Q3 2024 U-Haul Holding Company Earnings Call
Presentation portion of the call with an opportunity for question and answer the end if you'd like to ask a question. Please press star followed by one on your telephone keypad.
I would now like to turn this conference call labor to all host.
Misha virtually vice president of corporate development and Investor Relations. Please go ahead.
Good morning, everyone I would like to welcome you to Cineplex's fourth quarter 2023 earnings release Conference call hosted by Ellis, Jacob President and Chief Executive Officer, and Gordon <unk>, Chief Financial Officer before we begin let me remind you that certain statements being made are forward looking and subject to various.
Risks and uncertainties such forward looking statements are based on management's beliefs and assumptions regarding the information currently available actual results may differ materially from those expressed in forward looking statements information regarding factors that could cause results to vary can be found in the company's most recently filed annual information form and managements.
Good morning, My name is Laura and I will be your conference operator today at this time I would like to welcome everyone to the U haul holding company third quarter fiscal 2024 Investor Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer.
<unk> analysis. Following today's remarks, we will close the call with our customary question and answer period I will now turn the call over to Ellis Jacob.
Today's session.
Thank you Marisa good morning, and welcome to our Q4 2023 conference calls today Gordon I look forward to recapping. The notable year, we had in 2023.
I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star followed by the number killed. Thank you Mr. Sebastian <unk> you may begin your conference.
As I reflect on the year Cineplex truly demonstrated why we are north American leader in entertainment and media, we delivered a strong Q2 in a record breaking Q3, the best in our company's history. During 2023 Cineplex delivered strong year over year revenue growth of 20.
Speaker Change: Good morning, and thank you for joining us today welcome to the U haul holding company third quarter fiscal 2024 investor call before we begin I'd like to remind everyone that certain of the statements. During this call, including without limitation statements regarding revenue expenses income and general growth of our business may constitute forward looking statements within the meaning.
6% and nearly tripled its adjusted EBITDA to 157 4 million from continued operations.
Speaker Change: The safe Harbor provisions of section 27.
Of the Securities Act of 1033 as amended and section 21 E of the Securities Exchange Act of 934 as amended.
Our adjusted EBITDA margin significantly improved to 11, 3% in 2023 compared to four 9% in 2022, and even approaching the 2019 margins of 14, 1%.
Forward looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.
Speaker Change: Certain factors could cause actual results to differ materially from those projected.
For a discussion of the risks and uncertainties that may affect the company's business and future operating results. Please refer to the Companys public SEC filings and Form 10-Q for the quarter ended December 31, 2023, which is on file with the U S Securities and Exchange Commission.
These results prove we have the ability to succeed amidst an evolving entertainment industry. Despite the anticipated content supply challenges, which the entire exhibition industry faced we outperformed the North American box office relative to 2022 by 785 basis points.
Speaker Change: I'll now turn the call over to Joe showing chairman of U haul holding company.
Yes.
One of the reasons, we are outperforming our peers in box office performance is by giving our guests more reasons to keep coming back our alternative content strategy played an integral parts navigating last year's content supply ships 2023 marked our biggest year for international programming.
Joe: Well. Thank you all for joining us again for our quarterly report.
Joe: There have been a few positive signs in the consumer demand for either truck sharing our self storage rentals.
Joe: Yes.
Our U box continues to grow but it is simply too small part of the total market to be considered as an indicator.
Delivering 10% of Cineplex's annual box office revenues with firms like Baton animal and carry on charter three this compared to our North American peers, who generated only 4% of their box office revenues from international content.
Joe: Moving and storage demand.
We are making some modest progress in back filling the void created in our fleet.
Joe: By vehicle manufacturers on willingness to build sufficient truck product base.
Joe: Basically since the beginning of Covid.
In addition, the partnerships we have with the met opera National Theatre strip product stage productions sporting events and concerts allowed us to bring more immersive cinematic events and coming to our theaters.
Joe: This will take several years to work its way completely through the fleet, assuming someone will build trucks.
Joe: We continue to build and buy sell storage.
Joe: I believe the right locations managed over a period of years.
It was undeniably the Europe Taylor Swift with the Taylor Swift Arris to a concert film generating over $180 million in domestic box office revenue and taking top spot of Cineplex is number one title in Q4 2023.
Joe: Are a good investment for the company.
Joe: Everybody has their own opinion of what's going on in this market.
Joe: Rising costs continue to pressure U haul and our customers.
The remarkable response to this concert film allowed guests to re imagine their local theaters as a place to enjoy the ultimate concert experience with friends dancing and singing along with their favorite artists.
Joe: We are often unable to accurately predict future costs are to hedge them.
Joe: <unk> strategy is to try to absorb.
Joe: All legitimate cost into the present period.
In addition, the expansion of our distribution business Cineplex Pictures allows us to source content from all over the world and distribute to Canadian audiences like Oscar nominated Japanese fund the boy into herein.
Joe: Rather than try to postpone them.
Joe: Into an uncertain future.
Joe: Okay.
Joe: Our insurance subsidiaries are solid.
Joe: Mark I do converge, the president and chairman of our Oxford Life Insurance group.
Last year, we announced the Canadian theatrical distribution agreement with Lionsgate towards 2023 film slate, bringing 11 titles to the big screen.
Mark: He will be retiring this quarter after 45 years of leadership to this company.
They have extended the agreement for another year and Cineplex pictures looks forward to upcoming bunkhouse horror film imaginary and next summer's borderlands based on one of the best selling video game franchises of all time, starring Cate Blanchett, Kevin Hart and Jack Black.
