AMERCO’s Earnings Call: Growth Amidst Financial Strains

AMERCO ((UHAL)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for AMERCO presented a mixed sentiment, highlighting significant growth in revenue and strategic expansions. However, these positive developments were overshadowed by notable declines in earnings due to increased depreciation and losses on equipment sales. While the company is making strides in market share and expanding its footprint, financial challenges from higher costs and decreased transactions remain a concern.

Record Top-Line Revenue

The company achieved a record top-line revenue for any quarter in its history, which is particularly impressive given that it was the strongest seasonal quarter. This milestone reflects AMERCO’s ability to generate substantial income even in competitive market conditions.

Increase in Adjusted EBITDA

In the Moving and Storage segment, adjusted EBITDA saw a 6% increase, translating to nearly $32 million for the quarter. This growth indicates the company’s effective management and operational efficiency in its core business areas.

Expansion of Dealer Network

Since July, U-Haul has been aggressively expanding its dealer network, adding nearly 1,000 new locations in the last 12 months. This expansion has pushed the total count to over 25,000 locations, marking a significant milestone in the company’s growth strategy.

Strong Self-Storage Performance

Self-storage revenues increased by nearly $22 million, approximately a 10% rise, with average revenue per foot improving by just under 5%. This performance underscores the strength and resilience of the self-storage segment.

U-Box Revenue Growth

U-Box experienced revenue growth, with increases in storage rent and delivery income. The company is gaining market share and is on a trajectory to become the market leader in this segment.

Decrease in Earnings

Second-quarter earnings fell to $106 million from $187 million in the same quarter last year, with earnings per share dropping to $0.54 from $0.96. This decline highlights the financial pressures the company is facing.

Increased Depreciation Costs

Depreciation costs, along with losses on the disposal of retired rental equipment, led to a $107 million increase in costs for the quarter compared to the previous year, significantly impacting the company’s earnings.

Loss on Disposal of Rental Equipment

The company reported a $38 million loss on the disposal of retired rental equipment, a stark contrast to an $18 million gain the previous year, indicating challenges in asset management.

Challenges in Self-Storage Occupancy

Same-store occupancy decreased by 350 basis points to 90.5%, with 220 basis points attributed to the removal of delinquent tenants, reflecting challenges in maintaining high occupancy rates.

Increase in Operating Expenses

Operating expenses rose by $19 million for the quarter, driven by a $12 million increase in personnel costs and a $10 million rise in fleet repair and maintenance costs, highlighting the growing operational costs.

Forward-Looking Guidance

During the earnings call, AMERCO provided guidance indicating a challenging outlook. The company reported second-quarter earnings of $106 million, a significant drop from $187 million the previous year. Despite a 6% increase in adjusted EBITDA in the Moving and Storage segment, depreciation and disposal costs have posed substantial challenges, impacting earnings per share by $0.43. Capital expenditures for new rental equipment reached $1.325 billion for the first half of the fiscal year, reflecting a $169 million year-over-year increase. The company continues to expand its dealer network, adding nearly 1,000 new locations over the past year.

In summary, AMERCO’s earnings call reflects a mixed outlook with impressive revenue growth and strategic expansions, yet significant challenges in earnings due to increased costs. The company’s efforts to expand its market share and dealer network are promising, but financial strains from depreciation and equipment losses remain a concern. Investors will be keenly watching how AMERCO navigates these challenges in the coming quarters.