Element Fleet Management (TSX:EFN), a global leader in fleet management services, reported a strong second-quarter performance for 2024, with a 14% increase in net revenue and significant growth in adjusted earnings per share (EPS) and free cash flow per share. The company also announced the strategic acquisition of Autofleet, a software platform designed to enhance fleet management systems and optimize fleet utilization for mobility operators.
This move is part of Element's broader strategy to accelerate its digitization and automation capabilities. Additionally, Element Fleet Management has raised its full-year 2024 guidance for several financial metrics and completed the redemption of its Series C preferred shares, with plans to redeem Series E preferred shares in September.
Key Takeaways
- Element Fleet Management reported 14% net revenue growth in Q2 2024.
- The acquisition of Autofleet is expected to enhance Element's digitization and provide new value-added services.
- Full-year 2024 financial guidance has been raised, reflecting confidence in continued growth.
- The company has redeemed its Series C preferred shares and plans to redeem Series E preferred shares.
- Financial leverage was reported at 74.8%, with tangible leverage at 6.5x.
Company Outlook
- Element Fleet Management is optimistic about the second half of 2024, expecting strong growth.
- The company is investing in its business to drive future growth and shareholder value.
- Despite the strong order volume and originations, there is caution around gain on sale.
Bearish Highlights
- Ongoing investments and the redemption of preferred stock may create a drag on earnings.
- Conversion of debentures will impact earnings per share.
- No recurring service revenue is expected from Q1.
Bullish Highlights
- Autofleet's acquisition is poised to improve client services and shareholder returns.
- Net financing revenue has increased by 9.5% year-over-year.
- The average age of vehicles has decreased, indicating strong order volume and originations.
Misses
- The company remains cautious about the gain on sale despite overall positive financial results.
- There is an expectation of lower syndication volumes in the future, although demand remains robust.
Q&A Highlights
- CEO Laura Dottori-Attanasio emphasized the benefits of Autofleet's acquisition, including the acceleration of digitization and automation.
- Element Fleet Management is expanding into telematics and insurance services for small to medium-sized fleets.
- Autofleet will be integrated into both client-facing services and internal processes to optimize business operations.
In conclusion, Element Fleet Management's second quarter of 2024 has been marked by strong financial growth and strategic expansion through the acquisition of Autofleet. The company's leadership is confident in the positive impact this will have on their service offerings and overall business trajectory. Despite some potential short-term financial drags, the outlook for Element remains bullish as they continue to innovate and expand their market presence.
Full transcript - None (ELEEF) Q2 2024:
Operator: Good morning ladies and gentlemen and welcome to Element Fleet Management's Second Quarter 2024 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. And you are reminded that this call is being recorded. Following the prepared remarks, there will be an opportunity for analysts to ask questions. [Operator Instructions] Element wishes to caution listeners that today's information contains forward-looking statements. The assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in the company's year-end and most recent MD&A as well as its most recent AIF. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today's call references certain non-GAAP and supplemental financial measures. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP financial measures to IFRS measures can be found in the company's most recent MD&A. I would now like to turn the call over to Laura Dottori-Attanasio, Chief Executive Officer of Element. Please go ahead.