Mark: Mark will remain on the board of directors.
Joe: I will now pass the call to Jason Berg for some analysis of the numbers. Thanks, Joe.
Jason A. Berg: Yesterday, we reported third quarter earnings of $99 million compared to $199 million for the same quarter last year.
What's also setting us apart from our peers as no. Other exhibitor has a loyalty program like <unk> plus as it's both a great engagement to enrich and consumer data <unk> plus as Canada's most robust lifestyle loyalty program with over 14 million members and growing.
Jason A. Berg: This translates to earnings per share of <unk> 51 per nonvoting share this quarter compared to $1 two for nonvoting share in the third quarter of last year.
Jason A. Berg: Beginning with equipment rental revenue results compared to the third quarter of last year, we had a $59 million decrease which is about a 7% decline.
Now with the Empire grocery and home hardware as new retail partners, we have gained significant opportunities to attract new guests.
Jason A. Berg: Over the last 18 months, we've had a $379 million decrease in U move revenue, giving back a portion of the $1 $4 billion of increases we experienced the eight quarters before that.
Meaning we've converting non movie goers into moviegoers in fact, 25% of <unk> plus members, who visited Cineplex in 2023 made their first visit as the <unk>.
Jason A. Berg: To give you a better sense of how much of those revenues, we have maintained so far compared to the last quarter.
Jason A. Berg: Of the pre pandemic.
Jason A. Berg: The third quarter, which ended December 31 2019.
Jason A. Berg: We've increased our third quarter revenue results by over $218 million third quarter two years ago to today.
Jason A. Berg: We're on a compounded growth basis.
Speaker Change: I'm sorry.
Jason A. Berg: Four years ago.
Jason A. Berg: By nearly 8%.
Jason A. Berg: Average miles per transaction continue to decrease as customers are using our equipment on shorter mileage moves.
Jason A. Berg: On a positive note.
Jason A. Berg: Whereas transactions for the nine months are down a little over 3%.
Jason A. Berg: For the quarter, we were down just over 1%.
Jason A. Berg: In fact, while we still have a revenue decrease in the month of December transactions increased around 1% of the month.
Jason A. Berg: Unfortunately, we lost a bit of momentum in January as our results were undoubtedly affected by tough weather.
Jason A. Berg: Capital expenditures on new rental equipment for the first nine months.
Jason A. Berg: For $1 $350 million.
Jason A. Berg: That is a $334 million increase compared to the same period last year.
Jason A. Berg: We've increased our fiscal 2020 for full year net capex projections.
Jason A. Berg: From $870 million to approximately $930 million, so thats gross purchases net of proceeds.
Jason A. Berg: Proceeds from the sales of retired equipment are up $68 million for the nine months to a total of $595 million.
Steven: The increase in proceeds is coming from additional truck sales.
Steven: Average sales price per unit has been steadily declining.
Steven: At our current pace. This year, we should make maybe a 2500 to 3000 truck dent in our rotation backlog.
Steven: And our teams have been increasing the pace of truck retirements, taking out older equipment.
Jason A. Berg: For self storage revenues were up $20 million or 11% for the quarter.
Jason A. Berg: We increased the total number of occupied rooms, and we're also able to improve average revenue per occupied square foot by almost 4%.
Jason A. Berg: The year over year improvement in revenue per foot has been coming down as we progress through the year.
Jason A. Berg: Our occupied unit count at the end of December was up nearly 29000 units compared to the same time last year.
Jason A. Berg: Over that same timeframe, we've added 42000, new units into the inventory at this differential.
Jason A. Berg: Led to the our average all in occupancy ratio during the third quarter to decline.
Jason A. Berg: 282%.
Jason A. Berg: The same moderation in occupancy can be seen in the same store grouping of these properties that we put in our press release with.
Jason A. Berg: With an occupancy decrease of 210 basis points to 92, 9%.
Jason A. Berg: Our asking rents for new customers on average across the entire portfolio or up a little less than 3% year over year.
Jason A. Berg: During the first nine months of this year, we've invested $969 million in real estate acquisitions.
Jason A. Berg: Along with self storage in U box warehouse development.
Jason A. Berg: A $35 million decrease over last year.
Jason A. Berg: Spending on acquisitions of new properties has declined while investment in development of the existing properties that we own has increased.
Jason A. Berg: During the quarter, we added a little over 1 million, new net rentable square feet and we have just under 8 million square feet being actively worked on.
Jason A. Berg: Operating expenses in moving and storage increased $37 million for the third quarter.
Jason A. Berg: First the good news from the quarter was that the fleet repair and maintenance was down $3 million.
Jason A. Berg: Conversely, we had a $13 million increase in personnel.
Jason A. Berg: In the quarter also included approximately $17 million of costs that I would consider nonrecurring in nature.
Jason A. Berg: A large vendor rebate that we netted against cost last year that was a onetime event combined with some credit card accrual charges that were recorded this year that I would not expect to recur.
Jason A. Berg: Property taxes also were up about $4 million.
Jason A. Berg: We have made progress in deploying some of our cash balances to new investments but.
Jason A. Berg: But we still intend to remain conservative in regards to cash and liquidity as of December 31. This year.
Jason A. Berg: 2023.
Jason A. Berg: Cash along with availability from existing loan facilities at our moving and storage segment totaled $2 $211 million.
Jason A. Berg: With that I would like to hand, the call back to our operator, Laura to begin the question and answer portion of the call.
