In the letter to shareholders, the global CEO of the largest pure-play automotive fleet manager in the world reported a record pipeline of new vehicle orders and indicated the back log would not be cleared until global manufacturing returns to 100% capacity late in 2023.
“Element as a whole continues to perform better than ever,” said Jay Forbes, President and Chief Executive Officer of the Company. “We comfortably achieved all our 2021 growth objectives despite an industry-first global vehicle shortage. Our Q4 and full-year results speak to the determination, agility and accountability of our people, the resilience of our business model and the vital role we play for our clients and their businesses.”
“We are making significant progress in our pivot to profitable growth,” Mr. Forbes continued. “We generated $40-65 million of additional revenue, operating income and cash flow in 2021 that has been deferred by OEM production delays but is preserved in our record global Order backlog at year end. We continue to expect 2022 and 2023 to unfold as set out in our November disclosures, and we look forward to the exciting opportunities ahead. We have never been better positioned to sustain Element’s momentum and build on our success.”
Element received $2.1 billion of Orders in Q4 – the highest quarterly volume in the Company’s history by over $400 million – growing the Company’s global Order backlog 46% from Q3 to a record $2.9 billion at year’s end. This is approximately 200% more than the Company’s 2018-2020 average year-end backlog.
The $1.9 billion above-average volume, or “excess” Order backlog, represents $45 to $55 million of deferred net revenue, $40 to $50 million of deferred adjusted operating income and $55 to $65 million of deferred free cash flow for Element. The Company expects its global Order backlog to grow further – especially in the second half of 2022 and first half of 2023 – until global OEM production capacity has returned to 100% by mid-2023 and vehicle manufacturers begin clearing Element’s excess backlog in the second half of 2023.
Our commercial teams in Australia and New Zealand were also notably successful in 2021, especially against the backdrop of multiple broad and lengthy lock-downs in each country throughout the year and particularly in the second half. ANZ nonetheless grew Share of Wallet (SOW) revenue units 68% from 2020 and 90% from 2019 levels, and overall 2021 revenue units of 77,226 represent 6% year-over-year growth and 43% over 2019.
The business continues to work closely with government agencies and private businesses to assist them with EV transition planning, ICE vehicle replacement and fleet carbon reduction. We perform detailed analyses on EV suitability, fit for purpose, trip analysis (based on telematics data), vehicle selection, optimal term, and lease vs. ownership.
Specifically, in the fourth quarter we identified $1.2 million Australian dollars of annual savings regarding an EV transition plan for a New Zealand government department. This included transitioning 305 vehicles to plug in hybrid electric vehicles (“PHEVs”) and 460 vehicles to battery electric vehicles (“BEVs”), which will reduce their fleet carbon emission by 74% by 2024.
Full-year 2021 highlights in ANZ include:
- Delivered over $121 million Australian dollars in savings to clients – overachieving on our target – and of that, our clients “actioned” $26 million in Australian dollars.
- Created a new format and methodology for Government EV transitions in New Zealand – which has attracted new opportunities focused on savings and fleet transitioning;
- Completed a full fleet utilization analysis for a major New Zealand bank, assisting the organization transition to EVs;
- Developed an EV transition campaign roadmap, which will allow us to proactively target clients suitable for EV transition. This will minimize consulting time spent and maximize value for clients who may not have considered transitioning to EVs, with the objective to increase take-up of our EV+ product offering;
- Undertook a full fleet analysis including benchmarking for a large New Zealand Government body; and
- Successfully completed two sale-and-lease-back rounds for all the legacy vehicles from the previous fleet manager of a major Australian supermarket chain, representing over $13 million Australian dollars of volume. This was achieved by leveraging our value proposition, supported by great client service.