Good morning, and thank you for joining Legacy Housing's third quarter 2026 conference call. This is Jon Langbert, Chief Financial Officer.

Our Chairman and Chief Executive Officer, Kenneth Shipley, is also on the line and will join me for the Q&A session following our prepared remarks. Before we begin those, I'll read our Safe Harbor disclosure.

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 quarterly report on Form 10-Q filed yesterday with the Securities and Exchange Commission, and in our most recent annual report on Form 10-K.

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.

Before we get into the quarter, on August 13th, the board appointed Kenny Shipley Chairman of the Board, in addition to his role as Chief Executive Officer. Congratulations, Kenny!

With that, let's get to the numbers. Total net revenue for the quarter was $69.7 million, up 72.2% from a year ago.

Net income was $20.1 million, or 85 cents per diluted share, compared with $8.6 million, or 35 cents per diluted share, in the third quarter of 2025. Product sales increased 92% to $55.2 million.

We sold 635 homes in the quarter, compared with 420 a year ago. Our Heritage Housing stores grew sales while making room for our 2027 models, which began shipping in July.

Inventory finance sales declined, reflecting weaker dealer demand and fewer new dealers joining the program, and we're working closely with our dealers in that softer retail market. Gross margin on product sales was 36.9%, up 16.7 percentage points from 20.2% a year ago.

The improvement reflected a shift in product mix, together with the price increases we implemented during 2026. Keep in mind, too, that the prior year quarter was weighed down by tariffs and rising material costs.

Other revenue increased primarily because of the gain on the sale of a mobile home park we had taken as collateral. That covers the headline numbers.

The 10-Q has the full detail, including sales by channel, loan portfolio interest income, SG&A, our provision for loan losses, taxes, and our year-to-date results. The balance sheet remains in excellent shape.

We ended the quarter with $30.8 million in cash plus $5.3 million in short-term CDs, $36.1 million in total, up from $8.5 million at year-end. Operating cash flow for the first nine months was $35.3 million, nearly double the $18.2 million of a year ago.

Two working capital items moved meaningfully with our large contracts: customer deposits rose to $10.3 million from $1.8 million at year-end, reflecting advance deposits under those contracts; and accounts receivable rose to $30.4 million from $5.5 million, reflecting invoices that are payable within 35 days. Inventories were $39.6 million, down from $43.9 million at June 30th, and roughly flat with year-end as we shipped finished goods.

Year-to-date capital spending was $10.2 million, mostly for development of our land holdings, principally in Bastrop, and plant equipment. Our $50 million Prosperity Bank revolver remains undrawn.

We remain in compliance with all financial covenants, and we intend to renew the facility ahead of its July 2027 maturity. Total stockholders' equity finished the quarter at $582.4 million, up from $562.2 million at June 30th, and book value per share was $24.49, up from $23.64.

We made no share repurchases during the quarter, and approximately $9.3 million remains available under the board's repurchase authorization through February of 2029. As for growth, we continue to see a robust pipeline of opportunities, including housing for large construction and industrial sites, HUD-code homes, and park rentals.

Many of these units are higher specification and more complex to build, and customers place real value on our ability to deliver large quantities on compressed schedules. Our principal near-term constraint remains securing and retaining enough trained labor, and the recruiting and retention programs we discussed last quarter are underway.

Our Georgia plant still has room to grow with modest additional investment. On costs, roughly 9% of our material costs, about $2,700 per home, come from internationally sourced materials, and tariffs added approximately $700 per home to material costs during the first nine months.

To offset that, we implemented price increases averaging about 3.8% over the nine months, and we continue to diversify suppliers and source domestically where practical. Our loan portfolios remain a stable earnings engine.

In the consumer book, 97.6% of balances are current or less than 30 days past due, and total past-due consumer balances were 2.4% at quarter-end, compared with 2.6% at year-end. Within dealer inventory finance, about $2.5 million relates to homes that have been on dealer lots for more than three years.

We're working with dealers to move that older inventory through pricing and lending incentives, and where appropriate, repossessing homes for resale through our Heritage Housing stores or other dealers. Last quarter, I told you we had agreed to modify our roughly $48.6 million mobile home park note that matured in July, and we were finalizing the documentation.

That's now complete. The final terms differ slightly from what we outlined last quarter, most notably a slightly longer interest-only period.