Laura: Thank you Sir at this time I would like to remind everyone in order to ask a question. Please press <unk>.
Laura: Then the number one on your telephone keypad.
Jason A. Berg: Star then the number one we'll pause for just a moment to compile the Q&A roster.
Jason A. Berg: Right.
Jason A. Berg: Okay.
Jason A. Berg: Okay.
Jason A. Berg: Our first question comes from the line of Steven Ralston from box. Please go ahead.
Jason A. Berg: Okay.
Speaker Change: Good morning.
Speaker Change: Good morning.
Speaker Change: I actually all we have one question and I'll preface it by saying.
Jason A. Berg: Okay.
Jason A. Berg: The top line to me is roughly in line with expectations.
Jason A. Berg: It follows.
Jason A. Berg: What management has been saying and what I also believe is that.
Jason A. Berg: Still on year historical growth rate.
Jason A. Berg: Accurate.
Jason A. Berg: Paul.
Jason A. Berg: That caused by the pandemic.
Jason A. Berg: And given the economic environment.
Jason A. Berg: <unk>.
Jason A. Berg: With that premise.
Jason A. Berg: It's something that I mentioned in the last earnings call.
Jason A. Berg: A quite detailed earnings model and everything seems to be in line, except this one particular metric that I monitor.
Jason A. Berg: And that's looking at the operating expenses for moving in storage.
Jason A. Berg: And it's the margin for that so you divided by the revenues of the self moving equipment rentals.
Jason A. Berg: And it's popped up considerably and.
Jason A. Berg: Hi.
Jason A. Berg: I have not been following U haul for a very long time only five years.
Jason A. Berg: And.
Jason A. Berg: It's the highest margin.
Jason A. Berg: We will have expenses relative to revenues in that.
Jason A. Berg: Previous five years.
Speaker Change: I looked at the 10-Q and you didn't mention it.
Jason A. Berg: You attributed to personnel costs property taxes, and building maintenance and as you just said property taxes, the only went up $4 million.
Jason A. Berg: Please go ahead.
Jason A. Berg: You'll see that increase in our margin.
Jason A. Berg: What is concluding its in personnel costs.
Jason A. Berg: It seems like it's inflationary in nature.
Jason A. Berg: And just like you to dive a little deeper in fees operating expenses and <unk>.
Jason A. Berg: What's driving this increase.
Jason A. Berg: Because the third fiscal quarter, it's relatively a clean quarter.
Jason A. Berg: Given it.
Jason A. Berg: Seasonal slowness relative to some of the others.
Speaker Change: And it just kind of sticks out at me that.
Speaker Change: Operating expense number is accelerating higher than normal.
Jason A. Berg: Okay.
Speaker Change: I'll start with at this Jason so.
Jason A. Berg: So first our largest expense personnel costs.
Jason A. Berg: That's been more of a function of the the decrease in revenue and there has not been.
Jason A. Berg: Coincident decrease in personnel costs.
Jason A. Berg: We <unk>.
Jason A. Berg: Tried to become a little more efficient at the home office with staffing and the head count. This year is only up about 2%. So we are not growing.
Jason A. Berg: The size of the personnel so much that's more a function of the revenue just has been coming down.
Jason A. Berg: And we have the capacity for more business there.
Jason A. Berg: The repair and maintenance this quarter compared to last year is down if you were to go back four years, it's up probably $70 million.
Jason A. Berg: On a quarterly basis, so that's still higher than what we would expect.
Jason A. Berg: As we put on the new equipment and you see the depreciation expense climb associated with the new equipment, you would normally expect to see the repair and maintenance.
Jason A. Berg: Come down in the utilization of the fleet increase and both of those have been lagging this time around.
Jason A. Berg: And I did point out in the comments there are about.
Jason A. Berg: Little over $17 million of what I would say are kind of nonrecurring cost in this quarter, but I think youre speaking to trend a little bit more than just this quarter.
Speaker Change: Yes, I mean everything else is the quarter is it's actually pretty good.
Speaker Change: Considering the environment and.
Speaker Change: Kind of what youre dealing with.
Speaker Change: I'm just looking at this personnel costs, while I guess it.
Speaker Change: It might be something else.
Jason A. Berg: 2% is at the head count or is that the.
Jason A. Berg: Expenses.
Jason A. Berg: In other words, you might have to be paying employees.
Jason A. Berg: A higher level of compensation annually.
Jason A. Berg: In this environment.
Jason A. Berg: That was head count.
Jason A. Berg: He was head count okay.
Jason A. Berg: Our compensation going up higher than usual.
Jason A. Berg: I wouldn't classify higher than usual, it's been going up the last several years on a per hour basis I think for the nine months I think we're up somewhere close to $8 million to $10 million on medical benefits.
Jason A. Berg: And the rest is as wage activity.
Speaker Change: Okay well.
Speaker Change: Thank you for answering my question.
Speaker Change: All in all good quarter.
Speaker Change: I just got a little concerned about the expenses. Thank you.
Speaker Change: Thank you.
Speaker Change: Question comes from the line of Karl <unk> from Wolfe Research. Please go ahead.
Karl: Hey, guys. Thanks for the time I guess I'll start with a question I asked last quarter or two but just trying to think on a like for like basis. What you think the self moving equipment rentals would've been down if you remove the new stores you would have added year over year.
Karl: And I guess more broadly how does that compare to the prior quarter are you seeing any sort of sequential improvement.
Speaker Change: I don't know Jason has a number of I would say.
Speaker Change: Probably.
