Amerco

F:AUK

Earnings Call Analysis

Introduction and Opening Remarks

The investor call for U-Haul Holding Company's fourth quarter of fiscal year 2024 began with opening remarks from executives who acknowledged that the past year brought significant challenges in terms of fleet management and market dynamics. They outlined some of the key factors disrupting their operations, such as the high costs of new vehicles from Ford and GM, which have not been matched by comparable increases in resale prices【7:0†source】.

Financial Performance Overview

Jason Berg, an executive at U-Haul, noted that the company reported a loss of $863,000 for the fourth quarter, a stark contrast to the $37.4 million profit from the same period the previous year. For the full fiscal year, earnings dropped from $924.5 million in 2023 to $628.7 million in 2024. Key factors contributing to this decline included reduced gains from the sale of retired equipment and increasing depreciation costs. Yet, despite these challenges, EBITDA showed slight improvement, signaling some operational stability【7:1†source】【7:2†source】.

Fleet and Equipment Management

U-Haul's strategy around its fleet emphasized the shifting focus from gains on disposal of vehicles to managing depreciation costs and maintenance. During fiscal 2024, the company invested significantly in new rental equipment, totaling $1.619 billion, up $320 million from the previous year. This capital was aimed at refreshing the fleet, where the company continues to manage a backlog and plans further improvements in fiscal 2025. Despite an increase in proceeds from truck sales, overall gains from equipment disposal were down by $32 million compared to the previous year【7:2†source】.

Self-Storage Business Expansion

The self-storage segment was a bright spot, with revenues increasing $17.5 million or 9% for the quarter and $86.5 million or 12% for the full year. The increase was primarily driven by a 6% rise in the number of rented units and a 2.5% increase in revenue per occupied square foot. However, the occupancy ratio decreased slightly due to the addition of 55,000 new units. Investments in real estate acquisitions and self-storage developments totaled $1.258 billion for the year【7:3†source】【7:4†source】.

Challenges and Future Outlook

Looking ahead, the company anticipates a challenging environment influenced by regulatory pressures and market dynamics. Issues such as rising personnel costs, driven by wage mandates and inflation, were highlighted as significant concerns. The company aims to counter these through increased productivity and IT investments. On the fleet side, there is a clear expectation that gains on equipment disposal will continue to decline over the next 12 months【7:4†source】【7:5†source】.

Q&A Highlights

During the Q&A session, questions focused on fleet management, capital expenditures, and competitive positioning in the self-storage market. U-Haul executives reiterated their commitment to maintaining operational efficiency and expanding their footprint in key markets. They also emphasized their strategies to drive utilization and manage costs effectively despite the headwinds posed by a competitive and regulatory landscape【7:7†source】.

Conclusion

Overall, U-Haul Holding Company remains focused on navigating through the current economic challenges by leveraging its market position and improving operational efficiencies. While there are clear areas of concern, the company's strategic investments and adjustments aim to position it for long-term stability and growth【7:12†source】【7:16†source】.

Earnings Call Transcript 2024-Q4

[Operator]

Hello, and welcome to the U-Haul Holding Company Fourth Quarter Fiscal Year-End 2024 Investor Call. [Operator Instructions] Please note that this call is being recorded, and I will be standing by should anyone need assistance.

I would now like to turn the conference over to Sebastien Reyes. Please begin.

[Sebastien Reyes, executive]

Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company Fourth Quarter Fiscal 2024 Year-End Investor Call.

Before we begin, I'd like to remind everyone that certain of the statements during this call, including, without limitation, statements regarding revenue, expenses, income and general growth of our business, may constitute forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Certain factors could cause actual results to differ materially from those projected. For a discussion of the risks and uncertainties that may affect the company's business and future operating results, please refer to the company's public SEC filings.

I'll now turn the call over to Joe Shoen, Chairman of U-Haul Company.

[Edward Shoen, executive]

Good morning. Thanks for joining the call today. The huge price increases at Ford and GM put in over the last 3 years are manifesting themselves in less gain on sale. There is abundant product in the resale market and resell pricing increases have so far failed to parallel new vehicle pricing increases. How this will go into the fall is still a guess. Positively, repair has come down and has the potential to come down more as we trade vehicle depreciation expense for vehicle repair expense. Ordinarily, this is a positive trade-off.

Recent consumer confidence reports indicate some chance for an upturn in miles traveled per rental. So far, consumers remain cautious in our experience. Personnel costs are up. It's a combination of government wage mandates and inflation. Our best way to combat this is through increased productivity, primarily at the retail level. This is through better IT and whatever product improvements you can achieve.

We continue to expand our footprint in self-storage. We are still filling rooms, but at a slower rate than we are adding them. We have the broadest footprint in the self-storage business, yet there are still many markets, I believe is smart for us to expand into. Both moving and storage are need-based businesses. We, of course, aim to be the customer's best choice. I encourage you to patronize our products and services and encourage your friends to do the same. Look forward to talking to you in the Q&A section.

Jason?

[Jason Berg, executive]

Thanks, Joe. Yesterday, we reported a fourth quarter loss of $863,000 compared to earnings of $37.4 million for the same quarter last year. And for the full fiscal year 2024, we reported earnings of $628.7 million compared to $924.5 million for fiscal 2023. The most significant factors leading to the quarterly decline center around the continuing decline in gains on disposal of retired equipment and increases in depreciation costs from both the fleet and real estate.

