U-Haul Holding Company

Please stand by. Your program is about to begin. If you need operator assistance today, just press star zero. Hello and welcome to the U-Haul Holding Company fourth quarter fiscal year-end 2024 investor call. At this time, all parties are in a listen-only mode. Later, you will have an opportunity to ask questions. To ask a question, press star and 1 on your phone keypad. It's star 1 if you would like to ask a question. If you would like to remove yourself from the queue, press star 2. Please note that this call is being recorded, and I will be standing by should anyone need assistance. I would now like to turn the conference over to Sebastian Reyes. Please begin.

Good morning, and thank you for joining us today. Welcome to U-Haul Holding Company fourth quarter fiscal 2024 year-end 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. I'll now turn the call over to Joe Schoen, Chairman of U-Haul Holding Company.

Good morning. Thanks for joining the call today. The huge price increases that Ford and GM put in over the last three years are manifesting themselves in less gain on sale. There is abundant product in the resale market, and resale pricing increases have so far failed to parallel new vehicle pricing increases. How this will go into the fall is still a guess. Positively, repair has come down. and has the potential to come down more as we trade vehicle depreciation expense for vehicle repair expense. Ordinarily, this is a positive trade-off. Recent consumer confidence reports indicate some chance for an upturn in miles traveled per rental. So far, consumers remain cautious in our experience. Personnel costs are up. It's a combination of government wage mandates, and inflation. Our best way to combat this is through increased productivity, primarily at the retail level. This is through better IT and whatever product improvements we can achieve. We continue to expand our footprint in self-storage. We are still filling rooms, but at a slower rate than we are adding them. We have the broadest footprint in the self-storage business, yet there are still many markets I believe it is smart for us to expand into. Both moving and storage are need-based businesses. We, of course, aim to be the customer's best choice. I encourage you to patronize our products and services and encourage your friends to do the same. Look forward to talking to you in the Q&A section. Jason?

Thanks, Joe. Yesterday, we reported a fourth quarter loss of $863,000 compared to earnings of $37.4 million for the same quarter last year. And for the full fiscal year 2024, we reported earnings of $628.7 million compared to $924.5 million for fiscal 2023. The most significant factors leading to the quarterly decline center around the continuing Declining gains on disposal of retired equipment and increases in depreciation costs from both the fleet and real estate. To highlight this, if you look at our quarterly operating cash flow or income statement proxy EBITDA, you'll see that we actually had a slight improvement for the quarter. I'm going to start off with equipment rental revenue results. Compared to the fourth quarter of last year, we had a $10 million decrease, or 1%. March was the first time in 19 months that we experienced a year-over-year improvement in equipment rental revenue. Looking at combined April and May, we've seen revenue results flattened out compared to last year. To put this fourth quarter into context, we're $200 million better than we were in the fourth quarter four years ago. That translates into an average compounded annual growth rate of a little above 8% for the four-year period. Average miles per transaction continued to decrease, but less than the previous nine-month rate. For the year, total truck transactions were down 3%, while the fourth quarter was down 1%. And revenue per mile was positive for the quarter and for the 12 months. Capital expenditures for new rental equipment for fiscal 2024 were a billion $619 million. That's a $320 million increase compared to last year. Our initial fiscal 2025 projection is for about a $100 million increase in this number. Proceeds from the sale of retired rental equipment increased by $40 million to a total of $728 million in fiscal 24. The increase in proceeds is coming from additional truck sales. Average sales price per unit has been steadily declining. As we've both mentioned, a large component of the decrease in earnings for the quarter stems from a $32 million decrease in gains from the disposal of equipment compared to the fourth quarter of last year. As we've previously commented, we'd expect these gains to continue to recede over the course of the next 12 months. We've made progress on our backlog of rotating new trucks into the fleet. And our estimate for fiscal 2025 projects further progress on getting us back to where we need to be on the fleet side. We've increased the number of trucks sold by nearly 20% compared to the year before. At the end of this year, we reported 188,700 trucks in the fleet, which is down about 3,500 from March 31, 2023. Now, if you compare that to March of 2020, we still have over 12,000 more trucks in the fleet today than we did four years ago. For self-storage, revenues were up 17.5 million, or 9% for the quarter, and a little over 86.5 million, or 12% for the full 12 months. The quarterly increase was a combination of a 6% increase in the number of units rented, combined with about a 2.5% increase in revenue per occupied square foot. The year-over-year improvement in revenue per foot has been coming down as we've progressed through the year. Our total portfolio, so all of our locations combined, the occupancy ratio decreased 140 basis points to just under 80%. That's largely due to the addition of 55,000 new units that we've constructed, while we increased the number of occupied units by 31,000. If you narrow this group down to the same store pool, we saw 190 basis point decrease in occupancy to 92.3%. During fiscal 2024, we invested $1,258,000,000 in real estate acquisitions along with self-storage and UBOX warehouse development. That's down $83 million from the year before. Spending on the acquisitions of new properties has declined while investment in development of these properties has increased. During the quarter, we added 2,424,000 new net rentable square feet, which brought our 12-month figure to 5,475,000 new square feet. Our pipeline of active and pending projects remains robust at 7.8 million and 9.2 million square feet, respectively. Operating expenses at moving and storage were up $10 million for the fourth quarter and $100 million for the fiscal year. We've now had our second consecutive quarter of fleet repair and maintenance improvement with a decline of $11 million. Now the year was still up $33 million, but I would expect to see these costs continue to move down over the course of fiscal 2025. As we've been able to rotate in new trucks and begin to remove the oldest ones from the fleet, This has been a positive for repair and maintenance. I mentioned in the press release the $9 million quarterly increase in personnel for the quarter and $50 million for the year. We've also seen our liability costs increase $14 million in the fourth quarter as we had some negative development on accident claims this last year. Property costs, including utilities, building maintenance, and property taxes, We're up $5 million in the quarter and $26 million for the year. We are filing our 10-K later today, and that will be available both on the SEC website and on our investor website. This is our first financial statement audit with Deloitte, so you will see some slight changes in our presentation. Sebastian and I are always available if you have any questions about this. With that, I would like to hand the call back to our operator, Guion, to begin the question and answer portion of the call.

