Core Viewpoint - Legacy Housing Corp. (NASDAQ: LEGH) has been upgraded from Hold to Buy based on the potential value of 'hidden' assets that the company aims to unlock [1]. Company Analysis - The analyst has a long-term investment approach and has shifted focus from being a Tech analyst to also covering Commodities and Energy sectors, reflecting the ongoing energy transition [1].

Financial Data and Key Metrics Changes - Product sales decreased by $15.8 million or 10.9% in 2024 compared to 2023, primarily due to a decrease in unit volume shipped in direct sales and inventory finance sales categories [7] - Net revenue per product sold increased by 1.9% in 2024 compared to 2023, driven by a moderate increase in unit prices [8] - Net income increased by 13.2% to $61.6 million in 2024 compared to 2023, with basic earnings per share increasing by $0.32 or 14.3% [14] - Cash increased to approximately $1.1 million as of December 31, 2024, compared to $0.7 million as of December 31, 2023 [14] - Book value per basic share outstanding increased by 13.9% to $20.40 as of December 31, 2024 [15] Business Line Data and Key Metrics Changes - Consumer MHP and dealer loans interest income increased by $3.8 million or 10.1% from 2023 to 2024 due to growth in loan portfolios [8] - Other revenue increased by $7.0 million or 106.3% from 2023 to 2024, primarily due to $8.9 million in land sales [10] - Gross profit margin for product sales was 30.4% in 2024, down from 31.3% in 2023 [12] - Selling, general and administrative expenses decreased by $1.1 million or 4.4% in 2024 compared to 2023 [13] Market Data and Key Metrics Changes - The average price for a new single-family home in 2023 was $511,000, compared to a manufactured home price of $123,000 [18] - Legacy's average selling price in 2024 was approximately $61,000 per unit, up from $60,000 in 2023 [20] - Retail finance fundings in Q1 2025 are tracking well ahead of the 8% growth seen in 2024 [22] Company Strategy and Development Direction - The company continues to focus on the long-term fundamentals of manufactured housing, emphasizing high-quality, affordable homes and financing solutions [17] - Plans for 2025 include focusing on sales, particularly park sales in Texas and dealer sales in the Southeast, while streamlining product offerings and processes [28] - The company is in a strong net cash position and plans to repurchase shares aggressively if stock prices decline [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledges significant market uncertainties, including politics, tariffs, and recession risks, but remains committed to closely managing the business [16] - The affordable housing crisis is highlighted as a critical issue, with the manufactured housing industry seen as a necessary part of the solution [21] - Management expects production rates to improve as they ramp up production at Texas facilities, with a focus on building backlog [52] Other Important Information - The company sold a mobile home park as part of a settlement agreement, resulting in a meaningful gain [26] - The company is actively developing properties in Austin, with plans to sell lots in Phase 1 of a development project [27] Q&A Session Summary Question: Can you provide more details on land sales during the quarter? - The significant sale was a mobile home park from a settlement agreement in Beaumont, Texas, with other land monetized throughout the year [32] Question: Did you purchase any land in Q4 in Texas? - The company did not purchase land but is focused on foreclosing on development loans secured by land [35] Question: What are the concerns regarding delinquencies and the ability to recover loans? - Past due balances have increased slightly, but recovery remains strong due to home price increases and down payment requirements [38] Question: How might changing immigration policies impact customers and labor? - The company has not seen a material change in business from immigration policies, as they have stable borrowers [45] Question: Are there any expectations for increasing SG&A expenses in 2025? - Management does not foresee any material changes in SG&A expenses [47]

