U-Haul Holding Co /NV/ Q1 FY2025 Earnings Call

Good day, everyone, and welcome to today's U-Haul Holding Company First Quarter Fiscal 2025 Investor Call. At this time, all participants are in a listen-only mode. Please note, this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Sebastien Reyes. Please go ahead.

Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company first quarter fiscal 2025 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 Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Certain factors could cause actual results to differ materially from those projected. For a discussion of the risks and uncertainties that may affect the company's business and future operating results, please refer to the company's public SEC filings and Form 10-Q for the quarter ended June 30, 2024, which is on file with the U.S. Securities and Exchange Commission. I'll now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company.

Good morning, and thanks for taking your time to participate today. The increased cost of new rental trucks is expressing itself in our P&L in the form of a decrease in gain on sale and increased depreciation. We have so far been unable to pass along these increased equipment costs to the consumer. As you all know, automakers have been inflating the cost of internal combustion vehicles to subsidize electric vehicles. These inflated costs are not being supported in the resale market. As we have discussed, it puts you all in a pinch, on those vehicles we turn after 12 to 24 months, mainly pickups and vans. We remain focused on reversing the decline in moving equipment transactions. It is looking like we are finally getting traction over the same period from the prior year. While U-Haul can't get people to move, we can provide them with a better product and service once they are considering moving. The market is very competitive when the consumer has choices. We continue to see gains in self-storage while many large competitors are not presently doing so. However, self-storage remains a close contest. The U-Haul team will remain customer-focused to win additional business. We have continued to add self-storage units at a pace faster than we are renting them up. I still believe this is the right course. U-Haul has an outstanding team at the customer-facing level. We will continue to work to be the customer's best choice. Now I'll turn the call over to Jason to walk us through the numbers.

Thanks, Joe. Yesterday, we reported first quarter earnings of $195 million compared to $257 million for the same quarter last year. That equates to $1 per nonvoting share this quarter and $1.31 per nonvoting share for the first quarter of last year. Nearly 60% of the decline came from the decrease in gains on the disposal of retired equipment. During the remainder of my prepared remarks, all of my comparisons are going to be for the first quarter of fiscal '25 versus the first quarter of fiscal '24. Equipment rental revenue results, we had a $15 million increase. That's about 1.5%. This is our first year-over-year increase in equipment rental revenue in eight quarters and is 35% higher than the first quarter of fiscal 2020, which was our last quarter before the pandemic. And I mention this because it puts our current first quarter results above where our historical trend would have had us absent the positive business side effects of the pandemic. Transactions and revenue per transaction in both our in-town and one-way markets improved. The increase in transactions, combined with the progress that we've made in rotating older equipment out of the fleet, resulted in an increase in equipment utilization. July revenue results were close to even with last year's monthly result; we've had a good start here in the first week of August. Capital expenditures for new rental equipment were $539 million, that's an $85 million increase. We've increased our fiscal 2025 full-year net CapEx projection by about $40 million to $90 million. That's due to the addition of more units that became available from one of our manufacturers. On the other side of the equation, proceeds from the sales of retired equipment decreased by $49 million to a total of $144 million. That's a combination of fewer sales of our smaller trucks and vans along with a lower sales proceeds per unit that we received for each of those trucks. Switching gears to self-storage, we were up $17 million, which is about 8%, average revenue per occupied foot continued to improve across the entire portfolio, up nearly 3%. And if you carve out the same-store portfolio, we were up just over 4.5% per foot. Our occupied unit count at the end of June was up over 32,000 units compared to the same time last year. But as Joe alluded to, during the same time frame, we added nearly 64,000 new units, which led to our average occupancy across the entire portfolio declining about 280 basis points to 80%. If you split out the same-store portfolio, we saw average occupancy come down by 120 basis points to 93.9%. Since June of last year, we grew our same-store portfolio by 59 locations. During the quarter, we invested $402 million in real estate acquisitions along with self-storage and U-Box warehouse development costs. That was a $108 million increase. During the quarter, we added 17 new storage locations, along with expansion projects at several locations. The total square footage increase was just under 1.7 million new net rentable square feet. We currently have about 7,700,000 new square feet being developed across 158 active projects, and another 9.2 million square feet of development pending behind that. Our U-Box revenue results are included in other revenue in our 10-Q filings; this line item increased $9 million, of which U-Box was a major contributor. Earnings before interest, taxes, and depreciation at our Moving and Storage segment, adjusted to remove interest income from the prior year, increased by $16.5 million. A few comments on operating expenses at the Moving and Storage segment; they increased $21.5 million, leaving our operating margin before depreciation and lease expense flat with the first quarter of '24. On a positive note, we saw fleet repair and maintenance decrease a little over $20 million, a pace that we're unlikely to maintain throughout the rest of this year. On the other side, personnel costs were up a little over $11 million, liability costs associated with the fleet were up $13 million, and property taxes and building maintenance were up a combined $10 million. We continue to place a premium on having access to cash; at the end of June, at our moving and storage segment, our cash, along with availability, unused availability from existing facilities totaled $1.567 billion. We saw interest during the quarter increase $6.6 million while interest income on our cash and short-term investments decreased just under $9 million due to less cash being held on the balance sheet. For this year, there's going to be a bit of a presentation difference on the moving and storage interest income. It's going to take a little bit of extra effort to make the appropriate comparison. If you have any questions about that, please feel free to reach out to Sebastien and myself to walk you through it. On our Investor Relations website, we posted some supplemental materials this quarter that are in addition to our press release and our 10-Q filing; you can click on these on the home page and also on the lower right-hand corner of that page. With that, I would like to hand the call back to Angela, our operator, to begin the question-and-answer portion of the call.

