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Today, we're going to talk a little bit about U-Haul independent dealers. In our earliest decades, U-Haul products were offered exclusively through neighborhood dealers. These dealers were primarily service stations with industrious proprietors. They kept long hours, acted with economy and effectiveness and had pride in the service they provide to their community.

Today, U-Haul has a presence within 5 miles of 90% of the U.S. population. We have roughly 23,000 dealers today. Combined with over 2,000 U-Haul stores, this makes U-Haul the largest interconnected network of truck and trailer sharing in the world. By partnering with small businesses, U-Haul supports the buy local, shop local philosophy, increasing both the profitability and therefore, the resilience of our dealers.

On the average, we pay a 21% commission across all our product lines. The dealer has no start-up costs and no capital cost. Additionally, the U-Haul business model supports municipal or government objectives of reducing congestion, energy consumption and vehicle miles traveled.

We know by survey that over 50% of our customers will utilize alternative transportation modes to access our equipment, which optimizes existing public transportation infrastructure. And of course, conveniently located U-Haul dealers simply increase this connectivity.

Presently, we're on a drive to add 3,000 new dealers. We possess a large variety of electronic tools to identify where the population is growing and which neighborhoods would benefit from a U-Haul presence. Then this is magnified by the local knowledge from hundreds of area field managers, who support our existing independent dealers and additionally recruit new ones.

Today, I'd like to introduce you to one of our hard-working area field managers and a dealer on his route. Today, we're at Prescott's Laundry, a U-Haul dealer in Tempe, Arizona. And I have with me [ Ron Belak ], who is what we call an area field manager. He's the person who works with this independent U-Haul dealer.

Ron, how long have you been an area field manager?

Going on 10 years.

How did you find Prescott's Laundry?

Marketing, talking to people and meeting people out and about.

Did you have your eye on this particular area of town?

Yes.

And why? What motivated you to think this area of town was going to be productive?

It's college town, and college kids need trucks.

So essentially, Prescott's Laundry is a small local business, and then you've brought additional income to it?

Yes, sir.

And of course, our hope is that makes this whole business more resilient?

Yes.

Everybody in business knows they're struggling to make a living. Every dealer you have is -- has to work every day hard to make a living. So this is giving just a little bit more room maybe to Prescott's Laundry.

Correct. Yes, it brings more traffic through their business.

Okay. Why do people want to become a U-Haul dealer for someone like...

The main reason why I go into businesses and talk is to drive traffic through their business to bring extra revenue.

What are some of the things you're looking for in a location?

Are they there all the time? Do they show up? What does their business look like? Do they keep it clean? Is it neat? Is it respectful? Is it some place that I would send my grandmother into if she needed a U-Haul?

So if they're already running a good business, you've got a pretty good idea that...

I can help increase it, yes.

Yes, you can help increase it, and they'll do a good reflection on U-Haul. Why is being a dealership meaningful to this person, given that you've got a U-Haul store 5 miles away that's full service.

Because I believe personally that the community wants to support local business, and they would rather go into that place that they go into to get their milk every day to run a U-Haul truck.

Sure. So this is part of our shop local, buy local. Very much so we try to integrate in the community. Do you have to become politically familiar with the community at the same time in order to do this?

Yes, we do. We have to know all zoning regulations. We have to know all the laws. We have to know signage ordinances. We have to know zoning ordinances, where we can park trucks. Do we need to get permits? Do we not have to get permits?

How does adding trucks result in less vehicle miles traveled?

If the customer were to go to a center 5 miles down the road, they would be traveling twice as far. With this location, each transaction is only going through maybe 8 to 15 miles, where if they were going through the centers, they would now have that truck twice as long going through twice as many miles.

Here, it looks like we've got 10 trucks almost. What keeps these trucks running?

I check them out regularly. If a problem arises, we have vendors that come out and fix them. We have -- we try to keep up on maintenance, keep them clean, keep them running properly and properly maintenance.

So every dealer is connected via electronically connected to the entire U-Haul system?

Yes, sir.

I see. And then how about reservations? Is that the same thing? Reservations can come in through the...

Dealer system.

Does your dealer charge the same price that U-Haul charges at store?

Yes.

So there's no price advantage, it's purely a service and convenience advantage?

Yes.

We've been standing in front of your company vehicle. Tell us a little bit about it.

Okay. This is my ramp rig. So this is everything I need to do my job. We move trailers with the top. We have a winch on the front. We pull the ramps down in the back, so we can drag them up, secure them and move them to more productive locations. I have all the tools on the truck and parts to fix just about every trailer, a lot of stuff on the trucks themselves.

And does this truck help you meet people also?

Oh, it does because it stands out like a sore thumb. It is the most conversational piece you'll ever see in your life. And it's got my phone number on it, and I have received calls driving down the road from that number.

And that's your personal cellphone?

That's my personal cellphone.

You're all in?

I'm all in. And I am their support. I am their first call if they have a problem, I'm there for them no matter what. I've been in the situation. And if they're having a problem, I got a customer there, I want to make sure the customer gets taken care of and gets down the road quickly.

Good morning, Joe here.

Joe. Nice to meet you.

Frank, how long have you been in business?

Since 2012.

2012. Okay. So you've had quite a little bit of business experience before we ever met you?

Yes, yes.

And have you been at this location all the time?

This location, I acquired it in November of 2024.

So had you been in the laundry business before?

Actually, no. No. No, I really wasn't in the laundry business. There was like a day that happened where it was just dreaming of quarters, Joe, [ dreaming ] of quarters. of that. But it wouldn't let it go. It wouldn't let it go. I was actually looking for a place where I could occupy laundromat. And when I found the spot, I realized the overwhelming cost it would take just to build the infrastructure. And so found that was established because the cost point was a lot lower.

And so getting large amounts of capital isn't really a reasonable possibility for yourself. So you're substituting hard work and ingenuity for bringing in a lot more money and...

Sweat equity, absolutely.

Sure. Great. And what's it cost you to get into the U-Haul business?

Absolutely nothing surprisingly. I was absolutely blown away that, that was a true statement.

And then -- but that works good with your model. You don't have to go see a bank?

Honestly, it's been a great marriage in that respect, where we have maybe a plethora of a demographic here, different cultures, different ethnicities, different economic situations. And they are also consumers of U-Haul. And it became a marriage.

My clients who didn't use U-Haul, now see it and they're, "Hey, can I get a rental?" So there's the listening to the attendant. One of the things that it did help my laundromat is it brought the revenue necessary to afford an attendant here.

Yes, that's a critical thing, isn't it?

It is because it invites security. It invites amenities that I otherwise didn't feel comfortable...

We -- you get there, your second-class laundry, aren't you? And then when you get an attendant full time now, you can get your dream realized.

Agreed. And we can also offer additional services in the business such as drop-off wash and fold. With the U-Haul connection, now I'm getting more insight. [ U-Haul ] in and of itself is bringing traffic into the facility that enables us to offer some soft sale opportunities.

"Hey, we're here for wash and fold." We're here to help you with your laundry. You know a place to come to do your laundry now. That's a selling point. In and of itself, that costs me absolutely nothing from the partnership. And that is a great synergy to have.

Are you starting to see people coming in on the U-Haul app, where they've already filled out some of this information for you, so you now don't have to reenter the information?

That is correct. We're getting a very high significant amount that come and have those reservations. And in fact, they can acquire a unit when we are off hours. We can set it up. They get that authority from U-Haul and they can come in, and that just keeps the process moving in and of itself when we are not present here.

And how many days a week are you open here?

I'm open 365 days a year.

So if someone saw this video, wondering, should they be interested in U-Haul dealership, what would you tell them?

Don't wait. Yes. I mean this is a win-win. There is a zero negative loss to you. Leveraging the brand that U-Haul has built over the decades, you're going to grow your business. And that is exactly the positive impact this is having on me.

A successful U-Haul dealer invariably has a base business, which has taught them how to be in business, which just taught them customer service, taught them banking, taught them advertising. And so while the base business has evolved over time, the fact that dealers are a substantial contributor to the overall service we provide has remained the same.

Our independent neighborhood dealers outnumber company-owned and operated locations 10:1. Even with the great number of stores and independent dealerships we have today, I see much more opportunity to expand our service footprint, particularly with the fleet capacity we possess today.

With service-minded dealers, we can do so in a very capital-efficient way and build the resiliency of the dealer's base business, share the profitability with the local economy, reduce emissions and vehicle miles traveled, all the while meeting the needs of the moving public.

Hello. Welcome to the 2026 U-Haul Holding Company Virtual Analyst and Investor Meeting. Thank you for joining us today. During this meeting, we'll take a look back at our performance in fiscal 2026 and the first quarter of fiscal 2027.

Before we begin, I'd like to remind all participants of this webcast that certain of the statements during this meeting, 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 a discussion of the risks and uncertainties that may affect the company's business and future operating results, please refer to our most recent Form 10-K filing with the U.S. Securities and Exchange Commission and any updates as may be provided in our periodic Form 10-Q filings.

The virtual platform for this meeting is an important part of our corporate sustainability initiative. This is our 20th consecutive year hosting a virtual meeting.

Joining me today are a few key people from the organization. Joe Shoen, Chairman of U-Haul Holding Company. Joe has served as Chairman for 40 years and has worked at the company for 50 years. JT Taylor is President of U-Haul International. JT has held this position for 20 years and has been with you haul for 45 years.

Jason Berg is our Chief Financial Officer, and has worked at U-Haul or a subsidiary for 30 years; Parul Butala is President of America Real Estate Company as of this year. She was previously the Director of Land Use and Planning and has been with the company for 32 years.

Royal Shoen is the President of U-Haul Company of Eastern Arizona. She has worked in a variety of roles at the Home Office and in the field over the past 13 years. Erik Regan is Vice President of Dealer and Area Field Manager Operations. He has held this role for 4 years and has been with the company for 21 years.

[Operator Instructions] Our first question is on the dealer growth efforts on the earnings call, you said you're about halfway to the finish line on new dealers and 1/3 of the way on a revenue basis. Can you talk about how you're making sure that you're adding quality dealers to the network? What efforts do you have going on to help dealers be more effective? Erik, it sounds like one for you.

Yes. When we add independent dealers and we partner with independent business owners, one of the things that we look at as part of some of the characteristics is that they're open 6 or 7 days a week. When the dealers open that amount of time, we're able to have the equipment available to the customer, we're able to utilize the equipment better.

We also have area field managers that manage these locations. They have access to a lot of different types of data points and information. So this allows them to determine when and where to add dealers. They also have historical information of where dealers used to exist and may not exist today. And so with that, they can kind of go back in time and see if adding a dealer where we previously were would make sense.

And then as far as how we help dealers be more effective, as part of our 3,000 dealer push, we are from day 1, opening dealers with equipment that's available in that area. This allows us to serve the customer right away in their community.

We recall that you target a 10% unlevered IRR on storage. What has been the IRR for the past 10 years? And do you still target the same 10% IRR going forward? How has the new storage put in, in the last 5 years performing? Are they still reaching 80% occupancy by year 4 or 5? Jason?

Thanks, Sebastien. I'll start off with the last part of that question first as far as the occupancy performance. So we've had about 500 properties here that have matured past 5 years, so fiscal '21 and before when they went into service. Those properties actually were reaching occupancy levels ahead of schedule. Normally, we would project stabilization in year 5 at 90%. We're getting to 90% at the end of year 4 and 95% at year 5.

Now those properties all benefited from the work-from-home boomlet there in fiscal '22, '23. For the properties that we've opened the last 3 years, so they've -- in which case, it's a much smaller group, that's actually completed 3 years, but the ones that have completed 1 year into the 2 or into the third year; we're seeing those lag about 8% to 10% on occupancy right now.

The first part of the question, I think, was return on invested capital -- or I'm sorry, what was it? IRR. So our target when we're approving new deals has traditionally been the 10%.

Breaking it out into three pieces, when we're looking at existing storage facilities over the last 12 months, this is a pretty small group of properties. We're still targeting 10%. And we think when we go into the deals, that's what we're going to get. If you go back out 5 years, I think the average number is probably closer to 8.5%.

The next largest cohort of properties is our conversion properties. On those properties, we're much closer to or just above 10%. Those are some of our best returning properties.

And now the largest expansion cohort is the ground-ups. And on ground-ups, over the last 12 months, we've been just below 9%. If you were to look out -- I'm sorry, just below 10%. If you were to look out over the last 5 years, we're probably targeting just over 9%. So if we've taken a little bit of liberty on any of these deals, it's going to be the ground-ups.

Why has U-Box revenue slowed in the recent quarters? On a head-to-head basis, does U-Haul typically have a lower price than competitors on the same route? Are you seeing competitors using unsustainable price to compete for market share? Joe?

Yes, U-Box has ebbed and flowed. And oftentimes, my observation has been it's been our activity or our failure to act. So I wouldn't say U-Box has slowed is an accurate statement.

When you talk about price, it's very difficult to get a real price comparison that's absolute apples-to-apples. Our product offering is such that we're able to present the customer with what the customer sees as a very competitive price. And we expect we'll be able to do that ongoing. That was a structural decision we made early on.

And additionally, to my knowledge, we are the only people who will actually quote you and honor a real-time price. And in this current freight market, that's been a little bit of a task for us because we're seeing a constantly escalating prices. So it's difficult to have posted prices, but we maintain posted prices, and we believe the consumer wants to see them.

Finally, is the actions of the other competitors in the market sustainable? I don't know that would be their question to answer. Obviously, PODS, the PODS organization has been more aggressive on advertising in the last several months, and I think more aggressive in the marketplace.

U-Haul is a time-and-place business. In other words, having the right equipment in the right place at the right time. How is management employing AI or other information systems to improve the time and place aspects of the equipment fleet? How is management deploying and testing AI in the company? JT, do you want to take that one?

Sure. I think we're doing far more than just testing. We are productively using and employing AI throughout the company. We're curating the customer experience in the app online, in person, on the phone. We're utilizing it for our front line to better identify who our customers are, matching identities, which speeds the rental process. This especially helps with our 24/7 rentals.

We're using the -- our own data and AI to really get a best fit for our moving help customers with our service providers. And I think that's delivering a better customer experience as well. We're using AI assistant in our contact center, which helps them kind of maintain a set of a knowledge base, I guess, I would call it, that each agent, regardless of the experience they have in the center itself; can answer customers' questions and help the customer in a more unified, consistent manner.

And of course, our IT and development groups are using it on QA and many other areas. And there's far more than that. But I think the question hit on time and place. That's something that is, of course, important to our equipment distribution. We've been building tools for the last 40 years that help us do answer that question. And I don't know that there's any singular solution to fleet distribution. I think we'll continue to use those tools effectively, and I'm sure we'll advance those tools as we move forward.

What is the historical return on invested capital on the self-moving side? Jason?

Okay. Well, I'll start off with first with a 5-year look. So over the last 5 years, if you kind of do a rolling quarterly average, I think we're about 7.5%. Take that out to 10 years, we get closer to 8%. And then at the 15-year mark, that's where we're real close to 10% or just above where the S&P 500 has been on that.

So the question that you're probably getting to, and I did kind of slide past, I think you said the moving business, we don't have a separate calculations that we report publicly between the moving and the storage business. So I'm referring to the total company return on invested capital.

What's been happening in the last 5, 10 years that's caused the number to slide down? Over the last 10 years, I'd say we've had, conservatively speaking, somewhere between $700 million to maybe $1.7 billion of invested capital in real estate projects that haven't yet opened, right? And then you think about -- that's just the capital and properties that haven't opened.

If you then extend it out to ones that are working their way through the occupancy cycle, you have even more underutilized assets. So I think at a minimum, that's 140 to 150 basis points of the downward slide.

And then if you look out over the last couple of years where it's been even worse than the 5-year average I reported, you have that same issue on self-storage. We've now also built in some excess capacity on the fleet side, which has cost running through it without the same level of utilization that we would historically expect. And then we've had the pickup or the cargo van fleet issues on resale and the insurance costs.

So fortunately, most all of those things are transitory, and we're working our way out of them. We made some progress here in the first quarter. But the heavy lifting to get us back up to historical return on invested capital levels is really on the revenue side. It's the asset utilization. We have to fill the storage rooms and we have to get these trucks dispersed to their distribution points and rented.

Is U-Box cannibalizing storage? Parul, do you want to take a shot at that?

Yes, sure. Thanks, Sebastien. Is U-Box cannibalizing storage? I don't think so. There may be some overlap, but I think we are comfortable with that. To me, the question is not whether a U-Haul product occasionally replaces another U-Haul product. But the important thing is whether we are able to address and provide the right solution to that customer walking into our doors and keep that customer within the U-Haul network.

When we develop storage locations or U-Haul locations throughout U.S. and Canada, we try to co-locate both U-Box and storage because we believe it's complementary.

Traditional storage is for the customer who wants recurring convenient access to their belongings over a generally longer period of time, whereas U-Box is geared towards the moving customer who needs temporary storage, portability and delivery options. And U-Box also provides additional capacity when storage rooms are full. So no, I don't think it's cannibalizing at all. I believe it's very complementary to our business.

Royal, is that how you're seeing it in the field?

I am. I agree, Parul. Our greatest opportunity, though, is helping our team to understand the selling differences between both U-Box and self-storage and then being able to determine who is a self-storage customer versus who's a U-Box customer.

Great. If a low growth moving environment lasts for another 2 to 3 years and you're adding a huge number of dealers, do you think you can gain share with them? Essentially, you could gain share while reducing or maintaining the equipment fleet. Erik?

Yes. I believe historically, as U-Haul has grown over the years and our dealer organization has grown, we are creating greater customer convenience to the customer. When we do that, we are able to drive on increasing our transactions across our dealer organization. So when we're able to do that, I think we're going to serve the customer. And at the same time, we can do it while maintaining our same fleet size.

There's a chart that you've shown in the past that shows U.S. moving trend per capita declining for the past 40 years. How has it been trending in the past 3 years? Do you still see unmet demand for self-moving? And how large do you think the market is? Joe?

Sure. We've -- there's statistics. I think most of them come from the U.S. Bureau of Census on moves, and they show pretty much a steady decline over 40 years. Over the last 3 years, I don't think the data is sensitive enough to really say there's been any change to that.

How big is the market? Well, it's vast. We're certainly not serving half the market with U-Haul. It's a vast market. And when we increase convenience, as Erik talked about here just a moment ago, by introducing more dealers, what we -- our experience tells us is that we will increase overall transactions.

It may or may not change share. There's a lot of calculations that go into determining what is share, and there isn't a universally accepted standard for that. But it will change overall transactions, and that's really what's driven our economic line in the opposite direction of moving trends for the last 40 years.

As the company has added assets in recent years, it has also accumulated more debt. Debt has become more expensive generally and interest expense is consuming an increasing amount of corporate earnings. Net leverage has doubled in the last 4 years from 2.3x to 4.4x. With operating margins under pressure, does it make sense for management to prioritize debt reduction in its capital allocation decisions? Jason?

Thanks. So to be fair, the range that you gave, the 2.3x to where we're at today, we weren't ever going to be running the organization at 2.3x. You kind of caught us at the moment of greatest liquidity at that point before we really deployed the capital fully. So we went from that range to now where we're at today, 4.3x, 4.4x, which is a little bit outside of our comfort zone.

I'd say our comfort zone where we feel we've optimized capital is in the 3.5 to 4x net debt-to-EBITDA number. So with those -- with the current leverage number that we're looking at now, that means we're either $650 million heavy on debt or we're $170 million short on EBITDA. So the answer is probably somewhere in between those two numbers.

So what we've been doing to address that is we started this several years ago, actually, Joe started scaling back projected future spending on real estate. And in this last year, we took the step of taking our fleet plan and switching it to just a rotation only or what some of you might call maintenance CapEx year on fleet.

So that will generate some additional free cash flow this year. And we made the decision this year, the Board of Directors and management to then deploy that additional free cash flow towards the share repurchase plan.

