Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Legacy Housing Corp (LEGH, Financial) reported a successful fall show, which resulted in a record number of customer orders extending the backlog into the first quarter of 2025.
- The company increased production at its Texas plants and showcased significant updates to home finishes, appealing to younger home buyers.
- Interest income from consumer, MH P, and dealer loans increased by 17.3% due to growth in loan portfolios.
- Legacy Housing Corp (LEGH) reported a 27% increase in product sales for October 2024 compared to September 2024.
- The company is seeing improvement in its community business and has secured several meaningful orders, indicating potential growth in 2025.
Negative Points
- Product sales decreased by 18% during the third quarter of 2024 compared to the same period in 2023, primarily due to a decrease in unit volume shipped.
- Gross profit margin declined to 29.2% from 32.9% in the previous year, driven by underabsorbed labor due to lower production levels.
- Net income decreased by 1.8% to $15.8 million in the third quarter of 2024 compared to the third quarter of 2023.
- The company experienced a decrease in other revenue by 8.7%, primarily due to a decrease in forfeited deposits and dealer finance fees.
- High interest rates continue to depress transaction volumes in the community business, slowing recovery.
Q & A Highlights
Q: Can you discuss your expectations for production rates across your plants for the December quarter, given the strength in orders from the fall show?
A: Duncan Bates, President and CEO, explained that they are ramping up production due to the excitement generated at the Fall Show. Orders were delayed as customers waited to see new features, but production is expected to increase in the fourth quarter.
Q: How have orders trended into Q4, and has the momentum from Q3 carried over?
A: Bates noted that sales have been steady since the Fall Show, with production improving over Q3 levels. They are seeing more inquiries from park customers, which is a positive sign for future sales.
Q: Was there any impact from the hurricanes in Georgia and the Carolinas, and do you see potential opportunities in terms of rebuild or FEMA replacement?
A: Bates stated that while there were some delayed shipments, their facilities were not affected. They expect future rebuild work and are receiving inquiries for workforce housing products.
Q: Can you provide more specificity on gross margins and what normalization looks like for Q4 and into next year?
A: Bates expects gross margins to return to the low 30s in Q4. The decline in Q3 was due to labor underabsorption, but with increased production, margins should normalize by year-end.
Q: Has the settlement agreement been fully worked through, and will there be any ongoing impact in Q4?
A: Bates confirmed that the settlement agreement has been fully integrated into their books, resulting in a meaningful gain. They are now operating two parks and expect to monetize these assets soon.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
