EFN.TOEFN.TOTSX
Loading
Operator: Good morning, and welcome to Element Fleet Management's Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. [Operator Instructions] You are reminded that this call is being recorded. [Operator Instructions] Element wishes to caution listeners that today's information contains forward-looking statements, and the assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in the company's year-end and most recent MD&A and AIF. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today's call references certain non-GAAP and supplemental financial features. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP financial measures to add -- to IFRS, pardon me, measures can be found in the company's most recent MD&A. I am now pleased to turn the floor over to Laura Dottori-Attanasio, Chief Executive Officer. Welcome, and please go ahead.
Laura Dottori-Attanasio: Good morning, and thank you for joining us. The fourth quarter marked a year of record performance for Element, highlighting the disciplined execution that we applied in support of our long-term strategy. In 2025, we advanced our key focus areas, continued to invest in our capabilities and delivered strong financial results. Our efforts translated into record net revenue and double-digit growth in both adjusted earnings and free cash flow per share. Adjusted return on equity was 17.9%, reflecting the strength of our capital-light model. In recognition of our cash generation and confidence in our outlook, we increased our annual common dividend by 15% to $0.60 a share. Importantly, we achieved these results while successfully navigating a complex operating environment earlier in the year. This performance underscores the resilience of our business model, the dedication of our team and the growing relevance of our solutions-led tech-enabled platform. Throughout the year, we saw strong client engagement and building commercial momentum. In 2025, we welcomed 156 new clients. We continued to convert self-managed fleets and expanded relationships with existing clients through more than 1,000 share of wallet expansions. Our Strategic Advisory Services team identified over $1.6 billion in cost savings opportunities across our clients' fleets, and approximately half of those opportunities have already been actioned, a testament to the tangible value that we provide. At the same time, we've been strengthening the foundation of our business. The investments we've made over the past 2 years are translating into measurable outcomes. Our Dublin leasing initiative continues to perform as expected, and we are firmly on track to achieve our previously communicated run rate targets of $30 million to $45 million in revenue and $22 million to $37 million in adjusted operating income by 2028 with a targeted 2.5-year payback. Electrification is another area where we made meaningful progress in 2025. We increased electric vehicles under management by 36% year-over-year to approximately 129,000 vehicles. Our charging platform is now live in the U.S. and Canada, and we plan to expand globally in 2026 through new partnerships across our markets. Alongside improvements in our core business, we continue to broaden our offering beyond traditional fleet management and accelerate our entry into mobility. Since launching Element Mobility, we have developed a clear go-to-market approach centered on connected mobility, including telematics, road optimization and adjacent solutions. The integration of Autofleet has been central to our progress. By bringing development in-house, we are lowering structural costs and increasing our agility, accelerating product cycles, shortening time to market and responding faster to clients. We expect this to be a sustained competitive advantage. We launched our Element ONE app for drivers in March, and feedback has been very positive as our adoption continues to grow quickly, and we expect a broader rollout throughout 2026. Our digital ordering platform remains on track with the initial MVP targeted for release in the first half of 2026. In December, we completed the acquisition of Car IQ, adding embedded vehicle-initiated payment capabilities that enhance fleet operations and data connectivity. Together with Autofleet and our partnerships with industry leaders such as Samsara and Motus that we announced earlier in 2025, Car IQ meaningfully advances our digital strategy and our mobility platform. Collectively, these actions improve how we operate, enhance the client experience and support scalable growth. Looking ahead, the steps we've taken in 2025 position us well to capitalize on future opportunities. We closed the year having made strong progress on our digitization agenda, deepen client relationships and broadened our capabilities. The investments we've undertaken have resulted in a stronger operating model and position Element for sustainable growth in the years ahead. And with that, I'll turn it over to Heath to cover the financials and take us through our 2026 guidance.
