Q2 2024 Legacy Housing Corp Earnings Call

August 9, 2024

Operator: Good day, and thank you for standing by. Welcome to the Legacy Housing Corp. second quarter 2024 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again.

Good day, and thank you for standing by and we'll go to the legacy housing Corp, second quarter 'twenty 'twenty four earnings call.

Unknown Attendee: Welcome to the Loud Legacy Housing Corp.

Unknown Attendee: 2nd quarter, 2024 earnings call. At this time, I'll participate unless in only mode. After this pickage presentation, it will be a question-and-answer session. To ask a question during a session, you need to press star 1-1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.

Speaker Change: At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you wait to press Star one one on your telephone you didn't hear an automated message advising your hand is race to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I don't understand that.

Operator: Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker today, Duncan Bates. Please go ahead. Good morning.

Unknown Attendee: I will now attend a conference over to your speaker today.

Speaker Change: Conference over to your Speaker today Duncan Bates. Please go ahead.

Duncan Bates: Duncan Bates, please go ahead. Good morning. This is Duncan Bates, Legacy's President and CEO. Thanks for joining our 2nd quarter 2024 conference call.

Duncan Bates: This is Duncan Bates, Legacy's President and CEO. Thanks for joining our second quarter 2024 conference call. Max Africk, Legacy's General Counsel, will read the Safe Harbor Disclosure before getting started. Thanks, Duncan. At the outset, I will remind our listeners that management's prepared remarks today will

Duncan Bates: Good morning.

Duncan Bates: Duncan Bates legacies, President and CEO, Thanks for joining our second quarter 2024 conference call.

Duncan Bates: Good morning. This is Duncan Bates, Legacy's President and CEO. Thanks for joining our second quarter 2024 conference call. Max Africk, Legacy's General Counsel, will read the Safe Harbor Disclosure before getting started. Max

Max Africk: Max Africk, Legacy's general counsel, will read the safe harbor disclosure before getting started.

Speaker Change: Ex Africa Legacies General Counsel, who will read the safe Harbor disclosure before getting started.

Max Africk: Max. Thanks, Duncan. At the outset, I will remind our listeners that management's prepared remarks today will contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your question. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's Andrew Report, Public Security and Exchange Commission. In addition, any projections as the company's future performance represent management's best estimates as of today's call.

Max Africk: Thanks, Duncan. At the outset, I will remind our listeners that management's prepared remarks today will contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. However, actual results may differ from management's current expectations, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report filed with the Securities and Exchange Commission. In addition, any projections as to the company's future performance represent management's best estimates as of today's call, and Legacy Housing assumes no obligation to update these projections in the future unless otherwise required by applicable law.

Duncan Bates: Yeah.

Speaker Change: At the outset, I'll remind our listeners that management's prepared remarks today will contain forward looking statements, which are subject to risks and uncertainties and management may make additional forward looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward looking statements that is contained in the private Securities Litigation Reform Act.

Duncan Bates: Scott.

Speaker Change: Actual results may differ from management's current expectations and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report filed with the Securities and Exchange Commission. In addition, any projections about the company's future performance represent management's best estimates as of today's call legacy housing assumes no obligation to update these projections.

Max Africk: Legacy housing assumes no obligation to update these projections in the future, unless otherwise required by applicable law.

Speaker Change: In the future unless otherwise required by applicable law.

Jeff Fiedelman: Thanks, Max. I'm joined today by Jeff Fiedelman, Legacy's Chief Financial Officer. Jeff will discuss our second quarter financial performance, then I will provide additional corporate updates and open the call for Q&A.

Duncan Bates: Thanks, Max.

Speaker Change: Yeah.

Max: Thanks Max.

Duncan Bates: I'm joined today by Jeff Fiedelman, Legacy's Chief Financial Officer. Jeff will discuss our 2nd quarter financial performance, and I will provide additional corporate updates and open the call for Q&A.

Speaker Change: I'm joined today by Jeff Federman, Legacies, Chief Financial Officer, Jeff will discuss our second quarter financial performance and I will provide additional corporate updates and open the call for Q&A.

Jeffrey Fiedelman: Thanks, Duncan. Product sales primarily consist of direct sales, commercial sales, inventory, finance sales, and retail store sales. Product sales decrease 10.7 million, or 25.2 percent, during the three months and the June 30, 2024, as compared to the same period in 2023. This decrease was driven by a decrease in unit volume shift primarily in direct sales, mobile home park sales, and inventory finance sales categories.

Jeff: Thanks Scott.

Jeff Fiedelman: Product sales, which primarily consist of direct sales, commercial sales, inventory, finance, sales, and retail, decreased 10.7 million or 25.2% during the three months and June 30 of 2024 as compared to the same period in 2023. This decrease was driven by a decrease in unit volume shipped, primarily in direct sales, mobile home park sales, and inventory finance sales.

Speaker Change: Product sales primarily consist of direct sales commercial sales inventory finance sales and retail store sales Prada.

Jeff Federman: Product sales decreased 10, 7 million or 25, 2% during the three months ended June 30 of 2024 as compared to the same period in 2023.

Speaker Change: This decrease was driven by a decrease in unit volumes shipped primarily a direct sales mobile home park sales and inventory finance sales categories that.

Jeffrey Fiedelman: The decrease was partially offset by increased sales at our company-owned retail stores. For the three months and a June 30, 2024, our net revenue per unit sold decreased 1.3 percent to $61,600. As compared to the same period in 2023, primarily due to a shift in product mix to smaller units. Consumer MHP and dealer loans interest income increased 1.4 million, or 16.0 percent, during the three months and at June 30, 2024, as compared to the same period in 2023, due to growth in our loan portfolios. This increase was driven by increased balances in the MHP consumers.

Jeff Fiedelman: The decrease was partially offset by increased sales at our company-owned retail store. For the three months ended June 30, 2024, our net revenue per unit sold decreased 1.3% to $61,600 as compared to the same period in 2023, primarily due to a shift in product mix to smaller units. Consumer MHP and dealer loans interest in interest income increased 1.4 million or 16.0% during the three months end of June 30, 2024 as compared to the same period in 2023 due to growth in our loan portfolio.

Speaker Change: The decrease was partially offset by increased sales in our company owned retail stores.

Speaker Change: For the three months ended June 32020 for our net revenue per unit sold decreased one 3% to $61600 as compared to the same period in 2023, primarily due to a shift in product mix to smaller units.

Speaker Change: Consumer I'm HP, a deal with loans interest and interest income increased $1 4 billion or 16.0%. During the three months ended June 32024, as compared to the same period in 2023 due to growth in our loan portfolios.

Jeff Fiedelman: This increase was driven by increased balances in the MHP consumer and dealer loan portfolio. Between June 30, 2024, and June 30, 2023, our MHP loan portfolio increased by $16.6 million. Our consumer loan portfolio increased by 15.8, and our dealer finance notes increased by 0.9%.

Speaker Change: This increase was driven by increased balances in the Amex peak consumer into your loan portfolios.

Jeffrey Fiedelman: and dealer loan portfolios. Between June 30th, 2024, and June 30th, 2023, our MHP loan portfolio increased by 16.6 million. Our consumer loan portfolio increased by 15.8 million. And our dealer finance notes increased by 0.9 million.

Speaker Change: Portfolios.

Speaker Change: Between June 32024, and June 30 of 2023.

Speaker Change: <unk> loan portfolio increased by $16 6 million.

Speaker Change: Our consumer loan portfolio increased by $15 8 million and our dealer finance knows notes increased by zero point $9 million.

Jeffrey Fiedelman: Other revenue primarily consists of contract deposit for features, consignment fees, commercial lease rents, service fees, and other miscellaneous income, and decreased 0.8 million or 45.5% during the three months and the June 30th, 2024, as compared to the same period in 2023. This decrease was primarily due to a 1.0 million decrease in dealer finance fees, a 0.2 million decrease in commercial lease rents, partially offset by a 0.4 million increase in other miscellaneous revenue. Cost of product sales decreased 8.2 million or 27.4% during the three months and the June 30th, 2024, as compared to the same period in 2023.

Jeff Fiedelman: Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees, and other miscellaneous income and decreased 0.8 million, or 45.5%, during the three months ended June 30, 2024, as compared to the same period in 2023. This decrease was primarily due to a $1.0 million decrease in dealer finance fees, a $0.2 million decrease in commercial lease rent, partially offset by a $0.4 Cost of product sales decreased 8.2 million or 27.4% during the three months ended June 30, 2024, as compared to the same period in 2023. The decrease in cost is primarily related to the decrease in units sold.

Speaker Change: Other revenue primarily consists of contract deposit forfeitures consignment fees commercial lease rents service fees and other miscellaneous income.

Speaker Change: And decreased <unk> 8 million or 45, 5% during the three months ended June 32024, as compared to the same period in 2023.

Speaker Change: This decrease was primarily due to a 1.0 million decrease in dealer finance fees 0.2 million decrease in commercial lease rents, partially offset by 0.4 million increase in other miscellaneous revenue.

Speaker Change: Cost of product sales decreased $8 2 million or 27, 4%. During the three months ended June 32024, as compared to the same period in 2023.

Jeffrey Fiedelman: The decrease in costs is primarily related to the decrease in units sold. Gross profit margin was 31.9% of product sales during the three months and the June 30th, 2024, as compared to 29.8% during the three months and the June 30th, 2023.

Speaker Change: The decrease in cost was primarily related to the decrease in units sold.

Jeff Fiedelman: Gross profit margin was 31.9% of product sales during the three months ended June 30, 2024, as compared to 29.8% during the three months ended June 30, 2024; selling general and administrative expenses were flat during the three months and to June 30, 2024, as compared to the same period of 2023; we had a $0.8 million decrease in warranty costs. $0.7 million decrease in payroll and related expenses and a $0.2 million decrease in bad debt, offset by a $0.8 million increase in legal expenses.

Speaker Change: Gross profit margin was 31, 9% of product sales during the three months ended June 32024, as compared to 29, 8%. During the three months ended June 30 of 2023.

Jeffrey Fiedelman: Following general and administrative expenses were flat during the three months and the June 30th, 2024, as compared to the same period in 2023. We have a 0.8 million decrease in warranty costs, a 0.7 million decrease in payroll and related expense, and a 0.2 million decrease in bad debt expense. Offset by a 0.8 million increase in legal expense, a 0.4 million increase in property tax expense, a 0.2 million increase in low-moss provision, a 0.1 million increase in marketing expense, and a net 0.2 million increase in other miscellaneous expense.

Speaker Change: Selling general and administrative expenses were flat during the three months ended June 30 of 2024.

Speaker Change: As compared to the same period of 2023.

Speaker Change: We haven't zero point $8 million decrease in warranty costs zero point $7 million decrease in payroll and related expenses.

Speaker Change: 0.2 million decrease in bad debt expense.

Speaker Change: Sat Fi zero point $8 million increase in legal expense 0.4 million increase in property tax expense.

Jeff Fiedelman: $0.4 million increase in property tax, $0.2 million increase in the low-loss provision, $0.1 million increase in marketing, and a net $0.2 million increase in other miscellaneous. Other income expense increased $3.2 million, or 538.3%, during the three months ended June 30, 2024, as compared to the same period in 2022. We had an increase of $2.6 million in miscellaneous income as a result of a gain of $1.3 million on the sale of real property in Georgia and a reversal of $1.3 million of accrued liability. We had an increase of 0.3 million in other miscellaneous things, and we had an increase of $0.3 million in interest on other notes, receivables, net of allowances.

Speaker Change: Zero point $2 billion increase in loan loss provision of zero point $1 million increase in marketing expense.

Speaker Change: And a net 0.2 million increase in other miscellaneous expense.

Jeffrey Fiedelman: Other income expense increased 3.2 million or 538.3% during the three months and the June 30th, 2024, as compared to the same period in 2023. We have an increase of 2.6 million in miscellaneous income as a result of the gain of 1.3 million on the sale of real property in Georgia and a reversal of 1.3 million of the crude buy-villains. We have an increase of 0.3 million in other miscellaneous income, and we have an increase of 0.3 million in interest income for other notes receivables net of allowances. Net income increased 7.8% to 16.2 million in the second quarter of 2024.

Speaker Change: Other income expense increased $3 2 million or 538, 3% during the three months ended June 32024, as compared to the same period in 2023.

Speaker Change: We had an increase of two 6 million in miscellaneous income as a result of the gain of $1 3 million on the sale of real property in Georgia.

Speaker Change: And a reversal of $1 3 million of accrued liabilities.

Speaker Change: We had an increase of zero point $3 million in other miscellaneous income.

Speaker Change: And we have an increase of zero point $3 million in interest income for other for other notes receivables net of allowances.

Jeff Fiedelman: Net income increased 7.8% to $16.2 million in the second quarter of 2024 compared to the second quarter of 2023; basic earnings per share increased five cents per share, or 8.7%. In the second quarter of 2024, compared to the second quarter of 2023; As of June 30, 2024, we had approximately $0.1 million in cash compared to $0.7 million as of December 31, 2023. The outstanding balance of the Revolver as of June 30th, 2024 and December 31st, 2023 was $11.9 million and $23.7 million, respectively.

Speaker Change: Net income increased seven 8% to $16 2 million in the second quarter of 2024 compared to the second quarter of 2023.

Jeffrey Fiedelman: 24, compared to the second quarter of 2023. Basic earnings per share increased 5 cents per share, or 8.7 percent, in the second quarter of 2024 compared to the second quarter of 2023.

Speaker Change: Basic earnings per share increased <unk> <unk> per share or eight 7% in the second quarter of 2024 compared to the second quarter of 2023.

Jeffrey Fiedelman: As of June 30, 2024, we had approximately 0.1 million in cash compared to 0.7 million as of December 31, 2023. The outstanding balance of the revolver as of June 30, 2024, and December 31, 2023, was 11.9 million and 23.7 million, respectively. At the end of the second quarter of 2024, Legacy's book value per basic share outstanding was 19 dollars and 17 cents, an increase of 13.2 percent from the same period in 2023.

Speaker Change: As of June 32024, we had approximately zero point $1 billion in cash compared to 0.7 million as of December 31, 2023.

Speaker Change: The outstanding balance of the revolver as of June 30 of 2024 and December 31, 2023 was $11 9 million and $23 7 million respectively.

Jeff Fiedelman: At the end of the second quarter of 2024, Legacy's book value per basic share outstanding was $19.17, an increase of 13.2% from the same period in 2023. We repurchased 170,342 shares for $3.5 million during the three months ended June 30, 2021. On August 6, 2024, our Board of Directors authorized the repurchase of an additional $10.0 million of the company's common stock under the Share Repurchase Program. We will continue to repurchase shares opportunistically when the stock trades near liquidation. Thanks, Jeff.

