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Element Fleet Management (ticker: EFN) announced strong financial results for fourth quarter and full year 2023, with record net revenue of $1.3 billion and adjusted earnings per share (EPS) of $1.32 dollars.
The company successfully added 155 new customers, of which nearly half were self-directed conversions. Over the year, Element returned $345 million to shareholders and is on track to achieve profitable revenue growth and operational efficiency goals by 2028.
Salient aspects
Element Fleet Management reported record net revenue of $1.3 billion for 2023. The company achieved adjusted EPS of $1.32, with a significant increase in adjusted operating income. 155 new customers were added, the 45% of which are self-directed conversions. $345 million has been returned to shareholders through dividends, share repurchases and preferred stock redemptions. Strategic initiatives are in place, including a new sourcing presence in Asia and steps forward in digitalization and in automation.
Company perspectives
Element expects net revenue growth of 6-8% going forward. The company reiterates its 2024 guidance, targeting net revenues of $1.365 billion to $1.390 billion. Adjusted operating margins are expected to be between 55% and 55.5% for 2024. Capital investment needs are expected to remain constant at approximately $110 million.
Bearish highlights
Slight failure to achieve net promoter score target due to delays in titration and registration. An expected decrease in sales earnings next year, impacting net financial revenues.
Positive highlights
Adjusted operating margin increased 110 basis points to 55.3% in 2023. Full-year adjusted EPS and free cash flow per share increased $0.27 and $0.36, respectively. Syndication volume and service revenue are expected to grow, with syndication volume growth expected to align with origination volume growth of 11% to 17%.
Shortcomings
The net promoter score did not reach the target, mainly due to delays in the trials.
Highlights from the questions and answers
The company has made it clear that acquisitions are a better performance indicator than order backlog. Order backlog is expected to be strong through 2025, with a balance between supply and demand expected in the first quarter of 2025. Element is establishing a strategic presence sourcing business in Singapore to build relationships with Asian OEMs, which could potentially extend to the US and Canadian markets in the future.
Element Fleet Management’s press conference revealed a company with a strong financial position and strategic plans for future growth. Building a sourcing presence in Asia and focusing on digitalization and automation are key steps to achieving long-term goals. While the company faces some challenges, such as declining revenue on sale and delays in titration, the overall outlook remains positive, with confidence that it can achieve its forecast for next year.
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