Q2 2024 Element Fleet Management Corp Earnings Call

Frank Ruperto, Paul Holden, Paul Holden, Paul Holden, Paul Holden

Operator: Good morning, ladies and gentlemen, and welcome to Element Fleet Management's second quarter 2024 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode.

Speaker Change: Good morning, ladies and gentlemen, and welcome to Element Fleet Management's second quarter 2024 Financial and Operating Results Conference Call.

Operator: And you are reminded that this call is being recorded. Following the prepared remarks, there will be an opportunity for analysts to ask questions. To join the question queue, press 1, press star, then 1.

Speaker Change: At this time, all participants are in a listen-only mode, and you are reminded that this call is being recorded.

Speaker Change: Following the prepared remarks, there will be an opportunity for analysts to ask questions.

Speaker Change: To join the question queue, press 1, press star, then 1.

Operator: In the event you need assistance during a call, you may signal an operator by pressing the star key followed by zero. Ella 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, as well as its most recent AIF. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially.

Speaker Change: In the event you need assistance during a call, you may signal an operator by pressing the star key followed by zero.

Speaker Change: Ella wishes to caution listeners that today's information contains forward-looking statements.

Speaker Change: 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, as well as its most recent AIS.

Speaker Change: Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially.

Operator: 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 Dottorio-Atenasio, Chief Executive Officer of Element. Please go ahead.

Speaker Change: The company also reminds listeners that today's call references certain non-GAAP and supplemental financial measures.

Speaker Change: Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with the better understanding of how it assesses results.

Speaker Change: A reconciliation of these non-GAAP financial measures to IFRS measures can be found in the company's most recent MD&A.

Speaker Change: I would now like to turn the call over to Laura Dottorio-Atenasio, Chief Executive Officer of Element. Please go ahead. Laura Dottorio-Atenasio, Chief Executive Officer of Element.

Laura Dottori: Thank you. Good morning and thank you for joining us today. I'm delighted to share our latest achievement. As a team across Element, we created and unveiled our purpose. We are acquiring new capabilities in the digital and automation space. We delivered another strong financial quarter for our shareholders. Our centralized leasing initiative officially began operations in Ireland on time and on budget with no change to our expected benefits that we previously shared with you. And we released our fourth annual sustainability report with a commitment to setting science-based targets that include intended reductions to our greenhouse gas emissions. Now let me start with our purpose.

Speaker Change: Good morning and thank you for joining us today. I'm delighted to share our latest achievements.

Laura Dottoriow: As a team, across Element, we created and unveiled our purpose,

Speaker Change: We are acquiring new capabilities in the digital and automation space. We delivered another strong financial quarter for our shareholders.

Speaker Change: Our centralized leasing initiative officially began operations in Ireland on time and on budget with no change to our expected benefits that we previously shared with you.

Speaker Change: and we released our fourth annual sustainability report with a commitment to setting science-based targets that include intended reductions to our greenhouse gas emissions.

Laura Dottori: To further strengthen our culture, our team members worked collaboratively over the past year alongside our clients and key partners to unlock our very first purpose statement, move the world through intelligent mobility. Our purpose is a reflection of our unwavering commitment to putting our clients first, to leading the industry, and our ambition to affect positive change for a brighter future, to move the world embodies our dedication to intelligent, seamless mobility. And so, driven by our purpose, we accelerated our digitization and automation initiative with the acquisition of Autofit. Autofleet is an end-to-end software platform that's designed to support fleet management systems, optimize and manage complex operations, and maximize fleet utilization for mobility operators.

Speaker Change: Now let me start with our purpose. To further strengthen our culture, our team members worked collaboratively over the past year alongside our clients and key partners to unlock our very first purpose statement.

Speaker Change: Move the world through intelligent mobility.

Speaker Change: Our purpose is a reflection of our unwavering commitment to putting our clients first, to leading the industry, and our ambition to affect positive change for a brighter future.

Laura Dottori: It's led by a team of incredibly talented individuals, including its co-founders, Colby Eisenberg and Dor Shea. They have built a world-class team and a scalable digital platform that is built on a modern tech stack. Now having worked with the Auto Fleet team previously, we have experienced first hand the cultural fit with Element and the value add they bring to us and to our clients. This acquisition will enable us to better serve our clients by accelerating our digitization and automation efforts in fleet, with Optimized Mobility Solutions and it will help us expand into new value-added services.

Speaker Change: To move the world embodies our dedication to intelligent, seamless mobility.

Speaker Change: And so, driven by our purpose, we accelerated our digitization and automation initiative with the acquisition of Autofleet.

Speaker Change: AutoFleet is an end-to-end software platform that's designed to support fleet management systems, optimize and manage complex operations, and maximize fleet utilization for mobility operators.

Speaker Change: It's led by a team of incredibly talented individuals, including its co-founders, Colby Eisenberg and Dor Shea. They have built a world-class team and a scalable digital platform that is built on a modern tech stack.

Speaker Change: Now, having worked with the Auto Fleet team previously, we have experienced first-hand the cultural fit with Element and the value-add they bring to us and to our clients.

Speaker Change: This acquisition will enable us to better serve our clients by accelerating our digitization and automation efforts in fleets.

Speaker Change: with Optimized Mobility Solutions, and it will help us expand into new value-added services.

Laura Dottori: Now with regards to our quarterly financial performance, we continued our commercial success with the addition of more new clients by both earning share and converting self-managed fleets along with increased share of wallet wins. For the second quarter, we delivered 14% net revenue growth with expanded margins. All of which translated into double-digit adjusted earnings per share and free cash flow per share growth. Our very strong performance is a reflection of our team's relentless passion and dedication to delivering the very best for our clients.

Speaker Change: Now with regards to our quarterly financial performance, we continued our commercial success with the addition of more new clients by both earning share and converting self-managed leads along with increased share of wallet wins.

Unknown Executive: Good morning ladies and gentlemen, and welcome to Element Fleet Management's 2nd quarter 2024 Financial and Operating Results Conference Call. At this time, all participants are in a listen only mode, and you are reminded that this call is being recorded. Following the prepared remarks, there will be an opportunity for analysts to ask questions.

Speaker Change: For the second quarter, we delivered 14% net revenue growth with expanded margins, all of which translated into double-digit adjusted earnings per share and free cash flow per share growth.

Unknown Executive: To join the question queue, press one, press star, then one. In the event you need assistance during a call, you may signal an operator by pressing the star key followed by zero.

Speaker Change: Our very strong performance is a reflection of our team's relentless passion and dedication to delivering the very best for our clients.

Laura Dottori: Thanks to our clients for their continued support and to our Element team members for their great work. It's an honour to be part of such a great group of people. And with that, I'll hand it over to Frank. Thank you Laura and good morning everyone.

Unknown Executive: Ella wishes to caution the listeners that today's information contains four 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 and A, as well as its most recent AIS. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially.

Speaker Change: Thanks to our clients for their continued support and to our Element team members for their great work. It's an honour to be part of such a great group of people. And with that, I'll hand it over to Frank.

Frank Ruperto: We delivered another quarter of strong results. The momentum we benefited from in Q1 has carried into Q2 resulting in robust growth across all key metrics. Notably, we saw continued double-digit year-over-year growth in services revenue, along with a substantial 16% increase in net financing revenue compared with the same period last year. Our strong performance today, combined with a positive outlook for the remainder of the year, led us to raise our full year 2024 guidance for most metrics.

Frank: Thank you, Laura, and good morning, everyone. We delivered another quarter of strong results. The momentum we benefited from in Q1 has carried into Q2, resulting in robust growth across all key metrics.

Frank: Notably, we saw continued double-digit year-over-year growth in services revenue, along with a substantial 16 percent increase in net financing revenue compared with the same period last year.

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

Frank: Our strong performance to date, combined with a positive outlook for the remainder of the year, led us to raise our full year 2024 guidance for most metrics.

Frank Ruperto: We announced the acquisition of Autofleet, which, although relatively small, with a purchase price of approximately $110 million, aligns with our goals of acquiring capabilities to accelerate digitization and automation efforts. We expect the transaction to be accretive in 2025 with a payback of less than three years. As with our previously announced strategic initiatives, we will incur one-time non-recurring costs associated with this acquisition, which we will call out and adjust in our Q3 results. For clarity, our revised guidance excludes these one-time costs.

Frank: We announced the acquisition of Autofleet, which, although relatively small, with a purchase price of approximately $110 million, aligns with our goals of acquiring capabilities to accelerate digitization and automation efforts.

Laura Dottori: I would now like to turn the call over to Laura Ditorio-Atsanasio, chief executive officer of Elements. Please go ahead.

Frank: We expect the transaction to be accretive in 2025 with a payback of less than three years.

Laura Dottori: Good morning, and thank you for joining us today. I'm delighted to share our latest achievements. As a team across the Elements, we created and unveiled our purpose. We are acquiring new capabilities in the digital and automation space. We delivered another strong financial quarter for our shareholders. Our centralized leasing initiative officially began operations in Ireland on time and on budget with no change to our expected benefits that we previously shared with you. And we released our fourth annual sustainability report with the commitment to setting science based targets that include intended reductions to our greenhouse gas emissions.

Frank: As with our previously announced strategic initiatives, we will incur one-time non-recurring costs associated with this acquisition, which we will call out and adjust in our Q3 results. For clarity, our revised guidance excludes these one-time costs.

Frank Ruperto: We expect the acquisition to close early in the fourth quarter. Let's now turn to our second quarter results. All dollar amounts cited today will be on an adjusted basis, excluding one-time costs of just over $2 million in Q2, in current connection with our Dublin and Singapore initiatives. These initiatives have been stood up on time and on budget.

Frank: We expect the acquisition to close early in the fourth quarter.

Frank: Let's now turn to our second quarter results. All dollar amounts cited today will be on an adjusted basis, excluding one-time costs of just over $2 million in Q2, incurred in connection with our Dublin and Singapore initiatives.

Frank Ruperto: We anticipate the last of these expenses in Q3, consistent with our original budget. Q2 was another record performance for us in terms of net revenue, earnings, EPS, and free cash. This success was driven largely by the resilient and recurring nature of our revenue, as well as the robust and sustained commercial momentum we've generated as we continue to deliver on our client value proposition and create increasing value for both our clients and shareholders.

Frank: These initiatives have been stood up on time and on budget.

