Q2 2025 U-Haul Holding Co Earnings Call

Jason Berg

Thanks Joe.
Yesterday we reported second quarter earnings of $187 million compared to $274 million for the same quarter last year.
From the earnings per share perspective, this translates to (96¢) per nonvoting share compared to a $40 per nonvoting share in the second quarter of last year, 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.
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.
Equipment rental revenue results. We had an $18 million increase or about 1.7%. That’s slightly better than what our first quarter improvement was.
This is now our second consecutive quarter of year over year increases in the equipment rental revenues and it points to a likely trough. We should hopefully have a return to a more sustained growth trajectory, but 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.
And our in-town revenues on the trailer and towing fleet also increased during the quarter.
October in the first week of November saw revenue continue to trend positively compared to the same time last year.
Capital expenditures for new rental equipment for the first six months. We’re a billion $156 million. That’s $182 million increase compared to the same six-month period. Last year, we’ve increased our fiscal 2025 full year net CapEx projection. So that’s gross spending less sales.
We’ve increased it from a billion 90 million to approximately a billion 115. And that’s due to the availability of some additional equipment from our manufacturers that we can purchase. This year 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 portion of our depreciation increase that you’re seeing is in response to the declining resale values of these models, switching to self-storage revenues were up $16 million which is about an 8% improvement.
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%.
Our occupied unit count at the end of September was up nearly 32,000 units compared to the same time last year.
Now, during the same time frame, 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.
If you split out just the same store portion, we saw average occupancy decrease 80 basis points to 94.1%.
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.
That’s 100 and $1 million increase over the first six months of last year.
During the quarter, we added just over 900,000 new net rentable square feet. About 860,000 of that was from newly developed locations.
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.
Our U BOX revenue results are included in other revenue in our 10-Q file that are not large enough yet to break out separately.
But this line item increased. 7 million of which U Box was a major contributor.
Operating expenses and moving in storage increased just over $55 million.
As we mentioned on last quarter’s call, the decline in fleet repair maintenance. It was going to slow and it was down $5.4 million for the quarter.
Personnel costs were up a little over $17 million liability costs associated with the fleet increased 7.6 million and property taxes and building maintenance combined were up about $8 million.
During the quarter. We had a $16.5 million cost related to our transition to a new cardboard box supplier for our moving supplies.
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. As of September, of this year at our moving and storage segment, we had cash along with availability from existing loan facilities of a billion $775 million on our investor relations website, (investors.uhaul.com).
We posted some supplemental materials in addition to the earnings release and 10-Q filing. I would encourage you to take a look at them. We, we hope that they’re, it’d be helpful to you with that. I would like to hand the call back to our operator Leo to begin the question-and-answer portion of the call.

Operator

(Operator Instructions)
We’ll take our first question from Steve Ralston of Zacks.

Steve Ralston

Good morning. The 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, which is quite interesting because, two, I think two quarters ago, Joe mentioned that he expected slow but modest improvement 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?

Edward Shoen

I don’t see any big changes. We’re fine-tuning stuff all the time, but it’s, you’re getting miniscule changes or results. Now, that doesn’t mean we won’t come upon something that significantly works. I think that, oh, all this 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 fourth quarter. They 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. But I’m looking for that to be a modest success.
But I, don’t see anything.
I’m blind as to if something is going to pick up over the next 180 days.

Steve Ralston

Okay. Thank you for that in the self-storage business. The year over year rate of the gain year over year has been deteriorating. It used to be a nice solid double digits and now it’s upper single digits, there are a lot of factors that are going into this. And I know you point out that the size of your portfolio is growing and that’s mathematically that’s part of it. And you allude to the pricing situation. Could you comment on that trend? And when you think it’ll stabilize and start proving?

Edward Shoen

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 of that Jason can point to plenty of places we’re in the low to middle 90s doing fine. But as you bring on new product, you know, some are more winners than others.
I think our new product that’s coming on, it’s going to be 90% winners. And so, I look for that two outperform the industry, but today it’s going to go back to double digits.
You know, between now and next summer, I’d hesitate to predict that the, the whole industry is kind of got themselves funky and there’s many, many things going on which I probably don’t even know about.
But the I think we’re going to outperform our peer group and I think we should. But whether we’ll get this addition and the addition of new product and filling of rooms balanced out. Right.
it’s not, you know, it’s not totally clear. Of course, we’re going into what’s relatively speaking, a slow season, but that’s fine. There’s plenty of customers out there even in the slow season. So there’s no, 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 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 the, what the players are.
Where is the failure in our sales presentation? I always view this as customers are there. We’re, we’re failing to connect to them. And I still believe that is even though the other, the rest, many participants in the industry are reporting, you know, not too shiny results, but I tried to anticipate that and 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.
I expect to come out of that jumble ahead of my peer group, but we’ll see how that goes.

Steve Ralston

Just to talk out loud. I mean, that’s one of the key attributes of U-haul is that you build all this capacity and, 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.
And that works both in the rental business and self-storage.
Well, thank you for answering my questions.

Operator

(Operator Instructions)
We’ll move next to Jamie Wilen of Wan management.

Jamie Wilen

Hey, fellas, the first question is about you box and you seem to be gaining some share in the business. And the question is relative to, as you build new self-storage, you have a lot of new box storage in there. And 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 U box.

Edward Shoen

Yeah, I’m going to let my son SAM who runs you speak to that for just a minute and.

