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Operator: Good morning, ladies and gentlemen, and welcome to the U-Haul Holding Company Third Quarter Fiscal 2025 Investor Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, this call is being recorded on Thursday, February 6, 2025. I would now like to turn the conference over to Sebastien Reyes. Please go ahead.

Sebastien Reyes: Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company third quarter fiscal 2025 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 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. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. 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 company’s public SEC filings and Form 10-Q for the quarter ended December 31, 2024, which is on file with the US Securities and Exchange Commission. I’ll now turn the call over to Joe Shoen, chairman of U-Haul Holding Company.

Joe Shoen: Thanks, Sebastien. I’m excited to see some positive leadership for the country. My experience is that consumer optimism is good for the self-move business. I’m seeing increased optimism with both customers and U-Haul team members. Often, we are hit by a weather event in the fourth quarter that noticeably dampens rental transactions. So far, this has not been the case. As of this point, U-Haul has not had significant property or casualty losses due to the LA fires. Sometimes an event like this stimulates rental transactions. However, this does not appear to have been the case in Los Angeles. We are continuing to make progress with truck additions and deletions to correct the imbalances in our fleet due to COVID supply chain disruptions.

Our typical truck can be a ten-year asset, so it takes some time to work through fleet imbalances. Should the Trump administration progress in reducing crushing regulations, U-Haul is in a position to emerge from the electric vehicle mania with only modest damage. The medium truck industry has been heading towards an unknown impasse. The industry needs to focus on customer needs. The Truck Share business, where we compete with Penske, Budget, Enterprise, and multiple local businesses remains very competitive. As near as I can tell, market share is fairly stable right now. Our U-Box business continues to grow. Our teams continue to master the elements of this business. We are getting okay self-storage results, but are having to work hard to achieve them.

The storage industry is busy dialing out personal contact and customer service. I still see the other approach as the road our customers want us to, and I think our results validate our approach. I plan to continue to drive hard on adding storage product and take another look at this in early summer. Like yourselves, U-Haul is watching the tariff proposals. The supply chain, of course, is complex, and likely some misery will result. Overall, I am willing to let Trump and his team manage, and U-Haul to react. I’m the most optimistic I have been in some time. As always, however, the proof will be in the pudding. Jason, you want to give them some numbers?

Jason Berg: Thanks, Joe. So yesterday, we reported third quarter earnings of $67 million compared to $99 million for the same quarter last year. That translates to $0.35 per nonvoting share this quarter and $0.51 per nonvoting share for the third quarter of last year. Earnings before interest, taxes, and depreciation (EBITDA) in our moving and storage segments, and we’ve adjusted that to account for the change in interest income presentation, increased by $47.8 million due primarily to a stronger quarter of revenue growth. The disconnect between earnings per share and EBITDA is due primarily to three factors. First, fleet depreciation from the increased level of fleet acquisitions over the last several years. Second, the reduced gains on the sales of retired pickups and cargo vans.

And third, the declining interest income at the moving and storage segment as we’ve reduced our short-term cash balances as we’ve reinvested the funds. Of the $0.16 per share decline in earnings, $0.13 is from the decrease in gains on the sale of equipment, $0.12 from depreciation, and $0.05 can be attributed to the interest income variance. Looking at equipment rental revenue results, we had a $39 million increase, which is a little over 4.5% for the quarter. This is also better than the 1.5% to 1.7% improvements that we posted in the first and second quarters of this year. In addition to the continued strength in average revenue per transaction, and growth in in-town transactions, we saw additional last-mile revenue come through during the end of the quarter.

In-town revenues on the trailer and towing device fleet also increased during the quarter. And in January, we saw revenue continue to trend positively compared to the same time last year. Capital expenditures for new rental equipment for the first nine months were $1.587 billion, a $237 million increase compared to the same nine-month period last year. Proceeds from the sales of retired equipment decreased by $73 million to a total of $521 million. That’s a combination of us selling fewer pickups and cargo vans, along with lower average sales proceeds on the units that we did sell. A portion of that is what’s leading to some increases in our depreciation. Switching to self-storage, revenues were up $17 million, an 8% increase for the quarter.

Average revenue per occupied foot continued to improve across the overall portfolio, up approximately 90 basis points. And if you look just at the same-store portion of the portfolio, we were up just over 3%. Our occupied unit count at the end of December was up nearly 42,000 units compared to the same time last year. And over that same time frame, we added 80,000 new units, which led to our average occupancy across the whole portfolio declining to 78.7%. Splitting out the same-store portion of the portfolio, we saw average occupancy decrease by 50 basis points to 92.4%. During the first nine months of this year, we invested $1.214 billion in real estate acquisitions, along with development costs for self-storage and UBox warehouses. This was a $245 million increase over the first nine months of last year.