To highlight this, if you look at our quarterly operating cash flow or income statement proxy, EBITDA, you'll see that we actually had a slight improvement for the quarter. I'm going to start off with equipment rental revenue results. Compared to the fourth quarter of last year, we had a $10 million decrease or 1%. March was the first time in 19 months that we experienced a year-over-year improvement in equipment rental revenue. Looking at combined April and May, we were seeing move revenue results flattened out compared to last year.

To put this fourth quarter into context, we're $200 million better than we were in the fourth quarter 4 years ago. That translates into an average compounded annual growth rate of a little above 8% for the 4-year period. Average miles per transaction continued to decrease, but less than the previous 9-month rate.

For the year, total truck transactions were down 3%, while the fourth quarter was down 1% and revenue per mile was positive for the quarter and for the 12 months.

Capital expenditures for new rental equipment for fiscal 2024 were $1.619 billion. That's a $320 million increase compared to last year. Our initial fiscal 2025 projection is for about $100 million increase in this number. Proceeds from the sale of retired rental equipment increased by $40 million to a total of $728 million in fiscal '24.

The increase in proceeds is coming from additional truck sales. Average sales price per unit has been steadily declining. As we both mentioned, a large component of the decrease in earnings for the quarter stems from a $32 million decrease in gains from the disposal of equipment compared to the fourth quarter of last year.

As we've previously commented, we'd expect these gains to continue to recede over the course of the next 12 months. We've made progress on our backlog of rotating new trucks into the fleet, and our estimate for fiscal 2025 projects further progress on getting us back to where we need to be on the fleet side.

We've increased the number of trucks sold by nearly 20% compared to the year before. At the end of this year, we reported 188,700 trucks in the fleet, which is down about 3,500 from March 31, 2023. Now if you compare that to March of 2020, we still have over 12,000 more trucks in the fleet today than we did 4 years ago.

For self-storage, revenues were up $17.5 million or 9% for the quarter and a little over $86.5 million or 12% for the full 12 months. The quarterly increase was a combination of a 6% increase in the number of units rented combined with about a 2.5% increase in revenue per occupied square foot. The year-over-year improvement in revenue per foot has been coming down as we progress through the year.

Our total portfolio, so all of our locations combined, the occupancy ratio decreased 140 basis points to just under 80%. That's largely due to the addition of 55,000 new units that we've constructed while we increased the number of occupied units by 31,000. If you narrow this group down to the same-store pool, we saw a 190 basis point decrease in occupancy to 92.3%.

During fiscal 2024, we invested $1.258 billion in real estate acquisitions along with self-storage and U-Box warehouse development. That's down $83 million from the year before. Spending on the acquisitions of new properties has declined while investment in development of these properties has increased.

During the quarter, we added 2,424 000 new net rentable square feet, which brought our 12-month figure to 5,475,000 new square feet. Our pipeline of active and pending projects remains robust at 7.8 million and 9.2 million square feet, respectively.

Operating expenses at moving and storage were up $10 million for the fourth quarter and $100 million for the fiscal year. We've now had our second consecutive quarter of fleet repair and maintenance improvement with a decline of $11 million. Now the year was still up $33 million, but I would expect to see these costs continue to move down over the course of fiscal 2025. As we've been able to rotate in new trucks and begin to remove the oldest ones from the fleet, this has been a positive for repair and maintenance.

I mentioned in the press release, the $9 million quarterly increase in personnel for the quarter and $50 million for the year. We've also seen our liability costs increased $14 million in the fourth quarter as we had some negative development on accident claims this last year.

Property costs, including utilities, building maintenance and property taxes were up $5 million in the quarter and $26 million for the year. We are filing our 10-K later today, and that will be available both on the SEC website and on our Investor website.

This is our first financial statement audit with Deloitte, so you will see some slight changes in our presentation. Sebastien and I are always available if you have any questions about this.

With that, I would like to hand the call back to our operator, Guion, to begin the question-and-answer portion of the call.

[Operator]

[Operator Instructions] We will take our first question today from Keegan Carl with Wolfe Research.

[Keegan Carl, analyst]

Maybe just starting on the fleet CapEx because we kind of added on that. I guess what I'm just trying to understand is, obviously, we can expect more improvement as you refresh the fleet. But at the same time, we'd expect at some point, the utilization also improves over time. So could you help us just understand sort of the puts and takes there on how an increase in utilization, maybe offset some of the CapEx improvements?

[Edward Shoen, executive]

Well, I think you're basically correct, that's what you're looking to do is continue to drive utilization. My experience is as the utilization increases by decimal points, and that's about what you can really bring out of the place. Of course, we have a inherent conflict in our strategy, which is we attempt to have the widest distribution, which cuts against utilization. As you might imagine, our stores usually exceed the utilization of our dealers by a considerable amount, yet we're going to continue with our dealer program and try to grow out over the next year.

As we get a little bit reduction in maintenance, it also -- you can kind of equate that with an increase in uptime and uptime makes these vehicles more available for rent. So for the last, I would say, 90 days, we've been having a pretty decent results in holding the number of down vehicles under control.