So I think investor sentiment has been fairly positive on that. We may have had a little more excitement from that versus if I come out and said we're going to pay down our debt $350 million. But the plan going forward is we think we're probably going to peak this year on our debt levels. And absolute dollar of debt is probably going to begin to decrease. And then in the backdrop, the plan is for earnings to increase and then the ratio should stabilize on its own.

How has the rollout of toy haulers gone versus your original expectations? What are some of the secondary benefits such as opening up a new customer base? JT?

I'd say we are pleased with the rollout of the toy hauler. Joe sets a strong expectation, but I think if you -- as I look at it, we have met our expectations related to manufacturing. Our distribution has been strong. It's contributed to our revenue lines.

I think if I look at the most exciting part of that is we -- I would say we exceeded our customers' expectations. We sent out surveys -- we've been sending out surveys to the customers that are renting, trying to learn more about those customers and found that they're using it for far more than simply moving vehicles, moving their vehicles on a move.

They're using it -- they send pictures and they'll have airplane fuselages on the top of it, a helicopter body. farmers going to take their crops to market. We've had teen sailboat among so many other things that they do.

So -- and again, the length of it has been a very big positive because you see people taking lumber, baseboards, things like that. So additional use has been maybe for myself, a bit of a surprise, a pleasant surprise. And so yes, there's much going on with the toy hauler. I think it's been a big positive.

I -- the customer demand is so high on my lots that I can't even keep the equipment. They're just -- they're selling like hot cakes. But in regards to the new customer base, I'm seeing on the field that the toy hauler has opened up the off-road and overlanding markets for us.

Great color there. It sounds like you feel like the competitive backdrop for U-Box is tougher now than 1 to 2 years ago. Is that accurate? And do you think the big players in the market are being rational? Joe?

Read that one more time.

Yes. It sounds like you feel like the competitive backdrop for U-Box is tougher now than 1 to 2 years ago. Is that accurate? And do you think the big players in the market are being rational?

I don't think the market is so much more competitive. We have some cost pressures due to increased freight, but the actual market I see is expanding as people become more familiar with the product and its availability. So as you probably get from seeing our dealer organization, we attempt to broadly serve the country.

So we have U-Box firmly in every major market in North America. That's United States and Canada. And that is going to just increase awareness where most of our competitors service less than a total market. So the customer always has to find out, do you go there? Well, it's U-Haul. They know we go there. So I think that, that alone is going to continue to build this market.

I know and hope Joe is not going anywhere and strongly suspect [ Sam ] is waiting in line, but some general commentary about how management and the Board is thinking about this would be welcome. Joe?

That's a succession question?

Yes.

Okay. Well, first of all, I'm healthy and enjoy going to work. So there's not likely to be a big change there. Of course, succession is always a possibility, and it will eventually happen.

One thing that the investors in the outside normally doesn't see is most of our general management is distributed across the country. So we have candidates that people watching this webcast will be surprised. I'm confident that when I'm no longer in this position that the Board will have several good candidates.

You are reducing CapEx for the fleet and adding dealers. Does this imply that fleet is moving off of owned and operated sites to dealers? This seems like a difficult thing to execute efficiently. Do you think this is holding back your ability to capture market opportunity while this is in flight? JT?

No, I think it's the opposite of holding back market opportunity actually. I think we saw that today with the dealer that we saw at Prescott Cleaners. I think dealers, if they're open strategically, which that one was, if they're given a piece of equipment, as Erik had commented on earlier, to start off with; I think that's a powerful way to do it. I think it increases our overall market penetration.

And whenever we're increasing market penetration and increasing convenience at the same time, which adding dealers does, our equipment is more highly utilized, our customers win, and we end up increasing transactions.

So I think, no, we want to have that equipment utilization. Now we have to have a plan to do so, which you've heard about. And if we can -- the question is, can we execute on that plan, and I believe we can.

How has the sales effectiveness or market uptake been in toy haulers between dealers and operated locations? Erik?

Yes. I'm lucky to be in a position to get a lot of feedback from our field teams. And there's a lot of excitement behind the product. There is -- this product has given us a way to say yes to more customers. I also have the opportunity to be part of the dealer message board system online, where dealers are able to interact with one another.

And they share all the time whenever a toy hauler lands on their lot. They love to share pictures of what customers are using them for. So there's absolutely some excitement behind the product. And like I said, it allows us to see yes to more customers.

This is a big question here on modeling. So it might be one for Jason. One of our core investment premises for U-Haul is the significant operating leverage the company achieves during demand spikes, similar to what was observed between 2020 and 2022. Since 2022, management has deployed significant capital to expand capacity, notably through the resurgence of the fleet rotation program, adding independent self-moving dealer distribution points, expanding self-storage square footage and scaling up the U-Box program.

In management's estimation, how much has U-Haul's overall capacity to serve both the self-moving and self-storage markets increased compared to the baseline of when COVID began in 2020? And how should we model the potential operating leverage of this larger footprint when the next demand surge occurs? So how should we model the potential operating leverage of this larger footprint when the next demand surge occurs?

Okay. Well, you pitched it to the finance guys, so you're going to get it in terms of revenue. So the fleet where we're at today, we've grown the fleet over the last couple of years for a variety of reasons, not all being expected future demand. There's always -- you're always watching the supply chain for trucks, I want to make sure that you have enough going into the future. But in regards to the opportunities that we see, we focused on the 3,000 dealers.

I guess the best way I could answer this question off the cuff would be taking the current fleet that we have today, looking and then taking the average utilization rate for the fleet. I'll take the years before COVID because those were unnaturally low and then unnaturally high. And if you were to rerun the size of the fleet that we have today against those utilization numbers, we could handle somewhere north of another $330 million of revenue with this size fleet.

And I'm going to caveat that and say that that's kind of a low floor estimate of what's capable with the size of the fleet. Every year, we get a little bit better at managing it, and that should get better.

On the storage side, we have a slide that addresses this in the investor presentation that if we were to just take the existing storage facilities that we have today and get them up to 90%, not assuming any improvement in rate, that's another $288 million, $290 million there.

When you already have acquired the assets for the model purpose, you're talking about operating leverage on storage, maybe not so much on trucks, you're talking about something probably north of 80% of that, an operating leverage figure against that revenue.

And then for U-Box, it's a little bit harder to model. We certainly have the containers. We have the covered storage space that we can grow into that if you were to just take our covered storage space and call it self-storage, it's another 17 million square feet of self-storage that we have in the system.

So I don't have a specific number to put to that yet because we don't have enough containers to fill that. But I think the first two will get you pretty close to what we think we could probably do over the next several years.

This is one on buybacks and use of capital. Due to the fact that we are slowing down purchases of moving rental equipment and slowing square footage growth in our self-storage portfolio, naturally, we would be generating substantial positive free cash flow over the next 18 to 24 months.

Our shares have appreciated nearly 40% since the announcement of the share buyback. Is it clear now to management and the Board that the best use of our excess capital is for share buybacks? Any response to that, maybe Joe or Jason?

Well, I'll start. It's not like we discovered the math in the last 6 months. I have a -- Kevin Hart, my Treasurer. And I have a very educated guess on what cash is going to be between now and at least the next 12 months looking forward. So knowing what our cash position is, that helps dictate how much capital we have to allocate.

And I think I kind of answered it in an earlier question that decisions that we're making on the operations side to allow them to grow into the assets that we've already purchased has given us a little bit of flexibility to open up the capital allocation. And as soon as that became available, we made the move to do a share repurchase.

And if rooms fill up and the trucks begin to rent, our first and foremost priority is to allocate capital to growth. So you can count on that taking place. Then we have the share repurchase. And then an earlier question was asking when we're going to pay down debt.

So between all three of those things, I would say growth comes first and then some management of the leverage level and then the share repurchase has been, as you noted in the question, has been successful.

What is management or the Board's opinion on why there is a 14% delta between our voting and nonvoting share prices? Jason, you've looked at this a little bit.

Yes. So -- we've had -- I've spoken with a lot of people that are listening to this call, people that are investing in the stock. We've had outside experts that we've engaged to help us try to understand this. We've played around with different allocations on the share repurchase program to see how that would affect it.

At the end of the day, I don't have a real good answer as to why the people listening to this call are choosing to invest in which class stock that they choose to invest in. We don't really see a huge difference economically between the two classes of shares. One has a vote and you can determine the value of that vote, given the ownership structure that we have. And the other one has a dividend attached to it.

And for whatever value that you attach to each of those, and I should say that the nonvoting has a greater number of shares. There's more liquidity in that class of shares. So we would have thought that they would have traded closer. We've tried to do everything we can to assist with that. But at a certain point, you kind of leave it to the market and you guys decide.

You have long said that moving activity is closely linked to the economy overall. Moving equipment revenue has been modestly positive for quite some time. Do you think the economy overall is still the main driver of moving activity? Or do you think there is a particular sector of the economy that is driving it like housing or apartment rental? JT?

You may have said this before, I think now having been here for 45 years, I think the main driver, I'm still a firm believer, is life's events. I think people get married, change jobs, sadly die. There's births. Those type of events, I believe, have -- is a major factor and a driver in what we're seeing in transactions and moves being made.

Certainly, housing and apartments being built, there's a bit of cyclicality to it. And I think it's there, but I think really life's events have the major impact on moves being made.

I might add to that. I think also people on this call are interested in revenue. And clearly, we see a larger ticket for a variety of reasons when things are booming and when they're not. But births and marriages and divorces and deaths don't really change. They're pretty much a basic demographic.

And our challenge in the 40 years JT and I have been working together, has always been, well, how do we beat that demographic? Is there a new pocket of business? Is there a product, let's say, the toy haul that is serving, as Royal said, the off-road and overlander market, which then brings them in and creates another dynamic.

So now as a result of that, we're real hot with tie-down straps right now. They're just hotter than a pistol, and it was kind of a lethargic product in our store before. So part of this always is a little bit of self-discovery, but I think people would be making a mistake if they tried to find a single or even two or three indicators that say this is going to drive business. I think you would be disappointed.

We have tried to do that many times and not succeeded in having something that had a better correlation than overall consumer sentiment. I can speak to our low points, typically, we've shot ourself in the foot. We jig going should the jog. That's in retrospect, what I would say. So try not to make a mistake and then can you just beat the demographics a little bit.

Can you talk about where you are on capacity of U-Box containers and warehouses? Are you paring back investment to grow either boxes or warehouses this year? Parul, do you want to take a shot at that?

Yes. Thanks, Sebastien. Building our U-Box locations throughout U.S. and Canada has been a top priority for our real estate group. In fact, in the last 5 years, we've actually doubled our covered space capacity. Currently, the U-Box container occupancy sits at about 67% and our U-Box utilization of the covered space is at about 34%.

Now the difference in this utilization -- the difference in between the occupancy of the containers and the utilization of the warehouse is intentional because we have to build these U-Haul warehouses well ahead of demand because they take so long.

For example, I'm working on a project in Hayward, California across the bay from San Francisco for a U-Box project, and it's just taken several years. In markets like these, industrial land is just scarce and expensive, zoning and entitlement processes are really complex, and the construction timelines are extremely lengthy. So we have to look ahead and plan our investment for our infrastructure much before customer demand.

Now having said that, we are not slowing our investment in containers because demand and utilization remains strong. But however, we are slowing our investment in warehouse space because we have built enough warehouse space to meet future demand. So we have built infrastructure ahead of demand. And now we just continue adding containers and wait for the warehouse occupancy to catch up.

Moving in storage usage has clearly been linked up over the years. Has there been -- or can there be a linkage from using toy haulers to self-storage? JT, what do you see?

I don't have a specific metric or statistic on that exact toy hauler linking directly up. I would say that the toy hauler has created more customer transactions. And any time we get more customer transactions, you're getting overall that direct connection between customer transactions and self-storage, I think, is what you said. So -- and there probably is a link. Royal, you may have a little better color of touching the customer as close as you do.

Yes. So what I've seen in my centers actually is those same off-road customers are the same customers that store vehicles with us via our RV storage or vehicle storage options.

Can you talk about the cost pressures in Q2 regarding U-Box and freight? Joe?

Sure. freight is up, it's likely to stay up a little while. If you track freight for 20 years, which I'm sure some of you have, it's very cyclical. It goes up and down, up and down. Two big factors are hammering it today. One is driver availability, and that's been in the press for the last 18 to 24 months; and of course, fossil fuels. So a variety of world events have driven up fossil fuels. So both of those are on.

And the freight companies, when they -- because they get beat down in load periods when demand is -- or supply is tight, they're very aggressive on pricing, let's put it lightly. So they get any excuse to put in a surcharge, they're putting in a surcharge. And they've gotten plenty of excuses lately, and they're getting away with surcharges.

So we do mostly less than truckload, which is a lot harder to hedge your contract out. We try, but it's not quite as clear cut as you'd like to imagine. So we're stuck with that.

As I mentioned earlier, we actually quote a price instantaneously to you. So our competitors are going to tell you we'll get back to you, then they will then quote a freight carrier, for instance, and they'll do whatever markup or whether they consider appropriate.

So we don't do that. We go right to a price. We think that gives us a tremendous advantage with the consumer. But right now, we're getting margins squeezed. I expect you'll see that ebb and flow over the entire life of U-Box.

Moving activity is stuck with low growth and U-Box has outperformed generally over the past few years. Do you still get the sense that U-Box is not taking share, but is instead additive? Joe?

Well, again, someone here said it earlier, maybe it was cool. The customers are a little different. Certainly, there's some overlap. And of course, when we had no U-Box, then we told them a truck was a perfect solution. The first I can remember moving in the [ Shoen ] family, we had 7 children, 2 cars, a big house and U-Haul solution was 212-foot trailers. We said that's where the big family needs to move 1,200 miles.

Well, of course, today, my wife would just divorce me if I said that it was just a couple of us moving. So I told her 2 6x12 trailers. It's a ridiculous proposition. But you kind of got to sell what you got. So we now have this additional card to play. It's sure there's going to be a little bit of crossover, but really, you're going to reach new customers and get a higher satisfaction level.

And Parul said that our goal is to keep these people in our orbit, not necessarily to slaughter them in any one transaction. We're looking to keep them in our orbit, keep them coming back. They'll move multiple times over their life, have multiple occasions to do business with us. So no, I don't believe it cannibalizes the business enough to just even whistle that.

I actually have the understanding that the Gen Z understanding of U-Box is "for the girlies that don't drive." And what they really mean by that is it's the customers that want convenience. They're the people that don't want to rent a truck and then drive to a storage facility to then complete their move. They're the people that want it delivered to their house.

And with U-Box, we can deliver it, we can ship it, we can store it. And at U-Haul, we are the moving experts. So U-Box allows us to say yes to all moving customers.

Got a question on margins here. In the past, you've said you expect the moving and storage business to reach EBITDA margins in line with or above the 10-year average, which is 33%. Do you still expect to achieve mid-30s margins? If so, what needs to happen to get there? And how long will this take? Jason?

Well, how long is it going to take is the big question. And I guess what I can say is there is no structural reason we can't get back to that level. Each time I look at our results the last couple of years, there's always, oh, well, if, but. We -- I have a little saying I won't get into on that.

But there's -- last 2 years, there's always been something that's come up that has kind of set us back a little bit from the pace. So last year, at least on the EBITDA margin, it was the insurance expense, right, the self-insurance liability. And we made up a lot of space last year, and we don't think that, that's going to be as much of a headwind this year.

It really does get back to filling rooms and renting trucks. It's really more of a revenue issue. And we either get to that point or you have to scale back the capacity side. And right now, we don't see any reasons why we should veer off of our path. We think we can grow into these assets, and we're going to. So is that 2 years? Is that 3 years from now? It's going to take a little bit of time to do that. But getting back to those margins, I just don't see a reason why we can't do it.

I think this next one might be a good one to end on. What is the company's strategy in choosing to allocate buyback dollars toward voting shares versus nonvoting shares? I might have thought you would favor the nonvoting shares, given the cheaper price. But it seems like the voting shares are being favored. Jason?

Okay. So certainly, through June, we tried out a bunch of different strategies to see what the effect would be for our purchases on any given day. So there was a whole bunch of very idiosyncratic type of buy orders that we put in. If you've listened to our update since then, the allocation has certainly shifted a little bit wider from what it was in June as we've seen the appreciation in the shares since we started buying.

So we're not locked into any specific allocation for that or we're not even locked into continuing to buy from there. But once we report the next quarter, I think you're going to see a wider allocation. I don't think we're going to see 9:1, but it will be something much closer.

I might add to that, Jason, parallel. When we did the stock dividend, we believed people wanted to see more shares total outstanding, and they believe that might help improve liquidity. And so in a lot of ways -- again, I'm no stock expert, but in a lot of ways, the lesser shares have less liquidity and taking them some out of the market just furthers that goal as far as I'm concerned and point is where we were asked to go by the shareholders, and we responded.

Thanks for that, Joe. As a reminder to everyone, this webcast is available for replay right where you came for it in the Events and Presentation section on our website. Thank you for your participation today and your ongoing support of the company. Take care.

Hello, everyone. Thank you for joining us, and welcome to U-Haul Holding Company's First Quarter Fiscal 2027 Investor Call. [Operator Instructions] I will now hand the conference over to Sebastien Reyes. Sebastien, please go ahead.

Good morning. Welcome to the U-Haul Holding Company First Quarter Fiscal 2027 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 a 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 and Form 10-Q for the quarter ended June 30, 2026, which is on file with the U.S. Securities and Exchange Commission.

I'll now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company.

Good morning, and welcome. We continue to have our work cut out for us. We need to increase U-Move and new store business. Operating expenses is continue to creep up, and this is a combination of operating inefficiencies and pure inflation. About this time last year, we began a massive effort to net gain 3,000 independent U-Haul dealer locations. We are halfway there and still have good momentum. For decades, U-Haul has had a strategy of convenience to the customer. Adding these locations will further that goal, enhancing affordability to our customer and positively impacting equipment utilization for U-Haul. U-Move transaction growth has room to improve.

Last year, at this time, we also initiated a harder line on delinquent storage accounts, pushing our same-store occupancy number down. By September, we should be reporting improvements in that number, but the actual work was done 1 year ago. Positively, our rate of adding new storage customers is improving, but of course, we want and need more. In my judgment, continued deceptive pricing practices by most of the storage REITs is degrading the self-storage industry's reputation with the public. At the minimum, their actions are increasing government oversight of self-storage as evidenced by recent regulations in New York City. This is a shame, and my team is dealing with it.

U-Haul's customer-facing digital tools reflect increasing acceptance by our actual and potential customers. So I see that as a good positive. Overall, I see a compelling future for our U-Move, U-Store and U-Box product offerings.

Now I'll turn it over to Jason to walk through the current numbers.

Thanks, Joe. Yesterday, we reported first quarter earnings of $123 million compared to $142 million for the same quarter last year. In terms of earnings per share, the first quarter of this year was $0.63 per nonvoting share compared to $0.73 for the same period last year. Earnings before interest, taxes and depreciation, what we refer to as adjusted EBITDA at our Moving and Storage segment decreased $9 million for the quarter to $537 million.

Included in both our release -- our press release and our financial supplement is a reconciliation showing how you go from GAAP earnings to adjusted EBITDA. For the first quarter, our equipment rental revenues increased $29 million compared to the same time last year. Transactions and revenue increased across both our In-Town and one-way markets. Compared to the end of June this year to June of the previous year, we added 75 new company-operated locations, and we had a net increase of over 1,100 independent dealers.

For the month of July, revenue has trended in line with what we saw in the first quarter results. Capital expenditures for new rental equipment in the first quarter of fiscal 2027 were $602 million. That's a $17 million increase compared to the same 3-month period last year, while proceeds from the sales of retired rental equipment were down about $14 million to $145 million. We're still projecting a decrease of over $500 million for net fleet investing over the back 3 quarters of the year. Storage revenues were up $16 million. That's about a 7% increase for the quarter. Our average revenue per occupied foot for the total portfolio sum, including both same-store and lease-up properties improved by over 6%.

