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spk05: by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Sebastian Reyes.
spk06: Please go ahead. Good morning and thank you for joining us today. Welcome to the UL Holding Company first quarter fiscal 2024 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 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 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, 2023, which is on file with the U.S. Securities and Exchange Commission. I'll now turn the call over to Joe Schoen, Chairman of U-Haul Holding Company.
spk00: Good morning, and thank you for joining us today. We continue to struggle to post new move numbers as good as the prior two years. My experience says overall moving activity has contracted. We have seen this before in an uncertain economy. Of course, we're continuing to scramble for business. As consumers become more optimistic, the entire market will likely expand. Our repair spending on trucks and trailers continues to rise. Of course, there's always some waste, and I'm working to eliminate the waste, but the fundamental drivers of repair are too few replacement units, needing to increase mileage per unit, and parts and labor inflation. We have not resorted to large-scale discounting and self-storage, unlike some of our major competitors. We are continuing to build and buy at a rate above our rate of unit rent-up. This doesn't disturb me greatly, and I plan to continue adding units and drive on increasing the rate of room rent-ups. In UBOX, our total revenue was down for the quarter due to decreased pricing. Freight costs finally went down, and we lowered some rates due to that. Our margins, however, are holding. Transactions are up. This should continue to be an expanding market for us. I look forward to speaking with you at our upcoming investor and analyst video conference, and Jason will now address the numbers in greater specifics.
spk01: Thanks, Joe. Yesterday, we reported first quarter earnings of $257 million. That's compared to $338 million for the same quarter last year, representing our company's third best first quarter results. Looking at it from the perspective of earnings per share, we reported $1.31 per nonvoting share this quarter compared to $1.68 per nonvoting share in the first quarter of last year. Starting off with equipment rental revenue results, compared to the first quarter of last year, we had a $92 million decrease. That's about 8.4% down. To put it into context, over the last four quarters, we've had a nearly $230 million decrease in U-Move revenue. In the eight quarters before that, so starting with the second quarter of fiscal 2021, we've experienced a $1,428,000,000 increase. So in the last 12 months, we've given back a small portion of the gains. The trends that we've seen in the past several quarters continued, declining transactions and reduced miles per transaction. Revenue per mile growth has remained positive, and July results trended down compared to last year. Capital expenditures for new rental equipment in the first quarter were $454 million. That's an $103 million increase compared to 1Q last year. The majority of this increase is in our box truck fleet, and we have increased our fiscal 2024 full-year net capex projection from 685 million to approximately 820 million. I would say about three-quarters of this increase is from the addition of more units onto our manufacturing schedule, with the remainder being projected decreases in sales proceeds from what we initially thought was going to happen. Speaking of, proceeds from the sales of retired rental equipment increased by $34 million to a total of $193 million for the first quarter. Sales volume increased while average proceeds per sale declined. Sales storage continues to be positive. Sales storage revenues are up $26 million. That's 15% up for the quarter. Average revenue per foot continued to improve across the entire portfolio, up nearly 6%. Our occupied unit count at the end of June was up a little over 42,000 units compared to the end of June last year. During that same 12-month timeframe, we've added nearly 64,000 new units to the portfolio. This differential led to the average occupancy ratio coming down for all of our own locations by about 170 basis points to an average occupancy rate of just under 83%. This same moderation in occupancy was also seen in our same store grouping of these properties. We saw about an average decrease, again, of 170 basis points, bringing the occupancy level to 95, just over 95%. We continue to fine-tune our new self-storage disclosure in the press release. During the first quarter of fiscal 2024, we invested $294 million in real estate acquisitions, along with self-storage and UBOX warehouse development. That's a $16 million increase over the first quarter of last year. During the quarter, we added just over 1.1 million new net rentable square feet. About 73,000 of that was in the form of existing self-storage acquisitions. We currently have just under 7.1 million new square feet being developed across 159 projects. Operating earnings in our moving and storage segment decreased $95 million to $387 million for the quarter. operating expenses were up $28 million for the first quarter. Fleet repair and maintenance led the way with a $30 million increase. Work continues on increasing capacity, shifting repair work to company-operated shops, and rotating the truck fleet, but we have fallen behind. Personnel costs increased $11 million, about half of that coming from increased health plan costs. Compared to the last two years, personnel costs as a percent of revenue are elevated. However, over a longer-term view, they're not out of line on a percent of revenue basis. Some other expenses, including accident liability costs, the cost of freight and shipping, and payment processing costs all decrease during the quarter. We continue to place a premium on having access to cash and liquidity. At the end of June, cash, along with availability from existing loan facilities that are moving to the storage segment, totaled $2,792,000,000. During the quarter, interest expense at moving and storage increased $11,000,000, while interest income that we earned on our cash and short-term investments was up $22,000,000. During the quarter, we implemented Accounting Standards Update 2018-12 that targeted improvements to the accounting for long-duration contracts. This affects most of the products that we have on the books that are life insurance subsidiary. While this new rule has increased the amount of life insurance disclosures that you're going to see in our filings, and it's going to lead to some additional earnings or comprehensive earnings shifts between years, it does not have any effect on the underlying economics of our book of business there. With that, I would like to hand the call back to our operator, Dave, to begin the question and answer portion of the call.