So when a vehicle gets scheduled in for certain types of maintenance, we take it off the rental register. And we've been able to -- we're doing a better job of controlling that than we did a year ago on the same. It's largely by refreshing the fleet, which is what you referenced.

[Jason Berg, executive]

Keegan, this is Jason. I also -- in my prepared remarks, I pointed out that we're still a little over 12,000 trucks more than we had going into COVID, which was largely a result of us holding on to trucks longer into their age. We went into last year with a backlog of maybe almost a year behind on rotation, and we cut that probably by 2/3 this last year. So it's freeing us up to be able to take some more of those units out.

So part of the equation is the denominator, which is the number of trucks that we're holding. Joe mentioned utilization, it can be measured in decimal points. At least decimal point does translate into something very important to us.

And I think as we shed more of these older trucks, it's going to improve utilization or give us the opportunity to improve utilization. And I wouldn't be surprised to see the fleet -- the total fleet about the same size or maybe again, a few thousand trucks left by the end of next year.

[Keegan Carl, analyst]

That's really helpful color. I guess maybe just shifting gears here. Obviously, the commentary in the press release and one way moves is that it's still below expectations.

I guess, could you just maybe help us understand, frame of reference, as we move into peak leasing season, what sort of -- or what percentage of your moves are typically one-way moves. And I guess, specifically on that metric, maybe any commentary in April and May, specifically in one way moves would be really helpful.

[Jason Berg, executive]

This is Jason. I'll start off with just some of the figures. So historically -- well, I got to break this up. Over the last, say, 10 years, we've been probably on a revenue break about 55% in-town, 45% one-way. If you went back, I think, it's 15 -- a little over 15 years, it was closer to 50-50. And the transaction break is much more stark. Throughout COVID, that narrowed a couple of percentage points.

The number of one-way moves -- well, I say the amount of one-way revenue increased several percentage points. The transaction break remained about the same. So it was longer moves, and we were able to charge a little bit more per mile. So that kind of outlines what the transactions and the revenue looks like.

And I'll it to Joe for any prognosis.

[Edward Shoen, executive]

Yes. When I said I think the consumer is still pretty conservative, that really results in less miles per rental. People still move because moving is a need and it's based on things like marriage and births, deaths, these things that are inherently kind of smooth. They don't have a lot of peaks and valleys, and they steadily increase over time. But how far people move and therefore, how big the dollar amount of the transaction has something to do with just how they feel about life.

They think it's great. I'm going to go on my big adventure and move to San Diego and start a new career. Well, great. That will be great for us. But when they get more conservative, they say, well, I'm going to move to another house in the neighborhood, keep the kids in the same school, keep my present job. So that just shortens the move. And to a large extent, we have to recover costs based on mileage incurred because our cost very much vary with mileage incurred.

So I don't see a big shift. I thought we would pick up a little bit quicker than we have. And I'm still expecting we're going to see this shift we're not running behind last year, but we're running, I think, a little bit behind historical trends or at least how I have anticipated they would play out. And we'll see the housing turmoil or whatever it's called, has some modest effect on it. But I think how people feel about the economy and this whole -- their whole life situation has -- our experience, it has a greater effect than residential new home sales.

[Keegan Carl, analyst]

That's really helpful, Joe. I guess let's shift gears to storage. I thought commentary in the press release, calling out competitive pricing really stood out. I guess I'm just curious, twofold. What's changed in the past few months to cause you guys specifically to put that in the press release? And I guess, second, how is this impacting your decisions around what you guys are doing with your street rates?

[Edward Shoen, executive]

We have a different rate strategy than most of our larger competitors claim they have. Now of course, the only way you really know rates is to just doggedly go out and make calls. It's not enough just to survey the Internet. But the -- all our competitors have some sort of a demand pricing model where when they think demand is up, they jack prices significantly. And when demand is down, they cut prices or reduce prices, whatever you want to call it significantly.

We don't pursue the demand model. We're one of the few people who post room prices in our stores. If you were to go to our competitor, it would be nothing for the next person in line to be quoted a rate 20% to 40% different than the person right ahead of them, kind of like motels and hotels do sometimes. And we do not follow that strategy. And I think what we've done has proven to at least be reasonable, given our ability to maintain some modest rate increases over the last 18 months.

Now there's a lot of factors that go into this whether our competitors do what they -- what the demand pricing model would say, which is increase the prices now that during the summer, I don't control any of that. I have no window into it other than monitoring pricing. So this, in my experience, jumping around pricing confuses the customer. They don't know if they're getting a good deal or a bad deal. And we have a much more steady approach to pricing. So if we offer a discount, it's really a discount.

It's not that we jack the rate and then put a -- you kind of see that in how department stores used to price. They inflate the cost and then the discount off of it until you're getting a sale and all they're really doing is charging what they would have charged to you in the first place, but they're confusing you. So we don't subscribe to that process. Our competitors are -- admit that they believe this drives revenue per square foot for them.

It's very difficult for me to give you an honest appraisement of that, but it does confuse the customer if they go see a competitor in, let's say, February would be 40% back to us. And so -- but we just -- we have to deal with that, and we've been dealing with it.

I'm a little bit less confident that they're going to come up on their rates going into this demand season. In other words, they successfully reduced prices when demand was down. Are they going to -- really I don't know and we kind of are having to proceed ahead and have to explain it to the customer that if they do business with us, they're not going to see a increase in price.