Speaker Change: At the end of the second quarter of 2024 legacy book value per basic share outstanding was $19.17 an increase of 13, 2% from the same period in 2023.

Duncan Bates: We repurchased 170,342 shares for 3.5 million during the three months and in June 30, 2024. On August 6, 2024, our Board of Directors authorized the repurchase of an additional 10.0 million of the company's common stock under the share repurchase program. We will continue to repurchase shares opportunistically when the stock trades near liquidation value.

Speaker Change: Yeah.

Speaker Change: We repurchased 170342 shares for $3 5 million during the three months ended June 32024.

Speaker Change: On August six 2024, our board of directors authorized a repurchase of an additional $10.0 million of the company's common stock under the share repurchase program.

Speaker Change: We will continue to repurchase shares opportunistically, when the stock trades near liquidation value.

Duncan Bates: Thanks, Jeff. Our team continues to focus on product sales. They work through delays in Georgia and with certain customers in Texas that push shipments into the third quarter. Our dealer business across most of the platform is strong. Some independent dealers are slow to move aged inventory. We launched a retail financing special to assist with this ahead of our fall show. Retail finance applications were up 34 percent from the second quarter of 2024 compared to the second quarter of 2023. Our community business has been impacted by higher interest rates for the past few quarters. Transaction volume, which drives demand as new owners work to increase rent roles, is down, and new development is slow.

Jeff Federman: Thanks, Jeff.

Duncan Bates: Our team continues to focus on product sales. We work through delays in Georgia and with certain customers in Texas that push shipments into the third quarter. Our dealer business across most of the platform is strong, although some independent dealers are slow to move aged inventory.

Jeff Federman: Yes.

Speaker Change: Our team continues to focus on product sales it worked through delays in Georgia and with certain customers in Texas that pushed shipments into the third quarter.

Speaker Change: Our dealer business across most of the platform is strong.

Speaker Change: Some independent dealers are slow to move aged inventory.

Duncan Bates: We launched a retail financing special to assist with this ahead of our fall show. Retail finance applications were up 34% from the second quarter of 2024 compared to the second quarter of 2023. Our community business has been impacted by higher interest rates for the past few quarters. Transaction volume, which drives demand as new owners work to increase rent rolls, is down, and new development is slow.

Speaker Change: We launched a retail financing special to assist with this ahead of our fall show.

Speaker Change: Retail finance applications.

Speaker Change: 34% from the second quarter of 2024 compared to the second quarter of 2023.

Speaker Change: Our community business has been impacted by higher interest rates for the past few quarters.

Speaker Change: Transaction volume, which drives demand as new owners work to increase rent rolls is down and new development is slow.

Duncan Bates: However, the market is improving. Our quote activity is up meaningfully since the first quarter. We're having success selling smaller HUD units and tiny homes to both image and RV park owners, Amy the key rent affordable and occupancy high. Legacy has a handful of large community customers who paused orders for the past 12 months or so. These customers are back ordering and taking deliveries. Product gross margins were 31.9 percent for the second quarter of 2024. I'm proud of our team's effort to manage margins at lower production volumes. We are disciplined on price and watching labor and overhead expenses closely.

Speaker Change: However, the market is improving.

Speaker Change: Our quote activity is up meaningfully since the first quarter, we're having success selling smaller HUD units and tiny homes to both MH and RV Park owners, Amy to keep rent affordable and occupancy high.

Speaker Change: Legacy has a handful of large community customers, who paused to orders for the past 12 months or so.

Speaker Change: These customers are back ordering and taking deliveries.

Speaker Change: Yes.

Duncan Bates: Product growth margins were 31.9% for the second quarter of 2024. I'm proud of our team's effort to manage margins at lower production volumes. We are disciplined on price and are watching labor and overhead expenses closely.

Speaker Change: Product gross margins were 31, 9% for the second quarter of 2024, I'm proud of our team's effort to manage margins and lower production volumes, we are disciplined on price and watching labor and overhead expenses closely.

Duncan Bates: Our top priority for the remainder of 2024 is continuing to build our backlog, which will result in higher production volume. Our new sales team members are building customer relationships and signing orders. We increase production at our Georgia plant in July. As Jeff mentioned, we sold a property in Georgia during the second quarter. The sale positively impacted our results. Although one time in nature, investors will continue to see similar sales over the next few quarters. There are several real estate assets on our balance sheet, excluding our core developments, that have meaningful value. We receive zero credit for these assets in the public markets and will continue to monetize them.

Speaker Change: Our top priority for the remainder of 2024 is continuing to build our backlog, which will result in higher production volume our new sales team members are building customer relationships and signing orders we increased production at our Georgia plant in July.

Duncan Bates: As Jeff mentioned, we sold a property in Georgia during the second quarter. The sale positively impacted our results. Although one-time in nature, investors will continue to see similar sales over the next few quarters. There are several real estate assets on our balance sheet, excluding our core developments, that have meaningful value. We receive zero credit for these assets in the public markets and will continue to monetize them.

Speaker Change: As Jeff mentioned, we sold a property in Georgia during the second quarter the sale positively.

Jeff Federman: It really impacted our results, although onetime in nature investors will continue to see similar sales over the next few quarters.

Jeff Federman: There are several real estate assets on our balance sheet, excluding our core developments that have meaningful value. We receive zero credit for these assets in the public markets and we will continue to monetize them.

Duncan Bates: All those sales volumes are down in 2024. Our lending portfolios continue to grow. From the first half of 2023 to the first half of 2024, interest revenue for MHP, retail finance, and floor plan financing is up 26.5%. Our delinquencies remain low, and recovery rates are strong. On July 27th, 2024, we signed a binding settlement agreement to resolve litigation with a long-term MHP customer. Under the agreement, the borrower will deed two mobile home parks with homes to Legacy. Legacy were refinanced, the remaining debt and a new two-year note. The collateral and guarantors remain the same. We are finalizing the transfers and the new note and plan to discuss more details on the next earnings call.

Duncan Bates: Although sales volumes are down in 2024, our lending portfolios continue to grow. From the first half of 2023 to the first half of 2024, interest revenue from MHP, retail finance, and floor plan financing is up 26.5%. Our delinquencies remain low, and recovery rates are strong. On July 27, 2024, we signed a binding settlement agreement to resolve litigation with a long-term MHP customer. Under the agreement, the borrower will deed the mobile home parks with homes to Legacy. Legacy will refinance the remaining debt and a new two-year note. The collateral and guarantors remain the same.

Jeff Federman: Although sales volumes are down in 2024, our lending portfolios continue to grow.

Speaker Change: From the first half of 2023 to the first half of 2024 interest revenue from Mhpg retail finance and floor plan financing is up 26, 5% our delinquencies remain low recovery rates are strong.

Speaker Change: On July 27, 2024, we signed a binding settlement agreement to resolve litigation with a long term HP customer under the agreement the borrower will need to mobile home parks with homes to legacy legacy where refinance the remaining debt and a new two year note.

The collateral and guarantors remain the same we are finalizing the transfers and the new note and plan to discuss more details on the next earnings call. We view this as a very positive outcome for both parties.

Duncan Bates: We're finalizing the transfers and the new note and plan to discuss more details on the next earnings call. We view this as a very positive outcome for both parties. Investors following our story know that we have worked through multiple challenging situations over the last two years. We're hands-on operators, and solving these complex problems takes significant time and energy.

Duncan Bates: We view this as a very positive outcome for both parties. Investors following our story know that we have worked through multiple challenging situations over the last two years. We are hands-on operators, and solving these complex problems takes significant time and energy. With most of yesterday's challenges behind us, we can focus on growing our core business. There are no more distractions. We have built a great team. Everyone is contributing, and today I feel better about the company and our prospects than any other time since starting full time in June 2022. I am excited to show investors the earnings potential of this business as we push more volume through the plants this year.

Speaker Change: Investors following our story know that we have worked through multiple challenging situations over the last two years, we are hands on operators and solving these complex problems take significant time and energy.

Duncan Bates: With most of yesterday's challenges behind us, we can focus on growing our core business. There are no more distractions. We have built a great team. Everyone is contributing. And today I feel better about the company and our prospects than at any other time since starting full time in June 2022. I'm excited to show investors the earnings potential of this business as we push more volume through the plants this year.

Speaker Change: Most of yesterday's challenges behind us we can focus on growing our core business. There are no more distractions. We have built a great team everyone is contributing and today I feel better about the company and our prospects than any other time since starting full time in June 2022.

Speaker Change: I am excited show investors the earnings potential of this business as we push more volume through the plants.

Operator: Operator, this concludes our prepared remarks. Please begin the Q&A. Thank you. And, as a reminder, to ask a question, you will need to...

Unknown Attendee: Operator, this concludes our prepared remarks. Please begin the Q&A.

Speaker Change: This year.

Speaker Change: Operator. This concludes our prepared remarks, please begin the Q&A.

Operator: Thank you, and as a reminder, to ask a question, you need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Unknown Attendee: Thank you.

Unknown Attendee: As a reminder, to ask a question, you need to press star 11 on your telephone and wait for your name to be announced. To draw your question, please press star 11 again. Please stand by. We compile the Q&A roster. One moment for our first question.

Speaker Change: Thank you and as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby we compile the Q&A roster.

Operator: Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from Daniel Moore from CJS Securities. Your line is open.

One moment for our first question.

Daniel Moore: Our first question will confline of Daniel Moore from CJA Securities. Your line is open.

Speaker Change: Our first question will come from the line of Daniel Moore from CJS Securities. Your line is open.

Daniel Moore: Thank you, Duncan and Jeff. Thanks for taking the questions and all the color.

Daniel Moore: Thank you, Duncan and Jeff. Thanks for taking the questions and all the color. Let me start with, is it possible to quantify, in ballpark terms, the impact of the delays, the delayed shipments referenced in Georgia and Texas in the quarter that are being pushed into Q3?

Daniel Moore: Thank you Duncan and Jeff Thanks for taking the questions and all the color.

Duncan Bates: Let me start with, is it possible to quantify, involve our terms, the impact of the delays, the delayed shipments that referenced in Georgia and Texas in the quarter that are being pushed into Q3?

Daniel Moore: Would you start with is it possible to quantify.

Daniel Moore: In ballpark terms the impact of the delays the delayed shipments that referenced in Georgia, and Texas in the quarter that are being pushed into Q3.

Duncan Bates: You know, the bulk of that's in Georgia. We had shipments held up. for a few weeks over there, and those obviously will get pushed into Q3.

Duncan Bates: You know, the bulk of that's in Georgia. We were, we had shipments held up for a few weeks over there. And, you know, those obviously will get pushed into Q3. You know, I'd say so, there. I don't have a specific number. You know, I just think that, you know, the backlog looks decent, but, you know, customers are struggling, especially on the park side, with permits and getting, you know, getting pads ready, and, you know, we just experienced some delays where we thought, you know, we'd get 30 homes out, and instead, you ship the first 10, and it takes them longer than expected to take the rest. So I think, you know, in the third quarter, you'll certainly see a ramp up in shipments, but it was certainly slower than we would like this quarter.

Speaker Change: The bulk of that is in Georgia.

Speaker Change: We were we had shipments held up.

Speaker Change: For a few weeks over there and.

Speaker Change: Theres, obviously youll get pushed into Q3.

Duncan Bates: I don't have a specific number; I just think that the backlog looks decent, but customers are struggling, especially on the park side with permits and getting pads ready. We just experienced some delays where we thought, hey, we'd get 30 homes out, and instead you shift the first 10, and it takes them longer than expected to take the rest. So I think the third quarter, you'll certainly see a ramp up in shipments, but it was certainly slower than we would like this quarter.

Speaker Change: I would say.

Speaker Change: I don't have I don't have a specific number.

Speaker Change: I just think that.

Speaker Change: The backlog looks decent.

Speaker Change: But customers are are struggling, especially on the parts side.

Speaker Change: With permits and getting getting pads ready.

Speaker Change: And.

Speaker Change: We just we experienced some delays where we thought.

Speaker Change: We'd get 30 homes out and instead you shipped the first 10 and it takes them longer than expected to take the rest. So I think the third quarter, you'll certainly see a ramp up in and shipments, but it was certainly slower than we would like this quarter.

Daniel Moore: That's helpful. Obviously, the retail finance apps up 34% is a great sign. Anything you can say in terms of order rates and or changes in backlog during the quarter either sequentially or year-over-year?

Duncan Bates: That's helpful. Obviously, the retail finance apps up 34% is a great sign, and you can say in terms of order rates and or changes of backlog during the quarter either sequentially or year over year. Yeah, you know, Dan, we don't publish backlog, but we obviously follow it closely internally.

Speaker Change: That's helpful.

Speaker Change: Obviously, the retail finance apps up 34% is a great sign.

Speaker Change: And then you can say in terms of order rates <unk> changes of backlog during the quarter either sequentially or year over year.

Duncan Bates: Yeah, you know, Dan, we don't publish backlog, but we obviously follow it closely internally. I think, you know, this week, we probably had one of the best sales weeks that we've had all year. And, you know, so we're excited to get, you know, back focused 100% on sales. We've had a lot of distractions. This year we've cleaned up, you know, yesterday's problems. But, you know, I think that customers on both sides of the business are ordering, and the outlook, you know, looks a lot better than it did at this time last summer. And, you know, we fought some challenges that were unique to us.

Speaker Change: Yes.

Dan: Dan we don't publish backlog, but we obviously follow it closely internally.

Duncan Bates: I think, you know, this week, we probably have one of the best sales weeks that we've had all year. And, you know, so we're excited to get, you know, back focused 100% on sales. You know, we've had a lot of distractions this year as we've cleaned up, you know, yesterday's problems. But, you know, I think that customers on both sides of the business are ordering. The outlook, you know, looks a lot better than it did at this time last summer. And, you know, we fought some, you know, challenges that are unique to us, but we're, you know, really like starting to push a lot of homes out the door.

Speaker Change: This week, we probably we had one of the best sales weeks that we've had all year and so we're we're excited to get back focused 100% on sales.

Speaker Change: <unk> had a lot of distractions.

Speaker Change: This year is we've cleaned up.

Speaker Change: Yesterday's problems, but I think that that customers on both sides of the business you're ordering.

Speaker Change: The outlook looks a lot better than it did.

Speaker Change: At this time last summer and we thought some challenges that are unique to us, but where we're really starting to push a lot of homes out the door and we've got some big projects.