Frank: We anticipate the last of these expenses in Q3 consistent with our original budget.

Laura Dottori: Now let me start with our purpose. To further strengthen our culture, our team members worked collaboratively over the past year alongside our clients and keep partners to unlock our very first purpose statement. Move the world through intelligent mobility. Our purpose is a reflection of our unwavering commitment to putting our clients first, to leading the industry, and our ambition to affect positive change for a brighter future. To move the world embodies our dedication to intelligent seamless mobility.

Frank: Q2 is another record performance for us in terms of net revenue earnings, EPS, and free cash flow.

Frank: This success was driven largely by the resilient and recurring nature of our revenue, as well as the robust and sustained commercial momentum we've generated as we continue to deliver on our client value proposition and create increasing value for both our clients and shareholders.

Frank Ruperto: For the quarter, our adjusted operating income reached $153 million, up 15% year-over-year. This translates to an adjusted EPS of $0.29, which is a $0.04 increase from the same period last year. Additionally, our adjusted free cash flow per share also grew by 4 cents or 12% to 38 cents per share.

Frank: For the quarter, our adjusted operating income reached $153 million, up 15% year-over-year. This translates to an adjusted EPS of $0.29, which is a $0.04 increase from the same period last year.

Laura Dottori: And so, driven by our purpose, we accelerated our digitization and automation initiatives with the acquisition of auto fleets. Auto fleets is an end-to-end software platform that's designed to support fleet management systems, optimize and manage complex operations, and maximize fleet utilization from ability operators. It's led by a team of incredibly talented individuals, including its co-founders, Kobe Eisenberg, and Dor Shae. They have built a world-class team and a scalable digital platform that is built on a modern tech stack.

Frank: Additionally, our adjusted free cash flow per share also grew by 4 cents or 12% to $0.38 per share.

Frank Ruperto: We expanded adjusted operating margins year-over-year by 60 basis points to 55.7%. Moving forward, we anticipate operating margins to end the year at approximately 55% to 55.5%, assuming stable currency rates relative to the year. Net revenue grew by over 14% year-over-year to $275 million. This growth was largely driven by services and net financing revenue. Service revenue rose by $14 million or 11% compared to Q2 2023, reaching

Frank: We expanded adjusted operating margins year-over-year by 60 basis points to 55.7% this quarter.

Frank: Moving forward, we anticipate operating margins to end the year at approximately 55 to 55.5 percent, assuming stable currency rates relative to Q2.

Frank: Net revenue grew over 14% year-over-year to $275 million. This growth was largely driven by services and net financing revenue growth.

Frank: Service revenue rose by $14 million or 11% compared to Q2 2023, reaching $140 million. This increase was fueled by robust origination volumes and sustained higher penetration rates from new and existing clients.

Frank Ruperto: This increase was fueled by robust origination volumes and sustained higher penetration rates from new and existing clients. As noted, last quarter, Q1 services revenue benefited from $7 million in one-time items discussed last quarter. Excluding these amounts, services revenue was largely unchanged compared to a very strong first quarter.

Laura Dottori: Now having worked with the auto fleets team previously, we have experienced firsthand the cultural fit with element and the value as they bring to us and to our clients. This acquisition will enable us to better serve our clients by accelerating our digitization and automation efforts in fleet with optimized mobility solutions and it will help us expand into new value added services.

Speaker Change: As noted, last quarter Q1 services revenue benefited from $7 million in one-time items discussed last quarter. Excluding these amounts, services revenue was largely unchanged compared to a very strong first quarter.

Frank Ruperto: Net financing revenue grew $17 million, or 16% year over year, and $15 million, or 14% quarter over quarter. This growth is largely attributable to higher net earning assets associated with the increased origination volumes in the U.S., Canada, and AMZ. Gain on sale remained relatively unchanged year over year as gains in Mexico were mostly offset by lower gains in Australia and New Zealand as prices moderated.

Speaker Change: Net financing revenue grew $17 million or 16% year-over-year and $15 million or 14% quarter-over-quarter.

Laura Dottori: Now with regards to our quarterly financial performance, we continued our commercial success with the addition of more new clients by both earning share and converting self-managed along with increased share of wallet wins. For the second quarter, we delivered 14% net revenue growth with expanded margins, all of which translated into double digits, adjusted earnings per share and free cash flow per share of growth. Our very strong performance is a reflection of our team's relentless passion and dedication to delivering the very best for our clients.

Speaker Change: This growth is largely attributable to the higher net earning assets associated with the increased origination volumes in the U.S., Canada, and ANC.

Speaker Change: Gain on sale remained relatively unchanged year over year, as gains in Mexico were mostly offset by lower gains in Australia and New Zealand, as price is moderate.

Frank Ruperto: The increase in financing revenue was somewhat mitigated by higher funding costs and standby fees to support forecasted growth and origination. Overall, rates remain significantly more attractive than the prior year period. Shifting our focus to syndications, we successfully syndicated a record $955 million of assets. This represents a substantial 86% increase from Q2 last year and double that of Q1, increasing syndication revenue by $4 million or 42% year over year. We expanded the volume and names associated with syndications, which impacted NICS from a yield perspective.

Speaker Change: The increase in financing revenue was somewhat mitigated by higher funding costs and standby fees to support forecasted growth and originations. Overall, rates remained significantly more attractive than the prior year period.

Speaker Change: Shifting our focus to syndications, we successfully syndicated a record $955 million of assets this quarter.

Laura Dottori: So thanks to our clients for their continued support and to our element team members for their great work.

Frank Ruperto: It's an honor to be part of such a great group of people and with that, I'll hand it over to Frank. Thank you, Laura, and good morning, everyone. We delivered another quarter of strong results, the momentum we benefited from in Q1 has carried into Q2 resulting in robust growth across all key metrics. Notably, we saw continued double digit year-over-year growth in services revenue, along with the substantial 16% increase in net financing revenue compared with the same period last year. Our strong performance today, combined with a positive outlook for the remainder of the year, led us to raise our full year 2024 guidance for most metrics.

Speaker Change: This represents a substantial 86% increase from Q2 last year and double that of Q1, increasing syndication revenue by $4 million, or 42% year over year.

Speaker Change: We expanded the volume and names associated with syndications, which impacted MIX from a yield perspective. These significant volumes illustrate the depth of this funding source for us and the ongoing appeal of our assets to syndication clients.

Frank Ruperto: The significant volumes illustrate the depth of this funding source for us and the ongoing appeal of our assets to syndication clients. On the expense side, adjusted operating expenses for Q2 were $122 million, an increase of 13% year-over-year.

Speaker Change: On the expense side, adjusted operating expenses for Q2 were $122 million, an increase of 13% year-over-year.

Frank Ruperto: This increase was primarily due to higher salaries, wages, and benefits associated with accelerated spend, including higher short-term incentive compensation accruals, and targeted headcount in G&A to support growth initiatives. We believe that the acceleration of our digitization efforts expedited by the capabilities we will onboard as part of the auto fleet acquisition will allow us to enhance our scalability over the intermediate term. It is worth noting that net revenue growth continues to outpace operating expense growth by 110 basis points year over year.

Speaker Change: This increase was primarily due to higher salaries, wages, and benefits associated with accelerated spend, including higher short-term incentive compensation accruals and targeted headcount and G&A to support growth initiatives.

Frank Ruperto: We announced the acquisition of auto fleet, which, although relatively small, with a purchase price of approximately $110 million, aligns with our goals of acquiring capabilities to accelerate digitization and automation efforts. We expect the transaction to be accretive in 2025 with a payback of less than three years. As with our previously announced strategic initiatives, we will incur one-time non-recurring costs associated with this acquisition, which we will call out and adjust in our Q3 results. For clarity, our revised guidance excludes these one-time costs. We expect the acquisition to close early in the fourth quarter.

Speaker Change: We believe that the acceleration of our digitization efforts, expedited by the capabilities we will onboard as part of the Auto Fleet acquisition, will allow us to enhance our scalability over the intermediate term.

Speaker Change: It is worth noting that net revenue growth continues to outpace operating expense growth by 110 basis points year over year. And as I mentioned last quarter, we will continue to be purposeful in accelerating investments in the near term as our top line growth allows us to do so.

Frank Ruperto: And as I mentioned last quarter, we will continue to be purposeful in accelerating investments in the near term as our top line growth allows us to do so. This will help us ensure we are well positioned to expand our leadership in the fleet management sector. Additionally, originations were two billion dollars, up 5% from Q2 last year and up 28% from Q1.

Speaker Change: This will help us ensure we are well positioned to expand our leadership in the fleet management sector.

Frank Ruperto: Let's now turn to our second quarter results. All dollar amounts stated today will be on an adjusted basis, excluding one-time costs of just over $2 million in Q2, incurring connection with our double-it and Singapore initiatives. These initiatives have been stood up on time and on budget. We anticipate the last of these expenses in Q3, consistent with our original budget. Q2 was another record performance for us in terms of net revenue earnings, EPS, and free cash flow.

Speaker Change: Additionally, originations were two billion dollars this quarter, up 5% from Q2 last year and up 28% from Q1. This growth can be attributed to three items.

Frank Ruperto: This growth can be attributed to three items. First, OEM production volumes have recovered from earlier supply chain constraints. Second, Q2 traditionally represents the quarterly high-water mark aligning with OEM windows, ordering windows, and three is inflation or auto prices. Now let's turn to guidance.

Speaker Change: First, OEM production volumes have recovered from earlier supply chain constraints. Second, Q2 traditionally represents the quarterly high-water mark aligning with OEM ordering windows. And three is inflation in oil prices.

Frank Ruperto: Our strong financial performance and positive outlook for the remainder of the year led us to raise our full year 2024 guidance for the following metrics. We anticipate net revenue to be between $1.06 and $1.08 billion, implying annual growth between 11 and 13 percent. Adjusted Operating Income between $575 and $595 million. Adjusted EPS between $1.07 and $1.11. And adjusted free cash flow per share between $1.32 and $1.36. Again, these are before any one-time cost associated with our previously announced strategic investments and the cost associated with the acquisition of auto. While Q2 foreign currency volatility is reflected in our revised guidance, we do not forecast currency.

