U-Haul Holding Company (UHAL) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to U-Haul Holding Company's First Quarter Fiscal 2027 Investor Call. [Operator Instructions] I will now hand the conference over to Sebastien Reyes. Sebastien, please go ahead.

Good morning. Welcome to the U-Haul Holding Company First Quarter Fiscal 2027 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 safe harbor provisions of 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 June 30, 2026, which is on file with the U.S. Securities and Exchange Commission. I'll now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company.

Good morning, and welcome. [Audio Gap] is continue to creep up, and this is a combination of operating inefficiencies and pure inflation. About this time last year, we began a massive effort to net gain 3,000 independent U-Haul dealer locations. We are halfway there and still have good momentum. For decades, U-Haul has had a strategy of convenience customer. Adding these locations will further that goal, enhancing affordability to our customer and positively impacting equipment utilization for U-Haul. U-Move transaction growth has room to improve. . Last year at this time, we also initiated a harder line on delinquent storage accounts, pushing our same-store occupancy number down. By September, we should be reporting improvements in that number, but the actual work was done 1 year ago. Positively, our rate of adding new storage customers is moving. But of course, we want to need more. In my judgment, continued deceptive pricing practices by most of the storage REITs is degrading the self-storage industry's reputation with the public. At the minimum, their actions are increasing government oversight of self-storage as evidenced by recent regulations in New York City. This is a shame, and my team is dealing with it. U-Haul's customer-facing digital [Audio Gap] reflect increasing acceptance by our actual and potential customers. So I see that as a good positive. Overall, I see a compelling future for our U-Move, U-Store and U-Box product offerings. Now I'll turn it over to Jason to walk through the current numbers.

Thanks, Joe. Yesterday, we reported first quarter earnings of $123 million compared to $142 million for the same quarter last year. In terms of earnings per share, the first quarter of this year was $0.63 for nonvoting share compared to $0.73 for the same period last year. Earnings before interest, taxes and depreciation, what we refer to as adjusted EBITDA, and our Moving and Storage segment decreased $9 million for the quarter to $537 million. Included in both our release, of our press release and our financial supplement is a reconciliation showing how you go from GAAP earnings to adjusted EBITDA. For the first quarter, our equipment rental revenues increased $29 million compared to the same time last year. Transactions and revenue increased across both our In-Town and one-way markets. Compared to the end of June this year to June of the previous year, we added 75 new company-operated locations, and we had a net increase of over 1,100 independent dealers. For the month of July, revenue has trended in line with what we saw in the first quarter results. Census [Audio Gap] for new rental equipment in the first quarter of fiscal 2027 were $602 million. That's a $17 million increase compared to the same 3-month period last year. While proceeds from the sales of retired rental equipment were down about $14 million to $145 million. We're still projecting a decrease of over $500 million for net fleet investing over the back 3 quarters of the year. Storage revenues were up $16 million. That's about a 7% increase for the quarter. Our average revenue per occupied foot for the total portfolio of some, including both same-store and lease-up properties improved by over 6%. Digging into that number, our average new customer rental rates have increased by about 2.5% year-over-year, while our rates on customers who are leaving are just under 2% lower than what the move-in rate was. Same-store occupancy was down 456 basis points to 88.3%. Nearly all of that is due to the harder line that we took on delinquent units in the second quarter of last year. As Joe mentioned, net tenant movement activity is picking up, but we're still behind where we think it can be. During the first quarter of this year, we invested $194 million in real estate acquisitions along with self-storage and U-Box warehouse development. That's a $100 million decrease over the first quarter of last year. In this first quarter of this year, we added 18 locations with storage, totaling 1.1 million net rentable square feet. We currently have approximately 5.7 million new square feet being developed across 106 projects and then another $6.3 million of potential future development behind that in properties that we own but haven't yet started. To put that in context, last year, at this time, those 2 figures were 6.5 million square feet for active and 8.3 million square feet on pending, respectively. My projections have us continue spending on self-storage growth decline. Moving to storage, operating expenses were up $55 million for the quarter compared to the same period last year. Our EBITDA margin declined by just over 1.5%. Personnel, fleet maintenance and self-insurance liability costs were up just over $20 million. During the quarter, freight and shipping costs became more of a margin issue with these costs increasing close to $22.5 million from the run-up and what carriers are now charging. Shipping of our U-Box containers accounts the largest component, the smaller piece coming from shipping our retail products and repair parts in our system. For this last piece, our team is working to build further efficiencies into how we ship within the company. On the U-Box side, we continue to work with carriers as well as evaluating additional customer price adjustments. This cost is likely to be a headwind for the rest of this year, peaking here in July and then less on the back half of the year, but that's a lot of conjecture given how the freight markets are trending right now. Fleet depreciation increased $13.5 million for the quarter, but I'd like to point out only $800,000 of that increase was recognized after the month of April. It was May of last year that we began to materially increase the depreciation rate of our cargo van fleet. So those year-over-year negative variances are beginning to subside. Losses from the disposal of retired rental equipment decreased $24 million actually resulting in a gain of $1.9 million for the quarter. The resale market for cargo vans started the fiscal year relatively strong and has been receiving incrementally since. If this trends, it could lead to us holding the units purchased this fiscal year longer as we look ahead. As of June 30, this year cash and availability at the moving and storage segment totaled $1.349 billion. With regard to the $350 million share repurchase program that we announced during our last earnings release here in May. During the first quarter, we started making purchases for both voting and nonvoting shares. Through June, we repurchased 248,368 shares of voting at a cost of $15.6 million and 584,278 shares of our nonvoting stock at a cost of $32.4 million. Since June 30, through the close of the market yesterday, we've acquired an additional 149,747 voting shares and 813,211 nonvoting shares. As of date, the maximum amount that we can still use for repurchases is just under $242 million. At today's prices, we still see value in repurchasing shares. We're holding our 20th Annual Virtual Analyst and Investor Meeting on Thursday, August 20, 2026, at 11:00 a.m. Arizona time, which is 2:00 p.m. Eastern Time. This is an opportunity to interact directly with company representatives through a live video webcast at investors.uhaul.com. We'll have a brief presentation by the company, and then the rest of the session will be questions and answers. Feel free to submit the questions to us early by sending them to Sebastien or there will be a process for submitting them live during the presentation. With that, I'd like to hand the call back to our operator to begin the question-and-answer portion of the call.