Sales Performance - In 2024, the company sold 2,471 home sections, a decrease of 14.1% from 2,877 home sections sold in 2023[89] - Approximately 38% of 2024 product sales were attributed to independent retail distributors, down from 51% in 2023[92] - Texas accounted for 54% of product sales in 2024, slightly up from 53% in 2023[94] - Product sales declined by $15.76 million, or 10.9%, primarily due to a decrease in unit volumes shipped, with total units sold dropping from 2,434 in 2023 to 2,129 in 2024, a decrease of 305 units or 12.5%[116] - Total product sales for 2024 amounted to $129.345 million, down from $145.100 million in 2023, indicating a decrease of about 10.8%[259] Financial Performance - Total net revenue decreased by $4.95 million, or 2.6%, from $189.14 million in 2023 to $184.19 million in 2024[115] - Total net revenue for 2024 was $184,191,000, a decrease of 2.0% from $189,144,000 in 2023[170] - Net income rose by $7.18 million, or 13.2%, from $54.46 million in 2023 to $61.64 million in 2024[115] - Net income increased to $61,642,000 in 2024, up 13.9% from $54,460,000 in 2023[170] - Basic net income per share rose to $2.55 in 2024, compared to $2.23 in 2023, reflecting a 14.3% increase[170] Operating Expenses - Total operating expenses decreased by $3.98 million, or 3.2%, from $124.56 million in 2023 to $120.58 million in 2024[115] - Operating expenses decreased to $120,581,000 in 2024, down 3.9% from $124,557,000 in 2023[170] Cash Flow and Liquidity - Net cash provided by operating activities was $35.99 million in 2024, a significant increase compared to a net cash used of $13.54 million in 2023[129] - The outstanding balance of the Revolver decreased from $23.68 million in 2023 to $0 in 2024, with available credit under the Revolver increasing from $26.32 million to $50 million[136] - Cash at the end of the period increased to $1,149,000 in 2024, compared to $748,000 in 2023[175] Loan and Credit Management - The company has not experienced material losses on its loan portfolios historically, indicating strong credit management[100] - Consumer, MHP, and dealer loans interest income increased by $3.76 million, or 10.1%, due to growth in loan portfolios, with the consumer loan portfolio increasing by $17.6 million and the MHP loan portfolio increasing by $24.5 million[118] - The allowance for loan losses decreased to $694,000 at the end of 2024 from $765,000 in 2023, indicating a reduction of approximately 9.3%[262] - The allowance for loan losses for mobile home parks decreased to $654,000 in 2024 from $735,000 in 2023, indicating improved credit quality[273] - 99.8% of mobile home park loans were less than 30 days past due as of December 31, 2024, indicating strong payment performance[273] Warranty and Liability - The warranty liability at the beginning of 2024 was $2,910,000, which decreased to $1,950,000 by the end of the year, reflecting a reduction of 33%[217] - The product warranty reserve accrued in 2024 was $840,000, a significant decrease of 67% compared to $2,552,000 in 2023[217] - Warranty costs incurred in 2024 totaled $1,800,000, down 33% from $2,691,000 in 2023[217] Tax and Regulatory Changes - The effective tax rate for 2024 was 18.9%, compared to 20.8% in 2023, primarily due to federal tax credits for energy-efficient construction[124] - The Company has identified material weaknesses in internal control over financial reporting, including insufficiently designed control activities and lack of qualified accounting personnel[161] - The new accounting standards issued by FASB are expected to have no material impact on the Company's financial statements upon adoption[146] Shareholder Actions - The company repurchased 262,530 shares of common stock for $5.4 million during 2024, with a remaining authorization of approximately $14.6 million as of December 31, 2024[132] - The Company does not expect to pay dividends on its common stock, indicating a focus on reinvestment[232] Asset Management - Total assets increased to $534,194,000 in 2024, up 5.4% from $506,742,000 in 2023[169] - Total stockholders' equity increased to $493,956,000 in 2024, up 13.1% from $436,735,000 in 2023[169] - As of December 31, 2024, accounts receivable, net totaled $3,985,000, down from $4,656,000 in 2023, with an allowance for doubtful accounts of $578,000[187] Future Outlook - The company is exploring opportunities to increase production capacity to meet future demand[102] - The Company is currently evaluating the impact of new disclosure requirements related to income taxes and expense disaggregation standards[144][145]

