Element Fleet Management Corp.

We believe a moderation in vehicle prices will also benefit Element. In the U.S., the average prices of new vehicles declined by about 3% in the first nine months of 2024, and we expect them to drop by 6%-8% between now and the end of 2025 (see "Global Auto Outlook: More Players, Less Profit," published Oct. 9, 2024). We believe that management, over time, will continue to engage in more shareholder-friendly activities by increasing dividends and stock buybacks. For example, Element announced a 20% common dividend increase in November 2023 (to C$0.12 per share from C$0.10 per share). Our expectation is that dividends will continue to keep pace with Element's stated capital allocation priorities, which include a target dividend payout

...Origination volume expanded in the first six months of 2024 as production at original equipment manufacturers (OEMs) improved and the elevated order backlog converted to revenue. During that time, Element Fleet Management Corp. originated $3.5 billion of new vehicles, up 7% year over year on the improvement in auto production capacity and strong client demand. As vehicle production has improved, we expect continued normalization in the order-to-delivery cycle in 2025. We believe a moderation in vehicle prices will also benefit Element. In the U.S., the average prices of new vehicles declined by about 3% in the first nine months of 2024, and we expect them to drop by 6%-8% between now and the end of 2025 (see "Global Auto Outlook: More Players, Less Profit," published Oct. 9, 2024). We expect Element to manage shareholder returns in such a way that its leverage will remain at its target of 6.25x-6.75x debt to tangible equity. Element reported tangible leverage of 6.5x as of June 30, 2024,...

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