Heath Valkenburg: Thank you, Laura, and good morning, everyone. Our results this quarter and throughout 2025 reflect the continued disciplined execution of our strategy. We delivered strong performance across key metrics including record levels of net revenue, adjusted operating income and margins and adjusted EPS and free cash flow per share. These measures all finished the year within or above our 2025 guidance ranges. I'll begin with a review of our full year performance on an adjusted basis and then discuss some of the nonrecurring items that impacted our results in Q4. In 2025, net revenue was $1.2 billion, an increase of 9% year-over-year, reflecting strength across all of our revenue streams. Services revenue totaled $623 million, up 5% from last year, primarily driven by increased penetration and utilization across our client base. While VUM increased 3% during the year, the revenue impact builds over time as onboarding and implementation progress. We expect this will support continued service revenue growth in the coming quarters. Net financing revenue was $498 million, up 11% year-over-year, driven by ongoing efficiencies from our leasing and funding initiatives, higher gain on sale in Mexico and growth in net earning assets. This resulted in the core NFR yield of 4.73%, an expansion of 35 basis points versus 2024. Syndication revenue for the year was $64 million, up 50% from last year despite a reduction of $1.1 billion in assets syndicated. This was largely driven by favorable mix, the reinstatement of bonus depreciation and continued demand for our syndication product. Full year originations were $6.5 billion, down 4% year-over-year and below guidance, as previously communicated. This primarily reflects seasonal softness in client ordering during the summer months, combined with later year model availability that pushed deliveries into future periods. Importantly, underlying demand remains strong. Order volumes reached record levels of $2 billion in the fourth quarter and $6.2 billion for the year, providing good visibility into originations for the first half of 2026. As mentioned, our reported fourth quarter results were impacted by several nonrecurring items, the majority of which were noncash in nature. Most significant items included a $130 million deferred tax asset adjustment related to updated jurisdictional profit expectations, a $52 million write-off of our legacy ordering platform resulting from the continued transition to the Autofleet technology platform and $9 million of restructuring and acquisition-related costs related to the Car IQ transaction, which closed on December 31. We do not believe these items are indicative of our underlying operating performance, and therefore, have been excluded from our adjusted results. On an adjusted basis, operating expenses totaled $520 million, up 7% year-over-year, reflecting continued investment in digitization, scalability and product expansion. A combination of solid revenue growth and disciplined expense management generated positive operating leverage of 2.1% and resulted in adjusted operating margin of 56.2%, an expansion of 90 basis points year-over-year. Our performance translated into strong bottom line results with adjusted earnings per share of $1.24, an increase of 13% year-over-year, and adjusted return on equity of 17.9%, up 190 basis points from 16% in 2024. Briefly, on the fourth quarter, our adjusted EPS of $0.33 was up a strong 24% year-over-year, underpinned by record quarterly revenue of $313 million. Top-line growth of 16% reflected contributions from all revenue components, including service revenue, which rose 4% quarter-over-quarter to reach a record level of $163 million. Operating leverage in Q4 was a robust 7.3%, and we generated adjusted return on equity of 18.5%. Turning to capital allocation. We repurchased 5.4 million common shares in 2025 at an average price of $32.10 per share. In total, we returned $269 million to shareholders through dividends and share repurchases. This represented 43% of our adjusted free cash flow and was supported by strong cash generation with adjusted free cash flow per share increasing 15% year-over-year to $1.57. Capital expenditures remained well contained totaling $71 million in 2025. In addition, we continue to manage leverage within our target range, ending the year with a debt-to-capital ratio of 76.9%. As Laura mentioned, we have enacted a 15% increase in our common dividend to $0.60 per share annually and have remained active on share repurchases thus far in 2026. I will now turn to the year ahead and our 2026 financial guidance. We expect 2026 will be another year of solid financial performance with Element, highlighted by revenue growth in the range of 8% to 10% and the combination of positive operating leverage and share repurchases driving strong growth rates in adjusted EPS and free cash flow per share. Specifically, we expect to deliver net revenue of $1.28 billion to $1.305 billion, adjusted operating income in the range of $720 million to $745 million, adjusted operating margin in the range of 56.3% to 57.3%, adjusted EPS between $1.40 and $1.45, adjusted free cash flow per share of $1.67 to $1.72 and originations between $6.5 billion and $6.9 billion. These ranges provided prior to any material foreign exchange fluctuations or adverse impacts related to changes in global trade agreements or broader political uncertainty. In conclusion, 2025 was another year of solid performance across the Element business. We entered 2026 with strong momentum and a resilient financial position giving us confidence in our ability to continue executing our strategic priorities and delivering value for our clients and shareholders. Thank you. Operator, we are now ready to take questions.
Operator: [Operator Instructions] We'll take our first question today from the line of Vasu Govil at KBW.
Vasundhara Govil: I guess, Laura, I first wanted to ask about the Car IQ acquisition. I know you mentioned briefly in your prepared comments, but if you could elaborate a little bit on how you think about strategic benefits of owning that asset and bringing some of the payment functionality in-house? And I know it's early days, but sort of any color on how you think about the contribution that this business could have over time on revenue and margins? And if anything is baked into the '26 outlook?
