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LH

Legacy Housing Corp (LEGH)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 was operationally mixed: revenue declined 11.4% YoY to $44.3M while net income dipped just 1.8% to $15.8M, with EPS of $0.65; book value per share rose 12.7% YoY to $19.84 . Orders at the late-September Fall Show extended backlog into Q1’25, and management increased production at Texas plants into Q4 .
  • Product gross margin compressed to 29.2% (vs. 32.9% YoY; 31.9% in Q2), driven by under-absorbed labor on lower production; management expects normalization back to ~low-30% in Q4 as production ramps .
  • Mix shift continued: product shipments were softer (product sales –18.3% YoY), but financing income rose +17.3% on larger MHP and consumer loan balances; “other revenue” was aided by $2.7M land sales but offset by lower deposit forfeitures and dealer finance fees .
  • Near-term catalysts: order momentum (Oct product sales +27% m/m), backlog visibility into Q1’25, and monetization of two deeded parks from a settlement (275 spaces, ~35% occupancy) and non-core land (e.g., Horseshoe Bay, Bastrop) . No formal quantitative guidance given; management commentary implies improving sales and margin recovery in Q4 .

What Went Well and What Went Wrong

  • What Went Well

    • Backlog and demand: “record” attendance at the Fall Show; orders written pushed backlog into Q1’25; production increased at Texas plants; Oct product sales +27% m/m .
    • Financing strength: consumer/MHP/dealer interest income +17.3% YoY on portfolio growth; 12‑month interest revenue across MHP/retail/floorplan up 33.9% .
    • Asset monetization and balance sheet: $2.7M land sale in Q3; revolver balance reduced to $2.1M from $23.7M YE’23; book value per share up 12.7% YoY to $19.84 .

  • What Went Wrong

    • Volume/mix headwinds: product sales –18.3% YoY; shipments shifted into show orders (timing), with customers waiting to see updated finishes; under-absorption pressured margins to 29.2% .
    • Reduced ancillary revenues: “other revenue” fell 8.7% YoY on lower forfeited deposits (–$2.4M) and dealer finance fees (–$1.0M), partly offset by land sales .
    • Community (MHP) market still slow: high rates suppress transactions and new development; recovery expected into 2025; management continues to hold price, slowing recovery vs peers .

Financial Results

MetricQ1 2024Q2 2024Q3 2024
Net Revenue ($M)$43.2 $42.5 $44.3
Income from Operations ($M)$16.8 $16.0 $15.3
Net Income ($M)$15.1 $16.2 $15.8
Basic EPS ($)$0.62 $0.67 $0.65
Product Gross Margin %n/a31.9% 29.2%

YoY change (company-reported):

  • Net revenue: –18.2% in Q1 ; –19.3% in Q2 ; –11.4% in Q3 .
  • Net income: –7.0% in Q1 ; +7.8% in Q2 ; –1.8% in Q3 .

Segment drivers in Q3 2024:

  • Product Sales: –$6.8M (–18.3%) YoY; unit volume down (direct, MHP, inventory finance) partially offset by company-owned retail; revenue per product sold roughly flat YoY .
  • Consumer/MHP/Dealer Interest Income: +$1.5M (+17.3%) YoY, driven by portfolio growth (MHP +$22.0M; consumer +$15.6M YoY) .
  • Other Revenue: –$0.4M (–8.7%) YoY; lower forfeited deposits (–$2.4M) and dealer finance fees (–$1.0M) offset by land sales (+$2.7M) .

Selected KPIs and balance sheet:

  • Book Value ($M): $450.4 (Q1) ; $463.2 (Q2) ; $479.3 (Q3)
  • Book Value/Share ($): $18.46 (Q1) ; $19.17 (Q2) ; $19.84 (Q3)
  • Cash ($M): $0.6 (Q3)
  • Revolver ($M): $2.1 (Q3) vs $23.7 YE’23
  • Product Gross Margin %: 31.9% (Q2) ; 29.2% (Q3)
  • October 2024 product sales: +27% vs September 2024

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Product Sales (directional)Q4 2024NoneExpect Q4 product sales up vs Q3 Raised qualitatively
Product Gross Margin %Q4 2024NoneTarget back to ~low-30% range (vs 29.2% in Q3) Raised qualitatively
BacklogThrough Q1 2025NoneOrders from Fall Show extended backlog into Q1’25 Positive visibility
Asset Monetization (parks from settlement)Next “couple of quarters”NoneExpect to increase occupancy to ~50–70% and monetize “fairly near future” Monetization path
Bastrop (1,100 pads) lot salesH1 2025NoneAnticipate selling lots in H1 2025 Timing indicated

