Potential for them to raise their $25.00 target. GLTA
ELEMENT FLEET MANAGEMENT CORP Q1 First Look: EPS Beat And Guidance Maintained
Our Take: Positive. EFN reported an EPS beat relative to both our estimate
and consensus. It was a top-line driven beat with revenue coming higher
than forecast and operating margins in line. No change to guidance, but the
company did state its confidence in meeting or potentially exceeding the top
end of the guidance range. Current 2024 consensus EPS are $1.05 vs. the
upper end of guidance at $1.09.
Overview of results: EFN reported adjusted EPS of $0.27 (basic shares
outstanding). Adjusted EPS on fully diluted shares outstanding were $0.26,
above consensus and our estimate of $0.24.
Sources of variance: The company reported EPS above our estimate on
higher servicing income ($0.04/share), offset by higher-than-expected
expenses (-$0.02/share). A full variance table is provided in Exhibit 1 herein.
Guidance was maintained across all key metrics.
Servicing revenue easily exceeds our expectations: Servicing revenue of
$147MM was up 27% Y/Y and $18MM above our forecast of $129MM.
Growth is attributable to higher penetration and utilization rates of servicing
offerings from new offerings and existing clients and stronger revenue
generation in Mexico. Q1 revenue also benefitted from $7MM of revenue that
is not expected to recur in 2024.
Originations in line: Originations came in at $1.54B, up 10% Y/Y and
effectively in line with our forecast of $1.48B. Management anticipates
origination volume increases in both the second and fourth quarters of 2024.
This is primarily due to OEM order constraints which deferred certain activity
from Q1 into Q2. Q4 traditionally benefits from higher volumes associated
with OEM model year turnover.
Net financing revenue modestly better than forecast: Net financing
revenue of $107MM increased 9% Y/Y from Q1/23 and slightly higher
compared to our estimate of $104MM. Average earning assets increased 5%
Q/Q. The net financing margin was relatively stable at 5.47% compared to
5.43% in Q4/23.
Syndication revenue slows: Syndication revenue was $8MM, down 24%
Y/Y, and below our forecast of $11MM. Syndication volumes declined 7%
Y/Y due to a strategic decision to postpone the syndication of certain assets
to the second half of 2024 pending the outcome of proposed U.S. tax
legislation changes. Syndication rate of 1.74% declined from 2.14% last Q1.
Operating expenses higher, but margins in line: Operating expenses of
$119MM were up 16% Y/Y and were above our estimate of $111MM.
However, the operating margin of 54.7% was right in line with our forecast of
54.7%. Management maintained its 2024 full-year guidance of 55.0%-55.5%.
Conference call: Wednesday, May 15 at 8:00 a.m. ET (1-844-763-8274).