U-Haul - Q4 2024

Executive Summary

• Q4 FY2024 revenue was $1.179B, down 0.8% year over year; EPS was $0.00 per non‑voting share (−$0.05 voting) as lower gains on sale and higher depreciation offset slightly improved quarterly EBITDA per management.
• Moving & Storage revenues fell 2% YoY on softer one‑way activity and shorter miles per transaction, while Self‑Storage stayed resilient (+9% YoY) with revenue per occupied foot up ~2.5% and continued new capacity additions.
• Management flagged further compression in gains on disposal over the next 12 months, continued personnel cost inflation, and competitive rate actions in storage; fleet repair costs improved for the second consecutive quarter as refresh accelerates.
• FY2024 gross fleet CapEx was $1.619B; initial FY2025 projection is ~+$100M YoY. Pipeline remains robust (7.8M active and 9.2M pending self‑storage sq ft) with intent to keep building ~1M sq ft/quarter.
• Street consensus from S&P Global was unavailable at the time of writing; one sell‑side analyst on the call noted the reported top line “exactly met” his model, but this is not a substitute for SPGI consensus.

What Went Well and What Went Wrong

• What Went Well

  • Self‑Storage revenue +9% YoY in Q4; portfolio added ~55K net units in FY2024; revenue per occupied foot up ~2.5%, with robust build/acquire pipeline. “Our self‑storage product has been strong” — Joe Shoen.
  • Fleet repair and maintenance declined $11M YoY in Q4, second straight quarter of improvement as newer trucks rotate in, boosting uptime and availability.
  • Management continues disciplined, steady storage pricing versus competitors’ demand‑based whipsawing, aiming to preserve value and customer clarity in a tougher market.

• What Went Wrong

  • Q4 EPS compressed to breakeven ($0.00 non‑voting; −$0.05 voting) driven by a $32M YoY drop in gains on sale and higher depreciation (fleet +$11.6M; real estate +$12.3M), plus elevated liability costs.
  • One‑way truck rental transactions and miles per rental remained below expectations as cautious consumer sentiment curbed long‑distance moves; in‑town steadier but not enough to offset mix.
  • Self‑Storage occupancy dipped (avg monthly to 79.8% from 81.2%) as capacity additions outpaced move‑ins and competitive rate cutting across markets pressured street rates.

Transcript

Operator (participant)

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 One on your phone keypad. It's Star One if you would like to ask a question. If you would like to remove yourself from the queue, press Star Two. 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.

Sebastien Reyes (Head of Investor Relations)

Good morning, and thank you for joining us today. Welcome to the 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 Shoen, Chairman of U-Haul Holding Company.

Joe Shoen (Chairman)

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's 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 through 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?

Jason Berg (CFO)

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. 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 decline in 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 its 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 year-over-year 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 4-year period. Average miles per transaction continued to decrease, but less than the previous 9-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 $1.619 billion. 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 2024. The increase in proceeds is coming from additional truck sales. Average sales price per unit has been steadily declining.

As we 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 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 31st, 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 4 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 square 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 a 190 basis point decrease in occupancy to 92.3%. During fiscal 2024, we invested $1.258 billion in real estate acquisitions, along with self-storage and U-Box warehouse development. That's down $83 million from the year before. Spending on the acquisitions of new real properties has declined, while investment in development of these properties has increased. During the quarter, we added 2,424,000 new net rentable sq ft, which brought our 12-month figure to 5,475,000 new square foot.

Our pipeline of active and pending projects remains robust at 7.8 million and 9.2 million sq ft, 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, were 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.

Operator (participant)

Thank you. Once again, if you'd like to ask a question, it's 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 Wolfe Research.

Keegan Carl (Analyst)

Yeah, thanks for the time, guys. Maybe just starting on the fleet CapEx, because we kind of ended on that. 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 could you help us just understand sort of the puts and takes there, and on how an increased utilization may be offset some of the, the CapEx improvements?

Joe Shoen (Chairman)

Well, 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 dealer 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 down 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, obviously, and it's largely by refreshing the fleet, which is what you referenced.

