Q2 2025 U-Haul Holding Co Earnings Call
Collect-a-Look
J.B.M. iV. Dale Rodgers David Conrou Cah-Tae
Symphonic Ensamble
Speaker Change: Please stand by, your program is about to begin. If you need assistance on today's conference, please press star zero.
Speaker Change: Good day, everyone, and welcome to the U-Haul Holding Company second quarter fiscal year 2025 investor call.
At this time, all participants are in a listen-only mode.
Speaker Change: Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. Please note this call may be recorded. I'll be standing by if you should need any assistance.
Speaker Change: It is my pleasure to turn the conference over to Sebastien Reyes.
Sebastien Reyes: Good morning and thank you for joining us today. Welcome to the U-Haul Holding Company second quarter fiscal 2025 investor call.
Speaker Change: Before we begin, I would 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 of the safe harbor provisions section 27a of the Securities Act of 1933 as amended and section 21e of the Securities Exchange Act of 1934 as amended.
Speaker Change: For looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified [inaudible]
Speaker Change: Certain factors could cause actual results to differ materially from those projected.
Speaker Change: For discussion of the risks and uncertainties that may affect the company's business and future operating results, please refer to the company's public SEC filings and Form 10-Q for the quarter ended September 30, 2024, which is on file with the U.S. Securities and Exchange Commission.
Speaker Change: I'll now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company.
Joe Shoen: This is the time of year that we try to lock down our moving truck and trailer capex.
Sebastien Reyes: The big unknown for us is how successful the new administration will be in getting EV mandates turned around.
Sebastien Reyes: If the vehicle manufacturers can gain some certainty, that will help us with our strategy.
Rental income on moving equipment is up slightly.
Sebastien Reyes: My team has remained focused on this measurement, but we've been getting very modest results.
We are continuing to develop new storage product.
and bringing it online faster than we are filling units.
Sebastien Reyes: We are holding with our strategy, but we're watching this all the time.
Sebastien Reyes: Ubox, which is our service that it addresses both the time and the place needs of consumers.
is still making progress.
Sebastien Reyes: We have a significant infrastructure now in place that can reliably handle growth in our transactions, and I expect we're going to see some.
Sebastien Reyes: I have a word on the update on the acquisition of U-Haul holding company shares by Trion Fund manager LP Nelson Peltz.
Sebastien Reyes: As you know, Trion filed a 13-F with the SEC on August 14 regarding their U-Haul holding company stock holdings as of June 30.
Sebastien Reyes: Since then, Jason Berg has met once with Trion representatives and they have sent us a 31-page PowerPoint presentation. Trion has also communicated with other U-Haul holding company shareholders.
Of course, Trion's reputation precedes them.
Thank you.
Sebastien Reyes: We regularly consider multiple inputs and factors and will continue to do so.
We have our business plans in place.
Sebastien Reyes: There will not be any changes to our plans due to Trion's input.
Sebastien Reyes: Jason continues to work to get accurate helpful information to you as investors and he will continue to do so.
Many things are up in the air regarding consumer confidence.
Sebastien Reyes: We look forward to the new administration positively contributing to this, which will just make our ability to see the future a little more accurate.
Speaker Change: With that, I'll turn it over to Jason to take you through the numbers. Thanks, Joe.
Jason: Yesterday we reported second quarter earnings of 187 million dollars compared to 274 million dollars for the same quarter last year.
Jason Berg: From the earnings per share perspective, this translates to 96 cents per non-voting share.
Jason Berg: compared to $1.40 per non-voting share in the second quarter of last year.
Jason: Earnings before interest, taxes, and depreciation, EBITDA, at our moving and storage segment, and for the rest of this year I'm going to have to adjust to remove interest income from the prior year.
Thank you. Bye.
Speaker Change: That amount decreased by $18.1 million due almost entirely to operating costs that are unlikely to recur, and I'll touch on that further in a moment.
Jason: Equipment rental revenue results, we had an 18 million dollar increase or about 1.7 percent. That's slightly better than what our first quarter improvement was.
Jason: This is now our second consecutive quarter of year-over-year increases in equipment rental revenues and it points to a likely trough. We should hopefully have a return to a more sustained growth trajectory.
Jason: While we weren't able to generate increases in one-way moving transactions, we did see an increase in the average revenue per transaction for both one-way and in-town moves.
Jason: and our in-town revenues on the trailer and towing fleet also increased during the quarter.
Jason: October and the first week in November saw revenue continue to trend positively compared to the same time last year.
Jason: Capital expenditures for new rental equipment for the first six months were $1,156,000,000. That's an $182 million increase compared to the same six-month period last year.
