Q1 2025 Element Fleet Management Corp Earnings Call
Good morning, and welcome to element Fleet management first quarter, 2025 financial and operating results conference call.
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Element wishes to caution listeners that todays information contains forward looking statements.
The assumptions on which they are based in the material risks and uncertainties that could cause them to differ are outlined in the company's year end and most recent MD&A and I I S.
Although management believes that the expectations expressed in the statements are reasonable actual results could differ materially.
The company also reminds listeners that todays call references certain non-GAAP supplemental financial measures.
It's been 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.
F. R. S measures can be found in the company's most recent M D.
I would now let's turn the conference call, which Ms. Laura Vittorio.
Ausiello: Ausiello Chief Executive Officer.
Speaker Change: The floor is yours ma'am.
Speaker Change: Good morning, and thank you for joining us element is off to a strong start in 2025 building on the momentum of a record year in 2024.
Speaker Change: Our strong financial and operational resilience combined with ongoing commercial momentum.
Speaker Change: <unk> and solid net revenue growth year over year, even with meaningful movements in foreign exchange rates.
Speaker Change: And as we communicated last quarter, our adjusted operating expense growth moderated.
Speaker Change: We expect this trend to continue throughout 2025.
Speaker Change: Our business fundamentals remained strong and we believe that key elements of our business such as the impact of capital cost inflation and our growing portfolio of services help counterbalance potentially economic pressures.
Speaker Change: Evolving global trade dynamic presents opportunities to deepen relationships with existing clients and establish new ones clients increasingly rely on elements expertise and industry leadership to navigate complex challenges in times of change our purpose and value proposition become even.
Speaker Change: Been more essential.
Speaker Change: We're committed to helping clients lower their total fleet operating costs, while delivering an exceptional client experience for example, our strategic advisory team identified over one 5 billion in data driven savings opportunities for clients last year and an additional 380.
Speaker Change: Million this quarter.
Speaker Change: We remain confident in our ability to adapt to sustain momentum and create lasting value for our clients and our shareholders. Several factors underpinning this confidence.
Speaker Change: Our ongoing commercial momentum continues to grow with 34, new clients added this quarter.
Speaker Change: These included converting self managed fleets and gaining share from our competitors. Additionally, we saw another solid quarter of share of wallet growth, adding 246 service enrollments.
Speaker Change: Our client order volumes have been strong over the past two quarters, which we expect will drive increased originations.
Speaker Change: Our Dublin base leasing initiative remains on track to meet revenue and operating income targets.
Speaker Change: Early feedback on our recently launched insurance initiative has been promising with clients actively engaging with our commercial team.
Speaker Change: Our digital strategy is progressing as planned highlighted by advancements such as our digital driver App enhanced client reporting portal and continued investment in our ordering platform.
Speaker Change: Lastly, we are committed to investing in our digital capabilities to enhance existing service delivery further elevate the client experience and deepening digital engagement with clients.
Heath: Before I turn it over to Heath I want to acknowledge the continued efforts of our global team.
Speaker Change: You all for your dedication and your commitment as well as your consistent focus on delivering for our clients and our shareholders Keith over to you.
Keith: Thank you Laura and good morning, everyone.
Keith: We started the year with solid financial performance, driven by our resilient business model and strong balance sheet.
Keith: Year over year net revenue growth and positive operating leverage resulted in adjusted operating income of 151 million free cash flow per share of 36 cents in earnings per share 28 cents. Additionally, our return on equity continues to expand reaching 16, 7% this quarter.
Keith: Before turning to the financials, let me address two key factors influencing our Q1 results first significant foreign currency movements impacted our comparisons on many metrics year over year, the Mexican peso depreciated by 20% against the U S dollar while the Australian dollar.
Keith: Declined 5%.
This reduced net revenue by $17 million operating expenses by $4 million adjusted operating income by $13 million and diluted EPS by <unk> <unk>.
Keith: And second in Q1 2020 full services revenue benefited from $7 million in certain nonrecurring items disclosed last year.
Keith: Now, let's turn our focus to key growth drivers for Q1.
