Thank you for standing by. This is the conference operator. Welcome to the Element Fleet Management Fourth Quarter and Full Year 2020 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. In order to afford all analysts the opportunity to ask questions, Element kindly requests that analysts limit themselves to two questions in live dialogue with management. Should an analyst have additional questions, please rejoin the queue. To join or rejoin the queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. 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 as 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. Element's 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. Thanks to all of you for joining me, Vito, and our incoming Chief Financial Officer, Frank Ruperto, on the call this evening in which we intend to discuss Element's fourth quarter and full year 2020 results, the many successes we've achieved as an organization in 2020, and the early progress in the first two months of 2021, and our outlook for the balance of the year and beyond, particularly with respect to Element's growth strategy, our return to capital to our shareholders, and the opportunity set that presents itself in the form of electric vehicles and the gradual penetration of our clients' fleets over the next decade.
Before I begin discussing our results, I do want to acknowledge the continued presence of COVID-19 in our communities and express my heartfelt gratitude on behalf of everyone at Element Fleet Management to the healthcare professionals and so many other essential workers who continue to brave the front lines of the pandemic and advance the global vaccination effort. Well, Element's business has not gone unscathed by the economic fallout from COVID-19. I think our financial and operating results for 2020, inclusive of the fourth quarter, truly bore out the resilience of our business model and provide a healthy starting point for our profitable revenue growth ambitions this year. Element's growing base of over 5,500 loyal blue -chip clients is diversified across five countries, over 700 industries, and approximately 1 million vehicles under management.
The services we provide to all of those clients and their vehicles are essential, mission-critical to the clients' operations and enterprise, generating and sustaining revenues and fulfilling their commitments to their customers and stakeholders. The quality and diversity of our client base and the integral nature of our assets and services underpin the strength and durability of Element's 2020 performance against the backdrop of this global pandemic. In the fourth quarter of 2020, our company delivered CAD 132 million of adjusted operating income, a 2.4% increase quarter-over-quarter, and equivalent to CAD 0.23 per share. We delivered a 53.4% operating margin, a 40 basis point expansion quarter-over-quarter, and 980 basis points of improvement over Q4 2018, back when we were setting out on this transformation journey.
We also delivered a 14% pre-tax adjusted return on common equity, 10 basis points better than last quarter and 320 basis points better than two years ago. We also delivered CAD 0.25 of free cash flow per share, a 20% increase from two years ago in Q4 of 2018. For the full year 2020, we generated CAD 0.85 of adjusted EPS and CAD 1.02 of free cash flow per share, just CAD 0.01 and CAD 0.03 respectively below our same full-year 2019 results in spite of the weight of the global pandemic. Vito will walk you through all of our results in greater detail in a few minutes. When I sit back and look at the organization's accomplishments in 2020, there are countless highlights and milestones that my leadership team and I are proud of.
A handful of those represent overarching themes that really stand out for us. The first is the pervasive positive influence of our transformation experience on Element and our people. Over the course of 27 months of transformation, we made much -needed investments in our organization. We retooled and automated hundreds of business processes, streamlining systems and consolidating policies and procedures, and we bolstered our talent roster in the U.S. and Canada in particular, all to ensure that we deliver a consistent, superior client experience each and every day. Excuse me. In the process of this transformation, we also improved our employee engagement levels as measured by our comprehensive annual employee survey. Over 90% of our people completed the survey, and Element registered an overall employee engagement score of 86%, which is a 700-basis point improvement over the same score at the end of 2019.
Notwithstanding a challenging multi-year transformation agenda and in the midst of a global pandemic, I attribute this remarkable improvement in our people's engagement to our HR team's embrace of transformation principles and rigor, as led by our Chief People Officer, Jacqui McGillivray. Today, Element is delivering a consistent, superior employee experience to mirror the caliber of services we're delivering to our clients. This is an example of a very positive influence of transformation. Further, the ethos of continuous improvement that was a bedrock of our transformation program is one of the gifts that will keep on giving at Element. During the fourth quarter, Element's Center of Operational Excellence finalized the implementation of a model to support our business going forward. We developed a team of dedicated resources to drive continuous improvement. It's staffed with 12 experienced Black Belts.
They lead large, complex projects in support of Element's continuous improvement program, and they're aligned across the U.S., Canada, and Mexico by business area, with 25% of the team dedicated to Element's strategic relationship operations, which includes Armada. Employee engagement and continuous improvement are just two of the many examples of the positive influence our transformation program has had within Element. Of course, the most obvious impact of the transformation is the program's achievement itself. Who would have thought back in the fall of 2018, when we announced our CAD 150 million of annual run rate profitability improvement, that we would complete our journey in December 2020 having actioned a staggering CAD 208 million of profit-enhancing initiatives? This represents a 38% overachievement of this original goal. What's more, CAD 133 million, or roughly two-thirds of our action value, was delivered into operating income in 2020.
When we add to the CAD 77 million of profit enhancement delivered in 2018 and 2019, Element's transformation has improved our operating results by a total of CAD 210 million over the last three years, more than covering the CAD 208 million of one-time investments that we have made in support of the transformation. Well, thanks go out to all 2,500 of my colleagues. A special call-out is required for Jim Halliday, our Chief Operating Officer, who set the tone and pace that allowed us to excel as we drove to that consistent superior client experience. A second theme of accomplishment that stands out to me reflecting on 2020 is the continued strengthening of our investment-grade balance sheet and the maturing of our capital structure.
We finished the year at 5.74x tangible leverage, achieving our long-stated sub -6x target while repurchasing 762,000 common shares for cancellation in the month of December under our normal course issuer bid. Over the course of 2020, we excised CAD 2.4 billion of liabilities from Element's balance sheet, bringing tangible leverage from 7.11 at year-end 2019 to where we sit comfortably today below our 6x soft ceiling, all while maintaining shareholder equity essentially flat. We retired our CAD 567 million of convertible debenture in Q2, issuing our inaugural U.S. investment-grade senior notes in support of same. We redeemed the Series G preferred shares in full at the end of Q3, eliminating our most expensive series of preferred equity.
