Good morning. My name is Laura, and I will be your conference operator today. At this time, I would like to welcome everyone to the U-Haul Holding Company Third Quarter Fiscal 2024 Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Sebastian Reyes, you may begin your conference.

Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company third quarter of fiscal 2024 investor call. Before we begin, I’d like to remind everyone that certain of the statements during this call including without limitations, 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 risk and uncertainties, some of which cannot be predicted or quantified. Certain factors could cause actual results to differ materially from those projected. For 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, 2023, 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.

Well, thank you all for joining us again for our quarterly report. There have been few positive signs in the consumer demand for either truck sharing or self-storage rentals. Our U-Box continues to grow, but it is simply too small a part of the total market to be considered as an indicator of moving and storage demand. We are making some modest progress in backfilling the voids created in our fleet by vehicle manufacturers unwillingness to build sufficient truck product basically since the beginning of COVID. This will take several years to work its way completely through the fleet assuming someone will build trucks. We continue to build and buy self-storage. I believe the right locations managed over a period of years are a good investment for the company. Everybody has their own opinion of what’s going on in this market. Rising costs continue to pressure U-Haul and our customers. We are often unable to accurately predict future costs or to hedge them. My strategy is to try to absorb all legitimate costs into the present period rather than try to postpone them into an uncertain future. Our insurance subsidiaries are solid. Mark Haydukovich, the President and Chairman of our Oxford Life Insurance Group, will be retiring this quarter after 45 years of leadership for this company. Mark will remain on the Board of Directors. I’ll now pass the call to Jason Berg for some analysis of the numbers.

Thanks, Joe. Yesterday, we reported third quarter earnings of $99 million compared to $199 million for the same quarter last year. This translates to earnings per share of $0.51 for non-voting share this quarter compared to $1.02 per non-voting share in the third quarter of last year. Beginning with equipment rental revenue results compared to the third quarter of last year, we had a $59 million decrease, which is about a 7% decline. Over the last 18 months, we’ve had a $379 million decrease in U-move revenue, giving back a portion of the $1.4 billion of increases we experienced the eight quarters before that. To give you a better sense of how much of those revenues we’ve maintained so far compared to the last quarter of the pre-pandemic called the third quarter, which ended December 31, 2019, we’ve increased our third quarter revenue results by over $218 million third quarter two years ago to today, or on a compounded growth basis, I’m sorry, four years ago by nearly 8%. Average miles per transaction continue to decrease as customers are using our equipment on shorter mileage moves. On a positive note, whereas transactions for the nine months are down a little over 3%, for the quarter we were down just over 1%. And in fact, while we still had a revenue decrease in the month of December, transactions increased around 1% in the month. Unfortunately, we lost a bit of momentum in January as our results were undoubtedly affected by tough weather. Capital expenditures on new rental equipment for the first nine months were $1,350 million. That is a $334 million increase compared to the same period last year. We’ve increased our fiscal 2024 full year net CapEx projection from $870 million to approximately $930 million. So that’s gross purchases net…

Thank you, sir. [Operator Instructions] Our first question comes from the line of Steven Ralston from Zacks. Please go ahead.

Good morning.

Good morning.

Good morning.

I actually only have one question, and I’ll preface it by saying the top line to me is roughly in line with expectations. It follows what management has been saying, and what I also believe is that you’re still on your historical growth rate after the blip up that caused by the pandemic. And given the economic environment, it’s consistent with that premise. It’s something I mentioned in the last earnings call. I have a quite detailed earnings model, and everything seems to be in line except this one particular metric that I monitor, and that’s looking at the operating expenses for moving and storage, and it’s the margin for that. So you divide it by the revenues of the self moving equipment rentals, and it’s popped up considerably. And I have not been following U-Haul for a very long time, only five years, and it’s the highest margin or level of expenses relative to revenues in the previous five years, I looked at the 10-Q, and you do mention it. Its – you attributed to personnel costs, property taxes and building maintenance. And as you just said, property taxes only went up $4 million, which doesn’t account for that increase in margin. So I’m sort of concluding it’s in personnel costs. It seems like it’s inflationary in nature, and I just like you to dive a little deeper into these operating expenses and what’s driving this increase, because the third fiscal quarter is relatively a clean quarter, given its seasonal slowness relative to some of the others. And it just kind of sticks out at me that this operating expense number is accelerating higher than normal.