Keith: The figures discussed will be on an adjusted basis and exclude the impact of the $7 million in nonrecurring services revenue from Q1 last year.
Keith: Net revenue increased 8% year over year to $276 million this quarter driven by growth across all categories. This compares favorably with the 5% growth in adjusted operating expenses over the same period, resulting in positive operating leverage of two 9%.
Keith: Services revenue grew 9% year over year to $152 million, driven primarily by higher penetration and utilization from new and existing clients excluding.
Keith: Excluding foreign currency translation, which had a $6 million impact services revenue grew by a robust 13% year over year.
Keith: Net financing revenue grew 4% year over year to 112 million led by strong growth in financing income driven by pricing and funding initiatives. This was partly offset by higher funding costs associated with the increased interest expense from debt associated with our preferred share redemption and all.
Keith: Isolate acquisition.
Keith: Gain on sale declined year over year due to the unfavorable currency translation, but higher unit volumes continue to offset used vehicle price normalization.
Keith: The aggregate impact of foreign exchange translation reduced net financing revenue by $11 million year over year.
Keith: While origination volumes were down year over year. This was largely a function of foreign currency translation impacts excluding FX originations were up modestly.
Keith: Origination activity in our largest region the U S and Canada saw an impressive 13% quarter over quarter increase and encouraging sign of our strength and business resilience.
Keith: This growth was largely tempted by declines in Mexico, and Australia, where activity step back from Q4 due to seasonal factors.
Keith: Client order volumes have been strong over the past two quarters, which positions us well for higher originations and continued growth in net financing revenue in the coming quarters. In addition, our core vehicles under management increased 4% year over year at the high end of our expected 2% to 4% annual rate.
Keith: <unk>.
Keith: Net financing revenue continued to benefit from improvements and diversification of our funding sources and pricing initiatives.
Keith: In March we completed a private offering of $650 million in senior notes. This will replace notes Judah maturing June importantly, the spread we were able to achieve in this transaction represented a 247 basis point improvement versus our maturing nuts.
Keith: Indicative of our reduced cost of funding.
Keith: We see located 574 million assets this quarter, a 21% increase from Q1 last year, but down from Q4 Gee, There's a 346 million bulk syndication of a Canadian lease portfolio to Blackstone in December.
Keith: Syndication revenue increased by $3 million or 41% year over year, largely attributable to higher net yields and highest syndication volume the higher net yield in Q1 reflects a favorable syndication mix offsetting the scheduled reduction in bonus depreciation in 2025.
This quarter, we strategically delayed certain syndication activity to the second half of the year anticipating U S tax legislation changes the crude reinstate bonus depreciation back to a 100%.
Keith: Turning to expenses Q1, adjusted operating expenses totaled $125 million with year over year growth moderating to 5% as anticipated.
Keith: This trend is expected to continue throughout the year.
Keith: Solid net revenue growth and motor I did expense growth resulted in adjusted operating margin of 54, 7% in Q1, which represents expansion of 125 basis points year over year.
Keith: We remain focused on disciplined expense management in order to deliver on our 2025 adjusted operating margin target range of between $55 five and 56, 5%.
Keith: Our debt to capital ratio ended March at 74, 9% at the midpoint of our 73% to 77% target range.
Keith: We returned $77 million to shareholders through common dividends and share repurchases, we repurchased two 2 million shares in Q1 for total consideration of $40 million with an additional 600000 shares repurchased in April.
Keith: It is worth noting that our heightened and CIB activity in 2025 reflects an opportunistic approach that is not indicative of the future quarterly run rate.
Keith: Looking ahead, our momentum is strong we remain ready to adapt innovate and draws board it ties to further enhance the client experience, while consistently delivering value to our investors and clients.
Keith: Operator, we are now ready for questions.
Keith: Thank you Sir.
Keith: Analysts who wish to join the question queue. You May Press Star then one under telephone keypad.
Keith: We will hear a tone.
Speaker Change: The juror quest.
Speaker Change: If you are using a speaker phone please pickup your handset before pressing the keys.
Speaker Change: Withdraw your question. Please press Star then two.
Speaker Change: We ask that you please limit yourself to two questions. However, you can re queue to join.