Jason: We've increased it from $1,090,000,000 to approximately $1,115,000,000. And that's due to the availability of some additional equipment from our manufacturers that we can purchase this year.
Jason: Proceeds from the sales of retired rental equipment was down 44 million to a total of 361. This is a combination of fewer pickups and cargo vans sold, along with lower average sales proceeds on the units that we did sell.
Jason: A portion of our depreciation increase that you're seeing is in response to the declining resale values of these models.
Jason: Switching to self-storage, revenues were up 16 million dollars which is about an 8% improvement.
Jason: average revenue per occupied foot continues to improve across the entire portfolio up about 1.6% for the quarter and if you look at our same store portfolio we were up just over 2%.
Jason: Our occupied unit count at the end of September was up nearly 32,000 units.
Jason: compared to the same time last year. Now during the same timeframe, we've added 67,000 new units and that's what's led to the differential in our average occupancy ratio. We're down to about 80.9% for the whole portfolio.
Jason: If you split out just the same store portion, we saw average occupancy decrease 80 basis points to 94.1%.
Jason: During the first six months of this year, we invested $734 million in real estate acquisitions, along with development costs associated with self-storage and U-box warehouses.
Jason: That's a hundred and one million dollar increase over the first six months of last year.
Jason: During the quarter, we added just over 900,000 new net runnable square feet. About 860,000 of that was from newly developed locations.
Jason: We currently have approximately 8.1 million new square feet being developed. I would expect to see the net rentable square feet deliveries increase next quarter compared to what we did this quarter.
Jason: Our Ubox revenue results are included in other revenue in our 10Q file and are not large enough yet to break out separately, but this line item increased $7 million of which Ubox was a major contributor.
Jason: Operating expenses at moving in storage increased just over 55 million dollars.
Jason: As we mentioned on last quarter's call, the decline in fleet repair maintenance was going to slow and it was down $5.4 million for the quarter.
Jason: Personnel costs were up a little over 17 million dollars. Liability costs associated with the fleet increased 7.6 million.
Jason: And property taxes and building maintenance combined were up about $8 million.
Jason: During the quarter, we had a 16.5 million dollar cost related to our transition to a new cardboard box supplier for our moving supplies.
Jason: While we expect this over time to result in improved service and lower cost of goods sold, we opted to expense this amount in the quarter.
Jason: As of September of this year at our Moving in Storage segment, we had cash along with availability from existing loan facilities of $1,775,000,000.
Jason: On our investor relations website, investors.uhall.com, we posted some supplemental materials in addition to the earnings release and the 10-Q filing. I would encourage you to take a look at them. We hope that they'd be helpful to you.
Speaker Change: With that, I would like to hand the call back to our operator, Leo, to begin the question-and-answer portion of the call.
Leo: Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. To withdraw yourself from the queue, you may press star 2. Again, star 1 to ask a question. One moment while we queue.
David SIlver, David SIlver,
We'll take our first question from Steve Ralston of Zax.
Good morning.
Speaker Change: I have two questions concerning the trends of the business in the self-moving rental business and also self-storage.
in the rental business.
You've had your second consecutive quarter of year-over-year improvement.
Speaker Change: which is quite interesting because two, I think two quarters ago, Joe mentioned that he expected slow but modest improvement.
Speaker Change: over the near term. I'm wondering if you have anything that you can foresee over the next two quarters. I know you mentioned that you might see a strengthening later on, but what's your feeling for the next two quarters?
Speaker Change: I don't see any big changes we're fine-tuning stuff all the time but it's you're getting minuscule changes or results now that doesn't mean we won't
come upon something that significantly works. I think that...
all this
Speaker Change: turmoil in the country may settle down and we may start to see people act in a more predictable fashion which I hope results in more business for us but I have really no I don't have any window into that at all we're going to introduce
sometime in the
Speaker Change: fourth quarter, probably late in the fourth quarter, an additional trader model. It'll move the dial on trader rentals a little bit, but that's the fault. We have to manufacture them, so it's going to ramp up slowly. I'm looking for that to be a modest success.
But I don't see anything.
Speaker Change: I'm blind as to if something's going to pick up over the next 180 days.
Speaker Change: Okay, thank you for that. In the self-storage business, the year-over-year...
Speaker Change: rate of gain year over year has been deteriorating. It used to be a nice solid double digits and now it's upper single digits.
Speaker Change: There are a lot of factors that go into this, and I know you point out that the size of your portfolio is growing, and mathematically that's part of it, and you allude to the pricing situation.
Speaker Change: Could you comment on that trend and when you think it'll stabilize and start improving?
Speaker Change: Well of course we are adding rooms faster than we're filling rooms, that's our basic imbalance and of course it gets very location specific and all that.