Speaker Change: 1% or less.
Speaker Change: Barry.
Speaker Change: You can't get as harder number on that as you might think you'd be able to get.
Speaker Change: So kind of another way to phrase that question is.
Speaker Change: Good.
Speaker Change: The new stores cannibalize same store sales.
Speaker Change: They add to it.
Speaker Change: I think they were.
Speaker Change: Probably about half the revenue they generated was additive so, but that's going to be kind of my.
Speaker Change: But I can't give you a low.
Speaker Change: A hard number on that but that's something of course to be concerned of.
Speaker Change: As you know we also go to the customer via what we call a U haul dealer so trying to balance.
Speaker Change: Total revenue and then the source of that revenue, where the customer encounters the product.
Speaker Change: Of.
Speaker Change: Of course, a concern it's something we watch and stores did a little bit more of the business.
Speaker Change: Then they did a year ago.
Speaker Change: So.
Speaker Change: Since you could say that cannibalized, a little bit into <unk>.
Speaker Change: Dealer business.
Speaker Change: So.
Speaker Change: Two if we had stripped the stores out hadn't done them.
Speaker Change: I think we might have seen a percent maybe.
Speaker Change: Maybe maybe not that much on what Jason.
Speaker Change: Every couple of years, we do a study of this to see what happens when we put a new company location and the effect. It has on dealers that that hasnt been done now for a couple of years, but what we what we have found historically is that.
Speaker Change: The entire market ends up coming up after we put a company location and so.
Speaker Change: My my generalized response to that is.
Speaker Change: It.
Speaker Change: Yes.
Speaker Change: It does it shouldnt have a big negative effect and I haven't seen a market, where we've put a company location where.
Speaker Change: The overall market has gone down as always everyone I've ever looked at it's always gone up.
Speaker Change: That's really helpful.
Speaker Change: I guess shifting gears, just specifically myself moving business from January I know you mentioned it was.
Speaker Change: It didn't have an easy month, but also weather related I guess I'm just curious maybe as we work through that are you seeing any incremental improvements I know it's early in February, but just trying to get a better feel for.
Speaker Change: I guess, how you're expecting that portion of the business to trend throughout this quarter.
Speaker Change: Course.
Speaker Change: Hope Springs Eternal and of course anybody who tells me the weather caused them to be down business.
Speaker Change: Basically you get the tongue lashing, so we're not relying on that but I think that that we really did have some of that we had a pretty decent.
Speaker Change: First 10 days of February but February is another one of those months as some of them have done.
Speaker Change: Every six or seven years, we get slaughtered either in January or February we got slaughter to January could we get slaughtered in February it's still could happen.
Speaker Change: California had just had a another runoff.
Speaker Change: Nasty weather, but.
Speaker Change: So far.
Speaker Change: But again I am hopeful constantly so I might be the wrong person to statements. It doesn't look like there's anything.
Speaker Change: Negative in the market other than weather, although it is not a competitive force happening people as Jason commented are driving fewer miles and we've seen this over 40 years when people are.
Speaker Change: Comfortable with.
Speaker Change: Economic uncertainty they tend to drive our truck shorter distances.
Speaker Change: We've seen that repeat and repeat and theirs.
Speaker Change: Yes.
Speaker Change: Some kind of a little malaise.
Speaker Change: Over consumers' heads right now.
Speaker Change: Don't have an explanation for totally but.
Speaker Change: Until that kind of turns to a little bit more positive view.
Speaker Change: I don't expect them to drive more miles no I don't think we're losing long rentals to competitors. We look at those kind of things we don't see that happening. We just see that people are just.
Speaker Change: A little hesitant.
Speaker Change: When they get that way, it's kind of logical they don't want to move as far they don't want.
Speaker Change: Although still move because they got married but they just don't move in.
Speaker Change: To a distance city. So all these things that drive.
Speaker Change: These life events, they continue on but they're not quite as adventurous as they might have been.
Speaker Change: When they were more.
Speaker Change: <unk> built more.
Speaker Change: Positive about their circumstance.
Speaker Change: And this is Jason if I could just.
Jason A. Berg: I think people's definitions of slaughter might be Barry.
Speaker Change: For us Thats, not an accounting term, okay, probably closer to say like a five or 6% decrease.
Speaker Change: No that's really helpful.
Speaker Change: I guess, one specifically for Joe the press release I actually thought the commentary was pretty positive in the beginning you mentioned that you are seeing pockets of modern very modest growth in certain markets and product lines can you maybe go into some more detail on this and then what markets in particular are you seeing improvements in.
Speaker Change: Well, it's kind of a.
Speaker Change: Red State Blue State analysis about the long and short of it probably I think we are probably the same as every other business that restaurants to tell you the same thing.
Speaker Change: So where we have.
Speaker Change: We'll just take Tennessee Health, Tennessee is just a wonderful place to do business today.
Speaker Change: And just with just what it is.
Speaker Change: I think everybody sees that.
Speaker Change: We'll see how it goes.
Speaker Change: We.
Speaker Change: We kind of end up reflecting NCC someplace like Tennessee in your thinking.
Speaker Change: Push ahead, but we don't always get.
Speaker Change: Opportunities don't always present themselves only.
Speaker Change: Better markets.
Speaker Change: We're also seeing a lot of.
Speaker Change: We're going back through and sorting back at a very detailed level, where do we have the equipment.
Speaker Change: Or do we have the outlet.
Speaker Change: Population is.
Speaker Change: Is still shifting in this country not like it did during the pandemic, but people are moving around.