Speaker Change: At this time, we will just pause momentarily to assemble our roster.
Vasily: The first question, we have will come from Vasily <unk>.
Speaker Change: Okay BW. Please go ahead.
Speaker Change: Hi, Thank you for taking my question and good to be on the call.
Speaker Change: Congrats on the strong quarter just.
Speaker Change: Heath, one high level question on macro and tariffs obviously, if the situation seems to evolve every day just wanted to get a feel for your latest thinking on the backs of your business if any and we've also seen some macro weakening in the U S. As well. So just curious what youre hearing from your clients, if they're taking any actions related to that.
Speaker Change: You know wanted to gauge your confidence in the outlook just given all that uncertainty.
Speaker Change: Yeah, Thanks, Vasu I have to say.
Speaker Change: Managing fleets is certainly becoming a much more complicated in this environment, which of course is great from a <unk>.
From our perspective, given our value proposition, which is to help clients decreased their total cost of operation for their fleet. So.
Speaker Change: Well the recent AR auto tariff relief I would say as a positive.
Speaker Change: I'd also say that our vehicle in repair costs are still likely to increase.
Supply chains are still likely to experience some form of disruption. So our priority continues to be that we're going to support our clients. We're gonna help guide them through all of this our global trade dynamic.
Speaker Change: I'd say of interest to your question so.
Speaker Change: Just a reminder, every year and sometimes more often.
Speaker Change: Part of what we do is we propose actionable ways to our clients to decrease their fleet expenses.
Speaker Change: Say historically, our clients state action, let's say 30, maybe up to 35% of those savings that we would identify.
This past quarter, given the I'm going to say the pressures are that are here now and on the horizon from a cost inflation perspective, what we've seen is that 30% to 35% in the last quarter actually increased to 52%. So what we're seeing is our clients were.
Speaker Change: Eddie to take I'm going to say more aggressive or more proactive action to look to trim their costs are.
Speaker Change: Just given sort of market outlook.
Speaker Change: I, probably like to share maybe before talking about elements sitting it's important that I wouldn't think of the Oems because they're very important partners to us and we are in constant communication with them for our clients.
Speaker Change: So they've they've confirmed that they are committed to delivering commercial vehicles that our clients require notwithstanding some of what you're seeing in the news where some models are being cut.
Speaker Change: Those aren't the models.
Speaker Change: That are being used by our clients. So I'd say the overwhelming majority of our commercial clients have models that we will continue to be produced.
Speaker Change: Our order to delivery cycle times that we're seeing wells are up they're up marginally which is good.
Speaker Change: We're not seeing any order cancellations outside of historic norms.
Speaker Change: And again, unlike what you're seeing in the consumer space, where there was a large pull forward that dealers. We're seeing of orders in that I'm going to say March April period as people were worried about the future. We saw very little of that are in our client base.
Speaker Change: So we are feeling a good slide we reconfirmed our guidance as we shared last quarter the biggest potential impact company.
Speaker Change: We felt would have been FX volatility and as you've seen this quarter.
Speaker Change: That actually did impact our results and you know if it wasn't for that FX volatility our net revenue would have actually grown 14%.
Speaker Change: So I think it's worth highlighting that and also worth highlighting that our order volumes as Heath was talking about there remains strong and we expect them to drive strong origination and net earning asset growth. This year. So we're feeling good.
Speaker Change: Great. Thank you for that color that was Super helpful. And then just a quick follow up on the services revenue I sort of got the comment on the one timers.
Speaker Change: Effects headwinds I know some of that was already contemplated in the outlook, but just wanted to see if there was any variation versus what you were expecting and then on a reported basis should we still expect that you guys would be able to hit the low double digit for services revenue this year.
Speaker Change: Thank you.
Speaker Change: Yeah. Good morning, I'll I'll take that one so service revenue growth for the quarter, excluding the impact of those one off items and FX was 13% on an underlying basis year on year. So a really strong growth and it's actually our second highest service revenue number.
Speaker Change: We've ever delivered Q4.
Speaker Change: Last year was a really strong number and probably not indicative of a true run rate. There was some timing related numbers in Q4.