thank you once again if you'd like to ask a question is star one on your phone keypad star one if you would like to ask a question at this time you may remove yourself from the queue by pressing star two we will take our first question today from keegan carl with wolf research yeah thanks for the time guys maybe just starting on the fleet capex because we kind of ended on that um

I guess what I'm just trying to understand is obviously we can expect more improvement as you refresh the fleet, but at the same time, we'd expect at some point the utilization also improves over time. So can you help us just understand sort of the puts and takes there and on how an increase in utilization may be offset some of the CapEx improvements?

I think you're basically correct. That's what you're looking to do is continue to drive utilization. My experience is that utilization increases by decimal points, and that's about what you can really bring out of the place. Of course, we have an inherent conflict in our strategy, which is we attempt to have the widest distribution, which cuts against utilization. As you might imagine, our stores usually exceed the utilization of our dealers by a considerable amount. yet we're going to continue with our diesel program and try to grow it over the next year. As we get a little bit reduction in maintenance, it also, you can kind of equate that with an increase in uptime. And uptime makes these vehicles more available for rent. So for the last, I would say, 90 days, we've been having pretty decent results in holding the number of downed vehicles under control. So when a vehicle gets scheduled in for certain types of maintenance, we take it off the rental register. And we've been able to, we're doing a better job of controlling that than we did a year ago, I would say. And it's largely by refreshing the fleet, which is what you referenced.

Keegan, this is Jason. I also, in my prepared remarks, I pointed out that we're still little over 12,000 trucks more than we had going into COVID, which was largely a result of us holding onto trucks longer and into their age. You know, we, we went into last year with a backlog of maybe almost a year behind on rotation. And we cut that probably by two thirds of this last year. So it's, it's freeing us up to be able to take some more of those units out. So part of the equation is, is the denominator, which is the number of trucks that we're holding. Joe mentioned utilization. It can be measured in decimal points. Each decimal point does translate into something very important to us. And I think as we shed more of these older trucks, it's going to improve utilization or give us the opportunity to improve utilization. And I wouldn't be surprised to see the fleet, the total fleet about the same size, or maybe again, a few thousand trucks less by the end of next year.

That's a really helpful color. I guess maybe just shifting gears here, obviously the commentary in the press release on one-way moves is that it's still below expectations. I guess, could you just maybe help us understand, you know, frame of reference as we move into peak leasing season, what percentage of your moves are typically one-way moves? And I guess specifically on that metric, maybe any commentary in April and May specifically on one-way moves would be really helpful.

I'LL START OFF WITH SOME OF THE FIGURES. SO HISTORICALLY, WELL, I GOT TO BREAK THIS UP. OVER THE LAST, SAY, TEN YEARS, WE'VE BEEN PROBABLY ON A REVENUE BREAK ABOUT 55% IN TOWN, 45% ONE WAY. IF YOU WENT BACK, I THINK A LITTLE OVER 15 YEARS, IT WAS CLOSER TO 50-50. And then the transaction break is much more stark. Throughout COVID, that narrowed a couple percentage points. The number of one-way moves, well, let's say the amount of one-way revenue increased several percentage points. The transaction break remained about the same. So it was longer moves and we were able to charge a little bit more per mile. So that kind of outlines what the transactions and the revenue looks like. I'll leave it to Joe for any prognosis.

