UHAL: Reports 1Q FY2024 Results: Demand for truck rentals declined in the single-digit range due to economic uncertainty. Self-Storage continues to deliver double-digit growth, though now in the mid-teens range. Annual Investor Virtual Meeting on August 17th
NYSE:UHAL
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U-Haul Holding Company (NYSE:UHAL) reported financial results for 1Q FY2024 on August 9th. Economic uncertainty is impacting the demand for self-moving equipment and supplies. As a result, the volume of transactions and average miles declined YOY due to these general macro-economic factors. In addition, competitors in the self-storage area have resorted to price discounting, which management has not followed. In point of fact, on the earnings conference call, management indicated that move-in rates are still higher than the move-in rates last year The company continues to invest in the self-storage segment by acquiring existing facilities and new locations as well as constructing/renovating development projects in this segment.
To put the current financial results in perspective, with the 3.6% decline in total quarterly revenues during the quarter, the company still achieved the 2nd highest level of total revenues for the first fiscal quarter and the 4th highest level of total revenues of any quarter in the company’s history (as a consequence that the second fiscal quarter seasonally the strongest).
In the self-moving equipment segment, the volume of transactions and average miles declined YOY due to economic uncertainty. Likewise, in the self-storage area, occupancy rates declined due to general self-storage industry trends. However, U-Haul manages storage unit rates with discrimination according to geographical location, unit size, floor location and unit climate (airconditioned vs non-airconditioned). Therefore, in the current environment, U-Haul has not resorted to large-scale discounting as some industry peers have done. Moreover, on the earnings conference call, management indicated that move-in rates are about 3% higher than the move-in rates last year
On Thursday, August 17 at 2:00 PM ET, U-Haul Holding Company will host its 17th Annual Virtual Analyst and Investor Day.
Financial Results for First Quarter of Fiscal 2024
On August 9, 2023 after the market close, U-Haul Holding Company reported financial results for the first fiscal quarter ending June 30, 2023. Total revenues declined 3.6% (or $57.5 million) to approximately $1.54 billion, primarily due to an 8.4% decrease (or $91.6 million) in the self-moving equipment rental business, which was partially offset by a $31.0 million increase in net investment & interest income and a 14.9% increase (or $25.8 million) in self-storage revenues. Despite the 3.6% decline in total revenues, the company achieved the 2nd highest level of total revenues for the first fiscal quarter and the 4th highest level of total revenues of any quarter in the company’s history (given that seasonality favors the second fiscal quarter).
In the self-moving equipment rental business, revenues declined 8.4% as the volume of transactions, average revenue per transaction and average miles driven per transaction decreased with the declines more pronounced in the one-way market. However, revenue-per-mile continues to grow.
In the self-storage area, revenues increased 14.9% (or $25.8 million) as the average monthly number of occupied units increased by 9% YOY (or 44,957 units). Self-storage revenues increased due to a nearly 6% increase in monthly revenue per occupied square foot and an increase in new capacity (1.1 million net rentable square feet) during the quarter. Currently, the self-storage industry is under pricing pressure. However, U-Haul manages storage unit rates discriminately by geographical location, unit size, floor location and unit climate (airconditioned vs non-airconditioned rooms). In the current environment, management has not resorted to large-scale discounting as some industry peers have done.
In self-moving/self-storage products & services, revenue decreased 7.8% (or $8.48 million), roughly in line with the decline in the self-moving equipment rental business. Sales of hitches and propane also decreased.
Other revenue decreased by 8.8% (or $12.0 million), primarily due to lower sales in the U-Box program despite an increase in transactions. Overall U-Box revenues were impacted by a decrease in pricing as management passed on lower freight costs.
Total costs and expenses increased by 3.5% (or $38.3 million). Operating expenses increased 4.1% (or $30.1 million), primarily driven by fleet repair & maintenance, personnel costs and property taxes. Depreciation expense increased 21.1% (or $24.0 million) as rental fleet depreciation increased $8.7 million (due to an increased pace of new additions to the fleet) and depreciation expense from buildings & improvements increased $6.7 million.
Management continues to attempt to return to a normalized rotation program. Though the company is still not able to purchase as many new vehicles as desired, the availability of certain truck models has improved with capital expenditures on new rental trucks totaling $454 million during the first fiscal quarter compared to $351 million comparable quarter last year. For the first time in two years, management has increased the projected fleet net capex.
Earnings from operations declined 19.3% (or by $95.8 million) to $399.7 million compared to $495.5 million in first fiscal quarter of 2023.
Higher interest rates drove interest expense up $10.8 million to $60.6 million, while at the same time increasing net investment and interest income by $31.0 million.
For the first quarter of fiscal 2024, U-Haul Holding Company reported a net income of $256.8 million (or $1.27 per diluted voting share), a 24.1% decrease compared to $338.3 million (or $2.18 per diluted voting share) in the comparable quarter last year. Shares outstanding have remained stable at 19,607,788 shares since fiscal 2020.
Note: Management utilizes the two-class method where distributed earnings (dividends) and undistributed earnings are allocated in a three-step process to each class of common stock. Our EPS calculation differs from the company’s GAAP-compliant calculation in that we are attempting to illuminate the earnings power behind each voting share rather than adjust EPS for the distribution dividends.
As of June 30, 2023, U-Haul Holding Company has a strong liquidity position. The Moving and Storage operating segment has approximately $2.792 billion of cash and available credit as well as $118.8 million on the balance sheet that is invested in U.S. Treasury bills. Working capital was approximately $6.0 billion on June 30, 2023.
Management believes that there will be a credit tightening cycle and that the company’s cash position will enable the purchase of trucks and the continued development of self-storage facilities even if access to debt financing becomes problematical.
U-Haul Mobile App
The U-Haul’s mobile app was designed to manage a move with U-Haul through mobile telephones. It enables customers to get instant quotes, start and/or modify a reservation. The app simplifies the process and makes the reservation process less labor intensive for the company. The U-Haul app is currently ranked #14 in the Travel category in the apple app store.
In addition, the U-Haul app facilitates the use of U-Haul Truck Share 24/7, which allows DIY movers to pick up or return a truck anytime, day or night as well as drop off a U-Haul truck after hours. U-Haul Truck Share 24/7 can also be utilized on a desktop, notebook or pad. U-Haul Truck Share 24/7 is available at all 23,000+ locations in the U-Haul network. Over 6,000,000 transactions have occurred on U-Haul Truck Share 24/7.
Company Name Change
Effective on December 19, 2022 the company changed its name change to U-Haul Holding Company so that current shareholders and potential investors will have the awareness that the company holds one of the most recognized brands in North America.
Valuation
Utilizing comparable EV-to-EBITDA valuation of a blend of truck rental and self-storage companies, a target price of $70.30 is indicated.
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