Jason Berg (CFO)

Keegan, this is Jason. I also, in my prepared remarks, I pointed out that we're still a little over 12,000 trucks, more than we had going into COVID, which was largely a result of us holding on to trucks longer into their age. You know, we went into last year with a backlog of maybe almost a year behind on rotation, and we cut that probably by two-thirds this last year. So it's freeing us up to be able to take some more of those units out. So part of the equation is the denominator, which is the number of trucks that we're holding. Joe mentioned utilization. It can be measured in decimal points. But each decimal point does translate into something very important to us.

I think as we shed more of these older trucks, you know, it's gonna improve utilization or give us the opportunity to improve utilization. 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.

Keegan Carl (Analyst)

That's really helpful color. I guess maybe just shifting gears here. Obviously, the commentary in the press release and 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 sort of or 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.

Jason Berg (CFO)

Well, this is Jason. I'll start off with just some of the figures. So historically—well, I got to break this up. Over the last, say, 10 years, we've been probably on a revenue break, about 55% in town, 45% one-way. If you went back, I think it's 15, 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.

Joe Shoen (Chairman)

Yeah. 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 marriage, 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, they think: It's great, I'm gonna 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 gonna move to another house in the neighborhood, keep the kids in the same school, and 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 gonna see this shift. We're not running behind last year, but 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 have some modest effect on it. But I think how people feel about the economy and this whole their whole life situation, it has our experience, it has a greater effect than residential new home sales.

Keegan Carl (Analyst)

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. You know, what's changed in the past few months to cause you guys specifically to put that in the press release? And I guess second, how is this impacting your decisions around what you guys are doing with your street rates?

Joe Shoen (Chairman)

We have a different rate strategy than most of our larger competitors claim they have. Now, of course, the only way you really know rates is to just doggedly go out and, you know, make calls. It's not enough just to survey the Internet. But 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 do 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 a rate 20%-40% different than the person right ahead of them—unlike motels and hotels do sometimes.

We've not followed that strategy, and I think what we've done has proven to at least be reasonable, given our ability to maintain some modest rate increases over the past 18 months. Now, there's a lot of factors that go into this, and whether our competitors will do what the demand pricing model would say, which is increase the prices now that they're in the summer, you know, I don't control any of that. I have 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, and 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 kinda 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're really doing is charging you what they would've 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. You know, it's very difficult for me to give you an honest appraisal of that, but it does confuse the customer if they go see a competitor in, let's say, February, be 40% back of us. So 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 gonna 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. They'll, you know—and so, yeah, we're, in some markets, in some sized rooms, we might be a little bit stronger priced than the competitor, but we're generally able to explain it to the customer. And, but it's a constant concern because we're all impacted by income per square foot. And, of course, we're impacted by rooms rented, but we're impacted by income per square foot, and we try to maintain that.

Keegan Carl (Analyst)

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?

Joe Shoen (Chairman)

It's a constant conversation, rate increases are. And as far as some changes in the macro environment, other than the, you know, the whole storage business is a little tougher to compete in than it was certainly 36 months ago, and probably a little tougher than 24 months ago. Is it tougher than last summer? I am, I'm not absolutely certain, and we're not really into it quite yet. So—but, yeah, the, the, what do you wanna say? Scarcity mindset of the consumer is no longer there. They no longer think storage is scarce, so they wanna 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 aware, 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.

Jason Berg (CFO)

Keegan, this is Jason. Just to, to get to your average stay question, I, I just looked at that, our year-end numbers compared to what they were last year. In, 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.

Keegan Carl (Analyst)

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

Joe Shoen (Chairman)

You're talking motor vehicles?

Keegan Carl (Analyst)

No, on self-storage.

Joe Shoen (Chairman)

Self-storage. Well, we're probably gonna bring to market more rooms than we fill. That'd be my guess. Of course, I'm trying to fill rooms. I have pressure on everybody to fill rooms. They know it. But we, you know, 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, New York. Could easily be a 36-month process, so I'm not gonna 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 so that's, I'm gonna continue on that trend.

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.

Keegan Carl (Analyst)

Great. Super helpful. Thanks for the time, guys.

Operator (participant)

Thank you. Our next question comes from Steven Ralston with Zacks.

Steven Ralston (Senior Analyst)

Good morning.

Joe Shoen (Chairman)

Morning to you.