Laura Dottori-Attanasio: Yes, absolutely, Vasu. Thanks for the question. So super excited about the Car IQ acquisition that closed in December 2025. So Car IQ has this in-vehicle payment solution that effectively enables vehicles to act as payment nodes to help our clients reduce fraud, modernize their billing, and it can really deliver, I'm going to say, scalable solutions to our clients. So it's exciting for us in that it's going to enable us to embed payments into our digital ecosystem. It's going to allow us to transform what I'd say is a relatively outdated process into a really strategic one with better margins for us. And it's going to allow us to capture more spend. And for our clients, it does many things, including removing the need for physical cards, embedding payments directly into the vehicles in their telematics environment. So it's going to be -- well, today, it can be used for fuel, tolls, violation and parking, and it has some really interesting future use cases that we're super excited about. Our plans to integrate it into our Element ONE, our client portal and to our driver app. We're super excited. I would tell you this is -- for the years that I've been here, this is the first time we have had a lot of reverse inquiries from prospects and clients that want to access this capability. And so exciting when we did our due diligence, Car IQ had one case we saw with a client where they could cut their fuel spend by almost 14% just by eliminating card misuse. So we think this has a great capability for our clients. We did a few proof of concepts ourselves. And with one of the clients we did this with, it provided such great results that our client told us they didn't want to come off the platform and want to continue to use this. So we're feeling really optimistic and positive about what this can do, not just for us but for our clients. And so from a financial impact perspective, I'd say a little dilutive in this year given that this is the year that we need to do implementation and conversion. We do expect it's going to have a meaningful impact for our clients, as I talked about, so to really help them reduce their total cost of operation. For us, it will be over time that we'd expect it to drive more profitability. So we are projecting some, I'm going to say, modest accretion that should come in 2027, and that would be on both an adjusted operating income and free cash flow basis.
Vasundhara Govil: Great. That's great color. And then maybe just my second one is on the services -- servicing income growth. That's obviously lagged a little bit. I know I caught your comments about the VUM growth and that should help us in '26. But maybe if you could talk a little bit more about what sort of fell short of expectations this year? And then, as we think to '26, what kind of growth should we be modeling for that piece of the business?
Heath Valkenburg: Yes. Vasu, I'll take that one. So from a service revenue perspective, in 2025, we delivered $623 million. Excluding FX and the onetime items we have announced, it's approximately 7% growth year-over-year. And Q4 reached a record level of $163 million. What we did see in the first half of the year with the macroeconomic environment, including tariff uncertainty and trade-related concerns, is we did see a slower growth rate in the first half of the year of VUM growth and that did moderate sort of the full year service revenue expansion. Obviously, in the second half of the year, VUM growth resumed 6% -- 3% growth rather in the last 6 months, which gives us good momentum going into 2026. What we do see though is typically the incremental contribution of the VUM growth does build over time. So as we cross-sell additional products, as utilization on the vehicles increases over time. And also, many of the vehicles on board, especially in Q4, only contribute partial revenue for that period. So we expect over the medium term services will continue to remain the strongest part of our growth driver. And we're certainly focused on accelerating VUM, expanding our product penetration as well as continuing to enhance our product set, and Laura took us through the most recent acquisition in Car IQ.
Operator: Our next question today will come from the line of John Aiken at Jefferies.
John Aiken: Heath, just a couple of questions that followed from the guidance that you provided, which is not an argument. Thank you very much for that. But when we take a look at the anticipated originations, obviously, below the levels of the guidance that you had last year. What's impeding the outlook for originations? And then, what impact should we expect that to have under vehicles under management growth?
Heath Valkenburg: John, so maybe I'll touch on originations for 2025 more broadly, and then, we can talk about sort of impact to '26. So 2025, we delivered $6.5 billion in originations, and that was slightly down year-over-year and $200 million below our guidance range. It is important to contextualize this against 2024, which benefit from supply chain normalization and the backlog conversion that did elevate origination volumes. What we also saw in Q4 was we had really strong demand. So we had $2 billion of orders in Q4. We did see a modest extension in the order to delivery cycle times for vehicles that required upfit. And that pushed some of those Q4 orders into 2026, but gives us a good starting point for 2026. So in terms of our guidance, we're guiding $6.5 billion to $6.9 billion. That implies 7% growth at the upper end of that range. And to answer your question on impact in revenue, originations is an important metric, but it can fluctuate based on client behavior. And it should be viewed alongside other metrics, so VUM growth, net earning assets, yield, and the latter 2 are primarily the drivers of net financing revenue. And again, in 2025, we saw a really strong improvement across both of those metrics. NEA was up 3%. Our average yield was up 35 basis points, and that ultimately drove record net financing revenue of $498 million.
