Q1 2025 Legacy Housing Corp Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Legacy Housing Corporation, Q1 2025 earnings conference call.
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 ask a question during this session, you will need a press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Max Africk, General Counsel. Please go ahead.
Speaker Change: Good morning. This is Duncan Bates, Legacy's president and CEO . Thank you for joining Legacy's first quarter 2025 conference call. Max Africk, our 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 which are subject to risks and uncertainties and management may make additional forward-looking statements and response to your questions.
Max Africk: Actual results may differ from management's current expectations, and any projections as to the company's future performance represent management's best estimates as up to today's call. Legacy, moreover, assumes no obligation to update these projections in the future unless otherwise required by applicable law.
Thanks, Bats.
Max Africk: Jeff Fiedelman, Legacy's Chief Financial Officer, will discuss our first quarter financial performance and I'll provide additional corporate updates and open the call for Q&A. Jeff, thanks Duncan.
Speaker Change: Product Sales primarily consists of direct sales, commercial sales, inventory, finance sales, and retail stores sales.
Jeff Fiedelman: Product sales decreased $6.5 million or 21.2% during the three months ended March 31, 2025, as compared to the same period in 2024.
Speaker Change: This decrease was driven by a decrease in unit volume shift, primarily in mobile home park sales, retail sales, direct sales, and other product sales categories.
R.R.S.
Thank you.
Speaker Change: For the three-month-sended March 31st, 2025, our net revenue per product sold increased by 23.1% as compared to the same period in 2024.
Speaker Change: The increase is primarily due to a decrease in units sold to mobile home parks, which are sold at wholesale prices, and an increase in units sold to consumers, which are sold at higher retail prices.
Speaker Change: Consumer MHP and dealer loans interest income did not change during the three months ended March 31st, 2025, as compared to the same period in 2024.
Speaker Change: Between March 31st, 2025 and March 31st, 2024 are consumer loan portfolio increased by 20.3 million.
Speaker Change: Our MHP loan portfolio increased by 20.1 million, and our dealer finance notes decreased by 2.4 million.
Other revenue primarily consists of contract deposit for features.
Speaker Change: Consignment fees, commercial lease rents, land sales, service fees, and other miscellaneous income.
Speaker Change: and decreased 1.0 million or 59.2% during the three months ended March 31, 2025, as compared to the same period in 2024.
Speaker Change: This decrease was primarily due to a 1.1 million decrease in forfitted deposits.
Speaker Change: Partially offset by a 0.2 million increase in portfolio fees and service revenue and land sales and a net 0.1 million decrease in other miscellaneous revenue.
Speaker Change: Cost of product sales decreased 3.3 million or 16.0 percent during the three-month and at March 31st, 2025.
Speaker Change: as compared to the same period in 2024. The decrease in costs is primarily related to the decrease in unit sold.
Speaker Change: Gross Profit Margin was 29.2% of product sales during the three-month-ended March 31st, 2025, as compared to 33.6% during the three-month-ended March 31st, 2024.
Speaker Change: The cost of other sales was 0.5 million during the three-month-centred March 31st, 2025.
Speaker Change: Selling general and administrative expenses increased 0.4 million or 6.9 percent during the three-month extended March 31st, 2025, as compared to the same period in 2024.
We had a $0.6 million increase in legal expense.
0.5 million increase in low-moss prohibition.
and a 0.3 million increase in other miscellaneous expense.
Speaker Change: Offset by a 0.4 million decrease in warranty expense, a 0.3 million decrease in payroll and related expense, and a 0.3 million decrease in professional fees.
Speaker Change: Other income decreased 0.6 million or 35.5% during the three months ended March 31, 2025, as compared to the same period in 2024.
Speaker Change: That income decreased 32.1% to 10.3 million in the first quarter of 2025 compared to the first quarter of 2024.
Speaker Change: Basic earnings per share decreased to 43 cents per share or 30.6% in the first quarter of 2025 compared to the first quarter of 2024.
Speaker Change: As of March 31st, 2025, we had approximately 3.4 million in cash compared to 1.1 million as of December 31st, 2024.
