth in VUM remains a key attribute in driving our top line performance and we continue to target annual VUM growth of 2% to 4%.

We remain encouraged by this performance and continued growth in VUM and services further strengthens the recurring and capital-light nature of our earnings profile. Net financing revenue was $136 million, up 7% from the prior year. The increase reflected growth in average net earning assets, benefits from our leasing initiative and the continued evolution of our funding platform. The solid NFR growth was achieved despite the provision for credit loss associated with the client-specific matter we discussed last quarter. We are now fully provided for that exposure.

And due to the high quality of our lease portfolio, we expect annual credit losses will remain within our historical range of approximately 1 to 2 basis points over time. Core NFR yield increased 35 basis points to 5.12% demonstrating continued expansion while absorbing higher PCL. Syndication revenue was $18 million, an increase of 58% year-over-year. The increase was supported by higher syndication volumes, continued investor demand and the reinstatement of 100% bonus depreciation. Syndication remains an important balance sheet management tool and our new equity residual structure and complementary funding channel.

As the structure scales, Element can allocate volume across channels to enhance funding capacity, capital efficiency and our return profile over time. I'll touch on that in more detail when I discuss our balance sheet. Originations were $1.7 billion in the quarter, down 9% year-over-year and up 19% sequentially. The year-over-year decline primarily reflected the expected normalization in activity from the originate to syndicate client we discussed last quarter. Excluding the impact of this client, originations increased 4% during the first 6 months of 2026 compared to the prior year period.

As this client's activity peaked in the second quarter of 2025, the year-over-year comparison is expected to become more favorable through the balance of 2026. Sequentially, originations increased across all regions reflecting continued commercial momentum and the conversion of our order pipeline into funded assets. It is also important to view originations in the context of our broader business model. Approximately 60% of our vehicles under management are service only and do not require Element to provide financing.

In addition, quarterly originations can fluctuate based on the timing of client purchasing decisions whereas our earnings are supported by a much broader set of drivers, including growth in our vehicles under management. While variability in originations can occur, we would note net financing revenue has continued to consistently increase year-over-year, benefiting from higher net earning assets and ongoing expansion in NFR yield. Turning to expenses. The $141 million total in Q2 was slightly down quarter-over-quarter and up 10% from the prior year.

The year-over-year change reflected continued investment in Car IQ, Waymo and our digital capabilities together with inflation and higher depreciation. As Laura noted, we initiated organizational actions in Q2 that were supported by prior investments in digitization, automation and process simplification. Once fully implemented, these actions are expected to generate approximately $20 million in annual run rate savings, helping moderate expense growth in 2027 while supporting a more scalable cost structure, enhancing service quality and enabling continued investment in strategic growth priorities.

Adjusted operating income was $177 million, an increase of 9% year-over-year and adjusted operating margin was 55.6%. For the first 6 months of 2026, adjusted operating margin increased 60 basis points to 55.9% reflecting positive operating leverage across the first half. Adjusted free cash flow per share was $0.39 in the quarter, down 3% year-over-year reflecting higher cash tax payments in certain jurisdictions. Cash tax payments can vary between quarters as demonstrated by adjusted free cash flow per share increasing 11% year-over-year during the first 6 months of 2026.

Turning to the balance sheet. We ended the quarter with a debt-to-capital ratio of 76.5% within our targeted range of 73% to 77%. This reflects continued discipline in managing leverage and ties back to the broader funding initiatives discussed earlier. Our inaugural equity residual transaction with CPP Investments and Blackstone represents an important evolution in our funding strategy. It adds a complementary channel alongside traditional syndications and provides greater flexibility in how we deploy capital. Importantly, we're already seeing the benefits of this enhanced flexibility.

In Q2, we returned $163 million to shareholders, including $120 million allocated towards the repurchase of 5.8 million common shares. In the first half of 2026, we repurchased 8.1 million common shares representing 2% of shares outstanding and above the 5.4 million shares that we repurchased in all of 2025. We will continue to deploy capital with discipline using our enhanced flexibility to be opportunistic during periods of market dislocation. In summary, our first half results demonstrate the resilience and strength of the Element business model. In the first 6 months of the year, revenue grew 13% on a year-over-year basis. EPS increased 18% and free cash flow per share rose 11%. Services revenue continues to reaccelerate.

And as our partnership with Waymo launches in early 2027, we expect that our entry into the autonomous vehicle sector will add to our services growth. At the same time, our investments in technology and growth initiatives are now providing us with the ability to further improve our organizational efficiency and support positive operating leverage as the business scales. Our new funding structure also provides us with greater balance sheet flexibility that we will utilize on behalf of our shareholders. With a solid first half behind us, continued momentum in the core business and enhanced capital-light funding capabilities, we remain well positioned to deliver within our full year 2026 guidance ranges.

