Legacy Housing Corp (LEGH)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 net revenue was $42.5M, down 19.3% year over year, while basic EPS rose 8.7% to $0.67; product gross margin on sales improved to 31.9% from 29.8% YoY, aided by disciplined pricing and cost control .
• Other income benefited from a $1.3M gain on sale of Georgia real estate and a $1.3M reversal of accrued liabilities, lifting net income to $16.2M (+7.8% YoY) despite softer unit volumes .
• Management highlighted improving demand and a focus on accelerating sales volume; shipments were delayed in Georgia/Texas and pushed into Q3, with momentum expected to build as backlog increases and production ramps (especially at the Georgia plant) .
• Capital allocation remained shareholder-friendly: 170,342 shares repurchased at $20.53 in Q2 and an additional $10.0M authorization approved on Aug 6, 2024, bringing total equity to $463.2M and book value per share to $19.17 .
• No formal quantitative guidance was issued; call tone suggests an inflection in demand, stronger retail finance applications (+34% YoY), and targeted margin preservation, positioning Q3 for a shipment rebound .

What Went Well and What Went Wrong

What Went Well

• Margin management: Product gross margin on sales rose to 31.9% vs. 29.8% YoY, with pricing discipline and overhead control despite lower volumes (“I’m proud of our team’s effort to manage margins at lower production volumes.”) .
• Balance sheet monetization and other income tailwinds: $1.3M gain on Georgia property sale and $1.3M accrued liability reversal; management plans continued monetization of non-core real estate assets .
• Positive demand signals: Retail finance applications up 34% YoY; management cited “one of the best sales weeks” of the year and strong RSVPs for the late-September Fort Worth fall sales show .

What Went Wrong

• Unit volume and revenue pressure: Total units sold fell 24.2% YoY (514 vs. 678), with net revenue down 19.3% to $42.5M; mix shift to smaller, lower ASP units continued .
• Shipment delays: Georgia/Texas shipments were held up and pushed into Q3; park customers faced permitting/pad readiness challenges, slowing deliveries .
• Elevated legal and internal control issues: SG&A included higher legal expense (+$0.8M QoQ YoY); disclosure controls were deemed ineffective due to material weaknesses in internal controls over financial reporting .

Financial Results

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Demand is improving and our top priority is accelerating sales volume. We continue to monetize non-core assets and diligently manage expenses.” — Duncan Bates, CEO (press release) .
• “Product gross margins were 31.9%... I’m proud of our team’s effort to manage margins at lower production volumes. Our top priority for the remainder of 2024 is continuing to build our backlog, which will result in higher production volume.” — Robert Bates (prepared remarks) .
• “Retail finance applications were up 34%... Legacy has a handful of large community customers who paused orders... these customers are back ordering and taking deliveries.” — Robert Bates .
• “We will continue to repurchase shares opportunistically when the stock trades near liquidation value.” — Management .

Q&A Highlights

• Shipment delays and Q3 catch-up: Management noted several-week delays in Georgia, permitting/pad readiness issues at parks; expects a ramp in Q3 shipments though no specific quantification provided .
• Backlog and orders: Backlog tracked internally but not disclosed; recent “best sales week” of year; strong RSVPs for the late-September sales show point to improving pipeline .
• Litigation settlement details: Transfer of two parks to Legacy and consolidation/refinance to a single note smaller than prior balances; upside potential from asset values under evaluation with auditors .
• Margin sustainability: Labor inflation the key risk; plan to maintain margins with volume ramp and disciplined pricing; materials improving; selective pricing actions under consideration .
• Capital returns: Continued opportunistic buybacks when stock trades near calculated liquidation value; willingness to seek additional authorizations .

Estimates Context

• Wall Street consensus (S&P Global) for LEGH’s Q2 2024 EPS and revenue was unavailable at the time of this analysis due to data-access limits; therefore, we cannot provide “vs. estimates” comparisons or estimate counts. Values retrieved from S&P Global.*

Key Takeaways for Investors

• Margin preservation amid volume pressure is a notable positive; product gross margin rose to 31.9% despite lower shipments, reflecting pricing discipline and overhead control .
• Demand signals are turning: retail finance applications +34% YoY, large park customers resuming orders, and strong event RSVPs suggest an improving order backdrop into Q3 .
• Shipments delayed into Q3 create a near-term catch-up catalyst; watch Georgia/Texas throughput and backlog conversion to production .
• Balance sheet monetization and settlement de-risking support earnings and cash generation; expect continued asset sales and legal resolution benefits .
• Shareholder returns remain a priority: $3.5M repurchases in Q2 and new $10M authorization add support to per-share metrics and downside protection .
• Park financing and affordability strategy (smaller homes, higher down payments) align with macro conditions; potential tailwind if interest rates ease as forecast .
• Monitor internal controls remediation and legal expense trajectory; disclosure controls were deemed ineffective, and SG&A included higher legal costs YoY .

KPIs (Q2 2024 Snapshot)

Additional Notes

• Earnings materials timing release (July 16): Q2 results after market Aug 8; call Aug 9, with replay available on investor site .
• Segment reporting: The company is one reportable segment; revenue disaggregation tables above provide operational mix detail .