Laura Dottori-Attanasio: Good morning and thank you for joining us today. I'm delighted to share our latest achievements. As a team across Element, we created and unveiled our purpose. We are acquiring new capabilities in the digital and automation space. We delivered another strong financial quarter for our shareholders. Our centralized leasing initiative officially began operations in Ireland, on time and on budget, with no change to our expected benefits that we previously shared with you and we released our fourth annual sustainability report with a commitment to setting science-based targets that include intended reductions to our greenhouse gas emissions. Now, let me start with our purpose. To further strengthen our culture, our team members worked collaboratively over the past year alongside our clients and key partners to unlock our very first purpose statement, move the world through intelligent mobility. Our purpose is a reflection of our unwavering commitments to putting our clients first, to leading the industry and our ambition to effect positive change for a brighter future. To move the world embodies our dedication to intelligent, seamless mobility. And so driven by our purpose, we accelerated our digitization and automation initiatives with the acquisition of Autofleet. Autofleet is an end-to-end software platform that's designed to support fleet management systems, optimize and manage complex operations and maximize fleet utilization for mobility operators. It's led by a team of incredibly talented individuals, including its co-founders, Kobi Eisenberg and Dor Shay. They have built a world class team and a scalable digital platform that is built on a modern tech stack. Now having worked with the Autofleet team previously; we have experienced first-hand the cultural fit with Element and the value-add they bring to us and to our clients. This acquisition will enable us to better serve our clients by accelerating our digitization and automation efforts in fleets with optimized mobility solutions and it will help us expand into new value-added services. Now with regards to our quarterly financial performance; we continued our commercial success with the addition of more new clients by both earning share and converting self-managed fleets, along with increased share of wallet wins. For the second quarter, we delivered 14% net revenue growth with expanded margins, all of which translated into double-digit adjusted earnings per share and free cash flow per share growth. Our very strong performance is a reflection of our team's relentless passion and dedication to delivering the very best for our clients. So thanks to our clients for their continued support and to our Element team members for their great work. It's an honor to be part of such a great group of people. And with that, I'll hand it over to Frank.
Frank Ruperto: Thank you, Laura and good morning, everyone. We delivered another quarter of strong results. The momentum we benefited from in Q1 has carried into Q2 resulting in robust growth across all key metrics. Notably, we saw continued double-digit year-over-year growth in services revenue, along with a substantial 16% increase in net financing revenue, compared with the same period last year. Our strong performance to date, combined with a positive outlook for the remainder of the year, led us to raise our full year 2024 guidance for most metrics. We announced the acquisition of Autofleet, which, although relatively small, with a purchase price of approximately $110 million, aligns with our goals of acquiring capabilities to accelerate digitization and automation efforts. We expect the transaction to be accretive in 2025 with a payback of less than 3 years. As with our previously announced strategic initiative, we will incur onetime, nonrecurring cost associated with this acquisition which we will call out and adjust in our Q3 results. For clarity, our revised guidance excludes these onetime costs. We expect the acquisition to close early in the fourth quarter. Let's now turn to our second quarter results. All dollar amounts cited today will be on an adjusted basis, excluding onetime costs of just over $2 million in Q2, incurred in connection with our Dublin and Singapore initiatives. These initiatives have been stood up on time and on budget. We anticipate the last of these expenses in Q3 consistent with our original budget. Q2 was another record performance for us in terms of net revenue, earnings, EPS and free cash flow. This success was driven largely by the resilient and recurring nature of our revenue as well as the robust and sustained commercial momentum we've generated, as we continue to deliver on our client value proposition and create increasing value for both our clients and shareholders. For the quarter, our adjusted operating income reached $153 million, up 15% year-over-year. This translates to an adjusted EPS of $0.29 which is a $0.04 increase from the same period last year. Additionally, our adjusted free cash flow per share also grew by $0.04 or 12% to $0.38 per share. We expanded adjusted operating margins year-over-year by 60 basis points to 55.7% this quarter. Moving forward, we anticipate operating margins to end the year at approximately 55% to 55.5%, assuming stable currency rates relative to Q2. Net revenue grew over 14% year-over-year to $275 million. This growth was largely driven by services and net financing revenue growth. Service revenue rose by $14 million or 11% compared to Q2 2023, reaching $140 million. This increase was fueled by robust origination volumes and sustained higher penetration rates from new and existing clients. As noted, last quarter Q1 services revenue benefited from $7 million in onetime items discussed last quarter. Excluding these amounts, services revenue was largely unchanged compared to a very strong first quarter. Net financing revenue grew $17 million