Steven Ralston (Senior Analyst)

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, you—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, exiting out some pandemic gains. And adding to that with quarter-to-quarter trends and seasonality, the top line looked good. From your tone, however, it seems like that's changing. And so I'm asking you, what are you seeing going forward into fiscal 2025, where I should adjust that premise, if I should?

Joe Shoen (Chairman)

Well, this is 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, okay? And I think it's appropriate. I don't think it's any, you know, hat trick. I just think they're out there, we need to go around with the customer. Self-storage, we are going to see growth in total rooms rented, but probably a little decline in occupied square foot as a percent of all square foot. On rate and self-storage, we're gonna 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.

I think if we're careful and we don't abuse the customer, we may be able to do that again this year, get it just to, you know, some pennies more per mile, but those pennies add up. 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, just depending on who you believe, in California, you know, they've got everybody getting $20 or $25 an hour, depending if you're in healthcare or food service. Of course, they make exceptions for government entities, but they didn't make an exception for U-Haul. So, you know, this, this, this is just pure, gonna push up, push up those wages, so we have to drive on productivity, which, you know, is, is always speculative. We have programs, we're pushing them. A lot of this requires IT investment, and what should take 6 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 is a, it's a, it increases productivity of our personnel. And I, I would expect we will continue to make gains there.

How far we can push it, you just, 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.

Steven Ralston (Senior Analyst)

Okay, you went into basically the bottom line in 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?

Joe Shoen (Chairman)

Sure. It's negative gain on sale. In other words, our gain on sale is down right now—the future is cloudy. You know, for the last 24 months, automakers have pushed through tremendous increase. I'm talking upwards of 50%, and 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 gonna play out and this whole confusing thing of Ford and Chevrolet saying electrification, but doing gas, you know, and then basically taking it all out on the fleet customer. They've smacked every fleet 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.

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 the 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 gonna 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 kinda 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 them, 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 true of Stellantis or General Motors. They've had customers on allocation.

Now, whether they're gonna get their supply chain to catch up, or whether they even want to have it catch up because of the complex formulas they have to have for overall fleet economy, and now with the California Air Resources 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, I can't tell you what they're gonna do. We, we'll be the tail of the dog. We're not gonna be the people driving electrification. It's, it, it's its scope is so far beyond us that, that it's unknowable. So I think that's a, 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's. It may not be enough to compensate for the cost that they put through. It's not. Two years isn't a very long time to pick up an inflationary gain. So I just don't know. I mean, we're in this business for the long haul. We're gonna do it, and we're gonna keep the customer going, and I think this whole electrification deal will clarify itself over the next 3 or 4 years, and when it does, everybody will be able to make more accurate predictions.

But I, I thought Ryder's been a vocal leader in adopting electrification, and then they come out with this recent study last month that says it's gonna raise the cost 50%-100%. And you go, "Well, that's not a good news for your customers." So I'm not quite sure. You know, and of course, these are all—it's all based on everybody's assumptions, which nobody has a crystal ball. So that's kind of—that, that's a unknown here that's going on, and you, you see it in our reduction in gain on sale.

Steven Ralston (Senior Analyst)

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.

Joe Shoen (Chairman)

Correct.

Steven Ralston (Senior Analyst)

Could you just verify that, and where was it previously?

Jason Berg (CFO)

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 year, then it's reclassed down below what you would 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.

Steven Ralston (Senior Analyst)

Okay, thank you. Now for the comment, and I wouldn't have brought this up unless you, but 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 and or call for the U-Box, and it just shows up and everything works smoothly. And your employees are very accommodating.

Joe Shoen (Chairman)

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

Steven Ralston (Senior Analyst)

Thank you for taking my questions.

Joe Shoen (Chairman)

Truly.

Operator (participant)

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

David Silver (Analyst)

Yeah, hi. Good morning.

Joe Shoen (Chairman)

Good morning.

David Silver (Analyst)

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, not needed as much as in the past year or two? Thank you.