Under the amended note, effective July 3rd, the borrowers paid down $2 million of principal, bringing the balance to $46.6 million, about 23% of our MHP notes, pledged an additional manufactured housing community in Mississippi as collateral, and increased their personal guarantees. The note carries a fixed 7.9% rate through April of 2028, and prime plus 3% thereafter.

Interest was abated from July 3rd through October 3rd. Payments are interest-only through April 2028 and then amortizing, and the remaining balance is due at maturity in April of 2031.

We accounted for this as a loan modification with no gain or loss. Because of the abatement, we recognized no interest income on this note during the third quarter, and interest resumed in October.

The note was not past due at quarter-end, and based on our analysis of the collateral, we determined that no allowance was required. This is covered in note 4 of the 10-Q.

A brief update on America's CASA: our litigation against the sellers is in the Texas Business Court and has moved into discovery. Both sides have served written discovery, and we're preparing for depositions and third-party subpoenas.

It's still early, and we can't predict an outcome. Separately, during the quarter, we completed a measurement period review of the acquisition accounting.

Based on the historical sales performance of the acquired business, we concluded that the trademark and non-compete agreement had no fair value at the acquisition date. We removed the $4 million recorded for those intangibles and increased goodwill by $3.1 million, net of the related deferred tax effect.

Finally, an update on our control environment: we continue to work on remediating the material weaknesses disclosed in our 10-K. Since year-end, we've substantially expanded our accounting and finance team, including staff accountants and financial analysts.

In September, we hired a SOX compliance director, a CPA with SOX 404 and systems implementation experience. On September 1st, we completed our migration to Microsoft Dynamics 365 Business Central, and we're building out IT general controls around the new system.

We've made a meaningful start, but remediation is a multi-step process that will take time. The material weaknesses won't be considered remediated until the new controls have been tested and have operated effectively for a sufficient period.

To sum up, net revenue was up 72% to $69.7 million, net income was up 133% to $20.1 million, diluted earnings per share was 85 cents, and gross margin on product sales was 36.9%. Through nine months, we generated $35.3 million of operating cash flow, and we ended the quarter with $36.1 million in cash and short-term investments, no debt, $582 million of stockholders' equity, and a fully available revolver.

With a strong pipeline and our Bastrop County development expected to begin lot and home sales in 2027, we're well positioned heading into next year. Our loan portfolios remain a dependable earnings engine, and our balance sheet gives us the flexibility to fund that growth internally.

Legacy has never had a losing quarter in its history, and the third quarter of 2026 keeps that streak going. We're conservatively capitalized and focused on long-term value creation as affordable housing becomes ever more important to US consumers and policymakers.

Operator, that concludes our prepared remarks. Please open the line for questions.

Kenny and I will both be available to respond.

Hey, thanks for taking my question. Just wanted to learn a little bit more about the Bastrop County opportunity, where we stand now and how you see that playing out over the next 12 months?

Go ahead, Kenny. We, it's it's still a slow project.

It's hurry up and wait, and wait for the next regulator to give us an answer on something. We're putting the We're We did get a DOT approval and we're building the DOT entrance into the into the subdivision now.

They're finishing up the the sewer. They're They're claiming they'll be done by Decem- the end of December they'll be finished with our sewer system that we're putting in.

As they as they advance, it's slowed down some of the road building. We've got to come back in and do some more road work, and we've still got to build a bridge after they get across underneath it.

We've been kind of waiting on them guys, it's seems like it's put one puzzle piece in and we can't do anything else till we we can't put any more puzzle pieces in till we get that one started. That's been kind of the the drawback.

It's a pretty slow process, and we're a little bit aggravated with with how long it's taken to do things, but we're right here We can see the end of it coming pretty fast. We think we think we'll be we'll be selling lots here in the probably the maybe as late the first half of the year, late in the first half of the year maybe, we'll be ready to start selling lots, so that's kind of where we're at.

At a high level, it's a large development. It's over 350 acres.

A lot of the roads are in, we had to put in utilities. This is a very nice development.

It's higher end. It's not your old-style mobile home park where you might have 8 or 10 units per acre.

It's not that level of density. If anybody happens to be in the Austin area, I'd be happy to get you the address if you want to drive by and see it in person.

Right. There's been a lot of development with SpaceX around there, is that right?

I'm sorry, I couldn't hear what you said.

There's some development there with SpaceX and what not, right? Have you seen people poking around to see if maybe just sell the land wholesale outright?

