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Legacy Housing (LEGH) 9 Aug 24 2024 Q2 Earnings call transcript

AInvestSaturday, Aug 10, 2024 3:12 pm ET
2min read

In the recent earnings call for Legacy Housing Corp., key themes and trends emerged, providing insights into the company's financial health and growth prospects. Here are the highlights from the call.

Financial Performance

The second quarter of 2024 saw a decrease in product sales, primarily due to a decrease in unit volumes shipped, particularly in direct sales and mobile home park sales. However, there was a partial offset by increased sales at company-owned retail stores. The net revenue per unit sold decreased by 1.3%, primarily due to a shift in product mix to smaller units. On a positive note, consumer MHP and dealer loans interest income increased by 16.0%, driven by growth in loan portfolios. The company's net income for the quarter increased by 7.8%, and basic earnings per share increased by 8.7%.

Product Sales and Market Trends

Despite the decline in product sales, there are positive signs for the future. The company has been working through delays in Georgia and with certain customers in Texas to push shipments into the third quarter. Retail finance applications have seen a 34% increase compared to the second quarter of 2023, indicating a strong outlook for the retail business. The community business has been impacted by higher interest rates, but transaction volume is showing signs of improvement. The market is also improving, with quote activity up significantly since the first quarter. Legacy Housing is focusing on pushing more volume through the plants this year to build backlog and increase production volume.

Lending Portfolios

Interesting trends are emerging in the lending portfolios. From the first half of 2023 to the first half of 2024, interest revenue from MHP, retail finance, and floor plan financing increased by 26.5%. This growth is a testament to the company's successful lending strategies and the demand for affordable housing solutions. Delinquencies remain low, and recovery rates are strong, indicating a solid risk management approach.

Asset Sales and Litigation

Legacy Housing is actively managing its balance sheet, with a focus on selling non-core real estate assets. One notable sale in the second quarter was a group of warehouses at the Eatonton facility, which resulted in a $1.3 million gain. The company is also working through a litigation settlement with a long-term MHP customer, which will result in the transfer of two mobile home parks and the refinancing of existing debt. This settlement is expected to positively impact the company's financials in the coming quarters.

Looking Ahead

The earnings call painted a picture of a company that is focused on improving its financial performance and positioning itself for future growth. The management team is optimistic about the market outlook, with a focus on increasing sales volumes and driving growth in the retail and community businesses. The company's disciplined approach to cost management and its successful lending strategies are key strengths that will likely continue to drive growth in the coming quarters.

In conclusion, the Legacy Housing Corp. earnings call provided a comprehensive overview of the company's financial performance and strategic direction. With a focus on improving product sales, managing costs, and growing its lending portfolios, Legacy Housing is well-positioned to navigate the challenges of the housing market and capitalize on opportunities for growth.

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