Well, I’ll start with that. This is Jason. So first, our largest expense, personnel costs, that’s been more of a function of the decrease in revenue. And there has not been a coincidence decrease in personnel costs. We’ve tried to become a little more efficient at the home office with staffing, and the headcount this year is only up about 2%. So we’re not growing the size of the personnel so much. That’s more a function of the revenue just has been coming down, and we have the capacity for more business. The repair and maintenance this quarter compared to last year is down. If you were to go back four years, it’s up probably $70 million on a quarterly basis. So that’s still higher than what we would expect. As we put on the new equipment and you see the depreciation expense claim associated with the new equipment, you would normally expect them to see the repair and maintenance come down and the utilization of the fleet increase. And both of those have been lagging this time around. Then I did point out in the comments there are about a little over $17 million of what I would say are kind of non-recurring costs in this quarter. But I think you’re speaking to a trend a little bit more than just this quarter.

Yes. I mean everything else is – the quarter is actually pretty good considering the environment and what you’re dealing with. I’m just looking at this personnel cost. Well, I guess it might be something else. The 2% is that the headcount or is that the expenses? In other words, you might have to be paying with employees a higher level of compensation in order, in environment.

That was headcount.

That was headcount. Okay. Are these compensation going up higher than usual?

I wouldn’t classify it, higher than usual. It’s been going up the last several years on a per hour basis. I think for the nine months, I think we’re up somewhere close to $8 million to $10 million on medical benefits and the rest is wage activity.

Okay. Well, thank you for answering my question. And all in all, good quarter. I just have a little concern about the expenses. Thank you.

Thank you.

Question comes from the line as Keegan Carl from Wolfe Research. Please go ahead.

Hey guys, thanks for the time. I guess I’ll start with a question I asked last quarter too, but just trying to think on a like-for-like basis, what you think the self moving equipment rentals would have been down if you removed the new stores, you would have added year-over-year. And I guess more broadly, how does that compare to the prior quarter? Are you seeing any sort of sequential improvement?

I don’t know if Jason has a number, I would say probably 1% or less. That’s a very – its – you can’t get as hard a number on that as you might think you’d be able to get. But – so kind of another way to phrase that question is, did the new stores cannibalize same-store sales or were they additive? And I think they were probably about half the revenue they generated was additive. So that’s going to be kind of my – but I can’t give you a hard number on that. But that’s something of course, to be concerned of. As you know, we also go to the customer via what we call a U-Haul dealer and so trying to balance total revenue, and then the source of that revenue where the customer encounters the product is of course, a concern and something we watch. And stores did a little bit more of the business than they did a year ago. So in a sense, you could say they cannibalized a little bit into dealer business. So to – if we had stripped the stores out and hadn’t done them, I think we might have seen a percent maybe. Maybe not that much. I don’t know, Jason, what do you think?

Every couple of years we do a study of this to see what happens when we put a new company location in and the effect that it has on dealers. That hasn’t been done now for a couple of years, but what we have found historically is that the entire market ends up coming up after we put a company location in. So my generalized response to that is it doesn’t – it shouldn’t have a big negative effect. And I haven’t seen a market where we’ve put a company location in where the overall market has gone down. Its always – everyone I’ve ever looked at, it’s always gone up.

That’s really helpful. I guess shifting gears just specifically in the self moving business in January, I know you mentioned it was – it didn’t have an easy month, but also weather related. I guess I’m just curious, maybe as we work through that, are you seeing any incremental improvements? I know it’s early in February, but just trying to get a better feel for, I guess, how you’re expecting that portion of the business to trend throughout this quarter.