In Q4, we strategically right-sized approximately CAD 2 billion of revolving credit facility capacity and wound down the remaining CAD 500 million of capacity in our non-recourse facility, all of which will materially reduce our cost of funds in 2021 and beyond. In addition to a material de-risking of our balance sheet, these de-leveraging efforts will contribute to Element's net financing revenue growth as we lower the cost of funding our vehicles and expand our net financing margins. By way of example, net financing revenue was CAD 4 million higher in Q4 2020 than it was in the first quarter of 2019, and that is in spite of a CAD 2.3 billion lower average net earning asset base.
As we advance our capital lighter business model ambitions in 2021 and beyond, you can expect our balance sheet to continue to strengthen and mature, to remain investment grade, and to be available to support our clients' growth ambitions. The third theme that stood out to me in 2020 is Element's preparedness and passion for growth. In the U.S. and Canada, we readied our commercial organization in the first half of 2020 and enjoyed some quick wins in the second half of the year, including self-managed fleet proof points and competitive wins over fellow FMCs in both countries, as well as long-term renewals of several significant Element client contracts. Under the leadership of David Madrigal, our U.S.-Canadian commercial team has leaned into the aggressive pursuit of profitable revenue growth across these two countries, and we're quickly building up a high-quality pipeline in our domestic markets.
To put this into context, consider that 50% of the pipeline for the U.S. and Canada today has been populated in the last six months alone. Subsequent to year-end, we have two significant client wins driven by the U.S. and Canadian commercial teams to share with you. The first is actually a global mandate won by Element and our partner members of the Element-Arval Global Alliance. We were awarded the fleet business of a global energy technology company in the oilfield service industry in all five of Element's countries of operation, in 16 of 17 countries served by our partners at Arval. This win will add approximately 3,900 vehicles, representing approximately 12,000 service units to Element's platform.
In the U.S. and Canada, our slices of that pie represent a combination of renewed vehicles already managed here by Element, and the addition of approximately five times more vehicles to our domestic roster, all of those having been previously managed by another FMC. Our second significant client win in the first two months of this year is the owner of one of the largest and most diversified portfolios of energy assets in the U.S. The client chose Element as their new fleet solutions provider, and will transfer responsibility for servicing approximately 5,500 owned vehicles to our scalable platform from another FMC. This latter win represents approximately 40,000 new service units for Element without a dollar of capital being advanced, which is in keeping with our designs on a capital lighter business model.
You'll read my letter to shareholders earlier today, and in doing so, learn more about the different stages that our commercial teams are at in Mexico and Australia- New Zealand, and their likely contributions to our 4%-6% global net revenue growth expectations for 2021. In short, Element Mexico, under the leadership of Manuel Tamayo, continues to enjoy seemingly boundless demand for our financing and service solutions in the country, where approximately two-thirds of the fleets are in our wheelhouse in terms of self-managed target opportunities, and a market in which our brand is a dominant market leader. Q4 2020 saw the highest quarterly take-up of services in the year by Element Mexico clients, with contracts for more than 6,000 service units being initiated. A related highlight of the quarter was the extension of our maintenance service program to the entire fleet of one of Mexico's largest telecommunications companies.
In Australia- New Zealand, as we previously disclosed, Custom Fleet has won a number of what should be considered mega -fleets by local standards in 2020 in the form of each of Australia's two leading supermarket chains, as well as one of the country's largest not-for-profit organizations. Aaron Baxter and his leadership team have put all the right pieces in place to accelerate their revenue growth trajectory in 2021. As of just yesterday, we have another proof point as to the growth opportunities available to us in that market. Custom Fleet and Origin Energy, Australia's leading energy retailer, are working together to provide Origin's business customers with a one-stop shop for electric fleet vehicle procurement, management, and charging called Origin 360 EV Fleet.
Custom Fleet will provide Origin's business customers with fully managed electric fleet vehicles and accompanying services, including reporting and insights to help optimize fleet performance as well as emissions reductions. These will be bundled with Origin's charging infrastructure, carbon offsets, and energy solutions, taking the complexity out of making the switch to EVs for Origin's business customers with fleets in Australia. I know that many of you are hoping to hear more about electric vehicles, I promise to return to that topic towards the end of our call. However, right now, I'm going to turn the floor over to Vito to discuss our 2020 financial and operating results with you. Vito?
Thank you, Jay. Good evening, everyone. I'm pleased to be with you to talk through what we feel are a really solid set of Q4 2020 operating results, bringing to close what I would describe as an incredibly resilient fiscal year 2020 for Element and setting the stage for profitable revenue growth atop our scalable platform in 2021. Before I dive into the quarter, a few full year 2020 highlights from my perspective. Some of these are highlights because they're against the backdrop of COVID-19 and all the economic uncertainty that's stirred up. First of all, on a full year basis, our adjusted operating income in fiscal 2020 amounted to CAD 501 million, representing only a 2.4% decline versus fiscal year 2020. This is remarkable and demonstrates the earnings power embedded in this business model, fueled by the benefits of the transformation program.
The business generated CAD 449 million in cash available for distribution. As Jay noted, on the back of our October increase in dividends and NCIB announcement, we launched into our share buyback program. Both ANZ and Mexico grew all three of net revenue, adjusted operating income, and assets under management in 2020. Year-on-year decreases in service revenue and financing revenue for the full year 2020 were both less than 3%, with service revenue decreasing only 2.3% from CAD 493 million to CAD 482 million, and net financing revenue down only 1.3% from CAD 411 million to CAD 406 million for 2020 on 12% lower net earning assets tracing to our capital-lighter model. On the credit and collection side of things, our portfolio has stood up beautifully, notwithstanding the economic pressures and uncertainty that the pandemic has created. A 3% reduction in the delinquent accounts balance at year-end 2020 versus 2019.