Speaker Change: As you know, there's a tremendous amount of.
Speaker Change: Inborn migration and.
Speaker Change: These people are creating new.
Speaker Change: Likely new pockets of.
Speaker Change: Managed to you whether you want to call. It so we need to keep adjusting our basis.
Speaker Change: To market to those people, we largely do that in the initial phases.
Speaker Change: With our independent dealers because there.
Speaker Change: They are in that market running landscaping business or something else. So they make a good combination with U haul.
Speaker Change: But then we'll start to sort of communities to come a little more.
Speaker Change: Stablish, we May go ahead and put.
Speaker Change: The company operation in that area. So.
Speaker Change: Other than just saying.
Speaker Change: With nobody wants to hear Red State Blue State I would just say.
Speaker Change: Yes, it's communities growing that maybe we werent aware of last year.
Speaker Change: My best information from.
Speaker Change: What we call our local traffic, we have 200 traffic offices across the country.
Speaker Change: The people there.
Speaker Change: See trends first where do they see them.
Speaker Change: To alert us and say what does.
Speaker Change: It looks like it's going to go positive.
Speaker Change: A portion of Florida has done great.
Speaker Change: Texas has done great.
Speaker Change: It's about what you think.
Speaker Change: I would like to say that we had some marketing initiatives.
Speaker Change: Catching fire and I don't think we have a if we do I'm not aware of it I guess, what I'd say other than equipment distribution with us. It's so important to have the customer type.
Speaker Change: They have the equipment.
Speaker Change: Where and when the customer wants it so.
Speaker Change: Just because we only equipment doesn't mean it's.
Speaker Change: That corresponds to where demand is.
Speaker Change: Big Big operation trying to get to that.
Speaker Change: Constantly trying to get it better and it's a constantly moving target because next week, we will have.
Speaker Change: Tens of thousands of trucks in a different spot than they were this week.
Speaker Change: So.
Speaker Change: Constantly tried to re optimize that.
Speaker Change: Maybe just shifting gears to storage here.
Speaker Change: Just big picture are you seeing any change in your average length of stay and I know rate increases that are being sent out are obviously topical in the storage industry. I'm. Just curious are you seeing any change in how customers are reacting to the rate increases you are sending out.
Speaker Change: I'll say I'll address the rate increases.
Speaker Change: We continue to send rate increases that's not what's going on in the industry we have nowadays.
Speaker Change: <unk>, 50% off anymore.
Speaker Change: And thats unsettled the customer because they want to know why.
Speaker Change: Store.
Speaker Change: Rex.
Speaker Change: Art is half our price over half our price because they are going to Jefferies. So hard 90 days from now youre going to hedge kind of spec.
Speaker Change: We don't do that to people, we considered anti consumer activity and we think its destructive of the industry but.
Speaker Change: Everybody has their own.
Speaker Change: View of that.
Speaker Change: So whipsawing rates.
Speaker Change: Youre, making a rate change more than 5%.
Speaker Change: You would have to explain to me why.
Speaker Change: Something was wrong with your original pricing.
Speaker Change: The.
Speaker Change: Yes.
Speaker Change: Feedback so youll see us typically we're doing.
Speaker Change: I think we did 3% is it about what our asking rate is now over coal portfolio over the whole portfolio.
Speaker Change: Okay.
Speaker Change: The storage market is tighter.
Speaker Change: By far and it was two years ago by far.
Speaker Change: And so you are having to look to your knitting.
Speaker Change: Kind of our game I'd like to believe I'd like to believe that comes up.
Speaker Change: We start to dig in energizes us.
Speaker Change: And so that's what we're attempting to do.
Speaker Change: Offer a better.
Speaker Change: Overall experience for the customer.
Speaker Change: But not necessarily by slashing pricing.
Speaker Change: Maybe we could increase value group.
Speaker Change: Push value real hard.
Speaker Change: Thank you.
Speaker Change: This chase and I haven't seen any any dramatic shifts in the average stay.
Speaker Change: Really helpful. And then last one for me I guess, just another big picture question, but obviously you guys have a lot of excess liquidity on your balance sheet the farm cash.
Speaker Change: I guess I'm just curious how we should think about the utilization of that especially if you take a look forward rate curve is coming down.
Speaker Change: The interest income won't be as favorable as just kind of curious where your heads are at on cash utilization.
Jason A. Berg: Well this is Jason.
Jason A. Berg: We've worked it down.
Jason A. Berg: Give or take.
Jason A. Berg: Loss to $1 billion here from like say a year ago January till now so we're all about.
Jason A. Berg: Getting that reinvested back into the into self storage.
Jason A. Berg: I would say that.
Jason A. Berg: That right now we have.
Jason A. Berg: Somewhere close to.
Jason A. Berg: Our north of $1 billion six and.
Jason A. Berg: And assets.
Jason A. Berg: Would include cost of acquisition and construction put into them so far that.
Jason A. Berg: Are either haven't.
Jason A. Berg: Opened are not fully opened or have additional phases remaining so I wouldn't call them.
Jason A. Berg: Fully realized yet so that there is quite a bit going on there.
Jason A. Berg: <unk> been sitting out on the real estate financing side. So we do have.
Jason A. Berg: The ability to raise quite a bit of cash at some point, if we need to but as you can see where we're not doing that right now.
Speaker Change: Great. That's it for me thanks for the time guys.
Speaker Change: Our next question comes from the line of Jamie Wilen from knowing that as Frank. Please go ahead.
