Good morning, ladies and gentlemen, and welcome to the U-Hall Holding Company First Quarter Fiscal 2026 Investor Call Conference. [Operator Instructions] This call is being recorded on Thursday, August 7, 2025. I would now like to turn the conference over to Sebastien Reyes. Please go ahead, sir.

Good morning, everyone. Thanks for joining us. Welcome to the U-Hall Holding Company first 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 Security Act -- 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 in Form 10-Q for the quarter ended June 30, 2020, which is on file with the U.S. Securities and Exchange Commission. I will now turn the call over to Jason Berg, Chief Financial Officer of U-Haul Holding Company.

Thanks, Sebastien. I'm speaking to you today from our offices here in Phoenix, Arizona. Joe Shoen, our Chairman and CEO, is unable to attend today's call. However, he is going to be available to speak to you at length and answer questions in 2 weeks at our Annual Investor and Analyst webcast. We do have Sam Shoen, the Vice Chairman of our Board of Directors here with us today to answer questions. Yesterday, we reported first quarter earnings of $142 million compared to $195 million for the same quarter last year. In terms of EPS, that's $0.73 per nonvoting share this quarter versus $1 per nonvoting share last year at this time. Earnings before interest, taxes and depreciation, that -- I'll refer to this as adjusted EBITDA, in our Moving and Storage segment increased 6% or nearly $31 million for the quarter, driven by strong revenue growth across our product lines -- all of our product lines. Included in our release and our financial supplement is a reconciliation of adjusted EBITDA to GAAP earnings. The largest difference between adjusted EBITDA and GAAP earnings is depreciation, and this is also the cause of the largest negative variance in earnings year-over-year. During the first quarter of this year, we swung to a $22 million loss on the disposal of retired rental equipment as compared to an $8 million gain last year. Cargo vans that we purchased over the last 2 years that are now being sold came into the fleet with higher initial costs, and the current market resale values are not reflecting this that's resulting in a loss. We have increased the pace of depreciation of the remaining units to reflect this new reality. Additionally, we have depreciation from increasing the size of the box truck fleet by approximately 8,600 units…

[Operator Instructions] Our first question comes from the line of Steven Ralston from Zacks.

I had some questions specifically for Joe, but I also have one specifically for Sam. I'll delay my questions for Joe until the Investor Conference. The top line is improving, like Joe expected. And I had one specific question about U-Box, which I know Sam heads. U-Box once again has achieved double-digit growth this quarter, and it's through that tried and true formula of U-Haul that by adding capacity and then, specifically, in the case of U-Box, increasing warehouse space along with the number of containers and the number of delivery equipment. This is a growing area, and I assume ultimately will be broken out as a segment as it reaches 10% of revenues. How much potential do you still think there's left in U-Box? It's been growing. Do you think it's like 10% done or 25% done? Or is it just too early to tell?

Well, thanks for the question, Steve. This is Sam talking. I think you started off some wise observations. Of course, it's way too early to tell. I'm on the more optimistic side. I don't see why there's any reason that U-Box couldn't be as big as U-Haul is today. And I think we're just at the infancy. I think you really can't start answering that question until you start to get some real clarity on -- from the consumer of if they understand what this product and service really is. Of course, we're so blessed with traditional U-Haul that if you're 6 or 96, you know exactly what U-Haul is and what it does. And when you see it parked on the side of the road, you know exactly what it's there for. The customer isn't quite there -- the consumer isn't quite there with the U-Box portable moving and storage model. When they do, I think we'll really be able to answer the question you have. But I think it's -- the market is quite large. And as time goes on, you'll see it continue to grow as a pillar of U-Hall Company.

Let me just ask it in a slightly different way. Of the number of locations that you have across the United States, how many have functionality for you U-Box? What is -- it's the same question.