A 52% reduction of impaired receivables at year-end 2020 versus 2019, dropping from CAD 53.5 million- CAD 25.5 million. Perhaps most notable is the absolute quantum of charge-offs net of recoveries for 2020, only CAD 1.6 million. This speaks volumes about so many attributes of our business fundamentals, including the diversity and credit quality of our client base and the underlying quality of the asset base and the essential use of these very assets. Let's take a closer look at our Q4 results. Element's adjusted operating income for the quarter was CAD 132.1 million, equivalent to CAD 0.23 on a per share basis, which is a 2.4% or CAD 3 million increase over Q3 2020 results and a 4.6% or a CAD 6.3 million decrease from Q4 2019. Servicing income was the only revenue stream to decline quarter-over-quarter on an absolute basis. It declined 6.4% or CAD 8 million from Q3 2020.
Excluding the CAD 8.8 million accelerated amount of servicing income that we drew your attention to last quarter, servicing income grew CAD 0.8 million quarter-over-quarter. On a year-over-year basis, servicing income in the fourth quarter declined by 9.3% or CAD 12 million from Q4 2019, that was due to overall vehicle usage levels, which you can see some details on in our supplementary information document. Net financing revenue increased 3.1% or CAD 3.2 million quarter-over-quarter, despite a 2.1% reduction of net earning assets via syndication. The primary driver of the net financing revenue increase is interest expense management and growth in net earning assets in Mexico in particular. Net financing revenue increased CAD 6.2 million year-over-year, which represents particularly strong performance given that net earning assets for that period decreased by 14%.
The increase is mostly attributable to lower cost of funding that has substantially reduced liabilities by CAD 2.4 billion in 2020, and as Jay mentioned, also lowered the cost of financing the remaining indebtedness. Special kudos to the great work of Izzy Kaufman, our EVP, Treasurer, and his talented team. It's also worth calling out the continued growth in net earning assets in Mexico. In the U.S., where our syndication program is growing and strengthening, we syndicated CAD 619 million of assets in Q4, resulting in CAD 23.9 million of syndication revenue. This made a material contribution to our balance sheet deleveraging in the fourth quarter. Syndication revenue grew 57% or CAD 8.6 million quarter-over-quarter and declined 13.3% or CAD 3.7 million year-over-year. Yield improvement was the most significant driver of the quarter-over-quarter syndication revenue growth, and it also improved year-over-year for the fourth quarter.
Syndication revenue benefited from an improved rate environment in Q4, meaning lower investor hurdle rates over the course of the quarter and increasing demand for Element's assets. Feeding our syndication and net financing revenue streams, to a lesser extent, servicing income are our originations, which improved quarter-over-quarter in Q4. We originated approximately CAD 1.4 billion of assets in the quarter, an increase of CAD 107.5 million or 8.4% versus Q3 2020. U.S. and Canadian originations increased by 4.7% quarter-over-quarter, and this growth was in part driven by unfilled orders and pent-up demand tracing back to Q2 2020, when certain OEM production facilities experienced closures. Although Q4 2020 origination volumes in the U.S. and Canada do not yet represent a full catch-up on origination volumes delayed and deferred by the consequences of COVID-19, we are trending in the right direction.
If I take you back to Q2 2020 originations in the U.S. and Canada, they were approximately 44% lower than the same quarter in 2019, excluding our Armada volume. By comparison, Q4 2020 originations in Canada and U.S. are only approximately 10% lower than the same quarter prior year, again, excluding Armada. Material improvement origination volumes in the U.S. and Canada in the second half of 2020. ANZ origination volumes increased 4.7% quarter-over-quarter as Custom Fleet continues its swift recovery from the impacts of COVID-19. We're also beginning to see the positive impacts of our global growth strategy being executed in ANZ, where our commercial efforts are six to nine months ahead of those in the U.S. and Canada.
Finally, with respect to originations, as discussed last quarter, while the economic impact of COVID-19 was more muted in the first half of 2020 in Mexico, our business there experienced setbacks in the third quarter in terms of originations volumes. As we expected, originations in Mexico recovered in Q4, increasing 46.7% from Q3 levels. On a year-over-year basis, fourth quarter originations were 13.5% higher in Mexico in 2020, and in fact, 31% higher on an FX neutral basis. Mexico's relentless resilient growth is really a good sign for the future of EFN in all geographies, as they've demonstrated the ability to convert self-managed fleets, and those learnings and tools are now being deployed in U.S., Canada, as well as ANZ. Free cash flow is and will continue to be a key metric for us as our return of capital activities carry on in 2021.
Fourth quarter free cash flow per share was flat versus prior quarter and down CAD 0.04 from Q4 2019, with the timing of sustaining capital investments in 2020 being the main reason for the year-over-year decline. Before I hand it back to Jay, let me reflect for a moment on the work in effort over the last few years. As I think back to the summer of 2018, when we collectively embarked on an ambitious transformation agenda, we knew our efforts on behalf of our clients, our employees, our shareholders would be rewarding. I don't know that any of us truly appreciated the merits of both the industry fundamentals and Element's towering leadership position in the market. The work we have done has brought full value to Element's leadership position, and yet we still have many years of profitable revenue growth and value creation ahead of us.
Today, we have a client-centric organization focused on providing a consistent, superior service experience. We have a highly scalable operating platform. We have a stronger and more efficient balance sheet with ready access to capital. We demonstrated our ability to grow in both Mexico and ANZ, and have a team hungry to do the same in both the U.S. and Canada, where we have some early green shoots. We generate a substantial amount of cash, and with minimal capital requirements to fulfill our growth agenda, we are committed to distributing such cash by growing dividends and share buybacks. I can go on and on. None of this would've been possible without the unwavering courage, commitment, and passion of all Element employees. For this, I thank you for your trust and confidence and wish you all the very best. With that, Jay, I'll hand it back to you.
Thank you, Vito. As all of you know, Vito has been at the heart of everything Element has accomplished since he joined us as CFO in 2018 as my first hire. He has provided vital leadership, sound strategic counsel, and important expertise. What's more, all of that comes with a smile and a warm and engaging manner that makes Vito a joy to be around. We're stronger as an organization for all that Vito has done for and with us. As you may have seen in the news last week, Vito will be leaving Element this month to begin a new role and a tremendously exciting opportunity as the CFO of MDA. Like Element, MDA is that increasingly rare breed of a proudly Canadian company that is an industry leader in its field.