or 16% year-over-year and $15 million or 14% quarter-over-quarter. This growth is largely attributable to higher net earning assets associated with the increased origination volumes in the U.S., Canada and ANZ. Gain on sale remained relatively unchanged year-over-year, as gains in Mexico were closely offset by lower gains in Australia and New Zealand as prices moderate. The increase in financing revenue was somewhat mitigated by higher funding costs and standby fees to support forecasted growth and originations. Overall, rates remained significantly more attractive than the prior year period. Shifting our focus to syndications, we successfully syndicated a record $955 million of assets this quarter. This represents a substantial 86% increase from Q2 last year and double that of Q1, increasing syndication revenue by $4 million or 42% year-over-year. We expanded the volume and names associated with syndications which impacted mix from a yield perspective. These significant volumes illustrate the depth of this funding source for us and the ongoing appeal of our assets to syndication clients. On the expense side, adjusted operating expenses for Q2 were $122 million, an increase of 13% year-over-year. This increase was primarily due to higher salaries, wages and benefits associated with accelerated spend, including higher short-term incentive compensation accruals and targeted head count in G&A to support growth initiatives. We believe that the acceleration of our digitization efforts, expedited by the capabilities we will onboard as part of the Autofleet acquisition, will allow us to enhance our scalability over the intermediate term. It is worth noting that net revenue growth continues to outpace operating expense growth by 110 basis points year-over-year. And as I mentioned last quarter, we will continue to be purposeful in accelerating investments in the near term, as our top-line growth allows us to do so. This will help us ensure we are well-positioned to expand our leadership in the fleet management sector. Additionally, originations were $2 billion this quarter, up 5% from Q2 last year and up 28% from Q1. This growth can be attributed to 3 items. First, OEM production volumes have recovered from earlier supply chain constraints. Second, Q2 traditionally represents the quarterly high watermark, aligning with OEM windows, ordering windows and three is inflation in auto prices. Now, let's turn to guidance. Our strong financial performance and positive outlook for remainder of the year led us to raise our full year 2024 guidance for the following metrics. We anticipate net revenues to be between $1.06 billion and $1.08 billion, implying annual growth between 11% and 13%; adjusted operating income between $575 million and $595 million; adjusted EPS between $1.07 and $1.11; and adjusted free cash flow per share between $1.32 and $1.36. Again, these are before any onetime costs associated with our previously announced strategic investments and the cost associated with the acquisition of Autofleet. While Q2 foreign currency volatility has reflected in our revised guidance, we do not forecast currency. As such, the outlook for the remainder of the year assumes that FX will remain stable to those rates prevailing in Q2. Before concluding and opening the line to questions, I would like to walk you through certain changes to our capital structure, as previously communicated. We completed the redemption of our Series C preferred shares this June for a total of $91 million. Additionally, in September, we plan to redeem our Series E preferred for a total of $92 million. Recall that the result of replacing these preferred shares with debt will move the cost of capital from below the pre-tax income line to the NFR line, creating modest compression to NFR margins in the second half of 2024. Most importantly, these actions are EPS accretive and economically attractive to us. Additionally, in connection with conversion of our remaining convertible debentures, we issued 14.6 million shares from treasury which will impact our per-share financial results and are taken into consideration as per our guidance. We ended the quarter with tangible leverage at 6.5x and financial leverage for debt-to-total capital at 74.8%, both metrics providing flexibility to pursue strategic objectives, operate the business efficiently and continue to return capital to shareholders. In summary, we had an exceptionally strong first half of 2024 which allows us to continue investing in the business to sustain future growth and drive value for shareholders. Thank you, operator. We're now ready to take questions.
Operator: [Operator Instructions] The first question today comes from Geoffrey Kwan with RBC (TSX:RY) Capital Markets.
Geoffrey Kwan: My first question was on the origination side. Just given how often your clients typically hold their vehicles, for the vehicles that were not replaced during the OEM production shortage, what would be like your estimate of the percentage that have still not been replaced so far, even with the OEM production shortage, kind of being, let's call it, more normal in the past several quarters?
Frank Ruperto: The best way I can put that, Geoff, is 2 ways. One is we have now, with the OEM production coming back to a normalized level, are working through and seeing some of the benefit of that come through the line, as we have over the last couple of quarters. But the best way to think about it is, we peaked at average age of vehicles, U.S., Canada, roughly 59 days. And now -- I'm sorry, 59 months and that is now down to 49 months. And I think I've told you before, 42 months is really the average hold on these vehicle assets. So we're starting to see those come back in. But the fact that we are still above the 42-month period indicates to us that there will be continued orders, strong order volume and originations as we progress through the year.
