Legacy Housing Q1 2025 Earnings Report

Legacy Housing EPS Results

• Actual EPS: $0.41
• Consensus EPS: $0.57
• Beat/Miss: Missed by -$0.16
• One Year Ago EPS: N/A

Legacy Housing Revenue Results

• Actual Revenue: $35.70 million
• Expected Revenue: $44.13 million
• Beat/Miss: Missed by -$8.43 million
• YoY Revenue Growth: N/A

Legacy Housing Announcement Details

• Quarter: Q1 2025
• Date: 5/12/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 13, 2025
• Conference Call Time: 11:00AM ET

Legacy Housing (NASDAQ:LEGH) engages in the building, sale, and financing of manufactured homes and tiny houses primarily in the southern United States. It manufactures and provides for the transport of mobile homes, including 1 to 5 bedrooms with 1 to 3 1/2 bathrooms; and provides wholesale financing to dealers and mobile home parks, as well as retail financing to consumers. The company also offers inventory financing for its independent retailers; consumer financing for its products; and financing to manufactured housing community owners that buy or lease its products for use in their rental housing communities. In addition, it involved in financing and developing new manufactured home communities. The company markets its homes under the Legacy brand through a network of independent retailers and company-owned stores; and directly to manufactured home communities. Legacy Housing Corporation was founded in 2005 and is headquartered in Bedford, Texas.

Legacy Housing Q1 2025 Earnings Call Transcript

Key Takeaways

• Product sales fell 21.2% due to lower unit volumes despite a 23.1% increase in net revenue per product sold.
• Net income dropped 32.1% to $10.3 million and EPS declined 30.6% to $0.43 year-over-year.
• Management simplified the product line by reducing floor plans, color choices and options to improve plant efficiency and focus.
• Retail segment saw April unit sales hit a three-year high and retail loan originations rose 51% year-to-date through April.
• The modified mobile home park financing program now accommodates home sales to tenants, broadening the customer base in core markets.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Legacy Housing Corporation Q1 twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your speaker today, Max Africk, General Counsel. Please go ahead.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Good morning. This is Duncan Bates, Legacy's President and CEO. Thank you for joining Legacy's first quarter twenty twenty five conference call. Max Afrig, our General Counsel, will read the safe harbor disclosure before getting started. Max?

[Max Africk, General Counsel at Legacy Housing Corporation]

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 in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. 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 of today's call. Legacy, moreover, assumes no obligation to update these projections in the future unless otherwise required by applicable law.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Thanks, Max. Jeff Fiedelman, Legacy's Chief Financial Officer, will discuss our first quarter financial performance, then I'll provide additional corporate updates and open the call for Q and A. Jeff?

[Jeff Fiedelman, CFO at Legacy Housing Corporation]

Thanks, Duncan. Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $6,500,000 or 21.2% during the three months ended 03/31/2025, as compared to the same period in 2024. This decrease was driven by a decrease in unit volumes shipped primarily in mobile home park sales, retail sales, direct sales, and other product sales categories. For the three months ended 03/31/2025, our net revenue per product sold increased by 23.1 as compared to the same period in 2024.

[Jeff Fiedelman, CFO at Legacy Housing Corporation]

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. Consumer, MHP and dealer loans interest income did not change during the three months ended 03/31/2025 as compared to the same period in 2024. Between 03/31/2025 and 03/31/2024, our consumer loan portfolio increased by 20,300,000 our MHP loan portfolio increased by 20,100,000.0 and our dealer finance notes decreased by $2,400,000 Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, land sales, service fees, and other miscellaneous income, and decreased 1,000,000 or 59.2% during the three months ended 03/31/2025, as compared to the same period in 2024. This decrease was primarily due to a $1,100,000 decrease in forfeited deposits, partially offset by a $200,000 increase in portfolio fees and service revenue and land sales and a net $100,000 decrease in other miscellaneous revenue. Cost of product sales decreased $3,300,000 or 16% during the three months ended 03/31/2025, as compared to the same period in 2024.