Personally, on behalf of everyone at Element and all of our stakeholders, I want to say thank you, Vito, for all of your contributions to our success, and we wish you continued success of your own in the next chapter of your career. Coincident with Vito's departure, we formally welcomed Frank Ruperto into the role of Executive Vice President and Chief Financial Officer of Element. Frank joined us several weeks ago, and we're fortunate to have had Vito and Frank overlap for a bit of time as the co-leaders of our finance function. Consequently, Frank is very well-positioned to receive Vito's handoff shortly and to carry the baton for Element. Frank joined us from Rayonier Advanced Materials, a New York Stock Exchange-listed industrial company, where Frank served for many years as CFO and more recently led the company's core business unit.
With proven experience as a public company CFO, Frank brings over 30 years of expertise in business and finance, as well as proven capabilities spanning strategic planning, investor relations, capital markets, commercial and operations leadership, and enterprise risk management. Frank's skills and expertise will be invaluable as we aggressively pursue organic growth now that we've successfully completed our transformation. I spent a good deal of time getting to know Frank since we first met late last year during the interview process, and I can tell you he is approachable, collaborative, and humble. Frank is a highly curious individual, asks great questions, and has, I know, already rolled up his sleeves to work alongside his colleagues and with his team to enable growth and continuous improvement at Element. Frank, I'd offer you a few minutes to offer up some initial thoughts of your own.
Well, thank you, Jay. I appreciate the generous introduction, and I'm thrilled to have the opportunity to join Element at such an exciting time for the business. I want to say thank you to Vito for your time and advice, helping me up the learning curve these past number of weeks. I would extend those same thanks to all of my executive colleagues at Element and the senior leaders I've had the opportunity to work with so far. I can say unequivocally that Vito has put together a strong finance team that has the capabilities to drive Element to reach its goals. I joined Element having learned a lot about the company and the culture over the course of the interview process. Importantly, I was specifically attracted to the organic growth opportunity the business has identified.
Having worked with many companies as an advisor, as well as having sat in the CFO and business leadership chairs, Element is unique in its ability to target and execute on an organic growth initiative that can deliver on its growth objectives and commitment to shareholder value. I don't think I fully appreciated how achievable that opportunity was until I got here last month and have spent time in the business. Element's value proposition for self-managed fleets is really incredible in my view, and the untapped market in the U.S. and Canada alone is more than three times the size of our current global net revenue. There's no shortage of runway ahead of us. Mexico and ANZ combined add up to an even greater self-managed opportunity, and we're well on our way in those geographies.
There's also the macroeconomics of COVID making our value proposition attractive for prospects, especially in assisting companies access cost-efficient funding and enhance their liquidity through our financing platform. There are many sources of revenue growth independent of converting self-managed fleets into clients, for instance, the continued delivery of transformation initiatives, existing client retention and winning managed fleet clients from other FMCs, improving client profitability, and providing our full portfolio of services to more of our clients, and opportunistically identifying and onboarding additional mega -fleets. The strong cash flow-generating capabilities of the business allow for a significant and ongoing return of capital to shareholders through our dividends and share buyback activities. This return of capital provides investors with a low-risk income stream that they can redeploy in turn as they see fit. Suffice it to say, I'm energized by being here.
I look forward to meeting our shareholders, prospective investors, and analysts in the days and weeks ahead, and I'm truly grateful for this opportunity. With that, Jay, back to you.
Thanks, Frank, and again, welcome to the team. With 2020 behind us and all three objectives of our 2018 strategic plan crossed off the list, we entered 2021 with the benefits thereof. A robust and scalable operating platform, a true investment-grade balance sheet, and an undivided focus on our pure-play fleet management business. Yet the completion of transformation has a less obvious but no less valuable benefit. The considerable resources and capabilities that were concentrated on transformation for more than the last two years are all being redirected at our new strategic priorities. The aggressive pursuit of organic growth in all of our geographies, and demonstration of the scalability of Element's transformed operating platform by magnifying 4%-6% annual net revenue growth into high -single -digit to low -double-digit annual operating income growth.
The advancement of a capital-lighter business model by increasing service penetration and strategically syndicating fleet assets, enhancing our return on equity. The generation of a high -single -digit to low -double-digit annual free cash flow growth and predictable return of excess equity to common shareholders by way of growing dividends and share buybacks. We have chosen Driven for Growth as our rallying cry in 2021, signaling our new central purpose, the sizable market opportunity that's available to us, and our cultivated state of readiness. It also embodies the momentum we can feel in our transformed organization. We're not just ready to grow our top line. Profitable revenue growth is a primary objective of this organization in 2021.
I refer you to my quarterly letter to shareholders, published as part of our press release earlier today, where I've set out my views on a number of dimensions and angles to our 2021 growth ambitions, not the least of which are the headwinds and tailwinds generated by knock-on effects of the pandemic. These are influenced everything from semiconductor availability, to used vehicle prices, to foreign exchange expectations. We've proven the soundness of the good ship Element to weather far worse storms earlier last year, and will stay our course again in 2021, delivering for our clients, our people, and our investors. To address one of those knock-on effects of the pandemic here now, the global semiconductor shortage affecting motor companies' production capabilities remains a fluid situation, given the unprecedented nature of the circumstances.
What we know today is that Element order volumes placed in January and February of this year are higher than in those same months in any of the last three years. Client indications of ordering activity for this month of March suggests that trend will continue. We expect that there will be some delays in manufacturing these orders that we have received, and that consequently, approximately CAD 100 million of originations could slip from the first half of this year into the second half. We don't expect any material financial impact to arise from this delay in originations. A second topic that has gained momentum during the pandemic is the growing commitment to ESG and sustainability, in particular, across businesses, governments, and industries. Element's inaugural ESG report is approaching readiness for publication next quarter.
At the risk of front-running the environmental pillar of that report, I want to make a few comments about the growing attention being paid to electric vehicles in the context of our business. As the fleet solutions market leader everywhere we operate, Element is strategically well-positioned to support our clients and to lead our industry throughout the gradual electrification of automotive fleets over the next decade. We're prudently investing to maintain and to improve that position. We have the inside track by virtue of our experience in New Zealand, where roughly 2% of the 29,000 vehicles we manage are battery electric or plug-in hybrid electric vehicles. At the same time, our strategic alliance with Arval affords us the benefit of their fleet management experience in Europe, where both the EV products on offer and the supporting charge infrastructure are further ahead than that of North America and Australia.