Digging into that number, our average new customer rental rates have increased by about 2.5% year-over-year, while our rates on customers who are leaving are just under 2%, lower than what the move-in rate was. Same-store occupancy was down 456 basis points to 88.3%. Nearly all of that is due to the harder line that we took on delinquent units in the second quarter of last year.

As Joe mentioned, net tenant move-in activity is picking up, but we're still behind where we think it can be. During the first quarter of this year, we invested $194 million in real estate acquisitions along with self-storage and U-Box warehouse development. That's a $100 million decrease over the first quarter of last year. In this first quarter of this year, we added 18 locations with storage, totaling 1.1 million net rentable square feet. We currently have approximately 5.7 million new square feet being developed across 106 projects and then another $6.3 million of potential future development behind that in properties that we own but haven't yet started.

To put that in context, last year at this time, those 2 figures were 6.5 million square feet for active and 8.3 million square feet on pending, respectively. My projections have us continuing to see spending on self-storage growth decline. Moving and storage operating expenses were up $55 million for the quarter compared to the same period last year. Our EBITDA margin declined by just over 1.5%. Personnel, fleet maintenance and self-insurance liability costs were up just over $20 million. During the quarter, freight and shipping costs became more of a margin issue with these costs increasing close to $22.5 million from the run-up in what carriers are now charging.

Shipping of our U-Box containers accounts for the largest component with a smaller piece coming from shipping our retail products and repair parts in our system. For this last piece, our team is working to build further efficiencies into how we ship within the company. On the U-Box side, we continue to work with carriers as well as evaluating additional customer pricing adjustments. This cost is likely to be a headwind for the rest of this year, peaking here in July and then lessening over the back half of the year, but that's a lot of conjecture given how the freight markets are trending right now.

Fleet depreciation increased $13.5 million for the quarter, but I'd like to point out only $800,000 of that increase was recognized after the month of April. It was May of last year that we began to materially increase the depreciation rate on our cargo van fleet. So those year-over-year negative variances are beginning to subside. Losses from the disposal of retired rental equipment decreased $24 million, actually resulting in a gain of $1.9 million for the quarter. The resale market for cargo vans started the fiscal year relatively strong and has been receding incrementally since. If this trend continues, it could lead to us holding the units purchased this fiscal year longer as we look ahead.

As of June 30, this year, cash and availability at the moving and storage segment totaled $1.349 billion. With regard to the $350 million share repurchase program that we announced during our last earnings release here in May, during the first quarter, we started making purchases for both our voting and nonvoting shares. Through June, we repurchased 248,368 shares of voting at a cost of $15.6 million and 584,278 shares of our nonvoting stock at a cost of $32.4 million. Since June 30, through the close of the market yesterday, we've acquired an additional 149,747 voting shares and 813,211 nonvoting shares. As of today, the maximum amount that we can still use for repurchases is just under $242 million.

At today's prices, we still see value in repurchasing the shares. We're holding our 20th Annual Virtual Analyst and Investor Meeting on Thursday, August 20, 2026, at 11:00 a.m. Arizona time, which is 2:00 p.m. Eastern Time. This is an opportunity to interact directly with company representatives through a live video webcast at investors.uhaul.com. We'll have a brief presentation by the company, and then the rest of the session will be questions and answers. Feel free to submit the questions to us early by sending them to Sebastien or there will be a process for submitting them live during the presentation.

With that, I'd like to hand the call back to our operator to begin the question-and-answer portion of the call.

[Operator Instructions] The first question is from the line of Steven Ramsey with Thompson Research Group.

Maybe to start with in storage, the development and pending square footage gradually declining to the 12 million level right now. Do you expect this to continue gliding down in the next few quarters or through the rest of this year. And is there a floor in your mind on either the pending or developed square footage that you would like to maintain for future business purposes? .

Well, first of all, what you'd like to do is you'd like to be developing just slightly more than you're renting. And right now, there's a significant gap there. We had been developing at about twice the rate we were renting up. That's -- I don't have a hard number in my mind, but we're probably now developing at 140% of the rate we're renting up. So there's been improvement there. I expect continued improvement there, and I'd like it to be closer. Part of the problem with development is by the time you see a store open, the company probably has 3 years in the site. So many of these things were -- that you're seeing come up in the numbers we were really committed to at this point, maybe 2 years ago.

So I have a pretty good idea of where we're headed, but we also pack into that number purchases. And should purchases -- should something open up, we're looking at it, and we would try to make a hard run at it. So if you're buying existing, even if they're only 50% occupied, there's considerable value to that. Jason, you've got something to add?

No, I don't.

Okay. That's helpful. And then good to get some of the color on the OpEx growth. Maybe just -- maybe another way to unpack it, OpEx grew 7%, moving and storage revenue up 3%. Can you maybe dissect how much of the operating expense growth was for the freight issues and how much of it is more in your control such as repair and maintenance? Basically, what actions could you take in the next few quarters to moderate the OpEx growth down to where moving and storage revenue is.

Let me take a bite at it and then we'll turn it to Jason. Part of this is inflationary, and we've pushed back on this, and we've had a lag, but that stuff inevitably catches up to you. So that's it. Reported inflation is lower than what I think actual inflation is both for our customers and for the company ultimately. Of course, it puts pressure on personnel. Most of our increase in personnel has been in medical benefits, not in base compensation. So there's a built in, I should say, postponed reckoning some of the rep there. With the fleet, part of this had to do with the rate at which we are selling trucks prior to sale, we bring the truck up to good salable condition, and that could cost easily $4,000 a unit.

So that pushed our numbers around a little bit in this quarter, and it kind of moves the expenses between quarters. So I think we might see a little bit better in that in the next quarter. Jason, do you want to add to that?

Sure. If you think about our big 3 costs, personnel, repair and maintenance and the liability costs for the fleet, those 3 costs this quarter were up about $20 million, and they represent about 70% of our operating expense number. So if you were to take those as a percent of revenue, I would estimate that it probably took down the margin somewhere around 25 basis points, whereas the freight number, the $22-plus million increase there as a percent of its normal run rate is fairly significant.

Now we're coming off of a 3-year period where the freight market has been extremely positive for people who are shipping and not so much for people that are doing the shipping. So if there is a positive to this, and we're going to have to balance this with revenue expectations for U-Box is that for the largest portion of this freight cost increase, we're either going to eat some of that cost or pass some of it along to the customers. And I think we'll probably be doing some version of a little bit of both.

Okay. Okay. That's helpful. And then last one for me. Halfway through the effort to add dealers, can you talk about how effective this has been in your mind? And are you still confident that you need to go all the way to where that goal was?

Yes. So what happens, of course, is you bring somebody on and typically, the revenue lags behind as they just learned. So it's kind of anybody's guess is how far or how mature is your addition of it. It's certainly no more than half because no more than half have been brought online. I would say probably in numbers coming through, it's probably closer to 1/3 complete because those numbers -- the first period of time the dealer is just getting established.

We can easily -- the market will support 3,000 dealers if we will thoughtfully open them. There's quite a little bit to this. Of course, we have about 850 people who opening dealers as part of their job content. So we have quite a force pretty much overlaid the population just about how the population exists. I think that we can certainly do 3,000. What we will do when we get there and how much more emphasis on it we'll put, I don't know. If you looked at us over the 30-year period, what you see is dealers and U-Haul operated stores have kind of a 10:1 ratio. And we're just kind of adjusting up where we had ought to be. We've had quite a drive on adding company-owned locations, which, of course, drives CapEx real hard.

With dealer, the CapEx is in fleet, not in property, plant and equipment. So the fleet, if you can handle the dealer by just being a little more deft on how you handle distribution, you don't have a huge capital commitment to add more dealers. So that's a positive part of this whole deal. I believe we can add the 3,000. And we already outgun our competitors pretty solidly. But our goal isn't to outgun them. Our goal is to try to get a better connection with the customer where the customer defaults to U-Haul as a solution. We have compelling evidence that if we'll introduce a truck into a community, I imagine it was one truck, it's not. But if we introduce one truck into a community and hold the line for 10 years, we have solid evidence that the consumers in that community will drop about 19 vehicles from the registrations.

In other words, a whole bunch of pickups and vans and miscellaneous vehicles the customers are hanging on to. When they find U-Haul as a reliable and nearby solution, it's a more cost-effective solution than holding on to a vehicle. So there's a lot of pressure in the country right now to reduce vehicles. Of course, that isn't what the automakers are looking for. And it's not our goal, but it is what we see come out of it, which helps aligns our goals with the goals of most communities that are trying to get a reduction there. So I think there's room executing, it's a little bit of a hat trick. But we have good momentum right now, and I have good esprit core in my team. So I would expect we'll continue.

The next question is from the line of Steven Ralston of Zacks.

First, I'd like to congratulate Joe on his 50th anniversary with U-Haul. I looked at the photos in the social media, and it looked like you had a nice party.

Yes. I'm not Mr. Party exactly, but you're right, we had a nice party.

In the self-moving segment, I noticed both transactions and total revenues increased both across in-town and one-way markets. But it appears that the average revenue per transaction is not headed in the same direction. Could you unpack the dynamics behind this divergence?

Sure, Steven, this is Jason. So it continues to be a little bit of a balancing act with where we are at on rates and where we're at on transactions. So on our One-Way business this quarter, we saw a pickup on revenue and a little bit stronger on a percentage basis pickup in transactions, but the average revenue per transaction was still off a little bit. And for the longest time now, that's been due to miles per transaction, but we actually saw a small increase in miles per one-way transaction for the quarter.

So we just -- for the last 2 quarters, have seen the revenue per mile step back a little bit. And our team is looking at that. It's not -- has not been a concerted effort to try to do that. So I don't think that's going to be a trend that will continue. On the in-town business, transactions have been up, I would say, on a quarterly basis in a fairly spotty fashion. We had a decent about a 2% increase in in-town transactions for this quarter -- I'm sorry, revenue, the transaction increase was probably 0.5%, I apologize. On there, we saw revenue per mile outpaced the decrease in miles a little bit. So we haven't really had a quarter yet where everything is trending in a positive direction. I would say that we just haven't had -- other than a fairly steady increase in revenue, the 3 major factors that contributed to that haven't lined up all in 1 quarter.

I might add to that. I've consistently been kind of a little bit of a transactions now, revenue to follow guy, which annoy some people here. But there's a certain amount of truth to it. So as we've added locations, it's become more convenient to people. And in fact, that's reflected in maybe a little bit lower ticket because they didn't drive quite -- maybe they drove 5 miles less or something of that nature. But in my experience, if you can drive transactions and particularly bring newer people into the customer base that over the period that will continue, they will tend to repeat and we'll see continued growth.

So that's what I'm driving on. But I think we have pretty good awareness here of revenue per transaction and miles per transaction. We're not alarmed.

Moving over to U-Box. Other revenue only grew 1.1% this quarter, which we know is primarily driven by U-Box. Over the last few quarters, U-Box has expanded its footprint in warehouse space and containers and delivery vehicles. Is this due to a tough comparison against last year's 15.5% roughly growth in the first quarter of the last fiscal year? Or is it -- or is something else impeding U-Box's top line growth?

Well, I'll start with that and let Joe clean up if he needs to. Transactions, the underlying transactions for the quarter looked better than the actual revenue results. So part of this, I would attribute a couple of million dollars of the variances is just due to how we've done the accounting for some of the insurance products associated with this product and shifted some of that to our P&C company from here. But even given that, it wasn't a blowout quarter for U-Box. So number of boxes in storage is up and the number of boxes that we shipped is up. It's just that the average revenue per each of those didn't climb as fast. And I referenced the issue that we have with freight, and that's going to be a balancing act as we go through the rest of this year is how much of the inflation that we're facing can the customer bear without us affecting transactions too much.

I might add to that, that when you see this freight goes up, it has another kind of a strange consequence. It often reflects more late shipments and late shipments really annoy the customer. So we had an increase in late shipments that had something to do just with the general freight market. And in other words, people were bidding a job, awarded the job, then they just didn't show, okay, which causes us to have to basically book some real expedited and expedited shipments can cost you 3x what a regular shipment cost.

And I can't quite unpack that number, but there's an underlying thread going on here. We made some changes probably 4 weeks ago now that have driven down late shipments, and that will drive up customer satisfaction. You're always run the blend of this. So I think we made a misstep there that has been corrected. And I think that we will be proceeding ahead calmly and solidly. The increase in boxes and storage is another key metric we've driven on hard over the last 9 months, and we're starting to see some results there. The U-Box product is kind of a mix of U-Move and U-Store. It's hard to characterize the customers one way or the other. And the greater margin is in the storage of the U-Box rather than the shipping of the U-Box. So as we drive on more storage, which we attribute to U-Box, we don't put that into our storage numbers, but in fact, it is storage.

So as we drive on the more storage for U-Box, I think it's going to help our margins a little bit and drive the whole thing. So yes, we were a little slow from what we had hoped to do, but it appears to be turning the corner.

And just a last quick question concerning the share repurchase program. With the announcement last quarter, your stock has gone up 42% since you announced the program. But looking at the -- how it's composed, roughly $32.5 million was deployed toward nonvoting stock and $15.5 million to voting stock, which is a 2:1 ratio roughly. But the ratio between nonvoting and voting shares is 9:1. Is there a strategic reasoning concerning this mix?

I'll start with that. This is Jason. So when we first rolled out the plan, and we were testing different allocations and different trading strategies to see what effect it would have on the shares. When the safe harbor window closed and we had to switch to a 10b5-1 plan, I think you've seen in the numbers that we put into the Q as subsequent to the quarter and what I just reported now that it shifted a little bit more towards buying the nonvoting shares. In our minds, there really shouldn't be much of a valuation difference between those 2 shares, but it's interesting to see where individual investors decide to attribute value. And so I guess that's my insight into it.

Are you saying it's almost totally due to the regulatory restrictions of implementing a share repurchase program?

No. We set the plan. But then the plan just runs outside the safe harbor window. I would say the -- I mean, if you look at the number of shares that we've repurchased and the number of shares that are trading, it's not our trading activity that I don't believe it's the actual trades that are driving the share price because we're a relatively small piece of the overall activity.

No, I didn't mean to imply that at all. I was thinking that I know it's based on the average volume of the shares on a given day that is regulatorily controlled. And if that was forcing you to have to skew initially?

No, that's not the case at all.

The next question is from the line of Andy Liu from Wolfe Research.

A lot of good ground is already covered. So my question is really kind of as you think about the U-Haul footprint geographically, right? I'm just kind of wondering where you guys look to expand or even contract because when I look at the earnings release, right, you guys get the top 20 markets. I see kind of the biggest growth in square footage on the storage side is North Carolina, Ontario, and then you actually had some square footage decline quarter-over-quarter from places like Missouri and Indiana. So I'm just curious, are there certain states or markets that are performing relatively better that you're looking to expand more into? Or is there some places where there could be some portfolio pruning going on?

This is Joe. We're not dropping storage except a condemnation or something of that nature. We're -- I'm trying to think of a place. It's a couple of times, we've done a redevelopment of a place so you take the storage down and then magically 2 years later, you add more rooms to the same site. So -- but as far as -- no, we're not pruning the portfolio. That would be the answer to that first question.

The second part to me was how are you deciding where to put it. Well, as you probably are better aware than I am, there's a bunch of sharp people with plenty of statistical information building storage also. So we are looking for where we see an opportunity for us. And often, because we have such a broad footprint, we may see an opportunity. So I don't know currently, the last time I looked, Public Storage was serving 41 states. So they're not competing in 9 states. So I might see more opportunity there for like a bunch of storage into Wyoming and Montana, not exactly New York City, but we think they were all opportunities. And so we're kind of being opportunistic.

Storage is very much a local market when you get down to an individual store. It's geographically specific, I guess, would be a better way to say it. Store is geographically specific. You only store in Montana if you have some other contact or relation with Montana. There's always brand awareness issues, and we, I think, work on them. I don't think -- I think maybe our competitors are making some decisions more driven by that than we are. We believe we have fairly good brand awareness. So no, we're not pruning. And yes, we're trying to look for where the opportunity is. And oftentimes, it's taking us out of some of the major metros because there's not a major metro in the United States. Well, I'll say there is one. El Paso -- I mean Laredo, Texas.

We went into Laredo, nobody else is there, okay? Well, I won't bore you with all the reasons, but that's a significant metro area with no national competitors. So that would be an example. We're in there because we're in with the U-Move product and we're familiar with the market. It's just -- so we consider that a good market. The rest of the country may say it's an unsettled border town and they don't want a piece of it. Well, that would be okay, too. We're already in and we're already dealing with it.

Okay. That's a lot of good detail there. I appreciate that. And then you brought up the interesting point of your kind of brand recognition. I know earlier this year, right, and you guys do this periodically as well, put onto your website about things such as just earlier this year, it was the rate lock for a year. So as you talk about kind of the pace of move in -- of net move-ins picking up, would you attribute that more towards kind of you guys are doing something unique and different? Or do you see like a broader improvement in the overall industry and leasing environment?

No, I don't think the industry and leasing environment is improving. I think in the fact that the major companies we're competing with are destroying the industry's reputation with the consumer or eroding it. They're not destroying it. That's over broad, but they're eroding it. And we're using price lock to try to distinguish that, but it's difficult for consumers to separate one big company from another. And so it's a little bit of an uphill battle, but we're dealing with that battle, and that's -- we have had -- we have been the only major person who's ever posted prices in their -- at their location for probably 30 years. And we have a whole different view of relations to consumers than some other people do. And only the future will determine who's correct. .

The next question is from Jeff Kauffman of Citizens Bank. .

Well, congratulations, Joe. And also, I guess I'm kind of wondering, are you surprised by the share reaction post the announcement of the buyback. .

No. I think the market was sweating us out a little bit, and they quit sweating us out. The value is there and more. But of course, it's always a question of time, and you all have a relatively tight time frame. So I too often see things in terms of decades rather than quarters. And so we have to get kind of a happy meeting place. And I think that the buyback gave us a little bit more of a happy meeting place.

It's nice that the market is seeing the value now. Question for gains on sale. Big turn this quarter, great to see. I know we're still well off of probably where we should be on a normalized basis. But given the big year-on-year change of almost $24 million, could you talk a little bit about the components of it? How much of that change was we sold more vehicles? How much of that change was a change in vehicle price? How much of that change was relative to the lower depreciable value that you guys have been pushing through the P&L?

Well, I'll touch on it, and then I'll let Jason, he's much more precise on his numbers. But basically, there's -- with all this depreciation and resale are murky. And so our objective is to try to reflect actual depreciation. And so you'll see sometimes we are more aggressive than other companies because we think there was real actual depreciation. And so we're trying to match it in. We did a poor job of that, I think, for 3 years because we were foolishly optimistic on resale values. We got a little more realistic on resale values and so our depreciation came in.

So we're realizing the costs every quarter, which when I took accounting and the principles of accounting, that was one of them, try to have income and expense in the same period. So I think it's just a better reflection, okay? So you could say it was all due to depreciation, and you understand it's not. But -- and we don't have total product line visibility of income. I can't say we know for a fact how did the pickups do, how in fact the -- because a bunch of expenses are allocated and if you look at our total operating expenses. But we saw improvement across the board, including on equipment condition. So equipment condition impacts resale.

If it's too good, you not run the equipment hard enough. If it's -- if the equipment condition is poor, you run the equipment too hard. And so that's a little bit of a murky one, but we did a better balancing job. And most of the actions we took on that really date back probably 20 months because this has to all process through on a sales cycle, if that makes sense. And the sales cycle is something like 20 months. It's been moving around because we've had dead ends and so we've held sales. And Jason alluded to, we might hold some sales going into this fall. We were just -- it's just a constant trade-off you're trying to optimize that. And it's not -- it doesn't just run statistically on railroad tracks. And a big part of that is because of the total disruption of the automotive industry and new prices and resale prices have oscillated, not -- our experience for 40 years was they crept up, but they've been oscillating and they've actually crept down or not crept down.