[Operator Instructions] The first question is from the line of Steven Ramsey with Thompson Research Group.

Maybe to start with in storage, the development and pending square footage gradually declining to the 12 million level right now. Do you expect this to continue guiding down in the next few quarters or the rest of this year. And is there a floor in your mind on either the pending or developed square footage that you would like to maintain for future business purposes? .

Well, first of all, what you'd like to do, you should like to be developing just slightly more than you're renting. And right now, there's a significant gap there, where we had been developing at about twice that we were renting up. That's -- I don't have a hard number in my mind, but we're probably now developing at 140% of the rate we're renting at. So there's been improvement there. I expect continued improvement there, and I'd like it to be closer. Part of the problem with development is by the time you see a store open, the company probably has 3 years in the site. So many of these things were that you're seeing come up in the numbers, we're really committed to at this point, maybe 2 years ago. So I have a pretty good idea of where we're headed, but we also pack into that number purchases. And should purchases -- should something open up, we're working at it, and we would try to make a hard run at it. So if you're buying existing, even if they're only 50% occupied, there's considerable light to that. Jason, you've got something to add?

No, I don't.

Okay. That's helpful. And then could we get some color on the OpEx growth. Maybe just -- maybe another way to unpack it OpEx grew 7%, moving and storage revenue up 3%. Can you maybe dissect how much of the operating expense growth was for the freight issues and how much of it is [Audio Gap] moving and storage revenue is.

Let me take a bite at it and then we'll turn it to Jason. Part of this is inflationary, and we've pushed back on this, and we've had a lag. That stuff inevitably catches up to you. So that's it. Reported inflation is lower than what I think actual inflation is both for our customers and for the company, ultimately. Of course, it puts pressure on personnel. Most of our increases in personnel has been in medical benefits, not in base compensation. So there's a built in, I should say, post some of the rep there. With the fleet, this had to do with the rate at which we are selling trucks prior to sale, we bring the truck up to good saleable condition that could cost easily $4,000 a unit. So that pushed our numbers around a little bit in this quarter and it kind of moves expenses between quarters. So I think we might see better than that in the next quarter. Jason, you want to add to that?