We'll take our first question from Keegan Carl with Wolfe Research. Please go ahead.

Yes, thanks for the time, guys. Maybe to kick things off, Joe mentioned on the release that it feels like the customer is winning. I guess I'm just curious, is this comment more broadly just surrounding pricing power and potential erosion around that? Or is there something else there that was meant by that comment?

The customer is, of course, who's going to win. I know that we view this very much as a consumer product. If someone can win the support of the consumer, they will do that by pleasing the consumer, and that's our intent; we believe that will give us a modest amount of greater ability to weather some hard times. So it depends on who you talk to, but a bunch of people think it's hard times in the storage business. I'm not totally of that mind, but it is much more difficult to get new customers than it was two or three years ago.

Keegan, this is Jason. If I could also just add to that. I mentioned the revenue per occupied foot on storage is still improving. And on the fleet, we did still see some increased revenue per mile. So we haven't yet seen any sort of decrease in pricing power there.

Got it. That's really helpful. I guess one for you, Jason. I know you mentioned a little bit about July and August performance. But big picture, I'm trying to get a better feel for. Are you starting to see any sequential acceleration maybe from June to July and then July and August across your various business segments?

I would say that storage has been a fairly steady performer. My expectation going into the year was that we would start to see revenue per occupied foot kind of trail off; that's remained pretty resilient. On the equipment rental business, I'm not ready to declare some sort of victory on that front. It's been a little bit in fits and spurts so far this year. Fortunately, we've had more positive than we've had negative but we built up a little momentum going into July and then July flattened out, which was a little disappointing. And now the first week of August, it seems to be picking up. So we're certainly, I wouldn't say that all the momentum is there yet.

Got it. I guess just big picture, it feels like we've kind of worked through the peak housing season, and it wasn't what people were necessarily anticipating. So I guess I'm just wondering on the moving business, did anything stand out regarding the volume or cadence of in-town versus one-way moves?

This is Joe. We saw increases in both. My experience is that the ratio of them is determined somewhat by the consumer's optimism, and we saw a little bit of growth in the one-way, which is a little bit more optimistic consumer. Now, is that a trend? I wish I knew the answer to that. We're definitely digging deep and having to go to every corner of the market to try to find business, but of course, that's what we're supposed to do anyway.

Got it. I guess just shifting gears to storage, typically, the quarter from April to June is a strong quarter for storage. Obviously, the housing market is continuing to have an impact. I guess what I'm just curious is maybe on street rates, given that's what the new customer has been getting. What happened in the quarter for you guys? Have you been adjusting it at all based on what the competition is doing and are you seeing any positive trends versus last year in the same period?