Frank Ruperto: This success was driven largely by the resilient and recurring nature of our revenue, as well as the robust and sustained commercial momentum we've generated, as we continue to deliver on our client value proposition and create increasing value for both our clients and shareholders. For the quarter, our adjusted operating income reached $153 million, of 15% year-over-year. This translates to an adjusted EPS of 29 cents, which is a 4 cent increase from the same period last- last year.

Speaker Change: Now, let's turn to guidance. Our strong financial performance and positive outlook for the remainder of the year led us to raise our full year 2024 guidance for the following metrics.

Speaker Change: We anticipate net revenues to be between $1.06 and $1.08 billion, implying annual growth between 11 and 13 percent.

Speaker Change: Adjusted operating income between $575 and $595 million Adjusted EPS between $1.07 and $1.11 And adjusted free cash flow per share between $1.32 and $1.36

Frank Ruperto: Additionally, our adjusted free cash flow per share also grew by 4 cents for 12% to 38 cents per share. We expanded adjusted operating margin to your over year by 60 basis points to 55.7% this quarter. Moving forward, we anticipate operating margins to end the year at approximately 55 to 55.5%, assuming stable currency rates relative to Q2. Net revenue grew over 14 percent year over year to $275 million. This growth was largely driven by services and net financing revenue growth.

Speaker Change: Again, these are before any one-time costs associated with our previously announced strategic investments and the costs associated with the acquisition of auto fleet.

Speaker Change: While Q2 foreign currency volatility is reflected in our revised guidance, we do not forecast currency. As such, the outlook for the remainder of the year assumes that FX will remain stable to those rates prevailing in Q2.

Frank Ruperto: As such, the outlook for the remainder of the year assumes that FX will remain stable to those rates prevailing in Q2. Before concluding and opening the line to questions, I would like to walk you through certain changes to our capital, previously communicated. We completed the redemption of our CRC preferred shares this June for a total of $91 million.

Frank Ruperto: Additionally, in September, we plan to redeem our Series E Perfer for a total of $92 million. Recall that the result of replacing these preferred shares with debt will move the cost of capital from below the pre-tax income line to the NFR line, creating modest compression to NFR margins in the second half of 2020. Most importantly, these actions are EPFs are created, and economically attract- Additionally, in connection with conversion of our remaining convertible debentures, we issued 14.6 million shares from Treasury, which will impact our per share financial results and are taken into consideration as per our guidance. We ended the quarter with tangible leverage at 6.5 times and financial leverage for debt to total capital at 74.8%.

Speaker Change: Before concluding and opening the line to questions, I would like to walk you through certain changes to our capital structure.

Speaker Change: as previously communicated.

Speaker Change: We completed the redemption of our Series C preferred shares this June for a total of $91 million. Additionally, in September , we plan to redeem our Series E preferred for a total of $92 million.

Frank Ruperto: Service revenue rose by $14 million or 11% compared to Q2 2023 reaching $140 million. This increase was fueled by robust origination volumes and sustained higher penetration rates from new and existing clients. As noted, last quarter Q1 services revenue benefited from $7 million in one-time items discussed last quarter. Excluding these amounts, services revenue was largely a change compared to a very strong first quarter. Net financing revenue grew $17 million or 16% year over year and $15 million or 14% quarter over quarter.

Speaker Change: Recall that the result of replacing these preferred shares with debt will move the cost of capital from below the pre-tax income line to the NFR line, creating modest compression to NFR margins in the second half of 2024.

Speaker Change: Most importantly, these actions are EPS-recruited and economically attractive to us.

Speaker Change: Additionally, in connection with conversion of our remaining convertible debentures, we issued 14.6 million shares from Treasury, which will impact our per share financial results and are taken into consideration as per our guidance.

Frank Ruperto: This growth is largely attributable to higher net earning assets associated with the increased origination volumes in the U.S., Canada and AMC. Gain on sale remained relatively unchanged year over year as gains in Mexico were mostly offset by lower gains in Australia and New Zealand as prices moderate. The increase in financing revenue was somewhat mitigated by higher funding costs and stand-by fees to support forecasted growth in originations. Overall, rates remained significantly more attracted than the prior year period.

Speaker Change: We ended the quarter with tangible leverage at 6.5 times, and financial leverage for debt-to-total capital at 74.8%. Both metrics providing flexibility to pursue strategic objectives, operate the business efficiently, and continue to return capital to shareholders.

Operator: Both metrics providing flexibility to pursue strategic objectives, operate the business efficiently and continue to return capital to shareholders. In summary, we had an exceptionally strong first half of 2024, which allows us to continue investing in the business to sustain future growth and drive value for shareholders. Thank you, operator. We're now ready to take questions. And as to wish to ask the question, you may press star and one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys.

Speaker Change: In summary, we had an exceptionally strong first half of 2024, which allows us to continue investing in the business to sustain future growth and drive value for shareholders.

Frank Ruperto: Shifting our focus to syndications, we successfully syndicated a record $955 million of assets this quarter. This represents a substantial 86% increase from Q2 last year and doubled out of Q1, increasing syndication revenue by $4 million or 42% year over year. We expanded the volume and names associated with syndications which impacted MIX from a yield perspective. These significant volumes illustrate the depth of this funding source for us and the ongoing appeal of our assets to syndication clients.

Speaker Change: Thank you, Operator. We are now ready to take questions.

Speaker Change: Analysts who wish to ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: You will hear a tone acknowledging your request.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing any keys.

Speaker Change: To withdraw your questions, please press star then 2.

Speaker Change: We will pause for a moment as callers join the queue.

Operator: To withdraw your questions, please press stars and two. We will pause for a moment as callers join the queue. The first question today comes from Geoffrey Kwan with RBC Capital Markets. Please go ahead. Hi, good morning.

Speaker Change: . . . . . .

Frank Ruperto: On the expense side, adjusted operating expenses for Q2 were $122 million and increased of 13% year over year. This increase was primarily due to higher salaries, wages and benefits associated with accelerated spend including higher short-term incentive compensation and cruise and targeted headcount and gene access for growth initiatives. We believe that the acceleration of our digitization efforts expedited by the capabilities we will onboard as part of the auto fleet acquisition will allow us to enhance our scalability over the intermediate term.

Speaker Change: Dr. Paul Holden.

Speaker Change: The first question today comes from Geoffrey Kwan with RBC Capital Markets. Please go ahead.

Frank Ruperto: My first question was on the origination side, just given how, you know, how often your clients typically hold their vehicles, for the vehicles that were not replaced during the OEM production shortage. What would be like your estimate of the percentage that have still not been replaced so far? Even with the OEM production shortage kind of being, let's call it more normal in the past several quarters. The best way I can put that, Geoff, is two ways.

Jeffrey Kwan: Hi, good morning. My first question was on the origination side, just given how you know how often your clients typically hold their vehicles.

Speaker Change: for the vehicles that were not replaced during the OEM production shortage.

Speaker Change: What would be like your estimate of the percentage that have still not been replaced so far?

Frank Ruperto: It is worth noting that net revenue growth continues to outpace operating expense growth by 110 basis points year over year. And as I mentioned last quarter, we will continue to be purposeful in accelerating investments in the near term as our top line growth allows us to do so.

Speaker Change: Even with the OEM production shortage kind of being, let's call it more normal in the past several quarters.

Frank Ruperto: One is we have now, with the OEM production coming back to a normalized level, are working through and seeing some of the benefit of that come through the line as we have over the last couple of quarters. But the best way to think about it is we peaked at average age of vehicles, U.S., Canada, roughly 59 days. And now, I'm sorry, 59 months.

Speaker Change: The best way I can put that, Jeff, is two ways. One is we have now, with the OEM production, coming back to a normalized level.

Frank Ruperto: This will help us ensure we are well positioned to expand our leadership in the fleet management Additionally, Originations for $2 billion this quarter of 5% from Q2 last year and up 28% from Q1. This growth can be attributed to three items. First, OEM production volumes have recovered from earlier supply chain constraints. Second, Q2 traditionally represents the quarterly high water mark aligning with OEM windows, ordering windows. And three is inflation and oil prices.

Speaker Change: are working through and seeing some of the benefit of that come through the line as we have over the last couple of quarters. But the best way to think about it is, we peaked at average age of vehicles, U.S. Canada, roughly 59 days.

Frank Ruperto: And that is now down to 49 months. And as I have told you before, 42 months is really the average hold on these vehicle assets. So we're starting to see those come back in, but the fact that we are still above the 42 month period indicates to us that there will be continued orders, strong order volume, and originations as we progress through the year. Okay, that's helpful.

Speaker Change: and now, I'm sorry, 59 months.

Speaker Change: and that is now down to 49 months and I think I told you before, 42 months is really the average hold on these vehicle assets. So we're starting to see those come back in but the fact that we are still

Speaker Change: Above the 42-month period indicates to us that there will be continued orders, strong order volume and originations as we progress through the year.

Frank Ruperto: Now, let's turn to guidance. Our strong financial performance and positive outlook for a remainder of the year led us to raise our full year 2020 for guidance from the following metrics. We anticipate net revenues to be between 1.06 and 1.08 billion, implying annual growth between 11 and 13%. Adjusted operating income between $575 and $595 million. Adjusted EPS between $1.07 and $1.11. And adjusted free cash, little per share, between $1.32 and $1.36.

Frank Ruperto: And then, Next question was on the net finance income. I think if I remember correctly at the start of the year we were kind of messaging modest growth. I think it might have been like low single digits for reasons like lower expected gain on sale, some of the impacts of dealing with the legacy capital structure and the impact on net finance, revenue. I know that there's still that one PREP remaining, but what we've seen from H1-24 this year is the net financing revenue is up 9.5% year-over-year. So I just wanted to get your thoughts.

Dale: Okay, that's helpful.

Speaker Change: Next question was on the net finance income. I think if I remember correctly at the start of the year we were kind of messaging modest growth. I think it might have been like low single digits for reasons like lower expected gain on sale, some of the impacts of dealing with the legacy capital structure and the impact on net financing.

Speaker Change: revenue.

Speaker Change: I know that there's still that one PREP remaining, but what we've seen from H1-24 this year is the net financing revenue is up 9.5% year-over-year.

Frank Ruperto: Again, these are before any one-time cost associated with our previously announced strategic investments and the cost associated with the acquisition of OEM. While Q2 foreign currency volatility is reflected in our revised guidance, we do not forecast currency as such the outlook for the remainder of the year assumes that FX will remain stable to those rates prevailing in Q2.

