Q4 2024 Legacy Housing Corp Earnings Call
Speaker Change: Hello, everyone and welcome to the Legacy Housing Corporation, full year 2024
Speaker Change: At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand distraced.
To withdraw your question, simply press star 1-1 again [inaudible]
Speaker Change: Please be advised that today's conference is being recorded. Now it's my pleasure to turn the call over to our CEO . Don't convey it. Please proceed.
Speaker Change: Good morning. This is Duncan Bates, Legacy's president and CEO . Thank you for joining our call to discuss Legacy's year-end 2024 results. Max Africk, Legacy's general counsel will read the Safe Harbor Disclosure before getting started. Max,
Max Africk: Thanks, Duncan. Before we begin, I will remind our listeners that management's prepared remarks today will contain forward-looking statements.
Max Africk: which are subject to risks and uncertainties, and management may make additional forward-looking statements and response to your questions.
Max Africk: Therefore the company claims the protection of the safe harbor for four looking statements that is contained in the private security litigation reform act of 1995 1995.
Max Africk: Actual results made differ from management's current expectations and any projections as to the company's future performance represent management's best estimates as of today's call. Legacy assumes no obligation to update these projections in the future, unless otherwise required by applicable law. DeForest Hinman, Mark Smith, James McCanless, Jeffrey Fiedelman, Legacy Housing Corp,
Thanks, Max.
Speaker Change: I'm joined today by Jeff Fiedelman, Legacy's Chief Financial Officer Jeff will discuss our 2024 financial performance and I will provide additional corporate updates and open the call for Q and A.
Jeff.
Thank you. Bye.
Thanks, darken.
Speaker Change: Product sales decreased 15.8 million or 10.9% in 2024 as compared to 2023.
Speaker Change: This decrease was driven primarily by a decrease in unit volume shift, primarily in direct sales and inventory finance sales categories.
Speaker Change: In 2024, our net revenue per product sold increased 1.9% as compared to 2023, primarily because of a moderate increase in unit prices.
Speaker Change: Consumer MHP and dealer loans interest income increase 3.8 million or 10.1% from 2023 to 2024 due to growth in our loan portfolios
Speaker Change: This increase was driven primarily by increased balances in the MHP and consumer loan portfolios.
Speaker Change: Between December 31st, 2024 and December 31st, 2023, our consumer loan portfolio increased by 17.6 million.
Our MHP loan portfolio increased by 24.5 million.
and our dealer finance notes balance did not change.
Speaker Change: The change in the balance of our MHP loan portfolio is primarily due to a settlement agreement we reached with a significant borrower as discussed in our 10K.
Speaker Change: Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, land sales, service fees, and other miscellaneous income.
and increased 7.0 million or 106.3% from 2023 to 2024.
Speaker Change: This increase was primarily due to 8.9 million in land sales related to the Forest Hollow Mobile Home Community and the property in Marble Falls, Texas.
Speaker Change: 0.5 million in rental income from our mobile home park properties.
Speaker Change: partially offset by a 1.5 million decrease in forfitted deposits, a 0.6 million decrease in rental income from least mobile homes, and a 0.3 million decrease in other miscellaneous revenue.
Speaker Change: The cost of product sales decreased $9.6 million or $9.7% in 2024 as compared to 2023.
Speaker Change: The decrease in costs is primarily related to a decrease in unit sold.
Speaker Change: Gross Profit Margin was 30.4% of product sales during 2024 as compared to 31.3% during 2023.
Speaker Change: The cost of other sales was 8.2 million in 2024 and primarily reflects the cost associated with our land sales.
Speaker Change: Selling general and administrative expenses decreased 1.1 million or 4.4% in 2024 as compared to 2023.
Speaker Change: This decrease was primarily due to a 1.4 million decrease in warranty costs, a 0.4 million decrease in consulting and professional fees, and a 0.4 million decrease in salaries and benefit costs.
Speaker Change: Partially offset by a 0.4 million increase in real estate taxes and a net 0.7 million increase in other miscellaneous costs.
Speaker Change: Other income expense net increased by $8.3 million in 2024 as compared to 2023.
