Legacy Housing Corporation Q4 2025 Earnings Call - Pricing Held, Volumes Slid, Provisions Pinched Profits

Operator: Good day, and thank you for standing by. Welcome to the Legacy Housing Corporation Q4 2025 earnings call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. After the speaker’s presentation, there will be a question-and-answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. I would now like to hand the conference over to your speaker today, Curtis Hodgson, Executive Chairman.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Good morning. This is Curtis Hodgson, Executive Chairman. I’m here with Jon Langbert, our Chief Financial Officer. Thank you for joining our fourth quarter and full year 2025 conference call. Jon will read the Safe Harbor disclosure before we get started.

Jon Langbert, Chief Financial Officer, Legacy Housing Corporation: Great. Before we begin, I’m reminding 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. Actual results may differ from management’s current expectations. We refer you to a more detailed discussion of the risks and uncertainties in the company’s annual report filed yesterday with the Securities and Exchange Commission. Any projections as to the company’s future performance represent management’s estimates as of today’s call. Legacy Housing assumes no obligation to update these projections in the future unless otherwise required by applicable law.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Thanks, Jon Langbert. I’m going to turn the call over back to Jon Langbert now for a review of our full year and fourth quarter 2025 performance, after which I will speak briefly with my thoughts and some additional corporate updates. We’ll open the call up for Q&A.

Jon Langbert, Chief Financial Officer, Legacy Housing Corporation: Thanks, Kurt. Let’s get straight to the numbers. I’ll cover the full year first, then give some color on how the fourth quarter shaped up specifically. For the full year ended December 31st of 2025, total net revenue was $164.6 million, compared to $184.2 million in 2024, a decrease of $19.6 million or 10.7%. Product sales decreased $12.4 million or 9.6% to $116.9 million. We sold 1,703 units in 2025, down from 2,129 in 2024, a decline of about 20%. However, net revenue per unit sold increased 13% to $68,700 from $60,800 in 2024 as we implemented price increases to offset rising raw material costs and the impact of tariffs on goods imported from China.

Tariffs continue to add roughly $1,200 to the cost of the standard floor plan. The primary driver of the product sales decline was commercial sales to mobile home park customers, which fell $16.8 million or 30% as park operators scaled back orders due to capital caution following sharp cost inflation, already high occupancy rates, and tighter financing conditions. Partially offsetting this were increases in direct sales of $2.3 million or 25% and retail store sales of $2.5 million or 12.7% as we focused on growing our company-owned store network. Consumer, mobile home park, and dealer loan interest income increased to $43.7 million, up $2.5 million or 6.1% compared to 2024. This increase was primarily driven by growth in the consumer loan portfolio.

Our consumer loan portfolio grew $24.7 million to $203.6 million at year-end, up 14%. The mobile home park note portfolio decreased $9.1 million to $199.1 million, primarily due to parks paying off notes early. Dealer inventory finance loans decreased to $28.4 million. Other revenue decreased $9.7 million or 71%, primarily due to an $8.8 million decrease in land sales, both of which were significant non-recurring items in 2024, as well as a $1 million decrease in forfeited deposits. On the cost side, cost of product sales decreased $5.2 million or 5.8% related to the lower unit volumes, though this was partially offset by higher raw material costs and tariff impacts.

Product gross margin was 27.5% for the full year, down from 30.4% in 2024. SG&A expenses increased $7.3 million or 33% for the full year. The primary driver was a $4.5 million increase in the loan loss provision, reflecting our growing loan portfolios and a more conservative reserving posture. Additional increases included $1 million in legal costs and half a million dollars in warranty costs. Other non-operating income decreased $9.3 million versus 2024. This comparison is heavily influenced by a significant one-time gain that ran through 2024, specifically a gain related to a loan settlement agreement and a property sale in Georgia. Absent those items, the underlying comparison is more modest.

For the full year, net income was $41.8 million compared to $61.6 million in 2024, a decrease of $19.8 million or 32.2%. Net income margin was 25.4%, down from 33.5% in 2024. Diluted earnings per share were $0.74 compared to $2.48 in 2024. From a balance sheet perspective, we ended the year with $8.5 million in cash, up from $1.1 million at the end of 2024. Our $50 million revolving credit facility with Prosperity Bank carried essentially zero balance at year-end, only $1.2 million drawn, which was associated with the AmeriCasa line of credit we assumed and subsequently paid off in January 2026. The stockholders’ equity was $528.6 million.

