Good day, and welcome to the AMERCO Second Quarter Financial 2020 Investor Call and Webcast. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would like to turn the conference over to Sebastien Reyes. Please go ahead, sir.

Good morning and thank you for joining us today. Welcome to AMERCO’s second quarter fiscal 2020 investor call. Before we begin, I'd like to remind everyone that certain 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 the Securities Act of 1933 as amended and 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, 2019, which is on file with the U.S. Securities and Exchange Commission. I'll now turn the call over to Joe Shoen, Chairman of AMERCO.

Thanks, Sebastien and good morning to everybody. I appreciate you being on the call. I assume you've all seen the numbers. Our moving equipment utilization did not keep pace with moving equipment fleet growth for the first half of the year. I'm focusing on that and would expect to see some improvements by fiscal year-end. The big economic opportunity for U-Haul is to have the always moving fleet positioned geographically evenly relative to demand. I believe we could have done better. Overall, our fleet capacity is considerably less than demand. However, the seasonal, periodic and geographic nature of demand makes the match-up tricky. Of course, this is our business and we should know it. Self-storage continues to be a growing segment both for U-Haul and others. As I have cautioned in the past, ready capital will encourage oversupply from time to time or place to place. I believe our team can hold the increased pace we are operating at. We have a supply of empty rooms in many good markets. I look for us to do our job and rent these units up. We're well in excess of 20 years. U-Haul has maintained its own proprietary database of self-storage rates and supply in all 50 States and all Canadian provinces. We try to soberly approach the market, although we have made mistakes from time to time. These storage assets are 20 to 50 year assets. Historically, oversupply has healed itself with growth in demand. There is a substantial supply of new empty units in many markets. I am not certain that time alone will heal them all. Of course, U-Haul must manage its costs. We are showing strong depreciation increases, which do not bother me. I continue to look for unnecessary vehicle maintenance expenses; personnel has run up a bit and I need to be thoughtful there. Overall, the U-Haul business correlates with consumer confidence. U-Haul is a geographically widely dispersed operation. I'd expect to benefit from operational improvements in an overall growing economy and look forward to talking with you in the future. Jason, do you want to go through the numbers?

Thanks Joe. Throughout my presentation this morning, all my comparisons are going to be for the second quarter of this year compared to the second quarter of fiscal 2019 unless otherwise noted. Yesterday, we reported second quarter earnings of $7.97 a share compared to $8.35 a share the previous year. Equipment rental revenues increased 3% or approximately $23 million. Transactions and revenue were up in both our one-way and In-Town markets. These trends were similar for both trucks and trailers. Our footprint of company-owned locations continues to expand. Since September of last year, we've added over 90 new company-owned retail locations. Capital expenditures on new rental trucks and trailers were $1,037 million for the first six months of fiscal 2020. That's up from $787 million the year before. Our truck purchase schedule is skewed heavier to the first half of the fiscal year, meaning this pace will slow over the next six months. Proceeds from the sales of retired equipment decreased to $397 million for the first six months from $428 million last year. As you may recall, at this point in time last year, sales were a bit higher as we were still recovering from delays stemming from manufacturer recalls. Sales this year are meeting our expectations. Storage revenues were up $13 million just under 15%, the majority of the revenue gain came from growth in occupied rooms. Looking just at our occupied room count as of September 30, we had an increase of 47,000 rooms compared to the same time last year; that’s a 75% increase in pace year-over-year. Since last September, we've added 127 new locations with self-storage at them. From an occupancy standpoint, we continue to add new units faster than we're filling them, although that spread is narrowing. Our all-in average monthly occupancy throughout the second quarter of fiscal 2020 was 70%. This quarter we took a look at facilities that had occupancy over 80%. At September 30 of this year, we had 744 locations or about 63% of all of our owned storage locations that were over 80% occupancy. Compared to last year at this time, that's an increase of 59 locations. The average occupancy at these locations was 91%, slightly up from where it was last year. Our real estate related CapEx for the first six months of this year was $423 million compared to $481 million last year, however, within these figures is some reallocation. The portion attributable to acquisitions has declined while the amount from construction and improvements has increased. From October 1, 2018, through September 30, 2019, we added 6,076,000 net rentable square feet, or about 73,100 storage units, to the portfolio. About a million and a half of that square footage came online during the second quarter. Operating earnings in the Moving and Storage segment decreased $7 million to $229 million for the quarter. I'd like to touch on a few of the more significant items. Depreciation expense associated with the rental fleet increased $17 million as we've continued to add new equipment to the fleet. Meanwhile, gains on the sale of rental equipment increased $6 million. Depreciation on all other assets, primarily storage location assets, increased by $8 million. Outside of depreciation, personnel costs represented the largest single increase in operating expenses. These costs increased at a rate greater than our revenues. Other costs including property taxes, insurance expense and freight costs are three of the other larger items that generated increases. These four types of expenses in aggregate accounted for approximately $26 million of the operating cost increase during the quarter. In August, we declared a $0.50 per share cash dividend that was paid in September. As of September 30, 2019, our cash and availability from existing loan facilities at our Moving and Storage segment totaled $559 million. With that, I'd like to hand the call back to our operator to begin the question-and-answer portion of the call.