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

[Operator Instructions] The first question is from Nick Brady with [ Vaz Global ].

This is Nick Brady filling in for Vasu Goval. Just on servicing revenue, I know growth picked up to 8% this quarter. Can you maybe speak to your mid- to long-term target for that business? Can it return to a double-digit grower? And if so, is that mainly from loan growth accelerating or monetization of additional services?

So as we think about medium-term growth, we've always guided the market to a 6% to 8% revenue growth. And then the composition of that, the service revenue growth over the medium term will be a higher contribution to that growth relative to financing income. In terms of where that growth comes from, number one, it's expanding our portfolio. So growing our vehicles under management and we target 2% to 4% growth on an annual basis for VUM. Additionally, we always see the impact of inflation coming through with a lot of our service revenue driven by passthrough items.

And then we continually drive increased product penetration of our existing products into our portfolio and that's a combination of our traditional products that we have, but also the new products that we have brought to market, whether it's route optimization or the new Car IQ product that we acquired. And then the additional one that I would mention are other initiatives and something like the Waymo autonomous vehicle space is another area that will drive stronger service revenue growth into the future.

Got it. And then just one quick follow-up question. You mentioned the core NFR yield continued to rise. How much higher can that yield get and maybe what are the biggest drivers there? Is it mainly just cost of funds improvement or some of the other moving pieces?

Yes. So we were pleased with another really solid yield in our NFR for the quarter and really it reflects the continued benefit from our leasing initiatives. So we set up our leasing business a number of years ago and we're seeing the benefits of that coming through. Additionally, we are improving our funding costs. And just one example of that is during the quarter, we completed a senior notes offering and the spread on that was 70 basis points over U.S. treasuries and that's actually our most efficient debt funding to date. So this enables us to refinance higher debt costs at more attractive terms.

So as I said, a strong yield in the quarter of 5.12% despite some higher credit loss provisions that we expect will normalize over time. In terms of the look forward on that yield, we think that these improvement items are durable drivers and should continue into the future. Having said that, it's important for us to balance increased yield with growth and new client wins and the benefits of our lower funding costs can drive strong NFR yield, but also enables us the ability to pass some of that on to clients to drive growth into the future.

The next question is from Bart Dziarski with RBC Capital Markets.

I wanted to ask on the efficiencies identified by the Strategic Advisory Services Group. So $480 million I think that's one of the highest or higher quarterly numbers we've seen. So could you maybe walk us through like what are the additional savings being identified and how that's impacting the value prop of Element with its clients?

Yes. Our Strategic Advisory Services team is in fact doing a fantastic job. The savings again come from, I'd say, a real broad review of again how our clients operate, whether that's from acquisition of the vehicle, uptime of the vehicle, maintenance, et cetera. And so that is where a lot of this has come from, I would say, with the investments we've made in not just our people, but really our technology and our AI-enabled tools. And on previous calls, we've talked about our Nova agent.

I'd say we've been able to bring more great ideas or insights for cost savings to our clients, which has helped and the macro environment as well. When we look at the percentage of savings not just that we've identified, that have been enacted has been at a good percentage. And I think that represents a bit of the environment and how our clients are more interested in finding the savings that they can find.

Super. And then just looking at Slide 16 on the service penetration for top products. So thanks for providing that disclosure. There's about 7 listed there and I think Element currently offers 22. So could you maybe for the remaining 15, just I know the blended penetration will be lower, but give us a sense of what that looks like? And then how the discussions with clients are going in terms of increasing that penetration over time?

So the ones that we've presented on the slide there, I would say, are more mature or longer-running products that exist in the fleet management industry. And therefore, the other products that we have do have a lower penetration rate and therefore, more opportunity to drive those across the platform. So there are items such as the Car IQ product that we're bringing to market and some of the more newer technology products. And they would have a penetration rate that is sort of more in the low single digits to 15% range. So plenty of opportunity for us to drive that higher across the portfolio over time.

The next question is from Stephen Boland with Raymond James.

You probably expected this question, but just on the equity residual structure that you put in place. Can you just give us a little bit of the mechanics on that? Is that 2 separate transactions within getting rid of the residual as well as the upfront paper? And you also mentioned that the emergence of income comes over a longer period of time. Maybe just a little more description on that, please.