Speaker Change: If we think about services going forward, we still expect that the service revenue growth will be our fastest growing revenue line item.
Speaker Change: And given the sort of a pent up demand from the orders that we have some of the initiatives we implemented whether they are the oldest fleet acquisition insurance those sorts of things.
Speaker Change: Coupled with just the general growth of the business, we expect it to continue to grow through through 2025.
Speaker Change: Thank you very much.
Speaker Change: And next we have Stephen Baldwin.
Raymond James: Raymond James.
Speaker Change: Just the first question was just on you mentioned, a robust margin, but basically some of the pricing adjustments as a part of our global.
Speaker Change: Our global initiative, you announced last fall that you can kind of reviewing all the pricing for all your service products.
Speaker Change: I'm just wondering how that that review is progressing.
Speaker Change: Yeah, Good morning statement so.
Speaker Change: If you're referring to sort of margin and how we how we increase margin.
Obviously part of it is is appropriate expense management, the digitization of all of our operational function, which is a key reason for the auto fleet acquisition.
Speaker Change: In addition to that is there's the optimization will continued optimization and standardization of our business.
Speaker Change: Primarily that's being driven add about leasing business, so youll recall.
Speaker Change: We've got a targeted revenue of 30 to 45 million coming out of that initiative and translating to $22 million to $37 million of Iowa that initiative is going really well, Chris Gittens is leading that that function and we're starting to see the benefits of that coming through.
Speaker Change: The second thing that I would call out that's helping us to drive.
Speaker Change: So the margin is the continued evolution of our funding model.
Speaker Change: In Q1, we implemented a commercial paper program that enables us to opportunistically reduce our cost of funds.
Speaker Change: When when the when the.
Speaker Change: That program is is.
Speaker Change: Is.
Speaker Change: It is up and running.
Speaker Change: And then the other item that I would say in a wall that hasn't yet hit Q1. It just shows the work were down from a funding side of things.
We actually.
Speaker Change: Raised all all bombed at a rate of 103 basis points in Q1 that will replace a maturing bond in June that was raised a 350 basis points for these guys. So that's sort of just shows the impact with Mike from a funding side of things to bring down right. So over time.
Speaker Change: Okay. That's good and maybe just a follow up there you mentioned the commercial paper.
Speaker Change: Timing of that and also the.
Speaker Change: Off balance sheet securitization facility not the bulk of them that was announced last year I'm just wondering the timing on that as well.
Speaker Change: Yes, so the commercial paper program is in its up and running we actually utilize that facility in Q1, we did pay it off by the end of the quarter. So you won't see it in in the sort of the balance sheet at the end of the quarter.
Speaker Change: So we did get some benefit from that in Q1 in terms of our off balance sheet structures. We are working through another structure.
Speaker Change: It's probably too early to it to announce anything further from that sort of thing. However, we are making good progress and and are on track to.
Speaker Change: To deliver that in the back half of the year.
Speaker Change: Okay. Thanks very much.
John Aiken: The next question, we have will come from John Aiken objections.
Speaker Change: Good morning Heath in terms of the FX I guess try to squeeze in two part question first philosophically.
Speaker Change: Any thoughts in terms of hedging and secondarily you spoke to the revenue impact, but can you give us a sense in terms of how.
Speaker Change: The FX volatility impacted expenses in the quarter.
Speaker Change: Okay.
Speaker Change: Yeah, absolutely so from a revenue standpoint, it was $7 million to $8 million reduction.
Speaker Change: The reduction and then from an expense side of things it was $4 million. So.
Speaker Change:
Speaker Change: Your expenses did benefit from the FX side of things, having said that.
Speaker Change: The even adjusting for FX year on year expenses are up 6%.
Speaker Change: All of which $3 million was actually the acquisition of auto flight.
Speaker Change: In terms of your first question around hedging of.
Speaker Change: On the P&L.
Speaker Change: Obviously, the impact of FX doesn't impact our business model, where our value proposition or anything like that it really is just the translation of those revenues.
Speaker Change: Peso and the Aussie dollar New Zealand dollar perspective.