We would now begin the question-and-answer session. The first question is from George Godfrey with CL King. Please go ahead.

Hey, there. Joe, I was wondering if you could expand on your comments about, I'm sure you know exactly where I'm going, the number of units in the storage building out and just thinking over past calls about your desire to increase that capacity and now you're not sure that time will fill that up. Have you done more analysis proprietary for yourself and the industry that suggests that perhaps we're at an overcapacity state that isn't going to be corrected anytime soon? I just want to get an understanding of what your comments imply. Thanks.

No, I don't think we're in an overcapacity state because there's no such thing as a market; that's the problem. In the past, people have added units and while it's always surprised me, I've been in this business a while. Demand is always kind of caught up to it after five or six years. There's so much going on right now. Every estimate that I see of new construction, I believe is below what's actually occurring by as much as 50%. Now that seems like an awfully big error, but that's my opinion. We don't have good data on supply increases by year; they're really not very accurate. But of course, our job is to make sure we don't put product in those markets and mostly we've avoided that. So I don't think we're particularly vulnerable, in other words putting something that's going to be a barking dog indefinitely, but we'll have as much as we've got going. We'll end up with some short-term barking dogs, that's for sure. The other thing is our product is a lot different. Most of our product is a lot different than what you see in the market out there because we do this in conjunction with the truck and trailer operations, and that's just a little bit different. We get a little more of a different customer than most of our competitors. Again, it's hard to generalize because there are so many subtleties, but we mostly cater to our U-Haul customers and not just customers in general. That gives us a tiny edge if we do a good job. So I'm not concerned about having stuff out there, but I see what you see: a tremendous amount of new supply coming online, and a lot of it's pretty good product. The other thing when you look at supply is that there's various types of product out there. So a general statement of how many units or how many square feet there are in the market doesn’t really tell the story because your standard drive up is much different from interior, interior climate-controlled storage. While there's certainly overlap, the markets are different. So demand will reflect a little differently. I don't want you in any way to think I'm trying to run on the market. I don't think so at all. But I think we've got exciting times ahead, and of course, my opportunities to try to turn this into an opportunity for U-Haul, and I'm committed to these assets going ahead. As I said, these are 20- to 50-year assets. We've held many of these assets for 40 years and I don't think anybody could have predicted that when they were first put in. The fact of the matter is that the customer has indicated they want this sort of a product, and they want it all across the country. We are much more geographically dispersed than anyone else in the market. I would say we're at least twice as dispersed as anybody out there who's a major name. So when things slow down, they'll slow down market by market, which means we won't be entirely stuck in slow markets, nor will we be entirely blessed by fast markets. We'll be able to pick our way through the situation. I'm very excited. We've had a good last 12 months on room round-ups. Of course, we needed it since we've put a bunch of new product out there and needed to ramp up. But it has, and that doesn't discourage me at all. I'm very positive on the self-storage business, and obviously I'm very positive on the truck and trailer business.

Understood. Thank you for that clarification. I'll get back in queue.

