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UHAL: Record revenue growth for a first quarter offset by expenses for a new U-Box POS system.

By Ian Gilson, PhD, CFA

AMERCO (UHAL) announced its first quarter results of fiscal 2015 on Aug. 6, 2014 followed by a conference call on Aug. 07, 2014. Moving and Storage revenue grew by over 11%, which is a record for any 1Q/1Q period in company history. Overall revenue grew at 10% Y/Y.

The rapid growth of U-Box required a new Point of Sale system which had a negative impact on gross margins. This should have a short term impact (one or two quarters) and the new systems will maintain the high quality of the company's electronic infrastructure. U-Box has close to full national coverage and we would expect this operation to be profitable by the end of fiscal 2015.

Fleet additions increased by 53% from the 1Q14 to $326 million and this had a positive impact on transactions. However, the increase in average fleet lifetime caused an increase in maintenance expenses. The net result of the two factors was a decline in operating margins and operating income was below our estimate.

Both point to point and about town transactions grew in the 1Q15. This was primarily due to the increase in fleet size rather than higher vehicle utilization. Increases company owned locations as well as independent dealerships  There were some increases in pricing. This shows that there is still plenty of room for growth in the Self-moving market.

All the self storage units operated by AMERCO are also truck rental facilities. This give the company a competitive advantage versus other truck rental companies like Budget and Penske.

The company has begun to replace mortgage debt that is due this year and next year. Mortgage rates are down from when this debt was raised by over one percentage point, the new rate is in the low 4% area. AMERCO has long been able to finance both mortgages and leasing costs at the low end of the rate curve.


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