Legacy Housing Corporation (NASDAQ:LEGH) Q1 2026 Earnings Call Transcript

Legacy Housing Corporation (NASDAQ:LEGH) Q1 2026 Earnings Call Transcript May 8, 2026

Operator: Good day, and thank you for standing by. Welcome to the Legacy Housing Corporation first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, you will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Curtis Hodgson, Executive Chairman of the Board. Please go ahead.

Curtis Hodgson: Good morning. This is Curtis Hodgson, Executive Chairman. I am here with Jon Langbert, our Chief Financial Officer. Thanks for joining our first quarter 2026 conference call. Jon will now read the safe harbor disclosure before we get started.

Jon Langbert: Before we begin, I am 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 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 Corporation assumes no obligation to update these projections in the future unless otherwise required by applicable law.

Curtis Hodgson: Thanks, Jon. I will turn the call back to Jon now to walk you through the quarter’s results, and then I will come back with some thoughts on the business and a few corporate updates. After that, we will open the call for questions and answers. Jon?

Jon Langbert: Thanks, Curtis. Let us get to the numbers. Total net revenue for the quarter was $34.4 million, down 3.7% from $35.7 million a year ago. Despite the modest top-line decline, net income grew to $10.0 million from $10.3 million, and diluted EPS came in at $0.46, up from $0.41 in 2025. So revenue was a touch softer, but the bottom line was stronger, and I will walk through how we got there. Product sales were $21.6 million, down 11.3%. We shipped 312 units in the quarter versus 350 a year ago, with average revenue per unit essentially flat at roughly $69,100. The story underneath the headline number is really a mixed story. Inventory finance sales were down about $7.6 million, or 68%, as our dealers continue to work through existing inventory on their lots.

That decline was largely offset by strength across our other channels. Retail store sales nearly doubled, up 81% to $6.1 million. Direct sales were up 80% to $2.7 million, and commercial sales to mobile home parks grew 12% to $7.6 million. The shift toward retail and direct selling reflects the strategy we have been executing, getting closer to the end consumer and expanding our company-owned distribution. Loan portfolio interest income was $11.3 million, up 6.2%, with essentially all of that growth coming from our consumer book. The consumer portfolio ended the quarter at $204.8 million, up modestly from year end. Mobile home park notes finished at $199.5 million, and dealer inventory finance receivables at $26.5 million. On the expense side, cost of product sales was down 13.1%, broadly in line with lower volumes, and SG&A came in at $5.8 million, down 8.3%.

The SG&A decline reflects lower payroll, health benefit, and legal costs, partially offset by a higher loan loss provision and modestly higher property taxes. The net result is that even with revenue down a touch, we delivered net income growth of about 6% and EPS growth of around 12%, a function of slightly stronger gross margins, lower SG&A, and a lower effective tax rate. On taxes, our effective rate for the quarter was 16.1% versus 19.3% a year ago and the 21% statutory rate. The benefit reflects two items. First, the federal energy efficient home improvement credit known as Section 45L, which provides a per-home tax credit for manufacturers who build homes meeting specified energy efficiency standards, which we have qualified for on a substantial portion of our production.

Second, a discount on transferable tax credits we purchased during the quarter. As a reminder, the Section 45L credit terminates on June 30, 2026, under last year’s tax legislation. We expect our effective rate to move closer to the statutory rate after that. The balance sheet remains in excellent shape. We ended the quarter with $14.1 million in cash, up from $8.5 million at year end, on $7.0 million of operating cash flow. Inventories rose to $50.4 million from $39.9 million at year end, primarily in finished goods. Curtis will speak more about the inventory build and the data center project driving it in a moment. Our $50 million Prosperity Bank revolver had less than $1 million drawn at quarter end, leaving roughly $49 million of available capacity, and we are in compliance with all our financial covenants.