James R. Wilen: Hey, Phil It's Joe you've always said that.
James R. Wilen: The fleet utilization for the trucks is one of the most important metrics you look at with transactions being.
James R. Wilen: Lets say relatively flat.
James R. Wilen: I realize you have to upgrade the fleet to bedroom bedroom units all the time.
James R. Wilen: Why or why are we increasing the size of our fleet while transactions are flat if we're trying to.
James R. Wilen: Grace that fleet utilization percentage.
James R. Wilen: It's really because our.
James R. Wilen: Deletions have quite okay.
James R. Wilen: So in other words is this is all about.
James R. Wilen: What goes on the top and what goes out of the box.
James R. Wilen: We have.
James R. Wilen: The bottom still needs to come out.
James R. Wilen: Some of them.
James R. Wilen: Just <unk>.
James R. Wilen: Grounding.
James R. Wilen: We believe it's better to rent a different truck.
James R. Wilen: Pending sale of course that does.
James R. Wilen: Small adjacency face because we're just park.
James R. Wilen: But.
James R. Wilen: Until we can see.
James R. Wilen: Or that's kind of what happens now.
James R. Wilen: At the same time.
James R. Wilen: Down completed our pickup fleet, maybe 'twenty 300, 7500, Jason do you know where we are exactly.
Speaker Change: Alright and of our fleet, mostly pickups and cargo vans is down close to 4000 units.
Speaker Change: Vans pickups were down almost 4000 units.
Speaker Change: And I think that that's all.
Speaker Change: We can most readily respond to its more liquid recently.
Speaker Change: Are those trucks go to the auction.
Speaker Change: <unk> dealers and such and so thats.
Speaker Change: A much bigger market.
Speaker Change: <unk>.
Speaker Change: So our.
Speaker Change: Van trucks.
Speaker Change: Typically we sell.
Speaker Change: <unk>.
Speaker Change: So it is not.
Speaker Change: From auction, where you can clear 50 trucks a day.
Speaker Change: Go out dribs and drabs.
Speaker Change: Since we stopped selling during the pandemic.
Bob: Alright, Bob.
Bob: Fawcett with buyers and buyers.
Bob: Other sellers of whatever buyers do so.
Bob: And the last.
Bob: 12, 18 months, we've tried to.
Bob: Yes.
Bob: Coming on but it is coming on slower than we expected so I don't.
Bob: I think when we calculate utilization you correct me, Jason I believe we calculate all fronts.
Bob: If it's actually in the late those arent right, but if it's but if it's but if you haven't actually classify them and we have a lot or is it down then it watered down.
Bob: So I think where.
Jason A. Berg: Youre right, we have too many trucks.
Jason A. Berg: But I think it's because they are not sold yet because we have bought too many and.
Jason A. Berg: So we're still buying a license plate, but a bunch of this.
Jason A. Berg: Yes.
Jason A. Berg: Pending gotcha.
Jason A. Berg: Sale, and Thats, where it could be but it shouldnt be in the rentals.
Jason A. Berg: Alright your fleet.
Bob: Managers have declined a bit are you seeing any difference in the quality of the vehicles that you own that that wood.
Bob: Give you any.
Bob: Inclination that fleet maintenance and repair.
Bob: We will not be a rising triggered moving forward.
Bob: We're not that far along you saw our repair expense bloom, something like $200 million a year.
Bob: And that was because of the rod.
Bob: New vehicles and basically just like you have.
Bob: Family, If you will.
Bob: <unk>.
Bob: The mom and it goes to the data and then it goes.
Bob: And those are the Kid it has a lot of variable cost associated with it but not much fixed cost.
Bob: And Thats basically what's happened to a bunch of our trucks.
Bob: Depreciated now do you want to drive it another 1000 miles you got to pay for Spain.
Bob: Every thousand miles so.
Bob: Yes, we've seen some improvement you can debate it.
Bob: Blitzer.
Because that was what I was going to just ask about I know the.
The priority is to get the fleet.
Rotated buildout with self storage and getting that done and so I was curious about.
Then the cost base, we've seen a lot of businesses through this period, where they had a lot of revenue from.
Kind of the Covid changes.
And then you are lapping that and you have some excess cost in the business in certain places are you all not in that position I mean, I know you all are always very mindful of cost, but just curious about how the cost base stacks up versus what you would expect kind of given how youre looking at the revenue.
Trajectory over the last four years and normalizing now.
Well I think youre going to see personnel.
Touch area for three or four years.
There's a whole bunch of initiatives coming on.
State and possibly at the federal level Thats going to.
Massively in sleep wages, and maybe Thats, a public policy I don't know.
But.
Question is of course can we.
Earn that back through some value add with the customer or somehow.
The customer anticipate paying that.
That's all kind of to be determined.
If you've followed the states the states are.
So theres been a lot of press about to California's bumping fast food wages.
<unk> fast food, Idaho, why they're bumping AMA.
Obviously political.
That will.
Ricochet through my Operation also in California, let's see.
So we're.
Labor is very fungible and so.
Yes.
Can't stay competitive leave me and start making hamburgers, okay. So.
Just to just the truth.
I think I think we've been through similar things, but theres quite a swarm of this coming at US right now and.
And I would expect it to keep this trend to go for three or four years I don't have them.
Crystal ball, obviously, but theres so many of these initiatives.
Down to cities.
New York is just replete with.
Minimum wages for salary people.
First a couple of times I heard that what do you mean minimum wage for salaried people.
Okay.