Sure. If you think about our big 3 personnel, repair and maintenance and the liability costs for the fleet, those 3 costs this quarter were up about $20 million, and they represent about 70% of our operating expense number. So if you were to take those as a percent of revenue, I would estimate that they probably took down the margin somewhere around 25 basis points, whereas the freight number, the $22-plus million increase there as a percent of its normal run rate is fairly significant. Now we're coming off of a 3-year period where the freight market has been extremely positive for people who are shipping and not so much for people that are doing the shipping. So if there is a positive to this, and we're going to have to balance this with revenue expectations for U-Box is that for the largest portion of this freight cost increase, we're either going to eat some of that cost or pass some of that along to the customers. And I think we'll probably be doing some version of a little bit of both.

Okay. Okay. That's helpful. And then last one for me, halfway through the effort to add dealers. Can you talk about how effective this has been in your mind? And are you still confident that you need to go all the way to where that goal was?

Yes. So what happens, of course, is you bring somebody on in and typically revenue lags behind as it just learned. So it's kind of anybody's guess as how far or how mature is your addition of it. It's certainly no more than half because no more than half of them brought online, I would say probably in numbers coming through, it's probably closer to 1/3 complete because those numbers, the first period of time the dealer is just getting established. I believe easily, market will [Audio Gap] opening dealers as part of their job content. So we have quite a force, pretty much overlaid the population just about how the population exists. I think that we can certainly do rebound what we will do when we get there and how much more emphasis on it we'll put, I don't know. If you looked at us over the 30-year period, what you see is dealers and U-Haul operated stores have kind of a 10:1 ratio. And we're just kind of adjusting up where we had ought to be. We've had quite a ride on adding company-owned locations, which drives CapEx real hard. With neither, the CapEx is in fleet, not in property, plant and equipment. So the fleet, if you can handle the dealer by just being a little more deft on how you handle distribution, you don't have a huge capital commitment to add more dealers. So that's a positive part of the solution. I believe we can add the 3,000. We already outdone our competitors pretty solidly. But our goal isn't to outgun them. Our goal is to try to get a better connection with the customer where the customer defaults to U-Haul's solution. We have compelling evidence that if we'll introduce a truck into a community, imagine it was one truck, it's not. But if it's one truck into a community and hold the line for 10 years, we have solid evidence that the consumers in that community will drop about 19 vehicles registrations. In other words, a whole bunch of pickups, vans and miscellaneous vehicles that customers are hanging on to. When they find U-Haul as a reliable and nearby solution, it's a more cost-effective solution than holding on to a vehicle. So there's a lot of issue in the country right now to reduce vehicles. Of course, that isn't what the automakers are looking for. And it's not our goal, but it is what we see come out of it, which helps our goals with the goals of most communities are trying to get a reduction there. So I think there's -- we're executing. It's a little bit of a hat trick. But we have good momentum right now, and I have good spree core in my team. So I would expect to continue.

The next question is from the line of Steven Ralston of Zacks.

First, I'd like to congratulate Joe on his 50th anniversary with U-Haul. I looked at the photos in the social media, and it looked like you had a nice party.

Yes. I'm not Mr. Party exactly, but you're right, we had a nice party. .

In the self-moving segment, I noticed both transactions and total revenues increase both across in-town and one-way markets. But it appears that the average revenue per transaction is not headed in the same direction. Could you unpack the dynamics behind this divergence?

Sure, Steven, this is Jason. So it continues to be a little bit of a balancing act with where we are on rates and where we're at on transactions. So on our One-Way business this quarter, we saw a pickup on revenue and a little bit stronger on a percentage basis pick up in transactions, but the average revenue per transaction was still off a little bit. And for the longest time now that's been due to miles per transaction, but we actually saw a small increase in miles per one-way transaction for the quarter. So we just -- for the last 2 quarters have seen the revenue per mile step back a little bit. And our team is looking at that is not -- has not been a concerted effort to try to do that. So I don't think that's going to be a trend that will continue. In the in-town business, transactions have been up, I would say, on a quarterly basis in a fairly spotty fashion. We had a decent about a 2% increase in in-town transactions for this quarter -- I'm sorry, revenue -- the transaction increase was probably 0.5%, I apologize. On there, we saw revenue per mile outpaced the decrease in miles a little bit. So we haven't really had a quarter yet where everything is trending in a positive direction. I would say that we just haven't had -- other than a fairly steady increase in revenue, the 3 major factors that contributed to that haven't lined up all in 1 quarter.