Total stockholders’ equity finished the quarter at $539.0 million, up from $528.6 million at year end. We repurchased about 31,000 shares for roughly $0.6 million during the quarter under our new $10.0 million authorization that the board approved in February, leaving approximately $9.4 million available for future repurchases through February 2029. The credit quality across our loan portfolios remains solid. At quarter end, more than 97% of both our consumer loans and our mobile home park notes were less than 30 days past due. We did increase loan loss reserves modestly in the quarter, reflecting continued portfolio growth and a slightly more conservative posture given the broader economic backdrop. With that, I will turn it back to Curtis.

Curtis Hodgson: Thanks, Jon. Let me hit a few business topics: the operating environment, some specific business updates, and a couple of items that warrant a closer look from this quarter. The Q1 environment was a continuation of what I have spoken to in the past. Inflation picked up a little bit during the quarter, and the Fed is holding its benchmark rate steady, and 30-year mortgage rates are staying above 6%. Sustained higher borrowing costs continue to weigh on affordability, which affects our end consumers and particularly affects our park customers. They are just trying to make a return on their investment, and higher interest rates are making it more difficult to do so. Tariffs became a meaningful theme during this quarter, and they continue to affect our cost structure.

The Supreme Court ruled in February that the emergency tariffs imposed in 2025 were not authorized, and U.S. Customs has begun winding down those duties. We are in the process of asking for a $0.683 million refund based on that Supreme Court decision. Meanwhile, the U.S. Trade Representative picked up new Section 301 investigations in March that could provide a different legal basis for tariffs going forward. And effective April 6, right after our quarter end, additional 232 duties were imposed on things like aluminum, steel, and copper, which do affect our cost structure. The bottom line is combined effective tariff rates on most Chinese-origin goods are still meaningful, and we are still absorbing real input cost pressures. A few other specific items.

On retail and dealer activity, the shift toward retail at our own company stores we have been talking about is really showing up this quarter, and I think it will continue to improve. Our retail sales are up 81% year over year. Part of that increase came from buying AmeriCasa last year, which sells our homes, but it also sells three other brands at that location. Across our 14 company-owned retail locations—we call it Heritage Housing, our Tiny House Outlet, and AmeriCasa—direct access to end consumers continues to be a meaningful part of our strategy. On our finance division, the loan portfolios continue to perform very well. Consumer loan portfolio interest grew, credit quality is over 97% across all of our portfolios, and we have not seen any deterioration that would require us to change our reserving posture beyond the modest increases that we have been making.

On capital allocation, we restarted share repurchases this quarter under the new $10.0 million authorization, and with our stock continuing to trade near book value, we view buybacks as a sensible use of our capital alongside reinvestment in the business. Let me talk a minute about the workforce housing orders that for the last two calls I have mentioned. During this quarter, we received nonrefundable deposits of about $8.0 million from customers for large workforce housing orders. We started production on those orders in the first quarter, but had not made any deliveries from those orders in the first quarter. Now that we are in the second quarter, I expect 200 to 300 units to be delivered on those fairly high-margin orders for which we have deposits in place, and we should recognize substantially all of these workforce housing orders in calendar year 2026.

Another topic I would like to spend a minute on is the AmeriCasa litigation. We filed a lawsuit in March. Our claim is related to misrepresentations and omissions made in that acquisition. We are early in the litigation. I am not exactly sure where it will end up, but the litigation was necessary because the acquisition we made last year was not panning out as we expected, and I think it is because things were either not disclosed or erroneously disclosed during the due diligence period. The litigation is not really material to our consolidated financial position, our liquidity, or our operations. We will continue to evaluate the facts and circumstances regarding that acquisition, and I just want everybody to know that it is not going to be the savior to the company; on the other hand, it is not going to be very deleterious either.

One other item that is worth flagging. In 2024, we came to an agreement with borrowers under which we received clear title to [inaudible] home communities and a new $48.6 million short-term promissory note bearing interest at 7.9%. This note matures in July 2026. We have been in contact with the borrower, and they have now made all required payments under that bridge loan. We are talking about taking a partial payment and renewing it; we are talking about what possible lending we are willing to do on a going-forward basis. We still believe that there will not be any negative effect from this note, but we are in the process of negotiating, and you never know how it might turn out. A couple of other closing thoughts that are really short. Q1 was a solid quarter, especially in light of the management transition that happened in the fourth quarter.

