BMO Auto Forum February 16, 2017 Element Fleet Management

Transcription

1 BMO Auto Forum February 16, 2017 Element Fleet Management BMO 2017 Auto Forum

2 Certain information in this presentation is forward-looking and related to anticipated financial performance, events and strategies. When used in this context, words such as will, anticipate, believe, plan, intend, target and expect or similar words suggest future outcomes. Forward-looking statements relate to, among other things, the objectives, vision and strategies of Element Fleet Management Corp. ( Element ); the future financial reporting of Element; future cash flows, financial condition, operating performance, financial ratios, projected asset base and capital expenditures; Element s anticipated dividend policy and plans for return of capital; Element s ability to deliver benefits from consolidation; anticipated cash needs, capital requirements and need for and cost of additional financing; future assets; demand for services; Element s competitive position; and anticipated trends and challenges in Element s business and the markets in which it operates; Element s borrowing base and other issues relating to Element s funding facilities; those related to the integration and financial impact of the acquisition of various fleet management businesses; the implementation of Element s systems integrations; and Element s R&D investment plans and product offerings. The forward-looking information and statements contained in this presentation reflect several material factors, expectations and assumptions of Element including, without limitation: that Element will conduct its operations in a manner consistent with its expectations and, where applicable, consistent with past practice; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax and regulatory regimes; certain cost assumptions; the continued availability of adequate debt and/or equity financing and cash flow to fund its capital and operating requirements as needed; and the extent of its assets and liabilities. Element believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct. By their nature, such forward-looking information and statements are subject to significant risks and uncertainties, which could cause the actual results and experience to be materially different than the anticipated results. Such risks and uncertainties include, but are not limited to, operating performance, regulatory and government decisions, competitive pressures and the ability to retain major customers, rapid technological changes, availability and cost of financing, availability of labour and management resources, the performance of partners, contractors and suppliers, and the execution of integration initiatives. Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Except as required by law, Element disclaims any intention and assumes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Throughout this presentation, management uses 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 Element s Management Discussion & Analysis that accompanies the financial statements for the most recent quarter or year, which have been filed on SEDAR ( Element believes that certain Non-IFRS Measures can be useful to investors because they provide a means by which investors can evaluate Element 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. BMO 2017 Auto Forum 2

3 Element: October 3, 2016 Element Fleet Management: Pure play fleet management franchise World s largest publicly traded fleet management business Stable growth Investment grade credit quality Recurring high margin service and fee income Driving consistent revenue and net income generation BMO 2017 Auto Forum 3

4 What is it? End to end management of transportation fleets drawing on technology driven solutions Products and services that assist in the management of a company's transportation assets Why? Most businesses and organizations across the world provide company cars and trucks to their sales, service and management personnel Top five spending category for an organization A company fleet is a mission critical tool for enabling employees to perform their jobs How? Element Manages this function for clients, improving safety, reducing costs and increasing productivity Where? Worldwide, through Element s own operations and with a strategic alliance When? 24/7/365 through on board technology Primer Fleet Management BMO 2017 Auto Forum 4

5 Element s Fleet Business Consolidation Cumulative Growth in Fleet Net Earning Assets $ Billions (CAD) $13.8 $13.8 $0.4 $1.0 $5.4 June 2012 May 2013 June Acquisition of TLS Fleet Management from Scotiabank Acquisition of GE Fleet Canada Acquisition of PHH Fleet Acquisition of GE Fleet North America and ANZ Split from Element Financial Corp. Established in 1980 Superior credit experience and fee revenue (40%) #3 market share in Canadian automotive fleet Established in 1987 Portfolio purchase and strategic Canada / US cross border fleet management alliance Portfolio compromised of ~650 regionally diversified customers with low turnover Established in 1946 Acquisition of U.S. and Canadian assets and operations of PHH Arval Established in 1987 Leading North American position Largest publicly traded FMC in the world Leading global technology and services platform BMO 2017 Auto Forum 5

6 Element Today The Leading Global Fleet Management Company Total assets Market capitalization TSX Composite Index Employees C$18.2 billion C$5.2 billion EFN 2,700+ As of Oct 3 rd, 2016 As of Feb 13 th, 2017 Earning Assets Vehicle Financing Canada 0 0 Acquisition, Title, Licensing & Registration New Zealand Mexico 2% 4% 10% Telematics, Risk & Safety, Accident Management Australia 7% United States Fuel, Maintenance & Remarketing 77% BMO 2017 Auto Forum 6

7 Element-Arval Global Alliance Footprint Managing Over 3 Million vehicles in 50 countries BMO 2017 Auto Forum 7

8 Product Overview BMO 2017 Auto Forum 8

9 Revenue Mix Recurring Service Revenue Total Revenues Q Q Q Q Q Service & Fee Revenue 45.1% 50.2% 52.9% 54.1% 55.5% Spread Revenue 54.9% 49.8% 47.1% 45.9% 44.5% Service and Fee Revenue continues to grow as a percentage of Total Revenue mix Service and Fee Revenue now 55.5% of Total Revenue mix Element s new and enhanced fleet management system will add capacity and scope to our service offering and increase Service and Fee Revenue, both on an absolute and percentage basis going forward BMO 2017 Auto Forum 9