spk05: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Steven Ralston with Zach. Please go ahead.
spk07: Good morning. Obviously, the self-moving equipment rental business is being driven by some macroeconomic factors that are out of your control. But looking down deeper, it seems like the one-way market is being especially affected. I'm wondering how your effort to reposition the fleet from the a situation that was created by COVID a couple of years ago, given that slowdown in the one-way traffic business.
spk00: Okay, this is Joe. I'll speak to it for a minute. At least three times in my career, I've seen during a time of consumer confidence decreasing, people shorten the entire mileage that they move. And that also results in a shift of longer mileage one-way rentals into shorter mile rentals. The vast majority of our moves are driven by necessity. People's family grow or spouse dies or people retire. These are life events and they kind of continue just in a pretty even rate, but people's optimism and their willingness to go a long distance In a move, we've seen a decline, and I believe that's what we see going on here. Our fleet issues are that we're not able to purchase at quite the rate that we would like to to get the optimum balance of repair costs versus depreciation. And any time you buy a car or a truck, it's just like in your personal life. kind of trading off variable costs to repair for fixed costs, which is capital costs. So we would rather here today be a little bit heavier on the fixed costs. We think that balance, our experience says the balance would favor profits, but we just don't have availability of that many units yet. Does that answer your questions?
spk07: I was more thinking about how the equipment has migrated, let's say, from New York and California towards Florida, that the equipment is not equally dispersed.
spk00: Yes. Of course, we always have some equipment imbalances. Actually, Florida and Texas, which you would think would now be buried in equipment, are not. And we're seeing more localized unproductive, what we call unproductive areas, more around retirement communities than a simple shift from the north and the east to the south. So there's a lot of factors go into that. Part of it is, where my team does a better job. If they do a better job, we rent more equipment out. I think we've got teams in Florida and Texas right now that on balance are doing a pretty good job, so they've kind of alleviated that, but we have other imbalances, and this just is a constant juggling.
spk07: Thank you. Looking at something more under your control, though not completely, are the expenses. There are different components and some interesting dynamics in the different line items. But it looks like there's about a 3.5% to 4% inflation through the costs. Can you mention anything specific that you're using to address these increased expenses?
