10-Q: U-Haul Q1 Earnings Drop Amid Rising Costs, Fleet Depreciation

U-Haul Holding Company reported a significant decline in first-quarter net earnings, despite revenue growth, primarily due to increased operating expenses and higher depreciation and losses on equipment disposal.

Summary

• Net earnings available to common stockholders decreased by 27.2% to $142.3 million for the quarter ended June 30, 2025, compared to $195.4 million in the prior year.
• Basic and diluted earnings per share for Common Stock fell to $0.68 from $0.95 year-over-year.
• Total revenues increased by $82.0 million to $1.63 billion, driven by growth in self-moving equipment rental ($43.9 million increase), self-storage ($18.5 million increase), and other revenue, including the U-Box program ($20.8 million increase).
• Total costs and expenses surged by $130.8 million to $1.37 billion, largely due to a $44.4 million increase in operating expenses (including $20.2 million in personnel and $17.2 million in liability costs) and an $87.5 million increase in depreciation and net losses on disposal of rental equipment.
• Depreciation expense on the rental fleet increased by $50.7 million due to more box trucks and expected decreases in resale values, while net losses from disposal of rental equipment increased by $29.7 million.
• Interest expense rose by $15.1 million to $82.3 million due to increased debt outstanding and higher average cost of debt.
• Net cash provided by operating activities increased by $144.5 million to $598.4 million for the three months ended June 30, 2025, primarily due to timing of credit card settlements and reduced payable payments.
• The company added approximately 1.2 million new net rentable square feet to its self-storage portfolio during the quarter, contributing to a 1.3% improvement in average revenue per occupied foot.
• Over the last 12 months, U-Haul added 6.0 million net rentable square feet of new storage, a mix of 1.6 million acquired and 4.4 million new development.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative. While revenue growth in core segments and strong operating cash flow are positive, the significant decline in net earnings and EPS due to substantial increases in operating costs, depreciation, and losses on asset disposal indicates a weakening in profitability. The heavy capital expenditures are a long-term play, but the immediate financial performance is concerning.

Positives

• Total revenues increased by $82.0 million, demonstrating continued demand for self-moving and self-storage services.
• Self-moving equipment rental revenues grew by $43.9 million, with increased revenue per transaction in both In-Town and one-way markets.
• Self-storage revenues increased by $18.5 million, supported by occupancy gains, new capacity additions (1.2 million new net rentable square feet in the quarter), and a 1.3% improvement in average revenue per occupied foot.
• Other revenue, primarily from the U-Box program, increased by $20.8 million, indicating successful expansion of this service.
• Net cash provided by operating activities significantly increased by $144.5 million, improving liquidity from operations.
• The company is owed a $129 million tax refund plus $20.7 million in interest from the IRS for prior tax years, which is currently being processed.
• Property and Casualty Insurance segment saw increased revenues and earnings from operations.

Negatives

• Net earnings available to common stockholders decreased by $53.1 million (27.2%) year-over-year.
• Basic and diluted earnings per share for Common Stock declined from $0.95 to $0.68.
• Total costs and expenses increased substantially by $130.8 million, outpacing revenue growth.
• Operating expenses for Moving and Storage increased by $44.4 million, driven by higher personnel costs ($20.2 million), liability costs ($17.2 million), and rental fleet repair expenses ($5.2 million).
• Depreciation expense on the rental fleet increased by $50.7 million, reflecting an increase in fleet size but also expected decreases in resale values.
• Net losses from the disposal of rental equipment increased by $29.7 million, indicating lower resale values and higher average costs of units sold.
• Interest expense increased by $15.1 million due to higher debt levels and increased cost of debt.
• Net investment and interest income decreased by $1.9 million, partly due to realized losses on derivatives and invested assets in the Life Insurance segment.
• Life insurance premiums decreased by $1.6 million, primarily due to lower life and Medicare supplement premiums.
• Self-storage average monthly occupancy rate based on unit count slightly decreased to 78.1% from 80.0% in the prior year.