I'll start off by just speaking to the actual numbers. We're still running a positive variance between, well, kind of on both of the statistics that are part of that question, asking rents this year versus last year are up for us, and the spread of what the incoming rate is versus the customer outgoing is also still positive for us. So I haven't seen those have been running on average for us for really the last year or so kind of plus 3% in that range.

This is Joe. I would add that what in my judgment is what's been happening is that we're catering to the customers to justify our rates, and our competitors are not. Again, this goes back to a fundamental view of the business. I view this as a consumer product. If I can figure out what they want, there is still a reservoir of additional customers who are willing to pay a fair price. There has been a lot of discounting in the industry that's way below the cost of doing business. I don't know if Jason wants to weigh in on that, but they've been pricing much lower than the cost of doing business. And of course, that usually doesn't work out over a long time.

And then last one for me. Obviously, there's a lot of concerns around the broader consumer, particularly in storage. I guess I'm just curious: one, are you seeing any change in your average length of stay; two, how are customers reacting to the existing customer rate increase you're sending out? And then just generally, are you seeing the signs of softness in the storage customer that some of your storage competitors have called out?

There has been softness for two years, just about certainly 18 months. We have our way of responding to that, and our competitors have their way. Our way has been to try to increase customer service so the customer can justify spending their hard-earned dollars at the U-Haul facility. We haven't been doing a whole bunch of additional discounting or hidden fees, any of this sort of thing. I think that long-term, that's going to benefit us, but the jury is still out on that. We just have a fundamentally different way of looking at the customer.

And just for Jason, just any commentary on the length of stay? Are you seeing any difference in trends there?

Sure. We've—I looked at this for this last quarter. We saw maybe a little bit of like a 1% tick up in greater than two years; a couple point increase in the one to three month range. Most of that came out of the one to two year range. So a little bit of movement to the outside. But again, we're talking small percentage points. The other push point that you might look at and the strength of the consumer is what you would call our delinquency rate. That was up maybe 20 basis points compared to the same time last year but still within the range that we would deem acceptable.

Great. Super helpful. Thanks for the time, guys.

You're welcome.

Our next question comes from Steven Ralston with Zacks. Please go ahead.

Good morning. I'm going to start with—it might sound like an intuitive comment, but that's the first thing that comes to mind. In the last conference call, Joe mentioned that he expected the top line to improve modestly through the calendar of 2024. And I was skeptical, but so far, it's coming to fruition. As you mentioned, the depreciation effect is coming into play with these strong CapEx program. This noncash expense is basically disguising U-Haul's earnings power. I just happened to rent a van this week, and I was impressed. It was a relatively new van, under 20,000 miles. And it gave me a thought that—CapEx timeline?

I'm sorry, Steven, we lost you for a second there. You kind of dropped out on and said it gave you a thought?

Yes. So it gave me a thought that the—thinking about the CapEx timeline, it might have been easier to buy smaller vehicles like vans as opposed to trucks and larger trucks for the self-moving rental market. Have those—if that would affect depreciation in that, if you are buying more expensive, larger trucks at the tail end of the CapEx timeline, we might see depreciation even increase more. Could you speak to that?

Steven, this is Jason. I'll start. It's not just the larger trucks that are costing more; it's also the trucks that you're seeing are also costing more. The vast majority of our line item gain on disposal of equipment or the insert that's part of depreciation; the majority of that is those, it's the cargo vans and the pickups, and that's the area where we're seeing sales proceeds year-over-year decrease. Now we're starting to begin to sell the units that we've been purchasing in the last 12 to 18 months that were costing us more, which is further shrinking that. And with that realization in place, we've been on new units that have been purchased, we've been increasing the depreciation on that too, so that we're not in a loss position when we go to sell them. So that's putting the upward pressure on depreciation right now. And we will continue to see that increase at least at the rate that you're seeing right now.

All right. I don't know if my question was answered. I'm thinking about larger trucks, with larger price tags, with maybe the supply is not adequate yet or you had to purchase those trucks, and we might see a bulge of large trucks being bought and then all of a sudden seeing the depreciation come through.