So certainly glad to have the transaction done and our first transaction done. So this is what we refer to as an equity residual transaction. It's under a multiyear committed program with CPP Investments and Blackstone. So firstly, I'd say that the partnership validates the quality and low-risk profile of Element's assets and adds a complementary off-balance sheet funding channel alongside traditional syndication. So it will complement our syndications. From a financial impact although the transaction closed in June, from an accounting perspective, it was effective 1 May.

So ultimately, what that does is approximately $700 million of receivables move off the balance sheet on 1 May reducing the interest income for the final 2 months of the quarter. And so while it does impact the timing of revenue during Q2, the overall attractiveness of the economics and the structure are quite compelling for Element. So compared to traditional syndication, there is less revenue recognized upfront and a greater portion is earned over the life of the leases. So we'll begin receiving distributions from the structure from July 1 and those revenues will flow into the income statement over the approximate 4-year average life of the asset.

So in addition while also receiving the cash flows, we also retain a portion of the tax attributes helping to manage cash taxes over time. So that's some of the mechanics of the structure. Ultimately, as with syndication, the program is primarily a balance sheet management tool, but has a number of strategic benefits for us. So number one, it diversifies our funding sources. So this adds an off-balance sheet tool that complements syndications. It also extends our capacity. So many of the assets that were in this structure are not actually eligible for traditional syndications so we can put them down this structure.

And ultimately, that gives us flexibility to allocate assets across syndications or this structure or other channels based on what works best from an economic market conditions, capital efficiencies. I'd also say that, as I said, the economics are attractive. So we retain the client relationship. We retain the management and servicing revenues. And then we retain a 49% economic interest in future lease cash flows and associated tax attributes. And then as we saw in Q2, the structure reduces the capital required to support asset growth and creates flexibility for us to invest in the business and return capital to shareholders.

So ultimately, that enabled us to have a sizable share repurchase of 5.8 million shares in the quarter $120 million, while maintaining our debt-to-capital ratio of 76.5% and taking advantage of what we believe was an attractive share price during the quarter. So overall, we're delighted to have the program stood up. It's another funding tool to our toolkit. It improves the capital efficiency. It supports the capital-light growth strategy. And then from a modeling perspective, I think the key points are that interest income impact begins the 1st of May and then we'll start to receive the distributions from the structure from July 1. So I know that's a long answer, Steve. All the necessary pieces to you.

I appreciate that. I'm not sure you want to take this one. Just like I go back to my notes, just in terms of Dublin operation, that operating income was supposed to impact -- have an impact in 2028. I know we're probably halfway through that. Maybe just a little bit of what's happening in Dublin and what have they taken over or what's the operational update you could provide on that, please?

Stephen, it's Laura. Maybe I'll take that one. So happy to report that that is progressing really well. Probably worth revisiting a bit why we launched it when we started, I guess, almost 2.5 years ago. The objective really was that we wanted to create this global leasing center of excellence and the concept was we wanted to bring consistency not just how we structure transactions or price risk or manage the portfolio, but it was also about improving efficiency allowing for us to, I'd say, make faster decisions so that we can deliver a better experience for our clients and a better one for our commercial team in serving our client base.

And so I'm happy to report that everything is rolling out as expected. And so we talked about some of the improvements, I'd say, that we've seen in our net financing revenue and yield. And so I think that I'm going to say reflects some of what we've done. And I'd just say that we are on track to deliver the targets that we had laid out when we first started talking about our Dublin initiative and that relates to -- we talked about our revenue targets and adjusted operating income benefits that would have run rate numbers as of 2028 and Heath feel free to share those numbers in the U.S. dollar equivalent. So I think it's actually going really well.

And I'd even go as far as to say when I think of the last quarter, we spoke about our decision where we reduced exposure in that one originate to syndicate client. I do like to believe that the way we're set up now, that really just reflects sort of the discipline now in how we are deploying our balance sheet. So even if it does have a short-term impact on a metric like originations, we are set up in a way that we've got better portfolio management and a structure that allows for just more consistent execution across the business.

And just to add to what Laura said in terms of the numbers that we called out. So $30 million to $45 million increase in net revenue, $22 million to $37 million in adjusted operating income, both by 2028 and we're on track to deliver those numbers.

The next question is from Graham Ryding with TD Securities.

Just wanted to touch on the Waymo mandate. Just any context you can provide on the contribution to your vehicles under management and revenue from this mandate? Will we notice sort of a contribution on the servicing side? And then what's your visibility or potential for this partnership to grow? Is that the intention here?

Yes. Graham, I'm more than happy to take that one and I'm going to have to apologize in advance if I overtalk this one and then Heath again can step in and provide more detailed numbers if required. But needless to say, we are extremely pleased with the strategic partnership that we announced with Waymo. It's something we've been working on for a good 2, 2.5 years and we believe it's just a really strong validation of our capabilities and our long-term strategy. So again, we know EVs are a new technology, but we also know that a lot of that requires the same capabilities that Element has built over the years and so also great.