Book value per share was $22.20 at the end of 2025, compared with $20.45 a year ago, an increase of $1.75 per share or about 8.6%. Legacy delivered an 8.2% return on shareholders’ equity for 2025, and operating cash flow was strong at $37.2 million. Turning now to the fourth quarter specifically, it was shaped by two dynamics, stronger production volumes driven by our fall show in Fort Worth in late September, offset by continued cost pressures. Q4 net income came in at approximately $8.2 million compared to $14.5 million in Q4 of 2024, a decline of roughly 43%. Net revenue decreased $16 million or 29% compared to Q4 of 2024.

Fully $12.5 million of the net revenue decrease related to a non-recurring sale of a mobile home park project, including land and homes acquired previously in foreclosure during Q4 of 2024. Also, the decline in net income was impacted by an increase in SG&A of $3.5 million or 60% compared to 2024 as the company absorbed costs associated with the AmeriCasa transaction and increased loan loss provisions based on updates to our loan loss policy. Also, certain one-time non-operating gains and other income during Q4 of 2024 resulted in a $2.4 million decline in before-tax income in the comparison between Q4 2025 and 2024. On the positive side, the fall show generated strong dealer and park customer orders that translated into materially higher production in Q4 relative to Q3.

Loan interest income for the fourth quarter reached approximately $11.3 million, up from the prior year quarter as our consumer portfolio continued to grow throughout the year. On credit quality, we ended the fourth quarter in strong shape. At December 31, 2025, 98.4% of mobile home park loans and 97.4% of consumer loans are current or fewer than 30 days past due. We ended the full year with $8.5 million in cash and near zero leverage, a strong position from which to fund future growth. I’ll turn things back over to Curt now.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Thanks, Jon. Let me quickly cover my perception of our current market environment, then discuss a few strategic topics and share some concluding thoughts. The manufactured housing industry is continuing to face headwinds, and it did so throughout 2025. Despite persistent housing affordability problem for our markets, manufactured homes, of course, remain roughly two-thirds less expensive than site-built homes. Falling consumer confidence and tariff-driven price increases restrained growth. Industry shipments were running at an annualized rate of approximately 106,000 last year. Our own unit volumes were down approximately 20% year-over-year. The long-term structural case for affordable manufactured housing has never been stronger. The affordability gap between what we build and a site-built house continues to widen. Manufactured homes average about $98.5 per sq ft versus double that for site-built construction.

We are well-positioned to serve the roughly 63 million U.S. households with annual incomes below $75,000. Let me run through a couple specific topics. On the retail and dealer side, unit sales were lower year-over-year. The revenue rose sharply as price increases took hold and the size of our unit was up slightly. Our 14 company-owned Heritage and Tiny House retail locations were 12% higher in 2025 than 2024. On the community side, commercial sales to park owners and developers fell as operators scaled back. Our operators have been unable to raise rents as fast as price increases have been going on in our industry. We believe it’s a cyclical pause rather than a structural change. Underlying tenant demand remains stable.

Occupancy rates in the mobile home parks, particularly in large metropolitan areas, are very high. In our finance division, the loan portfolio generated $43 million in interest income last year, and we expect continued growth as consumer portfolio expands. Credit quality remains strong, over 97% current across all of our portfolios. We are seeing modestly higher charge-off activity and have increased our loan loss reserves accordingly, which is reflected in the SG&A increase John described. In fact, I believe there’s going to be around an $8 million delta between that which we pay taxes on, because we’re not allowed to deduct, loan loss provisions and our GAAP income that we’re reporting to you today. On tariffs and raw materials, we continue to monitor the situation closely, it seems to change almost every day.

Tariffs on Chinese source inputs currently add about $1,200 to the cost of each of our homes. I have to ask my buyers what’s the latest on tariffs, and the bottom line is we currently are paying 35% tariff on anything we import from China. We repurchased 346,000 shares last year, and our existing repurchase program expired in October. Although we did initiate a $10 million buyback program at our last board meeting, and we will be evaluating whether to repurchase on an ongoing basis. On development, we of course have one super big project going on in Austin. I keep predicting that it’s near finish.

