Element Fleet Management Corp Analyst Call Hosted By RBC Capital Markets Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. Thanks for that, Jay. So I'd like to lead off the fireside chat with this question. So in your letter to shareholders, that was included in your press release last night, you wrote about the fundamental attributes of Element's business model that foster resilience and dependable operating cash flow even during tumultuous times. Can you talk about how those attributes are working in Element's favor today?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. And then you're in the final year of your strategic plan, which included transforming the core business, strengthening Element's balance sheet and also beginning to pivot to growth in 2020. So how has COVID-19 impacted the plans? And when things start to return to normal, what are the key things shareholders should be thinking about regarding financial performance?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. And then switching over to kind of the operational side. Your letter to shareholders stress the importance of, first, focusing on Element's people, which is obviously the right thing to do. Now with 95% of people working from home, can you give maybe some other examples of what Element has had to change to balance the health and safety of its employees on one hand, but also delivering results for your stakeholders?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : That's a really good example. Well, we'll talk about your clients in a moment here. But first, as an aggregator of services for your clients, there's obviously only so much that you can control. What about everything that's outside your control, like the OEMs, the DMVs, the upfitters and the service supply chain? Like what are you hearing from that network and how it is -- how it's impacting your business?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. Client centricity has been your mantra since you took the helm at Element. One of the common questions I get from investors is what are you hearing from your clients? How are they faring? Element's vehicles are essential for your clients to generate revenue, but do they have the ability to generate revenue right now?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. And you touched about that in terms of some clients that are seeing some revenue headwinds. What about those clients that aren't getting -- generating revenue right now? What percentage of clients that require payment deferrals effectively due to an inability to pay or challenging ability to pay? And at what point do delinquencies add up to a material risk for Element? And how do you satisfy your ABS and syndicated lease obligations in that scenario?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. Moving on to liquidity. Your letter to shareholders cites well over $5 billion in contractually committed funding. What does that include? What does it exclude? And are there any limits on what you can use that for?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. Moving over to the balance sheet that committed forward funding is undrawn capacity, in other words, not on your balance sheet right now. What about your balance sheet today? You've been strengthening and deleveraging as part of the strategic plan, is it where you want it to be or at least where you need it to be today?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. Just a couple more questions. Next is just on the income statement. Can you quantify any of the following kind of 3 things for us? And these are kind of questions that I get asked fairly often by investors. So first one is in terms of the service revenue headwinds, in your letter to the shareholders, you noted that fleet services revenue may be softer in part due to lower mileage, impacting fuel, maintenance, accident services. Does this imply fleet services revenue growth could still be positive in 2020 on a year-over-year basis, albeit to a lesser extent than if COVID-19

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Okay. And my final question is that it seemed like there's a hopeful tone in your letter to shareholders yesterday in terms of seizing opportunities that this pandemic may create. I know you -- I think you might have alluded to some of this earlier, but could you maybe be a little bit more specific around these opportunities?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. Thanks for that, Jay. Those were all the questions that I had. Were there any remaining thoughts you wanted to leave with investors?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Great. Well, that concludes today's call. I would like to thank Jay and all the listeners for taking time out of their busy schedules to be with us today. Thank you.