Financial Performance - Net revenue for the year ended 2024 was $184.2 million, a decrease of 2.6% from 2023 [7] - Income from operations for the year ended 2024 was $63.6 million, a decrease of 1.5% from 2023 [7] - Net income for the year ended 2024 was $61.6 million, an increase of 13.2% from 2023 [7] - Basic earnings per share for the year ended 2024 was $2.55, an increase of 14.3% from 2023 [7] - Book value for the year ended 2024 was $494.0 million, an increase of 13.1% from 2023 [7] - Book value per share for the year ended 2024 was $20.40, an increase of 13.9% from 2023 [7][8] Business Model and Market Position - The company builds, sells, and finances manufactured homes and "tiny houses" through a network of independent retailers and company-owned stores [5] - Legacy is one of the largest producers of manufactured homes in the United States, focusing primarily on the southern U.S. [5] - The homes range in size from approximately 395 to 2,667 square feet and are priced from approximately $33,000 to $180,000 [5] Strategic Outlook - The company is well positioned for 2025, with a strong demand for affordable housing in the United States [3] - The integrated business model provides opportunities to deploy capital at high rates of return and compound shareholder value [3] - Over the last three years, the company has increased book value by nearly 60% [3]

Company Overview - Legacy Housing Corporation builds, sells, and finances manufactured homes and tiny houses through a network of independent retailers and company-owned stores [3] - The company is one of the largest producers of manufactured homes in the United States, with operations primarily focused in the southern United States [3] - Legacy offers a variety of homes ranging from approximately 395 to 2,667 square feet, consisting of 1 to 5 bedrooms and 1 to 3.5 bathrooms, with retail prices ranging from approximately $33,000 to $180,000 [3] Financial Results Announcement - Legacy Housing Corporation will release its financial results for the full year ended December 31, 2024, after markets close on March 12, 2025 [1] - A conference call to discuss the financial results will be held on March 13, 2025, at 10:00 a.m. Central Time [1] - Interested parties can pre-register for the conference call to receive dial-in details [1] Investor and Media Inquiries - Investor inquiries can be directed to Duncan Bates at (817) 799-4837 or via email at duncanbates@legacyhousingcorp.com [4] - Media inquiries can be directed to Kira Hovancik at (817) 799-4905 or via email at pr@legacyhousingcorp.com [4]

Group 1 - The article discusses the performance and outlook of Legacy Housing Corp. (NASDAQ: LEGH) within the context of the housing industry, which is currently facing challenges [1] - The author has a long-term investment approach and has transitioned from being a Tech analyst to covering Commodities and Energy sectors, reflecting a broader interest in market dynamics [1] Group 2 - The housing industry is experiencing significant changes, and the article highlights the implications for companies like Legacy Housing Corp. [1]

Financial Results - Legacy Housing Corporation reported its financial results for the fiscal quarter ended September 30, 2024[2]. - The press release detailing the financial results was issued on November 12, 2024[2]. - The financial results press release is included as Exhibit 99.1 in the Current Report[4]. Company Information - The company is listed on the NASDAQ Global Market under the trading symbol LEGH[1]. - The registrant is not classified as an emerging growth company[2]. - The company's principal executive offices are located in Bedford, Texas[1]. - The company has an IRS Employer Identification Number of 20-2897516[1]. Report Details - The report is not intended to be filed under the Securities Exchange Act of 1934[3]. - The report was signed by Duncan Bates, President and CEO, on November 14, 2024[5]. - The report includes a cover page interactive data file formatted as Inline XBRL[4].