Yes. I think that what you're saying is the mix of vehicles as they come in impacts that depreciation line. Absolutely. Right now, it's being most negatively impacted by the pickups and vans, but there's a little bubble coming at us on the big truck, assuming we can get the quantity. So far, we've been buying but almost based on allocation. In other words, we haven't had the flexibility. If we could have put another 1,000 trucks in, I would have been an advocate for it. Of course, we'd run it through a financial analysis. And had we bought another 1,000 big trucks, we would see a bump in depreciation. I don't think there's any doubt. I don't think you're going to see, I don't think it's going to be so visible to all of you. I don't know, Jason?

No, I get your question, Steven, and you're right. I didn't quite answer it. We are incrementally increasing as the larger trucks become available buying them. We've made a lot of progress on the backlog, so I don't see another situation like we had immediately coming out of COVID; the rotation program is night and day from three years ago. A lot of progress has been made there. The trucks—the larger trucks that are dropping out are the trucks that are 15-year plus trucks that have a very low depreciation attached to them. So as those come off, not much depreciation falls off, but then the new trucks come on, there is a big depreciation number. So we're going to see more of that this year. I'm not sure if your definition is bulge, but it is going to keep increasing as—but we're not falling behind on rotation of big trucks right now.

Thank you. That answers my question. Getting a little granular here with the other interest income being moved around. But on the line that now you have separated to see the interest being earned on marketable securities, it was lower than my expectations. You mentioned that you kept some cash on the balance sheet. Could you add some color on why you did that?

It's just cash waiting for us to invest. So we borrowed the money a few years ago, and we've been steadily working that down. I think our cash balances at Moving and Storage compared to a year ago were off maybe $1.3 billion, I think. So we've been working that balance down. Here in this next quarter, we're probably going to do another large borrowing and build that back up again because you can see our last 12 months, I think our run rate on real estate investment has run a little over $1.3 billion for 12 months. So I'm trying to keep enough cash available to maintain that pace here for at least the next couple of years.

Surprised me up over 7%. And I think there were some comments in previous conference calls that it tends to be in line with the self-moving equipment business, which—there was a disconnect this time; it was much stronger. Any reason for that?

I'm sorry, you dropped out on the first part of that question. I picked it up at 7%. I didn't hear before that.

Okay. From what I understand, U-Box is supposed to be generally in line with the self-moving equipment business, that maybe they'll be off by a few hundred basis points. But generally, they'll grow about the same percent. And that's what I got from previous conference calls. But this time, U-Box was much stronger, what, 5x, 6x stronger than the new equipment business. Is there a reason for that disconnect?

Sure. I'll start with that. Well, it's a smaller business that's in growth mode. So if you had the impression that it was growing the same percentage as you moved before, then I apologize for you getting that impression. It's been growing much faster. What I have said is that our estimated margin on that business, which is—we don't do separate P&Ls for it, so it's a little bit of a guess. But the operating margin is relatively close to what you're seeing for the overall moving in storage. Those move pretty close together, but the growth on that business has been, for the last several years on a percentage basis, exceeding even storage growth in most cases.

Yes. Thank you. I had a couple of questions. I mean, first, and I apologize if I'm making you repeat yourself, but I just wanted to zero in on the $192,000 total of rental trucks at the end of your first quarter. I guess that's a pickup from where we were in March, and it's exactly the same, I guess, is where we were 15 months ago. So basically, the declines in your overall rental truck portfolio that took place over 12 months, you made up in the first quarter here. Now I know it's probably not apples-to-apples, but was that your intention? And I thought, if I recall correctly, Jason, I think you said the plan was to kind of rebuild the rental fleet over fiscal '25? So I don't know, I'm just looking at what I think is a meaningful bump in your fleet in the first quarter relative to what I was expecting for the full year. So just if you could comment on that, I'd appreciate it. Thank you.

Sure. From a numbers perspective, that couple thousand of units was the smaller pickups and cargo vans, which we're moving out every 12 to 24 months. So what happened in March was we had a bunch of them pulled out in prep for sale, and then the deliveries came. There's a little bit of a dislocation there for a moment. On the box trucks, they're probably up 1,000 units from where they were last quarter. We've been pulling units from that fleet for sale. Now we just need sales to kind of get caught up. There's only so many of those units that you can pull out at one time. So I think towards the—my expectation would be that the fleet should be relatively flat year-over-year.