Speaker Change: 65% of our revenues are in U S dollars. So that's the bulk of our business has no impact and it really is just those those all the currencies. The main one is is the peso, which has been highly volatile over the last.
Speaker Change: Over the last 12 months or so in terms of hedging we.
Speaker Change: We it is some it does drive a level of volatility if you hedge your P&L.
Speaker Change: We do look to do intra quarter hedging so locking rights from a peso perspective, which we did in Q1 and Q2.
Speaker Change: And that just helps to reduce some of the volatility.
Speaker Change: But from a.
Speaker Change: An overarching principle the rights are at.
Speaker Change: In a relatively old town hall high levels, and we expect that that will normalize over time towards the main.
Speaker Change: Great. Thanks, I'll re queue.
Speaker Change: The next question of what we have will come from Tom Mackinnon of BMO.
Tom Mackinnon: Yeah, Thanks, very much good morning.
Tom Mackinnon: First question just on this deferral of the syndication that you're talking about right now I.
Tom Mackinnon: I assume that the.
Tom Mackinnon: The demand remains robust, but if we don't get any volume for syndication in the second quarter, we would that all that volume would be moved into the third into the fourth quarter is that the way we should be looking at your decision to delay syndication here.
Tom Mackinnon: Yeah morning, Tom So the first thing that I would say is the reason why we delight syndication volume is that.
Tom Mackinnon: There's a potential that the 100% bonus depreciation gets reinstated in the back half of the year that will increase our syndication yield. So that's the reason why we are delighted in terms of appetite for all pipe.
Tom Mackinnon: It remains really robust so that we could have absolutely down more syndication volume. If we wanted to in Q1. So it was purely a strategic reason to delay it to the second half of the year now regardless of what happens from a tax legislation perspective.
Tom Mackinnon: We can absolutely have the capacity to do more syndications in the back half of the year. So if you look at it Q2 Q3 of 2024, we syndicated the best part of $1 billion.
Tom Mackinnon: And so so we can we have the capacity to ramp it back up in the second half of the year, regardless of what the outcome is of the bonus depreciation.
Speaker Change: But are you, suggesting there is gonna be hardly any syndication volume in Q2 of 25, just given the fact that you've decided to.
Tom Mackinnon: Or is this or delay it.
Tom Mackinnon: No I said, we will continue to syndicate some volume in Q2, we don't want to do nothing and then.
Tom Mackinnon: <unk> have a huge amount that we need to do for Q3 and Q4. So so we will continue to do some syndication in Q2, just like we did in Q1, but we're.
Tom Mackinnon: Strategically delaying some portion of about a normal volume to the back half of the year.
Speaker Change: Okay, that's great and if you could just let us know a little bit more about the insurance solution that she's done in strategic partnership with hub now.
Speaker Change: Is it largely just a getting a share of commission here are you taking any insurance risk are you taking any claims riskier like I'm. Just if you can flesh that out a little bit for us. Please.
Laura Vittorio: Yeah. Good morning, Tom It's Laura I'll take that one.
Speaker Change: Me some comfort them, we are not taking any under writing risk. It is a more of a referral program in terms of our partnership.
Laura Vittorio: With hub.
Laura Vittorio: So we are off to a I would say a good start so you'll recall, we announced in January that we had launched what we're calling our element risk solutions we.
Laura Vittorio: We went so I'm gonna say lives into the market on March the 31st so it's been one month, so still incredibly early days, but we're seeing some strong interest from our clients for those or I should say, how we've chosen to go at the market is looking at clients that have insurance.
Laura Vittorio: Insurance renewals that are coming up within the 60 day window.
Laura Vittorio: So you've got a strong pipeline in this last month and we've got about I'm going to say.
Laura Vittorio: Perhaps this is the right term, but a 20% conversion rate into active negotiation, meaning our clients have signed a consent form and we've moved to quote so early days and quite frankly still too early to tell how long. This one will go but we are off to a good start and we're very happy with our partnership with hub.
Speaker Change: That's great. Thanks.
Paul Holder: Next we have Paul holder of CIBC.
Paul: Thank you good morning.
