ELEMENT FLEET MANAGEMENT CORP
Eastern Institutional Conference Presentation Takeaways
Event: We hosted Laura Dottori-Attanasio, President and CEO of EFN, for a
fireside chat at our 22nd Annual Eastern Institutional Investor Conference in
Montreal.
Key Takeaways
• The U.S. auto workers’ strike does not cause downside to guidance:
Delays engendered by the strike represent deferred revenue for the
company, not lost revenue. EFN reiterated that in a worst-case scenario
there is no expected risk to 2023 guidance, and only a modest downside
to 2024.The stance is supported by recent precedent with the supply
chain challenges created by the COVID pandemic, which EFN was able
to manage with minimal disruption. We recently published a scenario
analysis illustrating potential downside to EFN’s earnings outlook (report
here).
• Strong margins relative to other financial services companies: We
asked for thoughts on the sustainability of current margin levels given the
expansion to ~55%. Despite the outlook for some slight compression
created by increased funding costs, EFN expects margins to stay healthy
in 2023 and beyond. The revenue growth objective of 6%-8% per year is
supported by outsized growth in Mexico, where the company is focusing
on well-thought-out and risk-controlled expansion. On the other side of
the equation, expenses are expected to normalize following some
expansion brought on by a return to normal post the pandemic
(i.e., return to office, conference attendance, travel).
• Future growth opportunities in self-managed fleet space: The key
focus for expansion is the self-managed fleet space, which has a longer
sales cycle than EFN’s other verticals; the company has to effectively
convince an existing fleet manager that outsourcing is practical. This
area tends to comprise a small piece of overall expenses and does not
draw a lot of attention from C-suite management. However, this space is
evolving, particularly with the increase in electrification. We believe the
complexities of managing an electric fleet require the expertise that EFN
offers, and that the space is begging to draw C-suite attention given the
potential for improving ESG metrics for the client