Okay. Thanks for that. And then I had a question, I guess, on the storage side. But you are—in your CapEx budget, you're allocating quite a bit or to build out your storage capacity? And then I did note this quarter, I think, 0.4 million square feet of additional space where acquired inorganically or by acquisition. So when U-Haul thinks about your plans for adding storage, is it the case where you trade off between organic and inorganic growth, buy versus build, I guess? Or is it the case where you have kind of an organic growth target reflected in your CapEx budget and the amount of inorganic storage space that you add is really kind of a separate somewhat unrelated issue maybe for opportunistic reasons or maybe from deals that take a long time to be completed? But just a comment on how inorganic and organic elements of your growth in storage kind of play together? Thank you.

Sure. This is Joe. We're doing that. An entire new ground-up—that's a two to four-year process depending on where you are. So there's a big tail on that. So to kind of—it follows a trend line pretty much. It doesn't jump around a lot. The buying of existing storage, like you said, it kind of comes and goes. We don't have a target that we want to get X amount of it. I think it's very much opportunistic and most of those deals are closed pretty quick. Some of those things take a year ago; most of them are 90 or 120 days from first look to being running the site. So I think you could see more volatility on that, if that answers your question.

Okay. No, that's helpful. And then maybe, Joe, just to stick with you, I was reading in the press release the comment that you said competitors continue to mimic our customer service and we have to implement more ways to satisfy the customer. Could you just call out, if you wouldn't mind, can you call out one or two of the mimicry examples of the mimicry you cited, and then what are the last one or two or three differentiating moves that you've made to kind of counter the moves by your competition? Thank you.

Sure. A very physically obvious one you'll see is that all our competitors now put in windows with doors visible. That, of course, was our innovation; the competitors, even individual investors have figured that out now, and they just mimic us. Individual door alarms, we've been the strongest in the business of that for at least 10 years, and that gap is closing. There are some new technologies out there too that we have chosen not yet to implement. I don't have privy to their exact deal, but I can kind of see what they're doing. We've done a tremendous amount on unattended move in or move out. So you can call whatever you want, but giving the customer the ability to self-move in or self-move out. I think I credit very much Storage Express for really bringing this into focus for me; and giving that ability to me, Storage Express eventually was acquired by Extra Space, so they, of course, are now implementing that across their portfolio. I don't have privy to their exact deal, but I can kind of see what they're doing. So those are some easy ones. I don't want to tell you what I think I got to add, but I just do want to aggregate my own situation.

No problem. No, I appreciate that. And then maybe just this would be my last one. But when you break out your revenues, I guess, product line, the self-moving equipment rental revenues are up year-over-year as you called out for the first time in a number of quarters. When I look at those numbers, and I think the overall market, I think you indicated both in town and one-way we're up. Should I think that U-Haul is gaining share in kind of a static or slightly declining market? Or is this the case where the market is growing, and you're sharing in the growth on both sides? And then I'll just take it one step further, but if you are gaining share, I mean, I would have to guess that it would have to be on the one-way side; just given your positioning on the one-way moving side of things. So if you could just comment on maybe the relationship between the change in your self-moving equipment rental revenues year-over-year and relative to the overall market share gains, static, etc.? Thank you.

There are no accurate market share numbers. That's the first thing. We—of course, we have opinions, but there is no market share information. And seriously, what's half of the business; you see more movement between people who rent equipment and people who will say, use owned borrowed equipment. And there's a tremendous amount of people who basically move in the backseat of their car, or a truck they borrow from work, or God forbid a horse trailer, I see it every week. I think our gains over the last 12 months have been a better placement of our product relative to the consumer. Jason's auxiliary materials that he posted up on the website talk about what percent of the population or how many miles from—we're—speaking locations, then it becomes an individual piece of equipment. So it gets very granular. But I think that we've made some progress. Well, there's no question in my mind, we've made progress there. I think that we probably didn't take it from anybody other than owned and borrowed equipment. In other words, I'm not so sure that anybody who is a main brand saw any decline, but we expanded our share of the total market, but not at the expense of another competitor; maybe at the expense of owned and borrowed equivalents.

Very good. I appreciate all the color. Thank you.

Our next question comes from Jamie Wilen with Wilen Management.