Frank Ruperto: You know, obviously you've revised the guidance, but just how to think about how that plays out through the second half of this year, but also just going forward, because part of it you mentioned you flagged was a bit of a business or geographic mix issue that drove the higher finance. Yeah, so we always have mixed, right? So you have higher higher spreads in, you know, A and Z and Mexico. The biggest thing that's been driving the net financing revenue increase is just the growth in net earning assets.

Speaker Change: I just wanted to get your thoughts, you know, obviously you revised the guidance, but just how to think about how that plays out through the second half of this year, but also just going forward because part of it you mentioned you flagged was a bit of a business or geographic mix issue that drove the higher financing income.

Frank Ruperto: So we've had a significant growth in net earning assets, as originations have picked up substantially to record volumes this quarter. And that will that will that is most of the impact the benefit from the net financing perspective. But wouldn't that have been as expected for you, so it shouldn't, so that we wouldn't kind of baked into your... Net financing, you know, expectation when you built the guidance at the start of the year.

Frank Ruperto: Before concluding and opening the line to questions, I would like to walk you through certain changes to our capital structure as previously communicated. We completed the redemption of a CRC preferred shares this June for a total of $91 million. Additionally, in September, we plan to re-drain theme our series E Prefer for a total of $92 million. Recall that the result of replacing these preferred shares with debt will move the cost of capital from below the pre-text income line to the NFR line, creating modest compression to NFR margins in the second half of 2024.

Speaker Change: Yeah, so we always have mixed, right? So you have higher spreads in, you know, ANZ and Mexico. The biggest thing that's been driving the net financing revenue increase is just the growth in net earning assets. So we've had a significant growth in net earning assets as originations have picked up substantially to record volumes this quarter, and that is most of the impact, the benefit from the net financing perspective.

Speaker Change: But wouldn't that have been as expected for you so it shouldn't so that we wouldn't kind of baked into your

Frank Ruperto: Most importantly, these actions are EPS are created and economically attracted to us. Additionally, in connection with the conversion of our remaining convertible debentures, we issued $14.6 million shares from Treasury, which will impact our per share financial results and are taken into consideration as per our guidance. We ended the quarter with tangible leverage at 6.5 times and financial leverage for debt to total capital at 74.48%. Both metrics providing flexibility to pursue strategic objectives, operate the business efficiently and continue to return capital to shareholders.

Frank Ruperto: So in the start of the year, we've actually seen better financing costs in the market as well. So those two combined would would create most of that benefit. Okay, maybe if I can get one last question.

Speaker Change: net financing, you know, expectation when you built the guidance at the start of the year? No, in the start of the year, we've actually seen better financing costs in the market as well. So those two combined would create most of that benefit.

Laura Dottori: It's just the auto fleet acquisition. Do any of your direct competitors use them? And then if so, would there be any plans on whether or not they would still be able to use auto fleet? Good morning, Geoff. I'll take that one.

Speaker Change: Okay, maybe if I can get one last question. It's just the Auto Fleet acquisition. Do any of your direct competitors use them and then if so would there be any plans on whether or not they would still be able to use Auto Fleet going forward?

Laura Dottori: Our plan is to have auto fleets continue to operate independently, and so they will be able to serve any company that would benefit from utilizing them. We're really happy with this acquisition, we do think it's going to allow us to do more in the mobility space and if it can help others do better for clients in this space, we're all for that. So yes, the answer is yes. The next question comes from Paul Holden from CIBC. Please go ahead. Thank you. Good morning.

Frank Ruperto: In summary, we had an exceptionally strong first half of 2024, which allows us to continue investing in the business to same future growth and drive value for shareholders. Thank you, Operator.

Speaker Change: Good morning, Jeff. I'll take that one. Our plan is to have AutoSleep continue to operate independently.

Speaker Change: and so they will be able to serve any company that would benefit from utilizing them.

Unknown Executive: We're now ready to take questions. Analyst who wish to ask the question, you may press star than one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing any keys. To withdraw your questions, please press star than two. We will pause for a moment as colors join the queue.

Speaker Change: We're really happy with this acquisition. We do think it's going to allow us to do more in the mobility space, and if it can help others do better for clients in this space, we're all for that. So yes, the answer is yes.

Speaker Change: Okay, thank you.

Speaker Change: The next question comes from Paul Holden from CIBC. Please go ahead.

Frank Ruperto: So, a couple of questions on the auto fleet acquisitions, just to make sure I understand the value proposition appropriately. First off, Frank, you provided some useful numbers in terms of year one accretion, and then also mentioned, I think, a payback period of three years, if I got that correct. What's sort of embedded in that expectation? Is that primarily based on revenue to customers, or there's some kind of cost saving? period, and really, I guess, the value proposition here. So it comes in a couple of areas, so let me address the accretion in year one first.

Paul Holden: Thank you. Good morning. So, a couple questions on the auto fleet acquisitions, just to make sure I understand the value proposition appropriately. First off, Frank, you provided some useful numbers in terms of year one accretion, and then also mentioned, I think, a payback period of three years, if I caught that correct. What's sort of embedded in that expectation? Is that primarily based on revenue to customers? Are there some kind of cost savings?

Geoffrey Kwan: The first question today comes from Jeffrey Kwan with RBC Capital Market. Please go ahead. Hi, good morning. My first question was on the origination side, just given how, you know, how often your clients typically hold their vehicles. So, the vehicles that were not replaced during the OEM production shortage, what would be like your estimate of the percentage that have still not been replaced so far, even with the OEM production shortage kind of being, let's call it more normal in the past.

Speaker Change: period, really, I guess, the value proposition here.

Geoffrey Kwan: The best way I can put that, Jeff, is two ways. One is we have now with the OEM production coming back to a normalized level, are working through and seeing some of the benefit of that come through the line as we have over the last couple of quarters. But the best way to think about it is, we peaked at average age of vehicles, U.S. Canada, roughly 59 days. And now, I'm sorry, 59 months. And that is now down to 49 months. And I think I've told you before 42 months is really the average hold on these vehicle assets.

Frank Ruperto: This is a small acquisition, so it is very modest accretion in the first year, simply because of the size of it relative to us. So I want to make sure we're clear on that. In regards to the value proposition and the payback, it comes in two forms. As we move through and complete our digitization capabilities, the first piece is that we will become more scalable. We will be able to do more with less over time and be much more efficient from an operating perspective in serving our clients.

Speaker Change: Sure, so it comes in a couple of areas, so let me address the accretion in year one first. This is a small acquisition.

Speaker Change: So it is very modest accretion in the first year, simply because of the size of it relative to us. So I wanna make sure we're clear on that. In regards to the value proposition and the payback, it comes in two forms. As we move through and...

Speaker Change: complete our digitization capabilities.

Speaker Change: The first piece is that we will become more scalable, we will be able to do more with less over time and be much more efficient from an operating perspective than serving our clients.

Frank Ruperto: Additionally, that should also enhance our client experience by being more responsive to our clients and giving them better opportunities, better dashboards to see their vehicles and the like, which could assist us and should assist us in winning new business with best-in-class client-facing technology. So that's one component.

Frank Ruperto: So, we're starting to see those come back in, but the fact that we are still above the 42 month period indicates to us that there will be continued orders, strong water volume and originations as we progress through the year. Okay, that's helpful. And the next question was on the net finance income. I think if I remember correctly, the start of the year, you're kind of messaging modest growth. I think it might have been like low single digits for reasons like lower expected gain on sale, some of the impacts of dealing with the legacy capital structure and the impact on net financing revenue.

Speaker Change: Additionally, that should also enhance our client experience.

Speaker Change: by being more responsive to our clients and giving them better opportunities, better dashboards to see their vehicles and the like, which could assist us and should assist us in winning new business with best-in-class, client-facing technology.

Frank Ruperto: The major component of the payback is really our ability to accelerate our digitization effort and do more with less capital. So we still anticipate spending $110 million roughly per year. And sorry, and that's Canadian, so $85 million U.S. per year in regards to the spend of capital over the next several years. But we will be able to accelerate and take, you know, somewhere between one to three years acceleration depending on which projects we're looking at and getting those in place sooner. Again, enhancing our ability to scale as well as better client-facing technology, and I just had to tell a full thanks for that. Okay, that's good on Auto Fleet. Third or second question would be on syndication.

Speaker Change: So that's one component. Major component of the payback is really our ability to accelerate our digitization effort and do more with less capital.

Speaker Change: So we still anticipate spending $110 million roughly per year.

Frank Ruperto: I know that there's still that one pref remaining, but what we've seen from H1 24 this year is the net financing revenues up 9.5% near every year. So, I just wanted to get your thoughts. I obviously revised the guidance, but just how to think about how that plays out through the second half this year. But also just going forward because part of it, you mentioned your flag was a bit of a business or geographic mix issue that that drove the higher financing income.

Speaker Change: Ian.

Ian: sorry and that's Canadian so 85 million dollars US per year in regards to the spend of capital over those next several years but we will be able to accelerate and take you know somewhere between

Ian: one to three years Acceleration depending on which projects we're looking at and getting those plate in place sooner again Enhancing our ability to scale as well as better client facing technology

Frank Ruperto: Yeah, so we always have mix, right? So you have higher higher on spreads in, you know, ANZ and Mexico. The biggest thing that's been driving the net financing revenue increase is just the growth in net earning assets. So we've had a significant growth in net earning assets as originations have picked up substantially to record volumes this quarter. And that will, that looks, that is most of the impact with the benefit from the net financing perspective.

Speaker Change: Okay, that's good on auto fleet. Third or second question would be on syndication. You syndicated a lot of volumes this quarter at what I would say is a relatively low

Frank Ruperto: You syndicated a lot of volumes this quarter at what I would say is a relatively low syndication yield. So maybe walk us through the thought process there. Why such a high volume at a low yield?

Speaker Change: syndication yield. So maybe walk us through the top process there, why such a high volume might allow yield and then with that maybe give us an outlook for the or expectation for syndication yield for the remainder of the year.

Frank Ruperto: So wouldn't that have been as expected for you so it shouldn't, so that we wouldn't kind of baked into your net financing, you know, expectation when you built the guidance at the start of the year. So in the start of the year, we've actually seen better financing costs in the market as well. So those two combined would create most of that benefit.