Speaker Change: We had an 8.5 million increase in miscellaneous net, primarily due to one gains related to the settlement agreement described.
Speaker Change: Discussed Above. Two, a gain on the sale of property in Georgia. Three, gains related to properties acquired through foreclosure and four reversals of certain balance sheet liabilities.
Speaker Change: We have a 0.4 million decrease in interest income on other notes, and a 0.2 million decrease in interest expense.
Speaker Change: Med Income increased 13.2% to 61.6 million in 2024 compared to 2023. Basic earnings per share increased 32 cents per share or 14.3% in 2024 compared to 2023.
Speaker Change: As of December 31, 2024, we had approximately 1.1 million in cash compared to 0.7 million as of December 31, 2023.
Speaker Change: The Outstanding Balance of the Revolver as of December 31, 2024 and December 31, 2023 was 0 and 23.7 million respectively.
Speaker Change: At the end of 2024, Legacy's book value per basic share outstanding was $20.40, an increase of 13.9% from the year end of 2023.
Thanks, Jeff.
Politics, tariffs, recession risk, interest rate considerations, etc.
Speaker Change: Many of the call participants are long-term investors in Legacy Housing.
Speaker Change: I don't know how 2025 will shake out but I can assure you that our team will be in the office every day managing the business closely and making adjustments as needed.
Speaker Change: We continue to believe in the long-term fundamentals of manufactured housing and the value proposition that Legacy Housing provides as customers. High quality, affordable homes combined with financing solutions that keep monthly payments
Speaker Change: This group, nearly half of all households in the United States, has been severely impacted by increasing rental rates, higher prices for site-built homes, elevated mortgage rates, and stagnant wage growth.
A few data points from yesterday's 10K filing.
Speaker Change: The average price for a new single family home in 2023 was $511,000 including a land compared to a manufactured home of $123,000.
Speaker Change: In 2005, 20 years ago, approximately 18% of new single family homes sold in the United States were under $150,000.
Today, it's essentially zero.
Speaker Change: Legacy's average selling price in 2024 was approximately $61,000 per unit, up from $60,000 in 2023.
Speaker Change: The vast majority of legacy's business is wholesale, but even with the retail markup and other expenses, our homes and financing solutions provide an affordable alternative to site
Speaker Change: which a large portion of households in our country cannot currently afford.
Speaker Change: We continue to see coverage of factory-built housing in the media and hear positive talks of regulatory reform from the new administration. The affordable housing crisis is not solved without the manufactured housing industry.
Dealer Business across most of our footprint is healthy.
Speaker Change: We are moving out of a seasonally slow season. The team continues to sign new independent dealers in both our Texas and Southeast markets.
Speaker Change: Our community business is improving. As discussed on previous calls, higher interest rates have depressed community transaction volumes which tends to drive demand for new park model homes.
Speaker Change: We are receiving more inbound requests for large orders and think the community business will continue to improve in 2025.
Legacy's lending portfolios continue to compound.
Speaker Change: Our delinquencies remain low, although normalizing to pre-COVID levels and recovery rates are strong. In 2024, average interest rates for new retail loans were 1% higher than 2023.
Speaker Change: Product gross margins were 30.4 percent in 2024, under-absorbed labor given production, given lower production levels during the year impacted margins.
Speaker Change: We continue to watch labor closely and expect margins to normalize with production improving. We are also keeping a very close eye on material price fluctuations from the tariffs. We push through the first price increase in COVID in February of 2025.
Speaker Change: During the fourth quarter, Legacy sold one of the mobile home parks that was deeded to us under the settlement agreement.
Speaker Change: As Jeff mentioned, the sale resulted in a meaningful gain at your end. We are setting and renting homes in the second park now to increase occupancy before monetizing.
Speaker Change: A few updates on land development. We continue to focus on the properties in Austin.
Speaker Change: In Biasthrop County, our 1100-PAD development near Austin, the roads and utilities are nearly complete in phase one. We still anticipate selling lots in phase one this summer.