Financial Data and Key Metrics Changes - Product sales decreased by $6.8 million or 18.3% for Q3 2024 compared to Q3 2023, primarily due to a decrease in unit volume shipped in direct sales, mobile home park sales, and inventory finance sales [6][7] - Net income decreased by 1.8% to $15.8 million in Q3 2024 compared to Q3 2023, with basic earnings per share decreasing by $0.01 or 1.5% [13] - Gross profit margin was 29.2% for Q3 2024, down from 32.9% in Q3 2023, attributed to lower production levels and under-absorbed labor [10][20] Business Line Data and Key Metrics Changes - Consumer MHP and dealer loans interest income increased by $1.5 million or 17.3% in Q3 2024 compared to Q3 2023, driven by growth in loan portfolios [7] - Other revenue decreased by $0.4 million or 8.7% in Q3 2024 compared to Q3 2023, primarily due to a decrease in forfeited deposits and dealer finance fees [8] - Selling, general and administrative expenses remained flat compared to Q3 2023, with slight increases in payroll and healthcare expenses offset by decreases in warranty and bad debt expenses [11] Market Data and Key Metrics Changes - Applications for retail finance increased by 16% in Q3 2024 compared to Q3 2023, indicating a positive trend in market demand [18] - October 2024 retail finance funding reached the highest level since December 2020, suggesting a recovery in the market [18] - The community business is slowly improving, with more inbound requests expected to continue into 2025 [18] Company Strategy and Development Direction - The company is focusing on increasing production at its Texas plants and expanding its independent dealer network, particularly in South Texas, Florida, and the Carolinas [15][17] - The company is transitioning its community business by selling HUD tiny homes to RV park investors, viewing this as a growth opportunity [19] - Legacy Housing is also prioritizing land sales and development projects, with plans to sell lots in Bastrop County and Horseshoe Bay in 2025 [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about production ramp-up in Q4 2024, expecting to see improved sales and backlog reduction following the successful fall show [29][30] - The company is monitoring material price fluctuations and labor market conditions, with expectations for gross margins to normalize as production increases [20][34] - Management noted that while high interest rates are currently depressing transaction volumes, they anticipate improvements in the community business in 2025 [18] Other Important Information - The company reported a one-time gain from a settlement agreement, which has now been fully integrated into the financials [36] - The company is operating two mobile home parks with a current occupancy rate of approximately 35%, with plans to increase occupancy before monetizing the assets [22][42] Q&A Session Summary Question: Expectations for production rates across plants for Q4 - Management expects to ramp up production in Q4, driven by strong orders from the fall show and new sales team management [29] Question: Trends in orders post-fall show - Orders have remained steady since the fall show, with an increase in inquiries from park customers [30][31] Question: Impact of hurricanes on operations - The company faced some delayed shipments but emerged from the storms without significant damage, anticipating future rebuild opportunities [32] Question: Normalization of gross margins - Management aims to return gross margins to the low 30s in Q4, contingent on improved production and labor conditions [34][41] Question: Status of the settlement agreement - The settlement agreement has been fully resolved, with ongoing opportunities to increase occupancy in the newly acquired parks [36][38]

Core Insights - Legacy Housing (LEGH) reported revenue of $44.27 million for Q3 2024, reflecting an 11.4% year-over-year decline and falling short of the Zacks Consensus Estimate of $51.14 million by 13.44% [1] - The company's EPS remained unchanged at $0.64 compared to the same period last year, but it missed the consensus EPS estimate of $0.65 by 1.54% [1] Revenue Breakdown - Net revenue from Consumer, MHP, and dealer loans interest was $10.33 million, exceeding the average estimate of $10.11 million by analysts, representing a year-over-year increase of 17.4% [3] - Net revenue from Other sources was reported at $3.77 million, significantly higher than the estimated $1.45 million, but showed a decline of 8.7% compared to the previous year [3] - Net revenue from Product sales was $30.17 million, which was below the estimated $39.58 million, marking an 18.5% decrease year-over-year [3] Stock Performance - Over the past month, Legacy Housing shares have returned +2%, while the Zacks S&P 500 composite increased by +3.3% [4] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [4]