Frank Ruperto: And then with that maybe give us an outlook for the or expectation for syndication yield for the remainder of the year. Yeah, so think about syndication as a key funding mechanism for us. So with record origination volumes.., and the pent-up syndication that we held back in Q1, we had significantly more volume to bring to finance the origination component of the business. As a result of that, we also had to go, we had a mix shift.

Speaker Change: Yeah, so think about syndication as a key funding mechanism for us. So with record origination volumes,

Laura Dottori: Okay, maybe if I can get one last question, it's just the auto fleet acquisition. Do any of your direct competitors use them? And then if so, would there be any plans on whether or not they would still be able to use auto.

Speaker Change: and the pent-up syndication that we held back in Q1, we had significantly more volume to bring to finance the origination component of the business.

Speaker Change: As a result of that, we also had to go, we had a mix shift.

Frank Ruperto: So our syndication team on the same names that we're syndicating were roughly on part of slightly better from a gross yield perspective, but the mix component of it had a material impact on the, A.J. Blume and I.

Laura Dottori: We have a good morning, Geoff. I'll take that one. Our plan is to have auto fleets continue to operate independently, and so they will be able to serve any company that would benefit from utilizing them. We're really happy with this acquisition. We do think it's going to allow us to do more in the mobility space, and if it can help others do better for clients in this space, we're all for that. So yes, the answer is yes. Okay.

Unknown Executive: Thank you.

Speaker Change: Our syndication team, on the same names that we're syndicating, we're roughly on part of slightly better from a gross yield perspective, but the mixed component of it had a material impact on the

Unknown Executive: So, thank you all very much for coming. I'm going to hand it back to Paul to introduce one of our successful clients, David and Olivia, David Holman, who helped me make this happen again. With just this finances and health care policies of eradication, Paul, thank you for bringing it forward. And accelerate that project with your expertise. If you apply, you'll bring money forward to the increase of all of the yields from that perspective. And again, remember, we use it also to manage leverage, so we're roughly 6.5 times right in the mid-target of our range. Okay.

Speaker Change: The overall yield so think about you know

Speaker Change: certain clients with significantly more volume in the quarter.

Speaker Change: but they tended to be lower-yielding assets.

Speaker Change: One that we made before but that was a lower yield, but much higher volume this quarter. And then two new names that have come in that also decreased the yields from that perspective.

Paul Holden: The next question comes from Paul Holden from CIBC. Please go ahead. Thank you.

Frank Ruperto: Good morning. So a couple of questions on the auto fleet acquisitions, just to make sure I understand the value proposition appropriately. First off, Frank, you provided some useful numbers in terms of year one accretion, and then also mentioned, I think a payback period of three years if I caught that correct. What's sort of embedded in that expectation is that primarily based on revenue to customers, or there's some kind of cost saving.

Frank Ruperto: Period. Really, I guess the value proposition here. Sure. So it comes in a couple of areas. So let me address the accretion in your one first. This is a small acquisition, so it is very modest accretion in the first year, simply because of the size of it relative to us. So I want to make sure we're clear on that. In regards to the value proposition and the payback, it comes in two forms.

Speaker Change: And again, remember, we use it also to manage leverage, so we're roughly 6.5 times right in the mid-target of our range.

Frank Ruperto: And sorry, any way to give us sort of an outlook or expectation for the remainder of the yield? I mean, some of the things you highlighted maybe are more particular to the quarter, I would assume somewhat better yields for the remainder of the year, but what are you expecting, Frank? It's very dependent on the size of the origination pool in the next fall. So, you know, I think that we continue to see significantly higher volumes in origination for the rest of the year relative to last year, which would tell me that, you know, plus or minus, we will see lower yields than we saw in Q1, somewhere dependent around the current yields.

Speaker Change: And sorry, any way to give us sort of an outlook or expectation for the...

Speaker Change: remainder of the yield? I mean, some of the things you highlighted maybe are more particular to the quarter. I would assume somewhat better yields for the remainder of the year. But what are you expecting, Frank? It's very dependent on the size of the origination pool in the next fall. So, you know, I think that

Frank: We continue to see significantly higher volumes in origination for the rest of the year relative to last year, which would tell me that plus or minus, we will see lower yields than we saw in Q1.

Frank Ruperto: But again, it will be highly dependent on mix. Remember, too, even though the yield is lower, every deal we syndicate is economically advantageous to us, because the hold versus sell component of that is in our favor. So we get more value by selling that lease than we would holding it on book. And then last question for me, originations, I think I saw they were down, I mean down small in Mexico, but down 1% year over year, this quarter sort of an aberration, has anything changed in the growth outlook there?

Speaker Change: somewhere dependent around the current yields, but again, it will be highly dependent on mix. Remember too, even though the yield is lower.

Frank Ruperto: As we move through and complete our digitization capabilities, the first piece is that we will become more scalable, we will be able to do more with less over time and be much more efficient from an operating perspective than serving our clients. Additionally, that should also enhance our client experience, be more responsive to our clients and give them better opportunities, better dashboards to see their vehicles and the light, which could assist us and should assist us in winning new business with best-in-class client-facing technology.

Speaker Change: Every deal we syndicate is economically advantageous to us because the hold versus sell component of that is in our favor. So we get more value by selling that lease than we would holding it on book.

Speaker Change: I understand, okay. And then last question for me, originations, I think I saw they were down, I mean down small in Mexico, but down 1% year-over-year, this quarter sort of an aberration, has anything changed in the growth outlook there?

Frank Ruperto: So predominantly two things, the peso, so the FX impact on that originations number, so about 1.5 plus percent lower quarter over quarter from a peso valuation, so there's part of yours, and then we also had a slightly lower mix in regards to the cost of vehicles and vehicle types that were bought in the quarter, that tends to be more idiosyncratic and lumpy, that mix, it usually doesn't come much into play, so those two will make up that small compression in origination volume.

Speaker Change: So predominantly two things.

Speaker Change: to pay so.

Speaker Change: So, the FX impact...

Speaker Change: on that originations number. So we're about a one and a half plus percent.

Frank Ruperto: So that's that one component. Major component of the payback is really our ability to accelerate our digitization effort and do more with less capital. So we still anticipate spending $110 million roughly per year. And sorry, and next Canadian, so $85 million US per year in regards to the spend of capital over the next several years. But we will be able to accelerate and take somewhere between one to three years acceleration, depending on which projects we're looking at, and getting those played in place sooner. Again, enhancing our ability to scale, as well as better client-facing technology.

Speaker Change: lower quarter-over-quarter from a peso valuation so there's part of yours and then we also had a slightly lower mix in regards to the cost of vehicles and vehicle types that were bought in the quarter that is tends to be more idiosyncratic and lumpy that mix it usually doesn't come much into play so those two will make up the that small compression and origination

Unknown Executive: Okay, thanks for that, I'll leave it there. The next question comes from Jaeme Gloyn with National Bank Financial. Please go ahead.

Speaker Change: Thanks for that, I'll leave it there.

Speaker Change: The next question comes from Jaeme Gloyn with National Bank Financial. Please go ahead.

Frank Ruperto: I did want to touch on syndication and the volumes in this quarter. I believe in Q1, you had made the decision to delay for some potential tax advantages later on that didn't materialize. So in Q2, with this higher volume, is this reflecting some of that demand that would have been coming in Q1 and we should expect somewhat lower volumes going forward or is this reflective of where demand is from an institutional investor standpoint and perhaps maybe even increasing from these levels?

Speaker Change: Yeah, thanks. Did want to touch on that on syndication and the volumes in this quarter. I believe in that in

Jaeme Gloyn: Q1 you had made the decision to delay for some potential tax advantages later on that didn't materialize

Frank Ruperto: And I just want to tell a full thanks for that. Okay, let's get on auto-fully. Third or second question would be on syndication. You syndicated a lot of volumes this quarter at what I would say is relatively low syndication yield. So maybe walk us through the top process there, why such a high volume might allow yield. And then with maybe give us a look for the or expectation for syndication yield for the remainder of the year.

Speaker Change: So, in Q2 with this higher volume, is this reflecting some of that demand that would have been coming in Q1, and we should expect somewhat lower volumes going forward?

Speaker Change: Is this reflective of where demand is from an institutional investor standpoint, and perhaps maybe even increasing from these levels? Just some thoughts on that.

Frank Ruperto: Just some thoughts on that. So first, on the demand side, the demand, I think, remains robust, and I think you can see, you know, a 30-plus percent increase over our record volumes before, you know, very, very solid from that perspective. So the market is deep. They like these assets. We've said that before because of the safety of them and the very low default, right? So very good bank and life co-assets from that perspective. So the market is very deep as we look at it. I would say, you know, rough, rough.

Speaker Change: Yeah, so first on the demand side, the demand, I think, remains robust.

Speaker Change: And I think you can see, you know, a 30 plus percent increase over our record volumes before.

Frank Ruperto: So think about syndication as a key funding mechanism for us. So with record origination volumes and the pent-up syndication that we hold back in Q1, we had significantly more volume to bring to finance the origination component of the business. As a result of that, we also had to go, we had a mixed shift. So our syndication team on the same names that we're syndicating, we're roughly on part a slightly better from a gross yield perspective.

Speaker Change: You know, very, very solid from that perspective. So the market is deep. They like these assets. We've said that before because of the

Speaker Change: Safety of them in a very low default, right? So very good bank and life collapse, that's from that perspective. So the market is very deep, as we look at it. I would say, you know, rough, rough, we...

Frank Ruperto: We probably held back on $150 to $200 million of volume last quarter, and so that would have been come through this quarter. So you'll expect some lower volume than this record quarter in Q3 and Q4. That being said, it will still be at, you know, relatively robust levels versus historical trends. I understand. On the auto fleet, I just wanted to also maybe dig in and just get a little bit better understanding of maybe, you know, what were some of the gaps that were existing with EFN today to go to a buy versus build strategy and maybe a little bit more color on some of these value-add services that are coming on board. I would assume that existing customers are using auto fleet, and that was sort of the way into this transaction. But maybe a bit more color on those two factors. Hi Jaeme, I'll take that.

Speaker Change: probably held back on $150 to $200 million of volume last quarter. And so that would have been come through this quarter. So you'll expect some lower volume than this record quarter in Q3 and Q4.