Duncan Bates: But we're, you know, we're really starting to push a lot of homes out the door, and we've got some big projects. You know, there's some projects that I think we're pretty close to, that would be a game changer for us and really allow us to take production up. But we're just taking it day by day. We've got a lot of new salespeople that we've hired, you know, over the last 12 months, and it takes some time to get people trained and get them up to speed. And, you know, have them really understand the product and really understand the financing solutions before they can contribute.

Duncan Bates: And we've got some big projects. You know, there's some projects that I think we're pretty close on, you know, that would be a game changer for us and really allow us to take production up.

Speaker Change: There are some projects that I think we're pretty close on that.

Speaker Change: That would be a game changer for us and really allow us to take production up but we're just we're taking it day by day week.

Duncan Bates: But we're just, we're taking a day by day. We've got a lot of new salespeople that we've hired, you know, over the last 12 months. And it takes some time to get people trained and get them up to speed and, you know, have them really understand the product and really understand the financing solutions before they can contribute. And I'm happy with, you know, the direction that that's going. We've also, we implemented a new sales order system that we launched early this year, where we're now, you know, tracking all the details around quotes and orders and shipments, you know, in one system all the way through the process so we can hold people accountable on the sales side.

Speaker Change: Got a lot of new salespeople that we've hired over the last 12 months and.

Speaker Change: It takes some time to get people trained and get them up to speed.

Speaker Change: And Havent really understand the product and really understand the financing solutions before they can contribute.

Duncan Bates: And I'm happy with, you know, the direction that that's going. We've also implemented a new sales order system, you know, that we launched early this year, where we're now tracking all the details around quotes and orders and shipments in one system all the way through the process, so we can hold people accountable on the sales side. So a lot of things are moving in the right direction; we've just got to stay focused and really push sales forward.

Speaker Change: And I'm happy with the direction that that's that's going.

Speaker Change: We've also we implemented a new sales order system.

Speaker Change: We launched early this year, we're now tracking all the details around quotes.

Speaker Change: Orders and shipments.

Speaker Change: And one system all the way through the process. So we can hold people accountable on the sales side. So a lot of things moving in the right direction. We've just got to stay focused and.

Duncan Bates: So, a lot of things moving in the right direction; we've just got to stay focused and really push sales forward. I think another, in addition to the, you know, the retail finance applications, you know, being up pretty dramatically. You know, we do a fall show in Fort Worth every year. We're obviously tracking RSVPs to that show. It's our big sales event for the year. And we're way ahead of where we typically are from RSVPs. So, we're, you know, we're pushing hard to get to the show, and we're expecting a pretty good show in late September.

Duncan Bates: I think another thing in addition to the retail finance applications, you know, being up pretty dramatically, you know, we do a fall show in Fort Worth every year. We're obviously tracking RSVPs to that show. It's our big sales event for the year, and we're way ahead of where we typically are from RSVPs. So we're, you know, we're pushing hard to get to the show, and we're expecting a pretty good show in late September.

Speaker Change: And really push sales forward.

Speaker Change: Another in addition to the.

Daniel Moore: Excellent, really helpful. Maybe one or two more and I'll jump back in the queue.

Speaker Change: The retail finance applications.

Speaker Change: Being up pretty dramatically.

Speaker Change: We do our fall show in Fort worth every year we're.

Speaker Change: We're obviously tracking RSVP as to that show, it's our big sales event for the year and we're way ahead of where we typically are from RSVP, So where we're pushing hard to get to the shell, we're expecting a pretty good show in late September.

Daniel Moore: Excellent, really helpful.

Speaker Change: Sure.

Speaker Change: Excellent really helpful. Maybe.

Duncan Bates: Maybe one or two more, and I'll jump back in queue. But in terms of the litigation settlement, given the inflation that we've seen, you know, is it possible if the value of those assets could be above or meaningfully above the loans against them? Just how do we think about any potential gains or losses there? Yeah, you know, we've got to roll up our sleeves and do the work. And we've spoken with the auditors about that. And so, you know, Kwanne, we're trying to find putting those on the ballot sheet as something that we're going to spend a lot of time on this quarter. You know, but I think, you know, we're in the assets right. We're talking about, you know, over 300 spaces with houses, and, you know, I think, I think there could be some upside, but we just, we've got to, we've got to get everything wrapped up and get our team in there.

Speaker Change: Maybe one or two more and I'll jump back in queue, but.

Daniel Moore: But in terms of the litigation settlement, given the inflation that we've seen, is it possible that the value of those assets could be above or meaningfully above the loans against them? Just how do we think about any potential gains or losses there?

Speaker Change: In terms of the litigation settlement given the inflation that we've seen.

Is it possible if the value of those assets could be above or meaningfully above the loans against them. Just how do we think about any potential gains or losses there.

Duncan Bates: Yeah, you know, we've got to roll up our sleeves and do the work, and we've spoken with the auditors about that. And so, quantifying, and putting those on the balance sheet is something that we're going to spend a lot of time on this quarter. You know, but I think, you know, we're in the assets, right? We're talking about, you know, over 300 spaces with houses, and you know, I think there could be some upside, but we just, we've got to, get everything wrapped up, and get our team in there, and then figure out the best way to monetize the assets. We're not planning to own them for the long term.

Speaker Change: Yes, we've got to roll up our sleeves and.

Speaker Change: Do the work and we've spoken with the auditors about that.

Speaker Change: So quantifying putting those on the balance sheet is something that we're going to spend a lot of time on this quarter, but I think.

Speaker Change: We're in the assets right.

Speaker Change: We're talking about over 300 spaces with houses.

Speaker Change: And I think I think there could be some upside, but we just we've got to we've got to get everything wrapped up.

Speaker Change: And get our team in there and then figure out the best way to monetize the assets were not planning to own them long term.

Duncan Bates: And then figure out the best way to monetize the assets.

Duncan Bates: We're not planning to end the long term.

Duncan Bates: makes sense, and then lastly, any sense for the combined market value of the non-core real estate assets that you're in the process of divesting?

Daniel Moore: Make sense.

Duncan Bates: And then lastly, any sense for, like, combined market value of the non-core real estate assets that you're in process of divesting? Well, you know, I'll give you an example. What we sold in this quarter, you know, was a group of warehouses that we add at least to some tenants that are eaten 10 facility. And, you know, we essentially, I mean, we didn't pay much for that facility to start with. So I think when you can, you know, sell something for a $1.3 million gain that, you know, no one even realizes that you own is pretty important.

Speaker Change: Makes sense and then lastly, any sense for like combined market value of the noncore real estate assets that you are in the process of divesting.

Duncan Bates: Well, you know, I'll give you an example. What we sold in this quarter, you know, was a group of warehouses that we had leased to some tenants at our Eatonton facility. And, you know, we didn't pay much for that facility to start with, so I think when you can sell something for a $1.3 million gain that, you know, no one even realizes that you own, is, is pretty important.

Speaker Change: Well I'll give you. An example, we sold then.

This quarter.

Speaker Change: Was a group of warehouses that we at least to some tenants at our <unk> facility and we essentially we didn't pay much for that facility to start with so I think when you can sell something for a $1 $3 million gain that no.

Speaker Change: One reason realizes that you own.

Duncan Bates: And there's, you know, there are several, at least four or five real estate assets like that, in addition to, you know, a meaningfully sized portfolio of leased homes that have real value. So as we've, you know, as Jeff and his team have really dug into the balance sheet, you know, we've got a list of opportunities, and we're just, we're working through them. And this was the first real estate asset to come off the balance sheet and for us to monetize.

Speaker Change: It's pretty important and theirs.

Duncan Bates: And there's, you know, there are several, at least four or five real estate assets like that. In addition to, you know, a meaningfully sized portfolio of least homes that have real value. So, as we've, you know, as Jeff and his team have really dug into the balance sheet, you know, we've got a list of opportunities. And we're just, we're, we're working through them. And this was the first real estate asset to, you know, come off the balance sheet and, and for us to monetize.

Speaker Change: There are.

Speaker Change: There are several at least four or five real estate assets like that in addition to.

Speaker Change: Meaningfully sized portfolio of leased homes that have real value so as we've.

Speaker Change: As Jeff and his team have really dug into the balance sheet.

Speaker Change: We've got a list of opportunities and we're just we're working through them and this was the first.

Speaker Change: Real estate asset.

Speaker Change: To come off the balance sheet and for us to monetize.

Daniel Moore: Okay.

Daniel Moore: Okay. Really helpful, Duncan. I will jump back with any follow-ups. Thank you. Yeah. Thanks, Dan.

Daniel Moore: Really helpful.

Unknown Attendee: Duncan. I will jump back with any follow-ups. Thank you.

Speaker Change: Okay really helpful Duncan and I will jump back with any follow ups. Thank you yeah. Thanks.

Duncan Bates: Thanks, Dan.

Dan: Thanks, Dan.

Unknown Attendee: Thank you. One moment for our next question. All right.

Operator: Thank you. One moment for our next question. Our next question will come from Mark Smith from Lake Street. Your line is open.

Dan: Q1 moment for our next question.

Mark Smith: Next question. We'll come flying on Mark Smith from Lake Street.

Speaker Change: Our next question will come from the line of Mark Smith from Lake Street. Your line is open.

Mark Smith: Your line is open.

Jeffrey Fiedelman: Hi, guys. Um, first one for me. Just looking at the MHP loans here. I'm, you know, sequentially state pretty flat, but it looks like maybe the actual rate maybe came down a little bit. You just talk about that portfolio in, especially in a decline in rate environment, maybe, you know, what we should look for on kind of interest, you know, rates coming from that portfolio of MHP loans. Yeah, sure. I think. Park sales have been down, right? And so if we're selling less park model homes to communities, you've got less financing opportunities. And so, the growth in that portfolio was pretty robust. You know, 19, 20, 21, 22, 23 park business started slowing down, you know, as the full effective interest rates, you know, carried over into the real estate transactions.

Mark Smith: Hi guys, this is the first one for me just looking at the MHP loan.

Speaker Change: Hey, guys.

Speaker Change: First one for me just looking at the <unk> loan portfolio growth here.

Unknown Speaker: and Peter.

Unknown Speaker: You know, sequentially stayed pretty flat, but it looks like maybe the actual rate maybe came down a little bit. Just talk about that portfolio and, especially in a declining rate environment, maybe, you know, what we should look for in terms of interest rates, you know, rates coming from that portfolio of MHP loans.

Speaker Change: Sequentially stayed pretty flat, but it looks like maybe.

Speaker Change: Bob.

Speaker Change: Actual rate maybe it came down a little bit just talk about that portfolio and especially in Asia.

Speaker Change: <unk>.

Speaker Change: Declining rate environment, maybe what we should look for on kind of interest.

Speaker Change: Rates coming from that portfolio Bandmates prelaunch.

Unknown Speaker: Unknown Speaker Yeah, sure. I think you know. Park sales have been down, right? And so if we're selling fewer park model homes to communities, you've got less financing opportunity. And so, you know, the growth in that portfolio was pretty robust. You know, 1920, 21, 22, 23, park business started slowing down, you know, as the full effect of interest rates. Um, that carried over into the real estate transaction. And so the park business has been slower, and the portfolio has been growing slower than it had in the prior three or four years.

Speaker Change: Yeah sure I think.

Speaker Change: Parts sales have been down right and so if we're selling less park model homes to communities, you've got less financing opportunities.

Speaker Change: And so that the growth in that portfolio was pretty robust.

Speaker Change: 19, 2021 'twenty two.

Speaker Change: 23, part business started slowing down.

Speaker Change: The full effect of interest rates.

Speaker Change: Yes.

Speaker Change: Carried over into the real estate transactions and so the the part business has been slower and the portfolio has been growing slower than it than it had the prior three years or four years.

Jeffrey Fiedelman: And so the, you know, the park business has been slower, and the portfolio has been growing slower than it had the, you know, prior three or four years. You know, as far as interest rates go, the way that that product works is there's a two-year fixed rate, and then it flips to variable. And so, as notes flipped to variable, the interest rate, you know, will increase. And there's certain, you know, during slower times, I mean, we've used financing concessions to drive volume. Tends to be, you know, a period of no payments. So, these park owners can get homes in and get them set and get them rented before they start paying on the houses.

Unknown Speaker: Um, you know, as far as interest rates go, the way that that product works is there's a two-year fixed rate, and then it flips to variable. And so as notes flip to variable, the interest rate, you know, will increase. And there are certain loans, you know, in that book that will start to flip this year. We've used, You know, during slower times, I mean, we've used financing concessions to drive volume. It tends to be, you know, a period of no payments, so these park owners can get homes in and get them set up and get them rented before they start paying on the houses.

Speaker Change: As far as interest rates go the way that that product works.

Speaker Change: There is a two year.

Speaker Change: Fixed rate and then it flips to variable and so his notes flipped to variable <unk>.

The interest rate will increase and there are certain loans in that book that will start to flip this year.

Speaker Change: We've used.

Unknown Speaker: But, you know, the interest rates are the starting rates, and they tend to be in line. And so what we have seen, though, is we will offer a little bit better rate for that two-year fixed period if... if buyers put down a higher down payment. So we, you know, we have seen people say, Hey, I've got, you know, my customer in these communities is tapped out at 1200 bucks a month.

Speaker Change: Very slower times I mean, we've used.

Speaker Change: Financing concessions.

Speaker Change: To drive volume tends to be.

Speaker Change: A period of.

Speaker Change: <unk>.

Speaker Change: No payments. So these park owners can get homes in and get them set and get them rented before they start paying on the houses.

Jeffrey Fiedelman: But, you know, the interest rates are the end line. And so, what we, what we have seen though, is we will offer a little bit better rate for that two-year fixed period if buyers put down a higher down payment. So, you know, we have seen people say, hey, I've got, you know, my customer in these communities is tapped out at $1,200 a month. And, you know, I need to make X $100 a month in lot rent to support the real estate asset. And so, I need houses in here that I can keep, you know, the overall payment affordable.

Speaker Change: But the interest rates.

Starting rates.

Speaker Change: Tend to be in line and so what we have seen though is we will offer a little bit better rate for that two year fixed period.

Speaker Change: If.

Speaker Change: If buyers put down a higher down payment. So we have seen people say, hey, I've got my customer in these communities is tapped out at 200 Bucks a month.

Unknown Speaker: And, you know, I need to make X hundred dollars a month in rental income to support the real estate asset. And so I need houses here that I can keep, you know, the overall payment affordable. And so we've seen a shift to smaller homes, but we've also seen a shift toward, you know, people putting a higher down payment, so their monthly payment to us is lower to keep the homes up.

