Key Data
Q1/24 results were above our forecasts and consensus. Net revenue of $262mm was above our $245mm estimate (consensus was $230mm). Revenue growth was 14% (excluding $7mm in servicing revenue not expected to repeat). Margins were in-line (flat q/q). Adjusted EPS of $0.27 was above our (and consensus) estimate of $0.25. FCF/share of $0.35 was ahead of our $0.32 estimate.
Originations of $1.5bln were below our $1.8bln forecast (albeit up 4% q/q and 10% y/y). 2024 guidance of $7.0bln-$7.4bln is unchanged (we are modeling $7.2bln), suggesting volumes are expected to pick up. Syndication volume of $0.5bln was down q/ q (deliberate move by management, given proposed U.S. tax changes).
2024 guidance unchanged, but commentary suggests confidence. We have raised our estimates. We are now slightly ahead of guidance on revenue, adjusted EPS, and FCF/ share (previously at the high end). We remain in-line for margins, originations, and tangible leverage.
Servicing revenue (capital light) was particularly strong, up 21% y/y (excluding $7mm in one-time revenue). This is being driven by a combination of growth in higher-margin VUM, and increased client penetration (more services) and utilization (vehicle usage).
Vehicles under management (VUM) were flat q/q and down 3% y/y. However, excluding a low-margin white-label contract Element deliberately exited, VUM was +10% y/y (+2% q/q).
2024 capital-allocation priorities are balanced between investing for growth and returning capital to shareholders. Investing for growth and managing tangible leverage are top priorities, followed by growing the dividend, redeeming high-cost preferred shares ($193mm combined in Q2/24 and Q3/24), and then share buybacks. The redemption of a $126mm convertible debenture in Q2/24 will increase the share count.
Strategic initiatives unchanged, but progressing. An office in Dublin has been established (optimizing U.S. and Canadian leasing). Leadership is now in place to grow a presence in Singapore to support sourcing from Asian OEMs (EV focus). Lastly, investments are being made towards modernizing the technology platform.