Speaker Change: Ask a question on the strong customer orders to start the year I think for probably already addressed the original question, which I wanted to ask which is is this simply a pull forward of demand as a result of the anticipation of higher vehicle prices due to tariffs and it sounds like the answer's no.
Paul: Throw it out there anyway.
Paul: Thought does that suggest then obviously theres other drivers behind the strong demand that there is good probability that strong demand continues throughout the year.
Paul: Yeah.
Paul: Yeah. Good morning, Paul I'd say sell I'll take that one so euro.
Speaker Change: You're right in Q4, 2024, we had really strong order volume.
Speaker Change: So in the U S and Canada that was off by about 25% from year on year perspective, and that momentum has translated through the first half of this year.
Speaker Change: So our order backlog is up to $2 billion at the end of March.
Speaker Change: And then in terms of April we still see strong order volumes.
Speaker Change: We did see some pull forwarding in in numbers in April.
Speaker Change: But it's in the Grand scheme of things it is.
Speaker Change: Marginal and it's more of a pull forward from things that would've been ordered lighter in 2025 into the April month.
Speaker Change: So what is very strong in terms of how we expect to see that translate into originations. We did see some of that starts translating in Q1, so the USA and Canada originations was up 39% quarter on quarter.
Speaker Change: That was partly offset by Mexico, and I N Z, which is just seasonal so it's.
Speaker Change: It's the summer period, and I'd said Theres always lower originations in in Jan and then it builds from there just as an example.
Speaker Change: From.
Speaker Change: From old all our metrics, we expect those higher order volumes to translate into higher originations in Q2 and Q3.
Speaker Change: Which will in turn drive all fr in various service revenues.
Speaker Change: Okay. Thanks for that my second sort of.
Speaker Change: Related questions I, just want to better understand any potential change in customer behavior and Mexico in particular.
Speaker Change: Even if I adjust for FX originations year over year, or maybe you know sort of.
Speaker Change: Flattish.
Speaker Change: Obviously with the with the Investor Day, you did last year, we're expecting relatively high growth rates in Mexico.
Speaker Change: Overtime, so it would be in kind of a any pause in activity because of let's call. It elevated our heightened tariff risk for that geography in particular.
Speaker Change: Yeah, so specific to Mexico.
Speaker Change: You're right that adjusting for FX.
Speaker Change: The originations, but largely flat.
Speaker Change: We at this point in time, we don't see any any major concerns coming through from our clients.
And gross and volume continues to be robust there, having said that it is probably the area that potentially could be impacted the most by tariffs and those sorts of things from a growth perspective, but at this point and so on the business continues to perform strongly.
Okay.
Speaker Change: For me then thank you.
Speaker Change: Yeah.
Speaker Change: And that's the way of Graham Ryding of TD Securities.
Speaker Change: Okay.
Speaker Change: Good morning, Laura you mentioned that you're not seeing any orders being canceled can you just remind us that $2 billion thats sitting in your backlog those are those contractually guaranteed like Howard Howard orders being canceled actually flow through your business if that were to happen.
Speaker Change: Yeah, So as I mentioned before we haven't seen anything outside of normal course, and so when orders are placed.
Speaker Change: I would tell you that they can be cancelled up until the time. They are accepted by the Oems. Once they are accepted by the OEM or clients are contractually obligated to purchase vehicles.
Speaker Change: And so when we talk about orders or what we've been referring to you today are orders that have been accepted by the OEM.
Speaker Change: Okay understood.
Speaker Change: Understood. That's helpful. My next question would just be on the bonus depreciation if that does move back to 100%.
Speaker Change: Can you give us or can you remind us what the expected impact would be on your syndication revenue either in.
Speaker Change: <unk> dollar amounts or or that syndication yield.
Speaker Change: Yeah, absolutely so from a an annualized dollar amount perspective the.
Speaker Change: The impact would be a positive $25 million to $30 million. So.
Speaker Change: That comes in in the back half of the year, obviously, you're not going to get the full amount of that but it is a material upside to us which is why we've taken the decision to the lights indications.
Speaker Change: That's it for me thank you.
Speaker Change: Okay once again.