Net income was up over 6%, and on a diluted earnings per share basis, it was up 12%, somewhat because of our share repurchases and somewhat by the exit of executives that no longer have stock options. Our balance sheet is in great shape: $14 million of cash, essentially no debt, $539 million of stockholders’ equity, and an undrawn revolver. People look at us and say, my gosh, you have a clean balance sheet. We also are a one-entity company, no subsidiaries, and I think that is a very attractive place to be. The workforce housing orders are encouraging, especially here in Texas. The strength in our retail and direct sales reflects the strategy that we have been pursuing. Loan portfolios continue to be stable and a growing earnings engine. Georgia continues to be a big question mark.

We have managed to keep it running, but we do not have any workforce housing orders yet in Georgia, so we are relying on the old-fashioned selling to dealers and selling to parks and selling through our company stores. That does not have enough volume to keep us running at profitable production. As I have said before, Legacy Housing Corporation has never had a quarterly loss in our entire history. 2026 has kept that streak going, as will Q2. We are conservatively capitalized, focused on long-term value creation, confident in our ability to weather some near-term volatility while positioning for long-term growth as housing affordability becomes more and more important to U.S. consumers and policymakers, especially while interest rates remain at 6% or above.

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

Operator: We will now open the call for questions. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Our first question comes from Alexander Rygiel of Texas Capital Securities. Your line is open.

Q&A Session

Alexander Rygiel: Good afternoon, Curtis and Jon. Great to hear from you both. I always appreciate your broader perspective on the economy and broader housing market trends. I am curious, in your views, how you think that has changed over the last three months?

Curtis Hodgson: On the 10,000-foot view, Alex, our demographics are not all that healthy. For the first year in history last year, we had more people moving out of the country than moving into the country, and our birth rate is below two. So on a 10,000-foot view, we do not need a lot of new bedrooms. We already have all we need. Growth is basically geographically very particular. We have growth in states like Texas and Florida, and we do not have growth in states like Indiana and Ohio. Fortunately, we do business south of the Mason-Dixon line, and we still have a growing demographic in the states that we do business. As an aside, Kenny and I got in this business in 1980, and from 1980 to 1982—you young men that were not living through it have read the history books—that was the highest interest rate environment in the history of our company, where the prime rate of interest got all the way, I believe, to 18%.

Those were very good years in the mobile home business because high interest rates lock consumers out of traditional site-built housing. Buying the $0.5 million house at a 10% mortgage rate is prohibitive to almost anybody in this economy, which brings them down, just as it did in 1980–1982, to things that we sell. So higher interest rates are not a bad fact to the manufactured housing industry. If anything, they are a good fact. But we still struggle on where you are going to put them. We do not have a lot of vacant spaces in big cities. We do not have very many mobile home parks coming online, although, as you know, we are trying to do things in Texas, but we do not have a good answer to where we could put them. Lots of headwinds. And the industry itself has not grown in filling that void, and it has not grown on providing a neighborhood solution as the traditional homebuilders have, of which I know you follow many of them.

So even now that we have what should be tailwinds, we have not done a very good job as an industry of imitating the site-built housing people and selling community solutions as opposed to, say, a Jim Walters solution—for those of you that are my age—where we are just providing a house and somebody else has to put in the garage, somebody else has to put in the landscape, somebody else has to put in the premises and the fence. We basically are providing part of the solution but not all the solution, whereas when you follow your site builders, they are solving almost all of the neighborhood problems. We are trying to morph into that with our huge development outside Boston, which has got a lot of good news this week, if anybody was paying attention.

Within four miles of our location, we have thousands of jobs that have just been announced in the future. So that particular location I am very confident of, and we have made very little progress on other land holdings. I know I went above and beyond answering your question, but at least I did answer your question. Anything else, Alex?

