Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- U-Haul Holding Co (UHAL, Financial) reported a slight improvement in quarterly operating cash flow or EBITDA.
- The company experienced a year-over-year improvement in equipment rental revenue for the first time in 19 months.
- Self-storage revenues were up $17.5 million or 9% for the quarter and $86.5 million or 12% for the full fiscal year.
- The company added 2,424,000 new net rentable square feet in the quarter, with a robust pipeline of active and pending projects.
- Fleet repair and maintenance costs have shown improvement for the second consecutive quarter.
Negative Points
- U-Haul Holding Co (UHAL) reported a fourth-quarter loss of $863,000 compared to earnings of $37.4 million for the same quarter last year.
- Full fiscal year earnings declined to $628.7 million from $924.5 million in the previous year.
- Personnel costs have increased due to government wage mandates and inflation.
- The company experienced a $32 million decrease in gains from the disposal of equipment compared to the fourth quarter of last year.
- Occupancy ratio for self-storage decreased by 140 basis points to just under 80%, largely due to the addition of new units.
Q & A Highlights
Q: Can you help us understand the impact of increased utilization on CapEx improvements?
A: Joe Shoen, Chairman: Utilization increases by decimal points, which is significant. Our strategy to have the widest distribution cuts against utilization. Our stores usually exceed the utilization of our dealers. We aim to grow our dealer program and improve uptime by refreshing the fleet. Jason Berg, CFO: We have over 12,000 more trucks than pre-COVID. We cut our backlog by two-thirds last year, freeing us to remove older units. The fleet size may remain the same or slightly decrease.
Q: What percentage of your moves are typically one-way moves, and any commentary on recent trends?
A: Jason Berg, CFO: Historically, about 55% in-town and 45% one-way. During COVID, one-way revenue increased. Joe Shoen, Chairman: Consumer conservatism results in fewer miles per rental. People still move due to life events, but shorter distances impact revenue. We need to recover costs based on mileage incurred.
Q: What has changed in the competitive pricing landscape for self-storage, and how is it impacting your street rates?
A: Joe Shoen, Chairman: We have a different rate strategy than competitors who use demand pricing models. We maintain steady pricing, which confuses customers less. Competitors may increase prices during demand seasons, but we focus on value pricing without significant discounts.
Q: Are you seeing any changes in average length of stay or customer reactions to rate increases in self-storage?
A: Joe Shoen, Chairman: The storage business is tougher than 36 months ago. Customers no longer see storage as scarce and focus on value. Jason Berg, CFO: Average stay has not changed dramatically compared to last year.
Q: What are your views on the supply outlook in self-storage, and how will your deliveries impact that?
A: Joe Shoen, Chairman: We will likely bring more rooms to market than we fill. We focus on new construction, which is a long process. We see opportunities in many markets and aim to expand smartly.
Q: What are your projections for capital spending in fiscal 2025?
A: Jason Berg, CFO: Fleet maintenance CapEx is a priority, with a projected gross spend of around $1.7 billion. Real estate spend will be close to last year's $1.2 billion, with a focus on development construction. Net fleet CapEx will increase, requiring additional working capital.
Q: How has the post-pandemic environment affected your business opportunities and customer demographics?
A: Joe Shoen, Chairman: Remote work brought new customers, but that wave has receded. Digitalization continues to make doing business with U-Haul easier. We focus on reducing complexity and improving customer experience.
Q: What is the health of the U-Box business and its profitability outlook?
A: Joe Shoen, Chairman: U-Box has more long-distance moves. We are exploring ways to enter short-distance markets profitably. Pricing reflects common carrier rates, which have come down. We see transaction growth with modest revenue growth and stable margins.
Q: How does your self-storage footprint provide a competitive advantage?
A: Joe Shoen, Chairman: With over 600 warehouses, we have a significant footprint advantage. Customers value proximity to their stored items, which benefits us.
Q: What are your annual depreciation charges for 2024 compared to 2023?
A: Jason Berg, CFO: Fleet depreciation for 2024 was $565 million, up from $520 million in 2023. Real estate and service vehicle depreciation was $253 million, up from $213 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