[Jeff Fiedelman, CFO at Legacy Housing Corporation]

The decrease in costs is primarily related to the decrease in units sold. Gross profit margin was 29.2% of product sales during the three months ended 03/31/2025, as compared to 33.6% during the three months ended 03/31/2024. The cost of other sales was $500,000 during the three months ended 03/31/2025. Selling, general and administrative expenses increased 400,000 or 6.9% during the three months ended 03/31/2025, as compared to the same period in 2024. We had a $600,000 increase in legal expense, a $500,000 increase in loan loss provision and a $300,000 increase in other miscellaneous expense, offset by a $400,000 decrease in warranty expense, a $300,000 decrease in payroll and related expense and a $300,000 decrease in professional fees.

[Jeff Fiedelman, CFO at Legacy Housing Corporation]

Other income decreased 600,000.0 or 35.5% during the three months ended 03/31/2025 as compared to the same period in 2024. We had a decrease of $800,000 in non operating interest income, primarily as a result of the settlement agreement that we reached with a significant borrower in the third quarter of twenty twenty four, offset by a decrease of $200,000 in interest expense. Net income decreased 32.1% to $10,300,000 in the first quarter of twenty twenty five compared to the first quarter of twenty twenty four. Basic earnings per share decreased to $0.43 per share or 30.6% in the first quarter of twenty twenty five compared to the first quarter of twenty twenty four. As of 03/31/2025, we had approximately $3,400,000 in cash compared to $1,100,000 as of 12/31/2024.

[Jeff Fiedelman, CFO at Legacy Housing Corporation]

We did not draw on the revolver in the first quarter. The outstanding balance of the revolver was zero as of both 03/31/2025 and 12/31/2024. At the end of the first quarter twenty twenty five, Legacy's book value per basic share outstanding was $20.87 an increase of 13.1% from the same period of 2024.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Thanks, Jeff. Obviously, first quarter shipments were lower than we would have liked. I want to discuss the steps we have taken to address product sales growth moving forward. After the last earnings call in March, I flew with our founders to the Biloxi Mobile Home Show. It was a good opportunity for the three of us to walk houses, speak with customers, and discuss financing solutions.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

We left this show aligned on several important changes to our products, park financing program, and team. First, our product line needs to be simplified. Over time, we added too many floor plans, color choices, options, etcetera. We analyzed the sales data, dramatically reduced the number of choices, and simplified pricing. This change will allow our team to focus on the core products and gain efficiency in the plants.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Next, our park financing product has historically catered to the rental model. Our customers purchase homes and rent them to tenants. Some community owners, especially in the Texas markets, want the flexibility to sell homes. We introduced a modification to the MHP program that accommodates this subject to certain conditions. I believe this change will broaden our customer base in our core markets moving forward.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Finally, management needs to allocate more time to sales, marketing, and the land development projects. We hired industry veterans in key positions, including general manager in 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. We operate this business closely, but understand the importance of senior management across manufacturing and retail to allocate our time effectively. 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.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

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. 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.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

At our company owned stores, unit sales in April of twenty twenty five were the highest in three years. May twenty twenty five is tracking equally as strong. We view retail finance as a leading indicator on the dealer side. A couple of recent data points. Retail loan originations in April 2025 were the highest in one month since going public.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Originations year to date through April of twenty twenty five are up 51% over last year. Community shipments were lower than expected during the first quarter due to broader market uncertainty and timing delays with specific projects. Last week, I spoke with several community owners at the MHI conference. Demand for rentals in most regions is solid and M and A activity is improving. I was encouraged by HUD Secretary Scott Turner's speech and the new administration's views on regulatory reform, 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.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Delinquencies across the loan portfolios remain low and recovery rates continue to be strong. There were no material land sales during the first quarter, but we will continue to monetize noncore land holdings throughout the year. Near Austin, we continue pushing forward in Bastrop County with our 1,100 pad development. I drove the property a few weeks ago. The roads and utilities are completed in phase one.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

We still anticipate selling lots in phase one this summer. Phase two, the rental community, is not far behind. We are building the roads and water treatment plant now. Lot rent in the area is over a thousand dollars a month, and we believe this property is extremely valuable. We just need to finish it.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Share repurchases during the first quarter were limited by a narrow window and trading restrictions. Despite the soft quarter, we are long term focused and have plenty of balance sheet to repurchase shares at current trading levels. We continue to believe in the long term fundamentals of manufactured housing and the value proposition that legacy housing provides its customers. Operator, this concludes our prepared remarks. Please begin the Q and A.