When I said I think the consumer is still pretty conservative, that really results in less miles per rental. People still move because moving is a need and it's based on things like marriages, births, deaths, these things that are inherently kind of smooth. They don't have a lot of peaks and valleys. And they steadily increase over time. But how far people move and therefore how big the dollar amount of the transaction has something to do with just how they feel about life. They think it's great. I'm going to go on my big adventure and move to San Diego and start a new career. Well, great. That'll be great for us. But when they get more conservative, they say, well, I'm going to move to another house in the neighborhood, keep the kids in the same school, keep my present job. So that just shortens the move. And to a large extent, we have to recover costs based on mileage incurred, because our costs very much vary with mileage incurred. So I don't see a big shift. I thought we would pick up a little bit quicker than we have. And I'm still expecting we're going to see this shift. We're not running behind last year. we're running, I think, a little bit behind historical trends, or at least how I have anticipated they would play out. And we'll see. The housing turmoil, or whatever it's called, has some modest effect on it, but I think how people feel about the economy and this whole life situation, our experience, it has a greater than residential new home sales.

That's really helpful, Joe. I guess let's shift gears to storage. I thought commentary in the press release calling out competitive pricing really stood out. I guess I'm just curious twofold. What's changed in the past few months to cause you guys specifically to put that in the press release? I guess second, how is this impacting your decisions around what you guys are doing with your street rates?

We have a different rate strategy than most of our larger competitors claim they have. Of course, the only way you really know rates is to just doggedly go out and make calls. It's not enough just to survey the internet. But the All our competitors have some sort of a demand pricing model where when they think demand is up, they jack prices significantly, and when demand is down, they cut prices or reduce prices, whatever you want to call it, significantly. We don't pursue the demand model. We're one of the few people who post room prices in our stores. If you were to go to our competitor, it would be nothing for the next person in line to be quoted to rate 20 to 40% different than the person right ahead of them. Kind of like motels and hotels do sometimes. And we've not followed that strategy. And I think what we've done has proven to at least be reasonable, giving our ability to Maintain some modest rate increases over the last 18 months. Now there's a lot of factors that go into this. Whether our competitors will do what they. What the demand pricing model would say, which is increased prices now that they're in the summer. You know, I I don't control any of that. I have no no window into it other than monitoring pricing. So. This. in my experience, jumping around pricing confuses the customer. They don't know if they're getting a good deal or a bad deal. We have a much more steady approach to pricing. So if we offer a discount, it's really a discount. It's not that we jack the rate and then put a, you know, you kind of see that in how department stores used to price. You know, they inflate the cost and then they discount off of it and tell you you're getting a sale and all they really do is charging you what they would have charged you in the first place, but they're confusing it. So we don't subscribe to that process. Our competitors are adamant that they believe this drives revenue per square foot for them. It's very difficult for me to give you an honest appraisement of that, but it does confuse the customer if they go see a competitor in let's say February would be 40% back to us. And so, but we just, we have to deal with that and we've been dealing with it. I'm a little bit less confident that they're going to come up on their rates going into this demand season. In other words, they successfully reduced prices when demand was down. Are they going to do the other? I really, I don't know. And we kind of are having to proceed ahead and have to explain it to the customer that, if they do business with us, they're not gonna see a great increase in price. And so, yeah, in some markets, in some size rooms, it might be a little bit stronger price than the competitor, but we're generally able to explain it to the customer. But it's a constant concern because we're all impacted by income per square foot. Of course, we're impacted by rooms rented, but we're impacted by income per square foot, and we try to maintain that.

I guess just on that two-parter here, I mean, I guess, are you seeing any change in your average length of stay just given, you know, what appears to be some macro concerns? And I guess on the rate increase side of things, are you seeing any difference in how your customers are reacting to the rate increases you're sending out?

It's a constant conversation rate. And as far as some changes in the macro environment, other than the whole storage business is a little tougher to compete in than it was certainly 36 months ago and probably tougher than 24 months ago. Is it tougher than last summer? I'm not absolutely certain. We're not really into it quite yet. But yeah, What do you want to say? Scarcity mindset of the consumer is no longer there. They no longer think storage is scarce. So they want to have a conversation. What's the value? And we have a pretty long-term tradition with the customers of being a value pricing operation. We tend to do that without putting big discounts. So in other words, we don't necessarily jack the price, but then We also don't now then discount the price a bunch. And it's a dance. And my competitors are very well aware of it. They're all very intelligent people. They're all doing what they think is smart. And we just have different strategies.

Keegan, this is Jason. Just to get to your average stay question, I just looked at that. Are year-end numbers compared to what they were last year? In a couple of the buckets, maybe there was a 1% change from what it looked like last year. Otherwise, we're not seeing anything dramatic on that front.