Of course, hope springs eternal, and of course, anybody who tells me the weather caused them to be down in business basically gets a tongue lashing. So we’re not relying on that. But if you – I think that, that, that we really did have some of that. We had a pretty decent first 10 days of February, but February is another one of those months, the son of a gun. Every six or seven years, we get slaughtered either in January or February. We got slaughtered in January. Could we get slaughtered in February? It still could happen. California had just had another run of nasty weather. But so far I’m – but again, I’m hopeful constantly. So I may be the wrong person to say, but it doesn’t look like there’s anything negative in the market other than weather. In other words, there’s not a competitive force happening. People, as Jason commented, are driving fewer miles, and we’ve seen this over 40 years. When people are uncomfortable with their economic certainty, they tend to drive our truck shorter distances. Its – we’ve seen that repeat and repeat. And there’s a some kind of a little malaise, kind of over consumers heads right now that I don’t have an explanation for totally. But until that kind of turns to a little bit more positive view. I don’t expect them to drive more miles. Now, I don’t think we’re losing long rentals to competitors. We look at those kind of things. We don’t see that happening. We just see that people are just a little hesitant. And when they get that way, it’s kind of logical. They don’t want to move as far. They don’t want to – they’ll still move because they got married, but they just don’t move to a distant city. So all these things that drive business, these life events, they continue on, but they’re not quite as adventurous as they might have been when they were more – they just felt more positive about their circumstance.

In this case, if I could just – I think people’s definitions of slaughter might be very – for us…

That’s not an accounting term. Okay.

Probably closer to say like a 5% or 6% decrease.

No, that’s really helpful. I guess, one specifically for Joe, the press release, I actually thought the commentary was pretty positive in the beginning. You mentioned that you’re seeing pockets of modest growth in certain markets and product lines. Just maybe go into some more detail on this. And then what markets in particular you’re seeing improvements in?

Well, it’s kind of a red state, blue state analysis about the long and short of it, probably, I think we’re probably the same as every other business that restaurants will tell you the same thing. So where we have – let’s just take Tennessee help, Tennessee is just a wonderful place to do business today. And that just what just what it is and I think everybody sees that and we’ll see how it goes. We kind of end up reflecting it. So you see someplace like Tennessee and you think, well, good, let’s push ahead. But we don’t always get opportunities, don’t always present themselves only in the better markets. I also am seeing a lot of – we’re going back through and sorting back at a very detailed level. Where do we have the equipment, where do we have the outlet? And population is still shifting in this country, not like it did during the pandemic, but people are moving around. And as you know, there’s a tremendous amount of inborn migration. And these people are creating new – basically new pockets of manatee, or whatever you want to call it. And so we need to keep adjusting our basis to market to those people. We largely do that in the initial phases with our independent dealers because they’re in that market running a landscaping business or something else. And so they make a good combination with U-Haul. But then we’ll start to, as those communities become a little more established, we may go ahead and put a company operation in that area. So other than just saying, which nobody wants to hear, red state, blue state, I would just say it’s communities growing that maybe we weren’t aware of last year. I get my best information from what we call our local traffic. We have 200 traffic offices across the country and the people there see trends first. They see them and they try to alert us and say, well, this looks like it’s going to go positive. Of course, Florida has done great. Texas has done great. I mean it’s about what you’d think. I would like to say that we had some marketing initiative that was catching fire and I don’t think we have a particular, if we do, I’m not aware of it. I guess what I’d say other than equipment distribution with us, it’s so important to have the equipment where and when the customer wants it. So just because we own the equipment doesn’t mean it corresponds to where demand is. So we have a big operation trying to get that constantly trying to get it better. And it’s a constantly moving target because next week we’ll have tens of thousands of trucks in a different spot than they were this week. So you’re constantly trying to re-optimize that.

Maybe just shifting gears to storage here. I guess, big picture, are you seeing any change in your average length of stay? And I know rate increases that are being sent out are obviously topical in the storage industry. I’m just curious, are you seeing any change in how customers are reacting to the rate increases you’re sending out?

I’ll say – I’ll address the rate increases. We continue to send rate increases. That’s not what’s going on in the industry we have now is rate slicing 50% off and more. And that’s unsettled the customer because they want to know why store competitor X is half our price. Well, they’re half our price because they’re going to jack you so hard 90 days from now your head’s going to spin. We don’t do that to people. We consider it anti-consumer activity and we think it’s destructive of the industry. But everybody has their own view of that. So whipsawing rates, you’re making a rate change more than 5%. I – you’d have to explain to me why something was wrong with your original pricing. The – just that’s my feedback. And so you’ll see us typically we’re doing, I think we did 3%. Is that about what our asking rate is now?