[Operator]

Thank you. Our first question is going to come from the line of Mark Smith Your line is open. Please go ahead.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets, LLC]

Hi, guys. I I wanted to ask a little bit about pricing at first. It sounds like the the main reason for, you know, average price per home going up so much is is just due to the mix. But but can you talk about, you know, any pricing maybe that you took during the quarter?

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Yeah. So the primary driver of the increase in average selling price was, you know, was the mix. So, obviously, you know, soft quarter with shipments to mobile home parts, but we had a pretty strong quarter with, with retail sales and inventory finance sales, which shifted the mix way up, I think too far up. In general, we're obviously looking closely into, you know, all the tariff, you know, all the tariffs around raw materials. And we pushed through a price increase in February.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

We're planning to push through another price increase in mid June. And I think the good news is with the announcement yesterday, you know, the the price increase is is not nearly as severe as, you know, as we were expecting.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets, LLC]

Okay. And then just back on MHP sales here. You know, how much of this is, just less demand from parks versus maybe timing of orders? If you could quantify or speak to maybe orders, your backlog, that would be great.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Sure. I think it's a combination of both. We did have some shipments both out of all three plants or all three regions. So over in Georgia, we had a pretty large order that got pushed into the second quarter. In Texas, we had the same thing.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

And up north with our partnership, 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. But, you know, I we've been we've been pushing hard on on park sales. I I mentioned in my comments, you know, in in the Texas region, our financing product works really well for community owners that are renting the homes. So they buy the homes.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

They take the depreciation. They rent the homes versus, you know, setting up homes and and, you know, selling them in in your park. And so I think as, you know, as as guys in in our Texas territories, you know, have have spent a lot of money buying parks. They're trying to, you know, unlock or get some of their return some of their capital by, you know, selling houses. And so that's a modification that we've, you know, we've done, and we're we're just rolling out now.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

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 tenant owned homes versus the traditional rental model that we believe in.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets, LLC]

Okay. And then lastly, Duncan, can you just remind us any kind of capital spending or needs or use of cash kind of this year that are outside of the norm?

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Nothing outside of the norm. We're really pushing hard to get Bastrop completed. So, you know, we've got some additional capital going into that. You know, we're we're looking at opportunities all the, you know, all the time, whether it's, you know, to add to the dealer base or, you know, to add to the loan portfolio or to even add, you know, manufacturing capacity. So we are we're currently monetizing, you know, some noncore real estate.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

You'll see that flowing in. And then, you know, outside of that, it's it's developments, the retail manufacturing capacity and and adding more notes to the portfolio.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets, LLC]

Excellent. Thank you. Thank you.

[Operator]

Thank you. One moment for our next question. And our next question is going to come from the line of Daniel Moore with CJS Securities. Your line is open. Please go ahead.

[Will Gildea, Equity Research Associate at CJS Securities]

Hi. This is Will on for Dan. Can you talk about your expectations for production rates across your three plants 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 far in Q2? Thank you.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Hey, Will. Yeah. Well, you know, we came out of a, like, seasonably slower period. I think, you know, we're we're pretty enthusiastic about the dealer side of the business and especially our company owned retail stores. And, you know, you see that in the in the retail, you know, loan originations.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Parkside has been slower. It's lumpier. You know, if you get large orders that are that are held for, you know, for permitting or because the pads aren't finished or, you know, they can't get them set quick enough, it could have a, you know, a meaningful impact on on your quarter, and that's what we saw here. I mentioned in my comments that we've really simplified the product portfolio, and we're rolling that out to the customer base now. But I think you can imagine all the downstream effects of having too many color options and too many floor plans and too many additions to the house.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

So we've really streamlined that, which will help us get production up even higher in the Texas plants where we have orders. In Georgia, Georgia continues to sell and they continue to build. And we're really focused on rebuilding the dealer base there and adding new independent dealers. So I think as the team continues to make progress there, we'll be able to push production in Georgia higher than where we are now. But certainly, production in Texas for Q2 will be higher than Q1.