spk00: Well, of course, we're trying to purchase smarter, but there's an end to that. Everything is inflating. in our experience, from electricity to steel. And we've seen a little catch-up, there's probably a little more catch-up in wage rates, because that's just the truth, that the point of sale, which is where the bulk of our people exist, there's a lot of pressure on wages, as you see with people, other people in retail areas, that they're seeing wage pressure, we're seeing it too, and so people are getting paid more, which normally you would kind of celebrate, but it's inflationary and that's going to go on. We don't have any spin on the ball as far as controlling that. What we can control and what we work very hard on is simplifying processes and making them less labor intensive. To a certain degree, truck rental just simply is very physical. Trader rental is the same. There's a tremendous physicality to it. We have several initiatives. One would be our truck share 24-7, which I think just recently broke its 6 millionth transaction. Now that's programmed to date. But it means we're getting that process working pretty good. We also have revitalized, I would say, or focused much more on the U-Haul app. And the U-Haul app gets the customer to participate in some of this activity and reduces basically hours needed to work at the point of sale. Now, it's not a perfect equation, but overall it works. And we're driving on that, and I think that will continue to yield results for two or three more years. There's a lot of room to refine that. So I think our best chance of countering increased cost is not in that we're going to get a better deal on steel or something of that nature or building materials. I think that we're going to eliminate some processes that can be better done. Technology lends something to that and get some increases in efficiency, which will result in less labor man hours per transaction.
spk07: And just one last question in the self-storage area. You mentioned, and it's an interesting way it was worded, but you said that you looked at that subset that the occupancy has stabilized at 80% for at least 24 months. and showed that the decline was consistent with the overall number. I assume the purpose of that was to show that the decline is consistent across most of the segments there, and therefore it's just a general industry trend, and there's nothing specific to worry about there other than that the market is weakening.
spk01: Yes, that was the general thrust of that comment, is Jason.
spk07: All right. Thank you very much for taking my questions.
spk05: Thank you. The next question comes from Keegan Carl from Wolf Research. Please go ahead.
spk08: Yeah, thanks for the time, guys. So first on the moving business being down 8.4%, it obviously includes locations that were added over the last 12 months. I'm just kind of curious on a true like-for-like basis what you think it actually would have been down year over year.
spk03: You know, I don't have that number, but I think that's a fair question.
spk00: It's more complicated than just how many new locations you brought in, because also we do about half of our moving business through independent dealers. And always when we add a new location, we have to be careful that we're not cannibalizing those dealers. And undoubtedly there's been some cannibalization of that by these new stores. So if they hadn't been built, we'd have still gotten that part of the revenue. You know, if you want to assume there's 10 or 15% cannibalization, then I don't have a firm number on that. It's very location specific. And then the rest of it is new business. That might be fair. I don't know, Jason, if you have any more specific on that.
spk01: Yeah, I don't think that that's going to be a material part. I don't know if we would have seen a much bigger decrease on that. But that's an interesting question, Keegan.
spk08: I know that's a super helpful way to think about it. I guess shifting gears to storage. So obviously occupancy was down 170 basis points, and that makes sense to us just given a challenging market. I know in the opening remarks you said you're not lowering your street rates like the broader peer group is, but I guess I'm curious, what would it take for you to see it actually start to lower street rates?
spk00: Well, we analyze every location and every room size by location, and that's how we manage rates. you're unlikely to see us do something like, say, put in a 10% rate decrease. If we did a rate decrease, it would more likely be in a certain size. So let's say 5 by 10 non-air-conditioned rooms, or 10 by 15 air-conditioned rooms, or more specifically, 10 by 15 air-conditioned rooms on the upper floors. So it's very, very specific. We don't have in our bag of tricks or whatever you want to call it, you know, normally a normal maneuver to simply drop rates. And, I mean, of course, you probably saw the nice article in the Wall Street Journal recently that said basically anybody with a little bit of capital can get rich in self-storage. Well, it's a little bit more to it than that, as you might imagine. And mostly I see people when they drop rates, when they drop rates across the board, they're in a very uncomfortable situation. Once in a great while, a competitor will literally move next door or across the street. They'll drop rates as an introduction. That's not an uncommon phenomenon. And We'll lose tenants at that location because of that, but we typically don't drop the rate because our competitor will come up with a rate increase 90 days later, and some of those customers will now bounce back because now we'll be cheaper. In the meantime, it disrupts everybody to just drop our rate overall. So if that's a specific competitive situation and that would be our typical response is hold tight, and wait for them to get a little bit of occupancy and they'll increase rates greater than they decrease them. That's just about what our strategy typically is, Keegan.
spk08: Got it. I guess on the topic of storage, just curious if you're seeing any change in your average length of stay and then how that helps you guys determine what sort of rate increases you're sending out to your existing customers.