Geoffrey Kwan: Okay, that's helpful. And then next question was on the net finance income. I think if I remember correctly, at the start of the year, you were kind of messaging modest growth. I think it might have been like low-single-digits for reasons like lower expected gain on sale, some of the impacts of dealing with the legacy capital structure and the impact on net financing revenue. I know that there's still that one pref remaining, but what we've seen from H1 '24 this year is the net financing revenue is up 9.5% year-over-year. So just wanted to get your thoughts. Obviously, you've revised the guidance, but just how to think about how that plays out through the second half this year. But also just going forward, because part of it, you mentioned, you flagged was a bit of a business or geographic mix issue that drove the higher financing income.
Frank Ruperto: Yes. So we always have mix, right? So you have higher spreads in ANZ and Mexico. The biggest thing that's been driving the net financing revenue increase is just the growth in net earning assets. So we've had a significant growth in net earning assets as originations have picked up substantially to record volumes this quarter. And that will -- that is most of the impact, the benefit from the net financing perspective.
Geoffrey Kwan: But wouldn't that have been as expected for you so it shouldn't -- so that it wouldn't kind of baked into your net financing expectation when you built the guidance at the start of the year?
Frank Ruperto: So in the start of the year, we've actually seen better financing costs in the market as well. So those 2 combined would create most of that benefit.
Geoffrey Kwan: Okay. Maybe if I can get one last question, it's just the Autofleet acquisition. Do any of your direct competitors use them? And then if so, would there be any plans on whether or not they would still be able to use Autofleet going forward?
Laura Dottori-Attanasio: I'll take that one. Our plan is to have Autofleet continue to operate independently. And so they will be able to serve any companies that would benefit from utilizing them. We're really happy with this acquisition. We do think it's going to allow us to do more in the mobility space. And if it can help others do better for clients in this space, we're all for that. So yes, the answer is yes.
Operator: The next question comes from Paul Holden from CIBC (TSX:CM).
Paul Holden: So a couple of questions on the Autofleet acquisition, just to make sure I understand the value proposition appropriately. First off, Frank, you provided some useful numbers in terms of year 1 accretion and then also mentioned, I think, a payback period of 3 years, if I got that correct. What's sort of embedded in that expectation? Is that primarily based on revenue to customers? Are there some kind of cost saving/automation associated with Element's own processes and operating costs? Just wondering how to think through that payback period and really, I guess, the value proposition here?
Frank Ruperto: Sure. So it comes in a couple of areas. So let me address the accretion in year 1 first. This is a small acquisition. So it is very modest accretion in the first year, simply because of the size of it relative to us. So I want to make sure we're clear on that. In regards to the value proposition and the payback, it comes in 2 forms, as we move through and complete our digitization capabilities. The first piece is that we will become more scalable. We will be able to do more with less overtime and be much more efficient from an operating perspective in serving our clients. Additionally, that should also enhance our client experience, be more responsive to our clients and giving them better opportunities, better dashboards to see their vehicles and the like which could assist us and should assist us in winning new business with best-in-class client-facing technology. So that's one component. A major component of the payback is really our ability to accelerate our digitization effort and do more with less capital. So we still anticipate spending CAD 110 million roughly per year and -- sorry and that's Canadian, so USD 85 million per year in regards to the spend of capital over the next several years, but we will be able to accelerate and take somewhere between 1 to 3 years' acceleration depending on which projects we're looking at and getting those in place sooner, again, enhancing our ability to scale as well as better client-facing technology.
Paul Holden: That's helpful. Okay. That's good on Autofleet. Third or second question would be on syndication. You syndicated a lot of volumes this quarter, what I would say is a relatively low syndication yield. So maybe walk us through the thought process there. Why such a high volume at a low yield? And then with that, maybe give us an outlook for the -- or expectation for syndication yield for the remainder of the year?