Note: No formal quantitative guidance provided; management outlined directional expectations and project timelines .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
Production/backlogHeld production below desired; goal to build 8–10 weeks backlog; mix toward smaller homes Increased production in GA in July; pushing to raise TX; backlog building into Fall Show Show orders extended backlog into Q1’25; increased production at TX plants; Oct product sales +27% m/m Improving
Pricing/discountingHolding price; using financing concessions; watching competitors’ price cuts Considering price lever ahead of show; peers using discounts Still holding price; slower recovery vs peers; monitoring materials post-hurricane Mixed
MarginsQ1 product margins “significantly higher” due to leased-home sale; expect revert toward average Product GM 31.9%; aim to maintain with higher volume Product GM 29.2%; expect low-30% in Q4 as absorption improves Near-term recovery expected
Community (MHP) marketSlower due to high rates; pushing smaller HUD/tiny homes Park business still slow; quotes improved; settlement underway Park inquiries improving; several meaningful orders; settlement complete; operating two parks Gradual improvement
Financing portfoliosOver $10M quarterly interest revenue targeted; strong collateral and servicing MHP rate mechanics; down payment trends; portfolio growth slower than ’19–’22 Consumer/MHP interest income +17.3% YoY; 12‑month interest revenue +33.9% Positive
Asset monetizationEvaluating land; proposals to sell/partner (Bastrop, others) Sold GA property ($1.3M gain); expect more sales; share buybacks $2.7M land sale; plan to monetize two deeded parks; Bastrop/Horseshoe Bay updates Ongoing
Hurricanes/regulatoryn/an/aMinimal direct impact; potential future rebuild/FEMA/workforce housing opportunities Potential tailwind

Management Commentary

  • “Orders written at the [Fall] show pushed our backlog into the first quarter of 2025.” – CEO, Duncan Bates .
  • “Product sales for October 2024 were up 27% over September of 2024.” – Robert Bates .
  • “Product gross margins were 29.2%... under-absorbed labor... We expect margins to normalize with production improving.” – Robert Bates .
  • “Consumer MHP and dealer loans interest income increased $1.5 million or 17.3%... due to growth in our loan portfolios.” – Jeffrey Fiedelman .
  • “We sold excess land in Horseshoe Bay during the third quarter for $2.7 million.” – Robert Bates .
  • “We are opening our first new company-owned dealerships since the post-IPO build-out.” – Robert Bates .

Q&A Highlights

  • Production ramp and backlog: Management expects Q4 product sales “up over the third quarter,” with backlog worked down via higher production (especially in Texas) .
  • Margin trajectory: Target to get back to ~30%+ product gross margin in Q4 as absorption improves; monitoring lumber/wood product costs post-hurricane .
  • Settlement completion: Settlement accounting is now complete; now operating two parks; plan to raise occupancy to ~50–70% and monetize in the “fairly near future” .
  • Demand cadence: Orders steady since the show; park customer inquiries returning with orders in the 20–60 range; retail finance funding in Oct highest since Dec 2020 .
  • Hurricane exposure: Minor shipment delays, no material damage; potential future rebuild/workforce housing demand .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q3 2024 revenue and EPS but were unable to access due to an S&P Global API rate limit at the time of analysis. As a result, we cannot quantify beats/misses vs. consensus for this quarter [GetEstimates error].
  • Investors should note the company reported Q3 revenue of $44.3M and EPS of $0.65; without consensus figures, model updates will hinge on management’s commentary on Q4 volume/margin recovery and 2025 backlog visibility .

Key Takeaways for Investors

  • Backlog extends into Q1’25 and production is increasing into Q4, positioning for sequential improvement in product sales and a rebound in product gross margin to the low-30% range .
  • Financing income remains a resilient profit pillar as MHP/consumer portfolios expand; 12‑month interest revenue growth of ~34% offsets softer shipments .
  • Price discipline has slowed recovery versus peers but supports margin quality; watch for potential selective pricing actions if needed to accelerate volume .
  • Asset monetization is an underappreciated catalyst (parks from settlement, Horseshoe Bay sale, Bastrop lots in H1’25), with potential gains supporting earnings and capital returns .
  • Q3 margin pressure was primarily absorption-related and should moderate with production ramp; monitor lumber and material volatility post-hurricanes .
  • Community (MHP) channel is showing early signs of improvement; smaller HUD/tiny homes continue to resonate amid affordability constraints .
  • Lack of formal guidance raises uncertainty, but qualitative signals point to better Q4 and improving 2025 trajectory; estimate revisions will depend on the pace of backlog conversion and park asset monetization timing .

Citations:

  • Q3 2024 press release and 8‑K exhibit:
  • Q3 2024 earnings call transcript (prepared remarks and Q&A):
  • Q2 2024 press release and call:
  • Q1 2024 8‑K and call:
  • Scheduling press release:
  • S&P Global estimates retrieval status: GetEstimates returned a rate-limit error (consensus unavailable at analysis time).