Element Fleet Management Reports Q3 2017 Results

TORONTO, ONTARIO -- (Marketwired) -- 11/08/17 -- Element Fleet Management Corp. (TSX: EFN) ("Element" or the "Company"), a leading global provider of fleet management and fleet-focused business services, today announced financial results for the three and nine month periods ended September 30, 2017. As disclosed in the second quarter of 2017, Element has adopted new segmentation of core fleet management and non-core assets. See the Company's Management Discussion & Analysis ("MD&A") for the three-month and nine-month periods ending September 30, 2017 for more information.

Summary Consolidated Results for the Third Quarter of 2017

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In millions, except per share amounts
 and where otherwise noted                Core Fleet    Non-Core       Total
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Net earning assets                       $    12,110 $       995 $    13,105
Net revenue                              $     219.1 $      17.2 $     236.3
Adjusted operating expenses              $     118.4 $       1.4 $     119.8
After-tax adjusted operating income      $      79.5 $      12.2 $      91.7
After-tax adjusted operating income(to
 common shareholders)                    $      68.5 $      12.2 $      80.7
Adjusted basic EPS                       $      0.18 $      0.03 $      0.21
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"Over the last two years, we have developed and launched the industry's most advanced fleet management and analytics platform to support our fleet customers and help them navigate the revolution currently underway in the transportation and mobility sector," said Bradley Nullmeyer, Element's Chief Executive Officer. "Connected vehicle, sharing economy and autonomous vehicle technology are combining to create significant opportunities. We are well positioned to capitalize on each of these trends as we help our customers to drive operational efficiencies, safety improvements, and lower their total cost of ownership."

Recent Highlights

--  Originations in the third quarter of 2017 were $1.44 billion, up 6%
    compared to $1.36 billion in Q3 2016, and Element continues to make
    significant advances providing fleet management services to the ride
    sharing/car sharing sector.
--  Element acquired a 12.5% interest in Splend, an Australian based company
    that provides vehicles for on-demand rideshare and delivery services.
--  Element initiated fleet management services for an OEM car sharing
    program with a fleet currently approximating 5,000 vehicles.
--  Year to date, Element has returned $165 million in capital to
    shareholders through increased dividends and share buybacks, compared to
    $30 million for the same period in 2016. In the third quarter, Element
    repurchased 7.8 million common shares under its normal course issuer bid
    (NCIB) at an average price of $8.75.
--  Element continues to maintain a strong financial position with
    approximately $4.6 billion of liquidity. Subsequent to quarter end, the
    Company completed the issuance of US$1 billion of rated term notes
    through its Chesapeake Funding II platform. The offering brought
    Element's 2017 issuances to US$3.2 billion, the most in a year from any
    fleet asset-backed security (ABS) issuer. Element also extended the
    maturity of its senior credit facility by one year to November 2020.
--  The Company received an initial issuer rating of BBB+ with stable
    outlook from Fitch Ratings, and its investment grade ratings from Kroll
    Bond Rating Agency and DBRS, Inc. were also recently affirmed at A- and
    BBB (high), respectively, each with a stable outlook.
--  Element held its annual Fleet Roundtable forum, the Company's largest-
    ever event of its kind, bringing together hundreds of fleet company
    executives, suppliers, business partners, automotive manufacturers and
    Element experts to share best practices and discuss the opportunities in
    fleet management.