spk01: This Jason, I just looked at that this last quarter and compared to say like a year ago, it looks like each one of our duration stratifications has maybe moved out a percent. So across the portfolio, I would say there has been a general move to a little bit longer moves or longer stays.
spk00: And I would say, well, that seems paradoxical. It's not because little bit less moving activity a lot of the storages people are moving in or out and so they're going to store for 30 or 60 days because they're waiting for a place to be firmed up or these kind of just little timing difficulties and it's overall moving declines see that real short stays not as frequent
spk03: Got it. And then just one final one here on the topic of storage.
spk08: So if we think about supply in general, it's often what causes storage to underperform over a short time period. You mentioned in the opening remarks, you don't necessarily plan on stopping to grow your footprint right now. So I guess I'm just curious from the operational side of things, what you would need to see for that to change.
spk00: Well, I'd have to be discouraged on the long-term prospects. You know, when COVID broke out in March, I think of 2020, I got a little bit uncertain, so I stopped a whole bunch of projects. And it took me at least 24 months to recover and get momentum back again. And COVID was a first-time deal for me. And if I had, let's say, that same event, I wouldn't back off. I would say, no, the U.S. economy is going to roll through this, and I'll have a little dip, but it's better than being undersupplied. So I was undersupplied the last half of COVID, which I lost opportunity. There's no certainty. Now, is there overbuilding? Certainly, and I've said that for a couple of years at least. Of course there's overbuilding. The beauty of it is the markets are local. You could be overbuilding on the north suburb and underserved in the south suburb. All these things exist, and of course the art of this is can you find a place that still needs more supply. We're, as you probably are aware, we operate in all 50 states, so we make some different choices than some of our competitors, which are just kind of our strategies to be all 50 states. So we'll be expanding in a market maybe that they're not even in because they just don't, it's not got enough mass, they're not interested in being there, and And that's what I would try to do if I saw things get squirrely. And what I have been doing, which is, well, let's search out some different markets that we have great long-term confidence in, but aren't really on the radar of a lot of people because that market will never have five stores in it, five stores for one supplier. It's always going to a smaller market, and we do fine in those smaller markets, and our management structure works good for it, and some of our competitors, it doesn't work good for them, which is just a slight difference in strategy, not one's better than the other, but a slight difference.
spk08: And one final one for me here, just from a capital allocation standpoint, you guys are sitting on a ton of cash. I'm just curious how we should be thinking about the deployment of that over the next several quarters and years, and Where are you currently finding the best risk adjusted returns? Because it looks like it might be through short-term treasuries.
spk01: This is Jason. So we were fortunate to lock in rate on a large piece of this cash going into this rising rate cycle. And we've benefited from that. I mentioned the increase in interest income as we're in short-term government securities. And we've gone out and opportunistically purchased some treasuries here and there. I think our sense is that we are going to be going into a credit tightening cycle. We've already seen some small anecdotal evidence of that within our own lending group. And since that is the primary way that we raise capital, we are sitting on a bunch of cash. And that will give us the ability that should we want to buy more trucks and not have access to debt financing at that point, point in time where as much as we would like, it gives us some flexibility at that point. So our target goal for bringing cash down is probably closer to the $500 million mark. It's going to take us a few years to get back to that point. But we have in the pipeline of development, we're still looking at potential spending of up to $2 billion in that, along with a increasing fleet purchases over the next several years.
spk08: Super helpful. Thanks for the time, guys.
spk03: Really appreciate it. The next question comes from Steve Burrow with Oppenheimer.
spk05: Please go ahead.
spk04: Good morning. How are you?
spk00: Great, thanks. Appreciate you logging on.
spk04: Yes, thanks for having me. A quick question about CapEx. Are we expecting the remaining spend to be spread out over the rest of the year or more weighted towards the next quarter or two?
spk01: It'll be weighted a little bit heavier to the next two quarters.
spk04: And has it been easier to get supply from the manufacturers, Ford and them?