Looking just at the quarter, we added 2.3 million new net rentable square feet, with the majority of that being newly developed locations. We currently have approximately 8.5 million new square feet being developed, and I would expect to see the pace of new deliveries remain elevated into next quarter. Our UBox revenue results are included in other revenue in our 10-Q filing. This line item increased $9 million, a major contributor being UBox. We’re seeing both UBox moving transactions and UBox storage transactions grow. Over the last twelve months, we’ve increased our warehouse space or covered storage capacity for these containers by over 20%, and we expect to continue near that pace for at least the next twelve months. Operating expenses and moving in stores were up $11.6 million.

We did have another quarter of declining fleet repair and maintenance costs. This time, we were down close to $10.5 million. Some of the larger expense increases were personnel costs, up just over $15 million, although that increase is largely in line with the pace of revenue increase. We’d also had liability costs associated with the fleet go up $16.5 million, and property taxes were up just over $4.5 million. As of December 2024, at our moving and storage segment, cash along with availability from existing loan facilities totaled $1.348 billion. On our investor relations website, investors.uhaul.com, we posted some supplemental materials for the third quarter in addition to our typical earnings release and 10-Q filing. You can click on these in the lower right corner.

Before I hand the call over to our operator for questions, I want to thank and recognize our newest analyst, Steven Ramsey, at Thompson Research Group, who recently initiated coverage. He joins Keegan Carl at Wolfe Research and Steve Ralston at Zacks Investment who have been covering us as well. I encourage anyone interested to reach out to any of these three as they all have excellent insights. With that, I would like to hand the call back to our operator, Joanna, for questions and answers. Joe, myself, and Sam Shoen will be available for questions. Thank you.

Operator: Ladies and gentlemen, we will now begin the question and answer session. If you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Stephen Ralston at Zacks. Please go ahead.

Stephen Ralston: Congratulations on the good quarter with that significant uptick in revenue growth. My, well, my question is concerning the drivers in that growth. I noticed that the revenue per transaction has steadily increased for the last at least three quarters. It seems like you have a good pricing environment.

Jason Berg: Yeah, so I would say the answer to that is yes.

Stephen Ralston: There was concern about the, well, competition, and other things involved also.

Joe Shoen: Sure. Well, I’m one of these people who is always very tentative on increasing prices. I always want to communicate a value to the customer before we just try to pass on price increases. And there’s been a lot of cost increases over the last thirty-six months, not all of which have been passed along, but some of which we’re still gonna have to figure out how to pass along. Mainly in equipment acquisition, but it’s been in personnel. But we’re just like everybody else there. Everything’s up. So the customers are showing some willingness to recognize that and participate in those increases without feeling they’re being beaten up. You read the same stuff I do. People feeling beaten up about supermarket pricing, about energy pricing. I try to keep U-Haul where they see we’re trying to do some sort of value pricing. Yeah. We needed the price increase.

Stephen Ralston: Despite what you said, I did notice that it seems like you have instituted some cost controls. Because sales were up four to seven percent depending on where you’re looking. But your operating expenses were only up 1.6 percent and, you know, have been basically harping on this for the last few quarters. But it seems like something happened that you gained control of your costs.

Joe Shoen: Well, always, you know, there’s a delayed reaction. In a lot of this stuff. So I think I got the attention of my team probably six months ago, but then it doesn’t really filter through to financial results in a visible way for several months after that.

Stephen Ralston: One thing I noticed, and I’m surprised you didn’t mention it, that you set a record for the company. Your pipeline for the, well, the twelve trailing twelve months. New net rentable square foot has reached a record. You posted 7.4 million square feet. Prior to this, it was in the three, four, you know, like, 6.1.

Joe Shoen: Quite an accomplishment.

Stephen Ralston: And with your mention of acquiring more assets in the pipeline, at least statistically, is stable there at 16.8 million square feet. Do you expect to be in the seven or eight million net square feet trailing twelve months going forward for a while?

Joe Shoen: I think that’s faster than we can maintain. You know, some of this is opportunism, of course, if there’s something becomes available, but there’s not a lot of, you know, I guess, sweet deals in the storage business right now. So I think that’s faster than we can maintain.

Jason Berg: Jason, a little bit of color. Our acquisitions of existing storage properties over the last twelve months are about a million square feet. Heavier than it was the year before. That’s part of that increase. And the variance over last year at this time also is we were in the process last year of switching over to more ground-up development, and now we’re starting to see a bunch of those launched, whereas last year, they were just getting started.