Core Fleet Management Operations

The following summarizes results from the Company's core Fleet management operations:

                                           For the three-month periods ended
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                                   September 30,      June 30, September 30,
Results from continuing operations          2017          2017          2016
(in $000's for stated values,
 except per share amounts)                     $             $             $
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Net revenue
  Service and other revenue              134,902       143,392       142,762
  Net interest and rental revenue         84,164        81,060        83,482
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Net revenue                              219,066       224,452       226,244
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Adjusted operating expenses
  Salaries, wages and benefits            79,980        78,287        75,506
  General and administrative
   expenses                               38,412        43,191        41,723
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Adjusted operating expenses              118,392       121,478       117,229
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Adjusted operating income                100,674       102,974       109,015
  Provision for taxes                     21,141        21,625        22,893
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After-tax adjusted operating
 income                                   79,533        81,349        86,122
  Cumulative preferred share
   dividends                              11,068        10,253         8,912
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After-tax adjusted operating
 income attributable to common
 shareholders                             68,465        71,096        77,210
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After-tax adjusted operating
 income per share (basic)                   0.18          0.18          0.20
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                                            For the nine-month periods ended
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                                          September 30,        September 30,
Results from continuing operations                 2017                 2016
(in $000's for stated values,
 except per share amounts)                            $                    $
----------------------------------------------------------------------------
Net revenue
  Service and other revenue                     406,737              412,405
  Net interest and rental revenue               248,784              263,493
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Net revenue                                     655,521              675,898
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Adjusted operating expenses
  Salaries, wages and benefits                  232,411              221,215
  General and administrative
   expenses                                     121,403              132,128
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Adjusted operating expenses                     353,814              353,343
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Adjusted operating income                       301,707              322,555
  Provision for taxes                            63,358               67,737
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After-tax adjusted operating
 income                                         238,349              254,818
  Cumulative preferred share
   dividends                                     30,233               26,736
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After-tax adjusted operating
 income attributable to common
 shareholders                                   208,116              228,082
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After-tax adjusted operating
 income per share (basic)                          0.54                 0.59
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--  Services and other revenue was $134.9 million for Q3 2017, a decline of
    6% sequentially and compared to the same period in the prior year,
    respectively (1% and 3% on a constant currency basis, respectively).
    Results in Q3 2016 benefitted from one-time items, excluding which
    services and other revenue increased by 1% year-over-year, or 5% on a
    constant currency basis. The sequential decline was related to lower
    maintenance and fuel usage, consistent with the seasonal nature of these
    two revenue components.
--  Net interest and rental revenue for Q3 2017 was $84.2 million, or 0.8%
    higher than Q3 2016 and 3.8% higher than Q2 2017. On a constant currency
    basis, Net interest and rental revenue increased by 4.0% and 9.1%
    compared to Q3 2016 and Q2 2017, respectively, due primarily to
    increased lease activations and decreased interim funding as post-IT
    migration backlogs continued to be cleared.
--  Net interest and rental revenue margin (NIM) was 2.77%, up 0.17%
    sequentially and up 0.16% over the comparable period in 2016.

Non-core Operations

Element continues to execute on its strategy of optimizing value from non-core assets to enhance its capital structure and return capital to shareholders. Successfully completed non-core initiatives during Q3 2017 included the sale of approximately 60% of the heavy duty truck portfolio for $138 million, and the sale of US$23 million of Rail Notes, with both transactions yielding gross proceeds in excess of carrying book value. Net proceeds from asset sales were redeployed into capital return initiatives including share repurchases under the normal course issuer bid.

The Company continues to implement its strategic plan to improve operations in the 19th Capital joint venture. This plan includes moving vehicles to corporate fleets, expediting the sale or trade-in of certain units, and optimizing the composition of the fleet to improve overall efficiency. The Company expects these actions to right-size the operating fleet, increase utilization rates, and improve cash flows over time through the operation of newer and more efficient vehicles.

Net revenue for Non-Core operations was $17.2 million in Q3 2017 as compared with $19.4 million in Q3 2016 and $23.1 million in the preceding quarter. Results primarily reflected the sale of non-core assets and the run-off nature of the equipment finance portfolio in New Zealand.

Non-core assets now represent approximately 6% of Element's assets, down from 8% last quarter.

Dividends declared

The Company's Board of Directors has authorized and declared a quarterly dividend of $0.075 per outstanding common share of Element for the fourth quarter of 2017. The dividend will be paid on January 15, 2018 to shareholders of record as at the close of business on December 29, 2017. These dividends are designated to be eligible dividends for purposes of section 89(1) of the Income Tax Act (Canada).