spk00: Yes, it's loosening up, but it's at a snail's pace and it has me biting my fingernails. You know, it's a political question. You probably know as much about it as I do, which is they're trying to reconfigure the automotive industry, and that's causing them fits and being able to do their fundamental job, which is manufacturing automobiles. And they've made progress on it, but they have their hands full. We're on good terms with everybody. We're getting getting units, but they just, their total overall production has been short of demand.
spk03: And I think it's going to stay that way for a while. And how do you think that affects the fleet moving forward?
spk04: Should we be expecting a longer age of the fleet and less capex and turnover there?
spk00: Well, that may happen. If it does, that basically increases our effective cost per mile. And we're trying to manage the cost per mile, which is a trade-off of repair, a variable cost with CapEx, which is basically you get a fixed cost. The balance is a little bit too much on the repair variable cost side right now in our judgment. And we're trying to, of course, tune that more towards an optimum spot. So if what you describe happens, it won't be because it was our choice. It will be just because the market has constrained us. Now, we can go through that. We've done that before, but we think a more optimum trade-off would be a larger number of annual replacement vehicles.
spk04: And how should we be thinking about the impact from the increase in CapEx this year and the effect that will have on maintenance and repairs and the timing of those benefits? We're going to slow the increase, but it's not enough to stop the increase, in my judgment.
spk03: And do you think...
spk04: spend from the first half of this year that will start to slow the pace more in the first half of next year or second half?
spk01: I'll let Jason take a stab at that. Steven, on this one, the pace of new acquisitions is coming in reasonably well. If we finish out this year on new acquisitions the way that it looks like, we could make a dent of maybe picking up 2,500 units over a normal pace. We started off the year about a year behind in rotation from the last few years, so that would still put us over four years out from fixing it at that pace. The bigger piece that's going to affect maintenance is how fast we're taking the old trucks out. So the new trucks are coming in. I think our team is feeling a little bit more confident has more confidence that the new trucks will be there for them. Now we need them to start removing the older trucks that have the higher maintenance costs attached to them. And on that one, I would say we're at least a quarter behind. I don't think we made a lot of progress in this first quarter in getting older trucks pulled out of the fleet. So that's going to delay some of the benefits to repair and maintenance here at least another quarter until we can really start to pull old trucks out of the fleet so we can stop fixing them.
spk03: Thank you for that.
spk04: Moving to self-storage, the other self-storage REITs have reported pretty big price per square foot drops on move-ins versus move-outs. Are you seeing the same thing?
spk01: Our move-in rates are about 3% higher than than what they were last year, and we still have a positive differential between move-in and move-out rates. So we're moving in people at a higher rate than what the people were paying who were moving out.
spk04: And do you think that's because U-Haul is somewhat insulated? They're not as heavily concentrated in the top 25 MSAs. Do you think that's a benefit for you guys?
spk00: I'm not so sure it is. I think you watch our, we'll just pick the re-competitors. They'll have a good week. They'll jam rates. I mean, they could go up 15%. So they're a little bit more aggressive on the upside, which causes them to be a little more prone to retreat. Does that make sense? Yes. For an instance, We post rates. Our competitors don't post rates. The next person in line can get a different rate. So we have a different strategy, and we've tried to create an expectation with our customer, and we largely have. They kind of understand what our strategy is, and for one reason or another, they think that works for them. I think they're all probably aware, or not all, but many customers can figure out that the REIT down the street just dropped prices. Do they want to move to save $15 a month? Maybe, maybe not. And so I think they do a little bit, they harvest a little bit more on the up and they give away a little bit more on the down. But I don't know that either strategy is, It's just kind of the way we've built our customer relationship.
spk04: How do you balance rental rates versus occupancy rates when you're looking at where to set the price per square foot?
spk00: Again, we do it by location, by room type. So a given location. So here in Phoenix, Arizona, I don't know, we probably have 85 or so stores. And there will be certainly 10 different rates out there on a comparable room. So it's pretty specific. Just because you're in the Phoenix Metro, it's going to be a lot more discerning than that. We're going to get right down to the location. We have a staff that that's all, that's what they do, their storage rate department. And they are looking, of course, at occupancy and rent up, both. It depends on where you are in the cycle. If you're filling a new store or you're trying to trim the sales just right on a store that has 92%, you'd like to be at 95%. Just how are you going to trim the sales to get there? I'm pretty much dissatisfied with their work and have been for some time.
spk04: And on the cost side, I know you don't break out the cost specifically for self-storage, but as locations that share in self-storage and equipment rentals, are there synergies compared to a standalone self-storage facility or are NOI margins about the same there?
spk01: This, Jason, that, you know, it's a complicated question. from an asset owner, it certainly benefits the truck product line, the equipment rental product line, the U-box product line to have a blended location. The way a specific measurement would work for determining what the storage margin might be, we do have many locations that are essentially storage only. And the way that the costs get allocated to those locations, those look like they have, appear to look like they have a higher margin because there just isn't as much overhead costs going on there. And you don't have to split up the profits across multiple product lines. So we think the best returning locations for us have the full product line available to all the customers. And so that would look a lot different than a self-storage income statement by itself.
spk03: Got it.
spk04: Thank you. And last question I saw on the release, we included the chart again for the self-storage by state. Are the same store numbers comparable year over year?
spk01: So the same store numbers that were put in there represent what the same store calc was at that time, right? So there's a couple different ways of presenting that. The way we've presented it is showing what the same store pool looked like a year ago and two years ago versus taking the same store pool from this year and then carrying that back two years. We didn't go that route.
spk04: Would it be possible to maybe include both of them just so that you can compare whatever subset you're looking at? You're looking at the same group of stores, the same cohort.
spk01: Steven, I've been accepting feedback since last quarter on that. The comments asking for that have been fewer than the ones who have been happy with it. We've tried to index this against what people are used to from our storage competitors, and we've found this presentation and some of theirs. But it's an open question, so I wouldn't say that the book is closed.
spk04: All right. Well, thank you very much. That's all my questions, and I appreciate you taking my questions on the call.
spk05: Thank you. The next question comes from Craig Inman with Artisan Partners. Please go ahead.
spk09: Hey, guys. Finally on here live for once instead of sending in questions. I guess one of the things I was wondering about from a strategy perspective, you know, obviously moving in household formation and I don't love these macro questions, but you know, interest rates on housing and all that are a lot different now than they were two years ago. And you've seen that slow down. I'd imagine that kind of moving and household formation puts pressure on the truck rental business, but I'm not sure. Can y'all comment on just what that means for the business? You know, how big it should be? I know you want to win and gain transactions, but some thoughts around strategy with this change in what the consumer can afford from housing and what we're seeing there.
spk00: Again, I'd say the total drivers of moving are life events. When your family grows, you're looking for an opportunity. A lot of forces and factors go in there. One that I've been focusing on most recently, is the trend towards consolidation of the people in the property, the housing rental business, and the people who are attempting to form large tracts of rental single-family dwellings. That's a, to me, that those are two kind of big changes that will maybe impact frequency. People who rent more move more often. Maybe not in Manhattan. People will rent for 30 years. But in most of the country, you see all these four and five story multifamily basically apartment units that just have sprung up nearly on every piece of vacant land. Well, then that's become a growing subset of movers. And they have some different characteristics and We're trying to really understand them so we can make sure that our products and services are tailored in a way that's very attractive to them. I think that's, if I wanted to say what was going to be a, maybe move the needle a little bit over the next two, three, four, five years, I think that may be what moves the needle even more than interest rates. Again, I I'm sure you've heard the pitches, but they're saying we're going to get people to rent rather than own. World War II, we've been had, let's get people to own rather than rent. And I don't claim to understand the overall implications of that, but you can see that they've put up, I don't have a statistic, but you see them everywhere you go. These four and five storey units are just popping up Three years ago, I would have taken a bet they were overbilled. Then they've continued building, and they're building today. And they seem to find customers. Now, again, the Wall Street Journal reported a bunch of pressure on these people because of rising rates. Okay, but I think that's going to really just really drive more consolidation of ownership, not drive use. And maybe it'll compress their margins for a little while. But I think that this rental phenomenon, it seems like, people who rent, it's always been our mantra, people who rent are more likely to move than people who own. And so if they can have a shift in the number of people who rent, so it's gonna change this movement a little bit. 25 years ago, Phoenix was a crazy market, and they'd offer six month lease, one month free, and people moved every six months, it was just uncanny. And finally they quit doing that, but it was great for us because they were moving a mile. Okay. Okay. So great. You know, we get our 1995 and they told trip mileage uses maybe seven miles for the whole trip. We, you know, we make great money, but that's how sensitive these people can get. And I don't know quite what these big consolidating owners are going to do, but I know they plan to pass customers between their properties. They think they, We'll be able to encourage people to move from this property to that property, I don't know, based, I assume, on some combination of amenities and rental rates. So I think that's, to me, that may be an opportunity for the whole industry. And if it is, I intend for you all to be there.