Jason Berg (CFO)

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 growth spend somewhere around $1.007 billion compared to, I think we had $1.619 billion this year. And because of the shortages during the pandemic years, it's pretty much all, what I'll call it, 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 a billion, 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 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. And then, on the net fleet CapEx, I think we're gonna be going from somewhere; this year, it was close to $890 million, I think, right? Up to something closer to $1 billion. And we'll be needing to come up with, say, $350 million-$400 million of working capital to fund that. Joe, I don't know if you want to-

Joe Shoen (Chairman)

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

David Silver (Analyst)

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, and this question is, is in that, in that spirit. So, you know, in the post-pandemic environment here, you know, I'm kinda wondering how you look at your business opportunity as, 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, or your strategies to, to take advantage of that trend.

You know, it's been mentioned here, but digitalization or other productivity enhancements tied to labor, and, and I guess just, the ongoing, digitalization of things is probably something you, you think about, quite a bit. But, you know, as we sit here kicking off your fiscal year 25, I mean, what big differences or, or what, features or priorities have shifted, let's say, from four years ago? Thank you.

Joe Shoen (Chairman)

Okay. I would say that comparing, 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 gotta come to work." And so, where that's gonna 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 home work except for telephone sales, which we have, you know, a plethora of people doing that. But as far as people wanna 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. At least I've seen anecdotally some customers who are moving back from some place like Idaho closer to some place where there's actually employment. The digitalization, that's just 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 don't, I can't prove it, but I'm trying very much to understand that. And of course, it has the opportunity to make doing business with U-Haul easier, and 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 and, you know, return point; they're different, and there's a lot of moving parts there. But part of digitalization helps us anticipate those moving parts better and give the customer more certainty. And we're making regular progress with that. And I think we'll continue to do that, and I think the customer will respond. That's a. I don't know if you have a more specific question; I'd be happy to answer it.

David Silver (Analyst)

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.

Joe Shoen (Chairman)

Sure.

Operator (participant)

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

Jamie Wilen (Analyst)

Hey, fellas. A couple 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?

Joe Shoen (Chairman)

No. If we said that, I apologize.

Jason Berg (CFO)

Yeah, Jim, 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 gonna be selling more. So I think that there's the likelihood that the fleet's overall size could be coming down.

Jamie Wilen (Analyst)

Okay. So if we see.

Joe Shoen (Chairman)

But that's.

Jamie Wilen (Analyst)

Go on. Sorry.

Joe Shoen (Chairman)

Yeah. It's more complicated than that because a truck that has 120,000 mi on it just simply doesn't have the capability of production of a truck that's got 35,000 mi on it. And due to the postponement of replacements for a three-year period, we've got too many trucks with 120,000 mi on it, and then, let's just say between 100 and 140, we have kind of a gap, okay? And so it's not a strict mathematical trade-off. It's a little bit complex, and it depends on which size truck you're able to buy, because we've been on allocation, and that—what the automakers are offering doesn't necessarily correspond in quantity to what our needs are. So, we're gonna be—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 disgorge some of these higher mileage vehicles and bring in. I don't have. I can't, you know, can you bring in 4 trucks for every 5 you sell? Well, if you do that, you can maintain your transaction growth. Well, you're probably trading up, and that might shrink our fleet to 3,000 or 4,000 trucks. I don't have a—you know, it's kinda be opportunistic.

If 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 the business is going to expand simply because the population expands. That's the long and short of it, and we have a good increased print, and we ought to get our share of that business.

Jamie Wilen (Analyst)

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

Joe Shoen (Chairman)

That's exactly what we're looking for. Yes.

Jamie Wilen (Analyst)

Okay. On the U-Box side, could you talk about the health of that business and where it is profitability-wise, as you look through 2024 and then moving forward in 2025?

Joe Shoen (Chairman)

Sure. The U-Box has a higher amount of one-way versus local moves. In other words, there's a lot more moves over 100 mi than there are under 100 mi. And that's a little bit the nature of the, 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 prohibitively expensive if you have to contract the freight. So these, the common carriers kill you if you're going 100 mi, basically. And if you're going 3,000 mi, they get kind of affordable.

So, that's been our sweet spot has been the longer move with the U-Box, but there's demand in the shorter moves, and we're gonna see if we can get into that and still show a profit. Otherwise, our pricing 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?

Jamie Wilen (Analyst)

Mm-hmm.

Joe Shoen (Chairman)

So.

Jamie Wilen (Analyst)

How would you characterize the market share gain or loss within that business for U-Box?