John Aiken: And then, in terms of the guidance, the free cash flow per share growth implied is a little bit lower than what you're forecasting for the EPS growth. Should we assume that we're looking at higher sustaining capital investments like we saw in the fourth quarter throughout 2026?
Heath Valkenburg: Yes. Maybe I'll take the sustained capital fourth quarter question first, and then, come back to the sort of the free cash flow growth. So Q4 was elevated. There's some timing in there. We continue to target approximately $80 million of spend across both sustaining and growth CapEx and nothing has changed from that perspective. In 2025, we actually saw slightly lower spend, where we spent $71 million in CapEx across the 2, which is one of the reasons that impacted the free cash flow. So when we think about free cash flow relative to EPS, it's really mechanical. So nothing has changed in terms of our ability to generate cash from the business, and it is timing. So free cash flow actually outperformed EPS in 2025 and was really, really strong. And we just see that sort of flipping around in 2026.
Operator: We will hear next from the line of Stephen Boland at Raymond James.
Stephen Boland: I hate asking accounting questions, but Heath, I'm going to, can you explain what updated jurisdictional probability outlook of what that actually means on that charge?
Heath Valkenburg: Yes. No problem, Steve. I love accounting questions. So maybe I'll just give a bit of more color into sort of the key one-off items. So the first one, deferred tax asset, we recorded $130 million partial derecognition of a historical deferred tax asset. I want to stress that this does not reflect any deterioration in the operating performance of any of our geographies, and all of our regions continue to perform strongly. So the change really relates to some internal intercompany funding structure changes, as we look to optimize how we sort of fund the business internally. And ultimately, from a funding perspective, this gives us increased flexibility to raise more local funding, particularly in areas like Mexico, where we're seeing strong growth. So it's important to note, it has no impact on our effective tax rate or cash tax rate. It's a noncash accounting adjustment, and it does not impact sort of global profitability, or importantly, impact our ability to utilize those tax losses in the future.
Stephen Boland: Okay. So this is really the jurisdictional is Mexico, that's kind of where it's focused?
Heath Valkenburg: Some of the focus is Mexico, but it's a realignment of our internal funding structures and intercompany funding structures globally.
Stephen Boland: I'm not sure who this question can go to. But I guess when we were -- a bunch of us were in Mexico, I don't know, 18 months, 2 years ago, there was a program that was talking about a global review of services, pricing, and there was going to be a net benefit that was talked about. I won't say the number, but I'm just wondering, has that global review been completed? And is that kind of baked into some of the results in '25, I don't think -- certainly, I hadn't asked this question. But -- and is that -- I guess, is that review completed at this point?
Heath Valkenburg: Yes. So the pricing and go-to-market strategy is something we continue to refine, not only for Mexico, but all locations across the globe. We set up the leasing business and have seen some strong output as we continue to mature that leasing business and the learnings that we have do get applied to Mexico. So yes, we continue to refine our strategy from that perspective across all locations.
Stephen Boland: Okay. I'll sneak one more in here. Just, Laura, you talked about the -- I'm probably a broken record here, the partnership with Samsara, you mentioned in your opening remarks. Can you just provide an update what that partnership is starting to look like? What services or cross-services that you're looking to add, referrals, et cetera? And would it be helpful, please?
Laura Dottori-Attanasio: Yes. Sure, Steve. I guess what we talked about these partnerships with Motus that do reimbursements for vehicle expenses for individuals, and then, Samsara, who have telematics camera productivity offering. And all of that was done really to add, I'm going to say, additional services for our clients. We wanted to work with some of the best in the industry, and that's what we're doing. And it's going pretty well. Again, early days, but everything has been quite, I'm going to say, positive in line with what we expected. With both Samsara and Motus, we've already activated units and clients that have come through the referral program. And so, all looking good. Worth a reminder, we had said that in 2026 that we were expecting those partnerships to give us about mid-single-digit revenue. And so we're on track for that.
Operator: Our next question today will come from Tom MacKinnon at BMO Capital.
Tom MacKinnon: Two questions. First, just with respect to share buybacks, certainly more of an elevated pace year-to-date. You got the preferreds out of the way, converts out of the way. How should we be thinking about share buybacks? Should we sort of extrapolate a little bit about the accelerated pace you've had, and you do have a 10% NCIB that was launched mid-November 2025? And I have a follow-up.