One of these days I’ll be right, but I really think we’ll be putting homes into consumers in the calendar year 2026, although it may be the third or fourth quarter before that happens. We have 10 land development projects in total, many of which are already engineered and entitled. Our three manufacturing facilities, Fort Worth, Commerce, and Ellington, produced 1,549 homes in 2025. We’re certain to be able to outstrip that this year. We’ve been running pretty much at capacity at both Texas facilities since the first of the year. We’re probably going to do, just in Texas alone, the 1,500 units that we did company-wide last year. On workforce housing and data center opportunities, we have continued to exploit that.

We’ve already taken orders for over 500 houses in this space this year. It’s a potentially significant growth avenue, it complements our core business, and it’s something that we’re pretty good at. We also completed a small tuck-in acquisition, AmeriCasa, in November. It added a consumer loan portfolio, a retail location, and some technology. I don’t expect that acquisition to make much of a difference in 2026, although the prospects of some of the fundamentals, especially the technology, still looks pretty strong. For closing thoughts, let me just close on a couple things on where I think we stand. Legacy consistently delivers consistent profitability. We’ve never had a quarterly loss in our history.

This year’s increase in book value of 8.something% is the worst year we’ve had, but most of that was largely affected, Elizabeth, this way, by increasing provisions for loans as the economy gets a little less certain. The CECL requirements under accounting increased $several million, and that shows up in the fourth quarter. Our balance sheet is conservatively stated. Book value is $22.20 a share. I personally believe that liquidation value is significantly higher than book value because of all the provisions we take. Our valuation when we started was about $700,000. We’ve grown shareholders’ equity to $528 million over these 20 years. A pretty good IRR. I’m not going to broadcast it because it’s just pretty extreme.

As long as we keep growing at 8, 10, 12% per year, we’ll be a billion-dollar company probably by the turn of this decade and beyond that as we progress. With our stock trading near book value or today below book value, we view this period as an opportunity to reinvigorate growth and innovation, should increase profit margins and create stock premium. If the stock continues to trade at or below book value, we will use our balance sheet strength to repurchase shares opportunistically. In short, this is a great time to be an owner of Legacy. There really isn’t any downside. You own a part of a company that has never lost money in any year since its founding, that’s conservatively capitalized, and is perfectly positioned to provide affordable housing to thousands of families as affordability moves to the front of the national agenda.

Texas, in particular, has a front row in all the data center business, which for us is just what we often do in the oil fields. We provide workforce housing for rural areas that are experiencing growth. Operator, this concludes my prepared remarks. Please begin the question and answer.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Rohit Seth with B. Riley. You may proceed.

Rohit Seth, Analyst, B. Riley: Hey, thanks for taking my question. I’m trying to reconcile two things. The ASP per section dropped about 15% sequentially, but the ASP increased 12% and gross margin improved. Is that purely a function of selling more double-wides where per section revenue is lower but unit profitability is higher? Is there a pricing element, maybe discounting to move some excess inventory that you flagged last quarter?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Yeah. We measure production. This is Curtis. We measure production per floor, and that’s kind of how we track things. We report to y’all oftentimes per unit. If we have more double wides, our price per unit, of course, is higher than if we have single wides. Now, in the workforce housing space, it’s substantially all single wides. We sell at such high premiums, at such high values in workforce housing. I believe the average cost per floor, per unit, one and the same in workforce housing for the orders we’ve taken this year is over $85,000. That’s part of the disparity you’re seeing. We’re enjoying greater margins, especially product. I think that’s probably explains why the margin is doing just fine, even though the number of units we sold was less.

Does that answer your question?

Rohit Seth, Analyst, B. Riley: Yeah. Yeah, it does. If I get a follow-up, you mentioned on volume growth last quarter in 1Q looking better than 4Q, and it turns out your backlog is extending well into the first quarter. Now 1Q 14,070 sections. So are we in that 650 range for 1Q or has demand picture changed?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: A lot of our workforce housing orders really won’t show up in revenue until Q2. In fact, I think right now we have finished goods inventory, probably at an all-time high, almost all of which has a very big customer name attached to it. It’s like every development project. If you’re doing business with one of the big seven tech companies and they think they’re going to need housing in February, well, they really don’t need it till May. But they went ahead and bought it and gave us purchase orders, so we’ve produced it. We were obligated to produce it, but we won’t be recognizing the revenue until shipment. I think a lot of what we’ve already built in Q1 won’t show up as revenue till Q2.

