Potential for them to raise their current $24 target. GLTA
ELEMENT FLEET MANAGEMENT CORP.
Q3 First Look: EPS Beat; 2024 Guidance Better Than Feared
Our Take: Positive. EFN reported an EPS beat relative to both our estimate
and consensus. There was some concern ahead of the quarter that 2024E
consensus EPS were too high and might have to come down with the
introduction of 2024 guidance. Consensus EPS are at the top end of the
guidance range, but not outside the range (better than some had feared).
Overview Of Results: EFN reported adjusted EPS of $0.35 (basic shares
outstanding). Adjusted EPS on fully diluted shares outstanding were $0.34,
above consensus and our estimate of $0.32.
Sources Of Variance: The company beat our estimate on servicing income
($0.02/share) and syndication revenue ($0.01/share), slightly offset by higher
expenses. A full variance table is provided in Exhibit 1 herein.
Introduction Of 2024 Guidance: Guidance has revenue of $1.365B-
$1.390B (consensus $1.391B), operating margin of 55.0%-55.5% and
adjusted EPS of $1.41-$1.46 (vs. consensus of $1.46). Management expects
to meet or exceed the high end of 2023 guidance (EPS of $1.31).
Originations Came In Higher Than Expected: Originations came in at
$2.7B, up 88% Y/Y and above our assumption of $2.1B. Orders were also
solid at $1.9B. The backlog for originations decreased to $2.5B vs. $2.6B last
quarter, but still remain well above historical levels.
Net Financing Revenue Came In Line With Forecast: Net financing
revenue of $141MM was up 13% from $125MM in Q3/22 and essentially in
line with our forecast of $143MM. Average earning assets increased 21%
Y/Y and 7% Q/Q. The net financing margin contracted by 47bps Q/Q to
5.74%.
Servicing Revenue Exceeded Expectations: Servicing revenue of
$176MM was up ~18% Y/Y (14% in constant currency) and well above our
forecast of $168MM. Growth is attributable to higher originations, increased
utilization and new and existing client enrollment for services.
Syndication Revenue Above Forecast: Syndication revenue was $17MM,
53% more than last quarter, up 8.3% Y/Y. We estimated syndication revenue
of $14MM. Syndication rate expanded to 1.73%, up from 1.65% last quarter.
Operating Expenses Higher Than Expected: Operating expenses of
$149MM increased 19% Y/Y and were above our estimate of $146MM.
Growth was driven by higher compensation (higher headcount and annual
merit increases) and higher G&A expenses.
Operating Margins Above Target: Operating margin of 55.4% declined
from 56.9% in Q3/22, but was marginally better than our forecast of 54.9%.
The result was slightly better than management’s 2023 full-year guidance of
54%-55%.
Conference Call: Tuesday, November 7 at 8:00 a.m. ET (1-800-319-4610).