Alexander Rygiel: Yes, that was very helpful. Historically, the company has seen some positive seasonality after tax season. Since we are past that, can you comment on demand in April and early May?

Curtis Hodgson: Sure. I do not know that we can stomach much more demand in Texas with all our orders we already have in place. We are probably already out to August or September. We would have to find somebody to move in the line to take more orders. We did get a little seasonality bump in Georgia that let us turn the spigot back on, but we do not have much backlog in Georgia. Without the data centers and without the oilfield boom—which Georgia does not participate in hardly at all at either of those—the good old-fashioned mobile home business, the street dealers and the parks, is rather tepid. I do not mind going on record on this. I think followers of my peer group have already figured it out based on the punishment that they gave the stock prices this week.

I did notice before the call that our stock was actually up on what I consider fair but not great reports. We are in good shape as a company, and our next two quarters should be pretty doggone impressive based on houses already built in that backyard that we are starting to ship to these major customers in Texas. To answer your question, in summary, traditional demand is not great, but nontraditional demand like data centers and oilfield is as good as I have seen it ever since Rita/Katrina in 2005. So a lot of good news, but a little bit of bad news.

Alexander Rygiel: One last question: as it relates to the workforce housing order that you have—that is fantastic—but turning the page, how do future prospects look, and when might we hear about other big orders into this market?

Curtis Hodgson: In Texas, we are working several big orders—huge orders—and none of them have turned into deposits yet, but we are working that angle. The big seven companies that are involved in data centers are making a multitrillion-dollar commitment to this space. Compared to, say, the stimulus that was given to the economy after COVID by the U.S. government, in size the stimulus that these seven are giving the economy is comparable to the stimulus that the U.S. government gave a few years back in COVID, which was significant stimulus. So let us take a data center manufacturer. He is putting on his balance sheet an asset, but he is putting on my balance sheet income—as well as everybody in the construction business in this region.

The fact that income is going to be up for everybody in this region is a pretty remarkable amount of stimulus. There is a little bit of that going on on a nationwide basis, including Georgia, and even on a worldwide basis. But in our market—Texas and Louisiana—there is so much data center business that is actually going to happen, by these seven companies investing mega capital, I think we are good probably all the way through 2027 and maybe beyond that. So business is good in Texas. That is all I can tell you.

Alexander Rygiel: Good to hear. Thank you very much.

Operator: Thank you. As a reminder, if you have a question, please press 11. Our next question comes from Mark Smith of Lake Street. Your line is open.

Mark Smith: Hi, guys. I wanted to ask for a little more detail, if you can, Curtis, on this workforce housing deal—any more insight you can give us on the size and maybe the timing of revenue recognition as we work through the year?

Curtis Hodgson: I would guess that we already have somewhere around 600 units with deposits in this category out of Texas, which was about half of our entire production last year in Texas, maybe even more than half. The orders actually started in December, but they were not ready for the houses. We needed the order, so we built them anyway. Of the 600, at least half of them will be shipped in Q2, with the remaining being shipped in Q3 and Q4. To Alex’s question, Mark, I tipped my hand and said we are in the process of taking even more orders. Think of the double whammy we have here, Mark. We have data centers all over the state of Texas, and we have West Texas crude selling at nearly $100 a barrel, which we have historically always gotten orders from whenever there is a boom in the oilfield.

I do not know if you can tell me when the Iran war is going to be over or what is going to happen to oil prices; I might have a different opinion. But if this $90 to $100 a barrel holds, we are not only going to have lots of orders for data centers, we are going to have lots of orders for the Permian Basin as well, and it will lift all boats. Every manufacturer is going to get a benefit. We are not uniquely qualified—there are 34 operating plants in the state of Texas—but we are all going to rise together. We will not need independent dealers like we have in the past. We will not even need our own company stores. We will keep growing them, but I would rather build a past sale to Google than create too much inventory in my company stores in a rather tepid retail business.