Our intelligence gathered from these proving grounds tell us that the opportunities associated with increased adoption of electric vehicles by our clients far outweigh the risks to our business model, and that, in fact, the sooner the technology and infrastructure are ready at scale in our operating geographies, the better. Fundamentally, the struggle for fleet operators evaluating the opportunity to electrify is the complexity and the duration of the process. Cost-effective EV adoption requires ongoing data and intelligence gathering and analysis, incremental implementation, and persistent change management. Element's value proposition as a leading provider of outsourced fleet services and solutions is grounded in taking that kind of complexity off our clients' plates and managing it for them cost effectively.
Our compelling value proposition centers on data-driven strategies to lower clients' total cost of fleet operations and a consistent, superior client experience regardless of our clients' changing needs, which eliminates fleet-related administrative burden. In other words, the fundamentals of a fleet transition from internal combustion engines to battery-powered vehicles requiring analytics and change management make Element's standing value proposition even more compelling. The second challenge to fleet electrification, being the duration of the process, is farther from our control. However, we're already taking proactive steps to advance our clients' interests on this front. Frankly, these are fully aligned with our own interests in terms of net revenue growth and our ESG agenda.
For example, we're rapidly progressing discussions with electric vehicle manufacturers, both traditional OEMs and new entrants to the space, which would see Element committing to acquire EV volume in exchange for committed access to production capacity, much of which is slated to begin coming online towards the end of this year. We're also advancing working relationships with various infrastructure providers to ensure that the plans we craft to meet our clients' fleet electrification needs can be implemented and are sustainable. We're cultivating our industry-leading network of service partnerships to ensure the consistent superior client experience is no different for drivers and fleet managers of electric vehicles than it is for internal -combustion -engine vehicles.
As fleet EV penetration grows in all of our geographies, the attributes that make us the partner of choice for our clients today also ensure Element's place as the market-leading electric vehicle fleet manager everywhere we operate. We're working with dozens of clients on use -case assessments, pilot programs, and transition planning, and we have all the necessary capabilities to seamlessly add EVs to their fleets and to manage same today. There are currently approximately 500 EVs in our global fleet, excluding New Zealand, and another 500+ in New Zealand itself. Unfortunately, the present state of play suggests that the top and bottom -line benefits to Element from fleet electrification will remain modest in the short and medium term. We're working with our clients and supply chain partners to change that.
In closing, 2021 will be another inspiring year for all of us at Element as we consistently deliver for our clients, return significant capital to our shareholders, grow our industry-leading transformed business, and continue to create long-lasting value for all of our stakeholders. With that, let's open the floor to your questions.
We will now begin the analyst question -and -answer session. As a reminder, in order to afford all analysts the opportunity to ask questions, Element kindly requests that analysts limit themselves to two questions and live dialogue with management. Should an analyst have additional questions, please rejoin the queue. To join or rejoin the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request, if you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Paul Holden with CIBC. Please go ahead.
Thank you. Good evening. Jay, you mentioned orders in January, February, and trending in March very positively, and I believe what you said it was the highest you've seen in the last three years. I get that orders are different than originations, but if I look just back to Q1 last year, it was a very strong number on originations, partly because of the benefit of Armada volume. If I'm understanding you correctly, even excluding Armada today versus a year ago, you're still looking at strong order growth?
Yeah. Like for like comparison, Paul, 100%. The number of orders that we have received thus far, in January, February, are the highest that we've received in any of the last three years. As we continue to explore the conversations with clients regarding March orders, as the March order book continues to build, it would appear that that trend is continuing. A very strong signal. How much of that is attributed to the chip shortage and our clients wanting to accelerate the 2021 order into the first quarter, hard to tell. Again, an encouraging sign in terms of the robust demand that we're seeing within the client base in terms of orders that obviously will become originations.
Okay. That's an important point. Thank you. I just want to talk a little bit about the recovery or potential recovery then in servicing income. You show some useful data in your supp pack, but it really only goes up through December. If I look at mobility trends, sort of those reported, Apple, Google, et cetera, everything that people are looking at, it's showing a nice uptick since the end of 2020. I'm wondering if your usage data and miles driven data that you're tracking is substantially in line with that sort of let's call it low double-digit increase since the end of the year.
We are encouraged by what we're seeing in the early days of 2021 in terms of that trend line that was quite evident after the significant dip that we took in the second quarter of 2020, the resulting trend line that we have been seeing in the business with the gradual return of consumption of services, maintenance, fuel, and others, throughout that period. Again, we're encouraged by what we're seeing here in early 2021. We do think that the success of the vaccination program will allow the economy to come back fully, and with that, the full resumption of activities by our clients. Importantly, we continue to see no signs within the fleet in terms of de-fleeting. Our clients are maintaining the same level of vehicle inventory that they have traditionally maintained.
Beyond the few isolated cases that we've talked about in past calls, again, there's no systemic change in terms of fleet size within the client base. Again, no systemic change to the business model as a consequence of the pandemic. The demand for services remains strong and with the continued resumption of activities within the economy, we would expect that we will get back to at least the level that we were before and be able to grow beyond that.
Okay. I'll stick to my two questions, let others ask. Thank you.
Thank you, Paul.
The next question comes from John Aiken with Barclays. Please go ahead.
Good evening. Jay, thank you for the information on the new client wins. Just a couple questions on that. First, when we look at the global win, I think it was the oil services player, I'm assuming that that holds leasehold receivables, and that contract will then fall on over the next couple of years as the leases get renewed. On the flip side, when you talk about the player in the U.S. with the energy asset that's basically a services contract, does that come on board on day one, or do we have a gradual rollout on the revenue, similar to what we may see if this actually was on leases?