Rohit Seth, Analyst, B. Riley: Understood. Last one, maybe you can talk about this 21st Century ROAD to Housing Act that’s passing through Congress to remove the steel component, the chassis. Do you wanna make any comments on the impact to Legacy?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Yeah, that’s a very interesting piece of legislation that’s moving through. The definition of manufactured homes, ever since I’ve been in it, which is 40-something years, has always included a permanent foundation. A permanent chassis, I’m sorry. They’re removing that, and that’s about $2,000-$3,000 per floor when we manufacture and leave it. There may be an opportunity to retrieve, return those chassis to the factory, depending on how the houses are being set up. I don’t look at that being material because by the time we get it back, recondition it and recycle it, we’re not gonna save a significant amount of money. Even if we did, we’d be just passing it on to the consumer.

The neat thing about it is we’ll be able to get the houses lower because a 12-inch I-beam won’t be underneath the house anymore. Normally we install it about 40-48 inches above ground level for our finished floor, and we may be able to decrease that by 10 or 12 inches, which would be an advantage to the industry as a whole. That’s about it. There’s another concept working its way through called Duplex. In addition to a permanent chassis being part of the definition, a single-family dwelling has also historically been part of the definition. Now they’re going to allow duplexes. In certain urban environments, that could be some sort of marketing advantage.

There’s a little bit of governmental tailwinds in our industry, but not nearly as much as I was anticipating. I’m really anticipating that Washington, D.C. would encourage people to become homeowners, including what we build. But having listened to the entire State of the Union speech the other day, I didn’t hear any such proposal on the table. We’re not getting much tailwind from a legislative point of view.

Rohit Seth, Analyst, B. Riley: Understood. Thank you. I’ll pass it on.

Operator: Thank you. Our next question comes from Mark Smith with Lake Street. You may proceed.

Mark Smith, Analyst, Lake Street: Hi, guys. Wanted to ask a little bit about kind of sales and demand. Just, Kurt, you called out commercial sales and some weakness there in fourth quarter as maybe these operators pulled back. Can you just tell us kind of what you’re seeing from a demand perspective today and kinda how you feel about the year for commercial sales?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: You know, the only bright spot, Mark, I see are these workforce housing opportunities in rural places that are particularly robust for data centers. I mean, these people are spending money like, you know, drunken sailors. That is an extremely bright point, and we’re all participating in it. Not just Legacy, but our competition is building towards that. The end user, we still have a place to put them problem. In Austin, Texas, it costs $1,300 a month for a space if you can find one. You can always find something 100 miles, you know, out in the middle of nowhere. But if you want to be within commuting distance of a major metropolitan area, there just isn’t many places that are legal to park what we build.

That headwind, you know, we’ve been fighting that ever since I’ve gotten in the industry, and it really hasn’t improved that much. Fortunately, we had excess mobile home park spaces in many markets, and we all participated in helping fill those. If you visit a metropolitan area of 1 million or more people, pretty much that mobile home park is now full. I don’t care whether it’s Austin, Texas, or St. Louis or Cleveland. There just isn’t any empty mobile home spaces in significant metropolitan areas. The development side has been very weak. When you try to develop it like we are, what we thought was going to cost $40 thousand or $50 thousand a space is actually turning out to cost $70 thousand, $80 thousand, $90 thousand a space by the time we make all the regulators happy.

That creates a big difference, a big gap, because normally the land component in site-built housing is about 20%-25%. People are paying more for their park rent than for their payment on their mobile home. Our average mobile home payment is still under $800 a month in what we build. Yet people are having to pay $1,100-$1,400 a month to park it. That’s the headwind that continues to exist in the industry. It’s really not a factor in workforce housing because they build dedicated communities. For run-of-the-mill retail business, where to put them and where to put them economically is a war, Mark, and it just hasn’t improved since I met you eight years ago.

It’s the same issue.

Mark Smith, Analyst, Lake Street: Yeah.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: So, um.

Mark Smith, Analyst, Lake Street: Yeah.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: All right.

