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Element Fleet Management Corp
Symbol EFN
Shares Issued 380,355,836
Close 2018-02-05 C$ 7.95
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Element Fleet president, CEO Nullmeyer to retire

2018-02-05 17:07 ET - News Release

Mr. Brian Tobin reports


Element Fleet Management Corp. has provided an update regarding its strategic priorities, earnings outlook and leadership.

Since 2012, Element has completed a number of significant transactions that have created an industry-leading fleet management platform, with compelling new services for customers, and delivered sustained innovation and growth. More recently, the company has invested in, developed and made available to its customers, the fleet management industry's most advanced technology platform. This undertaking has taken longer than was originally expected and involved integration challenges. This has led to a temporarily higher-cost structure and a revenue growth trajectory below the company's long-term potential.

The company has recently announced significant customer wins that demonstrate the underlying strength of its strategy, such as the agreement to provide maintenance and accident services for the fast-growing Maven car-sharing service of General Motors Corp., and based on its current pipeline, Element is optimistic about the outlook for more rapid customer adoption in coming years.

Based upon consultation with several of its largest shareholders and with assistance of advisers, Element explored a broad spectrum of alternatives over the past year, including capital structure optimization and a sale of the company. That review is complete, and the company has determined that the best way to create long-term value for all stakeholders is to continue to execute on its strategy and remain focused on its customers, efficiency and the effectiveness of its operations.

Chief executive officer succession

After more than five years with Element in which he oversaw the creation and rapid growth of Element's industry-leading platform, Bradley Nullmeyer will be retiring from his positions as chief executive officer and director, effective immediately. The board of directors is conducting a CEO search that will include the consideration of external and internal candidates. President and chief operating officer Dan Jauernig has been appointed acting chief executive officer.

"On behalf of the board, I want to thank Brad for his dedicated service to Element," said Brian Tobin, PC, OC, chairman of the board of directors. "Brad led the company through significant change and growth, while assembling a management team that is ready to lead Element through its next chapter of growth. We are pleased that Brad will remain available to assist the company, and we wish him the very best in his retirement."

Mr. Nullmeyer stated: "I am proud of our collective efforts in building the world's leading fleet management company. With much of the heavy lifting associated with Element's rapid change behind us, now is the time to step back to enable the company to choose an operations-focused leader to drive the next stage of the company's growth. Dan Jauernig has the right skills and experience to assume this role, and I have committed to be available to ensure a smooth transition."

Mr. Jauernig has more than 25 years of experience in financial services. He joined Element as executive vice-president in November of 2014 and was subsequently promoted to the roles of president and chief operating officer. He joined Element from his previous role as president and chief executive officer of Classified Ventures/Cars.com (now Cars.com Inc.), a leading provider of on-line automotive research, reviews and advertising in the United States, where under his leadership, the company's revenue grew nearly twentyfold. Earlier in his career, Mr. Jauernig served as chief financial officer of Newcourt Credit Group and president of Newcourt Services. A cross-border professional, Mr. Jauernig holds the chartered professional accountant, certified management accountant and certified public accountant (Illinois) designations. He currently serves as chair of the risk committee of the board of directors of HomEquity Bank and as a director on Torstar Corp.'s board of directors.

Operations and efficiency

"After numerous acquisitions and related integrations, a corporate split, and a review of options for the company, it's time to turn all our attention to streamlining processes, driving efficiency and ensuring excellence in our operations and customer service," said Mr. Jauernig. "The board and I recognize that the rapid pace of change and growth has not been easy for a number of stakeholders, and the integration process has created challenges for some of our valued customers. I look forward to working with the many talented and dedicated individuals across our company as we put our 100-per-cent focus on our customers and exceptional execution."

The company is now focused on optimizing the customer experience. Element is also taking actions to align expenses to revenue growth. These actions will reduce the company's expense structure and run rate while maintaining investment in innovation and customer service.

Financial outlook

Element provides the following update to its financial outlook:

  • The company expects its 2017 operating results in the core fleet business to be in line with previously communicated 2017 guidance.
  • Integration challenges noted above resulted in 2017 ending with a decline in service units from the third quarter, and as a result, the company expects 2018 core fleet adjusted operating income will be down approximately 3 per cent to 5 per cent on a currency neutral basis.
  • New client originations and management initiatives in 2018 will build a foundation for growth in core fleet-adjusted operating income that is expected to resume beginning in 2019.
  • Element remains confident in mid- and long-term core fleet adjusted operating income growth rates of 7 per cent to 9 per cent in 2020 and beyond.

The company expects to report its fourth quarter and full-year 2017 results on March 15.

The company's fundamentals continue to be robust, as demonstrated by its leading market share in the North American fleet services business.

The company produces strong free cash flow and excess internally generated capital, which Element can use to finance growth and to return capital to shareholders through share buybacks and the company's dividend.

The company has excellent access to low-cost financing, with the high quality of its assets reflected in investment-grade credit ratings and record-low spreads on recent ABS issuance.

The company recently received an initial issuer rating of "BBB+ with stable outlook" from Fitch Ratings, and its investment-grade ratings from Kroll Bond Rating Agency and DBRS Inc. were also recently affirmed at "A-" and "BBB (high)," respectively, each with a stable outlook.

Conference call

The company will host a conference call to discuss today's announcement at 5:30 p.m. Eastern Time on Feb. 5, 2018. The conference call may be accessed by dialling the following numbers:

North America toll-free:  1-800-898-3989

Local:  416-406-0743

Passcode:  8954159 followed by the number sign

A series of presentation slides will be referenced by management during the conference call. These slides will be available on the company's website in advance of the call.

The call will be recorded and may be accessed until March 6, 2018, by dialling 1-800-408-3053 or 905-694-9451 and entering the passcode 2401840 followed by the number sign.

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