Risks

• Potential future pandemics or similar events could impact system members or customers.
• The economic environment may affect demand for products and the cost and availability of debt and capital.
• Fluctuations in costs to maintain and update the fleet and facilities pose a risk.
• Reliance on a limited number of manufacturers for rental trucks could impact operations.
• The company is exposed to interest rate risk on variable rate debt obligations.
• Control by a small contingent of stockholders could influence corporate decisions.
• Quarterly results are subject to fluctuations and seasonality.
• Changes in, and compliance with, government regulations, particularly environmental and motor carrier operations, could impact the business.
• Outcomes of litigation could have adverse financial effects.
• Reliance on the third-party dealer network introduces operational dependencies.
• Liability claims relating to rental vehicles and equipment are an ongoing risk.
• Ability to attract, motivate, and retain key employees is crucial for operations.
• Reliance on automated systems and the internet exposes the company to technology, cybersecurity, or data security breaches.
• Credit ratings could impact borrowing costs and access to capital.
• Ability to recover under reinsurance arrangements is a financial risk for insurance segments.
• Inflationary pressures and/or imposition of tariffs may challenge the ability to maintain or improve operating margins.
• Failure to acquire enough new rental equipment could lead to increased repair and maintenance costs and adversely impact the U-Move program.
• Unforeseen events, including adverse economic conditions or heightened competition, could lead to declines in revenues.

Future Outlook

The company plans to maintain its leadership in the North American do-it-yourself moving and storage industry by increasing transaction volume, improving pricing, product, and utilization for self-moving equipment rentals. Significant new investment in the truck fleet is expected to increase in fiscal 2026. For the self-storage business, the focus is on completing current projects, increasing occupancy in existing locations, and acquiring new properties, with spending on acquisitions and new development likely to increase. The U-Box program will continue to receive capital and resource investments. The Life Insurance segment aims to expand its presence in the senior market by growing its agency force, expanding product offerings, and pursuing business acquisition opportunities. Inflationary pressures may challenge the ability to maintain or improve operating margins, and unforeseen events like adverse economic conditions or heightened competition could lead to revenue declines.

Management Comments

• Our overall strategy is to maintain our leadership position in the North American do-it-yourself moving and storage industry.
• We accomplish this by providing a seamless and integrated supply chain to the do-it-yourself moving and storage market.
• Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities, portable moving and storage units and related moving and self-storage products and services.
• We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage units and portable moving and storage units available for rent, expanding the number of independent dealers and Company operated locations in our network and taking advantage of our Storage Affiliate and Moving Help capabilities.
• We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals.
• Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals and is likely to increase in fiscal 2026.
• For our storage business, we are actively looking to complete current projects, increase occupancy in our existing portfolio of locations and acquire new locations.
• New projects and acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives.
• It is likely spending on acquisitions and new development will increase in fiscal 2026.
• We will continue to invest capital and resources in the U-Box program throughout fiscal 2026.
• Life Insurance is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies.
• We believe we have the financial resources needed to meet our business plans, including our working capital needs.
• Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years.

Industry Context

The company operates in the highly competitive do-it-yourself moving and storage industry, where brand recognition, geographic presence, and integrated supply chain capabilities are key differentiators. Its strategy of expanding its network of company-operated locations and independent dealers, alongside increasing its rental fleet and self-storage capacity, aligns with efforts to capture market share and enhance customer convenience. The growth in the U-Box program reflects a broader industry trend towards flexible, portable storage and moving solutions. The insurance segments support the core moving and storage business by offering protection packages and expanding into the senior life and health insurance market, diversifying revenue streams.

Comparison to Industry Standards

• The company's self-storage occupancy rate of 78.1% (average monthly) and 78.8% (end of June) is slightly below the prior year's 80.0% and 81.0%, respectively. While new capacity additions are positive for long-term growth, a slight dip in occupancy could indicate increased competition or slower absorption rates compared to some industry leaders who maintain higher occupancy levels.
• The significant increase in depreciation and net losses on disposal of rental equipment suggests a more aggressive fleet rotation strategy or a challenging used vehicle market, which could impact profitability compared to peers with more stable fleet management costs.
• The company's investment in new self-storage square footage (6.0 million net rentable square feet over 12 months) indicates a robust expansion strategy, comparable to aggressive growth seen in leading self-storage REITs like Public Storage or Extra Space Storage, though specific project-level returns would be needed for a direct financial comparison.