Got it. And then last one for me, just because it was also brought up in the opening remarks, just on supply in general, I guess, what are your views on the supply outlook in the space? And I guess, how should we think about your deliveries in the next 12 months impacting that?

You're talking motor vehicles?

No, on self-storage.

Self-storage. Well, we're probably going to bring to market more rooms than we fill. That would be my guess. Of course, I'm trying to fill rooms. I have pressure on everybody to fill rooms. They know it. But all these, we're doing more new construction than acquisition. And new construction, depending on where you are, is a 24-month process. could be 36 months in some tough areas like California or New York, could easily be a 36-month process. So I'm not going to just turn that off necessarily. I see the storage market long term as good. And as I indicated in my remarks, I believe there's markets where it's smart for us to expand. We will rent net more rooms as we get bigger in these markets. and uh so that's i'm going to continue on that trend and you know now that interest rates are going up and jason is having to finance it higher he's of course encouraging me to be careful so you can be sure of that great super helpful thanks for the time guys

Thank you, our next question comes from Stephen Ralston with SACS.

Good morning. Good morning to you. Personally, well, let's put it this way, I looked at your top line when it was reported And it exactly met my estimate. And since I'm the only estimate out there, the top line was right on target. And what I was using was your statement from a couple of quarters ago saying that you saw the company returning to the historic growth rate, X-ing out some pandemic gains. And adding to that with quarter to quarter trends and seasonality, Joe Trumpey, The top line look good. Joe Trumpey, From your tone, however. Joe Trumpey, It seems like that's changing and so i'm asking you what what are you seeing going forward into fiscal 2025 where I should adjust that premise if if I should.

Joe Trumpey, Well i'm i'm busy Joe i'm hammering on truck rental I know truck rental pretty well I think we're going to. Post increases not decreases. In the coming year, OK? And I think it's appropriate. I don't think it's any. Hat trick. I just think we did. They're out there. We need to go around with the customer. Self storage we. I'm going to. See growth in total rooms rented but. Probably a little decline in. Occupied square foot is a percent of all square foot. On rate and self-storage, we're going to try to hold prices at least steady, if not get a small increase. In truck rental, it's very specific and we are getting a tiny bit more per mile right now. And I think if we're careful and we don't abuse the customer, we may be able to do that again this year. you know, some pennies more per mile, but those pennies add up. And if we can do that, I would look for both truck rental and self-storage to have a net gain a year from now, okay, for the whole year, as opposed to what we just took, which is kind of a beating. Profitability is a little bit more speculative because of the tremendous push on increasing entry-level personnel expenses by the government. It's massive. And they're also, all these people are under terrible inflationary pressures. They have to make more. That's just the truth. And so you see, and just depending on who you believe in California, you know, they've got everybody getting 20 or 25 bucks an hour, depending if you're in healthcare or food service. Dave Kuntz, Of course they make exceptions for government entities, but they didn't make an exception for you all, so you know this, this is just pure going to push up push up those wages, so we have to drive. Dave Kuntz, On productivity which. Dave Kuntz, is always speculative we have programs we're pushing them a lot of this requires it investment and what should take six months takes 18 months invariably in it. so you don't get quite what you want, but we've made substantial progress in basically customer self-dispatch and self-return, which increases productivity of our personnel. And I would expect we will continue to make gains there. How far we can push it, you don't know. But this is a do-it-yourself business, and if we make it, work well enough, customers are happy to do it themselves. In fact, many of our customers prefer to return it themselves or dispatch it themselves.

Okay. You went into basically the bottom line and different costs. Well, you had the depreciation, which is expected and has been a cycle for you for as long as you've been in existence. The personnel costs you just addressed with the productivity enhancers with the IT and the liability insurance, well, that, the way I look at U-Haul, that's not a true driver of the company. Are there any other costs that concern you?

