Element Fleet Management Corp.

Adjusted net revenue was $318 million, up 10% year over year. Service revenue was $164 million, up 8%, and net financing revenue was $136 million, up 7%. Adjusted operating income was $177 million, up 9%, adjusted operating margin was 55.6%, and adjusted EPS grew 12%; adjusted ROE was 19.6%. Vehicles under management ended at 1.56 million, up 3% year over year, and originations were $1.7 billion, down 9% year over year but up 19% sequentially. Adjusted free cash flow per share was $0.39, down 3% year over year. Debt-to-capital was 76.5%, within the 73% to 77% target range. For guidance, management reiterated annual VUM growth of 2% to 4% and said it remains on track to deliver within full-year 2026 guidance ranges; they also said July orders and originations were very strong and expect a stronger second half, with Waymo expected to add a few points of services revenue growth in 2027.

Laura Dottori-Attanasio framed the quarter as evidence that Element’s business model is resilient and that its strategy is working, emphasizing higher client value, better operating efficiency, and long-term shareholder value creation. She pointed to service reacceleration, the new Waymo partnership, and the equity residual transaction as examples of the company extending its core capabilities into new growth areas while staying disciplined. Her tone was confident and constructive, but she stressed the expansion into autonomy is measured and that expense savings will be implemented thoughtfully to protect the client experience.

Heath Valkenburg emphasized that the quarter showed durability in the model, with $318 million of adjusted net revenue, $177 million of adjusted operating income, 55.6% adjusted operating margin, and 19.6% ROE. He said the company is now fully provided for the client-specific credit exposure discussed last quarter and expects annual credit losses to remain in its historical 1 to 2 basis point range over time. He also highlighted a 76.5% debt-to-capital ratio, $163 million returned to shareholders in Q2, $120 million of which went to repurchasing 5.8 million shares, and said the new funding structure improves capital efficiency and supports opportunistic capital deployment.

Analysts focused on service revenue growth durability, the upside in core net financing revenue yield, the economics and mechanics of the equity residual transaction, Waymo’s revenue contribution, originations momentum, and the expense savings from the 8% workforce reduction. Management said medium-term revenue growth has been guided at 6% to 8%, with service revenue taking a larger share of that mix, and explained that NFR yield benefits from leasing initiatives and lower funding costs, including a senior notes issue at a 70 basis point spread over U.S. Treasuries. On the equity residual structure, management said roughly $700 million of receivables moved off balance sheet effective May 1, distributions begin July 1, and the structure retains 49% economic interest and some tax attributes. For Waymo, management said San Diego goes live in 2027, will modestly contribute to VUM but at a higher revenue per VUM, and should add a few points of services revenue growth in 2027. On originations and expenses, they said July orders were very strong, second-half originations should strengthen, and the workforce actions begin in the back half of 2026 with most of the $20 million annualized savings benefiting 2027.