Joe Shoen (Chairman)

We don't have firm numbers on that at all. I'm. 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, somebody's down, and it, you know, 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. You know, that it's very speculative. We attempt to find PEP. We have 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, and, you know, 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. We need to get a model that we can recover our costs, you know, with some certainty, rather than we just go out there and deliver this stuff for free. So we're pushing on that, and we've made some progress.

Jamie Wilen (Analyst)

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

Joe Shoen (Chairman)

I think it does.

Jamie Wilen (Analyst)

In the business?

Joe Shoen (Chairman)

Right now, we're somewhere in the mid-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. It's very interesting. Some people wanna 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 gonna have it at, you know, Central and Adams, they're very committed to you having it there. So you know, you need to have enough warehousing, you can actually make good on that representation.

Jamie Wilen (Analyst)

If you have in your 600s, any idea how many PODS might have?

Joe Shoen (Chairman)

No, I couldn't give you a number, but.

Jamie Wilen (Analyst)

Okay

Joe Shoen (Chairman)

I think it's less. I mean, just.

Jamie Wilen (Analyst)

Okay. And lastly, on self-storage, could you tell us what your annual depreciation charge was in 2024, and how that differed from 2023?

Joe Shoen (Chairman)

Jason's looking.

Jason Berg (CFO)

Let me, let me find the exact numbers for you. So the fleet—sorry, I thought I had it right in front of me. Okay, Jamie, the fleet depreciation over the last 12 months was about $565 million.

Jamie Wilen (Analyst)

Mm-hmm.

Jason Berg (CFO)

On buildings, real estate, and what I'll also call, like, service vehicles, it was $253 million.

Jamie Wilen (Analyst)

Okay. And could you tell, versus the previous year, could you tell us what those numbers were?

Jason Berg (CFO)

Sure. It was 5:20 and 2:13.

Jamie Wilen (Analyst)

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

Joe Shoen (Chairman)

Thank you, Jamie.

Operator (participant)

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

Stephen Farrell (Analyst)

Good morning.

Joe Shoen (Chairman)

Morning.

Jason Berg (CFO)

Morning.

Stephen Farrell (Analyst)

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?

Joe Shoen (Chairman)

I really don't have a projection, but I'm fighting for a lot of it. Now, there's always inflation and 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, repair expense per mile often 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 gonna have maintenance, but the trade-off becomes negative at some point, 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 talked 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 cost 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. We'll always use third parties for remote locations or, you know, the middle of the night or something, but we can make that trade-off 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, there's substantial money there, assuming we can get the trucks in. This year, as Jason says, we probably crossed over till we made some progress on that problem, and it'll take a couple of years of progress to get this back. It won't come back in one year.

Stephen Farrell (Analyst)

Mm-hmm. 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?

Joe Shoen (Chairman)

Well, I think on personnel, it's a pretty good bet in the near term, next year, but looking out the next 12 or 18 months, I think those, that's, you know, inflation is gonna 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, there, this minimum wage mania that the federal and then some of these states like California and New York have, it's a, it's a plethora of regulation, but they're bumping, I mean, not obvious to the normal person, but they're, they're bumping what you pay your salaried personnel, minimum, minimum pay for salaried personnel. And they've, they're putting in standards that theoretically are for the whole country.

But 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 gonna 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.

Stephen Farrell (Analyst)

Just moving to self-storage, last year, you guys had commented that you were targeting about 1 million sq ft per quarter. Given your kind of cautious outlook and comments around self-storage, do you think that'll be lower moving forward?

Joe Shoen (Chairman)

I don't think so. I 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 6 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 and in order to get your building permits, and you're 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're certainly gotta 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 a building and 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 that's. 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 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. 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's my hope. We're focusing on those locations, and we'll see how our strategy pans out.

Stephen Farrell (Analyst)

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

Joe Shoen (Chairman)

No, I won't even talk to them, or I 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 4 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. And 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. That maybe isn't as, doesn't stick out as hard as it would for one of our REIT competitors. Although they're very savvy people, and you know, they're constantly running the numbers.

Stephen Farrell (Analyst)

Well, thank you. That's all I have.

Joe Shoen (Chairman)

Sure.

Operator (participant)

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.

Sebastien Reyes (Head of Investor Relations)

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.

Operator (participant)

Thank you, everyone. This concludes today's.