Heath Valkenburg: Yes, so in 2025, we paid out 43% of our free cash flow in dividends and share repurchases, so $150 million and $120 million. For 2026, as Laura announced, we have increased -- a 15% increase in the dividend to $0.60 per share, which is approximately 28% of our trailing 12-month free cash flow. In the first 2 months of this year, we've already repurchased $34 million of shares. And so we do expect to continue to be active in share repurchases for the 2026 year.
Tom MacKinnon: Okay. And maybe you can talk a little bit about expansion in the services update on insurance services, and how should we be thinking about service attachment rates going forward?
Laura Dottori-Attanasio: Thanks, Tom. I'm -- I'll start off just maybe talking about insurance, and then, I'll let Heath take that broader question, services in general. So you'll recall, and we talked about this, we launched our insurance offering in January of 2025 under the banner of Element Risk Solutions, and we did that in partnership with Hub. So our plan was to combine insurance coverage placement. We're going to do that with claims management and safety services and do it in a modernized way. As I believe I shared, we did miss the mark on this one in that we had some gaps in our product offering, some gaps in our go-to-market approach. And I guess I'd also say from a lessons learned perspective, we underestimated the complexity of standing up our insurance offering inside of our fleet ecosystem. So while we still believe there is a worthwhile opportunity for us in insurance, we remain committed to doing it. We have put it on the back burner given some of the things we talked about like our Car IQ acquisition that have some real benefits to us in the short term. So on insurance, we're making some organizational changes. We're working with Hub, and we're looking at how we refine our approach and fill some of those gaps before we come back to market with the relaunch, but we are still selling the product. It's just not, I'm going to say, exciting enough to deliver what our expectations were when we first talked about this ideation. And maybe with that, I'll hand it over to Heath to talk about the broader services offering.
Heath Valkenburg: Yes, absolutely. So we expect the VUM attachment rates to continue to migrate higher. It's important to note, though, that new clients that you onboard sometimes have a dilutive impact to that migration. And we saw that in Q4, where the new VUM we brought on had a lower attachment rate of 2.2 services per unit. Obviously, the Car IQ VUM came on, had 1 services per unit. So those items do dilute the broad portfolio. But we expect over time for that VUM per unit to migrate over -- up over time, which -- so increased VUM, increased product penetration, and services per VUM will continue to drive higher service revenue over time. And then, maybe just to circle back on your previous question on the share buybacks, so we -- just to close that out, we generally target sort of a 1% to 2% of shares outstanding. I think we were 1.3% for 2025 and expect to sort of be at the higher range for 2026.
Operator: [Operator Instructions] Moving forward, we'll hear from Munish Garg at CIBC.
Munish Garg: Just one question for me. So on the off-balance sheet structures, I was wondering if you could provide an update on the progress on the new off-balance sheet structures that you have been working on similar to the Blackstone that was announced last year?
Heath Valkenburg: Yes, absolutely. So during the quarter, we did incur some one-time costs to enhance and expand our funding structure. So we do already have a strong and diversified funding platform, but this initiative is designed to provide additional flexibility, as we grow the business while optimizing for yield and overall returns. So during the quarter, we made meaningful progress. However, we're not yet in a position to formally announce the associated transaction.
Operator: Our next question this morning will come from Graham Ryding at TD Securities.
Graham Ryding: Laura, this is probably for you. Just interested about the autonomous vehicle sort of area. It seems like it's developing quickly. Is this a fleet management opportunity for you? And how much of an area of focus is this for you relative to everything else you've got going on?
Laura Dottori-Attanasio: Yes. Graham, thanks for that question. Super important, which, in large part, we started doing all the digitization, automation, acquisition of Autofleet, all of that to ensure that we remain in the connected vehicle. So I'd tell you today, autonomous vehicles represents a great opportunity for our company. We're starting to see some of them going from, I'm going to say, pilots -- piloting to commercialization. And we know that in doing so, they're going to have to scale through fleet ownership. So all of that's going to require funding, branding, maintenance oversight, safety reporting, real-time monitoring, scheduling, you name it. Those are all the things that we offer today and that we'll be able to offer to autonomous vehicles. So I would say with everything we've been doing, we are incredibly well positioned to support autonomous vehicles. And I believe we'll be able to win in the space just given the operational expertise that we have, so a positive.