And so yes, we're in some markets, in some size rooms, we might be a little bit stronger price than the competitor. But we're generally able to explain it to the customer. And -- but it's a constant concern because we're all impacted by income per square foot. And of course, we're impacted by rooms rented. But we're impacted by income per square foot, and we try to maintain that.

[Keegan Carl, analyst]

I guess just on that, two-parter here. I mean, I guess, are you seeing any change in your average length of stay just given what appears to be some macro concerns? And I guess on the rate increase side of things, are you seeing any difference in how your customers are reacting to the rate increases you're sending out?

[Edward Shoen, executive]

The constant conversation rate increases are. And as far as the some changes in the macro environment, other than the whole storage business is a little tougher to compete in than it was certainly 36 months ago and probably a little bit tougher than 24 months ago. Is it tougher than last summer? I'm not absolutely certain and we're not really into it quite yet.

So -- but are there the -- what do you want to say, scarcity mindset of the consumer is no longer there. They no longer think storage is scarce. So they want to have a conversation, what's the value. And we have a pretty long-term tradition with the customers of being a value pricing operation. We tend to do that without putting big discounts.

So in other words, we don't necessarily jack the price, but then we also don't now then discount the price a bunch. And it's a dance and my competitors are very well aware of it. They're all very intelligent people. They're all doing what they think is smart. And we just have different strategies.

[Jason Berg, executive]

Keegan, this is Jason. Just to get your average stay question, I just looked at that our year-end numbers compared to what they were last year. In a couple of the buckets, maybe there was a 1% change from what it looked like last year. Otherwise, we're not seeing anything dramatic on that front.

[Keegan Carl, analyst]

Got it. And then last one for me just because it was also brought up in the opening remarks. Just on supply in general, I guess, what are your views on the supply outlook in the space? And I guess, how should we think about your deliveries in the next 12 months impacting that?

[Edward Shoen, executive]

You're talking motor vehicles?

[Keegan Carl, analyst]

No, on self-storage.

[Edward Shoen, executive]

Self-storage. We're probably going to bring to market more rooms than we feel that would be my guess. Of course, I'm trying to fill rooms. We have pressure on everybody to fill rooms, they know it. But all these -- we're doing more new construction than acquisition and new construction, depending on where you are, it's a 24-month process. It could be 36 months in some tough areas like California, New York could easily be a 36-month process.

So I'm not going to just turn that off necessarily. I see the storage market aren't termed as good. And as I indicated in my remarks, I believe there's markets where it's smart for us to expand, we will rent net more rooms as we get bigger in these markets. And so that's -- I'm going to continue on that trend. Now that interest rates are going up and Jason is having to finance it higher, he's, of course, encouraging me to be careful. So we can be sure of that.

[Operator]

Our next question comes from Steven Ralston with Zacks.

[Steven Ralston, analyst]

Personally -- well, put it this way. The -- I look at your top line that when it was reported. And it exactly met my estimate since I'm the only estimate out there, the top line was right on target. And what I was using was your statement from a couple of quarters ago saying that you saw the company returning to the historic growth rate exiting out some pandemic gains. And adding to that with quarter-to-quarter trends and seasonality, the top line looked good. From your tone, however, it seems like that's changing. And so I'm asking you, what are you seeing going forward into fiscal 2025 where I should adjust that premise, if I should?

[Edward Shoen, executive]

Well -- this is Joe. I'm hammering on truck rental. I know truck rental pretty well. I think we're going to post increases, not decreases in the coming year, okay? And I think it's appropriate. I don't think it's any hat trick I just think we just -- they're out there, we need to go on with the customer.

Self-storage, we are going to see growth in total rooms rented but probably a little decline in occupied square foot as a percent of all square foot. On rate in self-storage, we're going to try to hold prices at least steady, if not get a small increase. In truck rental, it's very specific and we are getting a tiny bit more per mile right now. And I think that we're careful and we don't abuse the customer. We may be able to do that again this year, gets some pennies more per mile, but those pennies add up. And if we can do that, I would look for both truck rental and self-storage to have a net gain a year from now, okay, for the whole year as opposed to what we just took, which is kind of a leading -- profitability is a little bit more speculative because of a tremendous push on increasing entry-level personnel expenses by the government.

It's massive, and they're also all these people are under terrible inflationary pressures, they have to make more. That's just the truth. And so you see in -- just depending on who you believe in California, they've got everybody getting $20 or $25 an hour, depending if you're in health care or food service, of course, they make exceptions for government entities. But they didn't make an exception for you all. So this is just pure going to push up those wages. So we have to drive on productivity, which is always speculative.

We have programs we're pushing on. A lot of this requires IT investment and what should take 6 months, it takes 18 months invariably in IT. So you don't get quite what you want, but we've made substantial progress in basically customer self-dispatch and self-return, which is it increases productivity of our personnel. And I would expect we will continue to make gains there. How far we can push it, you just -- you don't know.

But this is a do-it-yourself business. And if we make it work well enough, customers are happy to do it themselves. In fact, in some -- many of our customers prefer to return it themselves or dispatch it themselves.