Stephen Ralston: And one last question concerning U-Box. I don’t know if it’s the first time I saw it, but you emphasized that the revenues are driven not only by the rentals but by the storage. Is there something happening in U-Box where people are storing more on your lots as opposed to just rentals and moving?

Sam Shoen: This is Sam Shoen. I’ll comment on that. I think you’re exactly right, Steven. That’s a good observation. Of course, that’s part of the reason we’re in this business is not just to serve the moving customer, but also the storage customer as well. And in many cases, they’re the same customer. And I think as we get better at selling and explaining the advantages of this unique product that I think a lot of consumers don’t really fully appreciate how versatile it is. As we get better at explaining that, we get more conversions to the self-storage end of the deal. And, of course, that’s why we’re in the business. That’s why I would invest in U-Haul is that’s really the exciting part of U-Box. It’s its storage potential and we’re starting to see some exciting progress on that side of it.

Stephen Ralston: Again, congratulations, and thank you for taking my questions.

Operator: Thank you. The next question comes from Keegan Carl at Wolfe Research. Please go ahead.

Keegan Carl: Yeah. Thanks for the time, guys. In the release, Joe mentioned that moving activity ticked up in the quarter, driving both demand for product and services. I guess I’m just curious to maybe quantify the transaction volume increases and how it trended by month?

Jason Berg: Now you’re going to have to go to Chase about that. Sure, so for the quarter, the transaction growth came from the in-town business, which was up just under 2% on transactions. On one-way transactions, which is a smaller number, it was down. It was still negative for the quarter. We’re still seeing revenue per mile gains in the one-way business, which is helping to offset the mileage decreases there. And I think the normal growth that we would have seen in the quarter got bolstered by a couple of percentage points from some last-mile business that came in to help push up the revenue per mile for the in-town and the miles per transaction.

Keegan Carl: I guess when on a month-to-month basis, did you notice anything that stood out? Maybe was November better than October? Did you see sequential improvement each month? Just kind of curious on that cadence.

Jason Berg: I would say October and November were fairly steady. It was towards the end of December when the last mile business came in. November and December looked a lot like what we have seen in the previous quarter and a half, two quarters.

Keegan Carl: Okay. Now that’s really helpful. And I know you, Joe, touched a little bit on January. I guess I’m just curious, like, are you seeing sequential acceleration from December to January, or is it more just the year-over-year improvement that you noticed?

Jason Berg: We always look at it year over year because there’s so much seasonality to it. So when I’m making comparisons and saying it’s up, it’s always to the same time in the previous year.

Keegan Carl: Got it. I guess just shifting to U-Box, obviously, growth continues to be strong there. If we take a very long-term view, I mean, how should we think about margins in that business relative to your storage business at what you would consider either a full or stabilized occupancy level within U-Box?

Jason Berg: Well, I’ll start with that, and then Sam can fill in or correct me if he has any other thoughts on it. But, Keegan, remember when we walked a few of those warehouses when you were out here, the newer warehouses that we have stack much higher. So as we get more of these boxes into storage, it’s going to help the theoretical margin. However you want to come up with that for U-Box. Because we’re just getting better utilization of the asset.

Sam Shoen: Understand. I don’t know which one. Yeah. No. I mean, that’s the same thing I was gonna say. You know, the way I describe it and think about it is using a different word, which is density. The exciting part of the U-Box storage solution is that we’re getting increased density in the same footprint that you would in a traditional facility. So if we can use this moving activity to follow the U-Haul formula, use our moving activity to generate containers and storage, we are going to be able to put that density to use and be really efficient. So I think that’s a wise question you’re asking.

Keegan Carl: I guess just to wrap this up, I mean, is it fair to assume that margins would be similar to self-storage, or could they even be higher? Like, I’m just trying to get a better feel for in the long run how this business can play out.

Sam Shoen: Well, of course, I’m shooting for higher. But we have a lot of work to do. So I think you having that expectation and issuing that challenge, I’m willing to accept.

Keegan Carl: No. That’s really helpful. Okay. I guess just maybe if we take a bigger picture view. You obviously have a lot of land in your development pipeline, and you mark them at cost. I guess if you were to actually take what’s in your portfolio, both land and buildings, what do you think it’d be worth at today’s market prices, and what sort of disconnect is there between what you’re marked at versus what it’s theoretically worth?