Speaker Change: And I need to make X $100 a month in lot rent to.

Speaker Change: To support the real estate asset and so I need houses in here that I can keep.

Speaker Change: The overall payment affordable and so we've seen a shift to smaller homes, but we've also seen a shift toward people, putting a higher down payments to their monthly payment to us is lower to keep the homes affordable.

Jeffrey Fiedelman: And so, we've seen a shift to smaller homes, but we've also seen a shift toward, you know, people putting a higher down payment so their monthly payment to us is lower to keep the homes affordable.

Okay.

Jeffrey Fiedelman: And then, I don't know if you're able to talk about it today, but can you talk about the settlement in any change that this has? I know that there was some refinancing of that note that was out there. Any impact that this has on the MHP notes as we kind of see them reported at the Capitol County? Well, it's, you know, this is a long time customer. We've done business with him and his partners for over 12 years. And he's got a nice portfolio. And it was an unfortunate situation. How we, you know, ended up here.

Mark Smith: And then, I don't know if you're able to talk about it today, but can you talk about the settlement and any change that this has had? I know that there was some refinancing of that note that was out there. Any impact that this has had on the MHP notes as we kind of see them reported in Gabbin County?

Speaker Change: Okay.

Speaker Change: Perfect and then I don't know if youre able to talk about it today, but can you talk about the settlement.

Speaker Change: And any change that this has I know there was some refinancing of that debt note that was out there any impact that this has on the HP notes as we kind of see them reported GAAP accounting.

Unknown Speaker: Well, it's a, you know, this is a long-term customer. We've done business with him and his partners for over 12 years. And he's got a nice portfolio.

Speaker Change: Well it's.

Speaker Change: This is a longtime customer we've done business with him and his.

Speaker Change: His partners for over 12 years.

Speaker Change: And he has got a nice portfolio.

Unknown Attendee: Welcome to the loud legacy Housing Corp.

Unknown Attendee: 2nd quarter, 2024 earnings call. At this time, I'll participate unless in only mode.

Speaker Change: And it was an unfortunate situation how we ended up here, but I think look it was.

Jeffrey Fiedelman: But I think, you know, look, it was, it was complex. There were, you know, a lot of feelings, a lot of history there. And so, it's taken a lot of, a lot of time, you know, to put this deal together. And I think it's a win, you know, for both parties.

Unknown Attendee: After this pickage presentation, it will be a question and answer session. To ask a question during a session, you need to press star 1-1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Speaker Change: It was it was complex.

Speaker Change: There were.

Speaker Change: A lot of feeling a lot of history there.

Unknown Speaker: And it was an unfortunate situation, how we, you know, ended up here. But I think, you know, look, it was a, it was, it was complex. There were, you know, a lot of feelings, a lot of history there. And so it's taken a lot of time, you know, to put this deal together, and I think it's a win, you know, for both parties. And so, you know, essentially, the two parts that are coming to us will reduce the balance on a new note. And we'll wrap up notes that are in the MHP portfolio and in the development portfolio and refinance those into one note that's drafted in accordance with Louisiana law, where all of the collateral is.

Speaker Change: So it's taken a lot of a lot of time.

Unknown Attendee: Please be advised that today's conference is being recorded.

Unknown Attendee: I will now attend a conference over to your speaker today.

Speaker Change: To put this deal together and.

Speaker Change: And I think it's a win.

Unknown Attendee: Duncan Bates, please go ahead.

Jeffrey Fiedelman: Police. And so, you know, essentially, you know, the two parts that are coming to us will reduce the balance on a new note and will wrap up, you know, notes that are in the MHP portfolio and in the development portfolio and refinance those into one note that's drafted in accordance with Louisiana law, where all of the collateral is located. All right, so look at the story. I think it's a long, long way of saying that, you know, you're going from, say, 60 to 70 individual MHP and development notes, you know, down to one note. Okay.

Speaker Change: For both parties and so essentially.

Duncan Bates: Good morning. This is Duncan Bates, Legacy's president and CEO. Thanks for joining our 2nd quarter, 2024 conference call.

Speaker Change: <unk>.

Speaker Change: The two parks that are coming to us we will reduce the balance.

Max Africk: Max Africk, Legacy's general counsel will read the safe harbor disclosure before getting started. Max. Thanks Duncan. At the outset, I will remind our listeners that management's prepared remarks today will contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements and response to your question. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Security Settigation Form Act of 1995.

Speaker Change: On a new note and we'll wrap up.

Speaker Change: Notes that are in the MH portfolio, and then the development portfolio and refinance those into one note.

Speaker Change: Thats drafted in accordance with Louisiana law, where all of the collateral is located.

Speaker Change: Alright.

Unknown Speaker: Unknown Speaker So I guess a long way of saying that, you know, you're going from, say, 60 to 70 individual MHP and development notes down to one note. Okay, so kind of a consolidation, but at the same time, it sounds like you get these couple of parks, but that loan, that refinance loan, is a smaller piece than what it was on the books before. That's right.

Speaker Change: Alright, so literally sorry, thank you I guess.

Speaker Change: Long way of saying that youre going from say, 60% to 70 individual MH P and development notes down to one note.

Max Africk: Actual results may differ from management's current expectations, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's Andrew Report Public Security and Exchange Commission. In addition, any projections as the company's future performance represent management's best estimates as of today's call. Legacy housing assumes no obligation to update these projections in the future, unless otherwise required by applicable law. Thanks Max.

Speaker Change: Okay.

Jeffrey Fiedelman: Okay, so kind of a consolidation, but at the same time, it sounds like you get these, these couple of parks, but that loan, every finance loan is a smaller piece than what it was on the books before. That's right. You know, and I think from their side, right, it gives them time to refinance, sell assets, you know, and get us paid back.

Speaker Change: Okay, so kind of a consolidation, but at the same time it sounds like you'll get these.

Speaker Change: A couple of parks, but that loan.

Speaker Change: That refinance loan is a smaller piece than what it was on the books before.

Unknown Speaker: That's right. You know, I think from their side, it gives them time to refinance, sell assets, you know, and, and, get us paid back.

Speaker Change: That's right and I think from their side, rather gives them gives them time to.

Duncan Bates: I'm joined today by Jeff Fiedelman, Legacy's chief financial officer. Jeff will discuss our 2nd quarter financial performance, and I will provide additional corporate updates and open the call for Q&A. Thanks Duncan.

Speaker Change: Refinance sell assets.

Speaker Change: And.

Speaker Change: And get us paid back.

Speaker Change: Okay.

Duncan Bates: And the last one for me, Duncan, is just looking at the gross profit margin, you know, on product sales, was really pretty solid here in the quarter. Can you just talk about the sustainability of that? It sounds like you've, you know, ramped up production in Georgia a little bit, but are there any cost pressures? What are you seeing on labor input costs? Anything that we should be looking at as we think about gross profit margin going forward? Sure. Yeah, I mean, I'm really proud of the team for keeping it at those levels, you know, just given the production volume.

Mark Smith: And the last one for me, Duncan, is just looking at the gross profit margin, you know, on product sales, which was really pretty solid here in the quarter. Can you just talk about the sustainability of that? It sounds like you've, you know, ramped up production in Georgia a little bit, but are there any cost pressures? What are you seeing on labor, input costs, anything that we should be looking at as we think about gross profit margin going forward? Sure, yeah, I mean it.

And the last one for me Dunkin' is just looking at the gross profit margin.

Speaker Change: Product sales was really pretty solid here in the quarter can you just talked about sustainability of that it sounds like you.

Jeffrey Fiedelman: Product sales primarily consist of direct sales, commercial sales, inventory, finance sales, and retail store sales. Product sales decrease 10.7 million, or 25.2 percent, during the three months and the June 30, 2024, as compared to the same period in 2023. This decrease was driven by a decrease in unit volume shift primarily in direct sales, mobile home park sales, and inventory finance sales categories. The decrease was partially offset by increased sales at our company owned retail stores.

Speaker Change: Ramped up production in Georgia, a little bit but are there any cost pressures what are you seeing on labor input costs anything that we should be.

Speaker Change: Looking at as we think about gross margin going forward.

Duncan Bates: Sure, yeah, I'm really proud of the team for keeping it at those levels, you know, given the production volume, and I think we can maintain it. You know, we took production up in Georgia. We're pushing really hard to take it up in Texas.

Speaker Change: Sure Yes.

Speaker Change: I'm really proud of the team for keeping it at those levels just given the production volume.

Duncan Bates: And I think we can maintain it, you know. We took production up in Georgia; we're pushing really hard to take it up in Texas. We've hit some, you know, we've, we've been closed, hit some air pockets, but orders were looking, you know, pretty strong in the past couple weeks, so that's a good sign. I think the, you know, the hardest thing to manage is labor. I think, you know, all companies struggle with labor inflation. I don't think wages are coming down anytime soon. And so we've been really disciplined with our pricing. We've had some, you know, we've reduced our raw material inventory.

Speaker Change: And I think we can maintain it.

Speaker Change: <unk> in Georgia, where we are.

Speaker Change: Pushing really hard to take it up in Texas.

Duncan Bates: We've been close, hit some air pockets, but orders were looking pretty strong the past couple weeks, so that's a good sign. I think the hardest thing to manage is labor. I think, you know, all companies struggle with labor inflation. I don't think... wages are coming down anytime soon.

Jeffrey Fiedelman: For the three months and a June 30, 2024, our net revenue per unit sold decreased 1.3 percent to $61,600. As compared to the same period in 2023, primarily due to a shift in product mix to smaller units. Consumer MHP and dealer loans interest income increased 1.4 million, or 16.0 percent, during the three months and a June 30, 2024, as compared to the same period in 2023, due to growth in our loan portfolios.

Speaker Change: We've had some.

Speaker Change: We then closed hit some air pockets.

Speaker Change: But orders were looking pretty strong the past couple of weeks. So that's a good sign.

Speaker Change: Thanks.

Speaker Change: The hardest thing to manage is labor.

Speaker Change: I think.

Speaker Change: All companies struggle with with labor inflation I don't think.

Duncan Bates: And so we've been really disciplined with our pricing. We've had some, you know, we've reduced our raw material inventory, but we've got a ways to go. But we've been able to take advantage of, you know, some materials coming down. But, but the big one is labor and holding price. And so I think if we can, you know, we can push production volume higher, which we will be able to do this year. And you know, we should be able to maintain gross margins, product gross margins that are, you know, at similar levels.

Speaker Change: Wages are coming down anytime soon and so we've been really disciplined with our pricing.

Speaker Change: We've had some we've reduced our raw material.

Duncan Bates: We've got a ways to go, but we've been able to take advantage of, you know, some materials coming down. But the big one is labor and holding price. And so I think if we can, you know, we can push production volume higher, which we will be able to do this year. You know, we should be able to maintain, you know, gross margins, product gross margins that are, you know, at similar levels. Okay.

Speaker Change: Raw material inventory, we've got a ways to go.

Speaker Change: But we've been able to take it.

Jeffrey Fiedelman: This increase was driven by increased balances in the MHP consumers, and dealer loan portfolios. Between June 30th, 2024 and June 30th, 2023, our MHP loan portfolio increased by 16.6 million. Our consumer loan portfolio increased by 15.8 million. And our dealer finance notes increased by 0.9 million.

Speaker Change: Vantage of.

Speaker Change: Some materials coming down.

Speaker Change: But the big one is labor.

Speaker Change: And holding price and so I think if we can we can push production volume higher which we will be able to do this year.

Speaker Change: We should be able to maintain.

Speaker Change: Gross margins product gross margins that are at similar levels.

Speaker Change: Yes.

Mark Smith: Perfect. Thank you.

Mark Smith: Perfect. Thank you. Thanks, Mark.

Speaker Change: Okay.

Speaker Change: Perfect. Thank you.

Jeffrey Fiedelman: Other revenue primarily consists of contract deposit forfeatures, consignment fees, commercial lease rents, service fees and other miscellaneous income, and decreased 0.8 million or 45.5% during the three months and the June 30th, 2024, as compared to the same period in 2023. This decrease was primarily due to a 1.0 million decrease in dealer finance fees, a 0.2 million decrease in commercial lease rents, partially offset by a 0.4 million increase in other miscellaneous revenue.

Mark Smith: Thanks, Mark.

Speaker Change: Thanks Mark.

Unknown Attendee: Thank you. One moment for next question.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Jay McCanless from Wedbush. Your line is open.

Speaker Change: One moment for our next question.

Jay Mccanless: The next question will come from the line of Jay McCanless from Wedbush. Elaine is open. I guess, thanks for saying my questions. Pretty much drawn through everything that I had on the repurchase.

Speaker Change: Our next question will come from the line of Jay Mccanless from Wedbush. Your line is open.

Jay Mccanless: Hey guys, thanks for taking my questions. I've pretty much gone through everything that I had on the repurchase. Nice to see that step up sequentially from 1EQ to 2EQ. Maybe how are you guys thinking about that on a quarterly run rate going forward?

Jay Mccanless: Hey, guys. Thanks for taking my questions.

Jay Mccanless: Pretty much gone through everything that I had.

Jay Mccanless: On the repurchase price to see that step up sequentially from <unk>, maybe how are you guys thinking about that on a quarterly run rate going forward.

Duncan Bates: Nice to see that step up sequentially from one key to two. Maybe how are you guys thinking about that on a quarterly run rate going forward. Yeah, you know, we've got, we've got support from the board to continue by and stock, you know, we're not going to come out. We're not; I'm not going to come out and say, hey, every quarter, you know, we're going to repurchase a certain amount of stock. We don't think that that's, you know, necessarily the best way to allocate capital, but we are going to repurchase opportunistically. So we're going to run a calculation internally each quarter that identifies our, you know, what we calculate is our liquidation value.

Duncan Bates: Yeah, you know, we've got support from the board to continue buying stock. We're not going to come out and say, hey, every quarter, we're going to repurchase a certain amount of stock. We don't think that that's, you know, necessarily the best way to allocate capital. But we are going to repurchase opportunistically. So we're going to run a calculation internally each quarter that identifies our, you know, our what we calculate as our liquidation value.

Jay Mccanless: Yeah.

Jay Mccanless: We've got support from the board to.

Speaker Change: To continue buying stock.

Speaker Change: Not going to come out, we're not going to come out and say hey every quarter.