They, in some cases, fell dramatically over the last 3 years relative to acquisition prices. The automakers are very hard working at trying to regulate this and get -- because, of course, it upsets their business massively. A great deal of this has to do with movements, political movements related to green energy and battery-powered or non-internal combustion related engines. And so this is kind of whipsawed everything, but those things have -- there's been some shock absorbers put on that mess over the last year. And that's helped us. It's helped everybody get some predictability. We can't just adjust -- we don't just adjust our depreciation every quarter. We try to have a little more continuity. We don't know if something is an incident or a trend. And what we're looking at is constantly trying to evaluate it.

So I would say we -- our guess were more accurate, let's put that than what our guesses were in some prior times. But that had to do with something with our -- how well we did our job, it had a lot to do with this oscillation in the market, which has had some brakes put on it, which is going to be a net gain for everybody. Jason?

Well, I guess what I would say is you have 2 primary variables, what you buy the truck for and what you sell it for then how we depreciate it over the course of the life. What has -- what we've done better job of doing over the last 12 months is depreciating the correct amount, and now you can see that in our results today. Our results last year showed that we weren't depreciating nearly enough. This year, eking out a small gain, we're seeing that, okay, well, we've depreciated the trucks, the correct amount.

And so a positive note is we don't have to increase the amount of depreciation per unit for the next year. So that's a positive. If there's something that isn't such a positive is that we're not at the point where we can dramatically decrease the depreciation per unit going forward, right, which is really the next step that we're aiming for. So what we've seen is incremental movement over the model year '25 and model year '26, the cost of the new units has been coming in. Now most of what we've sold this first quarter was still the higher-priced units, but we were selling into a market with higher resale values.

Those higher resale values appear to be a bit temporary and that the levels that we sold at in the first quarter aren't sticking. But they're not going into an area that is terrible. It's just not quite as good. So I think what we're looking forward to is as we purchase the rest of the cargo van fleet that we expect to buy this fiscal year, the average price of the units coming in is going to be going down. So the ones that we brought in early were -- have been the highest priced units, then they're going to trend down. And we said this in the last several calls, we're going to evaluate the resale market. And if the resale market levels out great, we may continue buying at this pace next fiscal year. But if the resale market continues to go down, then we'll hold these trucks next year and not sell into a down market.

Okay. That was very helpful. So I guess my takeaway is it's more a function of things that you've done internally than the external market becoming incrementally better.

No. I would say that prices are down, which we can credit our negotiating tactics or that's just where it's at. I would say that's just where the market is headed. And then the resale market was pretty good for a few kind of idiosyncratic reasons the first quarter of this year that probably aren't going to stick. So we have stuck with our depreciation. If we did one thing right, we stuck with our depreciation number, and that appears to have been adequate.

Next question is from the line of Jamie Wilen with Wilen Management. .

First, I want to commend you on the change in capital allocation strategy that you engineered last quarter. It's going a good way towards starting to narrow the value gap. I appreciate that. Question is on self-storage, as you look to build out your network and just look at the numbers for occupancy rates and the rental rates per square foot, what is the thing that drives you toward different areas? I realize it's always a local market and everything is individual. But are you targeting towards certain areas where occupancy rates are very high? Or is it more the rental rates that you start with? And which number are you trying to drive more? Do you want to drive occupancy rates or rental rates as you operate the self-storage facility?

Jamie, operationally, we are focused on occupancy rates. And we manage rental rates centrally pretty much. So I deal most of the time with the field force and the field force is just trying -- they accept the price and now the challenge is to rent them. But we have a group of analysts in here who can add and subtract just fine. And they're trying to optimize that. And if you look, you'll see that we have seen steady increase in average rental rate. And as Jason would point out, you're actually seeing our move-in rate a little bit above our move-out rate, and that's not been worth the outlier in the industry.

Most people are seeing their move-in rate significantly below their move-out rate, and that's been there -- they got every bit of 24 months of that. I don't know how long, but everybody that I ever get 24 months of that. So we have a little bit of a different strategy. We have another thing that other people don't have. I have something like 2,400, 2,300 stores. And some of them have a very, very strong truck rental orientation and some of them have a very, very strong storage orientation. And so kind of for internal strategic reasons, I may be going to try to balance out by putting storage in that community because I just simply don't have as much as I want to be able to get optimum results. In other words, how I spread my overhead makes a difference in how I look at the things.

So the last couple of Board meetings, we call those abutting properties. So we did some abutting properties that we might not do if we didn't already have a store, that kind of makes sense. So it's not red hot and run in place, but we're in there with the U-Haul. We plan to be there 10 years from now. And at some point, we're going to have to put storage in, in order to get enough total revenue to allow us to function. There's other pressures that you don't see. On the West Coast of the United States, there's tremendous momentum to introducing minimum wage for salaried personnel. This is kind of a new concept. Most of us think minimum wages have to do with hourly personnel.

These communities are coming in, and they're coming in with numbers in the $80,000 to $90,000 range. And in many communities, it's not supportable with the level of business that we're doing at that location. As you know, once you raise one tier of wages, it kind of trickles through every other tier. So that is driving up the breakeven revenue number that we need on a site. So a site that may have been very profitable or at least acceptably profitable for 10 years now is facing pressures that ultimately may be too great for them to endure. So we're going to put in storage as an adjunct and it will kind of make the whole thing a little more optimized.

Okay. On the U-Box side, you said transactions haven't increased in U-Box. How would you characterize your market share there versus where it was a few months ago? And the second part of that, Jason, you mentioned that we have to sell insurance on U-Box. I'm sorry to say I've never rented a U-Box. But obviously, that's got to be a very profitable operation for us to -- I'm not sure what damages you're insuring for in the U-Box, but one would think it's a very high profit margin for you.

Well, we would hope we'd have a good profit margin. We have 2 different kinds of insurance. One is damage in transit and one is damage in storage. So damage and storage would be something like a rodent got in your box, something like that. But that we have pretty good control over. Damage in transit because we consign the box to a shipper in many cases. It's not quite as predictable. And so we're making a profit on both of those lines. We intend to continue to make a profit on them. And it also, to a certain extent, increases the confidence of the mover. They feel we have insurance, it's insured. So they get a little more confidence in the whole process.

So as to market share, we don't have anything that's reliable data. We try different things to get something that we can gauge ourselves to. PODS, which is the biggest brand in the industry, I think we saw a little resurgence for them in the last 6 months. They got a little more -- somebody -- I don't know if they put a new guy in charge or whatever. They got put a little more zip in their step. On the myriad of other competitors, they're kind of -- most of them are going to be also rands, although they're all good people, and it's very difficult to develop a network. And so they have a lot of constraints in being competitive there.

We have substantially the network in place. I still have -- I'm still anticipating constructing a warehouse in Manhattan, okay? I got the land. I'm in the planning process. One day, we're going to break ground, and we'll pop down $20 million or $30 million put in the warehouse in Manhattan. But if you look at the United States as a whole, we have substantially positioned ourselves. So we have a network. I have a network. We have a network. Nobody is close to us on the network. And that asset other than property taxes and such, that asset once you've got it built, it's not a big cash drain, okay? So we're obviously increasing our share, but we don't really have a way to tell you. It's just the truth. Internally, we get all excited because we're all looking to beat the other team like everybody is. But to tell you that we could tell you share, I think, is the overstating of the facts.

Great job of moving all these businesses forward. Appreciate it.

We have reached the end of the Q&A session. I will now turn the call back to management for closing remarks.

Well, as Jason mentioned earlier, we'll hold our 20th Annual Virtual Analyst and Investor Meeting on Thursday, August 20 at 2:00 p.m. Eastern. You can access the video webcast at investors.uhaul.com. After our brief presentation, we'll have a Q&A session. You can send questions that you have ahead of time to [email protected] or you can submit the questions live during the event. Thanks for today, and we'll talk to you in a few weeks. .

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the U-Haul Holding Company Fourth Quarter and Fiscal Year End 2026 Investor Call. [Operator Instructions]

This call is being recorded on Thursday, May 28, 2026. I would now like to turn the conference over to Sebastien Reyes. Please go ahead.

Good morning, everyone. Thank you for joining us today. Welcome to the U-Haul Holding Company Fourth Quarter Fiscal Year-End 2026 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 a 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 and Form 10-K for the year ended March 31, 2026, which is on file with the U.S. Securities and Exchange Commission.

I'll now turn the call over to Jason Berg, Chief Financial Officer of U-Haul Holding Company.

Thanks, Sebastien. Good morning. I'm speaking to you today from our offices here in Phoenix. Yesterday, we reported a fourth quarter loss of $128 million compared to a fourth quarter loss of $82 million a year before. Our full year fiscal 2026 earnings were $83 million, down from $367 million the previous year. In terms of earnings per share, the fourth quarter of this year was a loss of $0.65 per nonvoting share compared to $0.41 per nonvoting share fourth quarter of the previous year. Earnings before interest, taxes and depreciation, which we refer to as adjusted EBITDA, at our moving and storage segment increased $6 million for the quarter to $223 million. And for the full year fiscal 2026 adjusted EBITDA increased $26 million to $1.646 billion. Included in our release and the financial supplement is a reconciliation of how you get from GAAP earnings to adjusted EBITDA or vice versa.

Approximately half of the fourth quarter's decline in EPS came from depreciation on the truck fleet, which went from $181 million in the fourth quarter of last year to $221 million this year. For the full fiscal year, it was $879 million compared to $693 million the year before. We began to materially increase the depreciation rate on our cargo van fleet in the first quarter of fiscal [ 2006, ] when we began selling the higher cost 2023 and '24 model year vans into a resale market that frankly just didn't recognize that increased price. Additionally, depreciation has been increasing on box trucks. We grew the box truck fleet by over 14,000 units, if you compare March -- end of March of '25 to March '26.

A few positive signals, though. The rate of change, we'll call it, the second derivative of fleet depreciation growth has been slowing. In fact, we've seen sequential declines in the last 2 quarters. For box trucks, the upcoming year of no planned growth will lead to a natural decline in depreciation over the course of the year even if we don't shrink the fleet. On the cargo van front, April and May resale results have been steady, albeit that's in relation to units that had a much higher depreciation rate over the last 12 months. Also, the step down in what we're paying for model year '25 units and '26 units will be beneficial, but not likely enough to be the sole solution to issue.

Looking forward, utilization of the expanded box truck fleet during this summer will inform us of what actions that we should take going into next year. And on the cargo van side, it's going to be the resale market and manufacturer pricing that are going to guide us as to whether we need to extend the holding period next year for those trucks and reduce future purchases.

For the fourth quarter, our equipment rental revenue results increased $12 million compared to the same quarter of the year before. And for the full year, we finished up $86 million, which is just over 2%. Revenue growth for both our In-Town and One-Way markets for both the quarter and the full year increased. In-Town growth was more robust. Comparing the end of March of this year to the end of March last year, we had 55 new company-operated locations, and we had a net increase of 1,400 independent dealers.

Our goal of increasing the number of dealers by several thousand and then productively dispersing equipment to them has been taking shape. April and May revenue has trended in line with what we saw in the fourth quarter. Capital expenditures for new rental equipment in fiscal 2026 were $2.81 billion. That was a $218 million increase compared to the year before, while proceeds from the sale of retired rental equipment that we sold increased by $48 million to $700 million. That nets out to net equipment purchases of $1.381 billion. I estimate that close to $780 million of the total spend was growth related.

Our projections for this coming fiscal year include growth of the U-Box container fleet and our new toy hauler trailer, but do not include growth of the truck fleet. We estimate for next fiscal year a decrease in new purchases, net of sales somewhere around $560 million. Storage revenues were up $16 million. That's a 7% increase for the quarter, and our 12-month results were up 8% or a little over $74 million. Average revenue per occupied foot for both our same-store and for the nonstabilized total portfolio improved by over 6%. Our average new customer rental rates have increased by about 3% year-over-year, and rates for customers leaving are still a couple of percentage points lower than customers moving in.

Same-store occupancy was down 540 basis points to 86.1%. I continue to highlight the portion that was due to our cleanup of delinquent rooms. And for this quarter, it was about 450 basis points of that decline. If you recall, we instituted the cleanup program in the second quarter of fiscal '26. Since then, delinquency has not been a problem, but we're still dealing with the year-over-year comparisons.

Net tenant move-ins remained slower than in recent years, but we're seeing some incremental improvement. Our strategy of straightforward pricing, which includes the 1-year price lock guarantee that Joe announced earlier this year is strengthening our team's resolve and beginning to resonate with customers. During fiscal 2026, we invested $966 million in real estate acquisitions along with self-storage and U-Box warehouse development at the $541 million decrease over fiscal '25.

For the full year, we added 66 locations with storage totaling 5.3 million net rentable square feet. We have approximately 5.5 million new square feet under development right now across 99 projects and another 6.2 million square feet of potential development behind that in properties that we own, but we haven't started. To put that into context, last year at those times -- at this time, those figures were, respectively, 6.9 million and 8.1 million square feet. My projections have us continuing to see spending on self-storage growth decline.

Moving on storage operating expenses increased $17 million for the fourth quarter. Compared to the fourth quarter of last year, our adjusted EBITDA margin saw a slight improvement with our all-in operating margin worsening due to the fleet depreciation that we discussed. Personnel increased $13 million for the quarter. Fleet maintenance and repair was up $1 million. And our self-insurance liability decreased by $2 million, largely due to a rough fourth quarter last year. We've made progress on this front over the course of fiscal '26, we've increased our reserves by about $93 million. At the end of March, our cash and availability in moving in storage totaled $8.479 billion.

A couple of last items. I wanted to highlight that the U-Haul Holding Company Board of Directors authorized a $350 million share repurchase plan. The plan stands across both our UHAL and UHAL.B share classes. The planned decreases in our growth CapEx this coming year allow us to allocate capital to this program. We firmly believe that the investments that we've made in the business over the last several years, while they're having near-term downside effect on our earnings, they will mature under the productive assets and yield expected returns.

If you haven't visited yet, although I assume, I guess everyone has if you're listening to this call on the Internet, visit investors.uhaul.com. We've relaunched the site, just trying to make it a little bit easier for people to access information. We'd always appreciate any feedback that you have on that.

With that, I'd like to hand the call back to our operator, John, to begin the question-and-answer portion of the call.

[Operator Instructions] Our first question comes from the line of Steven Ramsey from Thompson Research Group.

On the U-Box revenue per transaction being down, I believe, for the second consecutive quarter, if I remember correctly. Can you talk about the trends there and how volume is playing out within just overall U-Box?

Thanks for the question, Steven. Actual activity, and I'll define activity as moves and also boxes in storage, both of those are up. I would say the boxes and storage is up on a percentage basis a little bit heavier than the actual transaction activity, but both are up. As far as the revenue per transaction issues, we're seeing a couple of things. One would be the same thing we're seeing on some of the One-Way moves, and that is shorter moves, right? Shorter moves combined with whatever we've seen on the freight side, which for most of the year has been down. And then the last item I would like to highlight would be that competitively, I think the market appears to be a little bit more competitive than, say, it was a year ago, and we're going to be competitive right along with it.

Okay. That's helpful, Jason. And then the cross usage of moving and storage at around the 50% mark, that's good to see. Do you think that's a natural peak on that front? And then when you compare U-Box moves with U-Box storage, it sounds like that cross usage is increasing. Do you think over time that it could reach that 50% level as well?

Great question. The first one, I think the 50% is more of a baseline. I think there's -- I continue to believe it's one of the things that's frustrating but also it gives you optimism for the future. And that is, I think there's so much more that we can harvest on cross-selling. And so I think the 50% is a low part. If you were to flip it and try to analyze how many truck transactions have storage, that number is significantly lower. And I think we have a lot of people within the system that believe that number can be increased.

On the U-Box side, yes, I don't see why we can't increase the storage penetration there. It's a major goal of our -- our team is on it right now. Part of that is increasing the number of moving transactions. But part of that, which is a unique opportunity for us that the other portable storage providers don't have is that we have the ability to convert self-storage customers into these containers, right? So I think there's an opportunity there for us. The folks in our system who are best at that are the ones that have run out of storage space, right? They filled their facilities. And then they find ways to serve the customers, and U-Box is a fantastic way of getting people into storage. So both of those, I would say, on the U-Box we're in the early innings of that.

That's excellent. And can you talk about the uptake of toy hauler trailers in the quarter and more recently, given that you're investing more into it this next fiscal year, it sounds like it is going well. And maybe can you elaborate on the diverse usage of the product, given it seems to be more non-moving oriented?

Yes. The first group of people that we expected to use it were the people that traditionally use our auto transports, but then with larger vehicles, weren't able to use it. Now I think what we're seeing is the usage scenarios have expanded dramatically. A few months ago, I was up in North Dakota and our location up there was using them for smaller tractors, right? And I think we're going to continue to see that grow from a CapEx perspective. I think the plan going into this next year is maybe half the spending to maybe 2/3 of the spending that we did on the initial rollout. And then we'll just see where that goes. The only planned growth that we have for next year would be adding U-Box containers and these trailers at a slower clip than we did this last year.

Okay. Great. And last quick one for me. I'm sure there could be other questions on this on the call. But the buyback authorization, can you just describe the eagerness to deploy it or is it more of a perspective that let's have this ready to go just in case the stock gets low enough.

Well, we think the stock is low enough. We're eager to deploy it. So they officially approved it last week. My team is setting up the trading account. I'm working on proposed instructions, then I'll sit down with Joe and we've got the corporate resolutions. Everything you have to do behind the scenes is going, so I don't think this is something that we're going to wait too long on, no.

Your next question comes from the line of Steven Ralston from Zacks.

To me, the big news is the announcement of the share repurchase program. So I'm going to dwell on it a little more. It not only states that the Board has determined the stock's price is cheap, but also at the present time, it implies that further expansion of the fleet is not in the company's best interest given the over-fleeting and depreciation implications. It also implies the strength of the company's balance sheet. Could you speak to these and any other nuances about the rationale of the share repurchase program?

Sure. I appreciate the question, Steve. On the first front, yes, the Board of Directors thinks that the stock is trading at a discount today and that there's an opportunity to acquire it. Our view on that really hasn't changed too much. What I'll say has changed is the availability of capital. And for those who've been around a long time as you have, you know that our first instinct and what we typically do is we want to reinvest back into the business.

I would say that the pace at which we've grown over the last several years has now afforded us the opportunity today to do this because we've added so much capacity that under normal circumstances, it would take about this much time in order to soak up that with demand. So now we can take a year off at least of some of that growth, and it frees up the capital here without -- we don't believe it's going to materially affect our leverage levels. We think that there will be a certain amount, certainly on the fleet side, a certain amount of deleveraging taking place on that front. So it gives us that opportunity.

So look, ideally, at the end of the year, we've fully utilized these assets. We go back to a little bit of growth. But I think where we're at for what we want to accomplish, we have the most storage capacity that we've ever had. So I don't view that as a weakness. I view it as a huge opportunity. And while we're waiting for us to get caught up on filling that up, we're going to go out and do other things that we think are wise allocation of capital. And so we've finally been able to hit this program, and we appreciate everyone's patience.

Now just turning to the tone of business. I noticed in the fourth fiscal quarter, the rate of year-over-year growth in the self-moving equipment rental revenue line improved somewhat over the flattish growth in the third fiscal quarter. Even though the fourth fiscal quarter is seasonally the company's weakest, what were the drivers of that fourth quarter's growth? And what do you glean about the future tone of revenues in the self-moving rental segment going forward into fiscal 2027?

Yes. In the third quarter, we saw kind of a mix of an increase in In-Town revenue, a decrease in One-Way revenue. Fourth quarter both managed to increase. And of note, in the fourth quarter, we did see an increase in One-Way transactions.