[Steven Ralston, analyst]

Okay. The -- you went into basically the bottom line and different costs. Well, you had the depreciation, which is expected and it has been a cycle for you for as long as you've been in the existence. The personnel costs you just addressed with the productivity enhancements with the IT and the liability insurance will that -- the way I look at you hold that, that's not a true driver of the company. Are there any other costs that concern you?

[Edward Shoen, executive]

Sure. It's negative gain on sale. In other words, our gain on sale is down right now. And the future is cloud. For the last 24 months, automakers have pushed through tremendous increase. I'm talking upwards of 50%. And they've been able to get it at retail. And to a certain extent, that's pulled up resale prices. But it hasn't pulled them up as much as the costs have gone up. And so just how this is going to play out this whole confusing thing of Ford and Chevrolet saying electrification, but doing gas and then basically taking it all out of the fleet customer.

They've smacked every fleet customer in existence with us being one of them, with price increases way above their cost for the vehicle because they're using us to subsidize electrification. And so we're subsidizing it and beginning to benefit from it.

I read a recent study by Ryder. And they -- depending on some certain assumptions, estimate that total electrification of the classes of trucks they rent but result in at least 50% increase in cost, total cost to the user, sometimes as much as 100%. And they estimate it's going to impact with inflation to the whole country by 50 basis points, was interesting read.

I don't know that I agree on everything they say, and we rent some trucks different than they rent. But these forces are impacting everybody in transportation. And its root is really the overwhelming mantra of electrification when they don't really have any cost-effective solutions for electrification but they're spending money, great gobs of it. I know Ford, I kind of loosely follow them, and they're spending gobs of money on electrification, and that money is coming from internal combustion engine customers. That's just how it works.

So all that's affecting these resale prices and also availability. Ford simply isn't making as many trucks in the class we buy as they once did. They just simply aren't making. And so you can't buy what's not built, if that makes sense.

And we've basically been on allocation for, I'd say, at least 36 months. And the same thing is pretty much the true of Stellantis or General Motors. They've had customers on allocation. Now whether they're going to get their supply chain to catch up or whether they even want to have a catch-up because of the complex formulas they have to have for overall fleet economy.

And now with the California Air Resources Board attempting to force electrification on the whole rest of the country, they've got a very much a moving target. I can't tell you what they're going do. We'll be the tail of the dog. We're not going to be the people driving electrifications. It's scope is so far beyond us that it's unmovable. So I think that's a big wildcard. Of course, I would hope, to a certain extent, inflation will rescue us if they keep this inflation up the vehicles we played a little bit, but we're -- these are primarily the vehicles we hold 24 months or less.

And so even if we have inflation, it's -- it may not be enough to compensate for the cost that they put through. It is not 2 years isn't a very long time to pick up an [ inflationary mean ].

So I just don't know. I mean, we're in this business for the long haul. We're going to do it, and we're going to keep the customer going. And I think this whole electrification deal will clarify itself over the next 3 or 4 years. And when it does, everybody would be able to make more accurate predictions. I thought Ryder has been a vocal leader in adopting electrification and then they come out with this recent study last month. It says it's going to raise the cost 50% to 100%. You go -- well, that's not a good news for your customers. So I'm not quite sure. And of course, these are all -- it's all based on everybody's assumptions, which nobody has a crystal ball. So that's kind of -- that's a unknown here that's going on, and you see it in our reduction in gain on sale.

[Steven Ralston, analyst]

Just one more quick question and a comment. You said you are using Deloitte. I guess that's why I saw a new line item out there, other interest income. I'm assuming that that's the interest on your cash balance. Could you just verify that? And where was it previously?

[Jason Berg, executive]

So we've always had -- because we have 2 insurance companies, we've always had a line called net investment income where their interest income goes. And historically, the interest income on moving and storage cash balance has been negligible. So it just was included in that line. As we've held higher cash balances, right, at the same time, short-term rates have gone up. The number got to be a much larger number. And the theory behind that is interest income is not really part of our operations.

So for this year, then it's reclass down below what you call operating earnings. So there'll be a little extra work now to get an apples-to-apples comparison. But that other interest income is -- you nailed it. It's the moving and storage interest income on our short-term investments, which is government money market funds and some short-term treasuries.

[Steven Ralston, analyst]

Okay. And now for the comment, and I wouldn't have brought this up unless you -- but you mentioned it. To use U-Haul products and services and recommend it. I've used U-Haul 3x over the last 2 years, 2 different products. And I have seen productivity enhancements. I mean most of the things are done on the telephone or on iPhone. And the interaction with the employees has obviously been reduced and we just pick up your truck and -- or call for the U-Box, and it just shows up and everything works smoothly. And your employees are very accommodating.

[Edward Shoen, executive]

We're pushing on that. And I think that's -- on the longer term, that's a key result. We need to certainly be ahead of our competition. And we're trying very, very hard on that.

[Operator]

Our next question comes from David Silver with CL King.

[David Silver, analyst]

Yes. I just had a couple of questions that I think you've touched on, but maybe just if you could flesh out things a little more. But as you look to fiscal '25, with your projected capital spending just however you look at it, but could you maybe just point us qualitatively where you think you'll be increasing capital spending or which buckets may -- where you'll see the CapEx spending decline. So just kind of from your perspective, where is capital most needed or not needed as much as in the past year or 2?