Speaker Change: Jason can point to plenty of places where we're in the low to middle 90s doing fine. But as you bring on a new product, you know, some are more winners than others.
I think our new product that's coming on
outperform the industry.
but today it's going to go back to double digits.
Speaker Change: You know, between now and next summer, I'd hesitate to predict that.
the whole industry is kind of
Speaker Change: got themselves funky, and there's many, many things going on, which...
I probably don't even know about.
but the
Speaker Change: I think we're going to outperform our peer group, and I think we should, but...
whether we'll get this.
Speaker Change: addition of new product and filling the rooms balanced out right.
Speaker Change: At this point, I'm kind of fighting this out location by location. There's not a macro picture, I would say. I, this week, have most of my...
Speaker Change: senior managers around the country and of course we're just doubling down on how we're going to specifically get X more rooms rented at location Y and what does what where's our
Speaker Change: where's the failure in our sales presentation. I always view this as customers are there, we're failing to connect to them. I still believe that is even though the other the rest many participants in the industry are reporting.
you know, not too shiny results.
Speaker Change: I tried to anticipate that. I think I told people that there was many entrants into the market who didn't quite know what they were getting into. Well, they're all in it right now.
And that's going to be a little jumble, shaking out.
Speaker Change: I expect to come out of that jumble ahead of my peer group,
Speaker Change: Just to talk out loud, I mean, that's one of the key attributes of U-Haul is that you build all this capacity.
Speaker Change: and you know, you build it, it will come. The demand occurs, and last time it was COVID, and then you have all the capacity and the leverage to benefit from that.
Speaker Change: Yeah, and it works both in the rental business and self-storage.
Well, thank you for answering my question.
Thank you.
Speaker Change: And once again, to ask a question, please press star 1 on your telephone keypad. We'll move next to Jamie Weiland of Weiland Management.
Jamie Weiland: Hey fellas, the first question is about Ubox and that you seem to be gaining some share in the business and
Speaker Change: The question is relative to, as you build new self-storage, you have a lot of U-box storage in there, and
Speaker Change: How much of a competitive advantage is that for you? Is that why you're gaining share or does that just give you better pricing to customers or better margins for you as you, obviously you think that's a competitive advantage because as you build new self-storage you're including.
places for portable storage in there for you box.
Speaker Change: Yeah, I'm going to let my son Sam, who runs Ubox, speak to that for just a minute.
Speaker Change: Sure, I'm happy to answer that, Jamie. I think the question was...
Sam: Is the storage component of U-Box competitive advantage? No doubt about that. I'd agree with you. Now, is it why we're gaining share? That, I think, the answer to that is no.
Sam: doing a better job on that relative to us, but I can tell you storage at U-Haul, as you might imagine, is quite a focus, and so I've got a lot of support resources to take that C to the A that we know it should and could be, so
Thanks for your question.
Sam: Okay, as we continue to build self-storage, it will always include an extra component for portable storage as well.
Not always. You've got to map this out.
and probably the radius would have.
U Box
location serves is larger than the radius of customers that
Sam: to also try to build more self-storage to try to be strategic so we can make one project out of it and also expand our
Sam: You box network, but but so if you look at the ones we're building currently, it's pretty close maybe eight out of ten Okay
Speaker Change: But we don't have a goal of going to a one-to-one at all, Jimmy. That would be more capacity.
that we think we can.
Speaker Change: absorb. But right now what we're building, I'm just gonna guess, but I'd say eight out of ten of them, where we're putting in more storage, we're putting in UFOX.
Next, I want to go to...
Sam: The value gap is coherent between what you all are trading for and what it's worth.
Sam: in a similar revenue base than you, though it does not maintain your growth profile because you have added so much more fresh space than they have. They've got a $10 billion market cap on their shelf storage, and it seems like we're not getting that credit force.
Sam: for on our cell storage operation, which one would think our metrics for
Sam: occupancy and rate are similar to theirs and margin are similar to theirs, so one would think our valuation for our self-storage would be similar to that. Can you talk about the value gap and is that what is within a lot of the
Tryon's PowerPoint presentation for how to close that value gap.
Okay, I'll talk to it for a minute.
Of course we right now
Sam: Texas Capacity is a drag. I can't give you the number, but it's a drag on earnings. Obviously we own the stuff, we're paying for it.
and aggressive development is a drag.
Sam: Mathematically what comes out of that development, whether at the end of the day
Sam: This turns out to be a happy day or not is, you know, unknown until you get there. Of course, I think it's going to or I wouldn't be.
Thank you.
resources into it.
Speaker Change: As far as Mr. Peltz, I don't want to speak for him.