Now I think part of that, there's a little bit of a trade-off with revenue per transaction or rate. I think that there was a little bit of a hand off there. But we were able to increase the transactions. For the first 3 quarters of the year, One-Way transactions have kind of been up and down month-over-month, it was hard to get any sort of trend. So the fourth quarter was welcome on that front. But we're still seeing small declines in miles per transaction. I think I've been saying now for over a year that I expect that to bottom out. The actual mild decreases are getting much smaller, but that continues to be a little bit of a headwind, and that's probably not going to turn around until consumer confidence gets better.

What we've seen through the April and the first couple of weeks of May has been growth fairly similar to what we saw in the fourth quarter. So we would like to get back to the 4.5%, 5% growth. The initiative that Joe was pressing on expanding the dealer network, we're maybe 1/3 of the way there and trying to get the equipment out there. So I think some amount of those new dealers are going to be available to help to row the boat in the -- from Memorial Day to Labor Day here in the busy season. And if that all works out, I think there's more in store for us on this revenue line.

And just one last question, which is just something that occurred to me concerning retired rental equipment and the depreciation of -- one of the factors has been that the rate of depreciation has been underestimated. But it occurs to me that another factor could be that the realized prices from selling off the retired fleet dropped. Since these are older trucks, you held them longer than you expected to. And so the use was overextended, and the normal replacement cycle is stretched out. How much do you think the lower realized pricing account for the, I guess, pressure on profitability versus the underestimated depreciation that is mentioned more often.

The dynamic that you referenced is true. I just don't think it's applicable to this last 12 months as it has been in other years. We are back to about a 12-month replacement cycle for our cargo van fleet. So last year, we increased the amount that we spent on cargo vans without growing the fleet because we sold more. And the resale prices were fairly resilient over last year. As far as -- there wasn't a big decrease in average price per unit. I think in many cases, we may have seen increases for some models.

The bigger issue was it was not enough to cover the increased price that we paid for those units 2 to 3 years ago. And what we're seeing so far this year is pricing improving a little bit. We had a couple of good weeks in April, a little bit of a step back. So I'm not going to say that there's a trend yet. But we're selling newer units and it's looking better. But I'm not -- we're not ready to declare victory because that's still comparing it at a pretty elevated depreciation rate. So we need a couple of things to happen.

One, we need buy the units cheaper. Two, we need to sell them for more. And then three, we need to -- that will allow us to do 3, which is reduce the monthly depreciation on those so that we can get back to making some money on the actual rentals. And a couple of those things are falling into place. The prices for model year '26 have come down more than they came down in '25. But I mentioned in the prepared remarks, is that on that portion of the fleet, if we don't see -- we're going to compare the resale market this year versus what the manufacturers want to sell those for last year. And now we have built in for next year the optionality to not have to buy, right? We can sit out a year of buying vans or buying as many as we would normally buy. If we just don't feel like the resale market is there in relation to what they want to charge us for new trucks. Sorry, I went a little long there.

Your next question comes from the line of Andy Liu from Wolfe Research.

We covered good ground here. So I'll start on the storage side. So since you guys started the initiative to address the delinquencies here, seems like there's still some amount that you're working through in the quarter. So that's on the move-out side. But on the move-in side, I see kind of industry headline as well as some of the pure-play storage REITs kind of calling out that spring leasing season as it gained momentum. So I just want to get some color on what your thoughts are around how much of the evictions on the delinquency side that you have left here and when you can get back to kind of gaining occupancy from the momentum that we're seeing.

Yes. The delinquency issue now is really an idiosyncratic issue to specific locations. System-wide, we're back to the system expectation, the system standard. So we went -- we took all of our pain in 1 quarter, cleaned every one out, had a little bit of an amnesty program for folks that we're letting that go on. And then now we're on program. So if I still see individual locations that are running higher than they should, but system-wide, our percentages are in line with our expectations.

On the rent-up period, it's better year-over-year. But to give you a sense, I'm talking about a few thousand rooms. The pace has improved a few thousand rooms year-over-year. I'm not talking about $10,000 or $20,000 increase in pace. So we're still filling rooms. If you look at the locations that are rent up right now, we're probably depending upon the cohort, either year 1, year 2 or year 3 or somewhere between 5 to maybe 10 percentage occupancy points behind what we would normally expect. So we still have some ground to make up.

Got it. That's very helpful. And I think one thing that I wanted to appreciate is really, right, as you move out these delinquencies, I see it as the as a headwind of physical occupancy. That's reported, but if they weren't paying to begin with, right, I guess on a -- from an economic standpoint, you look to move someone out who wasn't paying to begin with, does it really impact as much? So I want to get a sense of how I should think about it as I look at the physical occupancy number that you report versus kind of maybe like an economic occupancy number because if you're moving out people who aren't paying and you're seeing improvement on the moving side, I guess, economically, I think it sheds a better picture than just the physical occupancy side, right?

It's for customers that want to run storage from us, it's fantastic, right? They now have a whole bunch of more rooms, I forget the exact number, but 35,000 more units available to them to rent. So yes, some of our folks were fooling themselves looking at physical occupancy versus economic occupancy. We've now made sure that everyone is on what our program was, which was economic occupancy all along. And so I think we're in a much better spot with people not trying to fool themselves with the physical occupancy.

No, for sure, for sure. And then just one last one on kind of on the U-Box. I noticed that you guys report quarterly the number of U-Box colocations you have. I think it's been going up every quarter. But I'm looking for this quarter, it seems to be down. So I'm curious if there's anything interesting of note there.

I still appreciate that you're going through our investor supplement and looking at that closely. Thank you. Yes, actually, it's a good question, and it's actually a sign of progress, and I'll explain why. So I'll break apart that number, which is our warehouse count versus what the customers see. So the U-Box availability for our customers is still near ubiquitous across all company-operated locations. They can pretty much get a U-Box at any company location, pick up and drop off.

What we've been doing is we've been consolidating warehouse space. So when we first got into this business, we were kind of finally trying to find anywhere we could to store these containers. As you look at our supplement, you can see these new warehouses that we're building, they're storing 1,000 to maybe 2,000 containers. So what's happened is from -- I'll go from March of last year to March of this year, we've added 49 warehouses that have more than a 500 box capacity. And then at the same time, we've reduced the number of warehouses that have less than 100 box capacity by, say, [ 160. ] It's not that we're not serving any markets or pulling back, it's that we're trying to become a little bit more efficient with the storing and the shipping of these containers We've increased -- over that same time frame, I mentioned the number of containers that we can store inside warehouses has increased 53,000, maybe 52,000. So that's the story behind that number.

Your next question comes from the line of Jeff Kauffman from Citizens Bank.

Just a quick question. I was looking at the supplement, and you had a terrific slide in there talking about how, geez, if we could just get the occupancy up in storage, here's what can happen to operating profits. And I think the point here is you don't really need the market so much to improve is just kind of get back to where you want to be in some of these businesses. Can you talk about kind of the core businesses? And how tough is it to get 100 basis points of occupancy back? You were talking about being 500 basis points to 1,000 basis points off.

And then on the moving and storage side, we know a lot of this issue is the depreciation and the losses on sale. It looks like you're going to anniversary the negative effect of the losses in this next quarter, that's different than generating a gain on sale. I understand that. But maybe talk about how far margins are off in that business once you get to a more normalized level in the market on depreciation levels and gain loss on sale as well.

Great questions. You're probably going to have to refresh my memory on some of this. I'm sure I'm going to forget one of them. The first one was on storage revenue I think today, just a rough rule of thumb is for every 1% increase in occupied rooms for a 12-month period, it's just under a $14 million increase in revenue. So our year-over-year increase in occupied rooms, excluding the effect of this whole delinquency issue has been I think, around 25,000 -- plus 25,000 to 27,000 rooms, I think. So at that rate, it's going to take us a while. I should have the exact number, but I don't.

What I'll say is we certainly should be capable of doubling that pace, plus 50,000 rooms. And on the margin question if nothing else were to get that much better, we would at least look better next year because from a comparable standpoint, it hasn't been a great year in fiscal '26.

So on the -- I mentioned the delinquency issue. We're going to lap that. So then the occupancy -- year-over-year occupancy numbers will look comparable and we won't have to try to explain that part. On the depreciation, we're going to -- we're on track to see the fleet depreciation decrease the second half of this year.

On the disposal on equipment, I really don't want to prognosticate on whether or not we're going to get back to a gain this year. But what I will say is everything is set up for us to do better than we did last year. And then when you combine the 2, depreciation plus the gain, which we do in the financial statements, that should be a headwind -- a tailwind going into next year.

On the repair and maintenance side of the equation, the fleet is in good shape. We we certainly are in a position where we can prune some of the oldest part of the fleet, and that would have the biggest effect on the maintenance number next year or the year that we're in now coming up. And on liability costs, we've got a lot of people here focused on trying to manage that number. From our claims units to our general counsel team, everyone is focused on making sure that not only do we seize the growth in that, but we also start to try to reduce it. And we finally got back to the point where we think we're well reserved on that front. So I would be surprised if I saw next year get much worse outside of maybe an inflation number.

So our EBITDA margin for last year for fiscal '26 was, I think, 29%. That's still probably 350 basis points off. And that -- so that's not even affected by depreciation. So we still have a ways to go and the majority of that being revenue.

Your next question comes from the line of Jamie Wilen from Wilen Company.

Jason, I want to flag the shift in the capital allocation strategy. But I hope it's not a short-term thing. I mean Joe has always said that the key measure for the truck rental business is fleet utilization. And if we can reduce that denominator, that will help that there. And also if we can slow down the very fast build-out of self-storage for a while, which starts at 0% occupancy and obviously doesn't make any money for a few years, that would help the overall number. So I hope it's not just a short-term thing and like it was COVID induced and then we'll go back to overspending for a while.

I appreciate the feedback.

Secondly, I would wonder if we could revisit the idea of selling advertising on the side panels of our trucks. We have a couple of hundred thousand vehicles. And there's a lot of other companies out there. I mean, you can see the Waymo cars going around and they have ads on their fleet, which teams put the little logo for $1 million a year on New Jersey. We have a couple of hundred thousand trucks out there. And if we could just sell the side panels, I would think we could -- for $100 a month, we could rent them to a Coca-Cola, McDonald's or Wendy's or 7-Eleven. And if you wrap those numbers around the size of our truck fleet, we're looking at incremental profits of around $0.5 billion a year. And I would hope you could relook at it. I mean any time I would see $1 billion laying in the street, I think the thing is to go down and pick it up.

Jamie, it's an interesting idea that obviously, we've thought about in the past and we tried to weigh the pros and the cons of that. Our view on that is that it would be a gain likely in the short term. Our challenge now is customer awareness of our product offerings. And we have excellent awareness of the rental equipment because people see it everywhere, and it's a clear brand imaging. What is less clear to customers is self-storage, moving supplies, U-Box and how all of those can be used together. And I would say before we introduce something that could potentially confuse customers, irritate local communities and their zoning boards, I think we're trying to find ways to use the equipment in a better way to inform our customers of every other product offering that we have.

I see that on the backs of the trucks, but on the side, it still says Cape Cod or visit wherever, and it's beautiful for the local company -- local communities, but we're spending millions of dollars a year just putting details, not promoting our product but promoting some city in this country.

Yes. We have a limited, very limited program where trucks that are transitioning into the for-sale fleet are used as advertisements, right, small businesses typically can use them out in front of their business as a billboard and storage inside, right? And that program has had limited success. But we've at least attempted to go down that path and look into it. Now that's full imaging, that's not partial imaging. I would be a little concerned about the confusion that it would cause customers and the potential issues that we'd have turning these into rolling billboards for everyone else and trying to explain that.

I like rolling billboards. I think it's a nice profit business for us, but that's your decision. Okay. Appreciate the switching capital allocation. I think it's a wonderful room for the company. Thanks, Jason.

There are no further questions at this time. I will now turn the call over to the management team. Please continue.

Well, I appreciate everyone joining us for the call. I hope you enjoy the new website and the investor supplement. And we will speak to you again on August 6 for our first quarter earnings call. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to U-Haul Holding Company Third Quarter Fiscal 2026 Investor Conference Call. [Operator Instructions]

I would now like to turn the conference call over to Sebastien Reyes. Please go ahead.

Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company Third Quarter 2026 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 a 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 and Form 10-Q for the quarter ended December 31, 2025, which is on file with the U.S. Securities and Exchange Commission.

I'll now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company.

Good morning, everybody. As you read in the press release, we continue to have earnings pulled down due to excessive acquisition costs of vans and pickups in model years '23 and '24. This has hit earnings hard, and you can see it in increased depreciation and originally declining gains on sale and now losses on sale of vans and pickups exiting the fleet.

To a much lesser extent, the enormous post-COVID price increases on internal combustion engine vehicles is dogging our box trucks with elevated depreciation. We had been accumulating internal combustion engine fleet due to predicted declines in availability of ICE-powered units going ahead. Now we are too heavy in fleet and the rental market is not responding with significant transaction increases. We are working a plan to open more U-Haul dealership locations, which will put some of this excess fleet to work while earning in return. We will likely still be overfleeted so we will need to increase sales of older, higher-mileage trucks over the next 12 months.

As best as I can tell, we are holding our own and then some in the self-storage industry. For nearly 24 months, we have been adding units faster than we are renting them up. This results in a surplus [ automotive ] units. We're launching some initiatives intended to improve our rate of units rendered over the prior year. The proof will be in the pudding, and we'll see how that develops going into summer.

We now have a significant U-Box presence at over 700 locations in North America. With that, I mean a significant warehouse and depot operation. This increases our capacity and the absolute number, well, to the extent that U-Box's self-storage, U-Box's both moving in storage. But one component of it is storage. To the extent Box is self-storage, this increases our capacity and absolute number of self-storage customers. We have over 200,000 U-Box containers in service and over 100,000 of them in the hands of customers. We have slowed our rate of adding U-Box warehouses as we have a workable present in most markets. However, in D.C., L.A., Boston, New York City and the Bay Area, we are still underserved. In Canada, we are still light on U-Box capacity in Vancouver Island and Edmonton. We have projects in planning or in construction in all of these markets. [ We're not planning ] to carry through on these capital expenses. We continue to heavily invest in digital tools to meet what customers expect from the industry leader. Most of this investment is expensed in the current period.

With that, I'll turn it back to Jason.

Thanks, Joe. Yesterday, we reported third quarter losses of $37 million compared to earnings of $67 million for the same quarter last year. So that's a loss of $0.18 per nonvoting share this quarter compared to earnings of $0.35 per nonvoting share in the third quarter of last year. Earnings before interest, taxes and depreciation, what we're calling adjusted EBITDA, in our moving and storage segment decreased 11% to nearly $42 million for the quarter. On a percentage basis, that's about the same decrease that we saw in operating cash flows for the quarter as well.

Included in our release and financial supplement is a reconciliation of adjusted EBITDA to GAAP earnings.

Depreciation and losses from the disposal of rental units continues to be a significant earnings headwind. During the third quarter of this year, we reported a $26 million loss on the disposal of retired rental equipment compared to a $4 million gain in last year's quarter. Cargo vans that we purchased over the previous 2 model years that are now being sold came into the fleet with a higher cost the current market resale values have not been reflecting that, thus resulting in this loss. We've also increased the pace of depreciation on the remaining units to reflect that new reality.

On top of this, we have depreciation from increasing the size of the box truck fleet by nearly 11,000 units compared to December of last year. Between fleet depreciation and the loss on disposal, we experienced a $75 million cost increase for this quarter compared to the same time last year, translated into nonvoting share EPS, that's approximately $0.24 a share. Over 3/4 of this negative variance is related to our cargo van fleet. Looking towards the future, the model year 2026 cargo van purchases that will be coming on the books this year are going to be at an average cost of about 12% lower than last year's model year. And if you compare them to 2 years ago, about 20% lower.

For the third quarter, our equipment rental revenues results increased $8 million or just under 1% compared to the same time the year before, the majority coming from in-town portion of our business. Comparing the end of December 2025 to the same time in 2024, we added 65 new company-operated locations, and we had a net increase of 365 independent dealers. These new locations, as Joe mentioned, are expected to help us better distribute the larger fleet and increase transactions.

For January, our results were trending quite positive prior to the onset of the significant weather activity that hit much of the country has certainly slowed the improvement over the last 1.5 weeks or so. Capital expenditures for new rental equipment in the first 9 months of this year were $1.748 billion. It's $162 million increase compared to same 9-month period last year. Looking at the last 12 months, so that would be the calendar year of 2025, our gross fleet spend was approximately $2.025 billion. If you net out equipment sales, we got down to $1.331 billion. I'm estimating close to $670 million of that gross spend was growth related. Initial estimates for next fiscal year are showing a decrease in new truck purchases somewhere north of $500 million.

Storage revenues were up $18 million or 8% for the quarter. Average revenue per foot continued to improve across the entire portfolio by just under 7%. While the same-store revenue per occupied foot was up 5%, reflecting the cumulative effects of our rate increase activity. Our strategy of straightforward pricing with the customer and avoiding the large introductory discounts continues.

Our same-store occupancy decreased 490 basis points to just over 87%. And mentioned in our last earnings call that in July, we took on an effort system-wide to increase the number of available units at existing facilities by focusing on delinquent units. This effort did not affect revenue because we don't record storage revenue until we collect it, but it has had an effect on our reported occupancy level. So of that almost 5% decrease in same-store occupancy close to 4% of that was related to the removal of delinquent rooms.

Net tenant move-ins year-over-year, so comparing end of December of this year versus last year, [ are ] slower than in recent years has picked up compared to where we were last year adjusted for the delinquent units.

During the first 9 months of fiscal 2026, we invested $770 million in real estate acquisitions along with the development of new self-storage and U-Box warehouse space. That's a [ $444 million ] decrease over the first 9 months of fiscal 2025. During the third quarter, we added 16 new locations with storage, translates to about 1.5 million new net rentable square feet. Our development pipeline now is down to active development is down to 106 projects that should result in somewhere around 5.7 million new net rentable square feet.

Moving to storage operating expenses were up $66 million for the third quarter. As a percent of revenue, we certainly took a step back from the progress that we made last quarter. First, personnel costs were up $16 million, and fleet maintenance and repair were up $13 million. But really, the unusual increase in the largest component that we had was related to our self-insurance liability costs, and they were up $38 million, with the majority of that being in the form of reserve strengthening. We've made progress on this front, increasing our liability by nearly $79 million since March of 2025.

In December, our property and casualty insurance company paid U-Haul Holding Company [ its ] parent $100 million dividend as we're taking steps to reallocate capital amongst some of our subsidiaries. This $100 million is now available for general U-Haul corporate use.

As of December 2025, cash along with availability from existing loan facilities, at our moving and storage segment totaled $1.475 billion. I'd like to remind everyone that we have a supplemental financial information exhibit that's available on our homepage investors.uhall.com under Investor Kit.

With that, I'd like to hand the call back to Jenny as we have Joe, Sam Shoen and myself here to answer questions.

[Operator Instructions] Your first question is from Steven Ralston from Zacks.

Taking into account that seasonally, this is the second weakest quarter in your year. There seem to be some pressures in the one-way market in the self-moving equipment area and also in the U-Box program. Could you discuss that? And also, does that indicate there is some sort of -- that the U-Box market sort of track the one-way market, one-way rental market?

I'll start on that. And I mentioned this last conference call, what we've seen over decades is when consumers get anxious, they shorten the distance of a transaction. So instead of moving relocating to Denver, they go to a summer of their existing town. They still move for a variety of reasons, which is basic underlying demand, but they've moved shorter distances. And sometimes that turns a one-way transaction into a local transaction.

So there's -- so U-Box, and I'll let Sam elaborate on this. U-Box, we've had our greatest success with long-distance transactions. So to the extent that it tracks U-Haul, it will kind of track it. U-Box will track it but maybe a little more exaggerated as a percentage of business.