Sure. So it depends what you're defining as you a U-Haul and, of course, most of the time in -- within the company, we look at our outlets, including our dealers. So if you want to make the calculation from that, you're looking at somewhere between 5% and 10%. If you're looking based on company stores, you're looking a little closer around half. So needless to say, it -- that's not necessarily assuming that you've got adequate build-out of the U-Box product piggybacked at those locations. So for example, you take a rather large market like Phoenix, you're still barely scratching the surface of the capability that we need to service the customer. And we're going to -- we're just going to have to keep building it out. And if what you're trying to do is make a projection to say should this double, triple, quadruple, 10x, you're going in the right direction.

Our next question comes from the line of Steven Ramsey from Thompson Research Group.

I wanted to start with U-Box, and I would just assume that transactions in U-Box is more associated with One-Way moves. Are you able to see if U-Box One-Way moves are growing faster than the rental segment One-Way moves? Or said another way, with One- Way transactions being up, is that a rising tide for U-Box?

Well, this is Jason. I'll start and just set the scene with the truck One-Way transactions -- truck and trailer. Those have been from flat up to slightly -- up 10,000 or 20,000 transactions in the quarter. So I'll let Sam to juxtapose his experience with U-Box One-Way transactions.

Yes. U-Box One-Way transactions are leading the way. They're exceeding our truck rental transactions as a percentage. I -- as far as a rising tide, I think they're decoupled in many ways. I certainly don't look at the performance of the One-Way shipping of U-Box product and juxtapose it against the truck rental numbers and say, "Well, we only have so much we can go or capped or one number is dragging down the other." I don't necessarily see it that way. And I think what you should expect is for U-Box performance as a percentage to exceed the truck rental gains that we're able to make. There's little doubt of that.

Okay. That's helpful. And then wanted to think about the margin profile of the business, 35%, virtually flattish year-over-year, even with Moving transactions up and then Storage and U-Box with a higher margin profile also growing faster. Can you maybe dissect what is causing margin trends in the quarter or if it's better to reflect over the recent past and maybe the puts and takes to the company margin?

Sure. This is Jason. I'll start with that. We put a new slide in the investor deck this time around that shows a proxy for cash flow, which would be adjusted EBITDA, the EBITDA margin and then the share of equipment rental revenue versus the share of storage revenue. And we don't have U-Box revenue in there yet. But the 2 newer revenue line, Storage, which is strange calling that newer, but it's newer than the original equipment rental revenue, both of those, when we include those in new projects, it has the effect of increasing the projected return. Now as you know, and you've been to some of our facilities, you see how everything kind of interacts and interrelates, it is very hard for us to break it out separately, but we certainly have seen that when we add more of each of those products to a location, the profitability improves.

Okay. That's helpful. And then maybe to think about the -- some of the dynamics playing out in the Storage segment, a lot of new facilities and units in the total base. Maybe as a headwind to the margin profile of the slides in the last couple of quarters have been helpful to see that. Can you maybe talk about the glide path there of how units getting soaked up can be positive to margin, certain thresholds that need to be hit to elevate the margin within the Storage business?

Yes. On the slide in the deck that we have that shows where future storage revenue is coming from, there's a portion of that, that shows Storage revenue from existing locations, or what we call non-same-store locations, ones that haven't hit 90%. And that number, taking it from where it is today to where it would be at 90% is somewhere -- it's going to be somewhere around $260 million, give or take. By the time we get there, there's likely going to be rate increases that will be a little bit more -- those are at locations where we've opened, and the expense load has largely been recognized in our financial statements. So that additional revenue, a very rough estimate would be maybe 80% of that, give or take, is going to flow to the bottom line. In some locations, it will be more than that. At some of the newer locations, that might not be all of that, but as a general rule of thumb, to give you a sense. So a lot of the headwinds that we're facing right now on the EBITDA margin or on the GAAP operating margin are truck related. It's the liability costs associated with the fleet. We've seen an increase in the severity of claims. I don't think we're seeing more accidents. I think the fleet is in real good conditions as far as accidents go. But the severity of those that we're running into is a little bit more significant, and we're building reserves back up, and that's affecting the margin. And that does hit earnings and EBITDA for both of those. And then for the earnings cycle, it's this depreciation headwind that we're facing. We're going to have to work through this cohort of trucks -- cargo vans we purchased the last 2 years. And then likely after this year, the spend on the box truck fleet will begin to slow a bit. And then we should peak on depreciation and then hopefully trend back down.

