Good morning and welcome to the AMERCO Second Quarter Fiscal 2022 Investor Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sebastien Reyes. Please go ahead.

Good morning and thank you for joining us today. Welcome to the AMERCO’s second quarter fiscal 2022 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 AMERCO’s business and future operating results, please refer to Form 10-Q for the quarter ended September 30, 2021 which is on file with the U.S. Securities and Exchange Commission. I will now turn the call over to Joe Shoen, Chairman of AMERCO.

Thanks, Sebastian. Well, we had another good financial report. Most of my teams have meaningful direction and are hard on their objectives. Attracting and retaining team members remains a struggle. We are blessed with many long-term persons and a company work ethic that is attractive to many people. As I have related before, General Motors and Ford are unable to supply U-Haul with replacement trucks in the type and quantity we desire. As a result, maintenance expense must increase. This will also cause some blips in CapEx when replacement units do become available. I have a push on this winter to bring bigger U-Box warehouses online and to expand the number of warehouses. I expect some results by late spring. We are also working to increase the size of our U-Box container fleet and delivery truck fleet. Our U-Box business continues to grow. We are continuing to expand our inventory of self-storage units. Ramp-up of existing units remains strong. I am working to accelerate new product coming online. Perhaps more than ever, our continued success is due to the hard-working nimble teams we have in every phase of our organization. Should you visit one of our locations and witness a team member going above and beyond, give them a word of encouragement. They need it. I value your continued support. Jason will now walk us through the numbers.

Thanks, Joe. So yesterday, we reported second quarter earnings of $20.90 a share as compared to $13.58 a share for the same period in fiscal 2021. Throughout my presentation, the majority of the comparisons are going to be for the second quarter of this year compared to the second quarter of last year, unless otherwise noted. Starting off with equipment rental revenue, we saw an increase of nearly 27%. That’s approximately $248 million. The additional revenue came from a combination of growth in transactions and increased revenue per transaction, which was due to both more miles being driven and average rental rate per mile. We have seen growth in U-Move revenue continue for the month of October. We are taking in new equipment from our manufacturers but, as Joe mentioned, at a rate slower than what is desired. We’ve also slowed the number of trucks that we’re retiring and selling. Capital expenditures on new rental trucks and trailers were $548 million for the first 6 months. That’s up from $395 million in the first 6 months of last year. Our original plans were skewed heavier towards heavier growth in the first half of this year. There is still a possibility of having a relatively – having relatively good acquisition activity over the second half of this fiscal year. However, since we initially set our fleet plan before the year started, given customer demand, we would have increased the size of our orders to be more in line with customer activity had the equipment and available to purchase. Our expectation for net fleet CapEx in fiscal 2022 is still around $550 million, but that’s subject to manufacturer availability and quite frankly, could go up or down. Proceeds from the sales of retired rental equipment decreased by $10 million to a total…

[Operator Instructions]

Debbie, I will go ahead and ask two questions that have come in beforehand from Craig Inman of Artisan Partners. The first question is what influence, if any, of course, is the constrained production of new trucks having on truck rental pricing? Would management assume pricing weakens as production comes back? I am sure this is too simple an assumption, so thoughts on how management views the current pricing environment would be helpful.

Alright, I will take that. Pricing is – rates are up. I had a customer push back real hard on Monday. They paid $669 for rental that 5 years previously they have done for $197. And the press feel pretty – very thoughtful that I had overreached on the pricing. I reviewed it and re-priced at a lower number. But what I found was the budget was $900-plus and is exactly $1,000 above our rate on the same rental. So, of course, my pricing people said we are already discounting. So, it’s kind of an uncertain journey here. Of course, our cost of equipment are up and they are going to continue to go up. We are in some kind of an inflationary cycle, but I don’t understand any better than any of you. But we know from our vehicle suppliers that they are going to be passing on considerable costs over the next probably 2 years. So, I think it’s going to have some impact on pricing, and they probably already has had some impact on pricing. I don’t believe that the prices I saw from this particular transaction from either our competitors made any sense whatsoever. So, I didn’t give it a lot of weight, very frankly. I think we still have a pact with the customer to try to be a low-cost provider of household moving storage services, and we want to try to honor that. But will prices come down as availability increases, I doubt it, because I think what we will see is inflated costs, and that’s going to mitigate the increased availability. Now, I obviously don’t give certainty on this, but what I am seeing on – with all our various vendors is that there is more cost increases on the horizon. And we have been served up a lot of price increases that, of course, we are pushing back on sometimes successfully, sometimes not. So, that’s kind of an overview of it.

Great. And then the second question, Jason, you kind of alluded to this. Cash is stacking up on the balance sheet, which is positive. What is management’s plan for all that cash?

So our goal has been to begin reinvesting back into real estate. So, we had made a big push several years ago with the infusion of capital from the sale of a portion of our Chelsea, New York location. This time around now, we have entered into this private placement type debt, which is 8-year, 9-year, 10-year and 12-year maturities with the idea that this is going to be working capital to help support the next round of development for the organization. And this next round of development will look a lot more like ground-up development versus the last time around, which was largely conversions with Kmart properties. So, we thought that this type of funding better fit that type of property profile.

Okay. The next question in the queue comes from Jamie Wilen with Wilen Management. Please go ahead.

Hi, outstanding quarter. It’s amazing what the hard work and effort produces in the outcome. On the self-storage side, I am enthused with your increase in occupancy rates that have gone up literally 500 basis points from March to September – March to June and June to September, is that continuing? Has October shown increased strength? And it looks like it’s kind of a straightforward progression.