Right. Yes, Steven, that's a great question. I think this is getting to kind of what you're asking. U-Box operates in almost primarily in what you move considers the long zones. So for rental trucks, what might be a 20% of our one-way business in the long zones, for U-Box might be 80%. And so I think the question you asked was does U-Box track the one-way moving market, certainly in that way it does. And then, of course, as we have distribution as we're using rate to control distribution, now we're pricing U-Haul trucks in a certain way and our customers are seeing that and getting to incorporate that into their choice. So I think the short answer to your question is yes.

You've discussed the depreciation line, a great deal. And I think I'm missing something because I just -- could you please explain it. Depreciation is up dramatically, but sequentially, from the second fiscal quarter to the third fiscal quarter, depreciation actually went down. What's happening on an accounting basis on that?

So this is Jason. A couple of things going on. First, the depreciation of the box truck fleet is a dynamic depreciation where every time a truck passes its 1-year anniversary, the depreciation rate steps down on it. right? So our -- the first year that we buy a box truck, we charge off 16% of the cost. The second year is 13%. And that keeps going down. So if we don't do anything, the depreciation on the box truck fleet will gradually just continue to step down.

The second part of that is on our pickup and cargo van fleet, which is a -- it's a smaller fleet...

Shooter live assets, right?

Yes, exactly. We hold it a shorter period, and those depreciation rates we're adjusting from quarter-to-quarter based upon what we see in the resale market. And as we've essentially almost finished selling through the model year '23 units. Now we're under the '24. And so we're -- that depreciation number is getting adjusted from quarter-to-quarter.

Your next question is from Steven Ramsey from Thompson Research Group.

Maybe to start with, what did you think about from the high level for your business? You've continued to invest in growth in all areas of the business in the time of subdued activity. If you think about moving competitors against you and the traditional moving and U-Box space, have you seen capacity reductions from peers or another angle maybe is how you're expanding in the dealer space to position you to perform well now and perform much better on the other side of this?

I'll answer that. Yes, on both moving fleet and locations. The numbers aren't hard. I can't give you a hard number of, let's say, how many outlets Penske or Budget has. But we have a bunch of other indicators we get from various industry sources that causes us to be fairly confident they're both reducing fleet and reducing outlets. So that should we see an upturn or should we get a -- another way to put it, should we do a better job of understanding and satisfying customer needs, we'll be in a position to fill that demand. And that's the way I look at it a lot more in where we failed to appreciate what our customer needs. And if we will find that failure and remedy it, the customer will reward us with more transactions, and we'll be in a better position. We'll have more outlets and convenience is kind of part of our overall strategy.

So we're far and away. And just for talking points, let's say, Budget has 3,000 outlets and Penske has 3500, but we're sitting with 24,000 and change. So as far as customer accessibility just we dominate. And that's part of our strategy. It's a judgment how far to push that. Frankly, it's not an algorithm. Maybe there is, but it isn't one that we [ have a math ] problem that solves that out. So one other thing that you don't see and Jason, I don't think he really talked about is, inside our fleet isn't homogenous. It isn't 1 number. So when he says we have 100x box trucks the size of those of the age matters when you're trying to manage the whole fleet. So we have been playing catch-up to massive disruptions in the supply chain caused by both COVID and the government's insistence on electrification.

Curing those takes a while. You can cure it in the pickup advanced fleet maybe in 24 months because you rotate that fleet. In our box truck fleet, it's at least an 8-year opportunity. So sometimes we're buying a little more trucks than we need because we need a certain size truck or that truck is now available and it wasn't available before. So there's a bunch of adjustments inside of the big number. And if you went back to, let's say, 2016, we had it at that point, the best I've ever had in my life. We had tuned that pretty good. And that falls through as profitability. So as we get this fleet rebalanced, and I wish I can tell you a date, I wish -- I'm trying to get my own self a date as to when that will be back in balance. I don't know.

We've had -- you've heard me belly ache about the administration and the drive towards electrification. You see that really caused the manufacturers to do 2 things. One, they increased the price massively I'm talking 30% and 50% price increases; and two, the allocated vehicles. We couldn't get the model we want and the quantity we want. We had to take what their supply chain was able to produce. And this caused disruption in the age and size of our trucks, and we're working very hard to remedy that. And you see this year, the year we're just kind of finishing, we bought very arguably, a little more vehicles than is reasonable. But if you get into the details, you would see we're attempting to get this balance back out. So 2, 3 and 4 years from now. it's the right mix in the age of vehicles to serve the market.

So we're very aware of it. But it's all judgment. It's not absolutely guaranteed. I think that I've been elated because the administration has done everything I could imagine it to kibosh on the electrification. So you and I'm sure all your peers have seen what -- our good friends in the manufacturing business, Mary Barra announced, I think, $6 billion or $5 billion write-off. Jim Farley announced $19.5 billion write-off. Well, that gives you some idea of the disruption at their level, and that disruption kind of is like a ripple of a pond that carries through to people like me or to car dealers, if you have any car dealer clients, you'll see that they're not getting the exact mix of vehicles that they wish they had.

But this will balance out. The carmakers are smart people. And once they shed themselves of this electrification, I don't know what it is this for you. I'm not sure the right name for it. But as they get out of that, they're going to deliver the mix of vehicles that customers want, and customers will respond. So if that kind of addresses your question, it may be too much information. I don't know.

No, that's helpful perspective. I appreciate that. wanted to think about the expense management side of things? I know it's been a focus for you. Do you think this needs to be a more intensified effort over the next 6 to 12 months? Or would you say the structure is actually in a good place, but it's more waiting on volume to come back?

I've been pounding through on -- we run on the system of budgets like a lot of people. So I've been pounding through budgets. Trying to get the correct response out of the various parts of the corporation. And I think I'll see some results in the present calendar year and a little bit more the next year. repair hasn't been too bad. It's a lot of money somewhere is approaching $800 million on an annual basis. But is coming in somewhere in a normative -- we calculate all repair by model, by year, by cents per mile. We have a pretty good ability to forecast that.

So repair, we've got half way under control. Personnel is kind of -- we're stuck [ in advice ] on that. I think many, many people or organizations are, which is cost of living for our workforce is rising at a pretty good clip, and they're pretty hard pitched. So we're going to see that increase steadily over the next 2 or 3 years, I think, for sure. And our job is to outpace that, and when I look at that, we look at that on a location-by-location basis. Basically, we need to get a nexus of revenue enough that will support the complement of people to be open the hours we want to be open. We may likely have to adjust some hours over the coming 12 months because the -- it's not going to generate enough surplus to pay the wages for the hours the store is presently open in my judgment.

Now that's not done, but that's the kind of pressure [ wonder ]. It's on -- it gets to a totally micro analysis you can say overall [ bla bla bla ]. But every morning, we open about 2,400 stores. So I got to have a body there. It's very specific. And then some days in the week, I got to have several bodies there. So -- and those people have to be paid [ diluted ] wage.

So there's going to be tension there. I think -- I don't know what part of the country you're from, but this year, the West Coast of the United States, let's say California, Oregon or Washington have put in greatly increased minimum wages that have processed, or have in place plans that will automatically do it next year. And in many jurisdictions, they've done this for both salaried and hourly. Most of us are used to a minimum wage per hourly personnel. But they're not putting in minimum wages for salaried personnel. And it's going to stress a significant number of our stores profitability.

So of course, we're going to pay the people, but we have to boost productivity. Full self-storage and U-Box have been a relief valve for that in many instances. We've been able to expand that presence in the location, but other locations are limited by the geographic footprint. There's only so much you can do on that piece of land. So I would see in Los Angeles, we have several occasions that are just slightly over half an acre. There's no [ wiggle ] there. So those are under intense pressure. And I don't have a simple solution to it, but we're very cognizant of it. We're working on it.

Okay. That's helpful. And then last one for me. You've talked some about U-Box in the major markets that you are building out. Can you clarify if construction is going on in those markets for warehouse capacity? And then secondly, can you talk about U-Box usage both moving and storage in large metros that you already have established warehouse presence. Trying to think about the potential upside in the big cities once it's built out.

I'll take the brunt of that question and let Sam take you back to it. In the cities I mentioned, the metropolitan areas as I mentioned, at the minimum, we own property. We're somewhere between land use and putting the roof on it at these locations. These are all -- to me, each one is a big saga, okay. So I know too much information on it. We'll pick DC. We've had the steel building on the ground for 2 years. That's how between COVID and normal city bureaucracies, how much it set us back. We thought 2 years ago, we were going to break ground. We ordered the building, they delivered it. We still haven't broke ground. So it's not because we're not trying. It's just -- it's quite elaborate. But in all those cities, we own the property or metros and all those metro areas, we own the property.

I'd say, I'll pick Vancouver Island. That's a readily apparent thing. If we don't have a significant warehouse capacity, there's just going to be no U-Box business at all. So we have to have real warehouse capacity there. So -- but in the rest of Canada, we've done a great job for the Maritimes, up and through Ottawa, down to Montreal, all through the Greater Ontario or the whole belt people between Toronto and Detroit, we've got a fairly adequate footprint. And so I believe the business will follow. Sam?

Sure. I'll add some more color. Metros for U-Box is something we're certainly maybe a little extra excited about because Joe had the foresight to design our product and our strategy specifically around the size of container that thrives in the metro areas with challenges of space. So for example, our container size unlike a lot of our competitors fits in an apartment parking spot, no problem.

A lot of the challenging metro areas are restrictions on where they can be laid in terms of needing permits or having outright restrictions to be placed on the street. Our container option delivery method with the trailer gives it a license plate, which means it can go in anywhere that's a legal parking spot. So those are tremendous differentiators in our product versus the competition, and those were deliberate. And of course, we're hoping they continue to drive some exciting results in the metro besides the fact that a lot of these -- the metro demand is for a smaller-sized container in the first place. So getting the right-sized product to those customers is what we do. So I think we've got a big advantage.

Steven, this is Jason. I just want to make sure that there isn't any misunderstanding. In these markets, our customers already have access to the U-Box product. We're just looking to improve their access to it. It's not that we aren't in those markets.

Your next question is from Jeff Kauffman from Vertical Research Partners.

I just had a question more for Jason. You talked about we're almost through the 2023 cargo van cohort and starting to work on the '24s. Can you give us an idea of how many vehicles we have left to kind of get caught up to the current market and maybe the differential between your average acquisition costs and where you're depreciating the '24s versus what that spread looks like for the '23s.

Sure. I'll give you some big picture numbers. On the '24s, we probably have somewhere around 6,000 of those left, and those were the most expensive ones, a little bit more pricey than the '23s. And then we have, say, close to 19,000 of the model year '25 that then were maybe $3,000 cheaper than the '24s. So now we're going to be in the process of rotating out the model year '24s, which we have been we've been hitting those with this increased depreciation. So part of -- answered the question earlier, I think it was for Steve Ralston, that's been part of the depreciation increases. We've been hitting those modeling years here before we have to sell them, hoping to minimize any loss on disposal. And we'll see how successful we are here in the next 12 months on that.

Okay. But is your sense that -- because, look, it's going to come out either way, right, either through depreciation or loss on sale. But is your sense, we've got the '24 model years mark-to-market fairly at this point in time? Or is there still kind of going to be this deferred catch-up on loss on sale?

I think it would be fair to expect a loss on sale for those units. I don't know if we're fully there yet.

Let me address it. It's you make your estimate of what you're going to get on sale when you're going in, you set up your books. We've had to come back with adjustments because the way the market has developed that estimate turned out to be wrong. And as far as I can tell, it's wrong because as the automakers get away from electrification and get their supply chains reorganized, they're now, in fact, selling new vehicles for less than last year's new vehicle and maintaining a margin. They need to make a profit. I'm all for it.

But that takes the resale value and kind of gives it a little bit more of a hit. And we haven't in recent years, at least not in the last 15 years, had a market where the new prices kept being under the old price. And so I think we poorly estimated this, and of course, we figured this out, I don't know, 1 year, 1.5 years ago, when we start to act on it, and everybody was confident going into this particular year we're in that we're finally through it. And then, of course, what happened, another round of opportunistic. So we're acquiring the fleet cheaper, but that may mean that these trucks that we just put in are going to retail for less or wholesale when we get rid of them for less than you thought.

So we're I've got people here pretty tuned up. And I think we will try to -- if we see it declining what my direction has been, try to adjust depreciation to where you're going to basically be neutral at sale because the problem with the sale is that by the time you get it, you forgot how much you paid for it and all that. So we should suffer the pain monthly, and that also puts pressure on money marketing people because they basically incur that depreciation cost as part of their charge or whatever you want to call it that, as part of what they know they have to hit, it's harder for them to -- for me to hold them accountable for recouping a loss on sale, but they really didn't have a budget or a forecast that adequately presented that.

So I'm very hopeful we're going to get it right, but you've seen how just this whole thing has just kind of ricochet through and it's given everybody some things they didn't really totally appreciate, and I'm kind of a glass half empty person, and I've kind of pushed our people. Of course, they're all marketing and now we're going to sell our way out of it. Well, I think it's pretty clear when the pickup or van prices declined 2 years in a row, you're not going to sell your way out of it. You're just going to respond to the market. So I think it's a collaborative effort to guess -- make these estimates. I won't call them guesses, but they're kind of a guess. But your estimate of what that thing is going to go out for 18 months from now is an estimate. Of course, there's other industry people making this estimate. We're not the only people trying to figure this out.

So I have some belief that we may now hit the bottom of this whole declining group of factors coming together. But should next year, GMC lower prices again. Because they improve their margins and they've written off all the garbage. They have the same problem. They add some garbage on the books because they were attempting to respond to government. And I don't want to call it third-party greeny pressure. People who didn't know what the facts were but nevertheless had power positions. They tried to respond to them has really cost them greatly. It hasn't hit us as hard, but it's costing us, and we will work through it, and every effort is being made to [indiscernible] fleet.

I've always [ prided ] myself over the last 40 years, of always having the fleet on the books for less than it's worth. Because when push comes to shove, if you're on the books for more than it's worth, it can be a very unpleasant time. So I've pushed real hard and we've missed it 2 years in a row on our pickup and van fleet. And we should have it right this time, but only time is going to tell. It's important. We're trying to undershoot without just being stupid. If I put too much depreciation on, of course, my rental teams will say we can't possibly make we can't make any of our goals. It's impossible that you've afflicted us with. So I have to not try to be not too low or too high.

So -- but on the other hand, I'll say that the whole company has overestimated resales for 2 years [ long ]. Yes, it all comes out [ awash ]. But during the interim period, it can affect people's motivations and I need to do [ that, too ].

Your next question is from Jamie Wilen from Wilen Management.

Joe, you've always mentioned that fleet utilization was your prime objective in managing the business. How did you arrive at only reducing the fleet expenditures in the coming year by $0.5 billion as you look forward, are you going to spend $0.5 billion less in future years as well?

Right. Now I'll start with the year, we're finishing up. So we call that fiscal '26, [ I believe ]. In fiscal '26, you're actually seeing an increased -- significantly increased fleet expense. That is aimed at trying to rebalance. If you don't buy some trucks, well, 4 years from now, you don't have those trucks at that mileage and that cost parameter. And so you create imbalances to the whole fleet. And that also impacts on what can you buy next? So in the year just finished, we put in something like 10,000 10-foot trucks. That's beyond replacement considerably.

We have a whole bunch of considerations. And that [ truck]; in our present plan for the coming year, we reduced that massively because we think we know what we're doing there. In my 20-foot truck, I have a disproportionate amount of fleet that's 8 or 10 years old. So while my total number is okay, my mix is off. A 10-year-old truck can't perform quite like a 5-year-old truck or a 4-year-old truck. So I'm buying a fair amount of those a little bit more than you might say is replacement simply because I have a lump of them that are 8- or 10-years old, and I've got to try to smooth that out. The perfect life of the -- [ trigger ] the life of the truck, divide that in the fleet, make that fleet purchase every year. That would be wonderful. But they just don't become available.

And in the past 5 years, it's been aggravated because of all these supply chain disruptions. The worst being we're on allocation. They would say, you can buy x trucks that -- we haven't seen that since the Korean war. So that caught us off balance, I would say, and resulted in a couple of times, we made huge buys because they would sell them to us. We had to have something, so we made a huge buy. So we're going to we're going to reduce this, and then we have to see what we can do with sales because that problem, it's a buying problem. It's also a selling problem. Can you take that many trucks into the sale market and can you move them. So we'll see in case my 20-foot trucks, I have something like 12,000 [ lump ] going through. And we can't digest 12,000 on a resale in one year and probably couldn't do it less than 3 years.

So depending on how -- but if I don't buy for 3 years, I'm just creating another lump that I'll have to face down the road. So I'm going to do some modest buys that may accelerate sales and see where that -- where we can find the balance. And so we're proving that, I'll say, specifically on the 20-foot truck right now. How much can we -- how many of those trucks can we put into the resale market successfully, and we should buy at least that many of them. this year so that we don't have another month in our supply chain.

So on the sales -- go ahead, I'm sorry.

I'd say on the self-storage side, as far as capacity utilization there, is there any thought of slowing the pace of development to a more modest level.

It slowed a lot. I think Jason thinks it's down $400 million. It's not a -- these numbers are a little bit soft. But we've slowed it down. A ground-up self-storage location is probably a 3-year process. So if I slow it down, you won't totally see it until 3 years from now. Now the other problem is if we want to speed it up, you won't see it for 3 years. So you got to be a little thoughtful going both ways.

So we have slowed it down. I'm still going ahead with what I consider to be strategic. So the U-Box warehouse as I mentioned, I believe they're strategic, and we would be foolish not to build them. Although -- so the -- it's going to be a significant amount -- enough money that I'm watching it. For self-storage, we're a little more opportunistic as we're going ahead now. We [ either ] think it's a market that we know better than somebody else and we see an opportunity, or it's something that's semi-distressed. [indiscernible] just bought location in Olive Branch, Mississippi. It doesn't mean much to you, but we already had a store there. We bought a second store. We paid well less than 3/4 of the cost of construction for it. And I think Olive Branch, Mississippi is going to [ be fine ] over the next 10 years, although it's probably not on your horizon. But it's a good solid growing area. I determined that was opportunistic and we go ahead with it.

Okay. You guys have done an excellent job of building value, but less than a stellar job of creating value for shareholders. If I were a Board -- pardon me?

I'm with you on that.

Okay. If I were a Board member, here's what I would suggest to you to help crystallize a bit more of that value. We all know how undervalued self-storage is relative to the rest of the world. And we'd like to help the investment community as well as analysts recognize a bit of that. What I would suggest is doing is selling a territory of well-occupied facilities that don't have box storage in there because I don't want to eliminate the competitive advantage we have with the rest of the world [ in ] U-Box.

But I would take an area where we have stabilized occupancies over 80% like a Tennessee or New Jersey and hopefully, no U-Box storage or not much. And I would want to sell that to one of the publicly held REITs, which could crystallize value for how much we have value if we have created there and recycle the proceeds. If we get $1 billion or $2 billion, use half of them to buy back stock, the rest to pay down debt. We'll build new facilities. But it would help crystallize what we built and hopefully not impact the growth of the core business there. What do you think of that?

I kind of understand the math of it. I won't say I am hot on the proposal. Of course, part of the opportunity is every one of those I work to get. And so I'm a little bit where you are selling it. And should the market turn up, we may rue the day we sold it. But I think that's a fair position to explore. I'll explore a little bit with Jason. He's pretty good on the numbers. So we'll explore that a little bit.

The stock buyback, I kind of go both ways on also. I'm not -- we went and did the stock dividend and a bunch of other stuff, tried to bring some analysts in, changed the exchange, we were going all in an effort to, I guess, improve liquidity or make the stock more interesting to people with, I think, very minimal results, okay? I don't think anybody at my end is a stock [ do ] -- we don't -- that's just not where we all live. I was underwhelmed with the response of the market when we did that. But these are -- we have to do something to demonstrate value.