Legal Proceedings

• The company is named as a defendant in various claims and litigation arising out of the normal course of business, none of which are expected to have a material effect on financial position and results of operations.
• The company is aware of issues regarding hazardous substances on some of its subsidiaries' properties and has a remedial plan in place, with compliance costs not expected to result in a material adverse effect.

Related Party Transactions

• U-Haul Holding Company engages in related party transactions with SAC Holding Corporation, SAC Holding II Corporation (collectively, SAC Holdings), Four SAC Self-Storage Corporation, Five SAC Self-Storage Corporation, Galaxy Investments, L.P., 2015 SAC Self-Storage, LLC, Blackwater Investments, Inc. (Blackwater), and Mercury Partners, L.P. (Mercury).
• Related party revenues from U-Haul management fees from Blackwater and Mercury totaled $9.6 million for the quarter ended June 30, 2025, consistent with fees for third-party managed properties.
• Related party costs and expenses totaled $32.1 million for the quarter ended June 30, 2025, including U-Haul lease expenses to Blackwater ($0.6 million) and Mercury ($0.04 million), U-Haul printing expenses to Blackwater ($1.4 million), and U-Haul commission expenses to Blackwater ($23.6 million) and Mercury ($6.5 million).
• The terms of leases and printing services with related parties are similar to those with unrelated parties.
• Subsidiaries of Blackwater and Mercury act as independent dealers, with commission terms identical to other independent dealers.
• Related party assets, primarily receivables from Blackwater and Mercury, totaled $40.5 million as of June 30, 2025.

Stakeholder Impact

• Shareholders: Experienced a decrease in net earnings and EPS, which could negatively impact share price and dividend sustainability, although Series N Non-Voting Common Stock dividends of $0.05 per share were maintained.
• Customers: Benefit from expanded self-moving equipment rental fleet, increased self-storage capacity, and growth in the U-Box program, enhancing convenience and service availability.
• Employees: Personnel expenses increased by $20.2 million, suggesting continued investment in the workforce, but inflationary pressures could impact real wages.
• Creditors: Increased debt outstanding and higher interest expense indicate a growing debt burden, though the company believes it has adequate liquidity and borrowing capacity.
• Suppliers: Increased capital expenditures on rental equipment and real estate acquisitions suggest continued demand for equipment manufacturers and construction/renovation services.

Next Steps

• Continue to focus on increasing transaction volume and improving pricing, product, and utilization for self-moving equipment rentals.
• Maintain an adequate level of new investment in the truck fleet, which is expected to increase in fiscal 2026.
• Complete current self-storage projects, increase occupancy in the existing portfolio, and acquire new locations.
• Increase spending on self-storage acquisitions and new development in fiscal 2026.
• Continue to invest capital and resources in the U-Box program.
• Life Insurance segment to expand presence in the senior market by growing its agency force, expanding new product offerings, and pursuing business acquisition opportunities.
• Evaluate the impact of the One Big Beautiful Bill Act (OBBB) on financial statements.

Key Dates

Recommendation

While U-Haul demonstrated revenue growth in its core moving and storage segments and improved operating cash flow, the significant decline in net earnings and EPS is a major concern. This profitability erosion is driven by substantial increases in operating expenses, particularly depreciation and losses on equipment disposal, and higher interest costs. The company is making considerable capital investments in its fleet and real estate, which are long-term strategic moves, but their immediate impact on profitability is negative. The pending IRS refund is a positive cash event but does not reflect core operational improvements. Given the mixed financial signals—revenue growth offset by declining profitability—a 'Hold' recommendation is appropriate. Investors should monitor whether the ongoing capital expenditures translate into improved operating margins and earnings in future periods, and how the company manages its rising cost structure.

Keywords

U-Haul, Self-moving, Self-storage, Rental equipment, Insurance, Logistics, Real estate, SEC filing, Quarterly report, Financial results, Earnings, Depreciation, Capital expenditures, Debt, Risk management