I don't know can you quoted Jason I believe it's hovering around 80 brand right now.
In New York.
You can't I don't take that as the Bible.
The minimum wage used to be about $34000.
For salaried people. So it was irrelevant, but now they're actually cranking this and it's going to affect places because.
Does it does there's different cost of living and maybe that maybe that makes sense.
San Francisco is not going to make quite as much sense in Alabama.
Gary through so there's a lot of this that's just going on thats pure inflationary driven by legislation.
And we're going to deal with it we have initiatives.
All the time, which is what I call productivity enhancing initiatives, which is an attempt to.
To get.
Our process to accomplish.
Task instead of the human.
When we have.
Made huge gains on that but not enough to.
Totally outweigh increased.
Sebastian: Personnel costs so.
Sebastian: We're still chasing it in my judgment.
Sebastian: We're in the midst of a.
Sebastian: Big revamp, which will probably take three years on our.
Sebastian: Point of sale orientation, but the net effect will be to have customers.
Speaker Change: Do more self service basically we get a lot of self service. We've quoted you before I think.
Speaker Change: Okay.
Speaker Change: Sebastian you press released recently, but we've done more than.
Speaker Change: $5 million will be called 24, 7%.
Speaker Change: Rentals.
Speaker Change: Where the customer is.
Speaker Change: Self dispatched itself returned.
Speaker Change: Where before it would have been.
Speaker Change: Somebody will somebody on our payroll or one of our dealers because it affects them equally who would had to comps that the customer accomplishes that that's a net savings for everyone. So long as the customer is good to go on it.
Speaker Change: Everybody Dave Buck.
Speaker Change: We're focused on this.
Speaker Change: Okay.
Speaker Change: I keep thinking that we're we've gotten everything we can and then they find something else. We're doing this kind of ignorant if you put it under a <unk>.
Speaker Change: Comprehensive review is located we can quit doing this or we can change how we do this.
Joe: Stabilize the.
Joe: Personnel input.
Joe: Without increasing a technology input a greater amount than we reduced the personnel.
Speaker Change: Going on all the time, but.
Joe: But we've been chasing that we haven't been looking at.
Joe: Okay, but the cost base, where it is Joe Youre not thinking that this is way out of line and we need to take action yet those are just ongoing pressures.
Joe: Yes.
Joe: So you are talking to we want to.
Joe: Decimate the ranks no reason to decimate the range.
Joe: You will you will lose business if you decimate the Rex can we run our own call centers can we tune that up Ohio, we tuned it up a bunch over the last 12 months.
Joe: Ratio of people too.
Joe: To calls to reservations, we've tuned it up a bunch.
Joe: And we are going we are continuing to do that and I expect to see.
Joe: Double digit increases in our productivity in that area alone.
Joe: This year, but.
Joe: At the end of the day.
Joe: Well, it's really a vehicle you really do have to clean up when it comes back you're really yet.
Joe: Smith.
Joe: Now, we've got customers parking vehicles and a lot of them are damn happy to do that.
Joe: Okay.
Joe: Tell him exactly where to put it electronically and they put it.
Joe: So we had zero of that business five years ago. Today, we have a considerable amount of that business every time I get a customer to do that.
Joe: They experienced no waiting in line and our personnel experienced less physical work so.
Joe: Yeah.
Joe: Very very focused on that but again.
Joe: On balance, we're chasing and not leaving it I would wish I could report.
Mark: Head of it.
Mark: Yes.
Joe: Welcome.
Mark: It hasnt happened, but.
Mark: Okay.
Mark: We are hard on it and I would say compared to our.
Mark: Peer groups.
Mark: At or ahead, I think both in the self storage and the self move industry.
Jason A. Berg: This we do a tremendous amount of customer.
Jason A. Berg: Customer self move ins and outs and self storage.
Jason A. Berg: We don't call that contactless or unmanned but.
Jason A. Berg: It's a version of that every time you get the customer.
Jason A. Berg: To do something if the customer considers that in their best interest.
Jason A. Berg: We all benefit.
Jason A. Berg: And so we are in the do it yourself businesses, both our self storage and our software with the do it yourself.
Jason A. Berg: So most of our customers.
Jason A. Berg: <unk> are willing to balance out they do a little bit of effort and we reciprocate suddenly with them when they called out a fair trade.
Speaker Change: Okay, Yeah that makes sense.
Speaker Change: And then just I know I've asked this before so household formation.
Jason A. Berg: Existing home sales obviously all.
Jason A. Berg: We.
Jason A. Berg: But what youre seeing in the data continues to indicate yours transactions are more tied to the consumer and just economic general economic activity consumer confidence versus the housing market being a big driver here.
Jason A. Berg: Yes.
Jason A. Berg: This is Jason.
Speaker Change: We are excited to see that.
Jason A. Berg: Last couple of reports on consumer confidence that should based on what we've seen historically that that should.
Jason A. Berg: To be a positive indicator for us and it's.
Jason A. Berg: It's not a it's not a great correlation but its the closest correlation we found so I think that that can't hurt and and as far as the housing market goes.
Jason A. Berg: If that opens up it it can't hurt us.
Jason A. Berg: In order to really help us so.
Jason A. Berg: On those fronts I think were looking at a couple of potential tailwind here.
Speaker Change: Yeah, but it's not the.
Speaker Change: You can't put your finger on and say, yes. It is clear that housing starts moving up and down just has a big driver to the one way moves.
Jason A. Berg: That works.