Jeffrey Fiedelman: Cost of product sales decreased 8.2 million or 27.4% during the three months and the June 30th, 2024, as compared to the same period in 2023. The decrease in costs is primarily related to the decrease in units sold. Gross profit margin was 31.9% of product sales during the three months and the June 30th, 2024, as compared to 29.8% during the three months and the June 30th, 2023.

Speaker Change: We're going to repurchase a certain amount of stock we don't think that that's net.

Speaker Change: Necessarily the best way to allocate capital.

Speaker Change: But we are going to repurchase opportunistically, so we're going to run a calculation internally.

Speaker Change: Each quarter that identifies R. R.

Duncan Bates: And when the stock trades down to those levels, we'll buy as much back as we can. And if we go through this authorization, you know, we'll ask the board for another one. But, you know, I think the buybacks have been well received, and I feel great about the prices that were and the volumes that we were able to repurchase stock in the first and second quarters. And we'll just keep an eye on it. And when it hits certain levels, we'll be aggressive.

Speaker Change: Calculate as our liquidation value.

Duncan Bates: And when the stock trades down to those levels, we'll buy as much back as we can. And if we go through this authorization, you know, we'll last the board for another one. But, you know, I think the buybacks have been well received. I feel great about the prices that were in the volumes that we were able to repurchase stock, you know, in the first and second quarter. And we're just, we'll keep an eye on it. And when it hits certain levels, will be aggressive.

Speaker Change: And when the stock trades.

Down to those levels will buy as much back as we can and if we go through this authorization, we'll ask the board for another one but.

Speaker Change: I think the buybacks have been well received I feel great about the prices and the volumes that we were able to repurchase stock.

The first and second quarter, and we're just we'll keep an eye on it.

Speaker Change: And when it hits certain levels will be aggressive.

Jay Mccanless: Okay, that sounds great.

Jay Mccanless: Okay, that sounds great. And then the liability reversal in the quarter. Was that a one-off thing, or should we expect more of that going forward?

Speaker Change: Okay that sounds great and then.

Duncan Bates: And then the liability reversal in the quarter was that one-off thing or should be expecting more that one forward. You know, I'd kind of throw that in the camp with some of these asset sales. You know, Jeff and his team, you know, now that we've, you know, got a great team on the, you know, accounting and SEC reporting side. And, you know, they're really digging in. So was they, you know, find older things in our balance sheet that don't make sense anymore. You know, they're going to, they're going to clean those up. And so there's, you know, there's items on both sides of the balance sheet.

Speaker Change: The liability reversal in the quarter was one off thing or should we expect more of that going forward.

Duncan Bates: You know, I'd kind of throw that in the camp with some of these asset sales. You know, Jeff and his team, now that we've got a great team on the, you know, accounting and SEC reporting side. And, you know, they're really digging in.

Speaker Change: I would kind of throw that in the camp with some of these asset sales.

Speaker Change: Jeff and his team now that we've got a great team on the accounting and SEC reporting side.

Speaker Change: And they're really dig in and so as they.

Duncan Bates: So as they, you know, find older things in our balance sheet that don't make sense anymore, they're gonna, they're gonna clean those up. And so there's, you know, there are items on both sides of the balance sheet; it's not all, you know, lopsided. But, you know, we're getting the, you know, the balance sheet cleaned up, and we're gonna, we're gonna sell assets that we don't get credit for and don't use.

Jeff Federman: I'll find.

Jeff Federman: Order things on our balance sheet debt that.

Jeff Federman: Don't make sense anymore, they're going to they're going to clean those up and so there is.

There's items on both sides of the balance sheet, it's not all.

Duncan Bates: It's not all, you know, lopsided. But, you know, we're getting the, you know, the balance sheet cleaned up.

Jeff Federman: Lopsided.

Jeff Federman: But.

Jeff Federman: We're getting.

Jeff Federman: The balance sheet cleaned up and we're going to we're going to sell assets that we don't get credit for and don't use.

Duncan Bates: And we're going to, we're going to sell assets that we don't get credit for and don't use.

Jay Mccanless: Okay. That sounds great. Thanks. Appreciate it.

Jay Mccanless: Okay, it sounds great. Thanks. I appreciate it. Yeah, thanks, Jay.

Speaker Change: Okay that sounds great. Thanks, I appreciate it.

Jay Mccanless: Yeah.

Unknown Attendee: Thanks, Jay. Thank you.

Yes, Thanks Jay.

Operator: Thank you. One moment for our next question. Our next question is on the line from George Melesky-Riazzi from MKH Management. The line is open.

Jeffrey Fiedelman: Net income increased 7.8% to 16.2 million in the second quarter of 2024. 24, compared to the second quarter of 2023. Basic earnings per share increased 5 cents per share or 8.7 percent in the second quarter of 2024 compared to the second quarter of 2023.

Unknown Attendee: One moment for our next question.

Speaker Change: Thank you one moment for our next question.

George Maleski Riyazi: Our next question is off the line of George Maleski Riyazi from MKH Management. The line is open.

Speaker Change: Our next question comes from the line of George Melas, <unk> Z from MK H management.

George Melesky-Riazzi: Great, thank you. Good morning, guys. Thanks for taking my question. Just a quick one, I think, hi Duncan. You guys talked a little bit about production, about things sort of working out better at the plant, about increasing production in Georgia. Can you just provide a little bit more color on the plants, how things are going on production level and quality basis, sort of give us a sense of how happy you are and where you think you could be in six months there?

George Maleski Riyazi: Great. Thank you.

Speaker Change: Your line is open.

Duncan Bates: Good morning, guys. Thanks for taking my question. Just a quick, I think, Hi Duncan. You guys talked a little bit about the production, about things sort of working out better at the plant, about increasing production in Georgia. Can you just provide a little bit more color on the plants, how things are going from a production level quality basis. Sort of give us a sense of how happy you are, and would you think you could be in six months there? George, I've been living and breathing Georgia for two years, and we have made some significant progress in Georgia.

George Melas: Great. Thank you.

George Melas: Good morning, guys. Thanks for taking my question.

Jeffrey Fiedelman: As of June 30, 2024, we had approximately 0.1 million in cash compared to 0.7 million as of December 31, 2023. The outstanding balance of the revolver as of June 30, 2024 and December 31, 2023 was 11.9 million and 23.7 million respectively. At the end of the second quarter of 2024, Legacy's book value per basic share outstanding was 19 dollars in 17 cents, an increase of 13.2 percent from the same period in 2023. We repurchased 170,342 shares for 3.5 million during the three months and in June 30, 2024.

Speaker Change: Just a quick.

Ken: Hi, Ken.

Speaker Change: Okay.

Speaker Change: You guys talked a little bit about the production about things sort of working out better at the plant, but increasing production in Georgia can you just provide a little bit more color on the plans how things are going from a production level quality basis.

Speaker Change: Sort of give us a sense of how happy you are and where do you think you could be in six months there.

Duncan Bates: George, I've been living and breathing Georgia for two years, and- He has made some significant progress in Georgia as far as the first step was, You've got to clean up, you know, you have to fix your quality issues, and we fixed those. And the houses coming out of Georgia now, you know, are just as good as anything we're building in Texas. And so I'm really proud of the team and their efforts in working with the regulators to get the quality to where it needs to be. And then, second, first you have to fix the quality, then you've got to go out and resolve the sins of the past with homes that have issues.

Speaker Change: George I've been living and breathing, Georgia for two years.

Speaker Change: And.

George Melas: We have made some.

George Melas: Significant progress in Georgia.

Duncan Bates: As far as, you know, the first step was you've got to clean, you know, you have to fix your quality issues, and we fix those. And the house is coming out of Georgia now, you know, or are just as good as anything we're building in Texas. And so I'm really proud of the team, you know, and their efforts in working with the regulators and, you know, to get the quality to where it needs to be. And then, you know, the second, you know, first, you have to fix the quality; then you've got to go out and resolve, you know, sins of the past with homes that, you know, have issues.

As far as the first step was <unk>.

Speaker Change: <unk> got a clean you.

Speaker Change: You have to fixture quality issues.

Duncan Bates: On August 6, 2024, our Board of Directors authorized the repurchase of an additional 10.0 million of the company's common stock under the share repurchase program. We will continue to repurchase shares opportunistically when the stock trades near liquidation value.

Speaker Change: We fixed those and the houses coming out of Georgia now.

Speaker Change: We are just as good as anything we're building in Texas, and so I'm really proud of the team.

Speaker Change: And their efforts.

Speaker Change: And working with the regulators and to get the.

Duncan Bates: Thanks, Jeff. Our team continues to focus on product sales. They work through delays in Georgia and with certain customers in Texas that push shipments into the third quarter. Our dealer business across most of the platform is strong. Some independent dealers are slow to move aged inventory. We launched a retail financing special to assist with this ahead of our fall show. Retail finance applications were up 34 percent from the second quarter of 2024 compared to the second quarter of 2023. Our community business has been impacted by higher interest rates for the past few quarters. Transaction volume which drives demand as new owners work to increase rent roles is down and new development is slow.

The quality to where it needs to be and then the second first you have to fix the quality then you've got to go out resolve.

Speaker Change: Sins of the past with homes that have issues and so we spent a.

Duncan Bates: And so we spent a tremendous amount of time and money doing that. And as you do that, you know, you start to win back some customers. And, you know, we have an entirely new sales team in Georgia. And they've been here for, I'd say, some cases a year, some less than a year. But it's, you know, it's full of young professionals, you know, who see the opportunity. And they're starting to, you know, they're starting to really get something going on the sales side. You know, we've had to win new customers. We've had to win, you know, relationships back with customers.

Duncan Bates: And so we've spent a tremendous amount of time and money doing that. And as you do that, you start to win back some customers, and, you know, we have an entirely new sales team in Georgia. And they've been here for, I'd say, in some cases a year, some less than a year, but it's, you know, it's full of young professionals who see the opportunity, and they're starting to, you know, they're starting to really get something going on the sales side.

Speaker Change: Tremendous amount of time and money doing that.

Speaker Change: And as you do that.

Speaker Change: You start to win back some customers.

Speaker Change: And.

Speaker Change: We have an entirely new sales team in Georgia.

Speaker Change: And they've been here for I would say in some cases, a year some less than a year, but it's.

Speaker Change: It's full of young professionals.

Speaker Change: Who see the opportunity and they are starting to they're starting to really get some.

Speaker Change: Something going on the sales side, we've had to win new customers we've had to win.

Duncan Bates: You know, we've had to win new customers. We've had to win, you know, relationships back with customers that had problems with houses. We've had to, you know, rebuild a dealer base over there, and I feel, you know, I feel good about where Georgia stands today. And we've just, we've got to, we've got to keep the momentum. The Georgia sales team is really firing on all cylinders, and they're all excited. And so we just have to keep pushing.

Speaker Change: Relationships back with customers that had problems with houses we've had.

Duncan Bates: It had problems with houses. We've had to, you know, rebuild a dealer base over there. And I feel, you know, I feel good about where Georgia stands today. And we've just, we've got to, we've got to keep the momentum. The Georgia sales team is really firing. And they're all excited. And so we just, we got to keep pushing. We took production up one house a day in July. You know, we didn't have to, you know, I think we had maybe we're a little heavy on labor there already to keep good people. And so, you know, we're right-sizing Georgia.

Speaker Change: Rebuild our dealer base over there and I feel I feel good about where we.

Speaker Change: Where Georgia stands today and we've just we've got to we've got to keep the momentum.

Speaker Change: The Georgia sales team is really fire and they're all excited and so we just we got to keep pushing.

Duncan Bates: We took production up by one house a day in July. You know, we didn't have to, you know, I think we had, maybe we're a little heavy on labor there already to keep good people. And so, you know, we're, we're, right-sizing Georgia. It's moving in the right direction. The Southeast, you know, is the market that seems to be pretty strong. And I think as you have, you know, storm activity through hurricane season, we, you know, we may get lucky with some big projects over there.

Speaker Change: We took production up one house a day in July.

Speaker Change: We didn't have to I think we had maybe we're a little heavy on labor there already to keep good people.

Speaker Change: And so.

Duncan Bates: I'm proud of our team's effort to manage margins at lower production volumes. We are disciplined on price and watching labor and overhead expenses closely. Our top priority for the remainder of 2024 is continuing to build our backlog which will result in higher production volume. Our new sales team members are building customer relationships and signing orders. We increase production at our Georgia plant in July. As Jeff mentioned, we sold a property in Georgia during the second quarter.

Speaker Change: We're right sizing, Georgia, it's moving in the right direction in the southeast.

Duncan Bates: It's moving in the right direction. The Southeast, you know, is the market seems to be pretty strong. And I think, as you have, you know, storm activity through hurricane season, we, you know, may get lucky with some big projects over there. I think one, one interesting thing that the Georgia team has done is, you know, they've targeted RV park owners with our tiny home products. And, you know, we've been able to build some customer relationships that look like they're turning into whales. You know, we're there able to get these houses in. And, you know, in many cases, have them rented before they're even set up.

Speaker Change: <unk>.

Speaker Change: The market seems to be pretty strong.

Speaker Change: And I think as you have storm activity.

Speaker Change: Through Hurricane season, we may get Lucky.

Speaker Change: There was some big projects over there.

Duncan Bates: I think one interesting thing that the Georgia team has done is, you know, they've targeted RV park owners with our tiny home products, and, you know, we've been able to build some customer relationships that look like they're turning into whales, you know, where they're able to get these houses in and, in many cases, have them rented before they're even set up. And, you know, we're calling them back and ordering more houses. So, a lot of good things.

Speaker Change: I think one interesting thing that the Georgia team has done is.

Speaker Change: <unk> targeted RV Park owners.

Speaker Change: Our tiny home products and <unk>.

Speaker Change: We've been able to build some.

Duncan Bates: The sale positively impacted our results. Although one time in nature, investors will continue to see similar sales over the next few quarters. There are several real estate assets on our balance sheet excluding our core developments that have meaningful value. We receive zero credit for these assets in the public markets and will continue to monetize them. All those sales volumes are down in 2024. Our lending portfolios continue to grow. From the first half of 2023 to the first half of 2024, interest revenue for MHP, retail finance and floor plan financing is up 26.5%. Our delinquencies remain low and recovery rates are strong.

Speaker Change: Customer relationships that look like they are turning into Wales, where they are.

Sure.

Speaker Change: <unk> able to get these houses in <unk>.

Speaker Change: In many cases have them rented before they are even set up.

Duncan Bates: And, you know, we're calling us back in order and more houses. So a lot of good things coming out of Georgia.

Speaker Change: And we're calling us back in order and more houses so a lot of good things coming out of Georgia.