Over the whole portfolio.

Over the whole portfolio. So the storage market is tighter by far than it was two years ago, by far. And so you’re having to look to your knitting. Well, that’s kind of our game. I like to believe. I like to believe when that comes up. We start to dig in and it energizes us. And so that’s what we’re attempting to do, offer a better overall experience for the customer, but not necessarily by slashing pricing. Maybe we could increase value. We were – we push value real hard.

And Keegan, hi, this is Jason. I haven’t seen any dramatic shifts in the average stay.

Really helpful. And then last one for me. I guess this is another big picture question. Obviously, you guys have a lot of excess liquidity in your balance sheet in the form of cash. I guess I’m just curious how we should think about the utilization of that. Especially if you take a look, the forward rate curve, it’s coming down, the interest income won’t be as favorable. So just kind of curious where your heads are at on cash utilization.

Well, this is Jason. We’ve worked it down, give or take, close to $1 billion here from like say a year ago January till now. So we’re all about getting that reinvested back into self-storage. I would say that right now we have somewhere close to or north of $1.6 billion in assets that, that would include cost of acquisition and construction put into them so far that are either haven’t opened or not fully opened or have additional phases remaining. So I wouldn’t call them fully realized yet. So there’s quite a bit going on there. We’ve kind of been sitting out on the real estate financing side. So we do have the ability to raise quite a bit of cash at some point if we need to. But as you can see, we’re not doing that right now.

Great. That’s it for me. Thanks for the time, guys.

Our next question comes from the line of Jamie Wilen from Wilen Management. Please go ahead.

Hey, fellas. Joe, you’ve always said that the fleet utilization for the trucks is one of the most important metrics you look at with transactions being, let’s say, relatively flat I mean, I realize you have to upgrade the fleet to better and better units all the time, but why are we increasing the size of our fleet while transactions are flat, if we’re trying to raise that fleet utilization percentage.

It’s really because our deletions haven’t quite [indiscernible] so in other words, this is all what goes in the top and what goes out the bottom. We have some stuff at the bottom that still needs to come out, some of just grounding. We believe it’s better to rent a different truck pending sale of course, that doesn’t put a big smile on Jason face because we’re – but until we can sell for them, that’s kind of what happens now. At the same time, we’ve down fleet our pickup fleet, maybe 2,300, 2,500. Jason, do you know where we are exactly?

Yes. The tolerant end of our fleet, mostly pickups some vans is down close to 4,000 units.

Yes. If you do vans and pickups, we’re down almost 4,000 units. And I think that’s our – we can most readily respond to. It’s a more liquid resale market. Most of those trucks go to the auction and through dealers and such. And so that’s a much bigger market. The van trucks are typically we retail it ourselves. So it’s not going some auction where you can clear 50 trucks in a day. They kind of go out dribs and drabs. And since we stopped selling during the pandemic, we kind of turned off the faucet with buyers and buyers, other sellers or whatever buyers do. So in the last 12, 13 months, we’ve tried to get that upcoming on, but its coming on slower than we expected. So I don’t – I think when we calculate utilization, you correct me, Jason. I believe we calculate all trucks.

If it’s actually in the – those aren’t included.

Right. But if its…

But you haven’t actually classified them and waters it down.

Then waters down. So I think we’re – you’re right, we have too many trucks. But I think it’s because they’re not sold yet, not because we have bought too many and we’re still buying license plate. But a bunch of this equipment more or less pending got you sale and that’s where it shouldn’t be in the rental.

Right. Your fleet maintenance expenditures have declined a bit. Are you seeing any difference in the quality of the vehicles that you own that, that would give you any inclination that fleet maintenance and repair will not be a rising figure moving forward?