Jason A. Berg: We have so much noise right now coming out of Covid and the changing dynamics of work from home, it's hard to isolate any one of these variables right now there's so many things happening.
Jason A. Berg: Yes, yes, okay alright.
Speaker Change: Alright, Thats all from me I appreciate it.
Speaker Change: And we have our next question coming from the line of Steven <unk> from Oppenheimer. Please go ahead.
Steven: Good morning.
Steven: You continue to see weakness in one way transactions can you comment a little on the level of transactions compared to 2019.
Steven: This compared to <unk>.
Steven: 2019.
Speaker Change: I'm not sure for quite back down to that level, but.
Steven: <unk>.
Steven: We've been working our way back to that.
Speaker Change: I would say I mentioned December we actually had a slight improvement in those so are my hope is that we are hitting the trough on the transactions here.
Jason A. Berg: Uh huh.
Jason A. Berg: The intown transactions are.
Jason A. Berg: Still ahead.
Jason A. Berg: And.
Speaker Change: I would want to verify the statement before I make it out so I will just say, where we're headed back towards that number I can't verify for sure for back to it yet.
Jason A. Berg: Okay.
Jason A. Berg: Okay.
Jason A. Berg: Okay.
Jason A. Berg: You mentioned the trucks that are pending.
Jason A. Berg: Pending sale, but still in the fleet is there.
Jason A. Berg: A big carrying cost and just to have those in the fleet, while they're waiting sale.
Jason A. Berg: No I think you can just take cost of capital cost interest stuff like that just crowed at it no there's not a big cost the worst thing is the battery goes dead yet.
Jason A. Berg: Put it back on a battery charger with no. They don't and they are not going down in value if anything they might be inching up in value, but I don't have enough.
Jason A. Berg: Frequency to where I'd be willing to predict that but I could see them because new truck prices are just astronomical.
Jason A. Berg: Typically that.
Jason A. Berg: Kind of.
Jason A. Berg: Rough way it flows through to used truck prices.
Jason A. Berg: So there's.
Jason A. Berg: Okay.
Jason A. Berg: There is no absolute.
Jason A. Berg: Certainties it doesn't cost us more to ensure that we're self insured essentially so unless we have an insurance event that the trucks parked it doesn't have an insurance event.
Jason A. Berg: Basically working it.
Jason A. Berg: Depreciation are and I think the depreciation is not a real cost I think the value of those flat or increasing.
Jason A. Berg: Then you have whenever capitals.
Jason A. Berg: Tied up in with whatever Jason wants to put on that for our costs.
Jason A. Berg: Okay.
Speaker Change: Okay. That's good.
Jason A. Berg: With the number of vehicles in the fleet growing and you talked a little bit about this earlier, but.
Jason A. Berg: Is there an opportunity to sort of switchover, one way vehicles that are older.
Jason A. Berg: Two the intown and local while the one way transactions are down or do you still need theyre available.
Speaker Change: We're doing exactly that.
Jason A. Berg: Okay.
Jason A. Berg: Yes.
Jason A. Berg: And for the older vehicles.
Jason A. Berg: Returns are more a function of lower utilization, because they're undergoing repair and maintenance are higher costs.
Laura: Youre, asking which vehicle is more profitable than new owner or when I guess that question as well.
Laura: Now more specifically for the older vehicles.
Jason A. Berg: <unk>.
Jason A. Berg: Are there returns more impacted by the downtime, while they are being repaired or the higher cost of the repair.
Jason A. Berg: Okay.
Jason A. Berg: It.
Steven Ralston: Many individuals truck that'll vary, but as we model them out our expectation and experience has shown that the increase in the.
Speaker Change: Increase in the maintenance costs the decrease in the utilization, which takes into account the days out of the fleet for repair.
Jason A. Berg: Largely offset by the significant decrease in the depreciation expense that we allocate towards them. So we reality, we depreciate these trucks down to 20% by the end of your 7% or 30%.
Jason A. Berg: And then and then after that we straight line them down to 15% over like the next eight years. So there's a very low <unk>.
Jason A. Berg: Low cost of depreciation there and.
Jason A. Berg: As a.
Jason A. Berg: Large cohort that largely ends up offsetting the increased cost and lower utilization.
Speaker Change: And to put a button on your other question I, just I just checked Stephen and.
Speaker Change: And trailing 12 months, one way transactions through December we're still ahead of where we were in December 2020.
Jason A. Berg: So.
Jason A. Berg: It hasn't it hasn't pulled back as much as I may have made it sound.
Jason A. Berg: We're still a ways ahead.
Speaker Change: Thank you for that and then just one question on <unk>.
Jason A. Berg: Storage.
Jason A. Berg: What percentage.
Jason A. Berg: New supply for the non same stores.
Jason A. Berg: <unk>.
Jason A. Berg: New supply versus expansion and struggling stores there.
Speaker Change: Okay.
Jason A. Berg: Okay.
Speaker Change: That's a good question I don't I haven't broken them out that way, but that's a really good question.
Speaker Change: I could age that portfolio and see ones that have been in there if they've been in there more than four years and haven't hit.
Jason A. Berg: Haven't hit stabilized pool, and then that would fall into that category of a lagging performer.
Speaker Change: I did not do that breakout this quarter.
Speaker Change: Okay, well, thank you guys.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time I'd now like to turn the call back over to management for final closing comments.
Speaker Change: Well thanks, everyone for the support we look forward to speaking with you. After we file our 10-K in May Thank you.
Speaker Change: Yes.
Speaker Change: Thank you, Sir ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Jason A. Berg: [music].