The Company's Board of Directors also declared the following dividends on Element's preferred shares:

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Series         TSX Ticker     Amount         Record Date    Payment Date
Series A       EFN.PR.A       $0.412500      Dec. 15, 2017  Dec. 29, 2017
Series C       EFN.PR.C       $0.406250      Dec. 15, 2017  Dec. 29, 2017
Series E       EFN.PR.E       $0.400000      Dec. 15, 2017  Dec. 29, 2017
Series G       EFN.PR.G       $0.406250      Dec. 15, 2017  Dec. 29, 2017
Series I       EFN.PR.I       $0.359375      Dec. 15, 2017  Jan. 2, 2018
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These dividends are designated to be eligible dividends for purposes of section 89(1) of the Income Tax Act (Canada).

Conference call

A conference call to discuss these results will be held on Wednesday, November 8, 2017 at 9:00 a.m. Eastern Time. The conference call may be accessed by dialing the following numbers:

--  North America Toll-Free: 1-800-806-5484
--  Local: 416-641-6104
--  International dial-in numbers:
    https://www.confsolutions.ca/ILT?oss=7P1R8008065484
--  Passcode 1069901#

A series of presentation slides will be referenced by management during the conference call. These slides will be available on the Company's website in advance of the call and may be accessed at https://www.elementfleet.com/about-us/investor-relations/presentations.

The call will be recorded and may be accessed until December 29, 2017 by dialing 1-800-408-3053 or 905-694-9451 and entering the pass code 1046782#.

Non-IFRS Measures

The Company's unaudited interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the accounting policies we adopted in accordance with IFRS.

The Company believes that certain Non-IFRS Measures can be useful to investors because they provide a means by which investors can evaluate the Company's underlying key drivers and operating performance of the business, exclusive of certain adjustments and activities that investors may consider to be unrelated to the underlying economic performance of the business of a given period. Throughout this Press Release, management used a number of terms and ratios which do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures presented by other organizations. A full description of these measures can be found in the Management Discussion & Analysis that accompanies the financial statements for the quarter ended September 30, 2017.

Element's unaudited interim condensed financial statements and related management discussion and analysis as at and for the three-month period ended September 30, 2017 have been filed on SEDAR (www.sedar.com).

About Element Fleet Management Corp.

Element Fleet Management (TSX: EFN) is a leading global fleet management company, providing world-class management services and financing for commercial vehicle and equipment fleets. Element's suite of fleet management services span the total fleet lifecycle, from acquisition and financing to program management and remarketing - helping customers optimize performance and improve productivity. For more information, visit www.elementfleet.com.

This release includes forward-looking statements regarding Element and its business. Such statements are based on the current expectations and views of future events of Element's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements, including, among others, statements regarding Element's technology platform and recent investments; growth opportunities presented by the evolving transportation and mobility sectors; the ability to drive operational efficiencies, safety improvements and lower cost of ownership; business growth and its ability to win new business, technological development, partnerships and strategy, the payment of dividends, repurchases of securities, capital allocation, expected annual results for core fleet management and non-core segments (including for various stated financial metrics), the strategies for Element's non-core assets, the refreshed strategic plan of the 19th Capital Group LLC joint venture, and expectations regarding financial performance. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Element, including risks regarding the fleet management and finance industries, economic factors, risks related to the completion of the purchase of new portfolios or technologies or the addition of new clients, risks related to the payment of dividends, risks relating to business integration and many other factors beyond the control of Element. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. A discussion of the material risks and assumptions associated with this outlook can be found in Element's current MD&A, and Annual Information Form, all of which have been filed on SEDAR and can be accessed at www.sedar.com. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Contacts:
Zev Korman
SVP Investor Relations
(416) 646-5421
[email protected]

Source: Element Fleet Management Corp.

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