Speaker Change: With any further question you May press Star then one on a touchtone phone again out of Star then one to ask it.
Speaker Change: Okay.
Speaker Change: Yes.
Jimmy: The next question, we have will come from Jimmy <unk> of National Bank Financial. Please go ahead.
Speaker Change: Yes, good morning.
Speaker Change: First question is just on the the moderating opex growth guidance, just want to make sure I understand that is that <unk>.
Speaker Change: Moderator on a on a quarter to quarter basis, or just relative to the prior year's quarter.
Speaker Change: So for instance, where should we see growth below 5% that.
Speaker Change: That was reported in Q1 in the next few quarters.
Speaker Change: Yeah. Good morning, Jeremy So from an Opex perspective, the moderation we talked to is is by stone or versus the 2020 full growth right. So we will continue to invest in the business by stone on the growth that we're seeing so.
Speaker Change: You Wouldnt shouldnt expect that each quarter expenses will come down.
Speaker Change: But certainly from a year on year perspective, the growth rate will moderate versus 2024.
Speaker Change: Yeah, Okay got that.
Speaker Change: And then my next question just.
Speaker Change: Looking at the bottom growth, obviously understand clients coming in and clients coming out just wanted to get a little bit more color as to.
Speaker Change: Perhaps what's.
Speaker Change: And what's going on with the 6000 vehicles that are.
Speaker Change: That decline with existing clients as that.
Speaker Change: The case, they can't get their vehicles in and replaced or are they you know what.
Speaker Change: Kind of decision processes going on there I know, it's small but just curious.
Speaker Change: Yeah, so from a volume perspective.
Speaker Change: There's nothing really material to call out from that perspective. It is a metric that we look at more on a longer term trend and if you look at from a year on year perspective call volume is up 4%, which is is it a higher end of our target range of two to four you always have some quarterly volatility which is normal.
Speaker Change: In terms of the specific 6000 that you referred to.
Speaker Change: No real major call outs, there clients will sell or sell a business or something like that and therefore that they might have a reduction in their flight.
Speaker Change: So it's another no real callout from there and I'll focus really is is continuing to have strong client retention and then now converting our new business wins to grow throughout 2020.
Speaker Change: Okay.
Speaker Change: Okay, Great and then lastly.
Speaker Change: Obviously, the auto fleet acquisition is still pretty new but what can you tell us about some of the.
Speaker Change: I don't know new client wins or new service our products are rolling out from for motto fleets and how that's contributing in this quarter.
Speaker Change: Well, Jamie it's Laura I'll take that I might be able to talk us even past the nine o'clock time slot.
Speaker Change: So everything I would tell you is not only are progressing as expected, but better than expected.
Speaker Change: So we acquired out of fleet to over the first the 'twenty 'twenty four and I have to say that we thought we were doing and we are we picked up a world class team and.
Speaker Change: They've got the scalable digital platform built on a modern stack and so what we're starting to see is how bringing auto fleet into element.
Speaker Change: We are starting to see those new revenue streams and more importantly, the efficiencies within our business. So auto fleet more specifically, that's going really well if they've got a solid pipeline of sales.
Speaker Change: So we're expecting a very positive in our outcome from them by the end of 2025, so that's progressing really well.
Speaker Change: And on the element front again going really well not only are we spending less than I would say we had previously planned on spending or would have had to spend had we dealt with third parties.
Speaker Change: We've managed to be out if you haven't seen it we've got our driver App, that's I would've called element motion, it's alive on Apple and Google play stores I'll just point out that it is an MVP minimal viable product. So it's some of the basics, there now and there'll be more to come but isn't it.
Speaker Change: It's if I could call. It a one stop shop to carry out sort of all the tests that are required for a driver or a fleet manager to manage their fleet in a very digital way so.
Speaker Change: So we're just getting started but it has mileage reporting a supplier to locate or fleet management inspection reports and we can even do a pooled vehicle capability. So that's going really well and before the year is out we will have launched our new digital vehicle ordering capability.
Speaker Change: And then there's other things sort of.
Speaker Change: Inside the organization that they're helping us just moved faster on the digitizing and automating so it's going much better than than expected.