Sure. I’m happy to answer that, Jamie. I think the question was, 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, we’re, we, I would say if I would give us a grade on the moving segment of U box, I’d give us an A and on the storage segment of U box, I’d give us a C but it just gives us massive opportunity going forward to shine.
I’d say the competitions doing a better job on that relative to us. But I can tell you storage at U haul, as you might imagine is, is quite a focus. And so I’ve got a lot of support resources to take that C to the, to A that we know it should and could be. So, thanks for your question.

Jamie Wilen

Okay. As we continue to build self-storage will always include an extra component for portable storage as well.

Edward Shoen

Not always, it you got to map this out and probably the radius would have U box location service is larger than the radius of customers that traditional self-storage serves. So, we’re using the opportunity when we build 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 U BOX network.
But, so if you look at the ones we’re building currently, it’s pretty close, maybe eight out of 10. Okay? But that’s we don’t have a goal of going to a 1 to 1 at all, Jimmy, that would be more capacity, then we think we can absorb. But, right now what we’re building, I’m just going to guess but the eight out of 10 of them where we’re putting in more storage, we’re putting in new box.

Jamie Wilen

Next, I want to go to the, the value GAAP coherent between what you all is trading for what and what it’s worth. When I look at competitor say AC smart, which has a 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 self-storage. And it seems like we’re not getting that credit force for it on our self-storage operation. Which one would think our metrics for occupancy and rate are similar to theirs and, and margin or similar to theirs.
So one would think our valuation for our self-storage would be similar to that. Can you talk about the value (GAAP)? And, and is that what is within a lot of the try ons powerpoint presentation for how to close that value? (GAAP)?

Edward Shoen

Okay. I, I’ll talk to it from that.
Of course, we right now, Texas capacity drag. I can’t give you the number. How do it, but it’s a drag on earnings. Obviously, we own the stuff we’re paying for it.
And aggressive development is a drag and both those things are just mathematically what comes out of that development, whether at the end of the day, 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, I wouldn’t be pouring resources into it as far as Mr Pel’s, I don’t want to speak for him.
And I don’t like to have anything, is anything, I don’t know, I could send you his presentation, Jamie. I don’t know if that would work. I, I don’t really, I don’t want to speak for him.

Jamie Wilen

Okay. And, and you talk about within self-storage that we’re you know, adding more spaces than, than we’re filling. So in, in the short term, it really impacts earnings. One of the beautiful things about COVID was not only that we were able to increase occupancy rates in the existing locations, but it restricted our ability to be to open new locations. So, there was much more of a balance in the near term between the costs of carrying newly open units. And the filling of existing units. 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, 10 years to balance off the near term impact for opening so aggressively with new locations.

Edward Shoen

Well, I would expect will Evan flows what I think? No.
Oh, there’s still a lot of opportunity and one of you all’s stronger points is the rep where we operate. So we’re very active in Wyoming and Montana and a lot of people kind of shrug their shoulders and that’s fine.
We’re already in Gillette, Wyoming. Okay. So, us going there with more products and services as long as it’s proportional to the market is totally within scope. Whereas you take one of our storage competitors, they have no reason to go to Gillette because they have no infrastructure, and they would have to gear the whole thing up and marginally it would be a loser for them.
You go to Northern New Jersey and they’re all eager to get in there with more product.
I just turned down some product in Northern New Jersey three weeks ago because to me it looks like hardworking overtaxed.
(I don’t know what you want to call it.) The, the price is not worth it.
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, and be positioned, oh, you know, for a 20 year, 30 year run out of them, they all make, you know, inflation, of course, has saved everybody in the self-storage business.
When we, when I first was doing this, we, we were bringing product on for $7 a square foot. He now we won’t rent it for $7 a square foot a year. That was all in cost.
Then at the point it bumped up to 15, we thought, boy, this is some pretty expensive storage. Of course, you go look at those places. Now they’re selling for 135 ft, same exact spot.
And so inflation has really saved the self-storage industry in my experience.
Oh, currently you’re going in at some pretty high cost and, and the units that are trading in the secondary market are still trading a very, very high multiples.
You know, it’s just maybe that’ll 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 as long as we’re very confident that market is going to produce results over time. But it’s a drag, as soon as you turn this tap off in about 18 or 24 months, 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. And.

Jamie Wilen

Exactly. You know, I just wonder, if we slow the pace of capital that we put into it. So the percentage of new units has, is lower. And then on the correlator to that, you talk about New Jersey versus Wyoming. And you know, if it’s easier to be a big player in a smaller pond than a small player in a big pond. And what would be the thought process of, you know, 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.

Edward Shoen

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 new store there. And so you could conceivably do some partitioning and some kind of a, you know, wacky showing a partial interest.
we did a version of that with WP Carey the deal finally, whatever you want to call it rolled over here just a year ago.
So we, have some experience with it.
What it seems to get is a one-time pop. That’s my, my experience. I get a one-time pop. And after that, of course, the people who have the financial interests and assets that they try to bring every penny out of it. Okay. So, I’ve done at one point I was managing 100 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 partitioning these things out is awkward, put it politely and, but that’s been our, our strategy is this combined presentation to the customer. So, if there we’ve tried a couple of different things and not seen anything that trying to partition these assets that really helped very much, I guess.

Jamie Wilen

Okay, thank you, Phil. I appreciate your time.

Operator

(Operator Instructions) I’m happy to return the call to management for closing comments.

Sebastien Reyes

Well, thanks so much everyone for your support. We look forward to speaking with you after report earnings in February. Thank you.

Operator

This does conclude today’s U Haul holding company second quarter, fiscal year 2025 investor call. (Operator Instructions)