Frank Ruperto: But the mixed component of it had a material impact on the overall yield. So think about certain clients with significantly more volume in the quarter. But they tended to be lower yielding assets. So two points. One that we've made before, but that was a lower yield. But much higher volume in this quarter. And then two new names that have come in that also decreased the yield from that perspective. And again, remember, we use it also to manage leverage.

Speaker Change: That being said, it will still be at, you know, relatively robust levels versus historical periods.

Speaker Change: Okay, I understand.

Speaker Change: On the auto fleet, I just wanted to also maybe dig in and just get a little bit better understanding of maybe, you know, what were some of the gaps that were existing with EFN today to

Speaker Change: to go to a buy versus build strategy and maybe a little bit more color on some of these value-add services that are coming on board. I would assume that existing customers are using Auto Fleet and that was sort of the way into this transaction, but maybe a bit more color on those two factors.

Frank Ruperto: So we're roughly 6.5 times right in the mid-target of our range. Okay. And sorry, any way to give us sort of a look or expectation for the remainder of the yield. I mean, some of the things you highlighted maybe are more particular to the quarter. I would assume somewhat better yields to the remainder of the year. But what are you expecting, Frank? It's very dependent on the size of the origination pool in the next fall.

Laura Dottori: I think as we've talked about, when we see all of the advancements in mobility, what we see with vehicle connectivity, fleet electrification, etc., we know that we have to continuously evolve for our clients. As we've shared, we've been on the path to build out our capabilities to be in a position to do more digitization and automation to better serve our clients. That is proving out to be expensive, and so we were looking to see could we partner or acquire capabilities such that we could move a lot faster.

Speaker Change: Yeah, hi Jamie, I'll take that

Speaker Change: [inaudible]

Speaker Change: When we see all of the advancements in mobility, what we see with vehicle connectivity, fleet electrification, etc.

Frank Ruperto: So, you know, I think that we continue to see significantly higher volumes in origination for the rest of the year relative to last year. Which would tell me that, you know, plus or minus, we will see lower yields than we saw in Q1 somewhere around the current yields. But again, it will be highly dependent on next. Remember, too, even though the yield is lower, every yield we syndicate is economically advantageous to us. Because the whole versus cell component of that is in our favor. So we get more value by selling that selling that lease than we would holding it on book. Understand.

Speaker Change: We know that we have to continuously evolve for our clients. As we've shared, we've been on the path to build out our capabilities to be in a position to do more digitization and automation to better serve our clients.

Unknown Executive: Okay.

Speaker Change: That is proving out to be expensive. And so we were out looking to see, could we partner or acquire capabilities such that we could move a lot faster?

Laura Dottori: And so we found AutoSuite, we really like the team, we think with them we're going to be able to better serve our clients and it's really all about accelerating all of our digitization and automation efforts. It allows us to really fast track, if you will, our modernization plan. They have an AI-powered platform. Again, that's going to help us streamline, automate, and just move faster. And as I shared in my prepared remarks, we found a world-class team that's a wonderful cultural fit with us.

Speaker Change: and so we found AutoSuite.

Speaker Change: We really like the team. We think with them we're going to be able to better serve our clients and it's really all about accelerating all of our digitization and automation efforts. It allows us to really fast track, if you will, our modernization plans.

Frank Ruperto: And then last question for me, originations. I think it's all there were down, I mean, down small and Mexico, but down 1% year over year. Does this quarter sort of an aberration as anything changed in the growth look growth outlook there? So predominantly two things, the peso. So the effects impact on that originations number. So about one and a half plus percent lower quarter over quarter from a peso valuation. So there's part of your yours.

Speaker Change: They have an AI-powered platform. Again, that's going to help us streamline automate and just move faster. And as I shared in my prepared remarks, we found a world-class team that's a wonderful, cultural fit with us. It's us.

Laura Dottori: They've got a scalable digital platform. It's built on a modern tech stack. So we're feeling incredibly positive about what we'll be able to achieve, with this acquisition for our client. Some of the potential value-added services, they are in a space that we are not. They do a lot in the short-term rentals and ride sharing.

Speaker Change: is the co-founder and co-creator of Scalable Digital Platform, it's built on a modern tech stack, so we're feeling incredibly positive about what we'll be able to do with this acquisition for our clients.

Frank Ruperto: And then we also had a slightly lower mix in regards to the cost of vehicles and vehicle types that were bought in the quarter. That tends to be more idiosyncratic and lumpy that mix usually doesn't come much into play. So those two will make up that small compression and origination volume. Okay. Thanks for that.

Speaker Change: Some of the potential value-added services, they are in a space that we are not. They do a lot in the short-term rentals and ride-sharing

Unknown Executive: I'll leave it there.

Laura Dottori: They have really strong analytics and other capabilities, so those are some of the other services we'll be able to do, things like optimized vehicle routing, keyless vehicle entry. The list goes on, and so it gives us not just a great talent team but really good tools that will help us better manage our clients and allow us to really optimize our business. We really are translating into where Frank was with synergies and whatnot over time, not just allowing us to go faster but things that will make our client experience better, jobs better for our clients, and sorry for our people, and should also allow us to deliver better returns for our shareholders. Okay, that's great. Thank you. The next question comes from Tom MacKinnon with BMO. Please go ahead.

Speaker Change: They have really strong analytics and other capabilities. So those are some of the other services we'll be able to do. Things like optimized vehicle routing, keyless vehicle entry.

Jaeme Gloyn: The next question comes from Jaeme Gloyn with National Bank Financial. Please go ahead. Yes, thanks. I did want to touch on that on syndication and the volumes in this quarter. I believe in that in Q1 that you had made the decision to delay for some potential tax advantages later on that didn't materialize.

Speaker Change: The list goes on. And so it gives us just really not just a great talent team but really good tools that will help us better manage our clients and allow us to really optimize our business. So all of that.

Speaker Change: to really translate into where Frank was at, synergies and whatnot over time, not just allowing us to go faster.

Speaker Change: And we'll be talking about things that will make our client experience better, jobs better for our clients, sorry, for our people, and should also allow us to deliver better returns for our shareholders over time.

Frank Ruperto: So in Q2 with this higher volume, is this reflecting some of that demand that would have been coming in Q1 and we should expect some lower volumes going forward or is this reflective of where demand is from an institutional investor standpoint and perhaps maybe even increasing from his levels just in thoughts on that? Yeah, so first on the demand side, the demand I think remains robust and I think you can see, you know, a 30 plus percent increase over our record volumes before, you know, very, very solid from that perspective.

Speaker Change: Okay, that's great. Thank you.

Laura Dottori: Yeah, thanks very much. Just a question generally on the impact of lower rates. I know from a finance revenue perspective, you're generally agnostic there, but perhaps what are you hearing from clients in the self-managed market and maybe their appetite to outsource as rates have come down? And I have a follow-up, thanks. Yeah, hi, Tom.

Speaker Change: [inaudible]

Speaker Change: Our next question comes from Tom MacKinnon with BMO. Please go ahead.

Tom McKinnon: Thanks very much. Just a question generally on the impact of the lower rates. I know from a finance revenue perspective you're generally agnostic there, but perhaps what are you hearing from clients in the self-managed market and maybe their appetite to outsource as rates have come down? And I have a follow-up, thanks.

Frank Ruperto: So the market is deep. They like these assets. We've said that before because of the safety of them in a very low default, right? So very good bank and life collapse that's from that perspective. So the market is very deep as we look at it. I would say, you know, rough, rough. We probably held back on 150 to $200 million of volume last quarter. And so that would have been come through this quarter. So you'll expect some lower volume than this record quarter in Q3 and Q4. That being said, it will still be at, you know, relatively robust levels versus historical periods. Okay, I understand.

Laura Dottori: We continue to grow in that space. We have a lot of opportunity, great conversations with clients who say demand continues to be strong. Look, there was a need, just given what we had been through, our clients needed to... when they decreased the average age of their fleet. Notwithstanding where rates are, but a lower rate environment certainly makes our proposition more interesting.

Hytom: Hi Tom, we continue to grow in that space, have a lot of opportunity, great conversations with clients who say demand

Hytom: continues to be strong of...

Speaker Change: Look, there was a need, just given what we had been through, our clients needed to...

Speaker Change: with a decrease in the average age of their fleet.

Speaker Change: notwithstanding where rates are, but a lower rate environment certainly makes our proposition

Laura Dottori: But as we've shared in the past, one of the big drivers for us to grow particularly in the self-managed fleet space remains the complexity of the space as it evolves. Really, when we think about fleet electrification and that complexity, that is really the opportunity for us and for these clients to deal with us where we feel we can, their total cost of operation. So that's the main driver.

Speaker Change: More interesting. But as we've shared in the past, one of the big drivers for us to grow particularly in the self-managed fleet space.

Laura Dottori: On the, on the auto fleet, I just wanted to also maybe dig in and just get a little bit better understanding of maybe, you know, what, what were some of the gaps that were that were existing with the event today to go to a buy versus build strategy and maybe a little bit more color on some of these value add services that are coming on board. I would assume that existing customers are using auto fleet.

Speaker Change: remains the complexity of the space as it evolves. Really, when we think about fleet electrification and that complexity, that is really the opportunity for us and for these clients to deal with us where we feel we can

Frank Ruperto: Yeah, and I would just comment as well, you know, the major reason why a self-managed fleet tends to go into an FMC is not because of the financing component, necessarily. It is because what we can do on the services side, as Laura said, really deal with the complexity of that fleet and lower the total cost of ownership. So that's absolutely critical.

Speaker Change: Frank Dottori, Frank Ruperto

Speaker Change: So that's the main driver.

Frank: I'll hand it over to Frank, maybe, that covers some of the lower rates as it relates to our overall business. Yeah, and I would just comment as well, you know, the major...

Laura Dottori: And that was sort of the way into this transaction. But maybe a bit more color on those two factors. Yeah, hi, Jamie. I'll take that. I think as we've talked about, when we see all of the advancements going to say in mobility, what we see with vehicle connectivity, wheel electrification, et cetera, we know that we have to continuously evolve for our clients. As we shared, we've been on the path to build out our capabilities to be in a position to do more digitization and automation to better serve our clients.