The next question is from Ian Gilson from Zacks Investment Research. Please go ahead.

Good morning, Joe.

Good morning, Ian.

I have a few questions. We had a significant gain again in the other revenue category. Could you sort of go through what is driving that revenue?

Hi, Ian, this is Jason. The majority – the vast majority of that in the moving and storage segment is associated with our U-Box product. So we're still seeing double-digit percentage growth in U-Box, both shipping of the boxes and then storage of the boxes.

Okay. When do we going to break that out as a separate line item or are you going to break it out?

Well, Ian, this is Joe. Of course, I want to show as few cards as possible, but there are some accounting rules that relate to this, and well before we trip them, we will, of course, break it out. It's still a relatively modest part of the whole mix, but it's part of the future we're building. What we need to do is a great job with these customers, and they'll tell their friends and we'll have more customers next year. So what I can tell you is we're doing a better job. As you know, I list my phone number all over the Internet, and I get a lot of customer calls and we're far from perfect. But we're steadily improving our execution with that product and steadily increasing our footprint. We're active from Halifax, Nova Scotia to the Texas border. This is a good market and it speaks to a lot of changing demographics or people that at least assert their changing demographics with millennials. I think it's a good product for us. I'm very optimistic about it. We're not – it's not costing us to be in the business and as long as we can grow solidly without incurring costs, I'm for keeping jumping into it. So the simple answer is I'm not going to disclose it until it gets close to needing to.

Okay. That's fine. On the moving in the storage – on the store inside, again, both of the last two quarters, in fact both of the quarters of this fiscal year, a naive calculation of revenue per square foot and revenue per room show a slight decline. Is that a trend or just coincidental?

Are you saying with our numbers?

Yes. I'm looking at your numbers.

Yes. I think what you're probably seeing is our Free Month Moving. We've had a few more takers in that and that as you're expanding rooms, of course, if the percentage of free moves stays the same or expands, those have to churn, and they typically take about three months to work themselves out. The good news is we're continuing to grow, so we continue to have some of these free rooms and they dilute the rental rate the way you're calculating it. I don't think there's any dilution in the rates we are actually charging.

And Mr. Jason, are the group of properties that we manage are essentially kind of the same store portfolio and they're seeing about 2% improvements in year-over-year rate?

It’s just to give you a sense of how we're growing; something that would be close to the same-store measurement.

Okay. Last...

Ian, in general, we're loath to cut rates, okay. We're just loath to do it and as long as I'm here, I intend to stick with that plan.

Okay. Last year we had a significant gain in the third quarter from the corporate accounts. Do you have any idea how FedEx, UPS, and VH and so on are positioning their fleets? Or are we likely to see that account grow again?

Ian, there is a lot of flux there; they’re growing their fleets, but of course, they're adding their own vehicles at a tremendous speed. I don't have access to any of their internal data, but they source vehicles from people we source vehicles from, so we have kind of an idea that they are out there strongly adding fleet. I would expect our business from them might be flat or down a little bit this year. It's still too early to tell, but I'm kind of guessing that November 1st which just passed is kind of the day they start running in here. So I don't have a clear enough picture. I have a lot of anecdotes and my anecdote is that they're going to be a factor, but they may have brought on enough of their own fleet that there'll be less of a factor. That's just a guess. All we need is my wife to start buying more items and they're going to rent more trucks.

And finally, you're warning us of possibly a continuation of a slower growth period. Are you adjusting your expenses to make that slightly lower expectation?

I don't think we've adjusted them enough, so I've got work to do there.

The next question is from Jamie Wilen with Wilen Management. Please go ahead.

Hi fellows, on self-storage, could you give us a shot at those stores that are operating over 80%? I assume that's a solid existing base. What are the same-store sales levels on those stores?

Jason, I'm going to let you try to give an answer to that.

Jamie, I guess I don’t – what I was looking at was the occupancy figures for those; I don’t have an estimated NOI or a revenue number for those right now.

The revenue ought to track; occupancy is not enough?