We’re not that far along. You saw our repair expense bloom something like $200 million a year. And that was because we were – new vehicles. And basically it’s just like you with a part of the family, if you – mom and it goes to the dad and then it goes to the kid. It has a lot of variable cost associated with it, but not much fixed cost. And that’s basically what’s happened to a bunch of our trucks. We’ve depreciated them. Now if you want to drive it another 1,000 miles, you’re going to have to pay for some maintenance every 1,000 miles. So yes, we’ve seen some improvement. You can debate it. Let’s say we booked 3,000 extra trucks, let’s just – I’m not sure exact number, but something like that. Okay, well, that’s 3,000 probably against 20,000 particular because it matters by size. So it’s not just the total number. Now we have to balance this for every individual size truck. Ordinarily, if you had your druthers, you’d buy the same amount of same size truck every year and you’d maintain a constant fleet, but because of supply considerations, this just doesn’t happen. And so we have fleets where we have a whole bunch of high mileage trucks and a whole bunch of low mileage trucks and no trucks in the middle. And that kind of goes through us like a snake swallowing a rat. It just kind of goes through. It’s got to kind of work its way through. It doesn’t just go through smoothly. So we’re seeing some of that. It’ll balance out and I’m not sure, I’m not going to predict next quarter a reduction in repair, but that should come as we bring in new trucks and then you’ll see depreciation…

And two little pieces of commentary, you increased the quarterly dividend by 25%. I’m glad you’re seeing to share everything with shareholders, and we look forward to some annual increases along the way. And then also, I love that you are quoting the self-storage analysts, that people understand that we have an incredibly large and growing self-storage business, and that we’ve never talked to the analysts there before. And I was wondering, within the industry if anyone else maintains the same organic growth that U-Haul has. I mean, this is the most difficult thing to do when you start at 0%, but it also creates the most significant upside. Is our organic growth relative to everybody else at a higher level at this point?

With out – I’m not going to say that I believe it was last year, but I know, I – we’re trying to grow everywhere where it makes sense that we’re not constrained by capital. Our constraint is our ability to execute, okay? You can just pour money into development, and you’re not going to be as happy as you can – costs can run out of control, if you don’t have some in-house expertise. So we are trying to expand, and we’re not capital constrained, but we’re not expanding everywhere because we just are unable to execute in that many places on a given day. So I don’t have a number that I’m trying to – that I’m benchmarking against somebody, like, extra space and saying, how we – I’m not doing that. We’re all in the marketplace. We’re all doing stuff. We all have slightly different strategies. And sometimes I learn something by watching them, and maybe sometimes they learn something by watching me. I’m not quite sure that. But of course, I try to keep my eye on them. So I understand what they’re doing to get themselves in a better situation.

As you look forward, are you looking to add a million square feet per quarter? Is that going to be a relatively constant number?

I’d like to see it be that, personally, yes. Again, we have to fill the room. See, we built more than we filled this last quarter. Okay. So, okay, got that. We’ve done that before. It’s not a terrible thing. The question is, are those rooms going to rent? And so I’m looking at rooms rented over the prior year by store, if I can manage that, okay? Well, then this thing kind of all works itself out. And then, of course, you’re watching the rate, because all these projects can’t get the rate. The master is going to go poorly. So we’re watching all that, and I think we should be able to continuously build at that rate. I believe we should now. Our model indicates we should be able to build at that rate, if something really changes in the macro environment, it’ll get us. But yes, that’s the rate I see us being able to continue doing.

Okay. And lastly on U-Box, you’ve continued to grow that business. Has the bottom line continued to keep pace with the top line growth and how are the margins in that business for you?

Jamie, this is Jason. I would say that U-Box is maybe a little bit outperforming, in that we had some revenue declines last year. It’s now bounced back. And for the really the last six months we’ve had transaction increases. This last quarter we had revenue increase. So we don’t do segment reporting here, but the best proxies that I have for kind of an EBITDA number for that is that it’s been down, but maybe in the 5% to 8% range. So in that sense, it’s done a little bit better than the rest of the organization.

Okay. Thank you, fellas. Appreciate it.

Our next question comes from the line of Craig Inman from Artisan Partners. Please go ahead.