Hi, fellows. I applaud that you look long-term in adding the self-storage units, which is going to pay off royally over time. But as you mentioned, in the short term, it takes, let's say, on average a three-year period for those things to not be a hindrance to the income statement. I'm wondering if you could quantify how much of a hindrance it is from those units that have not yet matured. It would be great to see that on a quarterly basis, so we could see if they're declining. I can't imagine that you're going to add much greater numbers annually than you have been, but I would love to see what that number is as it impacts the income statement?

This is Joe. I feel a little bit this is like the insurance company wants to have a device that knows speeding or not. I appreciate you're more on my side than the insurance company is. It is not—we don't have that calculation or make that calculation; Jason does it and doesn't tell me, okay? So I'm very aware of it. I've been trying to reposition the last—well, I've been effective at repositioning us over the last 24 to 30 months to get into some submarkets that I think I can reliably fill additional rooms in. So, and not to adding tremendous rooms in downtown L.A., I'm not sure is really in my best interest or the company's best interest in that. While we're adding a little bit, that's not really the thrust. We're looking for other markets that we think are—would allow us a little bit better cost advantage and a little bit, I guess, a cost advantage. Where we've really—we're—and you can't see it, and I don't know; I've asked Jason this question if he wants to. I think our newest projects are starting to ramp up at a better rate than we were 24 months ago. Our—and that trend, I'm hoping will continue that way. We're doing this. I think it's going to continue. And so—and I think that my slowness is more in the difference, which Jason, I don't remember the number, but we're down like 1.5% in same-store in occupancy. That's a lot of rooms at the end of the day. That's like 900 locations, all being down 1%. And so there's a bigger drag there; listen, there's an equal drag there to the drag of new construction in my judgment, although I do not have a mathematical equation, Jamie, on that. But I think my opportunity is there as much as it is in the speed at which I put in new units. That's kind of where I stand.

Would you still say it takes about three years for these new units to start to be contributing?

Yes, I think that's Jason. I'll let you speak.

Yes. It's still trending that way. It increased during COVID; we picked up 10 to 15 points of occupancy per year during COVID. We're now kind of back to normal projects that launched in the last 12 months; the first three quarters of those projects, occupancy was lagging from our historical average. It seemed to pick up in the last quarter, which would point to some of it is just management on that. We're kind of back to where we would expect to be at the end of 12 months. On your overall question, my sense of it is that the new projects are not necessarily a year-over-year drag on the operating margin, but certainly, it's been a drag on the return on equity and assets; you're certainly seeing that effect there.

Okay. Thank you, fellows. Appreciate it.

We'll go next to Stephen Farrell with Oppenheimer. Please go ahead.

Good morning. Operating expenses were up about $35 million year-over-year. How much of that is from growing the business, having more locations, personnel, compared to increases in operating expenses of the existing business?

It's a relatively small part of that. I don't have that number off the top of my tongue right now. That's not a significant part of it.

The new locations are not significant?

No. I would say that I'll try to find the number here before the call is out in order to verify that. But it wasn't enough to put much downward pressure on the margin, I'd say that.

Let me help you on this. Everything is coming up. Utilities are up. They're getting hit with property taxes; wages are up, and we're not up enough. We need to be up more in wages. It's a very competitive marketplace for quality people. So there's a lot of upward pressure on those expense lines. The challenge is to try to figure out how to configure things so the customer is willing to accept those increased expenses. As I pointed out earlier, the increased expense from the original equipment manufacturers on trucks, customers—they're not seeing that as a big benefit to them. In other words, costs went up, but nothing happened—there was no value increase to the customer. So we have plenty of—we have something like 33,000 employees. We've got people all over the country doing work, and it's been a battle; it's a continuing battle to try to make them more productive because they simply must be paid more because they're in this pinch. They're an advice. We have to try to do that. And that goes to some of it is streamlining operations, and I'm very hard-focused on that, but we've squeezed a lot of the waste out of the deal so far. It's not just—there's no big breakthrough going to come around the corner as far as I can see on that, although we're pushing on all fronts on that too. Try to do it. I was in a Wendy's the other day, and they would not take my order except at the kiosk, and of course, I didn't want a bunch of the junk on the burger, and I didn't want the meal, and I couldn't figure the damn kiosk out, so finally, their person had to come around from the back and come up to the kiosk and do it for me. Not at least average intelligence on these fast food deals, but they were trying to make it work better. In fact, they went backwards and spent a ton of money to go backwards. So this is, I think we're not unique in that. I think that you're seeing that all over people who have businesses where actual human work is being done, and how can you optimize that situation or get more productive locations. We're in that squeeze, and it's going to continue for some time; I just think that's a fact. And to the extent that you need assurance that we get that, we do get it, but there's not some magic thing around the corner, a truck that cleans itself or something of that nature, or storage rooms that don't have to be maintained or trucks that don't have to be maintained. We're going to be changing oil and changing tires at the speed of light going on into the future, and that just costs more money today.