spk09: Okay. Yeah, so it's too simple a thought to think that affordability has decreased and new sales are down, and that's going to really put a ton of pressure on the rental business.
spk00: I really think that would be my conclusion. Yeah, you're exactly right. You said it better than I did.
spk09: Okay. Yeah, well, my question was a little too long-winded there. Sorry. And I hadn't thought about y'all's strategy difference with the REITs in terms of how rate would play through later because your move-in rates are higher than in-place, which is the opposite of the REITs. How much longer would this trend go on given – how y'all operate structurally? Like how much more is there to go there and rate gains as the in-place ages?
spk00: That's kind of the $64,000 question. My team still believes they have some running room. I'm probably wrong. My brain says over the last 12 months we saw increases at 30% of you. I'm not sure that number's right. Yeah, I'm not sure. It sounds right. I don't put that in a calculation, but my team, they kind of know what they're going to do for the next 30 days. They're familiar with the properties they manage, and they believe there's still room. I've been surprised. We are seeing pushback from customers, obviously. Everybody is in this economy. But if second floor air-conditioned rooms are 100% full, they're going to look at a bump in the rate. And you almost always find that if you really study a location that some class of rooms is full and another class of rooms is at 80%. Well, did you make a mistake in your original model mix? Are your rates out of line? There's several things to look at. And of course my team looks at those things. So they think that the year ahead sees some promise for rate increases.
spk09: Okay. And then I didn't catch fully on the liquidity talk there. $2 billion to finish out in-place developments, or does that include possible deals? Just wanted some clarification on how you all are thinking about liquidity.
spk01: That would be to finish everything that we have on the books right now.
spk09: The escrow and everything?
spk01: Not including escrow.
spk09: Okay. So that cash is – you're effectively pre-funding a lot of that development with cash in case market conditions deteriorate and if you need to keep buying trucks to catch the fleet up.
spk01: Yes. I think what we've learned over time is it's better to have it than not have it with where we're headed. So – The spending on real estate, the last two years now, we've been well over a billion dollars in spend. I think we'll see that continue for the next couple years at least. And then the fleet spend is increasing because we're starting to get an increased number of units, and the cost for these new units is higher than it used to be. So in the first quarter of this year, I would say if you took The units that we purchased this year, if we were to have bought them at last year's prices, that's about $25 million of inflation. If we had bought them at the prices from two years ago, it's a little over $40 million of inflation. So with all of those headwinds, we are being very cautious.
spk09: Okay. And then on the app, for the company locations, you said you crossed 6 million transactions. Can you talk about the trend in terms of some color on the percentage of transactions that are happening in the app at the company locations versus, you know, just because it does seem like it can be a labor-saving tool. Obviously, there's always going to be a group that is just going to show up and walk in. but how big a percentage of your business is that?