Sure, it's negative gain on sale. In other words, our gain on sale is down right now. The future is cloudy. For the last 24 months, automakers have pushed through a tremendous increase. I'm talking upwards of 50%. They've been able to get it at retail and To a certain extent, that's pulled up resale prices, but it hasn't pulled them up as much as the costs have gone up. And so just how this is going to play out and this whole confusing thing of Ford and Chevrolet saying electrification but doing gas and then basically taking it all out on the fleet customer. They've They've smacked every customer in existence, us being one of them, with price increases way above their cost for the vehicle because they're using us to subsidize electrification. And so we're subsidizing it but getting no benefit from it. I read a recent study by Ryder, and they, depending on some certain assumptions, estimate that total electrification of classes of trucks they rent would result in at least 50% increase in cost, total cost to the user, sometimes as much as 100%, and they estimate it's going to impact inflation with the whole country by 50 basis points. It was interesting to read, I don't know that I agree on everything they say, and we rent some trucks different than they rent, but these forces are impacting everybody in transportation, and its root is really the overwhelming mantra of electrification when they don't really have any cost-effective solutions for electrification. But they're spending money, great gobs of it, I know Ford, I kind of loosely follow them, and they're spending gobs of money on electrification, and that money is coming from internal combustion engine customers. That's just how it works. So all that's affecting these resale prices and also availability. Ford simply isn't making as many trucks in the class we buy as they once did. They just simply aren't making. And so you can't buy what's not built, if that makes sense. And we've basically been on allocation for, I'd say, at least 36 months. And the same thing is pretty much the true of Stellantis or General Motors. They've had customers on allocation. Now, whether they're going to get their supply chain to catch up or whether they even want to have a catch up because of the complex formulas they have to have for overall fleet economy. And now with the California Air Resource Board attempting to force electrification on the whole rest of the country, you know, they've got a, very much a moving target. I can't tell you what they're going to do. We'll be the tail of the dog. We're not going to be the people driving electrification. Its scope is so far beyond us that it's unknowable. So I think that's a big wild card. Of course, I would hope, to a certain extent, inflation will rescue us. If they keep this inflation up, then vehicles will inflate a little bit, but these are primarily vehicles we hold 24 months or less. And so even if we have inflation, it may not be enough to compensate for the cost that they put through. Two years isn't a very long time to pick up an inflationary gain. I just don't know. We're in this business for the long haul. We're going to do it. We're going to keep the customer going. I think this whole electrification deal will clarify itself over the next three or four years. When it does, everybody will be able to make more accurate predictions. I thought Ryder has been a vocal leader in adopting electrification. Then they come out with this Recent study last month, it says it's going to raise the cost 50 to 100 percent. And you go, well, that's not a good news for your customers. I'm not quite sure. You know, and of course, these are all it's all based on everybody's assumptions. Nobody has a crystal ball. So that's kind of that's a unknown here that's going on. And you see it in our reduction in gain on sale.

Just one more quick question and a comment. You said you are using Deloitte. I guess that's why I saw a new line item out there, other interest income. I'm assuming that that's the interest on your cash balance. Correct. Could you just verify that? And where was it previously?

So we've always had, because we have two insurance companies, we've always had a line called net investment income where their interest income goes And historically, the interest income on moving and storage cash balances has been negligible, so it just was included in that line. As we've held higher cash balances right at the same time short-term rates have gone up, the number got to be a much larger number. And the theory behind that is interest income is not really part of our operations. So for this This year, then it's reclassed down below what you call operating earnings. So there'll be a little extra work now to get an apples to apples comparison. But that other interest income is, you nailed it. It's the moving and storage interest income on our short-term investments, which is government money market funds and some short-term treasuries.

Okay, thank you. And now for the comment, and I wouldn't have brought this up unless you mentioned it, to use U-Haul products and services and recommend it. I've used U-Haul three times over the last two years, two different products, and I have seen productivity enhancements. I mean, most of the things are done on the telephone, on your iPhone, and the interaction with the employees has obviously been reduced, and you just pick up your truck or call for the U-Box, and it just shows up, and everything works smoothly, and your employees are very accommodating.

Well, thank you. We're pushing on that, and I think that's a – on the longer term, that's a key result. We need to certainly be ahead of our competition, and we're trying very, very hard on that.

Thank you for taking my questions.

Thank you. Our next question comes from David Silver with CL King.

Yeah. Hi. Good morning. I just had a couple of questions that I think you've touched on, but maybe just if you could flesh out things a little more. But as you look to fiscal 25 with your projected capital spending, Just however you look at it, but could you maybe just point us qualitatively, you know, where you think you'll be increasing capital spending or which buckets may, you know, where you'll see the CapEx spending decline? So just kind of from your perspective, you know, where is capital, you know, most needed or not needed as much as in the past year or two? Thank you.

David, this is Jason. I'll start off and then let Joe clean up. Number one CapEx priority typically every year for us is going to be fleet maintenance CapEx. And going into next year, we're projecting a gross spend somewhere around $1.7 billion compared to, I think we're at $1.619 billion this year. And because of the shortages during the pandemic years is pretty much all what I'll call delayed maintenance capex. There isn't growth capex embedded in that number. It's catch-up. We were down a little bit on real estate spend, about $83 million, but on over $1.2 billion spend, it's a small amount. Of the amount that we spent on real estate last year, I would say a little over somewhere close to $925 million of that was development and construction. The rest was acquisition of new land or buildings. The projections I'm looking at for next year or planning for in cash projections is a spend somewhere close to that on real estate than on the net fleet CapEx I think we're going to be going from somewhere, this year it was close to $880 million, I think, right, $890 million, up to something closer to a billion. And we'll be needing to come up with, say, $350 to $400 million of working capital to fund that. Bill, I don't know if you want to add anything on top of that.