Speaker Change: As I mentioned during our last call, we own 300 developed mobile home lots in Horseshoe Bay, Texas. Our dealership nearby in Marble Falls, Texas is now open and we are selling land and homes there.
I'm proud of the team's progress this year.
Speaker Change: We finished 2024 with 33.5% gap net income margins, up from 28.8% in 2023.
Speaker Change: Over the last three years, we have increased book value by nearly 60% to $494 million.
Speaker Change: There's still a lot of work to do though. For 2025, we're focused on sales and specifically park sales in Texas and dealer sales in the southeast.
Speaker Change: Streamlining our product offering, Systems, Processes, and Employee Retention at our Retail Business, continuing to monetize non-core assets.
Speaker Change: and finishing construction and putting homes on our land at Austin.
Speaker Change: Legacy's integrated business model provides multiple avenues to generate returns for our shareholders, regardless of economic conditions. We are currently in a meaningful net cash position, and if our stock trades office here, we will repurchase shares aggressively.
Operator, this concludes our prepared remarks. Please begin the Q&A.
Speaker Change: Thank you so much and as I remind her to our audience, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again, thank you, one moment for our first question.
It comes from Mark Smith with Lake Street, please proceed.
Mark Smith: Hi, guys. I wanted to just dig in a little deeper on land sales during the quarter. If you can give a little more color on
Mark Smith: Kind of, you know, the big sale, you know, how it came about, you know, why at that point to make that sale and then future ones potentially coming sounds like still trying to improve the other one before selling it. And then also just land acquisitions. I think that you guys may have bought some property in Texas during fourth quarter.
Mark Smith: Yeah, hey, Mark. Thanks for the question. There's only one land sale during the fourth quarter, and that was the sale of a mobile home park from the settlement agreement in Beaumont, Texas.
Mark Smith: So that's the big sale. Obviously, throughout the year, we did monetize other land that we own, some in Eaton-Tin, as well as Down in Horseshoe Bay.
Mark Smith: and so we're looking at our portfolio closely and if there are non-core assets and the price makes sense to monetize them, we'll be opportunistic with that going forward.
Okay, did you guys purchase some land in Q4 in Texas?
Um...
Speaker Change: You know, how to foreclose on land. And, you know, so there's, you know, a meaningful portion of our loan portfolio.
Speaker Change: on the MHP, and specifically we call it development loans, but other notes receivable, that's secured by land. And, you know, if,
Speaker Change: You know notes mature then we're going to we're going to take that land back and and we'll monetize it you know when the price makes sense but you know there's a decent amount of equity in that you know portfolio as well so so when we sell it
You know the returns look pretty good [inaudible]
Okay, and that brings up a good point, maybe.
Speaker Change: if you can speak broadly about any concerns that investors may have around.
Speaker Change: The Delinquency Squeeze Consumers, kind of a tough environment today on your ability to take back and be covered if a loan goes bad, whether it's MHP or consumer.
Speaker Change: Yeah, I think they're a little bit different between the two portfolios, so maybe we start on, on the retail portfolio. You know, we've seen,
Speaker Change: You know, past due balances creep up a little bit, but it's certainly not to a point, you know, where we're concerned. And, you know, I think what's important to understand is...
You know, there are
Speaker Change: There are several features of that loan portfolio that make the recovery really strong. I mean, one is you've seen the prices of homes.
you know, since COVID go up, you know, essentially 40%.
Speaker Change: and so if you got a meaningful down payment and somebody's made you know payments on homes
Speaker Change: for a period of time. You know, we're currently selling repos now for, you know...
Speaker Change: Around 100% of the principle that's outstanding on those.
Speaker Change: The other piece is, there are features of that.
Speaker Change: On the MHP side, you know, and really the key to both of these portfolios is keeping the monthly payments affordable, you know, if a park owner is able to buy houses from us and finance them through us.
Speaker Change: and we keep their monthly payment low, then they're able to rent that house out to a rentor and generate a profit.
and as long as they get those houses set up.
Speaker Change: You know, the numbers work. I think where people get into trouble is...