Another way to demonstrate value is put these stores at 90% occupancy, then, of course, now it's a little bit easier. I'm sitting here with -- depending on how you want to count it, somewhere around 80% effective occupancy. Now it varies by every store, but that's an overall not a bad estimate. And that's been dragged down by -- every time I open a new store, I lower that number. So I believe that the market is significantly larger, but it's being say, mistreated. The customers are being mistreated by the industry now, and I'm going to try to see if I can communicate that to the customer that we're not the ones mistreated.

So we'll see how that goes. But a bunch of people have come into this industry, which you probably know them, and I don't. But they're big money operators, and they kind of view storage as a cow to be milked and I look at it more as a land to be patted and taken care of. So they're a little rough on the customer would be the nicest way to put it. And I think we can distinguish on our customer service, and I think there's enough people in the market now who -- this is their second or third time running storage, and they know that storage room is not a [ story ]. It's not a [ story ]. We'll see if I can communicate that to the wider group of customers.

Overall, I think we've been outperforming our peer group, if you wanted to find that as the big REITs, I believe we've done a better job of being able to maintain rates and expand customer base. Now, I don't get any numbers on there that you don't see. So I don't have any special look into their numbers, but it seems that they're having difficulty holding move in rates at or above move-out rates. We're still able to maintain a differential there. I think that's significant. I'm optimistic I can fill more rooms, but I've got it pretty close to the edge, I think, Jamie, as far as -- we're pushing somewhere as -- Jason may have a better number, 220,000, 230,000 units, something like that.

If you include the managed portfolio, so U-Haul-branded stores were about 290,000 rooms available.

Okay. So all of those are depending on either a liability or an opportunity. So as a shareholder, you're probably seeing a little bit of a liability because you're paying for them and get nothing for it. I think we're going to see significant progress in filling those rooms and that's how I have my teams wound up. At the same time that we've increased successfully, we've increased total customers every year in conventional self-storage. We've done the same thing. We've introduced something like 100,000 storage customers in the U-Box.

So from the point of view of operating a facility that manager is looking at a total storage customer base. So I'm not disgusted with our performance. But I think our performance has to be better because we've invested the money. But I think we're showing we're resonating with the customer as much or better than anybody else in the business.

I believe you have 2 customers here. One is the person who rents your storage facilities and truck rentals and the other customer are investors. And investors would love to see you harvest some of the value you've created where you turned $1 into $4, but we can't see it. Whatever you can do in that respect would be a good thing for...

I got it...

It's a consolation, I'm 76. I'm kind of getting a little closer to what -- and see the goose lay some golden eggs. All right. Thank you very much.

Appreciate your thoughts.

[Operator Instructions] And your next question is from Steven Ralston from Zacks.

I just want to circle back around in -- [ tap Joe's ] experience and get his historical perspective. You've pointed out that you're in a very unique period with the [ advent ] on EV vehicles and the demand that came through COVID. When you think about the situation in your past, does it remind you of any time in the past where you and resolve the situation and how it happened and you use that as like key markers in managing the company?

In a general sense, yes. But in fleet, we've always been able to buy all the fleet we had money for. Our problem up until recently was we always were capital constrained. And then this slipped to COVID and post-COVID, and we can buy what someone says we can have. That's -- that -- we don't have a lot of markers in there. But of course, we're working on it regularly. And I think if I had to do this all over again, coming out of COVID or I'll say post-COVID, I would not have -- when they went on allocation, I have told them to keep their trucks. That's what I'll tell them next time. They keep their trucks and when they jack prices, they can keep their trucks because I can sweat out 2, 3, 4 years, and I think my customer will support me.

I think I was over eager to buy trucks because we had such a nice balance in '16. I wanted to get back to that balance quickly. And I didn't stand firm enough when they came through with massive price increases. I just don't they weren't -- it's unsupportable. Now they had all this talk, and we all saw it and I think everybody is a little guilty of this saying that, as Mary Barra did, she had something, I don't know, after 2037 or something, GM will not make an internal combustion engine.

Well, if you're on my end of the deal, that's a frightening thought because the other ones don't run. So you can see how I fell into the trap [ that well ], if she's not going to build any, but then my friends at Ford didn't make quite as broad a statement, but practically speaking, they were running their investment as if they were no longer willing to make it.

An example, they quit the second shift to one of their truck plants. We've been the beneficiaries of that second shift for at least 10 years. So when they put a second shift to that plant, I will -- where the hell is trucks going to come from. So I think we'd have come out better if we just let the fleet age by just what suited us and just at the price [indiscernible] and we wouldn't be trying to digest all this excess cost. But that's not what happens. So now we've got to digest it and want to work it in a way that it doesn't come back and plague. People are trying to make fleet decisions 5 and 6 years and I want to try to smooth it out. And so that's causing us in some models to buy a few more trucks than an analyst would testify, but when you look at the age of the truck and what that's going to do to you going ahead, I think experience tells me you want to buy some trucks.

So -- so no, I don't have a marker and experience on this. self-storage, I have a lot of markers and experience. I'm fairly confident that, that's -- those are all good money bets. But the timing is too slow, and it's not enough to command investor support, which I understand I'm an investor here, too. So -- but we have markers. We can look at market penetration by various markets and storage market. The demand for that product has far exceeded anyone's expectations. I think you could say that of any of the major companies, [indiscernible] really appreciated how much demand there was for that product or there is for that product, and it's still being served in a spotty fashion. So filling in those gaps is an opportunity for someone if they can identify them and then get them [ until there ].

There are no further questions at this time. I will now turn the call back over to Sebastien Reyes for closing remarks.

Thanks, Jenny. I have one question that I wanted to post here that came in during the call. U-Haul's profit margins, excluding depreciation have been in constant decline for the last decade. Please explain why margins have been so persistently weak since 2016, and please explain your plan to restore the profitability of this great company.

Well, this is Jason. I'll take that one. Well, 2016 is picking the high point of our EBITDA margin. So that our earnings over the history of the company have been a little bit cyclical largely in relation to how much we expand the organization over a certain timeframe. So to pick 2016, which I think was maybe 35%, 36% EBITDA margin. The 10 years before that, our EBITDA margin was 25%. And the 10 years since 2016, our average EBITDA margin has been 33%. So there has been actually a structural improvement in how the organization has been run. And we've included a slide that shows this trend of improving EBITDA margins that I don't think it's happenstance that it coincides with our growth in the self storage and the U-Box market.

Since fiscal '16, we've had some up years and down years. I would say that during COVID years where we got back up to the mid 30% range, there was some recognition of revenue and not the recognition of the associated expenses that went along with it. So for example, the repair and maintenance that we were incurring during the work from home phase where revenues shot up. Under current accounting rules, you can't accrue for expected maintenance based upon how much the truck is going right now. So we accrued all of these miles and recognize the revenue and then there was a couple of years after that, that we've been paying for the repair and expense associated with that. Then we also had the somewhat idiosyncratic event where our former auditors failed to see the wisdom in how we chose to reserve for our self-insurance liabilities, and they took -- I think it was $88 million out of our self-insurance reserves in order to sign the opinion. And now over time, I think we've seen that we would have been much better off to leave those reserves on the books, and that would have been a little bit more of a shock absorber, right?

Because during COVID transactions increase, so the rate of incident, potential incidents increase, well now we're dealing with as those incidents that happened back then or developing. They're becoming a little bit worse than what was originally thought. It's always ifs and buts. But for this quarter, if we had a normal [ U-Haul ] revenue quarter of 4% growth, and we didn't have the reserve strengthening, we would be looking at an average EBITDA margin.

So I'm hesitant to agree with the premise that there's something structurally wrong with the how we're operating the business from an expense perspective, I would say that it's a revenue issue, and then it's a cycle. We've been in an unprecedented growth cycle how much we've grown the fleet and how much we've grown self-storage. And frankly, I think we've done a reasonably good job in keeping the EBITDA margins where they're at, while we're going through this process.

Now all of that to say, a decent EBITDA margin for us over a 12-month period is going to be in the low 30% range, and we are underperforming that this year.

Well, thanks again, everyone, for your participation. We look forward to speaking with you again after we report our year-end results in May. Thanks.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining you. You may all disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the U-Haul Holding Company Second Quarter Fiscal 2026 Investor Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025.

I would now like to turn the conference over to Sebastien areas. Please go ahead.

Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company Second Quarter 2026 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 a 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 and Form 10-Q for the quarter ended September 30 and 2025, which is on file with the U.S. Securities and Exchange Commission.

I will now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company.

Thanks, Sebastien. The earnings crush of increased depreciation and change from booking gains on equipment sales to booking losses on equipment sales became evident this quarter. We reported this over 2 years ago that we were having to pay too much for trucks. This pounding is likely to continue for some time as OEM manufacturers continue to bring current pricing in line. Resale values will likely decline roughly proportionally. While I'm glad to bring on new vehicles at lower cost, this likely will depress earnings in the current period.

Since July, we have been working to expand our dealer network well above the historical pace. This should help us better balance truck and trader inventories by increasing demand. I expect some success here. We spent more on repair in the quarter than I had anticipated. We are working a plan to slightly realize repair cost increases. As you all know, our customers drive the equivalent to the moon and back more than 12 times a day, tool repair or maintenance will always be significant cost. Mileage, however, is not up, so we can reel this expense back a bit.

Self-storage is a positive but it remains a slug fit. Not very many gains are coming easily even on good projects. I am focused more on expanding our footprint than increasing our depth. Competition is strong, customers are value conscious. That is an environment that U-Haul usually competes in well. Self-storage is still viewed positively by lenders, which is encouraging new competitors to enter in some markets. administration is having success in reducing ICE regulation that has driven unnecessary dislocations in the transportation economy. It has long been a dirty little secret that these regulations are politically and not environmentally driven. As the unproductive regulations on vehicle manufacturers and users subside, I expect a reordering that will benefit citizens and businesses alike. This is very positive for the transportation economy. Although the transportation economy overall will have to eat some huge residual costs from the old conceived green regulation.

In summary, our various business lines are solid and our results have covered a lot of expenses but are short in return to shareholders. I will now turn the meeting over to Jason to closer review the financial results.

Thanks, Joe. Yesterday, we reported second quarter earnings of $106 million. That's compared to $187 million for the same quarter last year. This is a $0.54 per nonvoting share EPS number this quarter compared to $0.96 per share non-voting share in the second quarter of last year.

Earnings before interest, taxes and depreciation, what we're calling adjusted EBITDA and our moving storage segment increased 6% or nearly $32 million for the quarter. This is about the same amount of improvement that we saw in the first quarter of this year. Revenue growth across all of our moving and storage product lines led to this increase. Included in our earnings release and financial supplement is a reconciliation of adjusted EBITDA to GAAP earnings. Once again, this quarter, the largest difference between adjusted EBITDA and GAAP earnings is depreciation, and that's also the cause of the largest negative variance in earnings year-over-year.

During the second quarter of this year, we reported a $38 million loss on the disposal of retired rental equipment, whereas last year at this time, we reported an $18 million gain. Cargo vans that we purchased over the last 2 years that are now being sold came into the fleet with a higher cost and the current market resale values are not reflecting that resulting in the loss. We have increased the pace of depreciation on the remaining use to reflect this new reality. Additionally, we have depreciation from increasing the size of the box truck fleet by approximately 10,000 units compared to September of last year. Between fleet depreciation and the loss on disposal, we experienced a $107 million cost increase for the quarter compared to the same time last year, translated to EPS that's about $0.43 a share. As a reminder, our total decline in earnings per share for the quarter was $0.42.

For the second quarter, our equipment rental revenue results had a $23 million increase, that's about 2%. Revenue per transaction increased for both our In-Town and One-Way markets compared to the same time last year. There was a decrease in overall transactions. In a move intended to improve customer convenience, we're increasing the number of independent dealer locations across our network. In the last 12 months, we've added nearly 1,000 new locations. In fact, for the first time in our history, we've eclipsed the 25,000 location count and the plan is to continue adding. This, in conjunction with the increase in the size of our truck fleet, we believe there's an opportunity to grow moving transactions. October results came in below trend. We're working for an improved November.

Capital expenditures for new rental equipment for the first 6 months of this year were $1.325 billion. That's up $169 million compared to last year. For the last 12 months, so the trailing 12 months, our gross fleet spend has been approximately $2.32 billion. If you net out equipment sales, it was $1.358 billion. I estimate that close to $640 million of the growth spending was growth related. We had another strong quarter for self-storage. Storage revenues were up nearly $22 million, which is about 10%. Average revenue per foot continued to improve across the entire portfolio by just under 5%, while same-store was up about 4%. We are seeing the cumulative effects of our rate increases flowing through to revenue. Our same-store occupancy decreased by 350 basis points in the quarter to 90.5%.

As I mentioned last quarter, in July, we took on an effort system-wide to increase number of available units at our existing locations by focusing on delinquent units. This effort did not affect revenue directly as we don't record revenue until it's collected, but it did have the effect of reducing our reported occupancy levels for now. Of that 350 basis point decline in same-store occupancy, about 220 basis points of that was related to removal of delinquent tenants. Net tenant move-ins, while slower than recent years, has picked up compared to where we were at last year, adjusted for delinquent units. During the first 6 months of fiscal 2026, we invested $526 million of real estate acquisitions, along with self-storage and U-Box warehouse development. That is down $208 million over the first 6 months compared to last year's first 6 months. During the second quarter, we added 23 locations with storage that translates to about 1.6 million new net rentable square feet. And we currently have 6.5 million square feet being actively developed across 116 projects.

Our U-Box revenue results are included in other revenue in our 10-Q filing. This line item increased $12 million, of which U-Box was a large part of that. We continue to have success increasing moving transactions as well as increasing the number of containers that our customers keep in storage, although the pace of growth for both slowed in the quarter.

Moving to storage operating expenses were up $19 million for the second quarter. As a percent of revenue, we improved compared to the second quarter of last year. The largest component of the -- one of the larger components of the increase is personnel, which was up $12 million, but that increased at about the same rate as revenue increase. Our liability costs associated with the fleet were up $23 million and fleet repair and maintenance, as Joe mentioned, was up $10 million. Regarding the liability costs. We've made progress on the self-insurance reserves from moving and storage. Over the last 6 months, we've increased our liability by $43 million. As of September 2025, cash, along with availability from existing loan facilities at our moving and storage segment totaled $1.376 billion. Supplemental financial information as of the end of September is available at our investor website, investors.uhaul.com under what we call Investor Kit.

With that, I would like to hand the call back to our operator, Angeline, to begin the question-and-answer portion of the call.

[Operator Instructions] Your first question comes from Stephen Ralston with Zacks.

I like to talk about the forest. Looking at the forest instead of the trees. I'd like to congratulate you on a record top line of any quarter in the company's history. Granted the second fiscal quarter is your strongest seasonal quarter, but nevertheless, it's a record [indiscernible] trees.

As we all know, the depreciation expenses have recently been a drag to the top line. I'd like to start the conversation by clarifying your method of depreciation. I think in the past, you've mentioned that you use accelerated depreciation now. But I've noticed that sometimes the depreciation is higher in the seasonally high quarters. Is there any component of usage involved in the depreciation scheduling?

Steve, this is Jason. So when -- for our rental fleet, we have 2 basic methodologies for depreciation. The first would be for our box trucks. And that's a dynamic depreciation model that depreciates faster in the earlier years have been slowed down over time. We hold those assets generally 12 to 15 years, and that schedule has not changed. But it does result if you have uneven purchases of box trucks, you can have that number either go up or down in a year.

The second part of the fleet is our cargo vans and pickups that we hold anywhere from 12 to 24 months. That's a straight-line method that is a little more responsive to what the resale market is because we sell them so much quicker. So what we're seeing today is a cargo van that would have depreciated at a certain level 3 years ago is now depreciating 2 to 3x that rate per month because of what we're seeing in the resale market.

When do you expect the depreciation expenses to peak on a quarterly basis? You have better insight into what your anticipated expense is the purchases are going to be and also the pricing.

So again, I look at it in 2 components. On the box truck fleet, I think our initial look into next year is we're going to be buying fewer of those trucks. I would expect the box truck depreciation to peak towards the end of this year, beginning of next year then start to trend down. On the cargo vans, whereas the price that we're looking to pay for model year '26 cargo vans is going to be coming down. That's going to be dependent on the resale market, and that's tough to judge right now.

So I'd like to think that we're peaking by the end of this year, and then it should maybe flatten out will start to come down. We are not increasing the size of that part of the fleet. So at least the total number of units subject to additional depreciation isn't growing.

Can I add there, Jason. I want to add that the question always is you take the hit every month, you take a hit when you turn the vehicle. And it's a bit of a guessing game. And so then we will routinely look at that and then mid-course make a correction because it's just how things work out. So we try -- we go in with what we think is a reasonable rate in depreciation with this last 18 last months, and it's really come clear here, the depreciation has been significantly greater. So when I look at this number, I had the depreciation and the loss on sale to try to understand what's going to be the peak.

And it's a little bit hard for us to forecast not consulting [ Jason ] here, but speaking from my personal opinion, I think we're a year away from the peak on the pickup of vans. But so much of this depends on how the new vehicles get priced because used vehicles just kind of are a reflection of new vehicle pricing. And if new vehicle pricing comes down, it could affect our assumptions [indiscernible] in depreciation.

A little harder question is -- could you anticipate what level of depreciation is going to be at the next trough? And to put it into context, in the beginning of the 2000s, actually pre-COVID, your level of depreciation on an annual basis was about $600 million. And actually, during COVID because you weren't buying more vehicles as you -- as many as you wanted, it actually grow below $500 million for 2 years. Now we're at a run rate of basically $1.1 billion of depreciation.

If you could get back to a trough of $600 million, the earnings this quarter would have tripled from what you reported. That's how much of an effect this has, given this run rate of over $1 billion in depreciation at some point, it should peak and then trough out. Do you have any idea where that trough would be dollars wise?

This is Jason. So I'll take a shot at that. So from when we went into COVID where we're at today, the fleet is at least 20,000 units larger and the trucks are costing more. So those are the 2 factors that are pushing the annual depreciation number up, right? If we were ever to get to a point where we bought the same number of trucks every year, we would our maintenance CapEx number would end up becoming our depreciation number over time. And going into COVID, I was -- at that time, it was quoting something $600 million for the trucks at least, not including trailers or the U-Box containers. Where we should end up is going to be much closer hovering around the $700 million to $750 million range, I would think, at a normalized number given the size of the fleet today, but it's going to take a little bit of time to get there.

That's very helpful. Last question on a completely different topic. I've noticed on social media. You have seen a lot of clips because earning some of your employees talking about day-to-day operations and innovations and equipment design. Is that a new effort of yours? Or have I just been missing it prior to this?

This is Sebastien. I think what you might be seeing a lot of is around our toy hauler, Stephen. Yes. I mean that's a real exciting opportunity for us. We've got a lot of really great pickup on that from really big automotive publications. And I think it's a market that we weren't serving as good as we could have before and is just a natural extension of 80 years of being in the trailer business. So I think there's a lot of excitement around that. I think public is starting to realize that as well.

The next question comes from Steven Ramsey with Thompson Research.

I wanted to ask a couple of questions on growing the dealer network you're optimistic on that effort. Can you share some of the reasons why you're optimistic? And what is the time line for gaining momentum on this effort as far as driving more moving transactions?

This is Joe. I'll speak to it. I think I'm expecting to see visible numbers by May, maybe before then, it depends how well I can get the organization to perform. Always, you're looking at market penetration. And when I segment out market penetration across various markets. I continue to see areas where we're lagging our own performance. I don't believe that the market is that different or the potential is that much different in one market or another. So let's say, eliminating Manhattan in places like that. But going to more communities, Denver, Phoenix, there's -- I think that there is substantial opportunity for increased penetration and dealers is our most effective way to enter that.