Yeah, I think you're pretty right on there. I don't expect it to be a whole lot less than that.

Okay, great. Thank you for that. And then last question is just maybe more of a big picture question. In your prepared remarks, you know, I heard a number of references to current conditions versus four years ago. And this question is in that spirit. So, you know, in the post-pandemic environment here, You know, I'm kind of wondering how you look at your business opportunity as your customer demographic, you know, now, let's say versus pre-pandemic. So I'll just throw out a couple of things, but certainly the trend towards remote work kind of affects where people, you know, live their lives. And I'm just wondering what implications that might have for your logistics or your strategies to take advantage of that trend and you know, it's been mentioned here, but digitalization or other productivity enhancements tied to labor and I guess just the ongoing digitalization of things is probably something you think about quite a bit. But, you know, as we sit here kicking off your fiscal year 25, I mean, how, what big differences or what features or priorities have shifted, let's say, from four years ago. Thank you.

Okay. I would say that, Karen, we didn't see the remote work thing coming, and it basically was a tidal wave of new customers. These were people who weren't U-Haul customers, who hadn't been historically U-Haul customers, And they all of a sudden became those. And I could see that in customer feedback that they didn't understand this or that procedure. And it's the reason because they just hadn't done any business with us. So that wave has receded. There still is a little bit of boomerang effect. And I don't have any kind of a measurement on it. But there's people now going back to work where they fled from because the employers and you see in the newspaper, employers are saying, yeah, yeah, yeah. But I mean, you got to come to work. And so where that's going to optimize out, I'm not sure. Personally, I've told our team don't hire anybody who wants to work from home because we don't have any homework except for telephone sales, which we have, you know, a plethora of people doing that. But, but as far as people want to work in a, administrative capacity or an analytical capacity from home, we don't have much of an appetite for it. I don't see many employers having that appetite. So that should kind of normalize out. But there's a little boomerang effect. I've seen anecdotally some customers who are moving back from someplace like Idaho closer to someplace where there's actually employment. The digitalization, that's a long-term ongoing trend and I continue to try to understand it better because I think there's a lot of misinformation out there and people have misstated what's given them success. Now, that's my opinion. I can't prove it, but I'm trying very much to understand that. Of course, it has the opportunity to make doing business with U-Haul easier. That's important. because people like things that are easier. So I'm very focused on that and seeing if we can reduce the complexity of the whole thing. Doing business with us can be somewhat complex because of the, particularly when you're doing a one-way move because you have a dispatch point, a return point. They're different and there's a lot of moving parts there. But we're, part of digitalization helps us anticipate those moving parts better and give the customer more certainty. And we're making regular progress in that. I think we'll continue to do that. I think the customer will respond. I don't know if you have a more specific question. I'd be happy to answer it.

Not at this point. I mean, I guess I'll follow up. with some more specific ones offline. But no, just wanted to hear your big picture views about, you know, certain evolutionary, I guess, trends in your business. So thank you for that.

Sure.

Thank you. Our next question comes from Jamie Willen with Willen Management.

Hey fellas, a couple of questions first on fleet. Did I hear you say that we have 188,000 trucks in the fleet and that is near the optimum level. And what's going to happen in the future is we're just going to be more in the replacing of some of the older vehicles with new ones. And, and that is a number we'll probably hang flat at as we move forward.

No, I, if we said that, I apologize.

Yeah, Jamie, this is Jason. I think maybe what I said might have confused you. I said most of our CapEx this last year and maybe even going into the next year is maintenance CapEx. So from a purchase perspective, we're buying more trucks, but we're also going to be selling more. So I think that there's the likelihood that the fleet overall size could be coming down.

Okay. So if we see – go on. Sorry.

It's more complicated than that because a truck that has 120,000 miles on it just simply doesn't have the capability of production of a truck that's got 35,000 miles on it. Due to the postponement of replacements for a three-year period, we've got too many trucks with 120,000 miles on it. And then let's just say between 100 and 40, we have kind of a gap, okay? It's not a strict mathematical tradeoff. It's a little bit complex, and it depends on which size truck you're able to buy because we've been on allocation. What the automakers are offering doesn't necessarily correspond in quantity to what our needs are. I'm looking to grow the capability of the fleet but that may not grow the numbers of the fleet over the next 18 months. It may, in fact, see a slight contraction in total numbers as we just gorge some of these higher mileage vehicles and bring in, I don't know, can you bring in four trucks for every five you sell? Well, if you do that, you can maintain your transaction growth while you're probably trading up, and that might, shrink our fleet to 3 or 4,000 trucks. I don't have a, you know, it's kind of be opportunistic. We don't have commitments for this next year's production yet. Those will start to go hard closer to the middle of July. And that'll help us know what the automakers are capable and willing to produce. So that'll help firm this up. But I, I, I, The business is going to expand simply because the population expands. That's the long and the short of it. And we have a good footprint, and we ought to get our share of that business.