The theme remains the same, and if you have been following these calls—because I know you have been on them, Mark—all I am doing is backing up what I already predicted two calls ago with real numbers. We are in good shape for a long time. It will blossom in Q3 and Q4, and it is going to show up beginning in Q2. We may have three of the best quarters coming up in front of us, but I do not like to overpromise and underdeliver. You have known me for eight or nine years, and you know that I am pretty conservative in these projections. But I know what is in the pack, and it would be nonsensical for me not to reveal it. We are going to have good three quarters.

Mark Smith: That is helpful. The other one was SG&A—there was a pretty impressive cut in SG&A this quarter, and I know there have been changes there. Can you talk about the sustainability of SG&A—are there further cuts, or with the orders coming in, are there areas you need to add?

Curtis Hodgson: I wish this was a video call because you would see a picture of me with a machete. I have just begun to cut SG&A, and everybody is supportive of that. We basically have $500 million worth of money invested in paper. That does not take any SG&A, or hardly any. I am tired of SG&A growing in the company when the rest of the company is not growing, so I would expect to see further declines in SG&A. I do not know how much we can get it down to because, as Jon correctly pointed out, SG&A is not just sales, general, and administrative; it includes things like warranty and reserves and provisions for loan losses. But from a pure people-and-expense perspective—the S, the G, and the A—I would expect further declines.

I do not know what our auditors are going to require for loan provisions that I think are nonsensical, and I do not know what skeletons are going to come up in the warranty department from yesteryear because we built some stuff that has been a legal issue. Part of our SG&A is still going to go down while part of it may not. I would expect maybe a 10% reduction by the end of the year in SG&A.

Mark Smith: You spoke earlier about inflationary pressures and tariffs. Do you think your SG&A cuts are enough to make up for inflationary pressures, and is there anywhere you can pull on COGS to get product cost down?

Curtis Hodgson: I have to go back to 2010–2030. The problem in the industry is all of the major manufacturers have been trying to build a cheaper product, and any time they can take $10 out, they consider it a triumph. The natural result is the product loses desirability—it does not have basic features, like medicine cabinets. We have taken a different tack. We are going to not build the cheapest one if possible and build to the middle of the market, and just recently we began to prove that theory out at the retail level with our company stores. We are not going to fight a war over who can sell the cheapest one for the lowest margin, because that is a recipe for failure. We are going to abandon that philosophy and concentrate on the middle market. This market needs to do more like site-built housing and turn into more of a turnkey solution to housing and get off the idea that the buyer has to buy his own medicine cabinet, if you know what I mean.

Mark Smith: With changes in immigration and your own workforce, are you seeing pressure on labor and your ability to hit new production goals?

Curtis Hodgson: As the younger generation would say, 100%. Deportations have hurt our sales to the Spanish market, and I think that is unfortunate, but it is okay. The interesting fact is our retail portfolio—which is 70% Hispanic—is behaving incredibly well, so we have not experienced a big uptick in repossessions. A little bit—I would say we are now repossessing at roughly 4% per year, but that is the historical norm in this industry. When we were repossessing at only 2% per year, it was because there was this quantum leap in prices during COVID and everybody was right side up in what they owed on their mobile home. Those increases in prices ended four years ago. In the four years since, we have had no substantial increase in prices in this industry, so for the loans made then in 2022, 2023, 2024, and 2025, we have consumers that are not well covered by the value of their mobile home, and I think that is the reason why repossessions are increasing back to historical norms.

Deportations are not affecting our loan portfolio, but they are affecting the sentiment of people and whether they want to buy a mobile home with this threat that some family member may be deported and they do not want to go back home with them. It has affected who we sell to at retail and how we sell to them, but it has not affected our portfolio. I think that does answer your question. Correct?

Mark Smith: That does. Thank you.

Operator: Thank you. I am showing no further questions at this time. I would like to turn it back to Curtis Hodgson for closing remarks.

Curtis Hodgson: Sure. Thanks, everybody, who joined the call today. I appreciate your interest in our company. That ends the call from my perspective.

Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect.