Element Fleet Management Corp
TSX:EFN
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
21.0403
29.74
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Element Fleet Management Corp
You don't have any saved screeners yet
Thank you
for
standing
by.
This
is
the
conference
operator.
Welcome
to
the
Element
Fleet
Management
Fourth
Quarter
and
Full-Year
2021
Financial
and
Operating
Results
Conference
Call.
As a
reminder,
all
participants
are
in
listen-only
mode
and
the
conference
is
being
recorded.
After
the
prepared
remarks,
there
will
be
an
opportunity
for
analysts
to
ask
questions.
[Operator Instructions]
Element
wishes
to
remind
listeners
that
some
of
the
information
in
today's
call
includes
forward-looking
statements.
These
statements
are
based
on
assumptions
that
are
subject
to
significant
risks
and
uncertainties,
and
the
company
refers
you
to
the
cautionary
statements
and
Risk
Factors
in
its
year-end
and
most
recent
MD&A,
as
well
its
most
recent
AIF
for
a
description
of
these
risks,
uncertainties
and
assumptions.
Although
management
believes
that
the
expectations
reflected
in
the
statements
are
reasonable,
it
can
give
no
assurance
that
the
expectations
reflected
in
any
forward-looking
statements
will
prove
to
be
correct.
Elements'
earnings
press
release,
financial
statements,
MD&A,
Supplementary
Information
document,
quarterly
investor
presentation,
and
today's
call
include
references
to
non-IFRS
measures
which
management
believes
are
helpful
to
present
the
company
and
its
operations
in
ways
that
are
useful
to
investors.
A
reconciliation
of
these
non-IFRS
measures
to
IFRS
measures
can
be
found
in
the
MD&A.
I
would
now
like
to
turn
the
call
over
to
Jay
Forbes,
President
and
Chief
Executive
Officer
of
Element.
Please
go
ahead.
Thank
you,
operator.
And
thanks
for
all
of
you
for
joining
us
this
morning.
We're
going
to
briefly
address
Element's
2021
performance
and
its
results,
as
well
as
our
outlook
on
this
year
and
next
year,
which
has
not
changed
since
we
last
spoke
to
you in
November.
However,
the
majority
of
our
time
together
is
going to
be
available
for
you
to
ask
questions
and
we'll
endeavor
to provide
as
much
color
and
insight
as
possible
in
our
responses.
Let
me
start
by
repeating
what
I
said
when
we
last
spoke,
which
is
that
Element
as
a
whole
is
performing
better
than
ever
before. And
the
list
of proof
points
to
this
effect
is
three
months
longer
now
than
it was
in
November.
Allow me
to
step
back
for
a
moment,
if
you
would.
In
October
of
2020,
we
set
out
three
strategic
priorities
for
Element
in
2021.
The
first
was
to
grow
net
revenue
between
4%
and
6%
above
2020
levels
in
constant
currency,
demonstrating
the
scalability
of our
transformed
operating
platform
by
magnifying
that
growth
into
superior
operating
income
growth,
thereby
expanding
our
operating
margins.
As
you
would
have seen
in
our
disclosures,
we
succeeded
on
all
accounts.
Our
second
strategic
priority
for
2021
was
to
advance
a
capital-lighter
business
model
through
growing
services
revenue
and
strategic
syndication
enhancing
returns
on
equity.
And
we
did
that
too.
And
our
third
strategic
priority
was
to
grow
free
cash
flow
per
share
and
return
capital
to
shareholders
through
growing
our
common
dividend
and
repurchasing
our
common
shares
under an
NCIB,
mission
accomplished.
While
achieving these
growth
objectives
is
gratifying,
what
still amazes me
is that
our
organization accomplished
this
during
the
first
ever
global
vehicle
production
shortage
in
the
history
of
this
industry,
which
lasted
the
entirety
of
2021
and
continues
to
persist,
albeit
to
a
lesser
extent
now
than
before.
Element's
growth
in
2021 against
the
backdrop
of
unprecedented
supply
chain
disruption
speaks
to
a
few
things:
it
speaks
to
the
determination,
the
agility,
the
accountability
of
our
2,500
employees
across
the
five
countries
in
which
we
operate,
my
executive
leadership
team
and
I
are
tremendously
grateful
for
our
people
and
everything
they've
accomplished
for
our
clients
in
2021.
Element's
growth
in
2021,
notwithstanding
OEM
production
shortages,
also
speaks
to
the
resilience
of
this
business
model.
That
resilience
has
been
proven
two
years
in
a
row
now.
First,
against
the
backdrop
of
COVID's
arrival
and
the
waves
of
global
lockdowns
in
2020
and
again
last
year.
This
resilience
is
what
gives
us
confidence
in
being
able
to
deliver
on
our
outlook
for
this
year
as
well
as
2023.
Lastly, Element's
success
in
2021
speaks
to
the
crucial
role
that
our
services
and
solutions
play
for
our
clients
and
their
businesses.
While
the
vehicle
supply
side
of
our
business
was
constrained
in
2021,
we've
experienced
record
levels
of
demand
for
vehicles
as
well
as
Element's
expertise
and
support
across
the
entirety
of
our
client
base.
On
the subject
of
demand
for
vehicles,
in
addition
to
the
2021
results
we
reported
yesterday,
our
business
generated
between
CAD
40 million
and CAD
65
million
of
incremental
revenue,
operating
income
and
cash
flow
in
2021,
which
has
been
deferred
as
a
consequence
of
OEM
production
delays.
This
value
is
represented
by
the
excess CAD
1.9
billion
of
backlogged
vehicle
orders,
placed
by
Element
clients
as
at
year-end
2021.
These
orders
are
excess
and
that
they're
on
top
of
our
usual
year-end
global
backlog
of
approximately
CAD 1
billion
in
order
volume.
We
continue
to
forecast
this
order
backlog
having
grown
further
by
mid-2023
when
we
expect
global
OEM
production
capacity
to
be
back
at
100%
and
our
excess
backlog
begins
to
recede.
All
these details
are
identical
to
the
outlook
we
provided
in
our
November
public
disclosures.
If
anything,
our
confidence
in
this
trajectory
has
been
bolstered
by
our
Q4
2021
and
year-to-date
2022
performance
in
combination
with
the
recent
public
statements
made
by
several
large
OEMs
regarding
expected
production
volume
recovers.
Returning
to
my
belief
that
Element
has
never
performed
better,
allow
me
to
offer
a
few
proof
points
from
our
2021
results.
These
are
in
cost
of
currency
to
eliminate
FX
translation
noise
and
restricted
to
our
fleet
management
or
our
core
business
performance
in
prior
years.
In
other
words,
on
an
apples-to-apples
basis,
Element
generated
more
net
revenue
in
2021
than
ever
before.
This
was
driven
by
more
service
revenue
and
more
net
financing
revenue
generated
in
2021
than
ever
before.
We
produced
more
adjusted
operating
income
than
ever
before,
more
free
cash
flow
and
more
free
cash
flow
per
share
than
ever
before.
And
we
returned
more
cash
to
common
shareholders
than
Element
ever
has
before.
We
achieved
all-time
high
Global
Net
Promoter
scores
for
2021,
as
well
as
for
Q4 2021
specifically.
This
is
a
truly
remarkable
achievement
for
an
organization
that
was
receiving
negative
Net
Promoter
Scores
in
some
geographies
when
I
joined
in
2018.
A
world-class
loyal
client
base
ordered
more
vehicles
from
Element
in
2021
than
ever
before.
On
this
account,
we
have
to
exclude
Armada.
However,
if
we
include
Armada,
2021
was
the
second
best
year
of orders
in Element's
history
and
a
mere
CAD
150
million
shy
of
2019.
Q4 2021
on
its
own
was
the
single
largest
quarter
of
vehicle
orders
in
Element's
history
by
a CAD
400
million
margin.
Regardless
of
whether
Armada
is
in
or
out
of
the
data
set
and
the
list
goes
on.
T
here
were
a
dozen
all-time
highs
reached
by
our
commercial
teams
in
2021
as
they
carried
that
momentum
into
this
year,
which
we
anticipate
will
be
even
more
successful
for
our
clients
and
client
prospects.
The
bottom
line
remains
that
Element
is
performing
better
than
ever,
and
perhaps
more
importantly,
we've
never
been
better
positioned
to
sustain
and
build
on
the
success.
Before
I
give
Frank
the
floor,
I
want
to
conclude
by
spotlighting
the
launch
of
our
Arc
by
Element
last
week,
which
is
our
integrated
end-to-end
EV offering.
Arc
by
Element
builds
on
our
established
success
with
EVs in
all
the
markets
we
serve
with
special
recognition
due
to
our
colleagues at
Custom
Fleet
in
New
Zealand,
where
their
offering,
called
EV-plus,
has
been
and
continues
to
be
the
only
end-to-end
EV
offering in
that
market for
years.
Element's
basic
value
proposition
making
the
complex
simple
for
our
clients
is
innately
responsive
to
the
challenges
of
fleet
electrification.
And
as
the
market-leading
FMC
in
every
region
we
serve,
Element
is
best positioned
to
support
our
clients
and
our –
lead
our
industry
through
the
gradual
electrification
of
automobile
fleets.
We're
excited
to
bring
our
full-service
EV
offering
to
our
clients
under
the Arc by Element
banner,
ensuring
consistency
for
our
global
clients
in
developing
this
offering
to
be
seamless
across
all
of
our
geographies.
With
that,
I'll
turn
things
over
to
you,
Frank.
Thanks,
Jay,
and
good
morning,
everyone.
I want
to
make
several
comments
regarding
our
2021
results
and
another
few
about
our
outlook
for
Element
this
year.
After
that,
we'll
jump
into
Q&A.
The
last
time
we
spoke
in
November,
we
gave
you
some
guidance
ranges
on
how
we
expected
Q4
to
play
out
and,
therefore,
how
2021
would
look
as
a whole.
The
business
ended
up
outperforming
many
of
these – those
guidance
ranges.
We
are
pleased
with
the
outcome,
and
I
will
provide
some
insights
on
the
strong
performance.
For
the
month
of
October
2021,
the
top
five
OEMs
we
do
business
with
in
the
US
and
Canada,
posted
their
lowest
vehicle
production
numbers
that
we
have
record
of.
They
were
struggling
with
supply
chain
issues,
and
the
near-term
outlook
was
dubious,
with
the
consumer
holiday
season
approaching
and
presumptive
routing
of
microchips,
the
higher
margin
in-demand
consumer
electronics.
This
changed
very
quickly
in
November,
OEMs
scheduling
and
production
capacity
accelerated
materially.
Supply
chain
raw
materials,
including
microchips,
ended
up
being
able to
support
multiple
shifts
at
our
OEMs,
and
the
number
of
plants
worked
throughout
the
US
Thanksgiving
holiday
and
later
into
December
than
is
customary
to
maximize
vehicle
production
before
the
end
of
the
year.
With
historic
order
backlogs,
the
OEMs
were
able
to
be
selective
about
which
vehicles
they've
produced,
so
they
focused
on
higher
margin
and
less
microchip-intensive
models
to
maximize
results
in
total
production
numbers.
Many
of
our
clients'
vehicles
fall
into
the
higher
margin,
but
less
microchip-intensive
category.
As a
result,
our
originations
were
above
initial
expectations
in
Q4.
Additionally,
and
this
is
independent
of
originations,
we
were
able
to
implement
and
start
generating
revenue
on
a
number
of
commercial
wins
that
we
had
assumed
would
come
online
in
2022.
Essentially,
our
Q4
outperformance
benefited
from
this
timing
of
originations
and
implementation
of client
wins.
But
it
is
also
a
testament
to
the
performance
of
our
employees
who
were
able
to process
this
volume
of
unexpected
originations
and
onboard
new
client
wins.
As
we
have
told
you
before,
originations
are
very
revenue
and
cash-accretive
events
in
our
business,
especially
when
you
include
the
knock-on
effects,
the
services
like
titling
and
registering
the
new
vehicle
and
remarketing
the
vehicle
being
replaced.
The
outperformance
was
not
100%
driven
by
incremental
originations,
but
they
were
significant
contributors,
as
was
the
anticipated
January
revenue
being
earned
in
December.
Syndication
revenues
for
the
year
were
healthy
CAD 64.4
million
with
a
full-year
yield
of
2.4%.
Q4
syndications
were
CAD 14.5
million
while
achieving
a
healthy
2.9%
revenue
yield
during
the
quarter.
Notwithstanding
the
strong
syndication
revenue
yields
in
both
Q4
and
Q3
2021,
we
continue
to
recommend
modeling
syndication
revenue
yields
closer
to
2%
going
forward,
and
we will
let
you
know
if
this
outlook
changes.
The
other
metric
that
varied
modestly
from
our
Q4
guidance
was
adjusted
operating
expenses.
You
may
recall
that
Q3
adjusted
OpEx
included
a
year-to-date
catch-up
accrual
for
short-term
incentive
costs,
reflecting
strong
business
performance
relative
to
our
balanced
scorecard.
Q4
business
performance
exceeded
expectations
on
the
same
basis,
and
Q4
salaries,
wages
and
benefits
increased
in
[ph]
quarterly (00:14:08).
Nonetheless,
we
delivered
on
our
adjusted
operating
margin
guidance
for
2021,
and
adjusted
operating
income
growth
continues
to
outpace
net
revenue
growth,
exemplifying
our
scalable
operating
platform.
As
you
update
your
model
for
2022
based
on
yesterday's
results,
a
couple
of
items
that
should
help.
We
remain
committed
to
2%
net
revenue
growth
in
constant
currency
in
2022,
despite
higher-than-anticipated
net
revenue
in
2021.
We
expect
our
adjusted
effective
tax
rate
to
be
somewhere
between
25%
and
27%
in
2022.
Many
external
factors
impact
this
on
the
margin,
including
currency
and
the dispersion
of
earnings
by
geography,
amongst
other
variables.
We
will
let
you
know
as
we
progress
through
the
year
if
our
ETR
expectations
change.
That
being
said,
as
you
know,
effective
tax
rate
as
an
accounting
construct
and
our
actual
cash
tax
obligations
remain
materially
lower.
We
expect
cash
taxes
to
be
in
the CAD
50
million to
CAD
55
million
range
for
2022.
We
expect
to
keep
our
operating
margin
in
line
with
2021,
despite
slower
growth,
and
we
expect
sustaining
capital
investments
to
be
in
the
CAD 50
million to
CAD 55
million
range.
Recall
that
we've
already
signaled
our
[ph]
intention (00:15:28)
to
redeem
our
Series
I
preferred
shares
in
June
this
year,
which
will
have
a
positive
impact
on
our
free
cash
flow
per
share.
And
we
are
committed
to
continuing
to
repurchase
shares
under
our
NCIB.
In
addition,
our
focus
on
an
asset-lighter
model
is
enabling
the
return
of
cash
to
shareholders
via
the NCIB
and
our
recently
increased
dividend.
These
ongoing
returns
of
capital
remain
a
critical
component
of
our
value
proposition.
With
that,
operator,
let's
please
open
the line
for
questions.
Thank
you.
We
will
now
begin
the
analyst
question-and-answer
session.
[Operator Instructions]
The
first
question
comes
from
Geoff
Kwan
of
RBC
Capital
Markets.
Please
go
ahead.
Hi.
Good
morning.
Just
when
looking
at
the
new
client
wins
in
the
cross-selling
that
seems
to
have been
accelerating
in
the
past
six
quarters.
The
momentum
seems
to be
broad-based,
but
there
were
two
things
that
stood
out
to
me
for
the
Q4
results.
When
I
looked
at
it
on
the
trailing
12-month
basis,
the
revenue
units
in
US
and
Canada
were
up
almost
to
100%
year-over-year
and
the
share
of
wallet
was
up
460%
year-over-year
on
the
market
share
wins.
So
just
wondering
how
you
explain
some
of
the
positive
momentum,
how
much
of
this
is
not
kind
of
included
in
the
2022-2023
guidance
because
of
the
chip
shortage,
and
how
does
the
pipeline
look?
Good
morning, Geoff.
Listen,
I'm
really
excited
with
the
revitalization
of
our
commercial
efforts
as
a
consequence
of
our
decision
to
pivot
to
growth
in
early
2021.
But you
might
remember
that
we
began
the
wholesale
overhaul
of
our
commercial
function
in
the
US
and
Canada
mid-2020
in
anticipation
of
going
hard
on
this
growth
agenda
in
2021.
And
as
you've
called
out
the
results
reflect
the
success
that
David
Madrigal
has
had
as
our
Chief
Commercial
Officer
in
revitalizing
this
commercial
function.
And
I
would
say,
there
are
a
lot
of
secrets
to
the
success,
and
it
has
come as
a
consequence
of
a
reorganization
and
upgrading
of
the
talent
and
skills
of
our
commercial
force.
Yeah, the
revamping
of
their
compensation
and
a
distinct
bias
introduced
to
the
sales
group
in
terms
of
the
pursuit
of
services
revenue
on
a
much
more
aggressive
basis
than
perhaps
what
has
been
the
case
in
the
past.
And
that
ability
to
increase
share
of
wallet
through
both
the penetration
of
our
service
offerings
to
the
entirety
of
our
client
base,
as
well
as
increasing
the
usage
of
those
services
across
that
client
base
has
been
a
key
part
of
the
success
that
we
see
in
terms
of
service
revenue
growth
–
certainly
revenue
unit
growth
in
2021,
which
in
turn
we
expect
to
translate
into
very
attractive
service
revenue
growth
in
2022
as
those
sales
are
–
transactions
are
implemented
and
those
services
are
spooled
up
with
those
respective
clients.
So, yeah,
this
has
all
been
very
much
about
the
concerted
energies
and
focus
that
we
brought
to
the
revitalization
of
our
commercial
groups
across
all
five
countries,
but
in
particular
the
Russia and
Canada,
and
the
success that
they've
enjoyed
in
share
of
wallet
gains
with
our
existing
client
base,
as
well
as
stealing
share
and
converting
self-managed
fleets,
and
in
doing
so,
the
provision
of
services
to
those
new
units
that
we've
taken
under
management.
And
then,
the –
can
you
give
out a
progress
update
on
the
North
American
self-managed
opportunity?
And
are
you
seeing
any
early
opportunities
for
market
share
wins
relating
to
the Donlen-Wheels
and
ALD-LeasePlan
transactions?
Yes.
So,
I
would
say
to
you
that
the
ready
opportunities
that
have
been
afforded
to
us
in
terms
of
this
focus
on
share
of
wallet
have
taken
a
lot
of
the
focus,
a
lot
of
the
energies
of
our
sales
team
and
devoted
them
to
that.
And
I
would
say
further
that
the
OEM
production
shortages
have
– coupled
with
the
continuing
restrictions
associated
with
operating
in
a
pandemic
world,
have
tempered
our
efforts
around
self-managed
fleets.
All of
the
opportunity
is
there.
Just
our
ability
to
access
it
has
been
somewhat
constrained
by
our
inability
to
have
the
face-to-face
meetings
with
the
C-suite
personnel
that
we
believe
are
the
right
points
of
contact
to
converting
the
self-managed
fleets
into
FMC
clients,
coupled
with
the
ready
success
that
we've
had
enjoyed
in
terms
of
increasing
share
of
wallet,
so
that
opportunity
for
us
continues
to
be
real.
We're
actively
pursuing
it
and
enjoying
great
success
as
you
see
[indiscernible]
(00:21:43) disclosed
in
the
supplementary
and
it
will
be
the
backbone
of
our
revenue
growth
strategy
go-forward,
but
for
2021,
it
was
a
bit
tempered,
given
again
the
restrictions
imposed
by
the
pandemic,
coupled
with
the
phenomenal
success
that
the
team
was
enjoying
in
terms
of
both
stealing
share
as
well
as
share
of
wallet.
And
on the
stealing
share,
the
consolidation
and
the
shifts
that
we've
seen
in
ownership
of
certain
of
our
market
competitors
have
given
rise
to
their
clients
seeking
alternative
FMC representation,
recognizing
that
the
[ph]
perils
and
trails
(00:22:27) of
integration
can
and
might
be
disruptive
to
the
client
experience
that
they might
enjoy.
So
us
having
come
out
of
that
and
offering
a
first-rate
industry-leading
client
experience,
coupled
with
the
concern
that
the
experience
that
they're
enjoying
with
their
current
service
provider
might
degrade
as
a
consequence
of
the
integration,
has
certainly
given
us
opportunities
to
steal
share.
And
again,
you
see
it
in
the
numbers
that team
is
taking
full
advantage
of
that.
And
if
I
can just
maybe
sneak
in
one
last
one
on
Amazon
or –
sorry,
I mean, Armada.
And
[ph]
they've (00:23:10)
talked
about
their
desire
to
electrify
their
delivery
van
fleet,
as
evidenced
by
their
order
with
Rivian
and
more
recently,
Stellantis.
And I
just
wanted
to
understand
Armada's
ability
to
procure
electric
delivery
vans,
given
the
chip
shortage,
and
that
there's
a
limited
number
of
OEMs
that
are
producing
these
electric
delivery
vans.
Are
you
able
to
talk
about
whether
Armada
is
facing
the
same
procurement
issues
for
getting these
electric vans
and
has
helped –
has
Element
been
involved
in
helping
Armada
with
this?
Yeah.
And
so,
I
guess,
maybe let
me
start
by
saying
that
we
continue
to
deepen
our
relationship
with
Armada,
which
is
our
largest
client,
as
we
provide
more
services
to
its
ever
growing
fleet.
And
further,
much
of
the
services
that
we
provide
to
Armada
are
drivetrain
agnostic.
So
whether
they're
Rivian
or
Stellantis,
BrightDrop,
Ford,
we
will
service
those
vehicles
much
like
we
do
their
ICE
vehicles,
as
we
work
closely
with
this
organization
to
achieve
their
last-mile
ambitions
as
they
gradually
electrify
their
growing
fleet.
They,
like
every
other
client,
would
be
constrained
by
this
chip
shortages
clearly
at
their
scale.
They
attract
a
disproportionate
amount
of
interest
and
attention
by
the
OEMs.
But
the
simple
math
has
it
that
every
one
of
our
clients
is
being
constrained
in
terms
of
their
ability
to
secure
the
necessary
vehicles
in
volume
to
meet
their
demand.
Thank
you.
Thank
you.
The
next question
comes
from
John
Aiken
of
Barclays.
Please go
ahead.
Good
morning. Frank,
wanted
to
talk
about
syndication,
I
think
in
the
MD&A
you
talked
about
a
different –
like
there
was
three
portfolio –
would
you
classify
this
portfolio of
transactions?
And
if
I
understand
correctly,
these
were
done
to
a
single
buyer?
Can
you
talk
about
these
transactions
first,
were
these
three
transactions
all
to
the
same
buyer
or
are these
to
three
different
buyers?
What
type
of
concentration
risk
does
this
pose
from
the
other
syndications?
And
also,
I
think the MD&A
mentioned
that
this
actually
resulted
in
higher
yields.
I'm
assuming
that
this
is
from
less
costs
associated
with
a
simpler
process,
but
is
there
anything
else
involved
in
the
higher
yields
derived
from
this?
Yeah.
Yeah.
Thank
you.
Thank
you.
So
the
quick
answers
are
these
are
deals
where
we
may
have
smaller
portfolios
of
assets
that
in
and
amongst
themselves,
the
effort,
the
cost
and
the
scale
could
negatively
impact
the
yield
associated
with
these
smaller
portfolios.
So
by
putting
together
a
number
of
these
smaller
portfolios,
smaller
deals
programs
into
one
portfolio,
we
attract
a
broader
range
of
buyers
for
those
portfolios
because
it's
worth
their
while
to
look
at
significantly
larger
portfolios
than
to
look
at
very
small
deals
as
we
look
at
that.
And
so
that
has
two
effects:
one
is,
because
you
attract
more
buyers
because
of
the
scale
of
the
portfolio,
there's
more
competition
for
those
assets
and,
as
a
result,
you
get
better
yields
and
better –
better
auction
dynamics
in
regards
to
those
portfolios.
And
then
secondly,
just
with
the
ease
of
doing
internally
1
deal
versus
doing
12
or
15,
obviously
has
its
benefits,
too,
just
from
a
bandwidth
perspective
with
our
syndication
partners.
So
that's
really
what's
going
on
here
with
those
portfolio
deals
as
we
put
them
together.
And
Frank,
is
this
a
response
to
the
fact
that
the
originations
in
the
OEMs
have
been
slower?
And
if
that's
the
case,
do
you expect
to
carry
this
practice
ongoing
forward,
given
the
fact
[indiscernible]
(00:27:30)
higher
yields?
We
expect
to
carry
the
practice
going
forward.
And
this
has
always
been
part
of
the
maturation
strategy
of
the
syndication
portfolio,
so
it
also
allows
us
to
take
some
of
the smaller
non-investment-grade
names
and
combine
those
with
some
of
the
investment-grade
names
and
get
better
economics
there.
So
really,
I
would
say
it's
more
part
of
our
ongoing
strategy.
It's
always
been
on
the
radar
screen
and
as
we've
continued
to
mature
this
market
and
broaden
the
buyer
universe,
this
made
sense
to
come
to
market
with
these
deals,
especially
given
the
yield
profiles
we
were
able
to
access
by
doing
that.
I
would
expect
that
you
would
continue
to
see
portfolio
deals
in
the
future
just
as
we've
continued
to
broaden
our
syndication
strategies
over
the
last
several
years.
I'd
also
add
that
this
week
we
were
able
to
do
our
first
Canadian
syndication
and
so,
again, another
step
in
the
maturation
process
of
our
syndication
platform.
That's
quite
clear.
And
thanks,
Frank.
And
Jay, if
I
may,
I
–
in
terms
of
the
return
capital
to
shareholders
you've
been
very
aggressive
on
the
buyback,
you've
increased
the
dividend,
but
it
–
is
there
any
set
timing
for
a
review
of
the
dividend
by
the
board
or
when
the
management
would
suggest
to
the
board?
It
looks
like
you've
done
it in
the
third
quarter
for the
last
couple of
times.
But
given
the
fact
that
we've
seen
our
free
cash
flow
very
strong in
this
quarter
and
presumably
growing
forward,
are
we
[ph]
ever (00:29:11)
going to
need
to
wait
a couple
more
quarters
for
the next
dividend
increase?
Or
would
this
be
something
that
the
board
or
the
management
team would
suggest
sooner
than
that?
Yeah.
John,
I
think
to
your
point,
we've
settled
into
a
comfortable
groove
here
as
you
know,
coincident
with
the
release
of
our
Q3
results,
we
have
announced
the
dividend
increase
for
two
years
in
a
row.
I wouldn't expect
that
to change
materially
for 2021,
given
– or
excuse
me,
for
2022,
given
that
we're
working
our
way
through
the
resumption
of
full
productive
capacity
by
the
OEMs
and
we'll
have
a
much
better
view
of
2023
as
we
enter
the
second
half
and
thereafter,
I
think
it
will
be
at
the
board's
discretion
as
to
the
frequency
and
the
timing
of
those
dividend
announcements
based
on
the
return
to
more
normalized
levels
of
origination
and
indeed
excess
originations
as
we
[ph]
claw (00:30:13)
back
some
of
that
backlog
that
has
built
as
a
consequence
of
these
vehicle
shortages.
Great. Thanks,
Jay.
[ph]
Over
to
you (00:30:21).
Thanks,
John.
The
next
question
comes
from
Jaeme
Gloyn
of
National
Bank
Financial.
Please
go
ahead.
Thank
you.
Good
morning.
Good
morning.
I
wanted
to
just
dig
into
some
of
the
yields
generated
on
the
rental
portfolio.
So
looking
back
into
2019-2020,
it
was
kind
of running
around
a
5%
revenue
yield
on
rental
revenue.
And
now
we're
stepping
up
close
to
8%.
Could
you
break
down
some
of
the
drivers
of
that?
I
would
assume
that
Mexico
was
a
big
driver,
but
could
you
break
down
and
give
us
a
little bit
more
color
as
to
the
contributing
factors
and
the
sustainability
of
those
factors?
Sure.
Do
you
want
to
or...
I'll take
that if you want...
Okay.
So
what
I
would
tell
you
is
there's
a
couple
of
things
that
are
driving
that.
Obviously,
geographic
growth
is
a
big
positive
for
that
as
we
see
it
going
forward.
Additionally,
scarcity
of
assets
is
also
a
driver
for
that.
So
more
competition
for
scarce
assets
in
regards
to
that
is
another
driver
of
it.
So
in
the
near-term,
we'd
expect
it
to
be
relatively
consistent,
but
we'll
keep
an
eye
on
that
and
make
sure
we
update
as
the
market
dynamics
change.
Did
we lose,
Jaeme?
I
think
so.
Pardon
me, Jaeme.
Pardon
me, Jaeme.
Your
line
is
open.
Please
go
ahead.
[indiscernible]
(00:32:22)
...lost
Mr.
Gloyn. We'll
go ahead
to
the
next
question,
sir.
The
next
question
is
from
Tom
MacKinnon
from
BMO
Capital.
Please
go
ahead.
Yeah.
Good
morning,
and
thanks
for
taking
my
question.
So
just
looking
at
the
operating
expenses
up
3% –
or
3.5%
quarter-over-quarter,
7%
year-over-year.
If
I
look
at
the
November
guidance
where
you
lay
out
revenue
and
pre-tax
operating
income,
you
can
sort
of
back
into
a
what
you
see
as
being
an
OpEx
growth
there.
And
that
would
imply
about
a
2%
CAGR
in
terms
of
operating
expense
growth,
so –
for
2022
and
2023.
So,
I
guess
the
question
is,
how
comfortable
are
you
maintaining
operating
expenses
at
2%
growth
rate
here
going
forward
when
they
went
up
7%
year-over-year
in
2021,
when
you
had
some
pretty
good
production
and
they
went
up
3.5%
quarter-over-quarter.
So
maybe
some
color
on
that,
please?
Thanks.
Sure.
I'll
take
a
crack
at
that.
So
when
we
look
at
the
OpEx
growth
this
year,
it
really
falls
into
two
categories:
one
is – and
impacted
in
the
third
and
fourth
quarter
salaries
and
wages.
So
the
outperformance
in
our
business
created
more
short-term
incentive
compensation
as
we
beat
balanced
scorecard –
met
and beat
balanced
scorecard
metrics
throughout
the
third
and
fourth
quarter,
and
so
adjusted
that.
Offset
modestly
by
less
long-term
compensation
adjustments.
If
you
remember
fourth
quarter
of
last
year,
we
had
a
material
adjustment
up
in
the
long-term
incentive
plan
accruals.
This
year,
not
so
much.
Offset
by
lower
G&A.
And
then
a
big
driver
has
been
the
depreciation
and
amortization
as
a
lot
of
our
new
projects
have
come
online
in
regards
to
pre-2019,
2020
investments
that
came
online
in
2021
around
mid-year
and
many
of
them
coming
on
at
the
same
point.
In
regards
to
the
outlook
of
2%
growth,
this
is
one
of
the
number
one
focuses
of
the
management
team,
cost
control
of
the
salary
and wages
line
and
the
G&A
line
as
we
move
forward
here.
And
so,
this
is
an
ongoing
discussion,
identified
and
taking
[ph]
paths
(00:35:00) to
drive
to
those
operating
expense
numbers,
consistent
with
the
growth
in
those
forecasts.
So,
I
would
tell
you
that
implies
target
growth
and,
therefore,
target
incentive
comp.
Should
we
significantly
outperform
the
growth,
then
you
might
see
slightly
higher
salary
and
wages,
but
you'll
see
an
increase
in
your
margins
because
of
that
outperformance.
So,
would
effectively
[ph]
pick
more
than
pay (00:35:28)
for
itself
should
that
occur,
but
with
our
guidance,
we
feel
very
strongly
that
this
is
a
critical
area
of
focus
and
that
we
are
focused
on
delivering
that
– those
OpEx
numbers
for
the
company.
And
Frank,
if
I
could
just
want
to
build
on
that
and
maybe
take
it
to
a
slightly
strategic
level,
so
as
Tom,
as
we
shared
with
you,
our
long-term
ambition
for
this
organization
is to
grow
revenue
at
4%
to
6%
and
to
translate
that
revenue
growth
into
a
higher
level
of
operating
income
growth.
So
we
do
expect
our
operating
expenses
to
grow
in
keeping
with
a
growing
business,
but
we
expect
to
be
able
to
expand
our
operating
margin
like
we
did
in
2021
by
66
basis
points
to
some
52.6%
as
we
go
forward.
The
other
piece
that
I
want
to
draw
your
attention
to
is,
in
2021,
our
operating
expenses
were
in
support
of
that
5.5%
revenue
growth
that
we
achieved,
plus
in
support
of
the
revenue
growth
that
has
been
deferred.
So
we
had
CAD 45
million to CAD
55
million
of
additional
revenue
that
we
earned
that
had
to
be
analyzed,
sold,
ordered
by
our
teams.
So,
they
had
to
do – we
had
to
have those
necessary
resources
in
place
to
earn
that
revenue.
And
so,
[indiscernible]
(00:37:10),
the
business
grew
10%
last
year.
Unfortunately, CAD
45
million to CAD
55
million
or, yeah,
4%
of
that
growth
ended
up
getting
deferred
into
future
years.
And
so
that's
the
other
piece
that
isn't
necessarily
obvious
on
the
disclosures
as
we
needed
to
have
the
infrastructure
in
place
and
the
associated
costs
of
providing
for
closer
to
10%
growth
than
the
stated
5.5%
growth
that
we
achieved in
the
year,
plus
as
you can
appreciate,
with
those
vehicles
not
being
available,
we
had
to
expend
a
great
deal
of
effort
on
behalf
of
our
clients
to
help
them
manage
through
this
industry
first
phenomenon
that
again,
was
a
large
call
on
resources.
So
coming
back,
for
us,
this
is
profitable
revenue
growth
and
expansion
of
operating
margin
over
time.
And
so,
we
would
expect
our
operating
expenses
to
increase.
As
Frank
says,
we
will
manage
them
judiciously
in
2022,
as
we've
continued
to
work
through
a
constrained
vehicle
environment.
However,
our
eye
is
always
on
that
operating
margin
as
our
means
of
assessing
just
how
well
we
are
evolving
[indiscernible]
(00:38:32) we've
our
operating
platform.
That's
great.
And
then
as
a
follow-up,
you
have
mentioned,
I
believe,
in
the
release
that
a
client
vehicle
activity
is
now
back
or
approximating
pre-pandemic
levels.
So
just
in
terms
of
the
usage-based
services
that
you
get
revenue
on,
looking
at
things
like
fuel
and
tolls
and
accidents
and
maintenance,
I
guess
tires,
things
like
that,
are
those
things
–
are
those
all
back
to
relatively
pre-pandemic
levels
as
well?
Maybe you
can
highlight
which
kind
of
your
services
are
sort
of
all
back
to
pre-pandemic
levels?
Yeah.
The
vast
majority
of
our
services
are
back
to
pre-pandemic
levels.
And
to
cite
a
couple
of
the examples
that
you offered
up,
fuel,
fuel
consumption,
managed
maintenance,
accident,
incidents,
tolls
and
violation.
So
they
are
at
or
approximating
the
volumes
that
we
would
have
– of
activity
that
we
would
have
seen
pre-pandemic.
A
major
area
of
service
revenue
for
us
that
isn't,
is
remarketing.
So
that
inability
to
have
a
new
vehicle
delivered
to
our
clients
such
that
we
can
take
possession
and
remarket
their
vehicle
in
Canada
and
the
US
and
generate
the
associated
revenue
from
that,
that
is
obviously
still
significantly
depressed,
given
the
OEM
production
shortages.
We
will
expect
remarketing
revenue
to
grow
from
its
base
of
2021,
given
our
increased
expectations
around
originations
in
2022.
However,
there
will
be
aspects
of
the
service
revenue
like
remarketing
that
are
still
held
back
by
virtue
of
our
inability
to
secure
sufficient
vehicles
in
quantity.
Okay.
Thanks
for
that.
Not
at
all.
Thank
you.
The
next
question
comes
from
Jaeme
Gloyn
of
National
Bank
Financial.
Please
go
ahead.
Yeah.
Thanks
for
letting
me
back
in
here.
So
second
question
was
just
going to
be
on
the
order
backlog
and
in
your
conversations
with
your
customers,
obviously
an
impressive
order
backlog
building
to-date.
But
in
those
conversations,
do
you
have
any
sense
or
any
indication
how
much
they
potentially
pulled
forward
orders
from,
let's
say, 2023
or
2024
or
even
beyond
to
just
really
prime
the
pump
to
get
ahead
of
OEM
production
delays? Do
you
have
a
sense
as
to
how
much
that
is
driving
activity
and
building
of
order
backlogs
today?
Yeah.
Actually,
we have
a
good
sense
of
that,
Jaeme,
and
very
little
of
the
order
backlog
that
we
have
built
as
of
December
31, 2021
would
be
pulling
forward
future
orders.
I
think
in
the
early
days
of
the
vehicle
shortage,
say
Q2,
there
probably
was
a
subsequent
quarter
worth
of
pre-ordering
that
might
have
been
pulled
back
by
certain
of
our
clients.
As
this
has
unfolded,
that
has
settled
down
substantially
and
in
large
measure
due
to
a
couple
of
factors:
so
one,
the
80%
of
the
order
banks
for
our
major
OEMs
are
closed,
so
we
can't
actually
place
future
orders
or
future
model
years
with
the
OEMs,
which
is
giving
rise
to
what
we
reference
as
shadow
order
backlog.
So
in
addition
to
these
contractual
orders
that
we
have
taken
and
reported
to,
we're
actually
monitoring
based
on
our
knowledge
of
our
clients'
fleets,
their
vehicle
usage
and
the
optimum
point
for
retiring
that
vehicle,
remarketing
that
vehicle
and
having
that
vehicle
replaced
by
a
new
vehicle.
And
that
shadow
order
backlog
is
building
substantially.
Again,
we
can't
place
those
orders
with
the
OEMs
until
the
order
queues
open
back
up,
which
we
expect
would
happen
in
kind
of
late
spring,
early
summer
for
some
of
the
models
that
would
be
of
interest
to
our
client.
So
again,
as
we
look
at
CAD
2.9
billion
of
order
backlog
that
is
built
as
at
December
31, 2021, roughly
CAD
1.9
billion
is
really
accessed.
In
any
given
year,
we'd
exit
the
year
with CAD
1
billion
worth
of
order
backlog,
so
there's
nearly CAD
2
billion
of
order
backlog.
And
all
of
that
is
vehicles
that
are
required
today
by
our
clients
to
satiate
their
growth
needs
or
to
manage
down
the
total
cost
of
ownership
of
their
fleets.
And
as
you
can
appreciate,
with
the
more
inflationary
environment
that
we're
seeing
out
there,
there
is
a
real
interest,
a
real
need
to
have
those
vehicles
delivered
ASAP.
Thank
you.
The
next question
comes
from
Paul
Holden
of
CIBC. Please
go
ahead.
Thank
you.
Good
morning.
Let
me
go
back to
the
discussion
around
operating
expenses,
and
I
guess
I
would
have
a
particular
concern
around
the
expense,
potential
path
forward of
expenses,
given
wage
inflation
we're
seeing,
and
particularly
in
the
US.
I'm
just
wondering
what
you've
accounted
for
in
terms
of
wage
inflation.
And
I
guess
thoughts
around
employee
retention
in
that
context
as
well.
Yeah. So – and
perhaps,
Frank,
let
me
start
and I'd
invite
you
to...
Yes.
...offer
up
any
additional
comments
around
this.
So
your
question
is
timely,
Paul.
We
have
just
gone
through
our
annual
performance
reviews
and
compensation
discussions
with
our
employee
base.
We
operate
within
a
performance-based
compensation
structure
for
the
entirety
of
the
organization.
So,
every
employee
participates
in
an
annual
short-term
incentive
program
that's
based
on
our
balanced
scorecard
results
and
one
of the
reasons
why
we
saw
an
increase
in
our
operating
expenses
in
Q3
and
Q4
last
year
was
as
a
result of
that
increased
performance
that
we
were –
we're
seeing
regarding
the
attainment
of
those
balanced
scorecard
objectives.
And
as
I
itemized
in
my
opening
comments,
record
high
NPS,
record
setting,
operational
effectiveness,
efficiency,
top
quartile
employee
engagement
scores,
and
returns
to
our
shareholders
cash
flow
income
in
keeping
with
plan,
all
led
to
a
rather
exceptional
payout
on
behalf
of
our
entire
employee
group.
That
was
shared
with
our
employees
earlier
this
month
and
in
addition,
so
were
the
merit
increases
for
2022,
all
of
which
were
very
well-received
by
our
employees
as
fair
recognition
of
their
performance
and
appreciation
for
same.
So,
I
would
say
to you
the
inflationary
impacts
associated
with
those
wage
increases
have
been
factored
in
to
our
2022
and
2023
guidance
that
we
have
provided
to
and
the
reaction
from
the
employee
base
in –
regarding
both
the
merit
increases
and
the
performance
payments
associated
with
the
short-term
incentive
programs
were
very
well
received.
And
Jay,
I
would
just
add
that,
obviously,
we
have
invested
in
technology,
so
we
do
see
the
wage
increases
that
Jay
has
discussed.
We
also
see
considerable
opportunity
to
find
and
discover
and
enact
efficiencies
around
our
business,
in
part
as
we
start
to
see
attrition
as
most
companies
are
these
days.
We
are
looking
to
better
drive
efficiencies
through
every
component
of
our
organization,
leveraging
both
test
practice,
but
also
the
technology
investments
we've
made
into
the
business.
Okay.
That
is
helpful.
Thank
you.
And
then
my
second
question
is
related
to
EVs.
Obviously,
you've
announced
a
number
of
initiatives
in
that
regard
recently.
And
if
I
think
about
the
driving
– underlying
driving
trends
towards
EV,
it
would
seem
like
a
particularly
important
initiative
for
government-sponsored
fleets,
which
tend
to
be
mostly
self-managed,
I
believe.
Do
you
think
that
over
time,
the
transition
to
EVs
and
your
capabilities
within
that
can
help
you
penetrate
that
very
large
government
self-managed
market?
Very much
so,
Paul.
I
think
your
observation
is
spot
on.
As
governments
look
to
lead
on
the
ESG
agenda
and,
in
particular,
around
sustainability,
I
think
they
recognize
that
they
want
and
need
to
walk
the
talk
and,
in
doing
so,
will
want
to
– will consider
the
electrification
of
their
own
fleets.
And
that
is
readily
apparent
to
us
in
New
Zealand.
They've
been
at
the
forefront
of
policy,
design,
and
adoption
around
a
much
more
sustainable
environment.
And
as
they
[ph]
castigated
(00:49:26) those
ambitions
through
their
government,
departments
have
sought
to
lead
by
example
in
terms
of
having
at
least 30%
of
their
fleet
electrified,
and
our
Custom
Fleet
Group
in
New
Zealand
has
been
at
the
forefront
of
that,
now
sits
on
a
number
of
government
panels
as
an
advisor
to
governments
in
terms
of
helping
them
assess
and
plan
for
this
evolution.
So
yes,
I
think
they
will
be
the
flag
bearer
of
fleet
electrification
go
forward.
And
as
they
do,
and
as
they
start
to
appreciate
the
complexities
of
evolving
from
ICE
to
EV, I
think
organizations
like
us
will
be
in
a
very good
position
to
provide
them
counsel,
provide
them
services,
and
ultimately,
provide
them
financing
for
those
fleets.
That's
great.
Thank
you.
I'll
leave
it
there.
Thanks,
Paul.
The
next question
comes
from
Shalabh
Garg
from
Veritas
Investment
Research.
Please go
ahead.
Good
morning,
and
thank
you
for
taking
my
questions.
So
first
thing
I
want to
touch
on
provisions
for
credit
losses.
I
see
that
after
Q2
FY
2020
this is
the
first
time
Element
took a
charge. So
any
[indiscernible]
(00:50:46)
over
there
and
any
outlook
on
how
it
can
shape
up
in
the
coming
months
and
quarters?
Yeah.
So
we
were
on
the
path
to
reduce
the
provision
for
credit
loss
as
we
move
forward,
and
then
Omicron
came
and
so
we've
got
two
components
to
our
credit
loss.
One
is
our
statistical
piece
of
this
and
then
some
management
overlays
that
we
put
in
place
at
the
beginning
of
COVID,
if
you
remember
in
2020,
and
we've
been
peeling
those
off.
We
have
some
of
those
left.
We
were
preparing
to
take
them
off
and
we
[ph]
tapped
the
brakes (00:51:22)
because
Omicron
happened
in
midst –
in
December
and
wanted
to
keep
an
eye
on
how
that
could
potentially
impact
some
of
the
business.
I
would
say
that
coming
through
Omicron,
we
feel
very
good
about
our
position
here
and
we'll
continue
to
take
our
trajectory
of
relieving
ourselves
of
those
management
overlays
as
we
progress,
all
things
being
held
equal
as
of
today.
Okay.
Thank
you. And
my
next
question
is
on
the
direct
costs
of
fixed
rate
service
contracts
line
item. So
I
see
that
it
has
increased
like
almost
10%
year-over-year,
not
taking
into
consideration
FX.
So
just
want
– I
understand
that
this
is
related
more
to
the
ANZ
subscription
program.
So
how
is
the
pricing
or
the
re-pricing
capability
over
there?
Like
if
that's
inflation driven,
then
is
it
possible
for
Element to quickly
re-price
those
subscriptions?
Like
how
does
that
[ph]
to look (00:52:22)?
Yeah.
The contracts
in
ANZ have
been
designed
such
that
it
offers
us
a
great
deal
of
discretion
and
flexibility
in
terms
of
the
pricing
arrangements,
and
thus,
we
are
less
exposed
to
inflationary
increases
on
the
associated
parts
and
labor
that
we
procure
on
as
part
of
that
managed
maintenance
program.
Okay.
Thank
you.
Those
answers my
questions.
Thank
you
very
much.
The
next question
comes
from
Geoff
Kwan
from
RBC
Capital
Markets.
Please
go
ahead.
Hi.
Just
a
couple
of follow-up
questions.
One
was
just
given
the
Russia-Ukraine
situation,
has
there
been
any
insights
you've
gotten
from
your
discussions
with
people
in
the
industry,
whether
there
might
be
any
impact
on
chip
production, just
given
the
neon
production
that
comes
out
of
Ukraine?
Yeah.
Well,
obviously,
we're
monitoring
the
situation
closely
and
have
not
yet
identified
any
immediate
issues
for
our
business.
Our
current
understanding
is
that
the
primary
impact
will
be
on
European
OEMs
manufacturing
in
Europe
that
rely
on
Russia
and
Ukraine
for
certain
key
ingredients
to
the
automotive
supply
chain,
not
the
least
of
which
would
be
palladium,
the
neon
gas
that
you
referred,
as
well
as
nickel
and
aluminum.
So,
I
would
say
to
you
that
the
chip
shortage
of
2021
took
most
global
OEMs
to
a
very
different
place
in
terms
of
their
understanding
of
their
own
supply
chains.
And
with
that
increased
understanding,
put
plans
in
place
to
minimize
disruptions
along
that
supply
chain
for
2022-2023
as
they
look
to
bring
back
their
product –
full
productive
capacity.
And
just
my
second
question
was
just
going
back
to
your
comments
on
Armada, it
seemed
to
me
– to
suggest
you
have
comfort
with
line
of
sight
on
revenues
with
them
or
at least
the
relationship.
I
just
want
to understand
what's
driving
that.
Is
it
because
you
perhaps
renewed
your
contract
with
them?
Is
it
specific
discussions
you've
had
with
them
about
how
they
view
their
relationship
with
Element
or
something
else?
And
just
trying
to
get
some
insights
of
being
a
long-term
partner
for
Armada?
Yeah.
And
as
we have
shared
in
the
past,
we
did
renew
our
contract
in
late
2020
with
Armada
for
the
continued
provision
of
services
and
indeed
the
expansion
of
services
that
we
provide
to
this
fast-growing
fleet
that they
operate.
I
would say
that
under
the
leadership
of Chris
Gittens, we have
made just
phenomenal
inroads
in terms
of
the relationship
that
we enjoy
with
this client.
We have
always had
the
lofty
ambition
of being
a
thought leader
in
the
fleet management
space
for
this organization.
And if
you spoke
with
them, I
think
they
would
be
very
forthright
in
saying
that
is
exactly
the
role
that
we
fulfill
for
them.
We
work
in
very
close
partnership
to
understand
their
evolving
needs,
and
they
are
evolving
and
fast
evolving,
and
then
to
help
design
and
implement
timely
solutions
to
enable
their
strategic
pursuit
of
same-day
delivery.
So
[ph]
now (00:56:17),
the
relationship
again
continues
to
deepen.
It
has
never
been
better,
it's
never
more
constructive,
and
we
work
in
an
enviable
fashion
in
terms
of
the
openness,
the
transparency,
and
the
spirit
of a
collaboration
to
effect
meaningful
solutions
on
a
timely
basis
for
this
client.
Thank
you.
The
next
question
comes
from
Stephen
Boland
from
Raymond
James.
Please
go
ahead.
Thanks.
Good
morning,
everyone.
I
just
want to
talk
about
the
backlog
again.
Jay,
I
think
last,
going
into
Q4,
you
provided
some
guidance
of
where
that
backlog
would
be
at
Q4,
which
came
in, I
think,
a
little
bit
above
your
guidance.
But
maybe
you
could
just
talk
about
– you're
talking
about the
backlog
growing
till –
I
guess,
till
the –
I guess,
the
first
half
of
2023.
So
do you
have
some
sort
of
range
that
where
you
think
the
backlog
will
be
at
that
point?
And
then
how
long
does
it
take
to
clear
to
get
back
to
that
CAD
800 million,
CAD 900
million
normalized
amount?
Yeah.
And
so
as
we
think
about
the
order
backlog –
again,
these
are
contractual
commitments
that
we've
made
to
an
OEM
to
have
a
vehicle
produced,
which
in
turn
results
in
a
contract
we
have
with
our
client
to
expect
that
vehicle
on
production.
And
having
built
to
CAD 2.9
billion
in
orders,
that
meant
that
we
needed
to
place
and
the
OEMs
needed
to
accept
these
orders
that
our
clients
have
in
turn
provided
us.
We
will
– in
Q1,
we
have
the
possibility
of
being
flat
or
maybe
even
being
slightly
down
in
terms
of
the
order
backlog
in
that
we
expect
the
originations
– OEM
production
to
increase
in
Q1
and,
as
a
consequence,
draw
down
some
of
the
order
backlog
that
has
built.
At
the
same
time,
as
I
mentioned
earlier,
some
80%
of
the
order
banks
have
been
shut
by
the
OEMs
so
not
accepting
any
more
orders
for
model
year
2022.
And
won't
be
opening
model
year
2023
order
banks
until
April,
May,
June,
depending
on
some
of
the
models,
or
perhaps
even
a
little later,
again,
depending
on
the
models.
So
we're
going to
have
this
dynamic
where
we
enter
Q1
with
CAD 2.9
billion
of
order
backlog.
It
will
be
drawn
down,
which
is
a
great
thing
in
terms
of
originations,
and
some
of
that
will
be
replenished
by
new
orders
that
we're
unable
to
place
with
the
OEMs.
And
that
for
us
is
just
a
bit
of
a
black
box
to
just
how
many
orders
we
will
be
able
to
place
and
to
the
extent that
we're
not
able
to
place
those
orders,
it
is
giving
rise
to
this
increasing
shadow
order
backlog.
And
I
think
we
started
with
originations,
we
went
to
orders,
we
went
to
order
backlogs, and
now
we
have
to
evolve
this
to
a
discussion
around
shadow
order
backlog,
just
to
give
you
an
idea
as
to
just
how
complex
this
topic
has
become.
And
again,
as
you
can
appreciate, there's
no
one
who
has
a
better
understanding
of
the
need
for
replacements
of
[indiscernible]
(01:00:10),
of
course,
than
we
do.
And
so
we have
a
good
clear
idea as
to
end
that
vehicle
is
in
need
of
replacement
and
when
our
plant
would
typically
signal
an
order.
And
what
we're
seeing
is
that
order
– shadow
order
backlog
is
increasing
substantially
as
a
consequence
of
the
order
banks
being
closed
and
us
not
being
able
to
place
the
order
with
the
OEM
and
create
that
contractual
chain
between
us,
the
OEM
and
the
client.
So
yes,
we
would
expect
the
order
backlog
in
Q1
could
be
flattish,
could
be
down
a
little
bit,
could
be
up
a
little
bit.
We
would
expect
as
the
order
banks
open
in
Q2,
and
again,
depending
on
how
quickly
the
OEMs continue
to
ramp
up
production,
there's an
opportunity
to
increase
the
order
backlog
through
Q2,
Q3,
and
obviously
Q4.
We
would
expect
a
fairly
significant
increase.
In
2023,
so
if
we
expect
our
OEMs
continue
to
ramp
up,
by
the
end
of
the
first
half
of
2023,
we
expect
the
OEMs
to
be
back
to
100%,
productive
capacity,
which
means
they
will
be
able
to
handle
the
fullness
of
our
current
order
volume.
And
at
that
point,
we'll
be
in
a
position
to
add
additional
shifts
to
start
to
chew
through
the
order
backlog.
And
we
expect
a
goodly
amount
of
that
order
backlog
to
be
addressed
into
the
second
half
of
2023
and
then
an
equally
goodly
amount
to
be
addressed
in
the
first
half
of
2024
before
we
get
to
a
more
normalized
level
of
originations,
call
it
the
second
half
of
2024.
So
again,
[indiscernible]
(01:02:23)
we're
not
seeing
anything
to
this
point
that
would
cause
us
to
be
[ph]
the least
(01:02:31)
concerned
about
the
guidance
that
we
provided
in
November
[ph]
regarding
(01:02:36) OEM
productive
capacity.
Indeed,
if
anything,
what
we've
seen
from
the
OEMs
to-date,
what
we're
experiencing
in
the
business
in
the
first
couple
of
months
of
2022
has
been
very
much
in
keeping
with
the
thesis
that
we
shared
with
you.
Okay.
That's
very
helpful.
Thanks,
Jay.
Yeah.
Given
the
hour,
this
concludes
today's
conference
call.
You
may
disconnect
your
lines.
Thank
you
for
participating,
and
have
a
pleasant
day.