Everything we do, and I talked about it a bit in my prepared remarks, but whether that's fleet operations, maintenance, life cycle management, et cetera; these are things that we do and we've done really well. So it does feel like a lot of work, but it does feel like a natural extension of what we already do really well. So we're going to begin by supporting Waymo in San Diego and we do expect there to be additional markets that will come online. And I'd just say that as they do, the operating model we expect it's going to evolve by city. But ultimately, we continue to do what we do best and it's how we enable just these efficient fleet operations.

Now every time we go into a city, it does require some, I'm going to say, incremental investment from us and that will be things like charging infrastructure that needs to be set up, could be again localized operational support. And so for the first one that we've announced that is in San Diego, all of those investments that are required, they've already been contemplated in our 2026 guidance. And so from, I'm going to say, an economic perspective so we expect that it will add to our services growth immediately starting in 2027.

And I'll hand it over to Heath when I'm done and he can maybe give a little bit of insight into the numbers at least just for the San Diego one keeping in mind all of these will be a bit different. I would just point out though and again, this will be great from a revenue generation perspective, but the margin will be somewhat different from what our traditional fleet management business delivers and that's because there are some different operational services that are involved in this business, but we still do expect to have some pretty attractive returns.

And before I hand it over, I did say I would talk long on this one so I apologize. But before I hand it over to Heath, I do think it's worth pointing out that for us, this really is more than just this one single, I'm going to say, commercial agreement that we have with Waymo. For us, we really see this as an opportunity for Element to be established as the fleet manager of choice for autonomous mobility. And so we think it validates our strategy and it should really open up a long-term growth market for us. And so I want to thank you for the question and hand it over to Heath, if he wants to provide maybe a little more insight into the numbers than I've done.

Yes. Laura, I think you summed it up beautifully and we're pleased to have this opportunity and partner with a company like Waymo. In terms of some of the financing or financial elements, the first thing I'd say is that this is going to be different than a traditional fleet. So from a VUM perspective while the contribution to VUM would be modest, the actual revenue per VUM is a lot higher than a traditional fleet.

So the complexity of the services performed as well as the high utilization of these assets means that on a per vehicle basis, the revenue is a lot higher. We expect as we go live with our San Diego site in 2027 that that will add a few points of services revenue growth for the 2027 year. And then we'll be looking to scale it from there as we scale both the number of vehicles, market expansion and operational scope.

Okay. Great. Appreciate the thorough replies there. And if I could add one more. Just when you talk to investors and you sort of get feedback on what's sort of driving the shares and the valuation, what are the key pieces you think you need to execute on here over the sort of near to medium term in order to drive the multiple on your shares higher? And where does VUM growth rank in that priority list?

Yes. Our focus certainly is to drive growth across all of our revenue line items and to continue to drive our margins higher. No doubt that there's a focus on service revenue growth. So we're pleased to see the reacceleration of service revenue up 8% for the quarter. So that is certainly a focus for us. In terms of how VUM plays into that, VUM is certainly a key metric for us. We target 2% to 4% growth on an annual basis, which will drive service revenue as well as financing revenue.

You then overlay the impacts of inflation, you overlay the impacts of increased product penetration, new products that we bring to market and then an item such as autonomous vehicles in our partnership with Waymo. That's a real focus for us to drive service revenue higher. And then you overlay all of the work we're doing to create efficiencies in the business through digitization, which will drive higher margins over time.

The next question is from Munish Garg with CIBC.

My first question is on originations. So to reach the bottom end of the range of guidance for 2026, you would approximately need $3.3 billion of originations in H2. Can you discuss the visibility you have into that acceleration year-over-year?

Yes, absolutely. So originations for the quarter were $1.7 billion, which was down 9% year-over-year, but up 19% sequentially. As expected, from a year-over-year comparison perspective, that was affected by the originate to syndicate client we've previously discussed and that activity peaked in the second quarter of 2025. If I exclude the impact of that client, originations in the first half have increased approximately 4% versus the prior year. Last quarter, we also highlighted some timing shifts in client ordering. So certain clients were moving activity into later periods of the year.

And so we did anticipate that that dynamic together with the originate to syndicate client would impact the second quarter orders and originations. Encouragingly though, we're now seeing that that trend is normalizing and we've got good visibility into our pipeline and July orders and originations were very strong. So based on the strength of our order pipeline and improving ordering activity, we expect the originations momentum to build through the second half of the year. I was just going to summarize that by saying we do need to increase growth in originations in the second half of the year. We've got good line of sight into doing that and expect a stronger second half as you saw across all geographies in Q2.