Well, I am going to say to your question, yes. The reason is, is we are not bringing what I consider enough new product online. We are absorbing the product faster than we are bringing it online. So, the party will be over if we don’t bring more product online. So, we run a real hard to rooms rented, Jamie, instead of occupancy percent. Of course, we have to have enough occupancy to pay our bills and everything, but we have to see units rented grow consistently. And we don’t have enough in inventory to continue at the present pace. No. The good news is that it will raise occupancy percent, but the bad news is it will constrain growth. So, we are trying to balance that out. It’s a little inexact because normally construction is herky-jerky, but with all this other nonsense in the economy, it’s worse than it was 5 years ago. So, it’s very – all your plans keep falling apart and you put them back together. But I expect by late spring to have some more products, significant more products online, and that might cause occupancy to slip a little bit. All along our occupancy, and Jason has tried to present this, we have two kinds of occupancy, the stores that have been around a while and then whatever we are able to bring online. So, at this time, we are doing a lot of Phase 2 build-outs. You are aware of the Kmart stores we have. Many of them, we only built out 50%. So, we will and have been and well through the rest of the winter continue to build out the rest of them, which will make each property cash flow better and be better provide enough money that we can afford management on-site. So, that part of the picture is pretty easy to see. The part is about bringing total round ups on lines a little more murky, although we have several that are half built at this time, which means they will be done by late spring, no doubt. So, that it’s kind of – you and I see it just a little bit different. I try to appreciate your view. My view is I need more inventory so I can continue to grow.

As occupancy rates obviously are improving for everyone in the industry that goes hand-in-hand with realized rental rates, and as I look at public storage increase their year-over-year rental rates by 13%, LSI by 14%, have your rental rates increased by similar numbers?

No. And a little bit of what they are showing is a mirage. They cut prices. Well, they cut prices, March a year ago and March 1.5 years ago real solidly. We never cut our prices. So, you have to do a 3-year trend on them to know what is comparable. I don’t know what their comparable is on a 3-year trend, but no, we are not seeing something like 13% increases, no.

Okay. In the 10-Q, you talked about other revenues of U-Box being the most significant contributor to a $50 million increase. Was it – am I reading that correctly?

Yes.

And could you give us a handle on what U-Box revenues are today?

It’s by far the largest component of that. It’s not yet 10% of the total revenue that would require us to break it out. And as I mentioned before, since there are no other public competitors in that space who report any sort of information, we are going to continue to blend that in with our other revenue number until it’s required to be broken out. But it’s starting to be a big enough number where you can kind of see the movement there because what else is in other revenue would be interest income on our short-term cash. It would be income from revenues from some of our ancillary programs like Moving Help. So, U-Box is far away overshadows what’s in that category right now.

And is there – their percentage increase greater than the corporate increase at this point?

Yes.

And historically, you said their margins are all in pretty close to historical corporate margins for everything else. Is that still the case?

It’s that game of how we choose to allocate expenses and how we have that sort of internal tracking setup, we allocate very heavily. So, it’s typically running a couple of points back. But at this point, it’s certainly – as we are underwriting new projects, we are finding that the inclusion of the U-Box is certainly helping the economics of our overall moving and storage offering.

Okay. And when you – I see all the new self-storage being opened, you really seem to have a much greater U-Box component or as you build those, you make sure you have room for U-Box. Does that give you a competitive advantage in there? And is that fueling the growth in U-Box at the moment?

I would say yes. But ultimately, it’s just consumers want it. We are going to try to get it to them at a fair price. I mean there is people who want that kind of a move and we just need to honor their requests. It’s a big country. There is a lot of markets to get this into to where you could say you really have it. I think I could say today that no one has extensive a network as we do in place. But our work is not as extensive as I can see it being. And the more we get a network, the more the customer sees that as a viable alternative. So, we have to continue to establish a physical presence in a number of cities and towns. And I think as we do that, we will see the business continue to grow and hopefully, grow faster than the truck rental part of the business. Truck rental is much more mature relative probably. There are no accurate numbers on market, market share and those things. But just from my experience is that there is more – there is a lot of room to grow in the containerized moving business.

Okay. And lastly, Joe, in Canada, while the business is very, very profitable, the profit margins are not as great as they are in the States. Is there anything that you can do in the future? And you don’t seem to have much of a build-out in self-storage in Canada. Is – what will you do in the future so those margins in Canada can approach the U.S., or is that not possible just because of the logistics up there?

I think it’s possible. Everything is a little bit different and it’s – its own country no kidding. They are very proud of that as we are of our distinct characteristics. We are – we don’t have as strong storage presence relative to our unit presence. Until September of this year, I was prohibited from going to Canada for almost 17 months. That had the predictable effect, okay. So since then, I have been able to get into Canada and my other management personnel have. And I think we have got Canada running hard and aggressively. But before that would have any impact on product availability is probably 18 months. So, maybe March of ‘23 before you really see this stuff really percolating through. But we are hard at it. We understand the deal. The basic consumer wants and needs are very similar in Canada and the United States. It’s a question of getting up there and getting the product presented.

Got it. Okay. Outstanding number, great job.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

I just want to thank everybody for their continued support and repeat my request. I hope you go into one of our stores from time-to-time. We are only as good as our last visit, which when I say that I always cross my fingers because, of course, it is just that simple. But if you go into one of our stores or when you go into one of our stores, you see somebody doing a good job. Tell them you are an investor and you appreciate the work they are doing. We are counting on them. So, I thank you. Look forward to talking to you again in 90 days. Sebastien, any closing comments?

We look forward to speaking with you in February. Thank you everyone.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.