Good evening, John. Your understanding is bang on. When we acquire a new client, in particular, a client that is currently being served by another FMC service provider, we earn into their fleet assets over time. As they replace the existing fleet that is held by the other FMC, those new originations come onto our book, and we build that lease book over a period of time. Envisioning us earning our way into the full book over a three, four, or five-year period. When we acquire a new client as it relates to services only, we usually onboard those and start generating revenue with them within one to two quarters, so they ramp up very quickly. The one exception that I would point out in terms of that is a self-managed fleet.
If we've identified a self-managed fleet, have worked with them to understand the benefits of outsourcing their fleet financing and management to us. In those situations, it is not uncommon for us to write a check and to buy out their position in their fleet at fair market value, and to take that asset on our books as a financing asset day one. We would be able to effectively build the book, and start generating both financing and services income within the first quarter or two of having signed the contract.
Thanks for the clarification, Jay. If I may, just one question further. When you talked about the avenues for growth on revenues from North America, one of the bullet points, I think, was improving clients' retention levels. Now, Jay, I thought that the client retention levels had been brought back to where they were previously, but is this an acknowledgement that you can actually improve upon that even further? What level of upside can we see from incremental retention? Because, again, I thought that that problem had already been solved.
Yeah, your understanding is correct. That problem had been solved in that having increased the rate of attrition, client attrition, when we were experiencing our difficulties back in 2017, early 2018, we built our client retention level back to what is typically viewed as the industry norm, ±98%. The challenge that we have put to our team, given the investments that we've made in our business, given the superior client experience that we're able to offer, is there an opportunity to redefine that level of client retention and to indeed increase it, and in particular, opportunities to increase that in the U.S. and Canada. In Mexico and in ANZ, we actually operate at an even higher level of client retention than the 98%.
The challenge to Jim Halliday and the operations team in Canada and U.S. is what avenues are available to us to take a level of retention, which is admirable for most industries, but to actually better it, given the superior operating platform that we have to offer our clients and prospective clients.
Understood. Thanks, Jay. I'll requeue .
Thank you.
The next question comes from Mario Mendonca with TD Securities. Please go ahead.
Good evening. Jay, first a question on the share-based compensation. The number was obviously kind of large this quarter. Can you describe what happened in Q4 2020 that would've caused the increase relative to what we've seen over the last few years?
This would be a perfect question to introduce our new CFO, Frank Ruperto. Frank, why don't you field that one?
Thank you.
Sure. Thanks, Jay, and Mario, thanks for the question. We saw an increase in the performance share unit component of that expense of roughly CAD 20 million. The result was an increase in the payout factor due to the better anticipated and actual performance relative to target. Those PSUs, based on the strong performance of the company, have reset to a higher level, and we took into account those incremental shares equivalents in calculating that number. The expense was offset slightly by decreases in stock options expense and restricted share units. The 2020 PSUs will be evaluated for their performance factor adjustment at the end of 2021. Really it was that increase better than target performance on those performance share units.
I think you said it related to 2018 and 2019. It's not the actual stock price, EFN's stock price that went up. It was what? Management's interpretation of performance relative to goals. Is that maybe the right way to look at it?
That is a good way to look at it. It's actual performance and where those PSUs performance were relative to target and our estimate on where those would pay out.
Just for perfect clarity, what happened in Q4 that caused management to revisit this performance? Presumably it wasn't the performance in Q4. This performance would have been earned throughout the year. What was it about Q4 that drove the big increase?
Yeah. We looked at it at the end of the year. We like to put a little bit of time in between the actual time that the grant is given, and then get a real understanding of what the performance looks like so that we don't end up swinging performance share units back and forth. Again, that's why when we look at the 2020 PSUs, we're not going to look at a performance factor adjustment until the end of 2021.
Okay. Real quickly then maybe Jay, my last question if I could. Yeah.
Sorry, Mario. Just the other factor that comes into play is obviously on LTIP awards and the finalization of same. They're subject to board approval. We want to bring a full accounting of the performance modification factors to the board for their review and approval, which is part and parcel of the accrual process.
Jay, my final question relates to revenue this quarter. Revenue was down 4% year-over-year this quarter. Your goal is for 4%-6% revenue growth. Obviously you see something meaningful changing in the next four quarters relative to what happened this quarter. Can you give me any guidance or a sense of what's going to be that much better in 2021 that didn't happen in Q4?
Yeah, I think we tried to illustrate that in a number of different forms as part of our disclosures this quarter and indeed in past quarters, Mario. When we look at this, we think of the business, as we've talked before, as about rough CAD 10 billion of gross revenue, CAD 9 billion of cost of services and cost of financing to get you that CAD 1 billion of net revenue that we report. We've guided you that syndication in and of itself is not going to be a contributor to year-over-year growth. So you're going to be deriving your revenue growth from both the increase in your gross lease net financing, or excuse me, gross financing revenue and your gross services revenue, as well as a decrease in your cost of services and cost of funding.
When you take, for instance, CAD 1.6 billion of debt under your balance sheet, that is going to be reflected in a lower cost of financing for the business. Which given our disclosures, is an offset to the gross revenues and thus is a contributor to net revenue growth for the business. When we look at the recovery from COVID-19, when we look at the momentum that in the business in terms of growth in Mexico that has a 25% CAGR revenue growth figure for the last three years, grew 10% last year. When you look at ANZ and the growth that we've had there grew 6% last year and is expected to grow much higher in 2021.
When you think about the early traction that we're getting in the commercial efforts in Canada and the U.S., those are all key drivers for us in terms of the expansion of the gross financing and service revenue of the business. Against that, we continue to work with our supplier network to drive down the cost of the services that we procure on behalf of our clients which offers us an opportunity to reduce those cost of sales. Through the efforts of Izzy and the treasury team reducing our financing load, reducing the costs of the financing instruments that we have as part of our balance sheet to drive down the cost of financing the leases of the business. That combination of factors gives us that pathway to the 4%-6% net revenue growth for 2021.
Thank you for that answer. Appreciate it.
Again, this is an important topic to us. We've attempted to approach this a number of different ways in our disclosures. We want to make sure that it is indeed well understood. Is there anything that remains a bit of a question mark in your mind around that?