I might add to that. I've consistently been kind of a little bit of a transactions now, revenue to follow guy which annoy some people here. But there's a certain amount of truth to it. So as we've added locations, it's become more convenient to people. And in fact, that's reflected in maybe a little bit lower ticket because they didn't drive quite -- maybe they drove 5 miles so less in that nature. But in my experience, if you can drive transactions and particularly, bring newer people into the customer base that over the period that will continue, they will tend to repeat and we'll see continued growth. So that's what I'm driving on. But I think we have pretty good awareness here revenue per transaction and miles per transaction. We're not alarmed.

Moving over to U-Box. Other revenue only grew 1.1% this quarter, which we know is primarily driven by U-Box. Over the last few quarters, U-Box has expanded its footprint in health space and containers and delivery vehicles. Is this due to a tough comparison against last year's 15.5% roughly growth in the first quarter of the last fiscal year? Or is it -- or is something else impeding U-Box's top line growth?

I'll start with that and let Joe clean up if he needs to. Transactions, the underlying transaction of the quarter looked better than the actual revenue results. So part of this, I would attribute a couple of million dollars of the variances is just due to how we've done the accounting for some of the insurance products associated with this product and shifted some of that to our P&C companies -- but even given that, it wasn't a blowout quarter for U-Box. So number of boxes in storage is up, the number of boxes that we shipped is up. It's just that the average revenue per each of those didn't climb as fast. And I referenced the issue that we have with -- and that's going to be a balancing act as we go through the rest of this year is how much of the inflation that we're facing can the customer bear without us affecting transactions too much.

I would add to that, that when you see this freight goes up, it has another kind of a strange consequence, it often reflects more late shipments and late shipments really annoy the customer. So we had an increase in late shipments that had something to do just with the general -- and in other words, people were bidding a job, awarded the job, then they didn't show, okay? It causes us to have to basically book some real expedited and expedited shipments can cost you 3x but a regular shipment cost. And I can't quite unpack that number, but there's an underlying threat going on here. We made some changes probably 4 weeks ago now that have driven down these shipments, and that will drive up customer satisfaction. You're always under the blend of this. So I think we made a misstep there that has been corrected, and I think that we will be proceeding ahead calmly and solidly. The increase in boxes and storage is another key metric we've driven on hard over the last 9 months, and we're starting to see some results there. The U-Box product is kind of a mix of U-Move and U-Store. It's hard to characterize the customers one way or the other. And the the greater margin is in the storage of the U-Box rather than the shipping of the U-Box. So as we drive on more storage, which we attribute to U-Box, we don't put that into our storage numbers, but in fact, it is storage. So as we drive onto the more storage for U-Box, I think it's going to help our margins a little bit and drive the whole thing. So yes, we were a little slow from what we had hoped to do, but it appears to be turning the corner.

And just a last quick question concerning the share repurchase program. With the announcement last quarter, your stock has gone up 2% since you announced the program. But looking at the -- how it's composed, roughly $32.5 million was deployed nonvoting stock and $15.5 million to voting stock, which is a 2:1 ratio roughly. But the ratio between nonvoting and voting shares is 9:1. Is there a strategic reasoning concerning this mix?

I'll start with that. This is Jason. So when we first rolled out and we were testing different allocations and different trading strategy to see what effect it would have on the shares. When the safe harbor window closed, and we had to switch to a 10b5-1 plan, I think you've seen in the numbers that we put into the Q as subsequent to the quarter, and we reported now that it shifted a little bit more towards buying the nonvoting shares. In our minds, there really wouldn't be much of a valuation difference between those 2 shares, but it's interesting to see where individual investors decide to contribute value. And so I guess that's my insight into it. .

Are you saying it's almost totally due to the regulatory restrictions of implementing a share repurchase program?