Jason Berg: Alright. Keel, that’s a great question. That’s not something that we’ve really discussed publicly other than to say we communicate to folks what the unencumbered balance or value is in the portfolio. You can see how much we’ve borrowed against real estate. As in the book value. And that can kinda give you some sort of triangulation as to the excess market value overbook in the portfolio, but No. I guess I would consider it fairly significant when I look at our ability to borrow. Which then puts our market value at least into perspective. We have quite a bit of capacity to, I mean, to borrow. If we had to if we had the earnings to support it, we could easily go out with the assets that we have and borrow another $2 billion against real estate.

Keegan Carl: Okay. I mean, that’s a good segue into my next question, which obviously the cash balance is down. It’s down here, a billion dollars down from the peak. I guess, just how should we think about your funding of growth going forward? You mentioned that you could take another $2 billion on. I mean, should we expect you to take on more leverage in the near to medium term to fund growth?

Jason Berg: I’ll start with this one. There are two tracks here. One, we are going to be going out and we’re gonna do some normal borrowing that we would do each year. We still have our guidepost of trying to remain under five times net debt to EBITDA. Which gives us quite a bit of runway. And then the exciting part is a lot of the assets that we’ve invested in are starting to launch. You see that in the net rentable square foot number. And that’s just going to give us more flexibility in financing future acquisitions. I would say the pace that we’ve been on the last twelve months, the $1.5 billion, if you look out the next year or two, we’ll probably slow a bit.

Keegan Carl: Okay. Then just the last one for me to kind of wrap everything up. I mean, if you would assume your entire storage portfolio stabilizes today, where do you think that actually puts your total portfolio EBITDA margin at? Or where do you think it would trend to? And the reason I’m kind of framing it like this is that, obviously, a large portion of your storage portfolio that was recently delivered is likely negative on the EBITDA side. So if you’d get that stabilized and where, where could your margin trend and what sort of expansion could we expect?

Jason Berg: Well, we don’t have a separate margin number for self-storage. Would say that with the current square footage that we just reported, excluding any sort of rate increases, if we get that up to our same store occupancy number today, that would be an extra close to $170 million of revenue. And the vast majority of that would fall to the bottom line.

Keegan Carl: On the storage. Just from the storage line. I don’t know. Right?

Jason Berg: Yeah. And then beyond that, in the development pipeline, we have probably close to $350 million of additional revenue or maybe a little bit higher than that. I might be understating it. So between what we have or what we are building now and what we have behind it, I think it has the opportunity to increase our annual revenue by about 50% from where we’re at today.

Keegan Carl: Okay. That’s super helpful. Thanks for the time, guys. Really appreciate it.

Operator: Thank you. The next question comes from Stephen Ramsey at Thompson Research. Please go ahead.

Stephen Ramsey: Hi. Good morning. Thanks for having me on the call. I wanted to go back to this moving business and the higher cost world that everybody is operating in. It sounds like competitors are raising prices as well. Given your cost advantages and your approach to serving the customer at a lower price, do you get a sense that competitors are raising prices more than you are and that your cost advantages enable you to gain share in a different way in this environment? And then, kind of a follow on to that, do you think when one-way moves pick up, the pricing dynamics allow you to gain even more share when that happens?

Joe Shoen: This is Joe. There’s a lot of factors going into that. Price is part of it. Normally, we’re gonna have to be competitive on pricing, and that’s just how it is. A lot of this has to do with utilization, which has to do with kind of where you have positioned the equipment. And how extensive is your distribution. So we have a very extensive distribution network compared to our competitors, and that gives us access to customers that it is not economical for them to access just because of distance. The customer has to travel too far to obtain the product, and so it effectively raises their rate even if their rate isn’t up. I wish I had a clear answer to your question. I don’t. There’s a lot of constantly moving parts, and it varies whether it’s an in-town transaction or a one-way transaction.

But on one-ways, we’re in a position to benefit with any increase in consumer activity. We’ve got the fleet out there. We’ve got the locations out there. We’re priced in the acceptable range. We should, if that comes, we should pick up.

Stephen Ramsey: Okay. That’s helpful. And then on the moving business, again, good to see fleet repair and maintenance costs continuing to show year-over-year declines. Can you share how much of that is attributed to newer fleet coming in? How much of that is doing more of that work in-house? And do you see a continued runway where you could show year-over-year declines in these costs going forward?

Joe Shoen: I think we can see some more cost decreases. Yes. I don’t have a good answer on how much of it is due to doing more work in-house versus taking it to third parties. But, you know, third parties just cost more, as you might expect. That’s all.

Jason Berg: Steve, it’s Jason. I’ll give kind of some ballpark estimates. Part of what we’ve done this year is decreased the size of our pickup fleet and, to a lesser extent, the cargo van fleet, and increased the size of the box truck fleet. So the repair of the box trucks would be more along the lines of your comment about repair costs going down due to rotation of newer equipment in, and the reduction of the pickup and cargo van fleet would have more to do with outside vendor repair. I would say that it’s probably roughly, at least for the truck repair, maybe a third due to less outside work and two-thirds from rotation of the fleet.