Okay. That's helpful, Jason. And the last quick one for me. When looking at the pending and developed storage square footage currently at 14.8 million, that's been sliding down for a few quarters. Is that a number that you expect to kind of gradually keep coming down over the next few quarters? Or is there a level of developed and pending square footage that you think it's a minimum level that we do not want to go under?

There's certainly an amount that we don't want to go under. I don't think we're close to that right now. But what we've been trying to do is slow the spend not because we don't believe in sell storage or not because we don't want to expand, but because we want to be rational in our capital allocation and make sure that we have enough to last us. And with the way that the fleet has been chewing up some capital during this time frame, we're pulling back a little bit on real estate spend. But you don't want to pull back too much or you have what happens to us during COVID, where we shut a bunch of stuff down, and then it takes a while to start it back up, and you get kind of this unusual amount. If we could stay somewhere in the, say, 4.5 million to 6 million square foot range each year, I think that's something that operationally, we've proven that we can handle. And if we do that, spending is likely to continue to decrease.

Our next question is from Andy Liu from Wolfe Research.

So really just wanted to double click first on the transaction volume. You guys talked about kind of flat to maybe slightly up in the quarter. Just wondering if you guys noticed anything in terms of sort of like the month-to-month trends. It's flat in the quarter, but had the month-to-month trends kind of like improving through the quarter. Or is it kind of pretty steady through the quarter? Any kind -- any color would be helpful.

Sure. All of our comparisons are going to be year-over-year because our business doesn't really compare well month-to-month. So our best quarter for Moving is really our second quarter. The second best would be the first quarter that we just finished, and then it goes third quarter and the fourth quarter are worst. So we're always comparing with how we did the year before because, largely, moving activity tends to look the same year-over-year. So what I mentioned for July is we're again seeing revenue increase from rates that we're having to charge because our cost of doing business has gone up. But we haven't yet seen traction on the -- on transactions. And we're going through a process right now. I mentioned that the fleet -- the size of the fleet has increased. I think from last year, we're up maybe 5,700 trucks. From the last quarter, we're up about 5,000 trucks. But we're also up close to 800 locations compared to last year between dealer locations and our company locations. So we're going through the process, which is fairly difficult of placing this new equipment in places that we think is going to be productive and opening dealers and doing that in an efficient fashion. And that's what we're working on now. Now if that doesn't work out the way that we think it is, we'll probably end up increasing the sales of trucks and reduce the size of the fleet. But right now, we think there's opportunity to use these trucks. To give you a sense of the challenge that we're facing, in the last 2 years, the number of locations that we've added is equal to the size of our second largest truck competitor, right? So in opening that many locations and distributing trucks across them and getting customers and our team to be able to route customers at those locations is a bit of a challenge, and that's what we're working through right now. And we're working through it at the same time that we're investing quite a bit in the fleet. But our plan is that all of this is going to pay off in the years to come.

Got it, got it. And sorry, about that. I should have worded my question a little clear. I meant monthly trend as how did April year-over- year; go, how did May year-over-year and June year-over-year. Is that -- has it been kind of year-over-year flat for all 3 months? Or has it been maybe improving on a year-over-year basis from April through June?