Okay. So as we grow the rentals, hopefully over the next year or so, fleet utilization should increase by those tenths of a percent that are important.

That's exactly what we're looking for, yes. Okay.

Okay. Um, on the U box side, could you talk about the, uh, the health of that business and, uh, word is profitability wise, uh, as you look through 2024 and then moving forward in 2025.

Sure. The new box has a higher amount of one way versus local moves. In other words, there's a lot more moves over a hundred miles than there are under a hundred miles. And that's a little bit the nature of the product, and it's a little bit what our emphasis has been. So we're exploring over the next, or have been for some months now, ways to see if we can crack into with a good economic proposition for customers in the short distance moves, which are prohibited expensive if you have to contract the freight. So the common carriers kill you if you're going 100 miles basically and if you're going 3,000 miles they get kind of affordable so and that's been we've our sweet spot has been the longer move with the box but there's there's demand in the shorter moves and we're going to see if we can get into that and still show a profit otherwise our our pricing has has been and probably will continue to reflect common carrier rates. They've come down over the last 12 months anyway. I'm not on them every day, but they've come down and our rates have come down, which means we've seen transaction growth with only very modest growth in dollars, but margin is the same or a little better. Does that make sense?

And how would you characterize the market share gain or loss within that business for UBOX?

We don't have firm numbers on that at all. If anybody has them, I'd love to hear them because I just don't have them. We see what we do relative to ourselves. And then, of course, we can go down to, you know, micro markets there really easily and we can see all that information. And so I see places where somebody's up substantially and other places where somebody's down and there's cause and effect. It's usually something we've done stupid or something we did correct. But overall, You know, comparing us to, let's say, pods, we have essentially no market share information on them, I would say. It's very speculative. We attempt to find, we haven't yet found a reliable source of that that we're willing to. Of course, my team all says they're doing great next to them. But, you know, it's a big business. There's a lot of potential there. and we're calmly tapping into it we're getting more satisfied customers and that's what builds our base and we're working on how to crack into this what we call shorter zones just less distance markets and we need to get a model that we can recover our costs you know with some certainty rather than just go out there and deliver this stuff for free so We're pushing on that, and we've made some progress.

As you build out your self-storage, a lot of the places have UBOX storage within it. Does that give you any sort of competitive advantage?

I think it does.

In the business?

Right now, we're somewhere in the middle 600s on warehouses over the United States and Canada, which gives us a tremendous footprint advantage over anybody else in the business in that we can be near the customer and Very interesting. Some people want to be close to their things. I don't know a better way to say it. And that's an advantage with those customers. Now, there's customers who could care less. But you'd be shocked at how many people, if you tell them you're going to have it at Central and Adams, they're very committed to you having it there. So you need to have enough warehousing you can actually make good on that to

representation if if you have in your 600 in the 600s any idea how many pods might have no i couldn't give you a number but i think it's less i mean just okay uh and lastly on self-storage could you uh tell us what your annual depreciation charge was in 2024 and how that differed from 2023 jason

Let me find the exact numbers for you. So the fleet. Sorry, I thought I had it right in front of me. TAB, Mark McIntyre, Okay Jimmy the fleet depreciation over the last 12 months was about 565 million. TAB, Mark McIntyre, And on. TAB, Mark McIntyre, Buildings real estate and what also call like service vehicles, it was 253 million.

TAB, Mark McIntyre, Okay, and could you tell versus the previous year, could you tell us what those numbers were.

Sure, it was 520 and 213.

Okay, great. Okay, nice job, fellas. Keep it going. Appreciate it.

Thank you, Jerry. Thank you. Our next question comes from Stephen Farrell with Oppenheimer Clues.

Good morning. Good morning. The last two quarters fleet maintenance has decreased, but looking back farther before that, Fleet maintenance increased about 300 million since the end of 2021. As you rotate the fleet, how much of that increase do you expect to get back?