Speaker Change: reason why a self-managed fleet tends to

Speaker Change: Frank Dottori, Frank Ruperto

Frank Ruperto: So, you know, where the financing tends to be more of a commodity type of product, it really is the hook from a self-managed fleet perspective, what we can do for them from a service perspective. Overall, though, when we went into this year, we have been able to.., term out our facilities at much better rates than we had seen historically in the last year, or in 2023, and we were 22 as well. So that's a very good positive and has created some tailwind. One of the reasons why our guidance has been raised is that lower financing environment from when we set up the original guidance back in November.

Speaker Change: where financing tends to be more of a commodity type of product. It really is the hook from a self-managed fleet perspective, what we can do for them from a service perspective. Overall, though, when we went into this year, we have been able to

Laura Dottori: That is proving out to be expensive. And so we were out looking to see, could we partner or acquire capabilities such that we could move a lot faster. And so we found auto fleet. We really like the team. We think with them, we're going to be able to better serve our clients. And it's really all about accelerating all of our digitization and automation efforts. It allows us to really fast track, if you will, our modernization plan.

Laura Dottori: They have an AI-powered platform. Again, that's going to help a streamlined automate and just move faster. And as I shared in my prepared remarks, we found a world-class team that's a wonderful cultural fit with us. They've got a scalable digital platform. It's still on a modern tech stack. So we're feeling incredibly positive about what we'll be able to do with this acquisition for our clients. Some of the potential value added services.

Speaker Change: term out our facilities at much better rates than we had seen historically.

Speaker Change: in the last year, or in 2023, and we were 22 as well. So that's a very good positive and has created some tailwind. One of the reasons why our guidance has been raised is that lower financing environment from when we set up the original guidance back in November.

Frank Ruperto: Okay, thanks. And then just with respect to the Auto Fleet acquisition, as you kind of onboard this software platform, do you foresee any potential disruption risk here at all? Or, what are you doing to try to minimize that if there is one?

Speaker Change: Okay, thanks.

Speaker Change: And then, just with respect to the Auto Fleet acquisition,

Speaker Change: As you kind of onboard this software platform, do you foresee any potential disruption risk here at all? Or what are you doing to try to minimize that if there is one?

Laura Dottori: Well, we are going to run AutoFleets as a separate entity, so it will be run independently. Again, as you shared, we explored many companies, their people, their technologies, and with Auto Fleet, we found the one that was the best fit. We believe that all of the benefits here, I'm gonna say far outweigh any perceived risk, in that our teams have spent considerable time collaborating together as we have worked together to serve some clients. We feel we share a common purpose, great cultural fit, and in allowing a startup to operate independently will further, I'm going to say, decrease the likelihood of things not working out.

Speaker Change: Well, we are going to run AutoSleep as a separate entity, so it will be run independently.

Speaker Change: Again, as you shared, we explored many companies, their people, their technologies, and with Autofleet we found the one that was the best fit.

Laura Dottori: They are in the space that we are not. They do a lot in the short-term rentals and ride sharing. They have really strong analytic and other capabilities. So those are some of the other services we'll be able to do things like optimize vehicle routing, keyless vehicle entry. The list goes on. And so it gives us just really, not just a great talent team. But really good tools that will help us better manage our clients and allow us to really optimize our business.

Speaker Change: We believe that all of the benefits here, I'm going to say far outweigh any perceived risks.

Speaker Change: In that our teams have spent considerable time collaborating together as we have worked together to serve some clients. We feel we share a common purpose, great cultural fit.

Speaker Change: And in allowing a startup to operate independently, we'll further, I'm going to say decrease the likelihood of things not working out. This is a great transaction, not just for us, but for auto fleet.

Laura Dottori: So all of that should really translate into where Frank was at synergies and whatnot over time, not just allowing us to go faster. But things that will make our client experience better, jobs better for our clients, sorry, for our people. And should also allow us to deliver better returns for our shareholders or sober times.

Laura Dottori: This is a great transaction, not just for us, but for Auto Fleet in that with our client base and our great sales force, this will allow Auto Fleet to grow at a faster rate, and with Auto Fleet's tech stack and very talented team, it's going to allow us to accelerate in the digitization and automation, and so, you know, deals work best when both parties win and both of us win in this transaction, and most importantly, this is going to be a great combination to better serve our clients, make our employees' jobs, as I said earlier, better. And all of that, as we do it properly, is going to result in better performance for our ship.

Speaker Change: In that, with our client base and our great sales force, this will allow auto fleet to grow at a faster rate.

Speaker Change: and with Autosleep, TechStack and very talented team, it's going to allow us to accelerate in the digitization and automation and so...

Unknown Executive: Okay, that's great. I'll read you.

Speaker Change: You know, fields work best when both parties win and both of us win in this transaction. And most importantly, this is going to be a great combination to better serve our clients.

Tom Mackinnon: Next question comes from Tom McKinnon with BMO. Please go ahead. Yeah, thanks very much.

Tom Mackinnon: Just a question generally on the impact of the lower rates. I know from a finance revenue perspective, you're generally agnostic there. But perhaps what are you hearing from clients in the self-managed market and maybe they're appetite to our sources rates have come down and have a follow-up. Thanks. Hi, Tom. We continue to grow in that space. Have a lot of opportunity. Great conversations with clients. It say demand continues to be strong.

Speaker Change: to make our employees jobs, as I said earlier, better. And all of that as we do it properly is going to result in better performance for our shareholders.

Laura Dottori: And naturally, this will help expand some of the services that you have, but can you elaborate on any other expansion of services that you might want to undertake? You know, even without having Auto Fleet, I think there were a few you spoke to before, but just wondering how your thoughts are there.

Speaker Change: Naturally, this will help expand some of the services that you have, but can you elaborate on any other expansion of services that you might want to undertake?

Speaker Change: You know, even without having Autofleet, I think there were a few you spoke to of before, but just wondering how your thoughts are there.

Laura Dottori: Yeah, absolutely. I'd say in the in the very first instance, it allows us to up our game as it relates to the digitization of our services, how our clients interact with us, and how we deliver all of the different products and services we have. And so that is the, I'd say, the first benefit that our clients should see in short order. As that gets done, as it relates to, I'm going to say additional value added services that we can provide, we'll be able to look at doing things in the telematic space.

Tom Mackinnon: Look, there was a need just given what we had been through our clients needed to say decrease the average age of their fleet. Notwithstanding where rates are, but a lower rate environment certainly makes our proposition more interesting. But as we've shared in the past, one of the big drivers for us to grow particularly in the self-managed fleet space remains the complexity of the space as it evolves really when we think about fleet electrification and that complexity. That is really the opportunity for us and for these clients to deal with us where we feel we can decrease their total cost of operation.

Speaker Change: Yeah, absolutely. I'd say in the very first instance, it allows us to up our game as it relates to the digitization of our services.

Speaker Change: how our clients interact with us and how we deliver.

Speaker Change: All of the different products and services we have.

Speaker Change: And so that is I'd say the first benefit that our clients should see in short order as that gets done. As it relates to, I'm going to say additional value added services that we can provide.

Laura Dottori: As I mentioned earlier, we're going to be in a position to, for ride hailing, optimize even further with stronger data and analytics and AI capabilities, the total cost of operation for our clients. I mentioned things like keyless vehicle entry, we'll have a lot of that that we can actually do. And so a lot of opportunity with them.

Speaker Change: We'll be able to look at doing things in the telematic space.

Speaker Change: As I mentioned earlier, we're going to be in a position to, for ride-hailing, optimize even further with stronger data and analytics and AI capabilities for the total cost of operation for our clients.

Frank Ruperto: So that's the main driver. I'll hand it over to Frank maybe to cover some of the lower rates as it relates to our overall business. Yeah, and I would just comment as well, you know, the major reason why self-managed fleet tends to go into an FMC is not because of the financing component necessarily. It is because what we can do on the services side, as Laura said, really deal with the complexity of that fleet lower that total cost of ownership.

Speaker Change: I mentioned things like keyless vehicle entry, we'll have a lot of that that we can actually do.

Laura Dottori: And then of course, we have the other opportunities that I've talked about previously, as it relates to the insurance space that we were working on and the small to medium sized fleet. Those are two initiatives that we continue to work on. And we actually feel that in working with auto, that that could allow us to move faster in that regard, and the Digitalization and Automation Capabilities, so we should be able to move faster with those two initiatives as well, and there will be more to come on that in future quarters. Okay, thank you. The next question comes from Graham Ryding with TD Securities. Please go ahead.

Speaker Change: and so a lot of opportunity with them and then of course we have the other opportunities that I've talked about previously as it relates to the insurance space that we were working on and the small to medium-sized fleets.

Frank Ruperto: So that's absolutely critical. So, you know, where the financing tends to be more of a commodity type of product. It really is the hook from a self-managed fleet perspective, what we can do for them from a service perspective. Overall though, when we went into this year, we have been able to term out our facilities as much better rates than we had seen historically. In the last year or in 2023, and we were 22 as well. So that's a very good positive and has created some tailwind.

Speaker Change: Those are two initiatives that we continue to work on.

Speaker Change: and we actually feel that in working with Autofleet...

Speaker Change: that that could allow us to move faster in that regard, too, just given the tool set that they bring and the digitization and automation capabilities. So we should be able to move faster with those two initiatives as well, and there'll be more to come on that in future quarters.

Speaker Change: Okay, thank you.

Frank Ruperto: One of the reasons why our guidance has been raised is that lower financing environment from when we set up the original guidance back in November. Okay, thanks.

Speaker Change: The next question comes from Graham Ryding with TD Securities. Please go ahead.

Graham Ryding: First, I just want to make sure I'm understanding this correctly because there has been a lot of conversation about the auto fleet. So just to sort of try to summarize, is this a way for you to basically leverage Auto Fleet, both in a direct client-facing capacity, in terms of what you can offer them, but also from your own processes and in terms of sort of digital and automation behind the scenes, you can leverage Auto Fleet as well? Should I think of it in both respects?

Graham: Good morning.

Laura Dottori: And then, just with respect to the auto fleet acquisition, as you kind of onboard the software platform, do you foresee any potential disruption risk here at all, or what are you doing to try to minimize that if there is one? Well, we are going to run auto fleets as a separate entity, so it will be run independently. Again, I just share, we explored many companies, their people, their technologies. And with auto fleets, we found the one that was the best fit.

Graham: Just first, I just want to make sure I'm understanding this correctly, because there has been a lot of conversation on Autofleet.

Speaker Change: just to sort of...

