U-Haul Holding Company Second Quarter Fiscal 2027 Investor Call - U-HAUL HOLDING CO

Explicit Guidance:

• Net fleet investment spending is projected to decrease by "a little over $500 million" for the full fiscal year 2027 compared to the prior year.
• Net fleet capital expenditures for the first six months of fiscal 2027 were down $223 million; the full-year decrease is tracked against this trajectory.
• Share repurchase capacity remaining stands at just under $224 million as of the report date.
• Management expects "sizable positive variance" on fleet liability costs specifically in the second half of fiscal 2027.
• Management anticipates average revenue per occupied foot improvements to "dissipate" partially as the company moves past the full-year impact of delinquent room cleanup.

Business-Segment Outlook:

• Self-Storage: Pipeline of projects not yet started is approximately 5.5 million square feet; active development has slowed to 5.5 million square feet (down from 6.5 million last year and 7.7 million pipeline previously). Development spending pace is approaching "steady state."
• U-BOX: U-BOX storage is expected to grow, driven by the conversion of traditional storage customers into containers; management notes a "big opportunity" to convert full traditional storage customers to U-BOX containers, though not yet "meaningful" across the system.
• U-BOX Real Estate: Investment in covered warehouse space for U-BOX is expected to decline significantly, with projected build-outs at "about half" of levels from one to two years ago, as the hub-and-spoke network covers major markets.
• Fleet: Fleet depreciation has reached an "inflection point," decreasing by $4.5 million in the quarter due to a shift toward newer, lower-cost cargo vans; losses from equipment disposal decreased by $34 million.
• Dealer Network: Net increase of 500 locations; future fleet size adjustments are contingent on the dealer program's absorption capacity, with a final call on fleet size deferred pending further progress.
• Revenue Mix: Management forecasts "structurally improving" margins as the ratio of equipment rental revenue (moving) declines relative to the more "sticky" annuity-based self-storage and U-BOX revenue streams.

Market and Competitive Outlook:

• Demand: No "structural demand catalyst" analogous to the COVID-era surge is anticipated; future growth is expected to rely on operational execution and dealer expansion rather than macro demand shocks.
• Transactions: Transaction counts shifted to positive year-over-year growth in October (up 23,000–24,000 transactions) after a prolonged negative trailing 12-month trend, viewed as a leading indicator for business improvement.
• Pricing & Utilization: Revenue per mile and miles per transaction are showing small but consistent improvements over three consecutive quarters; average new customer rental rates are up ~2% YoY, while renewal rates remain ~1% lower.
• Freight Costs: Management expects freight carrier costs to remain elevated ("not... lowering costs in the near term"); U-Haul aims to offset this via rate adjustments and load-sharing programs rather than expecting cost normalization.

Macro / Industry Outlook:

• Economic Environment: No specific macro catalysts (rates, GDP) are cited as immediate growth drivers; the focus remains on "internal" operational fixes to drive leverage.
• Industry Trends: Freight and shipping cost pressures are described as "universal" across the industry; management expects to pass these costs to customers through appropriate rate settings.

Strategic Initiatives:

• Dealer Expansion: Continuing to add independent dealer locations to expand reach and optimize fleet placement; progress on this front is critical to the future earnings growth narrative.
• Technology Integration: Rolling out AI tools to assist field teams (not replacing them) for operational efficiency; expected to yield "really powerful" outputs in the coming months.
  Capacity: Reducing U-BOX warehouse construction spend as the "hub-and-spoke" network matures, shifting focus from building new facilities to optimizing existing coverage.
• Operational Efficiency: Focusing on maintenance and customer review remediation during the post-peak seasonal lull to improve operational readiness for the next cycle.

Risks and Headwinds to Outlook:

• Freight Costs: Continued or rising freight and shipping expenses pose a risk to U-BOX margins; while manageable through pricing, they remain a significant expense variance.
• Transaction Growth: Future revenue acceleration is contingent on sustained transaction growth, which has only recently turned positive after a long period of decline.
• Dealer Program Efficacy: Uncertainty remains on whether the dealer expansion can effectively absorb the fleet to drive the anticipated leverage; a final verdict on fleet size is deferred.
• Market Volatility: Management cites "volatility in finance markets" as a factor influencing the balance between maintaining liquidity and executing share buybacks.
• Expense Normalization: Some revenue-per-foot improvements from the delinquency cleanup are expected to fade; personnel, property taxes, and insurance costs remain elevated.

Management Tone on the Future:

• Cautious Optimism: Tone is described as "hopeful" but hedged; leadership acknowledges that while revenue growth has been "durable and steady," it is "slower than we'd like to see."
• Execution Over Catalysts: Management rejects the need for external market catalysts, placing confidence in internal execution (dealer expansion, cost optimization, AI adoption) as the primary driver for future outperformance.
• Confidence in Margins: High confidence in the structural margin improvement narrative driven by the shifting mix toward longer-duration storage revenue and the normalization of depreciation expenses.