Mark Smith, Analyst, Lake Street: That leads to my next question. It’s just as we think about kind of industry or channel inventory that’s out there, are we seeing a build that puts a lag here for several quarters, or is that not really an issue?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Yeah, I really think I mean, it’s a little bit, you know, negative to say, but the industry continues to be a niche business, filling up existing mobile home parks, providing workforce housing, providing, you know, emergency housing in places that have been hit by weather issues or something like that. I would guess of the 106,000 mobile homes that were built last year, at least half of them went into one of those niche categories. So even though we could and our mobile homes look and feel and act as well as any site-built house, the reality of it is, for general get-to-live-in-it consumer business, we probably are sitting there only really building 50,000-60,000 mobile homes a year for that market across the 134 operating plants in the United States.

If you divide one into the other, you know, nobody can make a profit building 400 mobile homes in a mobile home factory. It’s just not enough volume. Unless we get some sort of help from the feds or some sort of push towards development in major metropolitan areas, I think we have too many plants chasing too little market, to be quite frank. We’re so conservative, you know. We would make money if the stock market went down 30% tomorrow. We would still make money. That’s just because we don’t have any debt, and we have $40-$50 million a year interest coming in. This year will be better, Mark, in product profits at all levels.

Retailing, manufacturing, even shipping will be better because the data center push nationwide is creating probably a demand of 20,000, 30,000, 40,000 units that frankly wasn’t here last year or the year before. That tailwind alone is going to help not just our company, but the industry as a whole.

Mark Smith, Analyst, Lake Street: Yeah. As we think about kind of where the demand is for homes, I’m curious, as we look at ASP, you know, per product sold here coming up, how much of that is a function of pricing that you guys took, and how much of that is a function of, you know, maybe a higher ASP on some of this workforce housing products?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: There was a lot of pressure to not raise prices, even with tariffs going up. We’re one of the few companies that track our labor cost per sq ft. I got to tell you, it’s double, triple what it was in the pre-COVID era. Wages didn’t go up triple. They didn’t even go up double. Basically, the labor we’re using today is less efficient than the labor we used five years ago. I don’t see any change of that. It’s work ethic, it’s regulations, it’s immigration controls. You know, we’re at

I’m not gonna publish it because it’s proprietary, but I will say that our labor per square foot price is more than double what it was on the onset of COVID, and our wages are probably up 50%-60%, if that helps you. I don’t see a change to higher labor costs. I mean, I think we’re all gonna endure that in virtually every industry, and we’re a pretty labor-intensive business. You know, about 20% of the manufacturing cost of a mobile home is labor. That is the hardest thing to control. But the commodities are holding in there too. I don’t know if you’ve been looking at copper or steel or lumber, but none of those are at lows. If anything, they’re.

I mean, obviously they went up in COVID to places that they’re not returning to, but we probably pay more for lumber, more for steel, more for windows, significantly more than we did pre-COVID.

Mark Smith, Analyst, Lake Street: Okay.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Does that help?

Mark Smith, Analyst, Lake Street: No, that helps. Was the pricing that you took and as you look at the mix here going forward, I guess maybe a different way of asking it is, you know, do you feel like you can maintain kind of this level, you know, 2025 level of gross profit margin? Or do we see a squeeze because of, you know, continued pressure on cost and maybe, you know, inability to take incremental pricing to cover it?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: You know, this is a tale of two states. You remember my earnings call 3 months ago. I kind of cautioned on Georgia, which we’ve actually had days where we haven’t worked in Georgia this first quarter. But Texas, on the other hand, we keep whipping them, saying, "Can you please increase production because we got plenty of orders?" We used to be able to build 7, 8 a day in our plant in Fort Worth. The workforce housing that we’re building there is pretty sophisticated, and we struggle to get 4 a day with our labor force with the same number of workers that we’re getting, you know, 7, 8 a day, 6 years ago. As long as we

I think the whole industry perceives that their plant used to be able to build 6 a day, but now only builds 4 a day. I don’t know what my competition is doing, but I’m coming to the realization that my belief in what capacity is historically correct, but isn’t correct for 2026. I don’t think we can ever get back to 7, 8 a day at our factories in Texas, where we were able to do that pretty easily for many years. I think even though we have 134 plants running in the United States, the capacity because of labor challenges is actually less today for those 134 plants than it was a couple years ago. I think, you know, we led this price increase.