Speaker Change: Okay. Thank you.
Speaker Change: And next we have Graham Ryding of TD Securities.
Graham Ryding: Hi, Laura I'll come back to your you mentioned earlier on the call that you're seeing clients.
Speaker Change: <unk>.
Speaker Change: No.
Speaker Change: Actionable items that reduce their cost of fleet management can you give us some examples of what.
Speaker Change: The third key.
Ideas that you would propose it there.
Speaker Change: They're responding to.
Speaker Change: Okay.
Speaker Change: Yeah, all kinds of things. So we look at again, how can we decreased our downtime for them. So it includes everything from whether it's taking on route optimization, what do we get them to do more what we call in network spend from a maintenance perspective.
Speaker Change: It might do less up fitting a different vehicles changing the colors on the vehicles.
Speaker Change: You know racks tires types of vehicles those types of things are where some of the I'm going to say more aggressive decisioning has been happening.
Speaker Change: I'd say historically when times are good we tend to like we do with our own personal vehicles. We go for all the bells and whistles in the vehicle and what we're seeing is the things we tend to recommend is that some of these things are not required and we're seeing that our clients are a much more prepared to take a.
Speaker Change: <unk> and to pull back on some of that spend to decrease their total cost of operation.
Speaker Change: Okay helpful and one more if I can just follow on the auto fleet. You mentioned the pipeline is building in 2025 would that be more on a standalone basis.
Speaker Change: Auto fleet.
Speaker Change: Search is going to the market or is there any sort of cross selling and T. E N clients, that's driving that parkway.
Speaker Change: So both are as you know he said auto fleets.
Speaker Change: We acquired them, but theres still a separate platform and so others can use them, including competitors if they would like to use their services as we don't see the the data that they have if that takes place. So their sales on their own are going very well and we are getting a lot of interest and the <unk>.
Speaker Change: Strong pipeline from our existing client base in terms of interest for the services that they offer so we're seeing it on both fronts.
Speaker Change: Great.
Speaker Change: Thank you.
Speaker Change: And next with Paul Holden CIBC.
Speaker Change: Yeah.
Speaker Change: Thanks have a couple follow up sort of more boring modeling questions but.
Speaker Change: Wanted to ask about the sustaining capex this quarter 5 million the lowest we've seen in a while just wanted to see if that's a timing issue and no change to full year expectations.
Speaker Change: Yeah.
Speaker Change: Yeah, that's it's largely timing bull so just schedule ing of various products Oh projects that we've got going on so it's still committing to.
Speaker Change: 90 million dollar amount annually okay.
Speaker Change: Okay. Thank you.
Speaker Change: And then also on the sort of the same free cash flow statement.
Speaker Change: The cash tax rate was a little bit higher.
Speaker Change: This quarter again, there can be some timing issue there.
Speaker Change: Im just trying to figure out whether that's just you know higher in Q1, and probably lower in future quarters, or if anything's changed in terms of how we should model the cash tax rate.
Speaker Change: Yes, so nothing's changed again timing on that one so Q1 had some state taxes that were paid off and.
Speaker Change: And it was higher than than the sort of normal normal amount, we expect that that will trend back down to average out closer to that Oh, ACD minimum amount of 59%.
Speaker Change: Perfect Alright, those are my boring question Ashish.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: This brings us.
Speaker Change: This concludes the question answer session I would now like to turn the conference call over to MS. Laura Tori.
Speaker Change: The RVO for closing remarks ma'am.
Speaker Change: Thank you very much and thank you everyone for joining US today, we remain focused on generating consistent and sustainable long term growth for our shareholders. We also continue to invest in innovation, while maintaining a disciplined approach to capital allocation. These efforts will keep us.
Speaker Change: SGR island forward thinking, enabling us to adapt our clients' evolving needs and really strengthening elements leadership in shaping the future of mobility, we look forward to reconnecting on our Q2 call in August and until then thank you once again and enjoy the rest of your day.
Speaker Change: And thank you for your time and into the rest of the management team. This does now brings us to the close of today's conference call. You May now disconnect. Your lines. Thank you all for participating and have a pleasant day.
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