We've always got some lowballers out there that are looking for a screaming deal or something, but we're getting so close that I think we'd be leaving a lot of money on the table. It's a big project, and it's going to be a cash cow once we get it going.

Okay. Then, you've had a lot of success with the data centers, the workforce housing.

Looks like you're seeing the end of that first contract with the customer. Maybe just talk about the opportunities that are out there today.

I think there's a lot of opportunities in a lot of different areas. Our backlogs are continuing to build, and there's opportunities everywhere.

It isn't just data centers. We just finished a big project for a guy that's building a man camp for oil field, and it was probably a 2 200 200-building man camp.

It's a pretty big man camp. There's a lot of opportunities, and there's a lot of building going on.

Through some of these man camps and that we're building in the oil field and this data center work, we're meeting a lot of new customers, and so I look forward to this thing really dominoing, and we're going to get a lot of work out of some of these other contacts we're making. It's kind of like selling a house to a park and the guy's buddy finds out what he's doing and he jumps in on the bandwagon.

We're getting some of that that's starting to happen.

Yeah. Then you've had this workforce housing ASP on there has been very attractive, and so should we see a normalization in the ASP in the upcoming quarter as that contract rolls off?

Can't hardly hear him. We're

having a hard time hearing you.

Oh, I said you've had the workforce housing contract, and the ASP on that work is significantly higher than your base business. Now that the contract's kind of winding down, should we expect a normalization in the ASP?

It does have a slightly higher selling price. They're more complex units and larger, it's really the overall product mix.

If dealer sales pick up, yes, I would expect that number to come down a bit, but our goal is to fill the pipeline with as much profitable business as possible. With the election results here, and the national mood on data centers, the demand for data isn't going away.

On those high-end units, I expect they're going to have to pretty much always now going to be built in uninhabited areas. Those are the ones that require workforce housing.

I think you might find a higher percentage of data centers requiring that, we're going to sell the most profitable units that we can produce. I think our constraint is manpower.

Can we get enough trained workforce into our factories and get production up as high as possible, and while we're doing that, sell the most profitable units.

Understood. All right, thank you.

I'll get back in line. Thank you.

Hey, Kenny and John, real nice quarter.

Hey, thank you.

Couple questions here. First, as it relates to Bastrop, can you remind us what the total lot opportunity is there for you, and then talk a little bit about kind of what your strategy is going to be.

Are you selling lots? Are you leasing lots?

Are you selling homes? Are you leasing homes?

All the above. Everything what you just said.

We've got, I think there's somewhere around room on the lots that we're selling are 260, and then there's another 800, something like that, about 800 rentals that we can do in the park. It's got a park in the middle, it's got land that we sell around the backside.

There's room to put an RV park over in one corner that we're going to do.

So... Even some commercial lots...

Yeah.

...because they're widening the road that goes by the site, we've lost some land while they're widening the road, but that increases the value of everything else.

Yep.

We do have some commercial lots that we could sell or lease. We haven't committed to anything, we'll be opportunistic as the market develops.

This is nothing that's going to fill up in one year, anything we think today could easily change a year from now as we roll it out. It's a mix of single and double-wide lots.

Those are pretty much set based on your roads that you're putting in there, but...

We'll be filling the lots up and selling house and land. Even in the park, we're going to set homes up and sell homes in the park also.

That's great. Then do you have any plans to sort of build community facilities at Bastrop, like a clubhouse or a pool or anything like that?

I guess what I'm trying to get to is what's the incremental kind of CapEx you're looking at spending on this?

We're already in the process of building a big...

Clubhouse.

Clubhouse right near the park now.

Most of the spend is done at this point. I think approaching $50 million in that development.

It's close to turning cash-flow positive as soon as we start selling. There's not a lot to go.

Lot rentals in that market are $1,000 to $1,300 a month just for lot rentals. So...

Wow.

You can imagine if we if we get this thing when we get it full, what the what the what the spinoff of the money is per month. It's it's going to be unbelievable.

For sure. As it relates to the workforce housing contract, how many units did you ship in the third quarter, and how many units remain to be shipped?

I don't know that we have that. We rushed around and to pull all this information together and filed and got the earnings out.

If you want to call John after a while, he can probably pull that information up for you. Alex, we'd be glad to do that.

We want to be as transparent with our partners as we can here, so. If you want to give John a call after a while, he can pull that information together for you.