Speaker Change: We did not draw on the revolver in the first quarter. The outstanding balance of the revolver was zero as of both March 31st, 2025 and December 31st, 2024.
Speaker Change: At the end of the 1st quarter 2025, Legacy's book value per basic share outstanding was $20 in 87 sets, an increase of 13.1% from the same period at 2024.
Thanks, Chef.
Speaker Change: Obviously, first quarter shipments are lower than we would have liked. I want to discuss the steps we have taken to address product sales growth moving forward.
Speaker Change: After the last turning school in March, I flew with our founders to the Biluxi.
Mobile Home Show
Speaker Change: It was a good opportunity for the three of us to walk houses, speak with customers, and discuss financing solutions.
Speaker Change: First, our product line needs to be simplified. Over time, we added too many floor plans, color choices, options, etc. We analyzed the sales data to dramatically reduce the number of choices and simplified pricing.
Speaker Change: This change will allow our team to focus on the core products and gain efficiency in the plants.
Next.
Speaker Change: Our park financing product has historically catered to the rental model. Our customers purchase his homes and rent them to tenants.
Speaker Change: Some community owners, especially in the Texas markets, want the flexibility to sell homes.
Speaker Change: We introduced a modification to the MHP program that accommodates this subject to certain conditions. I believe this change will broaden our customer base and our core markets moving forward.
Speaker Change: Finally, management needs to allocate more time to sales, marketing, and the land development projects.
Speaker Change: We hired industry veterans in key positions, including General Manager and Fort Worth, Director of Engineering for the Company, a purchasing manager for the company, and a Texas-based regional manager for our company owned retail locations.
Speaker Change: We operate this business closely but understand the importance of senior management across manufacturing and retail to allocate our time effectively.
Speaker Change: This was a necessary reset, and I'm encouraged by the feedback to date. Currently, production in Texas is up, and we're working hard to ship houses and extend our backlog.
Speaker Change: Moving to the market, we are now in the spring-selling season. Despite market uncertainty and tariff risks, our outlook for the remainder of 2025 is positive.
Speaker Change: Independent dealers across most of the footprint are healthy. We saw some slowdown in our South Texas dealers post-election during the first quarter, but sales are now recovering.
Speaker Change: at our company-owned stores, unit sales in April of 2025 were the highest in three years.
May 2025 is tracking equally as strong.
Speaker Change: We view retail finance as a leading indicator on the dealer side, a couple of recent data points.
Speaker Change: Retail loan originations in April 2025 were the highest in one month since going public.
Speaker Change: Originations year-to-date through April of 2025 or up 51% over last year.
Speaker Change: Community shipments were lower than expected during the first quarter due to broader market uncertainty and timing delays with specific projects.
Speaker Change: Last week I spoke with several community owners at the MHI conference. Demand for rentals and most regions is solid and M&A activity is improving.
Speaker Change: Less restrictive zoning, access to government financing solutions, and updates to the HUD code will have a long-term positive impact on our industry if executed.
Speaker Change: Delinquencies across the Loan Portfolios remain low and recovery rates continue to be strong.
Speaker Change: There were no material land sales during the first quarter, but we will continue to monetize non-core land holdings throughout the year.
Speaker Change: Near Austin, we continue pushing forward in Bastrop County with our 1100 pad development.
Speaker Change: I drove the property a few weeks ago. The roads and utilities are completed in phase one. We still anticipate selling lots in phase one this summer.
Speaker Change: Phase II, the rental community, is not far behind. We are building the roads and water treatment plant now. A lot rent in the areas is over $1,000 a month, and we believe this property is extremely valuable. We just need to finish it.
Speaker Change: Despite this off-quarter, we're long-term focused and have plenty of balance sheet to repurchase shares at current trading levels.
Speaker Change: We continue to believe in the long-term fundamentals, manufactured housing, and the value proposition that Legacy Housing provides as customers.
Speaker Change: Operator, this concludes our prepared remarks. Please begin the Q&A. Thank you, as a reminder to ask a question, please 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. One moment will we compile our Q&A roster.