Duncan Bates: But we've got to keep our head down and keep moving in the right direction.

But but we've got to keep our head down and keep moving in the right direction.

George Maleski Riyazi: Okay, that's a pretty good update.

Speaker Change: Okay Thats it predictive update yes it.

George Maleski Riyazi: Just, just remind us in Georgia, in the primarily Park Sale historically, what sort of the mix of sales there, and maybe also just a very brief update on the Texas plans. Yeah, Georgia, you know, we have some big park customers over there. You know, we've had to rebuild a dealer base, and we've got, you know, we've got some work to do, you know, with dealers. Some of the new sales guides are, you know, hitting the road and coming back with applications, and, you know, that's encouraging. But, you know, I'd say most of the sales in Georgia right now are park sales.

Speaker Change: Just remind us in Georgia, primarily park sales historically.

Speaker Change: What's sort of the mix of sales there and maybe also give us just a very brief update on the Texas plant.

Duncan Bates: Yeah, Georgia. You know, we have some big park customers over there. You know, we've had to rebuild a dealer base, and we've got, you know, we've got some work to do with dealers. Some of the new sales guys are hitting the road and coming back with applications, and that's encouraging. But I'd say most of the sales in Georgia right now are park sales. As far as Texas goes, you know, two plants in Texas, you know, also a lot of new faces on the sales team, people starting to hit, you know, their stride.

Yes, Georgia.

We have some big part customers over there.

Duncan Bates: On July 27th, 2024, we signed a binding settlement agreement to resolve litigation with a long-term MHP customer. Under the agreement, the borrower will deed two mobile home parks with homes to legacy. Legacy were refinanced, the remaining debt and a new two-year note. The collateral and guarantors remain the same.

Speaker Change: We've had to rebuild a dealer base and we've got we've got some work to do.

Speaker Change: With dealers some of the new sales guys are hitting the road and coming back with applications and that's encouraging but I'd say most of the sales in Georgia.

Right now we're park sales as.

Duncan Bates: We've got some dealers that are, you know, that are just knocking the ball out of the park in Texas. And then we've got others that, you know, I'd say haven't. You know, haven't moved to a more modern-based sales approach using the Internet and technology that are a little that are a little behind. And so we're, you know, we're trying to help them and, and, and the park business has been.

Duncan Bates: As far as Texas goes, you know, two plants in Texas, you know, also a lot of new faces on the sales team, people starting to hit, you know, hit their stride. We've got some dealers that are, you know, that are just knocking the ball out of the park in Texas. And then we've got others that, you know, I'd say, haven't, you know, haven't moved to a more, you know, modern base sales approach using the internet and technology that are a little bit, that are a little behind. And so, we're, you know, we're, we're trying to help them, and the park business has been slower in Texas, but orders have been picking up, you know, over the past couple of weeks, and we're really, you know, we're really pushing.

Duncan Bates: We are finalizing the transfers and the new note and plan to discuss more details on the next earnings call. We view this as a very positive outcome for both parties. Investors following our story know that we have worked through multiple challenging situations over the last two years. We are hands-on operators and solving these complex problems take significant time and energy.

Speaker Change: As far as Texas goes.

Speaker Change: Two plants in Texas.

Speaker Change: Also a lot of new faces on the sales team people starting to hit hit their stride. We've got some dealers that are.

Speaker Change #100: They are just knocking the ball out of the park in Texas, and then we've got others that I would say haven't.

Speaker Change #100: Haven't moved to a more modern based sales approach using the.

Duncan Bates: With most of yesterday's challenges behind us, we can focus on growing our core business. There are no more distractions. We have built a great team.

Speaker Change #100: The Internet and technology that are a little bit.

Speaker Change #100: That are a little behind and so.

Duncan Bates: Everyone is contributing and today I feel better about the company and our prospects than any other time since starting full time in June 2022. I am excited to show investors the earnings potential of this business as we push more volume through the plants this year.

Speaker Change #100: Where we are.

Speaker Change #100: We're trying to help them in and the park business has been <unk>.

Duncan Bates: Unknown Attendee, Max Africk, Jay McCanless, So a lot of things moving in the right direction, but we've got to show up next quarter and the following with that reflected in the numbers. And I think now that we've gotten through a lot of these larger distractions, we'll be able to do that.

Speaker Change #100: Slower in Texas.

Speaker Change #100: But orders have been picking up over the past couple of weeks and we're really we're really pushing.

Duncan Bates: So, a lot of good, a lot of things moving in the right direction, but, you know, we've got to show up next quarter and the following, you know, with those, with those, with that reflected in the numbers. And I think now that we've gotten through, you know, a lot of these larger distractions, will be able to do that.

Speaker Change #100: So a lot of good a lot of things moving in the right direction, but we've got to we've got to show up next quarter and the following with those with those with that reflected in the numbers.

Unknown Attendee: Operator, this concludes our prepared remarks. Please begin the Q&A. Thank you. As a reminder, to ask a question, you need to press star 11 on your telephone and wait for your name to be announced. To a draw your question, please press star 11 again. Please stand by. We compile the Q&A roster. One moment for our first question.

Speaker Change #100: Now that we've gotten through a lot of these larger distractions will be able to do that.

Duncan Bates: Okay, great. And then maybe just a quick update on your own, on your own dealerships. I think you have 12; I can't quite exactly remember that. We have 12 dealerships; I'd say we're, you know, making more changes to those, you know, the way that we operate those right now than we probably have in the last five years. So, you know, we've really embraced technology and internet marketing, and, you know, are starting to see some success. We've got some stores that are really outperforming, and some stores that are underperforming. And we've, you know, we've got to keep the hammer down there too.

George Melesky-Riazzi: Okay, great. And then maybe just a quick update on your own, on your own dealerships. I think I think you have 12, but I can't exactly remember the number.

Speaker Change #100: Sure.

Okay, Great and then maybe just a quick update on your on your own.

Speaker Change #101: On your own dealerships.

Speaker Change #102: You have 12 I can't exactly remember.

Duncan Bates: Yeah, we have 12. We have 12 dealerships. I'd say we're making more changes to those, you know, the way that we operate those right now than we probably have in the last five years. So, you know, we've really embraced technology and internet marketing, and we're starting to see some success. We've got some stores that are really outperforming, and some stores that are underperforming. And we've, you know, we've got to keep the hammer down there too. I mean, if I'm an investor looking at legacy, the retail business has underperformed for, you know, for years now.

Daniel Moore: Our first question will confline of Daniel Moore from CJA Securities. Your line is open. Thank you, Duncan and Jeff. Thanks for taking the questions and all the color. Let me start with, is it possible to quantify, involve our terms, the impact of the delays, the delayed shipments that referenced in Georgia and Texas in the quarter that are being pushed into Q3? You know, the bulk of that's in Georgia. We had shipments held up, for a few weeks over there, and those obviously will get pushed into Q3.

Speaker Change #102: Sure Yes.

Speaker Change #104: We have 12 dealerships I'd say.

Speaker Change #105: <unk> more changes to those to the way that we operate those right now than we probably have in the last five years. So we've really embraced technology and internet marketing and.

Speaker Change #105: We're starting to see some success, we've got some stores that are really outperforming in some stores that are underperforming.

And we've got to keep the hammer down there too I mean, I think if I'm, an investor looking at legacy.

Duncan Bates: I mean, I think if I'm an investor looking at legacy, you know, the retail business has underperformed for, you know, for years now. And I see that as a real opportunity. You know, we see our larger competitors, right, with big dealer, you know, company-owned stores and large footprints. And they're making it work. And this is certainly, you know, a fixable piece of our business. You know, we just had to, you know, our focus was elsewhere. And, you know, we're on it now. And I'm excited, you know, with some of the things that the team's coming back.

Speaker Change #105: The retail business has underperformed for for years, now and I see that as a real opportunity, we see our larger competitors right with big dealer.

Duncan Bates: And I see that as a real opportunity. You know, we see our larger competitors, right, with big dealers, you know, company-owned stores and large footprints, and they're making it work. And this is certainly a fixable piece of our business. You know, we just had to, you know, our focus was elsewhere. And, you know, we're on it now. And I'm excited, you know, about some of the things that the team's coming back to.

Daniel Moore: I don't have a specific number, I just think that the backlog looks decent, but customers are struggling, especially on the park side with permits and getting pads ready, and we just, we experienced some delays where we thought, hey, we'd get 30 homes out and instead you shift the first 10 and it takes them longer than expected to take the rest. So I think the third quarter, you'll certainly see a ramp up and shipments, but it was certainly slower than we would like this quarter.

Speaker Change #105: Company owned stores, and large footprints and they're making it work and this is certainly.

Speaker Change #105: A fixable.

Speaker Change #105: A piece of our business, we just had.

Speaker Change #105: Our focus was elsewhere.

Speaker Change #105: We're on it now and I'm excited with some of the things that the teams coming back with.

Duncan Bates: with.

George Maleski Riyazi: That was great. Best of luck. Thank you.

George Melesky-Riazzi: Sounds great. Best of luck. Thank you.

Speaker Change #106: That's great best of luck.

Duncan Bates: Thanks, George. Thank you.

George Maleski Riyazi: Thanks, George. Thank you.

Speaker Change #107: Thank you thanks.

George Melas: Thanks George.

Operator: Thank you. One moment for our next question. Our next question comes from Alex Rygiel from BeRiving Securities. Your line is open.

Unknown Attendee: One moment for our next question.

Speaker Change #108: Thank you one moment for our next question.

Alex Rygiel: Our next question comes from the line of Alex Rygiel from Be Arriving Securities. Your line is open.

Speaker Change #109: Our next question comes from the line of Alex <unk> from B Riley Securities. Your line is open.

Alex Rygiel: Thanks and good morning Duncan. It sounds like you're calling sort of an inflection point here positively in shipments and demand. Do you think this is more company specific, or do you see it improving kind of more on a macro basis across the entire sector?

Alex Rygiel: Thanks and good morning, Duncan. It sounds like you're calling sort of an inflection point here, positively in shipments and demand. Do you think this is more company specific? Or do you see it improving kind of more on the macro basis across the entire sector? You know, I'd say after, you know, seeing our larger competitors report this week. You know, I think everybody's pretty upbeat. Skyline had a big week; you know, big sales numbers. And so I think, you know, the market is improving. It's not, you know, it's not as great as we would, you know, we would like it, but it certainly seems to be moving in the right direction.

Speaker Change #109: Thanks, and good morning Duncan.

Daniel Moore: That's helpful. Obviously the retail finance apps up 34% of the great sign, and you can say in terms of order rates and or changes of backlog during the quarter either sequentially or year over year. Yeah, you know, Dan, we don't publish backlog, but we obviously follow it closely internally. I think, you know, this week, we probably, we have one of the best sales weeks that we've had all year. And, you know, so we're excited to get, you know, back focused 100% on sales.

Alex: Sounds like you are calling sort of an inflection point here positively in shipments and demand.

Alex: Do you think this is more company specific or do you see it improving kind of more on a macro basis across the entire sector.

Duncan Bates: You know, after seeing our larger competitors' reports this week, I think everybody's pretty upbeat. Skyline had a big week, you know, big sales numbers.

Speaker Change #111: I would say after seeing our larger competitors report this week I think everybody is pretty upbeat.

Speaker Change #112: Skyline had a big week big sales numbers.

Duncan Bates: And so I think, you know, the market is improving. It's not, you know, it's not as great as we would, you know, we would like it, but it certainly seems to be moving in the right direction. You know, I think our, you know, our sales numbers show that we've been dealing with a lot of challenges that have distracted us from, you know, really, really managing the sales team closely and spending a lot of time with customers.

Speaker Change #111: And so I think.

Speaker Change #111: The market is improving.

Speaker Change #113: It's not.

Speaker Change #113: Not as great as we would we would like it but it certainly seems to be moving in the right direction.

Daniel Moore: You know, we've had a lot of distractions this year as we've cleaned up, you know, yesterday's problems. But, you know, I think that that customers on both sides of the business are ordering the outlook, you know, looks a lot better than it did at this time last summer. And, you know, we fought some, you know, challenges that are unique to us, but we're, you know, we're really like starting to push a lot of homes out the door.

Duncan Bates: You know, I think our, you know, our sales numbers show that, you know, we've been dealing with a lot of challenges that have distracted us from, you know, really, really managing the sales team closely and spending a lot of time with customers. And, you know, that's what I'm excited about for the second half of the year. So a long way of saying, I think the market is improving, you know, but there are, you know, legacy-specific issues that we've been addressing. And I think this is an inflection point. And some of the larger production home builders are using progressive incentives and discounting to drive volume.

Speaker Change #113: I think our.

Speaker Change #113: Our sales numbers show that we've been dealing with.

Speaker Change #113: A lot of challenges that are distracted us from <unk>.

Speaker Change #113: Really really managing the sales team closely and spending a lot of time with customers and that's what I'm excited about for the second half of the year. So long way of saying I think the market is improving.

Duncan Bates: And, you know, that's what I'm excited about for the second half of the year. So, by way of saying, I think the market is improving, you know, but there are, you know, legacy specific issues that we've been addressing. And I think this is an inflection point.

Speaker Change #113: But there are legacy specific issues that we've been addressing and I think this is an inflection point.

Daniel Moore: And we've got some big projects. You know, there's some projects that I think we're pretty close on, you know, that would be a game changer for us and really allow us to take production up. But we're just, we're taking a day by day. We've got a lot of new salespeople that we've hired, you know, over the last 12 months. And it takes some time to get people trained and get them up to speed and, you know, have them really understand the product and really understand the financing solutions before they can contribute.

Speaker Change #113: Yeah.

Alex Rygiel: And some of the larger production home builders are using progressive incentives and discounting to drive volume, and they're seeing great success with that. You've held margin here, but obviously, volume has weakened. As the market comes back or as your unit volume picks up, do you think you'll be giving up any margin to drive some of that incremental growth? Yeah, it's something we're, you know, we're discussing now.

Speaker Change #113: And some of the larger production homebuilders are using aggressive incentives and discounting to drive volume and they are seeing great success with that.

Duncan Bates: And they're seeing a great success with that. You've held margin here, but obviously volume has weakened. As the market comes back or as your unit volume picks up, do you think you'll be giving up any margin to drive some of that incremental growth? Yeah, something we're, you know, we're discussing now. The margins do look great. You know, we haven't used the price lever. I think, you know, a lot of our larger competitors have used the price lever, but we're mindful that, you know, I don't think labor is coming down. And, you know, we'll see what materials do.

Speaker Change #113: <unk> margin here, but obviously.