Financial Performance - For the three months ended September 30, 2024, product sales decreased by $6.8 million, or 18.5%, compared to the same period in 2023, primarily due to a decrease in unit volumes shipped [134]. - Total net revenue for Q3 2024 was $44.3 million, a decrease of $5.7 million, or 11.4%, from $49.9 million in Q3 2023 [133]. - Net income for Q3 2024 was $15.8 million, a decrease of $285,000, or 1.8%, from $16.1 million in Q3 2023 [133]. - Total net revenue decreased by $25.4 million, or 16.4%, during the three months ended September 30, 2024, compared to the same period in 2023, primarily driven by a decrease in product sales [145]. - Product sales decreased by $29.9 million, or 24.4%, during the nine months ended September 30, 2024, due to a decrease in unit volumes shipped [146]. - Other revenue decreased by $1.4 million, or 17.5%, during the nine months ended September 30, 2024, primarily due to a decrease in dealer finance fees [150]. Sales and Production - The company sold 549 home sections in Q3 2024, down from 643 in Q3 2023, representing a decrease of 14.6% [121]. - The average net revenue per unit sold remained relatively stable at $63.5 in Q3 2024 compared to $63.6 in Q3 2023 [135]. - Approximately 48% of manufactured homes were sold in Texas for the nine months ended September 30, 2024, a slight decrease from 49% in the same period of 2023 [123]. - The company operates three manufacturing facilities and produces approximately 70 home sections per week, which translates to about 60 fully completed homes depending on product mix [122]. Expenses and Costs - The cost of product sales decreased by $20.1 million, or 24.1%, during the nine months ended September 30, 2024, primarily related to the decrease in units sold [151]. - Selling, general, and administrative expenses increased by $0.5 million, or 2.8%, during the nine months ended September 30, 2024, primarily due to increases in legal and marketing expenses [152]. - Inflation has impacted gross margins, with material and labor costs rising, and interest rate increases affecting financing availability for home buyers [129]. Cash Flow and Financing - Cash balances as of September 30, 2024, were approximately $0.6 million, a decrease from $0.7 million as of December 31, 2023 [157]. - The company believes that cash flow from operations and available credit will be sufficient to fund operations and growth for the next 12 to 18 months [156]. - Net cash provided by operating activities was $28.1 million for the nine months ended September 30, 2024, compared to a net cash outflow of $5.3 million for the same period in 2023, indicating a significant improvement [159]. - Net cash used in investing activities was $1.5 million for the nine months ended September 30, 2024, down from $7.6 million in the same period of 2023, primarily due to reduced loan issuances for manufactured housing parks [160]. - Net cash used in financing activities totaled $26.8 million for the nine months ended September 30, 2024, compared to a net cash inflow of $10.6 million in the same period of 2023, reflecting increased repayments on lines of credit and stock repurchases [161]. Share Repurchase and Credit Facilities - The company repurchased 262,530 shares for $5.4 million during the nine months ended September 30, 2024, with a remaining authorization of approximately $14.6 million for future repurchases [162]. - As of September 30, 2024, the outstanding balance of the new revolving credit facility was $2.1 million, with an interest rate of 7.61% [164]. - The company entered into a new Credit Agreement on July 28, 2023, providing a senior secured revolving credit facility with an initial commitment of $50 million [163]. - Interest expense under the new revolving credit facility was $686 thousand for the nine months ended September 30, 2024, compared to $588 thousand for the same period in 2023 [164]. Other Financial Metrics - The effective tax rate for the nine months ended September 30, 2024, was 18.2%, compared to 17.3% for the same period in 2023 [155]. - The maximum contingent obligations under repurchase agreements were approximately $856 thousand as of September 30, 2024, down from $3.0 million in December 31, 2023 [167]. - The company had a maximum leverage ratio of no more than 1.00 to 1.00 and a minimum fixed charge coverage ratio of no less than 1.75 to 1.00 as of September 30, 2024, indicating compliance with financial covenants [164]. - Cash at the end of the period was $570 thousand as of September 30, 2024, compared to $547 thousand at the end of the same period in 2023 [158]. - Other income increased by $7.1 million, or 296.7%, during the nine months ended September 30, 2024, driven by various gains including a reversal of accrued liabilities [154].