Over the last 30 years, dealers have hovered at just under half of our truck and trader rental revenue. Today, they're running maybe 3 percentage points below where they've been running. So I think we've got out of kilter about that much. Now nothing is certain, but I have significant indicators that tell me we've neglected this and whether -- so I think there's a nice increase here. And also for better or worse, we actually are a little bit over fleeted right now, which is why Jason reports we have a little bit lower utilization. So you see oftentimes in the past, I couldn't lose maneuver. I didn't have enough equipment to allocate. So today, I have equipment I can allocate. So to me, it's a big opportunity.

Now of course, if I can't do this, then Jason and other people in the company will insist we squeeze the fleet down a little bit in order to up utilization. These are just kind of ops and forces. I believe there's significant room in market penetration, and that's what I'm driving on. And we should see results by June, I believe. I'll see them sooner than that because I'll see different numbers than you see, but I believe by then you should see some results.

That's helpful color. Maybe thinking even further out on this effort to grow the dealer network. Can you talk about the long-term insights or goals as far as creating new owned U-Haul locations and the potential benefits of more U-Box warehouses in these markets if this were to come about, is this something 2 years out, 4 years out, if this comes to fruition?

Well, I've been steadily driving the whole company. The whole company has been steadily driving on increasing our storage and U-Box footprint quicker than our U-Move footprint. And I think that's because to justify a big company-owned operation, you to have suck in a fair amount of revenue, and that may not be available in markets where there's plenty of U-Box and e-store business. So of the stores that we've opened in the last, I don't know, 2 or 3 years, nearly every one of them is going to do more self-storage than it does. Truck and trade or rental revenue. And that would be, I think, a continuing pattern.

Okay. That's helpful. And then you talked about, as you described the slugfest in storage. Would you say that the competitive intensity there is equal to what it had been? Or is it intensifying further? And what are you looking for to -- that might show this is evolving to be a bit more healthy competitive environment than it has been in this recent period?

Well, Jason always brings me move in, move out rental rates for our competition. They quote that. And their move-in rental rates are massively below their move-out rates, which means they're bringing you in on kind of little bit of a over the zealous discount and then cranking the rate up. My experience is that offends a lot of customers, they would rather just be told about what it's going to cost them and then they'll figure into their budget. So that causes our people to point of sale to be quoting a first 3 or 4 months' rental rate that's going to be higher than what they're going to quote from the competition and 30% would not be a big gap. I've seen 50% gaps.

So this is, to me, is foolish. It sets up an expectation on the customer that we can't provide the product to that at those low rates, it's not economical for anyone. So -- but our competition, the big REITs primarily are dead set on that pricing mechanism. And so we're just -- it just kind of being a little bit of a slugfest and -- but overall, we're -- I think relatively, we're coming out well. It's a tough thing to know cause everybody does their information a little bit different, but I think we're coming out well overall. And I see a lot of runway ahead of us. As I said in my prepared comments, we're focusing a little bit more on breadth of coverage, the depth of coverage where I think due to their management structure, a lot of our REIT competitors are focusing more on depth of coverage than [ depth ], primarily because we're already in all these markets because of truck and trader rental. So we have just a little different strategy. I'm not saying it's a better or worse strategy, it's a little different, which is buying for me, I like a little differentiation.

Okay. That's helpful. And then last quick one for me. I know your activity in moving and storage generally tied to overall economic activity and life events. But in this time period with existing home sales being so depressed, I'm curious if you think in a recovery scenario on existing home sales, if that would be a wave that would lift the growth of one-way moves and lift new box growth even further, maybe just the general linkage of one-way moves in U-Box to existing home sales.

I don't think it will be enough of a boost that you'll be able to see it. No doubt, there's some moves there, but the transaction volume it takes to move that is pretty significant. I think that there's been a lot of consumer confusion or uncertainty. And I think as that becomes stable, my experience has been that we see a little more One-Way rentals and a little bit longer One-Way rentals, And we're not seeing that presently. So this is a pattern I've seen 3, maybe 4 times in my career, and it's -- I don't have a good way to estimate how long this will continue, but this has been a trend for a little while now. So we'll see. We saw just the opposite very coated. We got a little longer rental and a little more percentage of longways. It was strangely that turned out people were very eager to move.

So no, I don't think that home sales are going to be something that would be good for you to use as a 1 state to try to drive a prediction.

The next question comes from Andy Liu with Wolfe Research.

Yes. So I appreciate a lot of color around the depreciation here. I want to focus more on kind of like the cash side, right? So digging through your comments of the input cost being hired to get the new trucks in the secondhand market, not catching up to that. I just wonder on a capital allocation standpoint as you look at it today, how does the returns there compared to like money to spend post where, for example, the storage side on the development you guys previously called out, so a 10% yield on this. So just wondering when you think about the avenues of where you can deploy capital, how tested in the fleet versus storage compare?

I want to say one cautionary note, and that is what is the business cycle. And the problem is not the problem, but part of what you have to look at with the truck. It's a little bit longer asset than many people think. And certainly, storage is. So with that, I'll let Jason speak to it.

I was going to say about the same thing. So comparatively speaking, where costs are at revenues that today, the return on trucks has directionally gone down from where it used to be. But it's a combined product offering for us. And there was times when storage wasn't returning quite as well and the trucks and trailers carried the day for us. So I don't think we're going to -- because of -- just the current cost structure for a few years, but we're going to adjust the long-term strategy of the company, but we do have some work to get out of this cycle.

Okay. Yes, I totally hear you on that point there. So double clicking on the sort of moving side of business. You guys mentioned sort of the transaction volume side has been coming down. I'm just curious how that has kind of trended through the quarter like on a year-over-year basis, have things been year-over-year trend for, say, July to September? Has that been roughly the same through the 3 months? Or have things been trending better or worse throughout the quarter? Just want to get a sense of -- I get that the quarter is down, but just wondering how that trended, is it sequentially improving through the quarter? Or is it about to say the 3 months?

Yes, on transactions, we will have a good month and then we kind of receive a little bit. And I think the fourth quarter of last year, the first quarter of this year, that 6-month period, we were -- we had started to trend up in transactions. And then this quarter, we took a little bit of a step back. We saw a little bit more of that same sort of step back trend in October. So it's been the last couple of years, it's been tough to get the transaction number to turn.

Got it. No, that's helpful. And then my last question, kind of shifting to the storage side. I know you guys called that last quarter that you're working through getting some tenants out who aren't paying. So I see there's some impact on the occupancy here. Just want to get a sense of is that -- have you guys gone through the bulk of that and you set up to tackle those days and get occupancy up? Or is there like still a good amount of additions that you guys have to do on the storage front?

Yes. This is Joe. We're through that, and we're now in the cycle of what I want us to be, which is now re-rent those rooms all to paying customers. And we're making some gains there. Of course, going in the fall is the wrong time to execute this maneuver because overall demand isn't as strong as it is in the spring. So seeing gains right now, I think we did the right thing, overall, revenue is up. So if you measure money, which a lot of us do, the money is working up correctly.

Now it also, psychologically, with my managers opened up more opportunity. And I think that, that's going to have a subtle but very positive effect as we come into spring, just how -- the winter is always a little bit goofy, but it's always down a little bit, but sometimes not as much. So we're going to continue to drive on this. And I think we're through it. And it was the right move and now the question just is how fast can we drive revenue.

The next question comes from Jeff Kauffman with Vertical Research Partners.

A number of my questions have been asked, so I'm going to just kind of go in a different direction. I know you buy most of your vehicles domestically, Ford and General Motors, but have you seen any impact to vehicle prices or vehicle costs from the tariffs that are out there?

I'll try this and we buy some Stellantis fans that are assembled in Mexico. We buy some General Motors products that are assembled in Mexico or final assembly. These parts come from better than I do come from all over the planet. So they would be who we thought we would see the worst impact. So far, they've been picking their way through that minefield successfully. People I would say in other words, when it reflects down to us, and we see the net cost, they're still not clear out of the ballpark. Going in, we thought we might see the GM product built in Mexico be 15% or 20% noncompetitive. We're not seeing that presently. It's -- I don't know how the numbers work at their end. But so far -- but Ford has a little advantage here. I think they just -- they advertise that they have hired domestic content they're a little bit less influenced. But here again, some of their raw materials come through this foreign supply chain, and it's very complex.

In speaking with people, they all are dreading it, but none of them have something they can make stick with the end user. Does that make sense. And this could change as time goes on. I'm sure they all hedge stuff, did a whole bunch of things. We're kind of living on that right now.

Now does this show up primarily in the cost of your vehicle purchases and CapEx? Or does some of this show up in repair and maintenance cost for you?

It's going to be primarily in new vehicle costs. Although parts prices are going up. That's just a fact of life. And a lot of these components, let's pick an alternator, many of those are made non-domestically, they're sourced on domestically. And so they're going to encounter some tariff difficulties.

In the big number, it's not showing up yet, but everybody who's in the purchasing end of this is very wary and constantly trying to find some way to wiggle and hold prices a little longer. And we've put a lot of pressure on suppliers to hold prices. And again, I think a bunch of them could see this, and so they hedged their situation somehow and have kept the price increases way below these. You see numbers quoted on tariffs of 20% and 25%. We're not seeing that come through. I don't know, Jason, do you want to address that?

No, I haven't seen that either. Jeff, thanks for initiating coverage. Also, we appreciate that.

The next question comes from Jamie Wilen with Wilen Management.

I just wanted to touch base on U-Box a little bit. First, when does it come to the point in time where it has to be its own segment. I thought it was 10% of revenues. I think we're approaching that. But can you discuss U-Box is positioning? Obviously, the revenue growth in new box is far greater than the rest of the company. So what are the dynamics there that are causing U-Box to have such large increases and are they gaining market share, which -- and lastly, as their revenues increase, should they reach an inflection point on operating profitability.

Jamie, this is Sam Shoen. Can you repeat the last part of your question one more time?

As revenues are gaining and growing on U-Box, is there an inflection point where profitability dynamically moves forward?

Got it. I'll let Jason answer that last part, but I'll just touch on some general U-Box subjects. It's good to hear from you. Thanks for the questions.

As you noted, we continue to find success in U-Box. We had a very hot summer and then ended the quarter with a little bit of a whimper. But compared to the same period last year, in all our big revenue components of U-Box, we had increases on a percentage basis and a gross basis as well. Those are shipping income, storage rent and delivery income. Those are the real drivers for U-Box revenue. When you think about U-Box, expenses freight is where you need to focus on, those are under control. assets aren't limitation right now, plenty of containers, plenty of warehouse space, plenty of delivery equipment. You mentioned some of the things that are different about U-Box. A lot is the same. U-Box is a hard work business, just like the rest of U-Haul, but we're still poised for it to be an exciting cornerstone of the future. Does that help give you some color?

Do you see us gaining market share? Are we having a greater percentage of the business that's overall there? Or is the market for that type of moving growing significantly as well?

No, we're gaining market share. We're -- we've got our eyes set on becoming the market leader. That's our goal. There's no doubt. You talk to anybody in the competition we're making their life of living hell. And we're gaining market share unquestionably.

Living hell is good. And as far as the profitability inflection point?

Jamie, this is Jason. So the interesting thing about the U-Box is it has the profitability profile of both U-Move and U-Store, right? So on the moving transactions over the years, Sam has made great strides in the logistics side of the business and locking down those costs and being able to quote. So I think we're on actual over the road, getting boxes from 1 day to another through either over-the-road carriers or through our customers delivering the boxes for us. I think we're at a good margin level there.

So then the remaining piece of the puzzle where we can really take off is getting these -- more of these boxes in storage. And the overall occupancy in our facilities is a fraction of where we're at with the self-storage product. So there's a big upside on that as far as profitability explosion. My rough estimate continues to be that we're typically on a quarter-to-quarter basis within a couple of percentage points of the overall moving and storage margin. But the more boxes we feel, just like the more storage rooms, we fell, our margin profile is going to increase.

Okay. And does the length of time that a U-Box is in storage, has that changed at all over the last year or 2?

No. Generally, it's very similar to what we're seeing in traditional storage, which I think is a positive.

Okay. Good. Last question about capital allocation. Obviously, we're still having a whole bunch of self-storage, which does not contribute to profitability for a while. Would you ever think of selling off a bit of the self-storage that might be not our target markets and not our larger areas, so we can sell those off at full price to be able to increase where we do have some market strength and get some greater synergies?

I'll take that one. With very few exceptions, the answer is no, but partially because our existing footprint is we're strong in Wyoming. We're strong in North Dakota. So that's compare and contrast, let's say, to public. Well, public isn't so motivated in those 2 states because they don't have operations. And so for them to initiate anything, it's -- they have to make a big push, not to say they won't eventually make that push, but they have different priorities. So we have some locations that I would say that -- well, actually have some locations we bought from either public or extra space because they were fringed for their the way they look at the market, but not so fringe for us. And I don't think that's a good strategy for us at this time. We're not totally stressed. And typically, not always, but typically those locations have a decent return. They're not disadvantaged. If you get a lower rate, typically, you have a little lower going in cost.

Now that's not true with new construction of new construction. You'll be in nowhere [indiscernible] it costs of outlook construction costs in every metro area. So -- but on existing storage, you don't end up paying -- you pay a little discount in the market because it's basically NOI driven or rate driven.

I guess the question is the public storage wanted to go into Wyoming, wouldn't it be to their advantage to buy a leading participant in the market and pay full price to get there?

Yes, then that is what they will do, they will do that. Absolutely. You can count on that happening. I don't -- they don't share anything with me, obviously, but...

It would seem like a logical thing that if we could get full price for a state or 2 and then utilize those funds to go into other areas where we could get greater returns because we're selling at high prices and buying well.

My experience is that it doesn't work that way. Now you got to adjust for size of the location. Smaller locations have marginally less contribution just because that's the nature of rents. But if the locations are similarly sized, my experience is that we will do as well in a, let's just say, a Wyoming than we will in California. And sometimes we'll do better at Wyoming than California because right now, storage is so hot, you go in even tertiary markets in California are priced really, really strong for sale market. So I mean, I don't know. I'm sure 1,000 places a year pass in front of me, maybe more for Jason and then our real estate and field people more. You can kind of get a feel for the trends on this. So I don't think there's an opportunity to sell in those areas and reinvest in more densely populated areas. No, I don't think that's a good idea.

Last self-storage question. People have talked about the overbuilding of self-storage over time, yet our revenues per foot are up nicely in this past quarter. How do you explain that we're able to do that in a market that's theoretically saturated?

Well, a great deal that has to do with how well you manage at that level. At that level I was in a store the other day, and of course, we're doing trucks and storage and in walks a customer with a Starbucks and hands it to manager. I think what the hell is at. So I asked him well, that person's storage customer, she brings me in Starbucks every boarding. Well, [indiscernible] or the story true, okay? Obviously, there's more going on than just renting the room. They have a personal relationship. I like to say that people rent storage from other people, and they rent trucks for companies.

So not 100% true, but it's more true than false. So as we get a better quality manager and a manager that just simply is it's just a better quality, more service oriented. We're able to squeeze a little more rate out and we do a decent job of surveying rates on a repetitive basis, sorting for where were in the mix is there a rate opportunity. We essentially never do it across the board rate increase. It's always very specific to a type of storage or the size of storage done. And if you just keep at that regular, you'll kind of sort to what is the optimum pricing can get in that market. So I'm overall, proud that we're able -- we've been able to get a little bit of increases to the storage industry has struggled with increases lately. We're able to get them. But it's hard thought. But I think [indiscernible].

The next question comes from Stephen Farrell with Oppenheimer Close.

I just have a quick question about box trucks. Have you seen any relief in the pricing from manufacturers yet?

This is Jason. I'll start. On the box trucks, the percentage increase over the last couple of years has been a little more to date than what we've seen on the pickups in the cargo vans. That's really where the more material issue has been. We're seeing some relief on those.

But if you were to take the 10-year average of what inflation was on those units, pre-COVID to where we're at today, I would say that there's still 3,000 to 3,500 more expensive than what they would have been had we've never gone through this inflation cycle. On the box trucks, it's -- don't get me wrong, they're still up, but maybe it would go from, say, a 4% average annual increase to maybe 7% to 8%.

I'll give a slightly different answer to that question, which is Ford and General Motors, our primary suppliers have been beset with costs that are staggering as they've attempted to and just to a political agenda that didn't match the realities of the marketplace. So they've committed God knows how many billions of dollars and disrupted God knows how many supply lines laid off tens of thousands of internal combustion engineers and they have been attempting to recover those losses on customers like ourselves or the retail customer. And that's just the position they're stuck in.

They have now done in about pace. I think you could see that over the last 6 months. Even [ Mary Barra ] now recaps this stuff. And it was -- it's been a political agenda all along. And not a manufacturing agenda, but they're stuck with -- they actually build things for money. And so they've had to overspend and overinvest and they're looking for somebody to lay these costs out on over. If you look at this over a 30-year cycle, you can go to the manufacturer and say, "Hey, you want to complete a second shift". We can buy so many units. And we can all talk reasonably. That really has -- they've been precluded from doing that, but they just now, I would say, in the last 6 months have shown a little more willingness to let's all figure out how a bunch of us can make a profit as they back away from these unwanted and unneeded costs.

So -- and that goes clear across the line on transportation from pickup trucks up through Class 8 vehicles. Everybody is seeing the same dilemma and different people are in deeper. We're very lucky in that. We did not -- we did a lot of poking around, and we did plenty of test trucks, but we didn't go and commit a significant amount of resources to alternative means of propulsion. And although we've been compelled in, say, California, you can't build the building unless you put an electric chargers. No one is going to use them, but you can't build the building. And these costs are all inflationary. And to the automakers, there's so much -- they're covered up with them. But they're trying now, and we're going to see, I think they could hold prices constant for 2 or 3 years and I wouldn't hear a [indiscernible] that they heard that from me, I make myself very clear to it.

And given that they moved away from ICE vehicles, how long do you think it would take for them to take it back and increased supply?

They're already there in many models, and they're going absolutely as fast as they can make it happen because they've now admitted internally. Again, this was not a customer-driven agenda. And in capitalism, ultimately, the customer drives the market and the customer is driving away from it on anything that's utility vehicle. On passenger cars, I have no comment. I don't keep tracking that, but parent electrics are very successful there. But in utility vehicles, something like what we rent their total non-starter and have been -- and everybody has known it. It's been a dirty little secret, like I said, but nobody wanted to raise their hand because the political repercussions are telling the truth, we're terrifying to most people.

So the cat's out of the bag now, and I think people will speak freely about it. I won't be the only person in a transportation company who would express these same thoughts.

And just with moving, the competitors are facing the same problems that you guys are having just with increased costs of new vehicles and you guys were in a better position before the cost went up. Do you think that's led then to sort of cut prices and keep utilization high?

No. I'm doing a round of that in the middle of one right now, trying to see if we can ascertain what's really being priced in the market. And we've seen some discounting, but there's always some discounting. And when we do a price check, we don't just survey the computer and see what the computer shows they say they're charging, we attempt to actually deal hard like a customer would like it was real money and see we can beat them down to. So they're a little bit flexible. Like experience so far is they're still higher than us so that the consumer net-net. In most applications, we'll be very competitive, not in all applications. Nobody can be in all applications.

And year-over-year, I know that fleet maintenance was up $10 million in the quarter compared to last year. Operating expenses were up about [ $50 million ], I think. I know that you had greater insurance and liability expenses in the last 2 years. Are those still big drivers of the increase? Or is that leveled off?

So we -- are you talking about the 6 month numbers? Or the...

Yes, 6 months.

Yes. So for the 6 months, personnel was up about $32 million, repair and maintenance, $15 million and liability costs, $40 million. So yes, those are still the largest components, those 3. Everything else kind of a much smaller scale.

There are no further questions at this time. I will now turn the call over back to the management for closing remarks. Please go ahead.

Well, we look forward to speaking with everyone for our next quarterly earnings call that will be in February. Thank you very much.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.