Hey, guys, just real quick, technically, Jason, that $17 million you’re talking about, I didn’t catch that. Is that extra cost this quarter or there’s some kind of year-over-year comparison, just want to get a little color on that.

Yes. So a little under $5 million of that was a credit last year that didn’t recur this year. So it reduced expenses last year. It didn’t really increase them this year. But if you’re comparing last year to this year, it looks like an increase, and then the remainder of that was an additional expense that we booked this quarter that should not come around again.

Okay, got you. Okay. Because that was what I was going to just ask about. I mean, I know the priorities to get the fleet rotated, build out the self-storage and get that done. And so I was curious about then the cost base. You just – we’ve seen a lot of businesses through this period where they had a lot of revenue from kind of the COVID changes, and then you’re lapping that and you have some excess cost in the business in certain places. Are you all not in that position? I mean I know you all are always very mindful of costs, but just curious about how the cost base stacks up versus what you would expect, kind of given how you’re looking at the revenue trajectory over the last four years and it normalizing now.

I think you’re going to see personnel be a touch area for three or four years. I think that there’s a whole bunch of initiatives coming on at state and possibly at the federal level that’s going to massively inflate wages. And maybe that’s a public policy, I don’t know. But the question is, of course, can we earn that back through some value add with the customer or somehow get the customer to participate in paying that, and that’s all kind of to be determined. But if you follow the states, the states are – there’s been a lot of press about California’s bumping fast food wages. Why fast food? I don’t know, why they’re bumping them, it’s obviously political, but that’ll ricochet through my operation also in California, you see. So the labor is very fungible, and so if I can’t stay competitive, they’ll leave me and start making [indiscernible] okay, so its just the truth. I think we’ve been through similar things, but there’s quite a swarm of this coming at us right now. And I would expect it to keep this trend to go for a couple, three or four years. I don’t have a crystal ball, obviously, but there’s so many of these initiatives down to cities. New York is just replete with minimum wages for salaried people. I mean, first couple of times I heard that. What do you mean, minimum wage for salaried people? Well, I don’t know. Can you quote it, Jason? I believe it’s hovering around 80 grand right now in New York, okay? that you can – I don’t take that as the Bible, but its – the minimum wage used to be about $34,000 for salaried people, so it was irrelevant. But now they’re actually cranking this, and it’s…

Okay, but the cost base where it is. Joe, you’re not thinking, this is way out of line and we need to take action yet. Those are just the ongoing pressures.

Yes. So you’re talking to – we want to decimate the ranks. There’s no reason to decimate the ranks. You will lose business if you decimate the ranks. We run our own call centers. Can we tune that up? Oh hell, we’ve tuned it up a bunch over the last 12 months. Ratio of people to calls to reservations, we’ve tuned it up a bunch and we are continuing to do that and I expect to see double-digit increases in our productivity in that area alone this year. But at the end of the day, it’s really a vehicle. You really do have to clean it when it comes back. You really have to. We got customers parking vehicles and a lot of them are damn happy to do that, okay? We tell them exactly where to put it electronically and they put it there. So we had zero of that business five years ago. Today, we have a considerable amount of that business. Every time I get a customer to do that, they experience no waiting in line and our personnel experienced less physical work. So we’re very, very focused on that. But again, on balance, we’re chasing it not leading it. I would wish I could report we’re ahead of it. And that – it hasn’t happened, but we’re hard on it. And I would say, compared to our peer group, we’re at or ahead I think both in the self storage and the self move industry on this. We do a tremendous amount of customer self move ins and outs in self storage. Now we don’t call that contactless or unmanned, but it’s a version of that. Every time you get the customer to do something. If the customer considers it in their best interest. We all benefit. And so we are in the do it yourself businesses, both our self storage and our self movement to do it yourself deal. And so most of our customers are willing to balance out. They do a little bit of effort, and we reciprocate in some way with them. They call that a fair trade.

Got you. Yes, that makes sense. And then just – I know I’ve asked this before, so household formation, existing home sales, obviously all weak, but what you’re saying and the data continues to indicate is U-Haul’s transactions are more tied to the consumer and just general economic activity, consumer confidence versus the housing market being a big driver here.