Yes. So the occupancy at all of our locations that were greater than 80% was about flat at 91%, but we added 59 new locations that were under 80% last year. I guess I don't have exactly the answer to that that you're looking for right now, Jamie.

Got you. And if you could help us look at the full long-term strategy of self-storage, if you put a $5 million investment into building a self-storage facility five years ago, could you track what it would be over those five years? Initially, you've got a lot of depreciation and amortization and you're not making any money yet. When you get two, three, four, five we're probably not spending a lot of money to redecorate the cinder block walls. But we’re still depreciating it over a straight-line basis, I would assume. So the cash flow by year five should be significant. I was wondering if you could walk us through a model for what a $5 million investment would be from year one through year five?

Well Jamie, I guess I'll start by going through the actual occupancy figures that we've been seeing for our properties that have hit five years in maturity here, and we've been averaging, in the first year we get to about 40% occupancy, then it gets to 60% in year three, 70%, and then it starts to slow down in year three. In year four, we're somewhere around 77% to 80%, and then year five 80% to 85% is what we've been averaging. I think then if you look at the outliers on the median, we're probably running closer to 89% to 91% at year five. So the cash expenses that we have up front is the property taxes and a lot of these deals, if it's a conversion, we have the utility costs and then we do open up the shop and have some personnel expenses. Those expenses may increase a little bit over time. By the time we open up the storage product, we're typically cash flow positive in year three. I don't have a specific number I can give you on a $5 million investment right now, but I'd have to think about that and get it back to you.

Okay. That's an interesting number. What that stabilized number is that you're going to be returning over an extended period of time once we hit that 80% level? Certainly we'd love to have that. On the truck and trailer rental side, it seems we've – Joe, you've always said your main target is fleet utilization; yet fleet utilization is a function of the number of trunk rentals by the number of trucks we have out there. We seem to have over-expanded our fleet. I was wondering as you look forward, will we keep our fleet the same size as the market grows or actually shrink our fleet a little bit so we can increase that utilization and profitability number?

I don't think we'll shrink the fleet much. It's a little bit – it's not a totally simple answer to give you. I think we have location problems or location issues that are more telling in results than total truck issues. The problem is it's trucks that are available point in time that tell you whether you have too many. We obviously have had too many at some points because we haven't been able to rent. But at the same time, I've been out of trucks on Wednesday, in the middle of the week, many markets in California. I'm out of trucks. Not Saturday; Wednesday. So I have under-fleeted in California, but the problem is we can't just quite add them in California. Other markets just like that, Chicago would be an example where we're chronically short. My opportunity is to tune us up in distribution, and I started an initiative on that probably two or three months ago. Those things take a little time to bear fruit, but I'd expect to bear a little bit of fruit. You don't really see the good results until spring because of the cyclical nature of our business. We have an oversupply, but still in our uptick. In L.A. and Chicago, both those towns, if you call mid-week, you might have trouble getting the truck right now. If we can get the equipment into those markets, we'll pick up a little utilization. I don't think the total trucks is where we should react. The answer is I don't think it's going to go down, but it could go down a little bit just because different models age out. I'm still struggling with getting the right numbers of big trucks. We spent a ton on them over the last 12 months and I still don't have the right amount of them. It's kind of like swallowing too big a chunk right now to just pour those things on again. We're holding on that a little bit even though the market would support more of those units, but they're a big financial commitment. I don't think you'll see us shrink the fleet, although demand dwarfs our fleet. The problem is can we do our job and have it where it needs to be? It's that simple. Demand dwarfs our fleet. Now, demand is not constant; it is very periodic and cyclical. We could have done a better job, and I believe we'll do a better job. I've been focused a lot over the last 24 months on driving storage. I'm getting results in storage, and I think I just need to drive a little bit more on truck rental. I think I can squeeze a little bit more utilization out.

Okay. You guys know truck rental better than anybody else in the world because you've been doing it for longer than anybody else. The phenomenon of there's more trucks rented in California and Chicago and it's hard to keep up should be an easy thing for you guys to understand and put your capital there. You spent $1 billion on trucks and trailers in the first six months of the year. One would think this is more of just Joe deciding where the truck should go. We should have incredibly sophisticated modeling for what's the best utilization for trucks, where should we have the most, and how much money we should spend to get the most effective return on our capital dollars?