Well, now that you ask, it's hard to imagine growing net financing revenue without some very significant margin expansion. Maybe that's the messaging that you're offering that I'm not picking up on, that the net financing margins, or the NIM, looks like it would have to expand a fair bit because the assets themselves don't look like they can grow that abruptly given the level of syndication activity we're seeing. Maybe I could just ask one final quick thing. Do you have a level of originations in mind? I'm sure you have a level of originations in mind. Is there anything you can share with us on the level of origination that's consistent with the 4%-6%, or is that not something that's maybe appropriate to discuss?
Let me come back to the first point that you made, because I think it was a question asked and answered. I'll do so by way of just lifting a quote from my opening remarks. Net financing revenue was CAD 4 million higher in Q4 2020 than it was in Q1 2019, despite the fact that we had CAD 2.3 billion of lower average net earning assets. What we've been able to demonstrate is an ability to increase yield. We are less reliant. Obviously, originations are our lifeblood to driving net financing revenue for the organization, absolutely. It is only one piece of the puzzle. The other is yield.
As you start to think about the pricing power that comes with the ability to deliver a consistent, superior client experience, the pricing power that comes with being able to drive double-digit growth in expanding markets, and you think about the ability to expand margin by lowering the cost of your capital, both in terms of the amount of capital you're deploying and what you're paying for that, there are ample opportunities to drive yield, and as a consequence, make up for some of the softness of originations that have resulted from the pandemic.
Got it. Thank you.
Thank you.
The next question comes from Geoff Kwan with RBC Capital Markets. Please go ahead.
Hi. Good evening. My first question was just on the electric vehicle. Thanks for all the disclosures and comments that you had on there. I guess my question is more at a basic level is, in general, based on everything that you know today, if you had a customer that had a gas engine fleet and they wanted to electrify the fleet, from a net income perspective for Element, would that be neutral? Would it be positive? Would it be negative?
From what we know today, it would be positive.
Okay. Oh, sorry. Go ahead.
Yeah, no. Maybe just to give you a little bit of color on that. From a macro point of view, it's quite indisputable that the complexities that arise with this shift in technology, and make no mistake about this is a tremendous shift in technology. When we talk about the decade timeframe, in our estimation, it is going to take the better part of the decade to build sufficient momentum, to build out the charging infrastructure, to develop the products to bring to market, to shift culture, and to drive the right economics to facilitate this. It is going to be an extensive journey. From a macro point of view, the complexity associated with this transition to this new technology is indisputably beneficial to FMCs, and as a market leader, we think very beneficial to Element.
As you get down to the specifics of it, Geoff, there is such a significant cost differential on the purchase price of a vehicle today that increase financing revenue that comes with that opportunity, the increased syndication revenue that can come from that opportunity carries a great deal of economic benefit for an organization like ours. As we look at servicing income, these vehicles will still need to be maintained. Our estimations, they will run two-thirds to three-quarters of the cost of an internal combustion engine or an ICE vehicle. The majority of expenditures are truly drivetrain agnostic. Think about brakes, think about tires, et cetera. From a maintenance point of view, there will be less maintenance required for these vehicles, but it will still be a material amount of expenditures for our clients and thus a material revenue source for our business. Accident management.
Most accidents happen when the vehicle is stationary. Electric vehicle or ICE vehicle, will, in all likelihood, have at least the same rate of accidents. Actually, the repair costs for an electric vehicle are higher for a variety of reasons that I'd be only too happy to get into. We expect that that will be an ongoing source of service revenue for the business. Remarketing, telematics, registration, title, tolls, and violations are all going to be independent of the drivetrain of the vehicle. Fuel for us is not a big source of revenue. It doesn't top our top six service revenues. It might end up becoming a bigger source of revenue for us as we help these organizations deal with the proliferation of electricity suppliers across the geographies in which they operate.
Over and above that, we see new opportunities for revenue generation from managing tax incentive credits from governments, from installing and managing charging infrastructure at our clients' place of business or their drivers' homes, tracking mileage for government reporting in lieu of excise taxes. Yeah, we are feeling rather bullish about the economic and environmental benefits that we can advance through the electrification of fleets. The caution that we put out is this is going to be a gradual evolution in technology. If one of our typical service fleets came to us today and said, "We want to do a wholesale changeout," the vehicles aren't even available to them to do so. We can't procure them.
Again, it is going to take a fair degree of time for this to mature in terms of the availability of vehicles and availability of charging infrastructure and the improvement of the economics to drive faster, more wholesale adoption of this technology. We are very well positioned to benefit from this both economically and environmentally.
No, thank you for that. That's actually really good. My second question was around just with the new client wins, how would you describe the potential for more client wins as we look ahead to the next maybe couple of quarters, either new client wins or expanding client relationships? Then if maybe if you can talk about the progress on winning more self-managed fleets?
Strong. We're feeling very confident in all three regions in terms of the commercial efforts. Mexico is off to a great start. They finished 2020 strong, lots of momentum, and despite COVID-19 continuing to plague their environment, they are off to a very strong start this year, and we have high expectations for them in terms of a return to that higher level of double-digit growth that we have typically seen from that organization. Plenty of market opportunity and certainly the right team in place. In past conversations, we've talked about OpEx and some increases around growth, and some of that going into the Mexico organization. The team has done a great job of recruiting new talent, training that new talent. That talent is now being unleashed into new market opportunities that we haven't been able to approach given the limitations of talent.
That gives us further conviction in terms of the growth that we'll see in Mexico in 2021. Aaron and the team in ANZ last year was the first year in which they embraced their growth strategy. They went at it hard and despite wildfires and despite COVID-19, posted 6% revenue growth in that market. That was the first year of the strategy. They intend to go double-digit revenue growth this year. Again, early days, but we're seeing nothing that would be an impediment for them being able to achieve that. Closer to home, U.S. and Canada, again, we have completed the transformation of the commercial group under David Madrigal's leadership. As we mentioned, these are long sell cycles. Rough 10 months from time of identification to contract signing and an opportunity to begin to earn revenue.