My sales staff fought me on it every inch of the way, but our competition is now falling in line. We probably had about an 8-9% price increase in the middle of 2025. That had a negative effect on our sales ’cause when you go first, people buy from the competition because they’re cheaper. But now that everybody’s kind of falling in line, and we really think we build a better house, you know, we’re selling now for, you know, in the $50s per sq ft. Seven years ago, we were selling in the $30s per sq ft. I think we’ll see the $60s within the next 12 months. I think the industry nationwide will be selling in the $60s per sq ft at a wholesale level.

That’s, you know, that’s healthy. You know, the competition is pretty sophisticated. It’s not like we have a bunch of people that wanna lose money. I look for the competition to be sophisticated and to make sure that they don’t lose money. There’s no market share to be gained by, you know, by what do they call that? Predatory pricing.

Mark Smith, Analyst, Lake Street: Yeah.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: I think everybody knows that. I mean, we don’t get together at breakfast and decide what the price is. Somebody has to go first. But lumber today is the commodity on the market is $600. When COVID struck, it was $350. That’s the number one component. Steel, very similar. Other commodities like copper, very similar. I think the days of being super cheap housing is over. We’re selling $100,000 single wides now. Seven years ago, $100,000 would buy a pretty nice double wide, and now buys a nice single wide. I think that price increase has just got to be absorbed.

It’s hard because the people that live in them aren’t used to paying $800-$900 on their own payment $1,200 rent. You add those together, you got a $2,000, you know, 3-bedroom, 2-bath house with a yard. Their apartment alternatives really aren’t attractive compared to what we do. That’s our market. We sell to families that have a puppy dog and a kid, and they want a yard, and we’re a pretty viable alternative.

Mark Smith, Analyst, Lake Street: Well, I think the last question for me is just looking at operating expenses here in SG&A in Q4. Can you just give us any more breakdown on maybe what we should look at as one time in nature? I know you called out a $1 million legal cost. There was some loan loss reserves. You know, can you just give us maybe a good run rate of where your SG&A is and maybe to be helpful for how we should look at this going forward here in 2026?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Well, I’m sure you know we bought a couple of $12 million airplanes last quarter. No, I’m just kidding. I’ll turn that question over to Jon Langbert because he’s got a pretty good handle on the SG&A that took place in the fourth quarter.

Mark Smith, Analyst, Lake Street: Thanks.

Jon Langbert, Chief Financial Officer, Legacy Housing Corporation: Yeah, the SG&A has a lot of non-recurring, and it’s kind of, it’s a grab bag. It’s not just the three words that you think of in terms of sales expense and office overhead and administrative, because it includes that loan loss reserve. That’s really the big number in there, is we became more conservative in our estimates. That’s the big increase. I think that’s mostly behind us, so that should drop back, because it’s, we’ve already built up that extra reserve. It’s the change in reserve that shows up in SG&A. The legal expenses, those have dialed back. We had a. Some cases got settled, as well. The, I’ll put it in air quotes, the backlog of legal exposure has declined.

I think as a percentage of sales, SG&A should drop back to a more normal historical rate. It did bump up last year.

Mark Smith, Analyst, Lake Street: Okay.

Jon Langbert, Chief Financial Officer, Legacy Housing Corporation: Does that kind of give you the color you’re looking for?

Mark Smith, Analyst, Lake Street: Yeah, more of a low- to mid-teens is a better rate as we look forward, compared to the elevated that we saw here in maybe Q3, but especially Q4.

Jon Langbert, Chief Financial Officer, Legacy Housing Corporation: Right. I mean, the wild card is, you know, credit quality. We feel like we’re good at underwriting and have been historically. There’s a you know kind of a flip side to that, which is the market for used homes. If you do have a repossession, are you able to recover 100% of the unit’s value or 70% of the unit’s value? Or in other words, the outstanding balance that might be there. We had a blip post-COVID where that number was over 100% for a little while. You actually made money on repossessions. It’s returned to a more normal number now, and that gets reflected in SG&A as well. A lot of moving parts there.