Speaker Change: Our first question is going to come from the line of Mark Smith with Lake Street. Your line is open, please go ahead.
Speaker Change: I'm going to be talking about the the the the the the the the the the the the the the
Mark Smith: Hi guys, I wanted to ask a little bit about pricing at first. It sounds like the main reason for average price for home going up so much as it's just due to the mix. But can you talk about, you know, any pricing maybe that you took during the quarter?
Mark Smith: Yeah, so the primary driver of the increase in average selling price was, you know, was the mix.
You know, soft quarter with shipments to mobile home parks.
Mark Smith: But we had a pretty strong quarter with, you know, with retail sales and inventory finance sales, you know, which shifted the mix, you know, way up, I think, you know.
to far up. You know, in general, we're obviously looking, you know,
Mark Smith: You know all the tariffs around raw materials and we push through a price increase.
In February , we're planning to push through another price increase.
Mark Smith: in mid-June. And I think the good news is with the announcement yesterday, you know, the price increase is not nearly as severe as we were expecting.
DeForest Hinman, Daniel Moore,
Mark Smith: Okay. And then just back on MHP sales here, you know, how much of this is...
Mark Smith: You know, just just less demands, you know, from from parks versus maybe timing of orders, you know, if you if you could quantify or speak to maybe, you know, orders, you know, your backlog, you know, that'd be great. Sure.
I think it's a combination of both.
We did have some shipments.
Both out of, you know, out of all all.
Mark Smith: All three plants, are all three regions, so over in Georgia.
Mark Smith: They were waiting on some raw material in order to get houses shipped and so you know those are three meaningful orders that did slip.
Mark Smith: But, you know, we've been pushing hard on park sales. I mentioned in my comments, you know, in the Texas region, our financing product works really well for community owners that are renting the homes.
Mark Smith: So they buy the homes, they take the depreciation, they rent the homes, verses, you know, setting up homes and, you know, selling them in your park. And so I think is...
Mark Smith: You know, it's guys in our Texas territories, you know, it's been a lot of money by in parks, they're trying to, you know, unlock.
Mark Smith: or get some of their, return some of their capital by, you know, selling houses and so that's
Mark Smith: A modification that we've, you know, we've done and we're just rolling out now. The feedback's been pretty good, but I think that allows us to pick up some of the guys that, you know, have shifted more toward.
Mark Smith: 10-odown tones versus the traditional rental model that we believe in.
Speaker Change: Okay, and then lastly, Duncan, can you just remind us, you know, any kind of capital spending or needs or use of cash kind of this year that are outside of the norm?
Nothing outside the norm. You know, we...
Speaker Change: We're really pushing hard to get Bastrot completed, so, you know, we've got some.
Additional Capitol going into that.
Speaker Change: You know, we're looking at opportunities all the, you know, all the time, whether it's, you know, to add to the dealer base or
Speaker Change: You know, to add to the loan portfolio or to even add, you know, manufacturing capacity, so
Speaker Change: We are currently monetizing some non-core real estate. You'll see that.
Speaker Change: flowing in, and then, you know, outside of that, it's developments, retail manufacturing capacity, and adding more notes to the portfolio.
Excellent. Thank you.
Speaker Change: Thank you. Thank you one moment for our next question. And our next question is going to come from the line and Daniel Moore with CJA Securities. Your line is open. Please go ahead.
Speaker Change: Hi, this is Leon for Dan. Can you talk about your expectations for production rates across your three plans for Q2 relative to Q1? And what can you tell us about your discussions with customers in both retail and community markets and the cadence of order rates in Q1 and thus foreign Q2?
Thank you. Yeah, well, you know, we came out of...
Speaker Change: Like a seasonably slower period, I think that we're pretty enthusiastic about the dealer side of business and especially our company owned retail stores and you see that in the retail, you know, low-interroginations.
Speaker Change: Parkside has been slower, it's lumpier, if you get large orders that are held for permitting or because the pads aren't finished or they can't get them set quick enough.
Speaker Change: It could have a meaningful impact on your quarter and that's what we saw here.