<unk> has weakened.

Speaker Change #114: As the market comes back or as you get your unit volume picks up do you think you'll be giving up any margin to drive some of that incremental growth.

Duncan Bates: Yeah, it's something we're, you know, we're discussing now. The margins do look great.

Speaker Change #115: Yes, it's something we're discussing now.

Daniel Moore: And I'm happy with, you know, the direction that that's going. We've also, we implemented a new sales order system that we launched early this year, where we're now, you know, tracking all the details around quotes and orders and shipments, you know, in one system all the way through the process so we can hold people accountable on the sales side. So, a lot of things moving in the right direction, we've just got to stay focused and really push sales forward.

Duncan Bates: You know, we haven't used the price lever. I think, you know, a lot of our larger competitors have used the price lever. But we're mindful that, you know, I don't think labor is coming down. And, you know, we'll see what materials do. So something we're talking about right now, as we get ready for the show here in late September. Thank you.

Speaker Change #116: Margins do look great. We haven't used the price lever I think.

Speaker Change #116: A lot of our larger competitors have used the price lever.

Speaker Change #116: But we're mindful that I don't think labors coming down.

Speaker Change #116: <unk>.

We will see what materials do so something where we're talking about right now as we get ready for the show.

Duncan Bates: So something we're, you know, we're talking about right now as we get ready for the show here in late September.

Speaker Change #116: Here in late September.

Alex Rygiel: Thank you. Thanks, Alex.

Speaker Change #116: Thank you.

Alex: Thanks, Alex.

Unknown Attendee: Thank you.

Alex: Thank you.

Unknown Attendee: As a reminder, that star one one for questions star one one.

Alex: Well.

Daniel Moore: I think another, in addition to the, you know, the retail finance applications, you know, being up pretty dramatically, you know, we do a, a fall show in Fort Worth every year. We're obviously tracking RSVPs to that show. It's our big sales event for the year. And we're way ahead of where we typically are from RSVPs. So, we're, you know, we're pushing hard to get to the show and we're expecting a pretty good show in late September. Excellent, really helpful.

Alex: Mind, you that star one for a question Star one way.

Daniel Moore: And we have a follow-up from the line of danger more from CJS Securities.

Operator: As a reminder, that's star 11 for questions, star 11. And we have a follow-up on the line from Daniel Moore from CJS Securities. Your line is open.

We have a follow up from the line of Daniel Moore from CJS Securities. Your line is open.

Daniel Moore: Your line is open. Thank you again. You know, probably related to the last question, but now ASPs, after obviously several quarters' declines, flattened out and actually increased sequentially. So maybe just talk about whether you think we've maybe put in a little bit of a bottom and, you know, your expectations going forward. Thanks. Yeah, thanks, Dan. I think that's right. I think we've hit a bottom, you know. We went through several quarters where there was a shift on both the dealer side of the business and the parts side of the business to smaller, more affordable homes. You know, affordability is a problem throughout, you know, the entire housing market, not just first-time homebuyers buying stick-built homes.

Daniel Moore: Thank you again, probably related to the last question, but ASPs, after obviously several quarters of declines, flattened out and actually increased sequentially. So, maybe just talk about whether you think we've maybe put in a little bit of a bottom and your expectations going forward. Thanks.

Speaker Change #117: Thank you again, probably related to the last question, but.

Speaker Change #117: Asps.

Speaker Change #118: After obviously several quarters declines flattened out.

Duncan Bates: Yeah, thanks, Dan. I think that's right.

Speaker Change #119: Actually increased sequentially so.

Speaker Change #120: Maybe just talk about whether you think maybe put in a little bit of a bottom.

Speaker Change #119: And.

Speaker Change #121: And your expectations going forward. Thanks.

Duncan Bates: I think we've hit a bottom. You know, we went through several quarters where there was a shift on both the dealer side of the business and the park side of the business to smaller, more affordable homes. You know, affordability is a problem throughout the entire housing market, not just first-time homebuyers buying stick-built homes. And so I think, though, that the ASP declines have flattened out and, you know, should be pretty stable for the rest of the year.

Duncan Bates: Maybe one or two more, and I'll jump back in queue, but in terms of the litigation settlement, given the inflation that we've seen, you know, is it possible if the value of those assets could be above or meaningfully above the loans against them, just how do we think about any potential gains or losses there? Yeah, you know, we've got to roll up our sleeves and do the work. And we've spoken with the auditors about that.

Speaker Change #122: Yes, Thanks, Dan I think Thats right I think we've hit a bottom.

Went through several quarters, where there was a shift on both the dealer side of the business and the park side of the business to smaller more affordable homes.

Speaker Change #123: Affordability is a problem.

Speaker Change #123: Throughout the.

Speaker Change #123: The entire housing market not just first time homebuyers buying stick built homes and so I think.

Duncan Bates: And so, you know, Kwanne, we're trying to find putting those on the ballot sheet as something that we're going to spend a lot of time on this quarter, you know, but I think, you know, we're in the assets right, we're talking about, you know, over 300 spaces with houses, and, you know, I think, I think there could be some upside, but we just, we've got to, we've got to get everything wrapped up and get our team in there. And then figure out the best way to monetize the assets. We're not planning to end the long term. Make sense.

Daniel Moore: And so I think though, you know, that the ASP declines have flattened out and, you know, should be pretty stable for the rest of the year. Excellent.

Speaker Change #123: That.

Speaker Change #124: The ASP declines have flattened out.

Should.

Speaker Change #124: It should be pretty stable for the rest of the year.

Daniel Moore: And maybe the last one is, you know, throughout the sort of rise in interest rates, the cost advantage continues to widen between not only MH and stick built but, you know, obviously, you focused on kind of the lower end price points as well. In a declining, you know, if interest rates do pull in a little bit as forecast here over the next few quarters, is that, you know, do you see that as a net benefit or, you know, positive or negative, just kind of net of those cross currents? Thanks again. Yeah, you know, we

Duncan Bates: And maybe the last one is, you know, the throughout the sort of rise in interest rates, the, you know, the cost advantage. Continue to widen between not only M H and stick-built, but, you know, obviously you focused on kind of the lower end price points as well. In a declining, you know, if interest rates do pull in a little bit as a forecast here over the next two quarters. Is that, you know, do you see that as a net benefit or, you know, positive or negative, just kind of net of those cross currents. Thanks again.

Speaker Change #125: Excellent and maybe the last one.

Speaker Change #124: As you know.

Speaker Change #124: The throughout the sort of rise in interest rates.

Speaker Change #124: The cost advantage.

Continue to widen between not only MH and stick built, but obviously you're focused on kind of the lower end price points as well.

Speaker Change #124: In a declining.

Speaker Change #124: If interest rates do pull in a little bit.

Speaker Change #124: Forecast Europe over the next few quarters.

Is that do you see that as a net benefit or a positive or negative just kind of net of crosscurrents. Thanks again, yes.

Duncan Bates: Yeah, you know, we see interest rates really impacting the park side of our business. I mean, chattel rates haven't, you know, increased as much as traditional mortgage rates have. And I think the availability of financing for this customer base is pretty broad with some of the larger players. And so, you know, I think interest rates are going to come down either in September, or there's, you know, indications that they will come down.

Duncan Bates: Yeah, you know, we see interest rates really impacting the parts side of our business. I mean, shadow rates haven't, you know, increased as much as traditional mortgage rates have. And I think the availability of financing for this customer base is pretty broad, with some of the larger players. And so, you know, I think is interest, you know, is there either interest rates come down or in September or there's, you know, indications that they will come down. You know, I think the, you know, the park guys who are evaluating, you know, these like real estate assets, right, they'll start to move quicker and say, OK, well, I can get in this thing.

Speaker Change #124: Yes.

Speaker Change #126: C <unk>.

Speaker Change #127: We see interest rates really impacting the park side of our business I mean chattel rates haven't.

Speaker Change #127: Increased as much as traditional mortgage rates have and I think the availability of financing for this customer base is pretty broad with some of the larger players.

Duncan Bates: And there's, you know, there are several, at least four or five real estate assets like that. In addition to, you know, a meaningfully sized portfolio of least homes that have real value. So as we've, you know, as Jeff and his team have really dug into the balance sheet, you know, we've got a list of opportunities. And we're just, we're, we're working through them. And this was the first real estate asset to, you know, to come off the balance sheet and, and for us to monetize. Okay. Really helpful. Duncan. I will jump back with any follow-ups. Thank you. Thanks, Dan. Thank you. One moment for our next question. All right.

Duncan Bates: You know, I think the park guys who are evaluating these, you know, these, like real estate assets, right, they'll start to move quicker and say, Okay, well, I can get in this thing and refinance in the next 18 or 24 months. And, and that'll drive volume for the park side of our business. But, you know, our entire business is built around offering a quality product and a financing solution to our customers that keeps this product affordable.

Speaker Change #127: And so I think as interest is there either either interest rates come down or in September or there's indications that they will come down.

Speaker Change #128: Thank you.

Speaker Change #129: The part guys, who are evaluating these like real estate assets right they'll start to move quicker and say, okay, well I can get in this thing in.

Duncan Bates: And, you know, refinance in the next 18 or 24 months. And that will drive volume for the park side of our business. But, you know, we are our entire business is built around offering a quality product and a financing solution to our customer that keeps this product affordable. And, you know, we like that. Is the key is keeping it affordable. And so I think that, you know, there will be a buyer for this product. I think there's, you know, other goods and services will continue to be more expensive, and more of their discretionary income will go to other, you know, to other areas.

Speaker Change #129: Refinanced in the next 18 or 24 months and.

Speaker Change #129: And that will drive volume for the park side of our business, but we are our entire business is built around offering a quality product and a financing solution.

Speaker Change #129: To our customer that keeps this product affordable and we like that is the key is keeping it affordable and so I think that.

Duncan Bates: And, you know, we like that the key is keeping it affordable. And so I think that, you know, there will be a buyer for this product. I think there are, you know, other goods and services will continue to be more expensive, and more of their discretionary income will go to other, you know, areas. And, you know, there'll be demand for this product going forward, regardless of the interest rate environment.

Mark Smith: Next question. We'll come flying on Mark Smith from Lake Street. Your line is open.

Duncan Bates: Hi, guys. Um, first one for me. Just looking at the MHP loans here. I'm, you know, sequentially state pretty flat, but it looks like maybe the actual rate maybe came down a little bit. You just talk about that portfolio in, especially in a decline in rate environment, maybe, you know, what we should look for on kind of interest, you know, rates coming from that portfolio of MHP loans. Yeah, sure. I think.

Speaker Change #129: There will be a.

Speaker Change #129: A buyer for this this product I think there is other goods.

Speaker Change #129: <unk> and services will continue to be more expensive and more of their discretionary income will go to other.

Daniel Moore: And, you know, there's, they'll be demand for this product going forward regardless of the interest rate environment. Makes sense. I appreciate the color again.

Speaker Change #129: To other areas and there is there'll be demand for this product going forward, regardless of the interest rate environment.

Daniel Moore: makes sense. I appreciate the color again.

Speaker Change #130: Makes sense I appreciate the color again.

Daniel Moore: Thanks, Dan. Thank you.

Dan: Thanks, Dan.

Dan: Thank you.

Unknown Attendee: And I'm not showing any further questions in the queue.

Operator: And I'm not showing any further questions in the queue. I would now like to turn it back over to Duncan for any closing remarks.

Dan: And I'm not showing any further questions in the queue I would now like to turn it back over to Duncan for any closing remarks.

Duncan Bates: I want to turn the back over to Duncan for Nicole's remarks. Thank you for joining today's earnings call. We appreciate your interest in Legacy Housing.

Duncan Bates: Park Sales have been down, right? And so if we're selling less park model homes to communities, you've got less financing opportunities. And so, the growth in that portfolio was pretty robust, you know, 19, 20, 21, 22, 23 park business started slowing down, you know, as the full effective interest rates, you know, carried over into the real estate transactions. And so the, you know, the park business has been slower and the portfolio has been growing slower than it had the, you know, prior three or four years.

Duncan Bates: Thank you for joining today's earnings call. We appreciate your interest in Legacy Housing. We're hosting our fall show in Fort Worth on September 23rd and 24th. We've got a link on our website and encourage you to come out. See, we'll probably have 15 houses set up, fully furnished. You know, hundreds of customers, their speeches on our financing products and the industry. It's going to be a great event. I'd encourage anyone who's interested in learning more about the company or our products or seeing some of the updates to the products to come out. Operator, this concludes our call.

Duncan Bates: Thank you for joining today's earnings call. We appreciate your interest in legacy housing, we're hosting our fall show in Fort worth on September 23rd and 24th.

Duncan Bates: We're hosting our fall show in Fort Worth on September 23rd and 24th. We've got a link on our website and encourage you to come out. See, we'll probably have 15 houses set up, fully furnished. You know, hundreds of customers there; speeches on our financing products and the industry. It's going to be a great event. I'd encourage anyone who's interested in learning more about the company or our products, or seeing some of the updates to the products, to come out.

Speaker Change #131: Got a link on our website and encourage you to come out and see we'll probably have 15 houses set up fully furnished.

Speaker Change #131: Hundreds of customers their speeches on our financing products and the industry is going to be a great event.

I encourage anyone who's interested in learning more about the company or our products are seeing some of the updates to the products to come out operator. This concludes our call.

Unknown Attendee: Operator, this concludes our call. Thank you for your participation in today's conference. This doesn't include the program.

Operator: Thank you for your participation in today's conference. This does include the program. You may now disconnect. Everyone have a great day.

Thank you for your participation in today's conference. This does conclude the program and you may now disconnect everyone have a great day.

Unknown Attendee: You may now disconnect. Everyone, have a great day.

Duncan Bates: You know, as far as interest rates go, the way that that product works is there's a two-year fixed rate and then it flips to variable. And so, as notes flipped to variable, the interest rate, you know, will increase. And there's certain you know, during slower times, I mean, we've used financing concessions to drive volume tends to be, you know, a period of no payments. So, these park owners can get homes in and get them set and get them rented before they start paying on the houses.

Speaker Change #131: Okay.

[music].

Speaker Change #131: Okay.

Speaker Change #131: <unk>.

Speaker Change #131: Okay.

Speaker Change #131: Yes.

Speaker Change #131: Okay.

Duncan Bates: But, you know, the interest rates are the end line. And so, what we, what we have seen though is we will offer a little bit better rate for that two-year fixed period if buyers put down a higher down payment. So, you know, we have seen people say, hey, I've got, you know, my customer in these communities is tapped out at 1,200 bucks a month. And, you know, I need to make X $100 a month in lot rent to support the real estate asset.