Absolutely. To a certain extent we can do that. What happens with this one-way business, and we've put – I don’t have a dollar – we’ve put a lot of new one-way trucks in California. But they get one rental to Dallas and they're just out of commission. That makes sense. We're one rental to Boise as well. You can basically stand in L.A. and see people going to Dallas and Boise. You can form your own opinions about why they're leaving California. So getting that truck back is a little trickier. Rate alone won't do it; you can have a disparity of rates, and that will not even out demand. The demand is very profound for reasons that exist. But we have other ways to wiggle on that. Like you said, this is our game; we ought to know our game. We could have done better, and we've taken steps already in the fleet that just might work a little bit. We're hard at it, and I think I'm guilty for not being focused. This time last year, I wasn’t as focused on that as I am right now. The organization is like any, if I could ask people to juggle so many balls, then all of a sudden they start dropping balls. I have to be a little bit careful on that. I drove everybody pretty hard on room storage unit rentals. We’ve got a little bit of result. I think that might actually have a little bit to do with why some people lost focus. I'm back focused on it. I'd expect to see some movement; I don't know if it will show up in the money by fiscal year-end, but I'll have an opinion on whether we're making progress by then.

Okay. And lastly, Joe, as far as the rate of capital expenditures as you look down the next 12 months in self-storage and in expanding the truck fleet, what kind of numbers would you expect them to be similar or more or less than what you're spending today?

Well, storage may just trail off a little bit. It's difficult, as Jason said, we're spending more on construction and conversion than we are on acquisition. That's a little bit discretionary; I can acquire a piece of property then just decide not to build it. I can postpone it. If you get one of these projects, it’s probably seven to one on what the improvements are compared to the land acquisition. The improvement is the big part of the deal. The land acquisition is obviously carried on our balance sheet, and you see it in interest and property taxes. Getting into construction, the money pours out, and it’s hard to get real good deals in construction right now because everybody is building stuff; it’s kind of a seller’s market as far as construction services. If it looks like it's going to go soft, we'll put a project off. That’s about that simple. But we have enough projects teed up that we could run close to this rate and not run out of sites. I don't want to mislead you; we have plenty of stuff teed up. There are many points in time where you can turn it off. If it looks like it's appropriate, we will back off on those expenses, hopefully retain the properties, and keep them in inventory, building out two years later. We've done quite a bit of this phasing construction where we've gone in and put in the first, maybe 50% of the expense, held off on that, because that gives us enough room to rent for a year and a half, two years; then we’ll figure out as it feels appropriate to spend it. That helps us to modulate this a little better. I wouldn't look for construction to fall a lot, or for the real estate expenses to fall a lot, but they may taper off. They've tapered off a little bit. The fleet likely will be a little bit less, but Jason, I don't have a specific number on that.

It's still a little early for projecting next year's fleet plan, but the first versions of what we've been thinking about would be somewhere, let’s say, maybe $75 million less, but that's very preliminary.

We're getting hit by a bunch of price increases from the manufacturers. They have a lot of additional content due to sensors and all the stuff they're readying for autonomous vehicles, and they're building that into the architecture of the vehicles, which is simply raising costs without providing much benefit. In other words, there's not a lot that I can extract from my customer for wiring that they're not using. So we're suffering a little bit from that, and then we're having a round of that. Of course, we're pushing back real strongly. We’re not getting a good deal on equipment right now, but we will buy fewer of the big trucks, and we are already starting to buy a few of those big trucks that cost twice what a small truck costs, roughly. That’ll have a little effect too.

Okay. Thanks fellows.

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

Well, again, thanks to everybody, I appreciate your questions. We’re doing well and running as far as business is concerned. Of course, we got to get that to filter through to the bottom line, which is part of my opportunity. I look forward to talking to you all in another 90 days. Jason, any closing comments?

Nope. We'll talk to you at the end of the third quarter.

Sebastien, do you have legal remarks?

We'll talk to you later. Thanks.

All right. Thank you again.

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