Hard to give you an exact estimate, but I think the trend will be favorable in 2026 versus 2025.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Also, let me chime in a little bit here. You know, our SG&A includes, you know, all of our people that are in finance. It includes being public, even though we’re only a $500 million market cap company. So when you divide SG&A then as a numerator by product sales, you know, $116 million, it’s gonna seem high because it includes things that, you know, our peer group doesn’t have. You know, a robust finance department in our size, I don’t know what it costs to be public. I hesitate to put a number on it, but it seems like it’s a never-ending spiral upwards to between audit fees and, you know, public corporation fees. I would guess that that’s almost like a fixed expense.

It doesn’t change with sales. When sales come down, the SG&A ratio goes up. You follow me?

Jon Langbert, Chief Financial Officer, Legacy Housing Corporation: Yeah. Yeah.

Mark Smith, Analyst, Lake Street: No, that’s helpful. Thank you, guys.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from Alex Rygiel with Texas Capital Securities. You may proceed.

Alex Rygiel, Analyst, Texas Capital Securities: Thanks. Good morning, Kurt.

Jon Langbert, Chief Financial Officer, Legacy Housing Corporation: Good morning, Alex.

Alex Rygiel, Analyst, Texas Capital Securities: Couple quick questions here. What’s the final hurdle in Austin for deliveries? ’Cause I know there are a couple different things going on there with regards to wastewater treatment plants, road connection, and discussions with the school board.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Yeah. I think you could probably run our development meeting ’cause those same issues come up every time we have a meeting, which is monthly. The wastewater treatment plant, which is necessary to connect these thousands of spaces, the plant itself is substantially delivered, and that which is not delivered is said to be delivered this year. We have enough delivered that we can run about 40% capacity in that plant without anything further being delivered. We have not let the assembly of that out. We’ve taken bids. We’re close. I would guess that’s a 4-6-month lead time item. That is a major deal.

School board, I mean, as soon as they have convinced that we’re actually gonna put 1,000 rooftops in there, I’m sure they’ll rise to the occasion to build the school that we envision in the property. We have got DOT approval for connecting to the 2 highways that we abut. It took a long time to get that done, much more than we thought. As soon as we dot a couple I’s and cross a couple T’s, that construction should be imminent. You know, I said earlier, Alex, that I expect to actually put houses in there this calendar year. Just remind me in December if I turn out to be wrong. Hopefully, I’m conservative enough to be right on this one.

It’s a lot harder to get through the regulatory environment than I ever dreamed, and everybody’s got the same problem. I mean, I don’t know how Elon Musk can build a factory as quick as he did, but the rest of us have to, you know, play by the rules and get permits and get comments and change the plans and reapply and have Zoom meetings because nobody wants to meet in person anymore. It’s building anything now is. Even that site-built house, which used to be able to do in 6 months, a custom, is now 2 years. This has gone on much longer than I expected. I’ve got 7 years into this, Alex, and I’d like to see it finished while I’m still on this planet. I’m working on it as much as I can.

I’m the one directing that traffic. I designed it, I bought the land, and it’s going to be a very profitable deal. We’re in that thing, right. We’ll be all in for 60-70% of what the competition is when they do something similar.

Alex Rygiel, Analyst, Texas Capital Securities: Remind me again, how many homes do you think you need to deliver to that site prior to considering liquidating the whole asset?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Zero. ’Cause I consider liquidating it anytime somebody wants to knock on my door. The problem is, how else are we going to have distribution with the independent retailers fading, you know, nationwide and with our own company stores struggling to get ample volume. It was always designed to complement the factories. If, you know, some communities were to come along and pay us 2 or 3 times what we have in it, I suppose we’d have to look at that. It’s just such an advantage to be able to sell directly to the consumer. You know, I can see one of our factories taking 2 or 3 years at capacity just on that one project. That’s a little bit of an exaggeration because I don’t think we’ll fill that fast.

Let’s say I can see of the two Texas factories, one of them half of their capacity could be used just in that Austin project, and then we wouldn’t have to be apologizing for our numbers on these earnings calls. If there’s one market in the entire Southwest of the United States that commands a premium from a housing perspective, it’s Austin, Texas. More so than Dallas, more so than Houston, more so than Phoenix. It’s that kind of market. As you know, from this property, you can see downtown Austin’s skyline. It’s right next to the Formula One racetrack, only a few miles from the Tesla factory, only a few miles from the Austin-Bergstrom Airport.