Frank Ruperto: Yes. So think about syndication as our key funding mechanism for us. So with record origination volumes and the pent-up syndication that we hold back in Q1, we had significantly more volume to bring to finance the origination component of the business. As a result of that, we also had to go -- we had a mix shift. So our syndication team on the same names that we're syndicating, we're roughly on par to slightly better from a gross yield perspective, but the mix component of it had a material impact on the overall yield. So think about certain clients with significantly more volume in the quarter, but they tended to be lower yielding assets. So two points, one that we've made before, but that was a lower yield, but much higher volume this quarter; and then two, new names that have come in, that also decreased the yield from that perspective. And again, remember, we use it also to manage leverage, so we're roughly 6.5x right in the mid target of our range.
Paul Holden: Okay. And sorry, the -- any way to give us sort of an outlook or expectation for the remainder of the yield? I mean, some of the things you highlighted maybe are more particular to the quarter, I would assume somewhat better yields for the remainder of the year, but what are you expecting, Frank?
Frank Ruperto: It's very dependent on the size of the origination pool in the next call. So I think that we continue to see significantly higher volumes in origination for the rest of the year relative to last year which would tell me that plus or minus, we will see lower yields than we saw in Q1, somewhere depends around the current yields. But again, it will be highly dependent on mix. Remember, too, even though the yield is lower, every deal we syndicate is economically advantageous to us because the hold versus sell component of that is in our favor. So we get more value by selling that lease than we would hold it on book.
Paul Holden: Understand. Okay. And then last question for me, originations. I think I saw they were down -- I mean, down small in Mexico, but down 1% year-over-year. Is this quarter sort of an aberration? Has anything changed in the growth outlook there?
Frank Ruperto: So predominantly 2 things, the peso. So the FX impact on that originations number. So we're about 1.5%-plus [ph] lower quarter-over-quarter from a peso valuation. So there's part of yours. And then we also had a slightly lower mix in regards to the cost of vehicles and vehicle types that were bought in the quarter. That tends to be more idiosyncratic and lumpy. That mix usually doesn't come much into play. So those 2 will make up that small compression in origination volume.
Operator: The next question comes from Jaeme Gloyn with National Bank Financial.
Jaeme Gloyn: Did want to touch on syndication and the volumes in this quarter. I believe in Q1, you had made the decision to delay for some -- the potential tax advantages later on that didn't materialize. So in Q2 with this higher volume, is this reflecting some of that demand that would have been coming in Q1 and we should expect somewhat lower volumes going forward? Or is this reflective of where demand is from an institutional investor standpoint and perhaps maybe even increasing from these levels? Just some thoughts on that.
Frank Ruperto: Yes. So first, on the demand side, the demand, I think, remains robust. And I think you can see a 30%-plus [ph] increase over our record volumes before very, very solid from that perspective. So the market is deep. They like these assets. We've said that before because of the safety of them and the very low default, right? So very good bank and LifeCo assets from that perspective. So the market is very deep as we look at it. I would say rough, rough, we probably held back on $150 million to $200 million of volume last quarter. And so that would have been come through this quarter. So you'll expect some lower volume than this record quarter in Q3 and Q4. That being said, it will still be at relatively robust levels versus historical periods.
Jaeme Gloyn: Okay, understood. On the Autofleet, I just wanted to also maybe dig in and just get a little bit better understanding of maybe what were some of the gaps that were existing with the event today to go to a buy versus build strategy? And maybe a little bit more color on some of these value-add services that are coming onboard. I would assume that existing customers are using Autofleet and that was sort of the way into this transaction, but maybe a bit more color on those 2 factors?