Graham Ryding: Okay. Perfect. Maybe on more of a sort of competitive macro question, just GenAI and the related competition, it seems to be sort of weighing on the markets and concerns in a lot of sectors. Can you talk about the durability of your business, where you could see some competition from AI-related competition? Or where do you see the business being more durable and positioned well?
Laura Dottori-Attanasio: Absolutely. Look, I think our stock did get caught up in all of that, and AI does have the potential to pretty much upend absolutely everyone's business models. That said, for us, I think AI is going to have a meaningful benefit for us, not just from an internal efficiency perspective, but also from a client experience perspective. So again, we're super excited about the opportunity that that's going to present. And I talked a bit about it, but we started a couple of years ago to digitize, to automate, and that's where we put all of our pretty much capital allocation. So it's been to transition this, I'm going to say, leadership position that we've had in fleet management to intelligent mobility that we talked about, so we could really transform, what I'd say, has been historically somewhat of an antiquated industry into intelligent mobility. So with Autofleet in 2024, not only did we pick up, again, a phenomenal team of experts, but we picked up a great platform that we're building elements off of. And that platform, and this is important, and we never really talked about it a lot when we announced the acquisition, but it did come with AI already embedded in it. And it has, I'm going to say, an AI tool in it called Nova, one that can simulate whether it's supply-demand patterns and things in route optimization, improved fleet deployment, reduce downtime, et cetera. Nova was actually the first AI-powered large language model that was designed specifically for fleet management. And it's so good that it actually won an AutoTech AI Innovation of the Year award back in 2024 at, I think it was, the AutoTech Breakthrough Awards. So we are in a really good place with some of the actions that we've taken over the years. And I'd just say for Element more broadly, we also went out and got AI licenses for our team members, did all the training. We had all of our functions come up with use cases that could help increase client experience and take out costs. And so now in 2026, I'd say we're moving from that broader experimentation we did in 2025 to a lot more implementation in 2026, that's going to allow us to reduce manual processes and just move even faster in terms of automating how we do things. And I won't bore you with -- I find them exciting, but with the different use cases we have and the things we can do, I'd just say that pretty much every part of our business, when we look at it, AI can help us improve and do a lot better. And that's why we see it as a positive. And then, when you look at our broader business, and we talk a lot over the years about how resilient we are, we benefit from and -- we don't talk about it perhaps as much, but we've got some of the things that will allow us to continue to win. We've got scale with 1.5 million vehicles. We've got solid funding capabilities that can support all of our leasing, and again, leasing requires people, requires specialization and a balance sheet. And that's almost half of our business. And again, we've got our strong OEM relationships, where we get preferred vehicle pricing, allocation for our clients and an incredibly large network of service providers that also help drive savings for our clients. So all that to say, I think we're really well positioned from a resiliency perspective and that AI, as it goes, is just really going to help further enhance our value proposition for our clients. So again, feeling very excited about this one. And looking forward to, as we go in 2026, delivering on more capability through our Element ONE platform.
Operator: [Operator Instructions] We'll move forward to the line of Bart Dziarski at RBC Capital Markets.
Bart Dziarski: I wanted to ask around Element Mobility and the Autofleet. In your prepared remarks, Laura, you talked about lower structural costs and increased agility. And just hoping you can maybe help us out with some quantification or numbers around those 2 benefits?
Laura Dottori-Attanasio: Yes. Happy to talk about both. And I'll ask Heath maybe to clean up my answer because I might not give you the answer that you're looking for, but from an Autofleet perspective, and I know this isn't what you're looking for, but from a payback period, from where I stand, this paid back in spades already like almost from the first month. So -- for Autofleet, very specifically, the company as a stand-alone, its ARR was up, I think, almost 50% over last year. So that's a positive. But more importantly, it's really everything it's been doing for Element or what we're calling Element Mobility. It's allowed us to bring in, and I had some of that in my prepared remarks, but bringing in all of our development in-house or a lot of it, I should say, we're just much more agile, and we can bring products to market sooner, so just shorter time to market. So I really see that as a sustained competitive advantage for us and that it's got just intrinsic value that is hard to quantify, although Heath is doing a pretty good job of that, where we're looking at the amount of cost avoidance we have, savings and reduced cycle times and whatnot. And that's what allowed us to create this Element Mobility that we talked about. And so it's really an umbrella, or if I could call it, a division that's meant to drive innovation across our fleet landscape. And so sitting under this, I can call it an umbrella, we have things we've talked about, our innovation lab, that's going to be focused on next wave technologies. So that will include some of the things we talked about earlier, whether it's autonomous vehicles, AI, we'd also look at robotics. So all the things that are really going to dynamically transform, I'd say, how businesses manage their fleets. And so that would sit there, would have our intelligent routing, ride-hailing, telematics, in-vehicle payments, et cetera. And so in setting that up for sort of what comes next, we think that will allow us to lead on, I'm going to say, transformation without losing focus on execution and the day-to-day stuff that we have that we do so well when it comes to leasing and different services that we provide. And so, for mobility, there is no real number as we sort of put things under this umbrella. And we're going to take 2026 to think through what that looks like. And I know I've over-talked, but I'll hand it over to Heath to see if he has what you're looking for, which are numbers.