[Jason Berg, executive]

David, this is Jason. I'll start off and then let Joe clean up. Number one, CapEx priority typically every year for us is going to be fleet maintenance CapEx. And going into next year, we're projecting a gross spend of somewhere around $1.7 billion compared to, I think, we had $1.619 billion this year.

And because of the shortages during the pandemic years, it's pretty much all what I'll call, delayed maintenance CapEx. There isn't growth CapEx embedded in that number. It's catch-up. We were down a little bit on real estate spend, about $83 million, but on a $1 billion -- over $1.2 billion spend, it's a small amount. Of the amount that we spent on real estate last year, I would say a little over -- somewhere close to $900 million, $925 million of that was development and construction. The rest was acquisition of new land or buildings.

The projections I'm looking at for next year or planning for in cash projections is a spend somewhere close to that on real estate than -- on the net fleet CapEx, I think we're going to be going from somewhere -- this year, it was close to $880 million, I think, right, $890 million, up to something closer to $1 billion. And will be needing to come up with, say, $350 million to $400 million of working capital to fund that. Joe, I don't know if you want to add...

[Edward Shoen, executive]

No, I think that -- I think you're pretty right on there and I don't expect it to be a whole lot less than that.

[David Silver, analyst]

Okay. Great. And then last question is just maybe more of a big picture question. In your prepared remarks, I heard a number of references to current conditions versus 4 years ago. And this question is in that spirit. So in the post-pandemic environment here, I'm kind of wondering how you look at your business opportunity as your customer demographic now, let's say, versus pre-pandemic.

So I'll just throw out a couple of things. But certainly, the trend towards remote work kind of effects where people live their lives. And I'm just wondering what implications that might have for your logistics or your strategies to take advantage of that trend. And it's been mentioned here, but digitalization or other productivity enhancements tied to labor and I guess, just the ongoing digitalization of things is probably something you think about quite a bit. But as we sit here kicking off your fiscal year '25, I mean how -- what big differences or what features or priorities have shifted, let's say, from 4 years ago?

[Edward Shoen, executive]

Okay. I would say that we didn't see the remote work thing coming, and it basically was a tidal wave of new customers. These were people who weren't U-Haul customers who hadn't been historically U-Haul customers, and they all of a sudden became those. And I could see that in customer feedback that they didn't understand this or that procedure, and it's a reason they just hadn't done any business with us.

So that wave has receded. There still is a little bit of a boomerang effect and I don't have any kind of a measurement on it, but there's people now going back to work where they fled from because the employers and you see in the newspaper saying, yes, yes, yes, but I mean, you got to come to work.

And so where that's going to optimize out, I'm not sure. Personally, I've told our team, don't hire anybody who wants to work from home because we don't have any homework except for telephone sales, which we have a plethora of people doing that. But as far as people who want to work in an administrative capacity or an analytic capacity from home, we don't have much of an appetite for it.

And I don't see many employers having that appetite. So that should kind of normalize out. But there's a little boomerang effect. And I've seen anecdotally some customers who are moving back from someplace like Idaho, closer to some place where there's actually employment.

The digitalization is that just -- that's a long-term ongoing trend. And I continue to try to understand it better because I think there's a lot of misinformation out there, and people have misstated what's given them success.

Now that's my opinion. I don't -- I can't prove it, but I'm trying very much to understand that. Of course, it has the opportunity to make doing business with you all easier. That's important. Because people like things that are easier. So I'm very focused on that and seeing if we can reduce the complexity of the whole thing. We have been doing business where those can be somewhat complex because of the -- particularly when you're doing the one-way move because you have a dispatch point, return point, they're different, and there's a lot of moving parts there.

But we're part of digitalization helps us anticipate those moving parts better and give the customer more certainty. And we're making regular progress in that. I think we'll continue to do that. I think the customer will respond. That's -- I don't know if you have a more specific question I'd be happy to answer.

[David Silver, analyst]

Not at this point. I mean, I guess, I'll follow up with some more specific ones off-line. But no, I just wanted to hear your big picture views about certain evolutionary, I guess, trends in your business.

[Operator]

Our next question comes from Jamie Wilen with Wilen Management.

[James Wilen, analyst]

A couple of questions. First on fleet. Did I hear you say that we have 188,000 trucks in the fleet, and that is near the optimum level and what's going to happen in the future is we're just going to be more in the replacing of some of the older vehicles with new ones, and that is a number will probably hang flat at as we move forward?

[Edward Shoen, executive]

No, if we said that, I apologize.

[Jason Berg, executive]

Jamie, this is Jason. I think maybe what I said might have confused. I said most of our CapEx this last year and maybe even going into next year is maintenance CapEx. So from a purchase perspective, we're buying more trucks, but we're also going to be selling more. So I think that there is the likelihood that the fleet overall size could be coming down.

[James Wilen, analyst]

Okay. So if we see -- go on. Sorry.

[Edward Shoen, executive]

It's more complicated than that because the truck has 120,000 miles on it just simply doesn't have the capability of production of a truck that's got 35,000 miles on it. And due to the postponement of replacements for a 3-year period, we've got too many trucks with 120,000 miles on it. And then let's just say, between 140, we have kind of a gap, okay? And so it's not a strict mathematical tradeoff, it's a little bit complex, and it depends on which size truck you're able to buy because we've been on allocation and that -- with the automakers are offering doesn't necessarily correspond in quantity what our needs are.