Speaker Change: They take houses, they don't get them set up and they're paying, you know, they're paying us and not generating rental income. So we keep a close eye on that.
Speaker Change: and on the MHP side, there's a lot of levers for
Speaker Change: for Recovery and obviously this year we tested that in a big way and ultimately didn't flush a dollar of.
Speaker Change: You know, that through our income statement, and you know, we've had some, you know, significant gains as we've monetized those assets.
Speaker Change: Okay. Next question for me is just looking at, you know, changing immigration policies, you know, potential hired deportations. Curious any potential impact this could have, you know, both on customers and demand, as well as maybe your labor market.
Yeah, I mean, you know, it's up.
Speaker Change: Public Company. I mean, we've been e-verifying for years, so everyone we hire goes through that process.
You know, I think even...
Speaker Change: with some of the economic indicators down. I think any manufacturer is struggling with labor and so that's something that we continue to keep a close eye on but aren't worried about that necessarily impacting our workforce.
You know, when we, when we finance someone,
Speaker Change: Purchasing a home. The underwriting criteria requires certain things from these borrowers, and these aren't people that came across the border and decided to buy a mobile home.
Speaker Change: These are people that have been in the country for years and they have stable jobs and they can afford that house.
Speaker Change: So, while there's noise in the market, we haven't seen a material change in our business from the immigration policies.
Speaker Change: Perfect. And last one for me, SGNA, certainly down at good healthy levels here. I'm just curious, the sustainability and if there's anything we should have on our radar as far as maybe increasing, you know, SGNA expenses here in 2025.
Speaker Change: Well, there's, as you know, Mark from Coverness for a long time, SGNA is a hot topic.
Speaker Change: with the board and always under a microscope, so we're going to continue to run the business the same way, and I don't see any material changes in SGNA.
Excellent. Thank you.
Yeah, thanks, Mark.
Thank you.
Speaker Change: Our next question comes from the line of Daniel Moore with CJS Securities, please proceed.
Speaker Change: Hi, this is Will on for Dan. Can you talk about your expectations for production rates across your three plants for Q1 and first half of 2025?
Hey!
Speaker Change: Yeah, well, like I mentioned in the prepared remarks, I wish I had a crystal ball for 2025, but there's obviously a lot of moving pieces.
We've been really focused on-
Speaker Change: You know, the spring-selling season with a good backlog and or, you know, head into a mobile home show.
Speaker Change: Next week, we're, you know, we hope to continue to build that backlog. So, you know, our production is still not where we want it.
Speaker Change: I think, you know, but I think ultimately we're moving in the right direction. George is a little bit slower than we'd like.
Speaker Change: Continue to grow the Parkside of the business in Georgia.
The dealer's slide lags.
You know, but we're focused on building a backlog there.
Speaker Change: And, you know, and ramping production, you know, from the levels that we're at right now, but, you know, overall.
Speaker Change: I'm comfortable with it but it's our number one focus right now is ramping up production and getting home shipped.
Speaker Change: Thank you, and then just, you know, maybe you could add a little bit more color to back logs exiting this quarter, you know, compared to last quarter and year-over-year.
Yeah, I mean...
Speaker Change: If you followed the company for, you know, that you guys have the past couple of years, um,
Speaker Change: It's been a little choppy. We took pricing up with COVID.
Speaker Change: I think our prices were elevated when some of our competitors came off of pricing.
Speaker Change: and now with terrorists and with the labor market, that pricing's normalized and
You know, and the backlog looks pretty healthy.
Speaker Change: We don't report a, you know, a backlog number, but certainly in Texas.
Speaker Change: You know, we've got a, like we've got a pretty meaningful backlog and in Georgia, we're working on it.
Thank you very much.
Speaker Change: Thank you and as I remind their ladies and gentlemen, if you do have a question, press start one one on your telephone.
Speaker Change: As I see no further questions in view, I will turn the call back to Duncan Bates for his final comments.
Speaker Change: Thank you for joining today's earning scoff. We appreciate your interest in legacy housing.
Speaker Change: If you're in Galaxy for the mobile home show next week, please come by and see us. Operator, this concludes our call.