Stephen, this is Jason. I just checked. And locations that we had this first quarter that we didn't have first quarter of last year accounted for a little more than $2 million of additional operating expense that gives you a flavor.

That does. Thank you. And just to clarify the comments on your fleet size, you said it would be flat for the rest of the year. Is that from the June 30 number or March?

It will be some; it will probably be somewhere in between there. Every time I make a projection or prognostication on fleet, something changes around here, and I'm usually within a couple of thousand trucks of where we're right. So we could be plus 2,000 over where we were at March or below that.

And on the last conference call, you talked about potentially reducing the fleet size by about 3,000 or 4,000 trucks, and that would put it kind of significantly lower from where we are now. Is that something that is still in the works, or it could happen?

This is Joe. We did that as part of our fleet. When you look at that on a model basis, we did that. Then we had the opportunity to purchase a few more trucks that became available. As I have indicated before, we've basically done an allocation on other trucks, and the market is softening just a tiny bit. So the OEMs came back with some 'more capacity.' It was the motorhome guys took a beating, and they used a very similar truck to what we do. They were able to change their production line to make U-Haul trucks instead of motorhome chassis. And so we got them. So there was a little opportunism there, and we're going to have that persist at least through December, I think; we're going to get just a bit more than we had planned for ordinarily. I won't say ordinarily, but in past decades, we could tell you 10 months from now what we're going to produce damn near to the day; we were highly accurate. They no longer have that tight of a supply chain. I don't know all their problems; I'm sure they're working very hard, but that impacts us. When you look at the total fees, we did drop probably 4,000 trucks on the small end of the fleet. Then we've picked up a few thousand trucks on the big end of the fleet. The other one, you have to look at because what varies the fleet more than anything else is the rate at which you sell, you see? We have a bunch of let's call the starts and fits in bringing new equipment in. And then, of course, we think we plan when we're going to sell it. But we don't always sell as well as we had planned. It's not a long-fire going, but there's some resistance in the resale market right now. I think it's because the consumer is pushing on the new truck pricing; that's common knowledge in Wall Street Journal reports that. That reflects itself, of course; it kind of trickles down through used truck pricing. There's end demand. Again, in the middle of COVID, we said we want to sell the truck that we had the line of people to buy it. That's not the case today. We're still selling the trucks, and we're keeping more or less on program, but not as tight as we would like.

And you touched on potential capital raise during the quarter. How big would that be? And what's sort of your optimal level for cash just to operate the business going forward?

Sure. It will be in the form of a private placement of $500 million. Our optimal level of cash is—it kind of changes. Our floor historically has been—I've been allowed to keep enough cash to cover a year of debt maturities, excluding the fleet revolvers, but we're well above that now. But I mentioned it earlier in the call. In the last year, I think we've deployed our net cash balances have decreased over $1.3 billion. I'm just trying to prep that because we still have a couple of billion dollars of development on the balance sheet that we need to finish. We're certainly higher than what we need to just run the business from day-to-day, but to maintain the growth rate, I'm having to be a little bit heavy on cash.

That's all. Thank you very much.

This does conclude today's question-and-answer period. I will now turn the program back over to management for any additional or closing remarks.

Well, thanks, everyone, for participating today. As a reminder, one week from today on Thursday, August 15th, at 11:00 a.m. Pacific, 2:00 p.m. Eastern, we will host our 18th Annual Virtual Analyst and Investor Day. Participants can sign in at investors.uhaul.com. Questions for the Q&A portion can be sent prior to the meeting to ir@uhaul.com or submitted live during the event. We look forward to speaking with you next week. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.