Laura Dottori-Attanasio: I'll take that. I think as we've talked about when we see all of the advancements, I'm going to say, in mobility, what we see with vehicle connectivity, re-electrification, etcetera, we know that we have to, I would say, continuously evolve for our clients. As we've shared, we've been on the path to build out our capabilities to be in a position to do more digitization and automation to better serve our clients. That is proving out to be expensive. And so we were looking to see could we partner or acquire capabilities such that we could move a lot faster. And so we found Autofleet. We really like the team. We think with them, we're going to be able to better serve our clients and it's really all about accelerating all of our digitization and automation efforts. It allows us to really fast track, if you will, our modernization plan. They have an AI-powered platform. Again, that's going to help us streamline, automate and just move faster. And as I shared in my prepared remarks, we found a world-class team that's a wonderful cultural fit with us. They’ve got a scalable digital platform. It's built on a modern tech stack. So we're feeling incredibly positive about what we'll be able to do with this acquisition for our clients. Some of the potential value-added services, they are in a space that we are not. They do a lot in the short-term rentals and ridesharing. They have really strong analytics and other capabilities. So those are some of the other services we'll be able to do, things like optimize vehicle routing, keyless vehicle entry, the list goes on. And so it gives us just really not just a great talent team, but really good tools that will help us better manage our clients and allow us to really optimize our business. So all of that should really translate into where Frank was at, synergies and whatnot over time, not just allowing us to go faster, but things that will make our client experience better jobs, better for our clients -- sorry, for our people and should also allow us to deliver better returns for our shareholders over time.
Operator: The next question comes from Tom MacKinnon with BMO (TSX:BMO).
Tom MacKinnon: Just a question generally on the impact of lower rates. I know from a finance revenue perspective, you're generally agnostic there. But perhaps what are you hearing from clients in the self-managed market and maybe their appetite to outsource as rates have come down? And I have a follow-up.
Laura Dottori-Attanasio: We continue to grow in that space. Have a lot of opportunity, great conversations with clients. I'd say demand continues to be strong. Look, there was a need just given what we have been through our clients needed to, let's say, decrease the average age of their fleet, notwithstanding where rates are, but a lower rate environment certainly makes our proposition more interesting. But as we've shared in the past, one of the big drivers for us to grow, particularly in the self-managed fleet space remains the complexity of the space as it evolves. Really when we think about fleet electrification and that complexity, that is really the opportunity for us and for these clients to deal with us, where we feel we can decrease their total cost of operation. So that's the main driver. I'll hand it over to Frank maybe that covers some of the lower rates as it relates to our overall business.
Frank Ruperto: Yes. And I would just comment as well, the major reason why our self-managed fleet tends to go into an FMC (NYSE:FMC) is not because of the financing component necessarily. It is because of what we can do on the services side, as Laura said, really deal with the complexity of that fleet, lower that total cost of ownership. So that's absolutely critical. So we're -- the financing tends to be more of a commodity type of product. It really is from a self-managed fleet perspective, what we can do for them from a service perspective. Overall, though, when we went into this year, we have been able to term out our facilities at much better rates than we had seen historically in the last -- or in 2023 and we were -- '22 as well. So, that's a very good positive and has created some tailwind. One of the reasons why our guidance has been raised is that lower financing environment from when we set up the original guidance back in November.
Tom MacKinnon: Okay. And then just with respect to the Autofleet acquisition, as you kind of onboard the software platform, do you foresee any potential disruption risk here at all? Or what are you doing to try to minimize that if there is one?
Laura Dottori-Attanasio: Well, we are going to run Autofleet as a separate entity, so it will be run independently. Again, I just shared, we explored many companies, their people, their technologies. And with Autofleet, we found the one that was the best fit. We believe that all of the benefits here, I'm going to say, far outweigh any perceived risks in that our teams have spent considerable time collaborating together as we have worked together to serve some clients. We feel we share a common purpose, great cultural fit and then allowing a startup to operate independently will further, I'm going to say, decrease the likelihood of things not working out. This is a great transaction, not just for us, but for Autofleet, in that with our client base and our great sales force, this will allow Autofleet to grow at a faster rate. And with Autofleet's tech stack and very talented team, it's going to allow us to accelerate in the digitization and automation. And so deals work best when both parties win and both of us win in this transaction. And most importantly, this is going to be a great combination to better serve our clients, to make our employees' jobs, as I said earlier, better. And all of that, as we do it properly, is going to result in better performance for our shareholders.