This is Jason. I was excited to see the last couple of reports on consumer confidence that should based upon we’ve seen historically, that that should be a positive indicator for us. And it’s not a great correlation, but it’s the closest correlation we found. So I think that can’t hurt. And as far as the housing market goes, if that opens up, it can’t hurt us. It can only really help us. So on those fronts, I think we’re looking at a couple of potential tailwinds here.

But it’s not the – you can’t put your finger on and say, yes, it’s clear that housing starts moving up and down, just has a big driver to the one way moves. That’s not how it works.

We have so much noise right now coming out of COVID and the changing dynamics of work from home. It’s hard to isolate any one of these variables right now. There’s so many things happening.

Yes, yes. Okay. All right. No, that’s all for me. I appreciate it.

And we have our next question coming from the line of Stephen Farrell from Oppenheimer. Please go ahead.

Good morning. You continue to see weakness in the one way transactions. Can you comment a little on the level of transactions compared to 2019?

This is Jason. Compared to 2019, I’m not sure if we’re quite back down to that level, but we’ve been working our way back to that. I would say, I mentioned December, we actually had a slight improvement in those. So my hope is that we’re hitting the trough on the transactions here. The in town transactions are still ahead, and I would want to verify the statement before I make it. So I’ll just say we’re headed back towards that number. I can’t verify for sure if we’re back to it yet.

Okay. You mentioned the trucks that are pending sale but still in the fleet. Is there a big carrying cost just to have those in the fleet while they’re waiting sale?

No, I think you could just take cost of capital, cost of interest, something like that. Just throw it at it. No, there’s not a big cost. The worst thing is the battery goes dead and you have to put it back on a battery charger. But no, they don’t. And they’re not going down in value. If anything, they might be inching up in value, but I don’t have enough frequency to where I’d be willing to predict that. But I could see them, because new truck prices are just astronomical. And so typically that kind of in a rough way flows through to used truck prices. So there’s no absolute certainty – it doesn’t cost us more to insure them. We’re self insured, essentially. So unless we have an insurance event, if the truck is parked, it doesn’t have an insurance event. You’re basically looking at depreciation. And I think the depreciation is not a real cost I think the value of them is flat or increasing. Then you have whatever capital is tied up and whatever Jason wants to put on that for a cost.

Good. And with the number of vehicles in the fleet growing, and you talked a little bit about this earlier, but is there an opportunity to sort of switch over one way vehicles that are older to the in town and local while the one way transactions are down or do you still need their availability?

We’re doing exactly that.

And for the older vehicles, returns are more a function of lower utilization because they’re undergoing repair and maintenance or higher costs.

You’re asking which vehicle is more profitable, a new one or an old one? I guess, that question is, well.

More specifically, for the older vehicles, are there returns more impacted by the downtime while they’re being repaired or the higher cost of the repair?

Any individual truck, that’ll vary. But as we model them out, our expectation and experience has shown that the increase in the maintenance costs, the decrease in the utilization, which takes into account the days out of the fleet for repair is largely offset by the significant decrease in the depreciation expense that we allocate towards them. So we depreciate these trucks down to 20% by the end of year seven or 30%, and then after that we straight line them down to 15% over the next eight years. So there’s a very low cost of depreciation there, and as a large cohort, that largely ends up offsetting the increased cost and the lower utilization. And to put up a button on your other question, I just checked Stephen, and on trailing 12-month one way transactions through December, we’re still ahead of where we were in December 2020. So it hasn’t pulled back as much as I may have made it sound, we’re still ways ahead.

Thank you for that. And just one question on self storage, what percentage of new supply for the non-same stores is – new supply versus expansion and struggling stores there?

That’s a good question. I haven’t broken them out that way, but that’s a really good question. I could age that portfolio and see ones that have been in there. If they’ve been in there more than four years and haven’t hit the stabilized pool, then that would fall into that category of a lagging performer. I did not do that breakout this quarter.

Okay. Well, thank you guys.

Thank you. There are no further questions at this time. I’d now like to turn the call back over to management for final closing comments.

Well, thanks everyone for this report. We look forward to speaking with you after we file our10-K in May. Thank you.

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.