That's no problem. Then do you think you're going to be able to sort of backfill the capacity fairly efficiently as this first kind of big workforce housing contract kind of winds down in the first quarter / second quarter?

Do you think you'll be able to backfill it with kind of a second one or two or three smaller ones, such that volume stays at a relatively high level?

I think so. I think we're in good shape.

We've talked about our backlog, and I think we're in pretty good shape. I really believe that.

Who knows? We've got a whole new administration coming in.

A lot of these states went blue instead of red, and I don't know what's going to happen. If I knew that, heck, I'd load up and go to Las Vegas and start sports betting.

Sometimes I think that's an easier way to make a living than building mobile homes. I don't know.

We're good at what we do, and I think we're going to be just fine. I really believe that.

I'm still a big holder. I still got most of our shares that me and my brothers have put in a pile, and we're not selling them, so.

Good to hear. Thank you.

Take care.

Hi, thanks so much for taking my question, and congrats on another great quarter, really awesome. I wanted to ask a bit about the refund liability for the workforce housing repurchases.

I saw that between the fourth and sixth anniversaries of delivery, the contract entails a refund option where you would buy the units back at 33% or 25% of the original unit price. Could you talk a little bit about that, kind of more of the terms of that contract, if you think that's likely, and yeah, just any of the thinking around that?

Sure. You're exactly right on the numbers.

If the customer decides to return the units between years 4 and 5 after they've been delivered, we buy them back at 33%, and 25% if it's between years 5 and 6 of the original invoice for the unit itself, not for any extras. The customer needs to have the units clean and delivered back to us.

The math behind that is we have to kind of estimate what the likelihood is of that happening and what the numbers might look like at that time. We believe that it is unlikely that it would be executed, but if it was executed, we would be getting the units back at a cost below where we would be able to sell them.

We think the customer's most likely to do that themself, to use them there or at other projects, or to donate them perhaps, or sell them themselves. If they do put them back to us, we're pretty confident that that would be a profitable enterprise.

Legacy participated in a similar exercise many years ago post-Katrina. There was a large number of units available from FEMA that the company was able to buy en masse and sell quickly, and do that profitably.

This is something we'd have lots of notice to plan for. The expectation is the units won't come back, but if they do come back, we feel like we're in the business, so that we could repurpose them and resell them through our network, profitably.

Awesome. That's super helpful.

Do you have a sense of how long the project for this workforce housing customer will take? I'm just wondering, is it expected to end in 3 years and that's why you agreed on the 4 to 6, or is this project expected to take 6 or 7 years?

Do you have a sense of that?

Do you want to take that, Kenny?

I can't speak and be accurate on 3 or 4, 5 years from now. We don't know.

I'd be lying, or it'd just be my opinion. I think we're good for a few years.

Most of these guys, they put a lot of money in a pile to build these things, and I just can't see them unraveling them in 4, 5 years. A lot of them aren't even started using them yet.

The construction part of the projects were so big that they're still building on them. They hadn't even started yet.

I don't know. We don't have any idea how long it's going to last.

I just think these projects are going to be run in phases, and they're going to keep expanding. The places where they need the workforce housing, they have places to grow.

As long as demand for data continues to grow, and I don't think the math for data centers in space really works, I think these units will stay out there for quite a while.

Great. That's super helpful.

Then just a question on the financing side: I was wondering if you could talk a little bit about the rate environment with the Fed raising rates, how that impacts your business. I know chattel loans are less susceptible than regular mortgages, but I'd love to hear a little bit about that.

Also, if you've been seeing any increase in private lending in the industry, if that's affecting you in

chattel. Where?

Yeah.

If you pull up a graph all the way back from the '80s and you put the interest rates on there along with shipments, it's a pretty amazing graph because you're going to see the graph pretty much on shipments follow the rates. As rates went up, shipments went up, because as rates go up, people that are buying, these first-time home buyers, they just fall right out of that market.

Not only have we had a large increase in the cost of building these things, but interest rates going up, it just puts them out of reach, and they fall back into our industry, back into affordable housing. We've always done better in high-interest-rate environments than we have in low.

It's when rates go down low, then we're competing with site-built homes.

Awesome. Thanks, Kenny.

That's super helpful. That's all for me.

Congrats again on a great quarter.

Thank you very much.

Thank you all for joining us today and for your continued interest in Legacy Housing. We look forward to updating you next quarter.