[Will Gildea, Equity Research Associate at CJS Securities]

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?

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

I'd say this is probably you know, the lower end of the range. Right? We're we're under absorbed on labor. We just pushed through a price increase in February. You know, we've got another one coming in June.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

We're keeping an eye on, you know, material prices, but I think, somewhere around 30% seems realistic.

[Will Gildea, Equity Research Associate at CJS Securities]

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?

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Yes. I think it's the tariffs in our business compared to a lot of other industries you know, are not a I mean, they're they're a real consideration, but they're not a huge consideration. You know, we we manufacture all of our products here, and and the vast majority of the raw materials that go into one of our homes are are domestically sourced. But I I think the tougher thing for the business environment, regardless of what industry you're in, is just, you know, the uncertainty because everyone's impacted. But, I mean, I I think you you know, you're hesitant to go out and make a large investment or, you know, add people to the team just given all of the moving pieces over the past few months.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

So I think if we, you know, continue to to move to some normalcy, you know, that'll be that'll be good for, you know, for our industry as as well as the country.

[Will Gildea, Equity Research Associate at CJS Securities]

Thank you.

[Operator]

Thank you. And our next question is going to come from the line of Stefano Lattepe with Canneal Capital LLC. Your line is open. Please go ahead. Stefano, your line might be muted.

[Operator]

Alright. Hold on just one moment, please. Stefano, if you can hear me, please dial back in and press 11. You.

[Operator]

Alright. Sir, your line is open. You can go ahead and speak.

[Stefano Latapy, Head Trader at Cannell Capital LLC]

Hi. I have a question.

[Stefano Latapy, Head Trader at Cannell Capital LLC]

This morning, Craig Hallum came with a note in Capco and Skylane Champion where they said that the shipments were strong for the quarter, and they're expecting a bit more rate from the company. So I'm just asking why they have good shipments versus you guys.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Well, I think it it comes down to a couple of things. I mean, we just talked about, we had some delayed shipments. And I think a combination of pricing and the complexity of our product has hurt us this quarter. We've also had a lot of new people on the sales team. But I feel good about finishing the year strong.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

I think that pricing across the market has been really competitive. And we've chosen to keep our pricing where it is even at lower volumes. And so, as things pick up here, I think our pricing has fallen in line with where we've historically played and the backlog will continue to build.

[Stefano Latapy, Head Trader at Cannell Capital LLC]

Okay. So it's what more you will consider this to be more something specifically to you guys due to where you're spending on the coal rather than the industry being weak?

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

That's correct. Yes. I think the industry we're halfway through May right now. So a lot of things have happened since the end of the quarter. But I think, overall, you know, I'm very confident in the industry, and I think others are too.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

You know, affordability is a real challenge. And if you look at the price points of our homes and the financing solutions that we offer. 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.

[Stefano Latapy, Head Trader at Cannell Capital LLC]

Thank you.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Thank you.

[Operator]

Thank you. And I would now like to hand the conference back to Duncan Bates for any further remarks.

[Duncan Bates, President and Chief Executive Officer at Legacy Housing Corporation]

Thank you for joining today's earnings call. We appreciate your interest in Legacy Housing. Operator, this concludes our call.

[Operator]

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day. Hi.

Participants

Executives

• Duncan Bates, President and Chief Executive Officer
• Max Africk, General Counsel
• Jeff Fiedelman, CFO

Analysts

• Mark Smith, Senior Research Analyst at Lake Street Capital Markets, LLC
• Will Gildea, Equity Research Associate at CJS Securities
• Stefano Latapy, Head Trader at Cannell Capital LLC