So we're going to be -- I'm looking to grow the capability of the fleet, but that may not grow the numbers of the fleet over the next 18 months. It may in fact see a slight contraction in total numbers as we just gorge some of these higher mileage vehicles and bring in -- and I don't have, I can but can you bring in 4 trucks for every 5 year sale. Well, if you do that, you can maintain your transaction growth where you're probably trading up, and that might shrink our fleet 3,000 or 4,000 trucks, I don't have a -- it's kind of be opportunistic if we don't have commitments for him this next year's production, yet those will start to go hard closer to the middle of July, and that will help us know what the automakers are capable or willing to produce.

So that will help firm this up. But the business is going to expand simply because the population expands. That's the long and short of it. And we have a good footprint, and we ought to get our share of that business.

[James Wilen, analyst]

Okay. So as we grow the rentals, hopefully, over the next year or so, fleet utilization should increase by those tens of percents that are important.

[Edward Shoen, executive]

That's exactly what we're looking for, yes.

[James Wilen, analyst]

Okay. On the U-Box side, could you talk about the health of that business and where it is profitability wise as you look through 2024 and then moving forward in 2025?

[Edward Shoen, executive]

Sure. The U-Box has a higher amount of one-way versus local moves. In other words, there's a lot more moves over 100 miles than there are under 100 miles. And that's a little bit the nature of the product, and it's a little bit what our emphasis has been. So we're exploring over the next -- we have been for some months now, ways to see if we can crack into with a good economic proposition for customers in the short distance moves, which are prohibited expensive if you have to contract the freight.

So these -- the common carriers kill you if you're going 100 miles basically. And if you're going 3,000 miles, they get kind of affordable. So -- and that's been -- we've -- our sweet spot has been the longer move with the U-Box. But there's demand in the shorter moves and we're going to see if we can get into that and still show a profit. Otherwise, our pricing has been and probably will continue to reflect common carrier rates.

They've come down over the last 12 months anyway. I'm not on them every day, but they've come down and our rates have come down, which means we've seen transaction growth with not -- with only very modest growth in dollars, but margin is the same or a little better. Does that make sense?

[James Wilen, analyst]

And how would you characterize the market share gain or loss within that business for U-Box?

[Edward Shoen, executive]

We don't have firm numbers on that at all. I'm not -- I'm -- If anybody has them, I'd love to hear them because I just don't have. We see what we do relative to ourselves. And then, of course, we can go down to micro markets there really easily, and we can see all that information. And so I see places where if somebody is up substantially in other places, there's somebody is down and that there's cause and effect. It's usually something we've done stupid or something we did correct.

But overall, comparing us to, let's say, pods, we have essentially no market share information on them, I would say, it's very speculative. We attempt to find -- we haven't yet got a reliable source of that, that we're willing to.

But -- and of course, my team all says they're doing great next to them, and -- but it's a big business. There's a lot of potential there, and we're calmly tapping into it. We're getting more satisfied customers, and that's what builds our base. And we're working on how to crack into this, what we call shorter zones, just less distance markets. And we need to get a model that we can recover our costs with some certainty rather than just go out there and deliver this stuff for free. So we're pushing on that, and we've made some progress.

[James Wilen, analyst]

As you build out your self-storage, a lot of the places have U-Box storage within it. Does that give you any sort of competitive advantage?

[Edward Shoen, executive]

I think it does.

[James Wilen, analyst]

In the business?

[Edward Shoen, executive]

Right now, we're somewhere in the middle 600-some warehouses over the United States and Canada, which gives us a tremendous footprint advantage over anybody else in the business in that we can be near the customer and very interesting.

Some people want to be close to their things. I don't know better way to say it. And that's advantage with those customers. Now there's customers who could care less. But you'd be shocked at how many if you tell them you're going to have it at Central & Adams, they're very committed to you having it there. So you need to have enough warehousing, you can actually make good on that representation.

[James Wilen, analyst]

If you have in your -- in the 600, any idea how many pods might have?

[Edward Shoen, executive]

No, I couldn't give you number but I don't think it's that much. I mean just...

[James Wilen, analyst]

Okay. And lastly, on self-storage, could you tell us what your annual depreciation charge was in 2024? And how that differed from 2023?

[Edward Shoen, executive]

Jason is sharing, of course.

[Jason Berg, executive]

Let me find the exact numbers for you. So the fleet -- sorry, I thought I had it right in front of me. Okay. Jamie, the fleet depreciation over the last 12 months was about $565 million. And on buildings, real estate and what I also call like service vehicles it was $253 million.

[James Wilen, analyst]

Okay. And could you tell versus the previous year, could you tell us what those numbers were?

[Jason Berg, executive]

Sure. It was $520 million and $213 million.

[Operator]

Our next question comes from Stephen Farrell with Oppenheimer Close.

[Stephen Farrell, analyst]

The last 2 quarters, fleet maintenance has decreased. But looking back further before that, fleet maintenance increased about $300 million since the end of 2021. As you rotate the fleet, how much of that increase do you expect to get back?