It’s extremely well located, and it is the brightest part of our development portfolio. It’s the one that I wanna get across the finish line. The concept is so unique. It’s an integrated concept where we’re building neighborhoods like PulteGroup or D.R. Horton does, and nobody really has attacked it like that before. We’ll have carports, we’ll have communal parking, we’ll have amenities out the wazoo. We’ll be a neighborhood. The industry doesn’t really sell neighborhoods like site-built does, but this is a vision. I mean, it’s kind of an experiment. If this vision of a true neighborhood with nice amenities and a pretty good location works, then we’ll be able to command the premiums I think we can get for it. I think we can sell lots.

We have about 100 lots there. I think we can get $120,000-$130,000 a piece for those lots. Our cost is about half of that. The rents, heck, if we could get $1,200 a month rent for one of these little, you know, 35 by 90 spaces that we have, that’s a pretty good rate of return on our investment. I am looking forward to it. I just wanna live long enough to see it. That’s about it.

Alex Rygiel, Analyst, Texas Capital Securities: As it relates to the Georgia plan, it sounds like production there is somewhat limited. Can you talk about maybe what your longer term plan is with regards to that plan?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Well, I mean, our alternatives are obvious. We either admit that we can’t make a profit there and sell the property to one of our competitors. We are making a profit because we do a lot of ancillary work. We have a lamination facility that sells $4 or 5 million a year with pretty good margin. But the factory itself, quite frankly, I don’t think has added anything to our bottom line in 3 or 4 years, and in this quarter isn’t any better. Me and Kenny get together regularly and lament, "What are we gonna do with Georgia?" If you remember on my last earnings call, I pretty much predicted that we’d be struggling with what are we gonna do with Georgia.

I probably have Georgia employees that are listening to this call, but I’m such an open book, I’m not going to mince words about it. We’re not gonna continue to feed something that doesn’t make money. No one, no prudent businessman is gonna do that. Either we turn it, I don’t know, this year, 2026, or we dispose of it. It wouldn’t change our economics. It hasn’t contributed to earnings in so long, I can’t remember.

Alex Rygiel, Analyst, Texas Capital Securities: Lastly, as it relates to AmeriCasa, I know what came with that acquisition was a location in Houston that I think you were hoping to sell 10 or 12 units, I believe it was months. Can you give us an update on how the success of that acquisition has been, and also talked about its strategy to go direct to retail?

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Well, the acquisition was an attempt to try something new in retailerships, company-owned retailerships. I’m gonna spell it out here. We didn’t announce it in writing, but the Norman Newton employment agreement is no longer valid. He’s not with the company. You know, that management boost that we were looking forward to has not come to pass. As far as the hard assets we bought, we can probably justify those ’cause it was a reasonably good deal. The new launch to something that’s never been done before is not gonna happen, at least not anytime soon. Now, we do have the software. We’re continuing to install it at some of our locations. We picked up a couple pretty good middle managers in the process.

We have about a dozen Bogotá, Colombia employees that we picked up in the process. It wasn’t for naught, but my excitement over it has dwindled a lot since the last earnings call.

Alex Rygiel, Analyst, Texas Capital Securities: Fair enough. Thank you.

Operator: Thank you. I would now like to turn the call back over to Curtis Hodgson for any closing remarks.

Curtis Hodgson, Executive Chairman, Legacy Housing Corporation: Well, I just wanna thank everybody who joined today’s earnings call. We do appreciate your interest in Legacy, and we’re pretty transparent in what’s going on. I would have liked better numbers, but quite frankly, the provisions that we took caused pretty much the entire disappointment. We’re gonna continue to improve from an earnings point of view. I mean, I’ve been making money since I was eight years old. I’m not gonna stop now. I think that I’m not satisfied with the earnings or the earnings per share. But I personally got back involved in the company only a couple months ago, a few months ago, and I thought it was. On the last earnings call, I thought it was gonna be a piece of cake. Guess what?

It hasn’t been a piece of cake. I do think that we are gonna have a pretty good year in 2026. Hang on. Don’t be selling $18 a share. That’s my final words. I appreciate you all participating. Bye.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.