Got it. Okay. I went astray on that one, didn't I? So the revenue has been steadily up year-over-year. I would say that transactions, we have some on weeks and some off weeks. And we deal with the same issue that we've dealt with since the very beginning of the company, and that is people tend to move at the end of the month. So you get this cluster of transactions at the end of the month. And depending upon how the calendar falls from year-to-year, you can see these weird oddities. So looking at it over a 3-month period, you tend to flatten some of that out. And what I would say is we still haven't got traction, however you want to look at it. Month over month versus last year or for the 3 months, the traction still hasn't hit. And I'm not seeing that in July yet either. But it's not like we're far off. There are some weeks that we're up on transactions. So we're right there. We're right there.

Okay. Got it, got it. That's helpful. And then kind of shifting over to the storage side -- I mean, the storage stuff. I know you guys added a new slides here. So I think that segment is getting -- you guys are pushing for a little more focus on the segment. So I really want to ask on that slide on the future revenue coming out online. You guys gave what the future would look like on a revenue basis. Have you guys looked at it maybe on even an NOI or an EBITDA basis, kind of what that future pipeline is? I know you guys don't disclose margins, but just want to get a sense if that is the revenue number, how that hits the bottom line.

Yes. I answered the question for Steven just now. On the non-same-store locations that are already open, the additional revenue, somewhere around, I would say, 80% of that should probably fall to the bottom line. If you're asking about the other ones that haven't opened yet, those are tougher because as a whole, most of them have all of our product lines embedded. And so I don't have a clear answer to give you on that because we -- I mean, breaking out storage revenue as part of that.

No. It's really to give you on that front. So kind of, I guess, asking another way maybe on the development, the spending side of it, kind of how much does it cost for you to put this pipeline up? As I look at your slides, right, and if you have a 5-year look-back period, you did about $5.5 billion of investment, and you brought 26 million square feet of new space online. So that kind of backs into like $200 a foot. I'm not sure if that's a good proxy for the spend going forward.

Yes. I don't know if I would be here this long if I allowed a bunch of $220 a foot storage to -- so that -- on that slide, the $5.8 billion is -- represents the amount that we spent in that 5 years. So it's not exactly -- that's not for the -- that doesn't represent the 26 million square feet that went on. It represents a big portion of it. But I'd say there's 2 complicating factors to that calculation. One is because we do all this development on balance sheet, there's a certain amount that we've spent that isn't yet productive, right? We bought the properties. We started -- we have construction in progress, but they're not renting rooms yet. For the last couple of years, that number has run about $1.7 billion. We're probably about $1.690 billion in capital we've invested that isn't really producing revenue right now. And I would say, 5 years ago, that number was probably closer to $1 billion. So then I would take $650 million out of the numerator because that really is extra money that's spent on assets that aren't productive yet. And then the part that's a little also challenging to figure out is that also includes building U-Box warehouse space. And if you were to convert the amount of covered spaces that we've added the last 5 years to storage square foot because each one of those boxes is a 5x8 storage room. That's going to add somewhere between 8 million to 9 million square feet of self-storage space. So in reality, what the number could get to for our investment per foot should be much closer to say $150 a foot. That's the long story to get to the short answer, which is it should be about $150.

Okay. Got it, got it. Super helpful. And then sort of last question for me. I know you guys -- I asked last quarter as well. The development -- the yield that you guys set on these storage developments, you guys mentioned it was closer to like -- I think it was like 10%, right? So it will be -- so just curious how you guys closed that 10% number. Is that 10% on the $150 of per square-foot spend that you just referenced? Or is there a different method you're using to calculate the 10%?

Yes. That's going to be the unlevered IRR. So you take your total investment in the property, and we're looking out, I think it's 7 to 10 years of then capping it at the end of that time frame and looking to see how it performs over that time frame. If you were to try to convert that to a cap rate, it's probably going to be somewhere between 7.5, 8.

There are no further questions at this time. I would now like to turn the conference back over to management for the closing remarks.

Well, this is Jason. I hope everyone is just holding their questions for the Annual Investor Day, which is going to be in about 2 weeks. If you have any feedback in between, please feel free to shoot to us. Otherwise, we will -- we look forward to seeing you then. Thank you very much.

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