[Edward Shoen, executive]

I really don't have a projection but I'm fighting for a lot of it. Now there's always inflation in expenses, parts, all that stuff has gone up. Labor has gone up, but a bunch of that was really -- we didn't have trucks to depreciate, and so we just had to spend money on repair. Ordinarily, a mile spend -- repair expense per mile out or exceeds depreciation per mile once you get out to -- depending on the truck to a certain amount of mileage.

And of course, you're always going to have maintenance, but the trade-off becomes negative at some point. And so you need -- and that's why you refleet. And I would say of that -- let's say it was a $300 million increase over the time we talked about. I would say $250 million of that was probably allocated to -- I may be wrong, maybe it's $200 million, but more than half of it was due to holding a truck longer than would have been our druthers. So I look to capture a significant portion of that back, but of course, we're fighting repair per cost and we're fighting labor cost to earn that back. But we're positioned to earn it back. A great deal of that increase ended up being spent at third-party providers.

We provide a lot of our own maintenance. And that percentage slipped over the last 3 years. And we'll always use third parties for remote locations or the middle of the night or something. But we can make that trade-off come back our way, and that's what my focus is, how much I can make it come back. It just remains to be seen.

But there's substantial money there. Assuming we can get the trucks in and this year, as Jason said, we probably crossed over to -- we made some progress on that problem. And it will take a couple of years of progress to get this back. It won't come back in 1 year.

[Stephen Farrell, analyst]

And just based on your other comments around personnel liability, which are the big moving parts of operating expenses. To a certain extent, it sounds like we should just expect the elevated levels moving forward?

[Edward Shoen, executive]

Well, I think on personnel, it's a pretty good bet in the near term next year, both, throughout the next 12 or 18 months. I think those -- that's -- inflation is going to be a little bit up. And the Government is putting a tremendous mandates. We now have mandates on minimum wage for salary personnel, and this minimum wage mania that the federal and then some of these states like California and New York have, it's a plethora of regulation, but that it's bumped. I mean, not obvious to the normal person, but they're bumping what you pay your salary personnel, minimum pay for salary personnel, and they're putting in standards that theoretically for the whole country, but I can just tell you the difference between Mississippi and New York and what is a base salary that's acceptable for salaried personnel. There's more than $20,000 difference. They're putting in the same metric, which is thoughtless, and we're just going to have to work around it and live with it. That's all. There's no stopping these people. Although you have a chance to vote in November, that's my pod.

[Stephen Farrell, analyst]

Okay. And just moving to self-storage. Last year, you guys had commented that you were targeting about 1 million square feet per quarter and given your kind of cautious outlook and comments around self-storage, do you think that will be lower moving forward?

[Jason Berg, executive]

I don't think so. Right now, we're kind of committed to that. Again, as I said, once you break ground, it's a minimum of a 12-month process, but you're committed these 6 months prior to breaking ground because we acquired the property, and you're significantly into it with land use commitments you committed to the city and in order to get your building permits and you're committed to -- so there's a bunch of money that's committed and most of those projects are better to proceed ahead with. So to actually cut the deal, you're -- certainly, you've got to do it.

It's 18 months when you cut it before you see it is the truth, unless you do something foolish like half build to building let it sit, we've all seen that happen. It's -- that's typically foolish, but if you don't have any money, of course, you would do something like that. But that's -- we don't foresee that. We're pretty well carefully funded, carefully matched.

So we don't see those kind of actions as reasonably foreseeable over the next 18 months. So we're continuing to go ahead. And I believe there's -- there are many markets that there's opportunity, and I'm trying to focus on those markets, not just slugging it out.

But storage penetration or availability is all over the map. It's not continuous for the whole country or smooth. And so if you can get in the right micro market, you can do okay still and maybe do a little bit better than okay at least my hope. And that we're focusing on those locations, and we'll see how our strategy pans out.

[Stephen Farrell, analyst]

And are there any geographic areas that you can highlight where you are seeing those pockets of opportunity?

[Edward Shoen, executive]

No, I won't even talk to them. Hardly, I talk with a small circle of friends because I don't want -- I don't need any more people rushing in there besides me, okay?

There's plenty of sharp real estate people out there. And if they know where we're going, well, that just gives them one more bit of information to compete with us. So I'm keeping that quiet.

But we slug it out in all these major metros. And there's a ton of business available in L.A., but do you really want to slug it out there in L.A. and you may find L.A. is a 4-year term from acquisition to completion. I'm taking one project right off the top of my head that was actually 4 years and will we ever make any money because you -- we don't capitalize that cost. Most of it, we don't capitalize, but you paid it, okay?

And so you don't want to incur any more of that than you have to it. So there's other markets that are more business friendly. The competition is entrenched. So we're heading for those. We have the largest footprint in the business. We're the only people in all provinces in all states. In fact, we're the only people in all states.

And that lets us see a market because we're there already, but maybe is doesn't stick out as hard as it would for one of our REIT competitors. Although they're very savvy people and they're [ costly ] running the numbers.

[Operator]

We have no further questions at this time. I would now turn control of the conference back over to our presenters for any additional remarks.

[Sebastien Reyes, executive]

Well, thank you, everyone, so much for the support. As a reminder, we plan to file our 10-K later today, and we look forward to speaking with you after we file our first quarter results in August. Thank you.

[Operator]

Thank you, everyone. This concludes today's conference. We appreciate your participation. You may disconnect at any time.