I really don't have a projection, but I'm fighting for a lot of it. Now, there's always inflation in expenses, parts, all that stuff's gone up, labor's gone up, but a bunch of that was really We didn't have trucks to depreciate, and so we just had to spend money on repair ordinarily. A mile. Spent repair expense per mile. Out or exceeds depreciation per mile. Once you get out to depending on the truck to a certain amount of mileage and. Of course, you're always going to have maintenance, but the trade off becomes negative at some point. And so you need, and that's why you refleet. And I would say of that, let's say it was a $300 million increase over the time you're talking about. I would say 250 of that was probably allocated to, I may be wrong, maybe it's 200, but more than half of it was due to holding a truck longer than would have been our druthers. So I look to capture a significant portion of that back. But of course, we're fighting repair part cost and we're fighting labor costs to earn that back. But we're positioned to earn it back. A great deal of that increase ended up being spent at third party providers. We provide a lot of our own maintenance. And that percentage slipped over the last three years. And we'll always use third parties for remote locations or, you know, the middle of the night or something. But we can make that tradeoff come back our way. And that's what my focus is, how much I can make it come back. It just remains to be seen. But there's substantial money there, assuming we can get the trucks in. And this year, as Jason says, we probably crossed over to we We made some progress on that problem. And it'll take a couple years of progress to get this back. It won't come back in one year.

And just based on your other comments around personnel and liability, which are the big moving parts of operating expenses, to a certain extent, it sounds like we should just expect the elevated levels moving forward.

Well, I think on personnel, it's a pretty good bet in the near term. Next year, looking out the next 12 or 18 months, I think inflation is going to be a little bit up. And the government is putting in tremendous mandates. And now it mandates on minimum wage for salary personnel. I mean, this minimum wage mania that the federal and then some of these states like California and New York have, It's a plethora of regulation, but it's bumping, I mean, not obvious to the normal person, but they're bumping what you pay your salaried personnel, minimum pay for salaried personnel, and they're putting in standards that, theoretically, for the whole country, well, I can just tell you, the difference between Mississippi and New York and what is a base salary that's acceptable for a salaried personnel. There's more than $20,000 different, and they're putting in the same metric, which is thoughtless, and we're just going to have to work around it and live with it. That's all. No, there's no stopping these people. Although you have a chance to vote in November. That's my plug.

And moving to self-storage, last year you guys had commented that you were targeting about a million square feet per quarter. And given your kind of cautious outlook and comments around self-storage, do you think that'll be lower moving forward?

I don't think so. Right now, we're kind of committed to that. Again, as I said, once you break ground, it's a minimum of a 12-month process, but you're committed probably six months prior to breaking ground because you acquired the property and you're significantly into it with land use commitments. You've committed to the city in order to get your building permits, and you've committed to it. But there's a bunch of money that's committed, and most of those projects are better to proceed ahead with. So to actually cut the deal, you've certainly got to do it. It's 18 months when you cut it before you see it, is the truth, unless you do something foolish like half build the building, let it sit there. We've all seen that happen. That's typically foolish. But if you don't have any money, of course, you would do something like that. But we don't foresee that. We're pretty well carefully funded, carefully matched. And so we don't see those kind of actions as reasonably foreseeable over the next 18 months. So we're continuing to go ahead. And I believe there's There are many markets that there's opportunity in, and I'm trying to focus on those markets, not just slugging it out. But storage penetration or availability is all over the map. It's not continuous for the whole country or smooth. And so if you can get in the right micro market, you can do okay still and maybe do a little bit better than okay. That would be my hope. And that we're focusing on those locations and we'll see how our strategy pans out.

And are there any geographic areas that you can highlight where you are seeing those pockets of opportunity?

No, I won't even talk to them hardly. I'll only talk to them with a small circle of friends because I don't want, I don't need any more people rushing in there besides me. Okay. There's plenty of sharp real estate people out there. And if they, you know, know where we're going. Well, that just gives them one more bit of information to compete with us, so I'm keeping that quiet. But, you know, we slug it out in all these major metros and, you know, there's a ton of business available in L.A., but do you really want to slug it out there in L.A.? And you may find L.A. is a four-year term from acquisition to completion. I'm thinking of one project right off the top of my head that was actually four years, and you know, will we ever make any money because you, we don't capitalize that cost. Most of it, we don't capitalize, but you paid it. Okay. And so you don't want to incur any more of that than you have to. So there's other markets that are more business friendly. The competition isn't as entrenched. So we're heading for those. We have the largest footprint in the business. We're the only people in, all provinces and all states. In fact, we're the only people in all states. And that lets us see a market because we're there already. The maybe doesn't stick out as hard as it would for one of our weak competitors, although they're very savvy people and they're constantly running the numbers.

Thank you. That's all I have.

Thank you. We have no further questions at this time. I will now turn control of the conference back over to our presenters for any additional remarks.

Well, thank you, everyone, so much for the support. As a reminder, we plan to file our 10-K later today. And we look forward to speaking with you after we file our first quarter results in August. Thank you.

Thank you, everyone. This concludes today's conference. We appreciate your participation. You may disconnect at any time.