Duncan Bates: And so, I need houses in here that I can keep, you know, the overall payment affordable. And so, we've seen a shift to smaller homes, but we've also seen a shift toward, you know, people putting a higher down payment so their monthly payment to us is lower to keep the homes affordable.

Duncan Bates: And then, I don't know if you're able to talk about it today, but can you talk about the settlement in any change that this has? I know that there was some refinancing of that note that was out there. Any impact that this has on the MHP notes as we kind of see them reported at the Capitol County? Well, it's, you know, this is a long time customer. We've done business with him and his partners for over 12 years.

Duncan Bates: And he's got a nice portfolio. And it was an unfortunate situation. How we, you know, ended up here. But I think, you know, look, it was, it was complex. There were, you know, a lot of feelings, a lot of history there. And so, it's taken a lot of, a lot of time, you know, to put this deal together. And I think it's a win, you know, for both parties. Police. And so, you know, essentially, you know, the two parts that are coming to us will reduce the balance on a new note and will wrap up, you know, notes that are in the MHP portfolio and in the development portfolio and refinance those into one note that's drafted in accordance with Louisiana Law, where all of the collateral is located.

Duncan Bates: All right, so look at the story. I think it's a long, long way of saying that, you know, you're going from, say, 60 to 70 individual MHP and development notes, you know, down to one note. Okay. Okay, so kind of a consolidation, but at the same time, it sounds like you get these, these couple of parks, but that loan, every finance loan is a smaller piece than what it was on the books before. That's right. You know, and I think from their side, right, it gives them, gives them time to refinance, sell assets, you know, and get us paid back.

Duncan Bates: And the last one for me, Duncan, is just looking at the gross profit margin, you know, on product sales, was really pretty solid here in the quarter. Can you just talk about sustainability of that? It sounds like you've, you know, ramped up production in Georgia a little bit, but are there any cost pressures? What are you seeing on labor input costs? Anything that we should be looking at as we think about gross profit margin going forward?

Duncan Bates: Sure. Yeah, I mean, I'm really proud of the team for keeping it at those levels, you know, just given the production volume. And I think we can maintain it, you know, we took production up in Georgia, we're pushing really hard to take it up in Texas. We've hit some, you know, we've, we've been closed, hit some air pockets, but orders were looking, you know, pretty strong in the past couple weeks, so that's a good sign.

Duncan Bates: I think the, you know, the hardest thing to manage is labor. I think, you know, all companies struggle with labor inflation. I don't think wages are coming down anytime soon. And so we've been really disciplined with our pricing. We've had some, you know, we've reduced our raw material inventory. We've got a ways to go, but we've been able to take advantage of, you know, some materials coming down. But the big one is labor and holding price.

Duncan Bates: And so I think if we can, you know, we can push production volume higher, which we will be able to do this year. You know, we should be able to maintain, you know, gross margins, product gross margins that are, you know, at similar levels. Okay. Perfect.

Unknown Attendee: Thank you. Thanks, Mark. Thank you. One moment for next question.

Jay Mccanless: The next question will come from the line of Jay McCanless from Wedbush, Elaine is open. I guess, thanks for saying my questions. Pretty much drawn through everything that I had on the repurchase.

Duncan Bates: Nice to see that step up sequentially from one key to two, maybe how are you guys thinking about that on a quarterly run rate going forward. Yeah, you know, we've got, we've got support from the board to continue by and stock, you know, we're not going to come out. We're not, I'm not going to come out and say, hey, every quarter, you know, we're going to repurchase a certain amount of stock.

Duncan Bates: We don't think that that's, you know, necessarily the best way to allocate capital, but we are going to repurchase opportunistically. So we're going to run a calculation internally, each quarter that identifies our, you know, what we calculate is our liquidation value. And when the stock trades down to those levels, we'll buy as much back as we can. And if we go through this authorization, you know, we'll last the board for another one, but, you know, I think the buybacks have been well received.

Duncan Bates: I feel great about the prices that were in the volumes that we were able to repurchase stock, you know, in the first and second quarter. And we're just, we'll keep an eye on it. And when it hits certain levels will be aggressive.

Unknown Attendee: Okay, that sounds great.

Duncan Bates: And then the liability reversal in the quarter was that one off thing or should be expecting more that one forward. You know, I'd kind of throw that in the camp with some of these asset sales. You know, Jeff and his team, you know, now that we've, you know, we've got a great team on the, you know, accounting and SEC reporting side. And, you know, they're really digging in. So was they, you know, find older things in our balance sheet that don't make sense anymore.

Duncan Bates: You know, they're going to, they're going to clean those up. And so there's, you know, there's items on on both sides of the balance sheet. It's not all, you know, lopsided. But, you know, we're, we're getting the, you know, the balance sheet cleaned up. And we're going to, we're going to sell assets that we don't get credit for and don't use.

Unknown Attendee: Okay. That sounds great. Thanks. Appreciate it. Yeah. Thanks, Jay. Thank you. One moment for our next question.

George Maleski Riyazi: Our next question is off the line of George Maleski Riyazi from MKH management. The line is open. Great. Thank you. Good morning, guys. Thanks for taking my question. Just a quick, I think, hi Duncan. You guys talked a little bit about the production, about things sort of working out better at the plant about increasing production in Georgia. Can you just provide a little bit more color on the plants, how things are going from production level quality basis.

George Maleski Riyazi: Sort of give us a sense of how happy you are and would you think you could be in six months there? George, I've been living and breathing Georgia for two years and we have made some significant progress in Georgia. As far as, you know, the first step was you've got to clean, you know, you have to fix your quality issues and we fix those. And the house is coming out of Georgia now, you know, or are just as good as anything we're building in Texas.

George Maleski Riyazi: And so I'm really proud of the team, you know, and their efforts and working with the regulators and, you know, to get the quality to where it needs to be. And then, you know, the second, you know, first, you have to fix the quality, then you've got to go out and resolve, you know, sins of the past with homes that, you know, have issues. And so we spent a tremendous amount of time and money doing that.

George Maleski Riyazi: And as you do that, you know, you start to win back some customers. And, you know, we have an entirely new sales team in Georgia. And they've been here for, I'd say, some cases a year, some less than a year. But it's, you know, it's full of young professionals, you know, who see the opportunity. And they're starting to, you know, they're starting to really get something going on the sales side. You know, we've had to win new customers.

George Maleski Riyazi: We've had to win, you know, relationships back with customers. It had problems with houses. We've had to, you know, rebuild a dealer base over there. And I feel, you know, I feel good about where Georgia stands today. And we've just, we've got to, we've got to keep the momentum. The Georgia sales team is really firing. And they're all excited. And so we just, we got to keep pushing. We took production up one house a day in July.

George Maleski Riyazi: You know, we didn't have to, you know, I think we had, maybe we're a little heavy on labor there already to keep good people. And so, you know, we're right sizing Georgia. It's moving in the right direction. The southeast, you know, is the market seems to be pretty strong. And I think as you have, you know, storm activity through hurricane season, we, you know, we may get lucky with some big projects over there.

George Maleski Riyazi: I think one, one interesting thing that the Georgia team has done is, you know, they've targeted RV park owners with our tiny home products. And, you know, we've, we've been able to build some customer relationships that look like they're turning into whales. You know, we're there able to get these houses in. And, you know, in many cases have them rented before they're even set up. And, you know, we're calling us back in order and more houses. So a lot of good things coming out of Georgia. But we've got to keep our head down and keep moving in the right direction.

Duncan Bates: Okay, that's a pretty good update. Just, just remind us in Georgia, in the primarily Park sale historically, what sort of the mix of sales there, and maybe also just a very brief update on the Texas plans. Yeah, Georgia, you know, we have some big park customers over there. You know, we've, we've had to rebuild a dealer base, and we've got, you know, we've got some work to do, you know, with, with dealers, some of the new sales guides are, you know, hitting the road and, and coming back with applications, and, you know, that's encouraging.

Duncan Bates: But, you know, I'd say most of the sales in Georgia, right now, are park sales. As far as Texas goes, you know, two plants in Texas, you know, also a lot of new faces on the sales team, people starting to hit, you know, hit their stride, we've got some dealers that are, you know, that are just knocking the ball out of the park in Texas. And then we've got others that, you know, I'd say, haven't, you know, haven't moved to a more, you know, modern base sales approach using the internet and technology that are a little bit, that are a little behind.

Duncan Bates: And so, we're, you know, we're, we're trying to help them and, and, and the park business has been slower in Texas, but orders have been picking up, you know, over the past couple of weeks, and we're really, you know, we're really pushing. So, a lot of good, a lot of things moving in the right direction, but, you know, we've got to, we've got to show up next quarter and the following, you know, with those, with those, with that reflected in the numbers.

Duncan Bates: And I think now that we've gotten through, you know, a lot of these larger distractions will be able to do that. Okay, great. And then maybe just a quick update on your, on your own, on your own dealerships. I think you have 12, I can't quite exactly remember that. We have 12 dealerships, I'd say we're, you know, making more changes to those, you know, the way that we operate those right now than we probably have in the last five years.

Duncan Bates: So, you know, we've really embraced technology and internet marketing and, you know, are starting to see some success. We've got some stores that are really outperforming and some stores that are underperforming. And we've, you know, we've got to keep the hammer down there too. I mean, I think if I'm an investor looking at legacy, you know, the retail business has underperformed for, you know, for years now. And I see that as a real opportunity.

Duncan Bates: You know, we see our larger competitors, right, with big dealer, you know, company-owned stores and large footprints. And they're making it work. And this is certainly, you know, a fixable piece of our business, you know, we just had to, you know, our focus was elsewhere. And, you know, we're on it now. And I'm excited, you know, with some of the things that the team's coming back, with. That was great, best of luck. Thank you. Thanks, George. Thank you. One moment for our next question.

Duncan Bates: Our next question comes from the line of Alex Rygiel from Be Arriving Securities. Your line is open. Thanks and good morning, Duncan. It sounds like you're calling sort of an inflection point here, positively in shipments and demand. Do you think this is more company specific? Or do you see it improving kind of more on the macro basis across the entire sector? You know, I'd say after, you know, seeing our larger competitors report this week.

Duncan Bates: You know, I think everybody's pretty upbeat. Skyline had a big week, you know, big sales numbers. And so I think, you know, the market is improving. It's not, you know, it's not as great as we would, you know, we would like it, but it certainly seems to be moving in the right direction. You know, I think our, you know, our sales numbers show that, you know, we've been dealing with a lot of challenges that have distracted us from, you know, really, really managing the sales team closely and spending a lot of time with customers.

Daniel Moore: And, you know, that's what I'm excited about for the second half of the year. So a long way of saying, I think the market is improving, you know, but there are, you know, legacy specific issues that we've been addressing. And I think this is an inflection point. And some of the larger production home builders are using progressive incentives and discounting to drive volume. And they're seeing a great success with that. You've held margin here, but obviously volume has weakened.

Daniel Moore: As the market comes back or as your unit volume picks up, do you think you'll be giving up any margin to drive some of that incremental growth? Yeah, something we're, you know, we're discussing now. The margins do look great. You know, we haven't used the price lever. I think, you know, a lot of our larger competitors have used the price lever, but we're mindful that, you know, I don't think labor is coming down.

Daniel Moore: And, you know, we'll see what materials do. So something we're, you know, we're talking about right now as we get ready for the show here in late September. Thank you. Thanks, Alex. Thank you. As a reminder, that star one one for questions star one one.

Daniel Moore: And we have a follow-up from the line of danger more from CJS securities. Your line is open. Thank you again. You know, probably related to the last question, but now ASPs after obviously several quarters declines flattened out and actually increased sequentially. So maybe just talk about whether you think we've maybe put in a little bit of a bottom and, you know, your expectations going forward. Thanks. Yeah, thanks, Dan. I think that's right.

Daniel Moore: I think we've we've hit a bottom, you know, we we went through several quarters where there was a shift on both the dealer side of the business and the parts side of the business to smaller, more affordable homes, you know, affordability is a problem throughout, you know, the entire housing market, not just first time I'm homebuyers buying stick-built homes. And so I think though, you know, that the the ASP declines half flattened out and, you know, should be pretty stable for the rest of the year.

Daniel Moore: Excellent. And maybe the last one is, you know, the throughout the sort of rise and interest rates, the, you know, the cost advantage. Continue to widen between not only M H and stick-built, but, you know, obviously you focused on kind of the lower end price points as well. In a declining, you know, if interest rates do pull in a little bit as a forecast here over the next two quarters. Is that, you know, do you see that as a net benefit or, you know, positive or negative, just kind of net of those cross currents.

Daniel Moore: Thanks again. Yeah, you know, we see interest rates really impacting the parts side of our business. I mean, shadow rates haven't, you know, increased as much as traditional mortgage rates have. And I think the availability of financing for this customer base is pretty broad with some of the larger players. And so, you know, I think is interest, you know, is there either interest rates come down or in September or there's, you know, indications that they will come down.

Daniel Moore: You know, I think the, you know, the park guys who are evaluating, you know, these like real estate assets, right, they'll start to move quicker and say, OK, well, I can get in this thing. And, you know, refinance in the next 18 or 24 months. And that will drive volume for the park side of our business. But, you know, we are our entire business is built around offering a quality product and a financing solution to our customer that keeps this product affordable.

Daniel Moore: And, you know, we like that is the key is keeping it affordable. And so I think that, you know, there will be a buyer for this product. I think there's, you know, other goods and services will continue to be more expensive and more of their discretionary income will go to other, you know, to other areas. And, you know, there's, they'll be demand for this product going forward regardless of the interest rate environment. Makes sense. I appreciate the color again. Thanks, Dan. Thank you. And I'm not showing any further questions in the queue.

Duncan Bates: I want to turn the back over to Duncan for Nicole's remarks.

Duncan Bates: Thank you for joining today's earnings call. We appreciate your interest in Legacy Housing.

Duncan Bates: We're hosting our fall show in Fort Worth on September 23rd and 24th. We've got a link on our website and encourage you to come out. See, we'll probably have 15 houses set up, fully furnished. You know, hundreds of customers there, speeches on our financing products and the industry. It's going to be a great event. I'd encourage anyone who's interested in learning more about the company or our products or seeing some of the updates to the products to come out.

Unknown Attendee: Operator, this concludes our call. Thank you for your participation today's conference. This doesn't include the program. You may now disconnect.

Unknown Attendee: Everyone, have a great day.

Q2 2024 Legacy Housing Corp Earnings Call

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