10 Element Experience Category Leader #1 fleet management company in North America Scalable platform providing innovative, end-to-end services and leading technology Access to multi-national corporations through global partners across 45 countries Seasoned Experts Strong management team with an average of 15 years of Element Fleet Management experience and 17 years in the industry Quality Client Base Diversified, high-quality, long-tenured base of commercial customers Target fleets: > 100 units High levels of renewal and satisfaction yield long-term relationships Solid Track Record Profitable business with both services contribution (~55%) and NIM (45%). Recurring revenue streams from both clients and suppliers High levels of satisfaction yield longterm customer relationships YEARS 288 clients YEARS 74 clients YEARS 22 clients 50+ YEARS 150 clients BMO 2017 Auto Forum 10

11 Q Year-to-Date Performance Transformation Completed split to separate fleet management company More than doubled in size NEA s +120% Increased Service and Fee Revenue by 163% to $388.5 million from $147.6 million Improved returns New bank lines, improved ABS Ratings increased (BBB+/A-) Retained and re-energized customers Added services depth with new system and mobile offerings Yields to Average Earning Assets YTD 2015 Average Earning Assets ($billions) Interest Income and Rental Revenue, net Fees and Other Revenues Provision for (Recovery of) Credit Losses Net Financial Income Adjusted Operating Expenses Adjusted Operating Income YTD 2016 $6.4 $ % 5.50% 3.08% 3.67% (0.02)% (0.04)% 6.51% 6.78% 3.06% 2.95% 3.45% 3.83% BMO 2017 Auto Forum 11

12 Portfolio Quality Low Risk Assets/Minimal Credit Losses Portfolio continues to perform well Non-current accounts at 9 bps relatively consistent Allowance for Credit Losses at 6 bps of Finance Receivables reflects strong asset quality Delinquencies as a % of Finance Receivables Fiscal Q (1) 2016 Q Non-current (> 31 days) 0.18% 0.12% 0.09% Defaulted 0.01% 0.04% 0.02% Allowance for Credit Loss (as a % of Total Finance Assets) 0.09% 0.05% 0.06% (1) Average for fiscal 2015 Credit ratings upgraded to A-/BBB+ Capital capacity available to execute plan Leverage of 7.7:1 post split Prudent Manager of Capital Generates significant surplus cash and capital in excess of that required to fund growth in Net Earning Assets BMO 2017 Auto Forum 12

13 Liquidity Forward Funding Commitments December 31, December 31, September 30, (in 000 s) $ $ $ Cash and cash equivalents 66,869 61,007 6,766 Senior Facilities Facilities 1,950,000 7,379,222 4,590,950 Utilized against Facility 1,106,072 5,243,840 3,002, ,928 2,135,382 1,588,770 Vehicle Management Asset-Backed Debt Facilities 5,820,611 13,619,893 15,013,813 Utilized against Facility 4,844,708 10,144,437 9,982, ,903 3,475,456 5,031,104 Securitization Programs Facilities 2,510,850 3,123,255 - Utilized against Facility 1,831,870 2,540, , ,841 - Total available sources of capital, end of period 2,565,660 6,254,686 6,626,640 BMO 2017 Auto Forum 13

14 Capitalization As per MD&A 54% Fleet 67% Fleet Fleet Only (in 000 s, except ratio amounts) Senior Term Facility $ 1,106,072 $ 5,243,840 $3,002,178 Asset-backed Securitization 6,645,323 12,618,198 9,926,109 Secured borrowings 7,751,395 17,862,038 12,928,287 Convertible debentures 303, , ,822 Total debt 8,054,542 18,698,510 13,779,109 Total shareholders equity 2,830,951 5,717,555 3,856,052 (excludes trade receivables) $10,885,493 $24,416,065 $17,635,161 Financial leverage Tangible Leverage BMO 2017 Auto Forum 14

15 Current Funding Facilities Asset Backed Debt Variable Funding Notes (VFNs) Term Notes in Amortization Term Notes in Revolving Period Master trust structure Term matched Revolving period interest only Variable Funding Note provides forward funding commitments VFN provided by bank lending syndicate Used in both US and Canadian Facilities Floating Rate, Hedge interest rate risk Debt matures with assets Rated notes ~95% advanced rate Institutional Investors Reg 144A Notes Chesapeake I floating only Chesapeake II mix of fixed on floating Hedge interest rate risk Debt matures with assets Rates notes series issue AAA thru BBB WAL of Senior notes ~2yrs Soft bullets if not refinanced at end of term, they amortize $4.4b $3.4 b $2.2 b Revolving period used to manage duration investor target 2yrs maturity profile Revolving period used to manage liquidity longer duration decreases frequency of need to access markets Institutional investors Reg. 144A debt After revolving period notes amortize Fixed and floating rate notes Interest rate risk is hedged Variable Funding Notes Term Notes in Amortization Term Notes in Revolver BMO 2017 Auto Forum 15

16 Core Principles Core principles and standards provide solid financial foundation Asset expertise and deep sector knowledge Management experience through credit cycles Credit framework: Covenant first, collateral second" across all verticals Consistent standards for asset and portfolio management Matched Funding Acquisition discipline and integration focus Predictable annuity type diversified originations BMO 2017 Auto Forum 16

17 A stand alone, pure play now focused 100% on fleet management Launched with Investment-grade credit ratings reflecting asset quality (A-, BBB+) Stable ABS funding program - $11B raised since 2003 Prudent Balance Sheet leverage; growth in service and fee income drive 22+% ROTE Free cash flow sufficient to fund future growth and return of capital to shareholders Summary Long tenured, highly integrated customer base creates Sticky customer relationships Fleet Services is multi-billion dollar industry in the early stage of technology innovation Technology driven, business services model positions the firm for long term success BMO 2017 Auto Forum 17

18 Questions? BMO 2017 Auto Forum 18