spk00: Well, two separate subjects. One is what we call structure 24-7, which can go either through the app or you can go through desktop. So we're transitioning those people to the app. We're seeing good growth in the app. I think I can state correctly that Two weeks ago, we were in the top 10 in the travel apps adopted on Google. We got ahead of Steam up there, and we intend to run with it. Just where that will go, I can't predict, but we're trying to ponder the correct indicators on that. It looks like the app is just, we have, as I said, three years of running with it. steady growth so I think that that's going to pay off for us very much and I think it will the customers who want to do business that way it will increase their satisfaction so I'm all in on it if you just want to know what I'm working on I'm all in on it and I think it's going to continue to grow how far will it go I have no opinion but of course I don't know your habits but I have adult children, and they do so much on the handheld mobile that I think that's just that trend's here to stay, and we're trying to make sure we're in it in a big way. Of course, there's a whole bunch of another group of competitors who are internet-savvy people, and they want to be industry disruptors in every industry in the world, including ours. So I believe right now we have better tech than they do, and my plan is to continue to have better tech than they do so that we don't give ground to those people.
spk09: Okay. Last one. I remember when filling 30,000 rooms a quarter was pretty good in the summer, and now we're 44 and have been above that. Anything change in the last few years in terms of the ability to fill rooms faster, doing something better. Obviously you have more rooms, so that makes it more availability.
spk00: We have more rooms. They're thoughtfully placed in the present tense. We have stores that are 20 years old. We have stores that are 40 years old. So is that location now as hot as it once was? So if we're doing this right, there's room. We have good room in newer stores. Yeah, with the whole online move-in, we have a whole online move-in process for those stores. But they have amenities as good as or better than our competition. And, of course, customers want certain services, and they want certain levels of customer service. And we are competitive. largely exceeding their expectations at the new stores because the bathrooms are nicer, the load-on-load area's a little better. These are all, they seem like small things, but to the consumer, they add up. So I think what the real thing that's changed is the percentage of newer, say, let's say 24 or 36-month-old rooms, that that percentage has risen in our own portfolio. So I think that that has had a lot to do with this. You'll see a new place come online and it'll start renting up at a feverish pace. So that first 60% or 70% of occupancy just really impacts your rent-up rate overall for the company.
spk09: Okay. So that newer mix. So nothing in terms of just getting smarter about marketing or... No big change in strategy there.
spk00: Everybody else is getting smarter too. Normal capitalism rat race. We learn a little thing and then they learn a little thing. We both are trying to figure out what the other one's doing. It's normal capitalism. We have a slightly different strategy because of our truck and trailer rental business. We're more interested in Wyoming, let's say, than most people are because we rent trucks in Wyoming. We're all over Canada and Most of that's just a vast uninhabited expanse. So we end up in some places our competitor would have no appetite for. But we're making them work. Everything that my son likes to call secret sauce is a very tiny increment. There's a bunch of them, and when you execute them all, So let's say I came upon a new store and the rent-up rate wasn't what I would have anticipated. Well, immediately I know we're failing on one or more fundamentals. If we'll go through and just basically do a top-down workup on the store, we'll find out where we're short and tune that up. Rent-up goes in the curves. There's a tremendous amount involved in site selection. You want to get the right site. We spend a lot of effort, money, and I think all that Tell me, Jason, I think all that's expensed. I think all our site selection expense basically just goes through the cost.
spk01: We capitalize as little as we have to.
spk00: Yeah, so we're not, if it's a question of which way to push it, we push it towards expensing it. And I just think that there's a lot. That money comes back to you over time. You could make an argument for capitalizing it, but I just don't want it.
spk09: Yeah, no need to defer the – or better to pay the taxes now. Okay. No, that's it for me. Thank you.
spk05: You bet. This concludes our question and answer session. I would like to turn the conference over to management for any closing remarks.
spk06: Well, thank everyone for their support. As a reminder, one week from today on Thursday, August 17th at 9 a.m. Pacific, we'll hold our annual stockholder meeting. And then two hours later at 11 a.m. Pacific, 2 p.m. Eastern, we'll host our 17th annual Virtual Analyst Investor Day. Both events can be accessed on the web at investors.uhaul.com. And questions for the Q&A portion of our investor day can be sent prior to the meeting at ir.uhall.com or submitted live during the event. Look forward to speaking with you next week. Thank you.
spk05: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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