Legacy Housing(LEGH) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Product sales decreased by $10.7 million or 25.2% in Q2 2024 compared to Q2 2023, primarily due to a decrease in unit volumes shipped [4] - Net revenue per unit sold decreased by 1.3% to$ 61,600 in Q2 2024 compared to the same period in 2023 [4] - Net income increased by 7.8% to $16.2 million in Q2 2024 compared to Q2 2023, with basic earnings per share increasing by$ 0.05 or 8.7% [7] - Book value per basic share outstanding increased by 13.2% to $19.17 from the same period in 2023 [8] - Cash decreased to approximately$ 0.1 million as of June 30, 2024, from $0.7 million as of December 31, 2023 [7] Business Line Data and Key Metrics Changes - Consumer MHP and dealer loans interest income increased by$ 1.4 million or 16.0% in Q2 2024 compared to Q2 2023 due to growth in loan portfolios [5] - Other revenue decreased by $0.8 million or 45.5% in Q2 2024 compared to Q2 2023, primarily due to a decrease in dealer finance fees [5] Market Data and Key Metrics Changes - Retail finance applications increased by 34% in Q2 2024 compared to Q2 2023, indicating a positive trend in consumer financing [9] - The community business has been impacted by higher interest rates, leading to a decrease in transaction volume [9] Company Strategy and Development Direction - The company aims to build its backlog to increase production volume, with a focus on managing margins at lower production levels [10][11] - The company is actively monetizing real estate assets on its balance sheet, which have not received credit in public markets [12] - The company is focusing on improving its retail business, which has underperformed historically, by embracing technology and modern sales approaches [42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market improving, citing positive sales trends from larger competitors [45] - The company is addressing specific challenges that have distracted it from managing sales effectively, with expectations for improved performance in the second half of the year [45] - Management noted that while labor costs are a concern, they are focused on maintaining gross margins despite potential volume increases [29] Other Important Information - The company repurchased 170,342 shares for$ 3.5 million during Q2 2024, with an additional $10 million authorized for share repurchase [8] - A binding settlement agreement was signed to resolve litigation with a long-term MHP customer, which is expected to positively impact future operations [13] Q&A Session Summary Question: Impact of delayed shipments in Georgia and Texas - Management indicated that delays primarily occurred in Georgia, affecting shipments that will be pushed into Q3 [15] Question: Changes in order rates and backlog - Management noted that while they do not publish backlog figures, internal sales have shown improvement, and they are optimistic about future orders [16] Question: MHP loan portfolio performance - Management explained that the MHP loan portfolio has seen slower growth due to decreased park sales, but interest rates will adjust as loans flip to variable [23][24] Question: Gross profit margin sustainability - Management expressed confidence in maintaining gross profit margins despite labor cost pressures, with production ramping up in Georgia [29] Question: Future stock repurchase plans - Management stated that stock repurchases will be opportunistic based on internal calculations of liquidation value [31] Question: Production quality and plans in Georgia - Management reported significant improvements in production quality in Georgia and is optimistic about future sales growth [36][37]