U-Haul Holding Co /NV/ Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Moving Equipment: Rental income on moving equipment up slightly; teams focused on measurement but results modest. Developing new storage products, monitoring industry's unrealistic moving promotions.
• U-Box: Making progress, with significant infrastructure in place to handle growth.
• Acquisition Update: Trian Fund Management LP's acquisition of U-Haul shares; Jason Berg communicated with Trian, but U-Haul's plans unchanged.
• Earnings: Second quarter earnings $187 million vs $274 million last year. EPS $0.96 vs $1.40 last year. EBITDA at moving and storage segment decreased due to non-recurring operating costs.
• CapEx: Increased fiscal 2025 full year net CapEx projection due to additional equipment availability.

Segment Performance

• Moving and Storage Segment:
  • Equipment rental revenue: Had an $18 million increase (~1.7%), second consecutive quarter of year-over-year increases. First six months' capital expenditures for new rental equipment were $1.156 billion, a $182 million increase from the same period last year. Fiscal 2025 full year net CapEx projection increased to approximately $1.115 billion from $1.90 billion. Proceeds from sales of retired rental equipment were down $44 million to $361 million.
  • Self-storage: Revenues up $16 million (~8% improvement). Average revenue per occupied foot up ~1.6% quarter-over-quarter, same-store portfolio up just over 2%. Occupied unit count up nearly 32,000 units, but added 67,000 new units, resulting in average occupancy ratio of 80.9% (same-store 94.1%). Invested $734 million in real estate acquisitions and development costs for self-storage and U-Box warehouses in first six months, a $101 million increase from last year. Added ~900,000 new net rentable square feet, ~860,000 from newly developed locations.
  • U-Box: Revenue included in other revenue, increased $7 million, but not large enough to break out separately.

Guidance

• Increased fiscal 2025 full year net CapEx projection from $1.90 billion to approximately $1.115 billion.
• Expect net rentable square feet deliveries to increase next quarter compared to current quarter.
• Anticipate U-Box to continue making progress with existing infrastructure handling growth.

Risks

• Uncertainty around vehicle manufacturers' ability to gain certainty on EV mandates affecting U-Haul's strategy.
• Declining resale values of rental equipment affecting depreciation.
• Excess self-storage capacity acting as a drag on earnings due to aggressive development.

Question and Answer

• Q: Concerns about next two quarters for rental business and self-storage trends A: Joe Shoen mentioned no big changes foreseen, introducing an additional trailer model in Q4 likely to have modest impact. For self-storage, adding rooms faster than filling, but expects to outperform peer group with new products.
• Q: Value gap in self-storage valuation compared to competitors A: Excess capacity is a drag on earnings, aggressive development is a drag. Discussed partitioning assets and past experiences with such strategies, but no clear quick fix.