Yes. And maybe one more on the expenses. So on the 8% workforce reduction and approximately $20 million of annualized run rate savings in 2027, when do we expect the savings beginning to appear? And how much should be visible in the second half of 2026 and how much of these savings would be reinvested in other growth initiatives rather than flowing through the margins?

What I'm going to do, maybe I'm going to start and give -- I'm going to do a bit of my Waymo spiel here and then I'm going to hand it over to Heath once again maybe to really answer the question that you have. But I do think just with the announcement that we made, it is worth talking a bit about because it really is part of the transformation that we've deliberately, I'd say, been executing on over the past 2-plus years. As you know, we made a lot of important investments in our capabilities and there are capabilities that we do believe will differentiate Element over the long term.

And so that's like acquisitions that we made in Autofleet and Car IQ and all of the continued investments in our digital platforms, automation and AI. I'd say, and this part is important and we talked about this because everyone felt like why aren't your expenses coming down with these investments. And what we did say and I want to highlight is that we really didn't want to realize, I'm going to say, productivity gains until we were confident that the technologies that we were delivering could give our clients the experience that they needed and we wouldn't put any of that at risk.

So it was all about kind of proving our capabilities first, how we redesign the work and so that's what you're seeing today. We've actually moved at, I want to say, a faster pace than even we were expecting and that's why we were able to announce the productivity benefits that you're seeing. And so when we look ahead, I think you should think of this as an ongoing exercise as we continue to digitize all these processes and responsibly deploy AI. We're going to continue to do that and you'll see improved productivity over time.

But it's just really important to note because I know everyone wants this for tomorrow, but we do have to do this thoughtfully and at a pace that doesn't compromise the client experience because ultimately, that is what differentiates us. So we have to make sure we're going at a pace. And so next year, we talked about the $20 million of annualized savings and the good news is that allow us to continue delivering as our clients expect and I think as the market would like to see. And maybe with that, I'll hand it over to Heath for more detail on that.

Yes. So as per normal course, we'll provide 2026 guidance later in the year. But specifically for this objective, we will initiate these changes in the back half of the year. So there will be some small impact for 2026, but the key benefit will be for 2027. So $20 million is a material part of our expense growth in any 1 year. And while there will be some investments such as the Waymo partnership, this program of work will ultimately moderate the expense growth for 2027.

[Operator Instructions] The next question is from Jaeme Gloyn of National Bank.

I did want to just follow up on that OpEx savings into next year like the $20 million would be about 140 basis points based on sort of like just normal target net revenue growth, which is above the operating margin expansion that you're kind of guiding to this year. So is the expectation that you will take some of those savings and continue to reinvest in things like Waymo or building out more AV or more channels to sort of use those savings to further accelerate revenue growth?

Yes. Jaeme, I'd say it will be a balance across both. So the efficiencies that we're building into the business will drive margin expansion and we expect continued margin expansion into 2027. At the same time, we will be investing in key priorities to drive long-term growth such as autonomous vehicles.

If I switch over to VUM growth, looking at the breakdown of VUM growth, service-only vehicles continuing to expand nicely and it's service and finance and finance-only vehicles where we're seeing some VUM decline. Is that tied to that originate to syndicate client? Is there something else going on there? What can you sort of give us in terms of how that breakdown is shaking out and offer a little bit more color on the drivers?

Yes. So in terms of the different buckets, the key driver will be our or is our Armada relationship. You'll recall that that started off as financing and then shifted to service only. So there's a migration of that client from funding to services as the original vehicles that were funded roll off. So that's really the key driver. There's some there from the originate to syndicate offering. But excluding those 2 impacts, we are seeing growth across both funded and service only.

And then just to close up on the VUM, as discussed earlier, we target 2% to 4% VUM growth, which we believe gives us a good increase in our portfolio to drive the required top line growth. And we're currently at 1.56 million units, up 3% year-over-year. And while that's down a very modest 4,000 units for the quarter, I'd say that's normal course activity that you have across clients ins and outs during the period. But more importantly, we've got good line of sight to our pipeline of deals and we expect that VUM will continue to increase across the back half of the year.

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 thank you all for joining us today. Before we close, I do want to thank our Element team members around the world for their dedication, focus and hard work. The results that we discussed today are only possible because of the way our teams show up for our clients, for one another and for the business every day. And so thank you all and we look forward to speaking with you again in November for our third quarter earnings call.

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

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.