Legacy Housing Corp Q3 FY2024 earnings call

• Legacy's 2024 fall show was a success, hosting a record number of customers and extending backlog into Q1 2025.
• Increased production at Texas plants during Q4. Showcased significant updates to home finishes which were well-received.
• Q3 shipments were lower than desired as customers waited to order at the show. October 2024 product sales up 27% over September 2024.
• Dealer business is good, focusing on adding independent dealers in South Texas, Florida, and Carolinas. Retail finance applications up 16% Q3 2024 vs 2023, and October 2024 retail finance funding was highest since Dec 2020.
• Community business improving slowly, secured meaningful orders. Sold excess land in Horseshoe Bay for $2.7 million.
• Operating two mobile home parks from settlement, hiring manager to increase occupancy. Land development progress in Bastrop County and Horseshoe Bay. Opened new company-owned dealerships.

Product sales decreased $6.8 million or 18.3% in Q3 2024 vs 2023, driven by lower unit volume in direct sales, mobile home park sales, and inventory finance sales, partially offset by increased sales at company-owned retail stores. Consumer MHP and dealer loans interest income increased $1.5 million or 17.3% due to growth in loan portfolios. Other revenue decreased $0.4 million or 8.7%. Cost of product sales decreased $3.5 million or 13.9%. Gross profit margin was 29.2% of product sales in Q3 2024 vs 32.9% in Q3 2023. SG&A expenses were flat. Other income expense increased $3.5 million. Net income decreased 1.8% to $15.8 million. Book value per basic share outstanding was $19.84, up 12.7% from Q3 2023.

• Expect Q4 production to ramp up compared to Q3. Aim for gross margins to get back above 30% in Q4.
• Expect to increase occupancy in the two owned parks to between 50% and 70% before monetizing them.
• Anticipate continuing progress in land development and expanding the dealer network.

• Potential impacts from material price fluctuations.
• Hurricane impacts on production and material availability.
• High interest rates continuing to depress community business transaction volumes.

Q: Daniel Moore asked about expectations for production rates across plants in the December quarter relative to Q3, given strength in orders from the fall show.

A: Duncan Bates responded that they were looking to ramp production up, with Q3 being lighter than desired but the fall show creating excitement, and expecting Q4 product sales to be up over Q3.

Q: Mark Smith inquired about the settlement agreement's ongoing impact in Q4 and the ramp in MHP financing portfolio.

A: Duncan Bates said the settlement agreement moving pieces are complete, having realized a gain, and explained that with the settlement, balances shifted from development loans to MHP loans.

Q: Alex Rygiel asked about gross margins getting back above 30% in Q4, occupancy at owned parks, and how the fall show compared to expectations.

A: Duncan Bates stated aiming for margins back to 30%, expecting to increase park occupancy in a quarter, and said the fall show was a big success with significant product updates leading to good backlog visibility into 1Q '25