Tom MacKinnon: And naturally, this will help expand some of the services that you have, but can you elaborate on any other expansion of services that you might want to undertake even without having Autofleet? I think there were a few you spoke to before, but just wondering how your thoughts are there.
Laura Dottori-Attanasio: Yes, absolutely. I'd say in the very first instance, it allows us to up our game as it relates to the digitization of our services, how our clients interact with us and how we deliver all of the different products and services we have. And so that is the, I'd say, the first benefit that our clients should see in short order as that gets done. As it relates to, I'm going to say, additional value-added services that we can provide, we'll be able to look at doing things in the telematics space. As I mentioned earlier, we're going to be in a position to -- for ride hailing, optimize even further with stronger data and analytics and AI capabilities the total cost of operations for our clients. I mentioned things like keyless vehicle entry. We'll have a lot of that that we can actually do. And so a lot of opportunity with them. And then, of course, we have the other opportunities that I've talked about previously as it relates to the insurance space that we were working on and the small- to medium-sized fleets. Those are 2 initiatives that we continue to work on. And we actually feel that in working with Autofleet, that that could allow us to move faster in that regard to just given the tool set that they bring and the digitization and automation capabilities. So we should be able to move faster with those 2 initiatives as well. And there'll be more to come on that in future quarters.
Operator: The next question comes from Graham Ryding with TD (TSX:TD) Securities.
Graham Ryding: Just first, I just want to make sure I'm understanding this correctly because there has been a lot of conversation on Autofleet. So just to sort of try to summarize, is this a way for you to basically leverage Autofleet both in a direct client-facing capacity in terms of what you can offer them, but also from your own processes in terms of sort of digital and automation behind the scenes you can leverage Autofleet as well? Should I think of it as both respects?
Laura Dottori-Attanasio: Absolutely. You got it.
Graham Ryding: Okay, great. And then my only other question would just be on guidance, Frank. I think the sort of the numbers that you've provided, they imply that you're not really expecting much growth in the second half of the year versus the first half of the year from a sort of revenue and adjusted EPS perspective. And I think free cash flow per share is actually expected to trend down a bit versus the first half of the year. Is that accurate? And then what would be driving that?
Frank Ruperto: Okay. So a couple of things. Let me talk to the fundamental component of it. So again, we put out guidance, obviously, good revenue growth and good growth as you look at the back half of the year and think about the whole range. So we try to play guidance down the middle of the fairway as we look there at it. So we do see continued strong growth in the second half of the year as we move forward here. But recall, noneconomic, but we're going to have more drag from the preferred stock that will drag the NFR line as we move forward here as well as just our continued investment in the business consistent with that growth. On the per-share perspective, recall that we converted the debentures. So we now have $14 million incremental, incremental shares outstanding which obviously impact the EPS from a basic EPS perspective as we move forward here. The last thing I would just point you to is recall that we had $7 million in nonrecurring service revenue in Q1. And so we don't intend, because it's nonrecurring, that to recur as we move forward. And then finally, we continue to be cautious on gain on sale. As we look at it, it's held up well and that's been a benefit to us as Mexico has offset Australia and New Zealand and we've had more vehicles to sell, but we always keep our eye on that as well. But we feel very good about the second half of the year.
Operator: [Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to Laura Dottori-Attanasio for any closing remarks.
Laura Dottori-Attanasio: Thank you. Thank you for getting my name right. As we continue to grow and deliver for our shareholders, with strong financial results, we will drive forward and we're going to drive forward at pace with intelligent mobility initiatives and we're going to ensure that we consistently offer the very best to our clients. So thanks again to our Element team members for everything they do for our clients and for each other and a very special welcome to our soon-to-be new team members from Autofleet. And thank you, once again, for being with us today, and for your continued support of Element. We look forward to our next quarterly call. Have a wonderful day.
Operator: The conference has now concluded. You may now disconnect your lines. Thank you for participating and have a pleasant day.
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