The efforts of last year, the second half of last year, are starting to appear in terms of some of the results that we communicated earlier today, as well as some of the results that are continuing to mature here in this first quarter. Feeling very good. I would say that the government sector has been a bit slower to move. Understandably, given their focus is appropriately being placed elsewhere. We haven't seen perhaps as much opportunity to engage them in the conversation around the outsource of their fleets to our organization. That has been more than made up by the interest that we're seeing commercially. Some of the wins that we're seeing are absolutely steals. Steal share in terms of winning over mandates from our competitors. We're also seeing a good evolution of the self-managed fleet opportunities.
The team has been quick to identify those, equally quick to qualify and advance those, and we've reported some in some of our jurisdictions, and we'll look forward to sharing some progress updates as part of our Q1 update to you.
Perfect. Thank you.
Thank you.
The next question comes from Tom MacKinnon with BMO Capital. Please go ahead.
Yeah. Thanks very much. First question has to do with the syndication yields that we saw in the quarter. I think it's like 3.86%, like 100 basis points higher year-over-year and even higher than that quarter-over-quarter. Is this sort of an indication of what we should expect going forward? Naturally, this market kind of jumps around a bit. Any kind of help you can give us with respect to that. An increase in demand and lower investor hurdle rates, how is this shaping up in 2021? Is a syndication yield around that level more or less attainable for you?
Good evening, Tom. We had a very robust syndication returns for Q4. I would say that they weren't necessarily typical or indicative of the yields that you should expect on a go-forward basis. As you noted, the 386 was a third better than what we had done in Q3. Even as we look at the year and the contribution that the fourth quarter made to the year yield for syndication of 269, that was just slightly below what we would have done in all of 2019. No. When we first talked about syndication, we spoke of the yield will vary based on the assets that are being sold and the duration of those assets, the credit quality of those assets, and interestingly, the time of year.
Recognizing that there's a fair amount of demand for these assets that carry a very attractive tax benefit in the fourth quarter, that generally creates a little bit more demand and a little sharper pricing on the part of those wanting to secure those assets for their portfolio. No, I would not point to that yield as being indicative of the yield you should expect on a go-forward basis.
Is it better than the yield we saw in the third quarter, though, on a go-forward basis? Certainly increase in demand and lower investor hurdles, I guess.
Yeah. No. For us, the guidance that we have provided in terms of revenue growth and operating income and cash, we're going to stay within those parameters in terms of the guidance.
Okay. The second question is on OpEx. In the transformational summary that you put in the supplement on page six, it's like there's nearly CAD 30 million more in terms of OpEx, in terms of what you've actioned on and what you've delivered. How we're to read that? Does that mean if you have CAD 100 million in OpEx, that your OpEx eventually could be, that you reported in 2020, that your OpEx, assuming all the stuff that action gets delivered, would be CAD 30 million less, assuming no kind of inflation? Over what time period would that be?
I apologize. I'm not quite sure what you're referencing. Maybe I'll let Vito jump in and talk specifically to it. Maybe just as an overarching comment. We delivered CAD 133 million of operating income benefit via transformation to the 2020 results. That was a combination of OpEx reduction as well as net revenue expansion from either revenue assurance activities or reduction in our cost of financing and/or our cost of services. It's a combination of revenue enhancements and OpEx reductions that contributed to that CAD 133 million of benefit to the 2020 operating income. An important figure to cast one's eye on is the fourth quarter contributed CAD 39 million of operating income improvement as a consequence of the transformation.
You could extrapolate that, multiply it by four, get your CAD 156 million, and reasonably assume that for 2021, operating income will be better by the CAD 156 minus the CAD 133 of 2020, for a CAD 23 million improvement in operating income. Again, some of that will come from OpEx reduction. Some of it will come from higher revenues and lower cost of revenues.
Yeah. You laid out all those pieces on the supplement. I was just asking a question with respect to one of the pieces on OpEx. If I could just squeeze one more in, it has to do with the originations in the quarter. If we annualize those and try to factor in the fact that you've got some really good momentum running, at least in January and February and March in 2021. We annualize the CAD 1.4, we're at CAD 5.6. If you look at how you've got increased momentum coming in those first couple of months of 2021, how should we be thinking of originations next year? I think that might be something that a lot of the other analysts are probably trying to work into their models as well.
Yeah. Again, Tom, we think we've been rather fulsome in the guidance that we've provided you and your colleagues with regards to our performance next year and our aspirations around 4%- 6% revenue growth. High single, low double-digit operating income growth, and an equal growth in our free cash flow available to our shareholders. I won't get into the details around the syndication yields or origination numbers. Again, we think the guidance that we provided is sufficient to give you some guideposts in which to properly evaluate the performance of the business and to set expectations.
Okay, understood. Thanks.
The next question comes from Jaeme Gloyn with National Bank Financial. Please go ahead.
Yeah, thanks. I'll just keep it to one question here. Just thinking through the capital-lighter model, and with the leverage right now at 5.7 times. I think the Street and analysts and maybe investors are getting pretty comfortable with your ability to operate the business at this level. What are your considerations, or are you thinking through the possibility of potentially increasing leverage as we become more comfortable with you operating here? Any thoughts around that?
Having just attained this, we'd like to live with it for a little bit. This was fairly monumental for us to take this from 7.8 down to 5.7 over the span of the last couple of years. For us, the work that we've done to understand our ideal capital structure and to attain the most efficient capital structure for the business, which strongly suggests in and around six times tangible leverage is where we'd want to be. Plus or minus six times is where we are targeting. Came up a little shy at year-end based on some favorable movement in the U.S., Canadian dollar exchange rate. Brought that a little lower than what we would have otherwise anticipated. We'd see no reason to move off of that objective of in and around that six times tangible leverage.
Recognizing that that gives us the investment-grade balance sheet, which in turn gives us good standing with our clients looking to have their portfolio financed by an investment-grade entity. Gives us ready access to capital and cost-efficient access to capital, which allows us to be more competitive as we look to convert self-managed fleets as well as to steal share from competitors.
Okay, thanks.
There are no more questioners in the question queue. This concludes the question and answer session. I would like to turn the call back over to Mr. Forbes for any closing remarks.
Just wanted to say thank you. Appreciate your continued interest and support, and we'll look forward to conversing with you over the next couple of days to attend to any questions that we weren't able to get to tonight. Thanks all.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.