Heath Valkenburg: Bart, I'd probably break it down into 2 components. So the first one would be from a CapEx perspective and the spend that we had to incur to deliver some of our key projects that Autofleet have delivered. We saw a meaningful reduction in the cost of those. So a number of those projects we had scoped up with external parties prior to the transaction with Autofleet taking them on, we saw upwards of a 60% cost reduction. And that was partly -- or one of the reasons why we saw reduced CapEx spend of $71 million for the year relative to the $80 million target. So that is one benefit. The other benefit is on the operating expense side of the equation. You do see in the investor presentation, we break out the $9 million of efficiencies achieved during the year. What I would say is that most of our spend is really focused on digitization, product expansion and focused on growth, but that does have an added benefit on automating some internal processes and those sorts of things that do have an OpEx benefit as well. And I think you saw that in 2025, where our expense rate normalized from what was a double-digit expense growth rate in prior years to 7% in 2025. So looking forward, we expect our expenses will continue to grow as we do invest in the business, so new products, new capabilities, digitization, but we expect those efficiencies will continue to drive positive operating leverage.
Bart Dziarski: Awesome. That's very helpful color. And then one thing that jumped out this quarter was we saw continued VUM acceleration despite originations declining. And so I think there is an underlying trend there where maybe you're not as reliant incrementally on originations needing to drive VUM growth. And if that's the case, where are you seeing some other benefits or wins, if you will, on the VUM side?
Heath Valkenburg: Yes. So it's a great question. The VUM and the originations don't necessarily move in unison. We can grow VUM by bringing on service only VUM, and we can also have origination growth without actually driving VUM growth, where it's just clients returning an old vehicle and taking out a new vehicle at a higher cap cost. So they are somewhat decoupled. But over time, we expect growth in both originations and VUM. And as I sort of spoke on the top, we did see a slow start to the year on the VUM growth with macroeconomic environment. But pleasingly, we saw a strong increase in the back half of the year. And with things like Laura has spoken about, so Autofleet, Motus, Samsara, Car IQ, we expect that those things will also help us drive VUM growth and service revenue growth into the future.
Operator: Our next question will come from Jaeme Gloyn at National Bank Capital Markets.
Jaeme Gloyn: Just wanted to maybe dig in on the syndication a little bit, another quarter of greater than 3% yields. Is that something we should kind of expect here going forward? Or are there some other factors that's driving that for the past couple of quarters? And then, in terms of the volumes, thinking back to 2024, it was well over $3 billion. But outside of that, kind of in that $2.5 billion range. So just kind of want to get a sense as to how that -- you should expect that to flow from originations through to either average earning assets or syndications?
Heath Valkenburg: Yes. Jaeme, so I'd kick it off by saying syndications, first and foremost, is a balance sheet management tool, so we ended the year at a debt-to-capital ratio of 67.9%, which is at -- 76.9%, I should say, which is in our target range of 73% to 77% and well below our debt covenant, which is 80%. In terms of the volume in 2025, we were deliberate in pacing syndications as we deferred transactions while we waited for the reinstatement of bonus depreciation. Since that's come in, we've seen sequential increases in volumes in both Q3 and then in Q4 again. What we also did in 2025 is we've really prioritized client level funding optimization, which, coupled with bonus depreciation has seen really strong results in syndication yields. Having said that, client mix does contribute to the strong yields. And we expect from an ongoing run rate perspective, it'd probably be more in line with the full-year average as opposed to what we saw in Q3 and Q4.
Jaeme Gloyn: Okay. Great. And then, as we think about the Autofleet, I guess, penetrating more of the Element business, there is an ordering platform shuffling this quarter. What other -- are there other aspects of the business here that are right for that Autofleet to overtake? And, yes, I guess, maybe a little bit of color on some of those potential items that we could see down the road.
