Element Fleet Management (TSE:EFN) reported second-quarter results that included double-digit growth in adjusted net revenue and adjusted earnings per share, while management highlighted progress in its capital-light funding strategy, digital transformation efforts and expansion into autonomous-vehicle fleet services.
President and Chief Executive Officer Laura Dottori-Attanasio said adjusted net revenue increased 10% from a year earlier, adjusted EPS rose 12%, and adjusted return on equity reached 19.6%. She said the company generated record first-half revenue as services revenue re-accelerated and Element completed its inaugural equity residual transaction.
Revenue Growth and Operating Performance
Executive Vice President and Chief Financial Officer Heath Valkenburg said adjusted net revenue totaled $318 million in the second quarter, up 10% year over year. Service revenue rose 8% to $164 million, supported by growth in vehicles under management and higher service revenue per vehicle.
Vehicles under management ended the quarter at 1.56 million, a 3% year-over-year increase. Element continues to target annual growth of 2% to 4% in vehicles under management, according to Valkenburg.
Net financing revenue increased 7% to $136 million. Valkenburg attributed the gain to higher average net earning assets, benefits from the company’s leasing initiative and changes to its funding platform. Core net financing revenue yield rose 35 basis points to 5.12%, despite a provision for credit losses tied to a client-specific matter discussed in the prior quarter. The company said it is now fully provided for that exposure and expects annual credit losses to remain within its historical range of approximately 1 to 2 basis points over time.
Syndication revenue rose 58% year over year to $18 million, aided by higher syndication volumes, investor demand and the reinstatement of 100% bonus depreciation.
Adjusted operating income was $177 million, up 9% from the prior-year period, while adjusted operating margin was 55.6%. For the first six months of 2026, adjusted operating margin expanded 60 basis points to 55.9%.
Adjusted free cash flow per share was $0.39 in the quarter, down 3% year over year because of higher cash tax payments in certain jurisdictions. For the first half, however, adjusted free cash flow per share increased 11%.
Originations, Client Wins and Advisory Savings
Quarterly originations totaled $1.7 billion, down 9% year over year but up 19% sequentially. Valkenburg said the annual decline largely reflected normalization in activity from an originate-to-syndicate client whose activity had peaked in the second quarter of 2025. Excluding that client, originations rose 4% in the first six months of 2026 compared with the prior-year period.
Management said it expects originations momentum to build during the second half, citing a strong order pipeline, normalization of client ordering patterns and strong July orders and originations.
Element added 42 clients during the quarter, including 13 conversions from self-managed fleets, and completed 247 additional service enrollments among existing clients. The company’s strategic advisory services team identified approximately $482 million in potential client savings, with 41% of those savings already being actioned.
Dottori-Attanasio said the advisory team identifies opportunities across vehicle acquisition, uptime and maintenance, with technology and AI-enabled tools helping produce additional client insights.
Waymo Partnership and Digital Investments
Element announced a strategic partnership with autonomous-driving company Waymo and will initially support its operations in San Diego. Dottori-Attanasio said the work draws on Element’s existing capabilities in fleet operations, maintenance, lifecycle management and operational execution.
The company expects the San Diego launch to contribute to services growth beginning in 2027. Valkenburg said Waymo’s contribution to vehicles under management is expected to be modest, but revenue per vehicle should be higher than for a traditional fleet because of the complexity of services and high utilization of the assets. He said the initial launch could add “a few points” to services revenue growth in 2027.
Management said margins from the autonomous-vehicle relationship will differ from those in its traditional fleet-management operations because of different operational services, though it expects attractive returns. Investments needed for the San Diego launch, including charging infrastructure and localized support, have already been contemplated in 2026 guidance.
Element also cited progress with DigiAdvisor, its AI-powered maintenance decisioning platform, which combines connected-vehicle data, service information and Element expertise. The company said investments in digitized workflows, automation, data infrastructure and process simplification enabled organizational actions affecting 8% of its workforce.
Those actions are expected to generate approximately $20 million in annualized run-rate savings in 2027. Valkenburg said there will be a small impact in the second half of 2026, but the principal benefit will occur next year. Management said some savings will support margin expansion while some will be reinvested in long-term priorities, including autonomous mobility.
Funding Strategy and Capital Returns
Element ended the quarter with a debt-to-capital ratio of 76.5%, within its 73% to 77% target range. The company’s inaugural equity residual transaction with CPP Investments and Blackstone transferred approximately $700 million of receivables off its balance sheet effective May 1.
Valkenburg said the multi-year committed program provides an additional off-balance-sheet funding channel alongside traditional syndications. Under the structure, Element retains client relationships, management and servicing revenue, as well as a 49% economic interest in future lease cash flows and associated tax attributes. Revenue recognition is more weighted toward the life of the leases than under traditional syndication, and distributions began July 1.
During the second quarter, Element returned $163 million to shareholders, including $120 million used to repurchase 5.8 million common shares. In the first half, it repurchased 8.1 million shares, representing 2% of shares outstanding.
Management said the company remains positioned to deliver within its full-year 2026 guidance ranges, supported by first-half revenue growth of 13%, EPS growth of 18% and free-cash-flow-per-share growth of 11%.
About Element Fleet Management (TSE:EFN)
Element Financial separated into two independent public companies in October 2016. The former company now consists of Element Fleet Management, a global fleet management company, and ECN Capital, a commercial finance company. Element Fleet Management provides management services and financing for commercial vehicle and equipment fleets. The company’s suite of fleet management services deals with acquisition and financing, to program management and remarketing. ECN Capital operates across North America in three verticals of the equipment finance market: commercial and vendor finance, rail finance, and commercial aviation finance.