Sam: is anything I don't know I could send you his presentation Jamie I don't know if that would work I don't really I don't want to speak
Okay, and you talk about within self-storage that we're...
Thank you.
Reyes, Jason Berg, Edward Shoen
Sam: were able to increase occupancy rates in the existing locations, but it restricted our ability to open new locations. So there was much more of a balance in the near term between the costs of carrying.
Newly opened units and the filling of existing units.
Speaker Change: Do you think we'll ever get back to that balance so we can, you know, as opposed to always this is going to be wonderful long-term out ten years to balance off the near-term impact for opening so aggressively with new locations?
Speaker Change: Well, I would expect it will ebb and flow is what I think now.
there's
There's still a lot of opportunity.
and one of you all's.
breadth of where we operate, so.
We're very active in Wyoming and Montana.
Speaker Change: A lot of people kind of shrug their shoulders and that's fine.
We're already in.
of Gillette, Wyoming. Okay, so, us.
Speaker Change: Going there with more products and services, so long as it's proportional to the market.
Speaker Change: One of our storage competitors, they have no reason to go to Gillette because they have no infrastructure and they would have to...
Speaker Change: Gear the whole thing up and marginally it would be a loser for them.
Speaker Change: You go to northern New Jersey and they're all eager to get in there with more product.
I just turned down some products in Northern New Jersey.
three weeks ago.
This, to me, it looks like...
hard-working, overtaxed
Speaker Change: I don't know what you want to call it, but the prize is not worth it.
Speaker Change: Now, we'll see who's correct. Nobody knows for sure. But I think there's plenty of places for us to expand. If you want to look out and say two years, I think there's plenty of places to expand over the next two years. And I want to get in them and be positioned.
Oh.
Speaker Change: for a 20-year or 30-year run out of them. They all make sense.
Speaker Change: Inflation, of course, has saved everybody in the self-storage business. When I first was doing this, we were bringing product on for $7 a square foot. Now we won't rent it for $7 a square foot a year. That was all in cost.
Speaker Change: Then at a point a month up to 15, we thought, boy, this is some pretty expensive storage, of course.
Speaker Change: You go look at those places now, they're selling for $135 a foot, same exact spot.
Speaker Change: And so inflation has really saved the self-storage industry, in my experience.
Thank you.
Currently, you're going in at some pretty high cost and
That's very, very good.
high multiples.
you're just
Speaker Change: Maybe that will cool off some of this. We're in this, as you mentioned, for the long haul and there's no reason for us to...
In my mind to shy away from
going into a market so long as we're...
Speaker Change: I'm fairly confident that market's going to produce results over time, but it's a drag. It's a drag.
Speaker Change: As soon as you turn this tap off, you get about 18 or 24 months.
Speaker Change: It looks like a different place on the financial statements. Jason could probably quantify that, but I mean it just it flips real quick as soon as you're not
Pouring more capital into it.
Exactly, exactly.
Speaker Change: I just wonder, A, if we slow the pace of capital that we put into it so the percentage of new units is lower, and then on the corollary to that, you talk about New Jersey versus Wyoming.
Speaker Change: It's easier to be a big player in a smaller pond than a small player in a big pond. What would be the thought process of...
Speaker Change: Given the valuations for self-storage in New Jersey, if we sold off a part of our existing mature facilities to be able to then take the capital to build on
in areas with greater opportunity for profitability.
Speaker Change: You could possibly do some financial jiggering but what we have done for better or worse is
Most of these sites have U-box, U-haul.
Speaker Change: you store there and so you could conceivably do some partitioning and some kind of a you know wacky so you know partial interest
Thank you.
We did a version of that with...
finally
Speaker Change: Whatever you want to call it, we rolled over here just a year ago.
So we have some experience with it.
Speaker Change: What it seems to get is a one-time pop. That's my experience. I get a one-time pop, and after that...
and of course the people who
Speaker Change: have the financial interest and assets, they try to wring every penny out of it. Okay, so I've done at one point I was managing a hundred other stores from other people and I don't know but I got six or eight pretty good lawsuits, you know, alleging fraud or something of that nature.
it's not as
turmoil less
Partitioning these things out is awkward, to put it politely.
if they're
Speaker Change: We've tried a couple different things and not seen anything good.
trying to partition these assets that it really...
helped very much, I guess.
Okay. Thank you, fellas. Appreciate your time.
Speaker Change: And it appears that we have no further questions at this time. I'm happy to return the call to management for closing comments.
Speaker Change: Well, thanks so much everyone for your support. We look forward to speaking with you after report earnings in February. Thank you.
Speaker Change: This does conclude today's U-Haul Holding Company second quarter fiscal year 2025 investor call. You may now disconnect your lines and everyone have a great day.
[music]