Laura Dottori-Attanasio: Well, maybe, Jaeme, I'll kick it off and hand over again to Heath just for some numbers and to talk about the write-off, but with Autofleet, as I mentioned, we bought not just -- and we have great people there with their innovation, but the platform that we're looking to put all of our capabilities on to just given what a great platform that it is. And so, as time goes, that is the expectation that we will be on one platform, and it's all going to sit on Autofleet as the direction that we're headed on. And so for maybe this piece, Heath, if you want to talk just a bit about what we've done.
Heath Valkenburg: Yes. So when we announced the Autofleet acquisition, part of the rationale was no doubt to enhance -- to acquire an enhanced tech platform, which would drive sort of client experience and those sorts of things, which Laura has touched on. So the announcement today really to move away from our legacy ordering platform really just reflects the efforts of the Autofleet team and the continued adoption of their technology. So we took a one-off write-down of a historical amount, $52 million noncash impairment, as we really move to a new technology that will drive meaningful improvements in the client experience and our business. And that's a one-off item that we don't expect to happen in the future.
Jaeme Gloyn: Yes. I guess, what I'm getting at is like -- this is the ordering platform today, is there -- what -- is the entire Element business now on the new Autofleet ordering platform is -- maybe if I kind of extrapolate a little bit, like is there a mobile app where something similar, we see everybody move over to that new mobile app, something along those lines? Is there any additional color you can kind of dig into on that or am I just getting a little ahead of myself?
Laura Dottori-Attanasio: No, it's great. Look, I want everything for yesterday also. But we're moving everything onto this new platform. And so parts of ordering are going there. We do have other platforms. So we've written this one off. There are smaller other things. So I don't want to say never from other write-downs perspective, although we wouldn't expect anything like this, I'm going to say, size into the short term in the future. But yes, everything would move on to this platform eventually, and so, we would have our Element ONE client portal, and there is an Element ONE driver app, and the 2 speak to one another. And so the -- both the portal and the app, and as you know, our app is out there, our portal will be releasing soon, has taken some time because we do have some existing technology that's out there, and we wanted to ensure we were very thoughtful about how we were coming up with the new platform. So essentially, all the change we've done have sat on both, I want to say, old and new platform, and that is to ensure integrity of data and information that we have so that when the new platform, if you will, is being utilized that no information, no data integrity is compromised, et cetera. And so that's why this has taken us longer. But I think that's your question, directionally, yes, everything is going to sit in this one place.
Operator: [Operator Instructions] We'll hear from Stephen Boland at Raymond James.
Stephen Boland: Sorry, I'll be quick here. Just in terms of the Car IQ, you mentioned that there has been some test cases with existing clients. Is the plan to just introduce this to new clients or start rolling out to the existing client base as well? Sorry, I just want to clarify that.
Laura Dottori-Attanasio: Yes. Stephen, our plan is to offer it to our existing clients and to our new clients. So we're going to be looking at both. We -- well, I would say, we could do a forced conversion. That's not how we operate. Our plan is to offer it to our client base, and we will allow our clients to determine what they would prefer, if you will, to use. And so when I think of our partner there, Wex, we have had a long-standing and a really successful partnership with him. What we're doing here is, I'm going to say, we're really focusing just on making sure our clients are in the -- if I could say, in the right solution for them. And so I think of it kind of as, forgive us, a grocery store, where you think that you've got both trusted brands and your own high-quality store brand. And so that's sort of what our approach is going to be. And so we're really going to be providing our clients with choice and putting them in what we believe is the best offering. And as you know, all clients are different. And so, for some, it will be one option; for others, it will be a different one. But I'd just say that our priority is just going to be to ensure that we put our clients in the best offering for them.
Operator: Ladies and gentlemen, that was our final question from our audience. This concludes the question-and-answer session. I am pleased to turn the conference back over to Laura Dottori-Attanasio for any closing or additional remarks.
Laura Dottori-Attanasio: Great. Thank you, operator, and thank you all for joining us today and for your continued interest in Element. I do want to thank our investors and our analysts for their ongoing support and engagement and want to really thank our team members for their dedication because our achievements wouldn't be possible without their focus and commitment. So thank you, and we look forward to speaking with you again on our next quarterly call in May.
Operator: Ladies and gentlemen, this does bring to a close today's conference. You may disconnect your lines. Thank you for participating, and have a pleasant day.