Speaker Change: try to summarize. Is this a way for you to basically leverage Autofleet both in a direct client facing capacity in terms of what you can offer them but also

Speaker Change: From your own processes and in terms of sort of digital and automation behind the scenes you can leverage Autofleet as well Should I think of it as both respects?

Laura Dottori: Absolutely, you got it. Okay, great. And then my only other question would just be on guidance, Frank.

Frank Ruperto: I think the, the sort of the numbers that you've provided, they imply that you're not really expecting much growth in the second half of the year versus the first half of the year, from a sort of revenue and adjusted EPS perspective. And I think free cash flow per share is actually expected to trend down a bit versus the first half of the year. Is that accurate? And then what would be driving that?

Speaker Change: Absolutely, you got it

Speaker Change: Okay, great. And then my only other question would just be on guidance, Frank.

Laura Dottori: We believe that all of the benefits here are going to take far away any perceived risks. In that, our teams have spent considerable time collaborating together as we have worked together to serve some clients. We feel that we share a common purpose, great cultural fit. And in allowing a startup to operate independently, we will further, I'm going to say, decrease the likelihood of things not working out. This is a great transaction, not just for us, but for auto fleets.

Speaker Change: I think the sort of the numbers that you've provided.

Speaker Change: They imply that you're not really expecting much growth in the second half of the year versus the first half of the year from a sort of revenue and adjusted EPS perspective. And I think free cash flow per share is actually expected to trend down a bit versus the first half of the year.

Frank Ruperto: So a couple of things, let me talk to the fundamental component of it. So again, you know, we put out guidance for obviously good revenue growth and good growth as you look at the back half of the year and think about the whole range. So we try to play guidance down the middle of the fairway as we look at it.

Speaker Change: Is that accurate? And then what would be driving that?

Speaker Change: So, a couple of things. Let me talk to the fundamental component of it. So, again, you know, we put out guidance, obviously, good revenue growth and good growth as you look at the back half of the year and think about the whole range. So, we try to play guidance down the middle of the fairway as we look there.

Laura Dottori: In that with our client base and our great sales force, this will allow auto fleets to grow at a faster rate. And with auto fleets, tech stack and very talented teams, it will allow us to accelerate in the digitization and automation. And so, you know, deals work best when both parties win, and both of us win in this transaction. And most importantly, this is going to be a great combination to better serve our clients, to make our employees jobs as I said earlier better.

Frank Ruperto: So we do see continued strong growth in the second half of the year as we move forward here. But recall, non-economic, but we're going to have more drag from the preferred stock that will drag the NFR line as we move forward here, you know, just our continued investment in the business consistent with that growth. On the per share perspective, recall that we converted the debentures. So we now have $14 million incremental. Incremental Shares Outstanding which obviously impact the EPS from a basic EPS perspective as we move forward here.

Speaker Change: at it. So we do see continued strong growth in the second half of the year as we move forward here, but recall

Speaker Change: Non-economic, but we're going to have more drag from the preferred stock that will drag the NFR line as we move forward here as well as

Laura Dottori: And all of that, as we do it properly, is going to result in better performance for our shareholders.

Speaker Change: You know, just our continued investment in the business, consistent with that growth. On the per share perspective, recall that we converted the debentures. So we now have $14 million incremental.

Laura Dottori: And naturally, this will help expand some of the services that you have, but can you elaborate on any other expansion of services that you might want to undertake, you know, even without having auto fleets. I think there were a few you spoke to before, but just wondering how your thoughts are there. Yeah, absolutely. I'd say in the very first instance, it allows us to up our game as it relates to the digitization of our services, how our clients interact with us, and how we deliver all of the different products and services we have.

Speaker Change: Incremental Shares Outstanding, which obviously impact the EPS from a basic EPS perspective as we move forward here. The last thing I would just point you to is recall that we had $7 million in non-recurring service revenue.

Frank Ruperto: The last thing I would just point you to is recall that we had seven million dollars in non-recurring service revenue in Q1 and so we don't intend because it's non-recurring that to recur as we move forward. And then finally, you know, we continue to be cautious on gain on sale as we look at it. It's held up well and that's been a benefit to us as Mexico has offset Australia and New Zealand and we've had more vehicles to sell but we are always keep our eye on that as well.

Laura Dottori: And so, that is the, I'd say, the first benefit that our clients should see in short order, as I get done, as it relates to, I'm going to say, additional value added services that we can provide. We'll be able to look at doing things in the telematic space, as I mentioned earlier, we're going to be in a position to, for ride hailing, optimize even further with stronger data analytics and AI capabilities, the total cost of operations for our clients.

Speaker Change: In queue one, and so we don't intend, because it's non-recurring, that to recur as we move forward. And then finally, you know, we continue to be cautious on gain on sale.

Speaker Change: As we look at it, it's held up well, and that's been a benefit to us as Mexico has offset Australia and New Zealand, and we've had more vehicles to sell, but we always keep our eye on that as well. But we feel very good about the second half of the year.

Frank Ruperto: But we feel very good about the second half of the year. Okay. Those points are helpful. That's it for me. Thank, As a reminder, if you would like to ask a question, please press star, then one, to join the question queue. That's star, then one.

Speaker Change: Okay, those points are up for that. That's it for today. Thanks.

Speaker Change: As a reminder, if you would like to ask a question, please press star, then 1 to join the question queue. That's star, then 1.

Laura Dottori: I mentioned things like keyless vehicle entry. We'll have a lot of that that we can actually do. And so, a lot of opportunity with them. And then, of course, we have the other opportunities that I've talked about previously as it relates to the insurance space that we were working on and the small to medium-sized fleet. Those are two initiatives that we continue to work on. And we actually feel that in working with auto-sleep, that that could allow us to move faster in that regard, to just given the tool sets that they bring and the digitization and automation capabilities. So we should be able to move faster with those two initiatives as well. And there'll be more to come on that in future quarters.

Speaker Change: . . . . . . .

Unknown Executive: Okay.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Laura Dottori at Tenacio for any closing remarks. Thank you. Thank you for getting my name right. As we continue to grow and deliver for our shareholders with strong financial results, we will drive forward, and we're going to drive forward at pace with intelligent mobility initiatives, and we're going to ensure that we consistently offer the very best to our clients.

Speaker Change: This concludes the question and answer session. I would like to turn the conference back over to Laura Dottori-Atenasio for any closing remarks.

Laura Dottori: Thank you. Thank you for getting my name right.

Speaker Change: As we continue to grow and deliver for our shareholders with strong financial results,

Speaker Change #100: We will drive forward and we're going to drive forward at pace with Intelligent Mobility Initiatives and we're going to ensure that we consistently offer the very best to our clients.

Laura Dottori: So thanks again to our Element team members for everything they do for our clients and for each other, and a very special welcome to our soon-to-be new team members from Autofleet. And thank you once again for being with us today and for your continued support of Element. We look forward to our next quarterly call. Have a wonderful day. The conference is now concluded. You may now disconnect your lines. Thank you for participating and have a pleasant day. Thanks for watching!

Speaker Change #100: So thanks again to our Element team members for everything they do for our clients and for each other, and a very special welcome to our soon-to-be new team members from AutoFleet

Speaker Change #100: Thank you once again for being with us today and for your continued support of ELEMENT. We look forward to our next quarterly call. Have a wonderful day.

Graham Ryding: Thank you. The next question comes from Graham Ryding with PD Security. Please go ahead.

Graham Ryding: Good morning. Just first, I just want to make sure I'm understanding this correctly because there has been a lot of conversation on auto fleet. So just to sort of try to summarize, is this a way for you to basically leverage auto fleet, both in a direct client facing capacity in terms of what you can offer them, but also from your own processes and in terms of sort of digital automation. And they should be behind the scenes. You can leverage auto fleet as well. Should I think of it as both respects? Absolutely. You got it.

Unknown Executive: Okay. Great.

Speaker Change #101: The conference is now concluded. You may now disconnect your lines. Thank you for participating and have a pleasant day.

Speaker Change #101: [inaudible]

Frank Ruperto: And then my only other question would just be on guidance, Frank. I think the sort of the numbers that you've provided, they imply that you're not really expecting much growth in the second half of the year versus the first half of the year. From a sort of revenue and adjusted EPS perspective. And I think free cash flow for shares actually expected to turn down a bit versus the first half of the year.

Frank Ruperto: Is that accurate? And then what would be what would be driving that? So a couple of things. Let me talk to the fundamental component of it. So again, you know, we put out guidance. Obviously, good revenue growth and good growth as you look at the back half of the year. And think about the whole range. So we try to play guidance down the middle of the fairway as we look there at it.

Frank Ruperto: So we do see continued strong growth in the second half of the year as we move forward here. But we call non economic, but we're going to have more drag from the preferred stock that will drag the NFR line as we move forward here. As well as, you know, just our continued investment in the business consistent with that growth on the per share perspective. We call that we converted the debentures. So we now have $14 million incremental incremental shares outstanding, which obviously impact the EPS from a basic EPS perspective as we move forward here.

Frank Ruperto: The last thing I would just point you to is recall that we had $7 million in non recurring service revenue into one. And so we don't intend because it's not recurring back to recur as we move forward. And then finally, you know, we continue to be cautious on gain on sale as we look at it. It's held up well, and that's been a benefit to us as Mexico has offset New Zealand. And we've had more vehicles to sell, but we are always keep our eye on that as well. But we feel very good about the second half of the year. Okay, those points are helpful.

Unknown Executive: That's a great thanks.

Unknown Executive: As a reminder, if you would like to ask a question, please press star and one to join the question queue, that's star and one.

Unknown Executive: This concludes the question and answer session.

Laura Dottori: I would like to turn the conference back over to Laura Dottori, Asanasio, Bernie Kodner, Mark. Thank you. Thank you for getting my name right.

Laura Dottori: As we continue to grow and deliver for our shareholders with strong financial results, we will drive forward and we're going to drive forward at pace with intelligent mobility initiatives and we're going to ensure that we consistently offer the very best to our clients. So thanks again to our element team members for everything they do for clients and for each other and a very special welcome to our soon to be new team members from auto fleet. And thank you once again for being with us today and for your continued support of element. We look forward to our next quarterly call.

Unknown Executive: Have a wonderful day.

Unknown Executive: The conference is now concluded. You may now disconnect your lines. Thank you for participating and have a pleasant day.