Stephen Ramsey: Okay. That’s helpful color. Wanted to ask a question on U-Box. Maybe you can clarify again the pipeline of the build-out on warehouses that you have coming in the next twelve months and maybe where you see it going over the long term. I know in prior years, this was a constraint to growth. Would you say warehouses are a constraint at this point to U-Box growth?

Sam Shoen: This is Sam Shoen speaking. No. We’ve got a very robust pipeline for U-Box. We’ve had some good progress in the last year. Warehouse growth is certainly no longer on my list of excuses. It’s putting tremendous pressure on the competition and, again, freeing us up to run. U-Box is a part of our product line that wants to run, and so we’re on it.

Stephen Ramsey: Okay. That’s good to hear. And then last one for me. Storage occupancy looks like in the last few years, Q3 shows a sequential dip from the second quarter on both the same store and non-same store basis, but noticed that in this report, the sequential dip was less than the prior years. I’m curious if there’s anything to read into that, if it’s the environment improving or core outperformance. Just if there’s anything to read into kind of the sequential trends and if maybe there’s stabilization in the market broadly that you’re benefiting from.

Joe Shoen: Well, this is Joe. I don’t think there’s a broad stabilization in the industry. But, you know, I probably see my competitors’ numbers as well or better than I do, but there’s been a lot of erosion of both price and occupancy in the industry, and we’re swimming against that tide successfully so far.

Stephen Ramsey: Okay. That’s helpful. Thank you.

Operator: Thank you. And the next question comes from Jamie Wilen at Wilen Management. Please go ahead.

Jamie Wilen: Thanks, Phyllis. As you see within the industry, the level of additions that people are building other than yourselves, is that a declining rate from where it has been over the last two years, and does that create a little bit of opportunity for rate as you look forward?

Joe Shoen: It’s very market specific, Jamie. I don’t think I can give you a generalization. But when I travel, it looks like they’re building new stuff every place.

Jamie Wilen: On the U-Box side, a few other questions about the dynamics of the business. You know, the rates for storage, how do they compare for a self-storage rental rate per square foot? And I assume the margins on that unit in storage are rather high since we don’t have much cost against it. And if you could tell us about the dynamics of somebody who does a U-Box, how long is it normally in storage for? And are there any changes in those dynamics over time?

Sam Shoen: That’s a great question, Jamie. This is Sam Shoen. Right now, today, almost all of those metrics that you just brought up are very similar to our traditional self storage product. In my mind, there’s no reason why every single one of them could and should exceed. So just for example, when you brought up per square foot basis, if the product adds more convenience to the customer, there’s the flexibility to ship it, there’s the flexibility to deliver it to their door. Some customers in the industry sometimes refer to it as valet storage. Well, of course, we need to work towards getting a premium for that. Right now, we’ve gone from kind of famine to feast on warehouse capacity. I’d say my first priority is let’s get some occupancy, and as I think we’ve demonstrated in U-Haul, historically, once we’ve got the storage occupancy, I think we’ve done a decent job in maximizing the rate.

So that’s the game plan, that’s the trajectory we’re on, and I’m embracing all those issues that you brought up. It’s a good question.

Jamie Wilen: As we are gaining market share, is it a function of we’ve got much more indoor storage for this for the U-Box? I can’t imagine how someone would want to store it outside for an extended period of time, but is that a competitive advantage that’s allowing us to gain market share, and that’s why we’re focusing on that in the future as well?

Sam Shoen: Well, Jamie, I was hoping you’d ask me that kind of softball question. I was itching for somebody to ask me that question. The short answer to it is no. The competition has indoor storage as well. But, you know, despite that, we’ve got them in a real headlock. Our advantages, I would argue, are the fact that we’re lower cost, we can deliver multiple containers at one time. We have the most locations available in every state and every province. We have self-delivery options. These are all things the competition cannot match, and so, of course, that’s why we are on our way up and they are on their way down. It’s inevitable that we’re going to dominate this industry in the same manner we do the truck rental industry.

Jamie Wilen: Got that. Appreciate the insights. Also, thanks for the additional color in the presentations with the quarterly numbers.

Operator: You’re welcome. Thanks, Jamie. Thank you. That concludes today’s Q&A. I will turn the call back over to management for closing comments.

Joe Shoen: Well, thanks, everyone, for the support. We look forward to speaking with you after our year-end filing in May. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.