You know, I mentioned in my comments.
that we've really simplified the product portfolio.
Speaker Change: and we're rolling that out, you know, to the customer base now, but I think you can imagine in all the downstream effects of having.
Speaker Change: to many, you know, additions to the house. So we've, you know, we've really streamlined that which will help us get production up, you know, even higher in the Texas plants where we have orders in Georgia, you know, Georgia continues to sell and they continue to build.
Speaker Change: and we're really focused on rebuilding the dealer base.
Speaker Change: there and you know adding new independent dealers so I think is you know as the team continues to make progress there we'll be able to put production in Georgia higher than you know where we are now. [inaudible]
Speaker Change: by certainly production in Texas for a Q2 will be higher than Q1.
Speaker Change: Thank you, and then how should we think about gross margin and operating margins in Q and the back half of the year relative to Q1?
Speaker Change: I'd say, you know, this is probably, you know, the lower end of the range, right? We're under absorbed on labor. We just pushed through a price increase in February . You know, we've got another one coming and June .
Speaker Change: or keeping an eye on, you know, material prices, but I think, you know, somewhere around 30% seems realistic.
Thank you.
Speaker Change: Thank you, and then just one more. How much of a sticking point of tariffs and trade uncertainty been for your retail and community customers and conversely do you see the reduction in proposed tariffs as a meaningful potential catalyst for demand?
Speaker Change: I think it's, you know, the terrorists, you know, when our business compared to a lot of other industries.
Speaker Change: You know, or not a, I mean, they're a real consideration but they're not a huge consideration you know, we manufacture
Speaker Change: All of our products here and the vast majority of the raw materials that go into one of our homes or domestically sourced. But I think the tougher thing for the business environment, regardless of what industry you're in is just the uncertainty.
Speaker Change: because everyone's impacted, but I think you're hesitant to go out and make a large investment or add people to the team, just give in all of the moving pieces over the past few months.
Speaker Change: So I think if we continue to move to some normalcy, that will be good for our industry as well as the country.
Thank you.
Speaker Change: Thank you and again ladies and gentlemen if you would like to ask a question please press star 1-1 on your telephone
Speaker Change: And our next question is going to come from a line of Stethnolotapy with Kenan-Kaneel-Capital-LLC. Your line is open. Please go ahead.
Speaker Change: All right, hold on just one moment please. Stefano, if you can hear me, please dial back in and press star 1-1.
Speaker Change: Alright, through your Linus open, you can go ahead and speak.
Skyline Tranquil, where they said that the ship meant.
in a race on the company, and I'm just asking why...
and the Hapgood Shipments versus you guys.
Thank you for your time and attention.
Speaker Change: Well, I think it comes down to a couple of things. We just talked about we had some delayed shipments and I think a combination of pricing and the complexity of our product.
Speaker Change: Has, you know, has hurt us this quarter. We've also had a lot of, you know, new people on the sales team, but I feel, you know, I feel good about finishing the year strong.
Speaker Change: I think that pricing across the market has been really competitive and we've chosen to keep our pricing where it is.
Speaker Change: You know, even at lower volumes. And so, you know, as things pick up here, I think, you know, our pricing's fallen. In line, the floor we've historically played and the backlog will continue to build.
. . . .
Speaker Change: Okay, so what more you will consider this to be more something?
oraclee,
That's correct. Yeah, I think the industry, you know, we're...
Speaker Change: You know, we're halfway through May right now. So, you know, a lot of things have happened since the end of the quarter, but I think overall, you know, I'm very...
Speaker Change: Confident in the industry. And I think others are too, you know, fordability is a real challenge and if you look at the price points of our homes and the financing solutions that we offer.
Speaker Change: I think if the industry gets any type of regulatory relief from the new administration, it could have a really positive impact, but we're expecting a positive year.
Thank you.
Thank you.
Speaker Change: Thank you, and I would now like to have the conference back to Duncan Bates for any further remarks.
Speaker Change: Thank you for joining today's earnings call. We appreciate your interest in Legacy Housing. Operator, this concludes our call.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.
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