Prepared remarks
Good day, and thank you for standing by. Welcome to the Legacy Housing Corporation Q4 2025 Earnings Call. Operator provided instructions to participants. Please be advised that today's conference is being recorded. Operator provided instructions to participants. I would now like to hand the conference over to today's speaker, Curt Hodgson, Executive Chairman.
Good morning. This is Curt 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.
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.
Thanks, Jon. I'm going to turn the call over back to Jon 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. Then we'll open the call up for Q&A.
Thanks, Curt. 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 31, 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 a 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 nonrecurring 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 $0.5 million in warranty costs. Other nonoperating 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 $1.74 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 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 nonrecurring sale of a mobile home park project, including land and homes, acquired previously in foreclosure during Q4 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 nonoperating gains and other income during Q4 of 2024 resulted in a $2.4 million decline 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 notes 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.
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 problems for our markets, manufactured homes 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 site-built houses continues to widen. Manufactured homes average about $85 per square foot 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. But let me run through a couple of specific topics. On the retail and dealer side, unit sales were lower year-over-year. 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 of interest income last year, and we expect continued growth as the 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 Jon 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-sourced 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, we will be evaluating whether to repurchase on an ongoing basis. On development, we, of course, have one very large project going on in Austin. I keep predicting that it's near finished. One of these days, I'll be right. But I really think we'll be putting homes into consumers in 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 Eatonton, produced 1,549 homes in 2025. We are certain we can 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 continue to pursue 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 experienced 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 foundation, especially in technology, still looks pretty strong. For closing thoughts, let me just close a couple of things on where I think we stand. Legacy delivers consistent profitability. We've never had a quarterly loss in our history. This year's increase in book value of 8-point-something percent is the worst year we've had, but most of that was largely affected by increasing provisions for loans as the economy gets a little less certain. The CECL requirements under accounting increased several million dollars 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 that 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. But as long as we keep growing at 8%, 10%, 12% per year, we'll be a $1 billion 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, 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. 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 well 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 seat in data center business, which for us is similar to work we've done in 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.
Questions and answers
Operator provided instructions to participants. Our first question comes from Rohit Seth with B. Riley.
I'm trying to reconcile two things. The ASP per section dropped about 15% sequentially, but the ASP increased 12% year-over-year, 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 finished inventory that you flagged last quarter?
Yes. We measure production per floor and that's how we track things. We report to you often per unit. So if we have more double wides, our price per unit is higher than if we have single wides. In the workforce housing space, it's substantially all single wides. But we sell at such premiums and such values in workforce housing, I believe the average revenue per unit 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 in specialty products. I think that explains why the margin is holding up even though the number of units sold was less. Does that answer your question?
Yes, it does. If I get a follow-up, you mentioned on volume growth that 1Q looks even better than 4Q and the trade show backlog is extending well into the first quarter. Now Q4 came in at 570 sections. So are we in that 650 range for Q1? Or has the demand picture changed?
A lot of our workforce housing orders really won't show up in revenue until Q2. Right now, we are at a finished goods inventory probably at an all-time high, almost all of which has a large customer attached to it. For example, a development project may order for an earlier delivery date but actually need the homes months later. So we've produced it and were obligated to produce it, but we won't recognize revenue until shipment. I think a lot of what we've already built in Q1 won't show up in revenue until Q2.
Understood. And then last one, maybe you can talk about this ROAD to Housing Act that's passing through Congress to remove the steel component, the chassis. Do you want to make any comments on the impact to Legacy?
Yes. That's a very interesting piece of legislation. The definition of manufactured homes has historically included a permanent chassis. They are proposing to remove that requirement, and that's about $2,000 to $3,000 per floor in manufacturing cost. There may be an opportunity to return chassis to the factory depending on how homes are being set up, but I don't view that as material because by the time you get them back, recondition and recycle them, you won't save a significant amount. Even if there were savings, they'd likely be passed to the consumer. The practical benefit is we may be able to set houses lower, decreasing finished floor height by 10 to 12 inches, which would be an advantage. There's another concept called duplex that is moving through; removing single-family-only from the definition could provide some marketing opportunities in urban environments. So there are some modest governmental tailwinds for the industry, but not as much as I had anticipated. I haven't seen meaningful federal initiatives to encourage ownership in this sector recently.
Our next question comes from Mark Smith with Lake Street.
I wanted to ask a little bit about sales and demand. Curt, you called out commercial sales and some weakness there in the fourth quarter as maybe these operators pulled back. Can you tell us what you're seeing from a demand perspective today and how you feel about the year for commercial sales?
The bright spot I see is workforce housing opportunities tied to data centers. Those customers are spending heavily, and that's extremely promising. The broader issue remains distribution: there simply aren't many legal spaces to park homes in major metropolitan areas. Mobile home parks in metro areas of one million or more people are generally full. Development costs have increased significantly; what we thought would cost $40,000 to $50,000 per space now often costs $70,000 to $90,000 once you satisfy regulatory requirements. That gap is challenging because park rents have increased faster than the ability to develop new, economical spaces. Workforce housing is different because those communities are purpose-built and command premiums. For retail business, where to put homes economically remains a constraint, and that hasn't improved materially.
And that leads to my next question. As we think about industry or channel inventory, are we seeing a build that creates a lag for several quarters? Or is that not really an issue?
The industry remains niche: filling existing parks, workforce housing, and emergency housing after weather events. Of the roughly 106,000 homes built last year, I would guess at least half went into those niche categories. While our homes compare favorably to site-built homes, the general consumer market is smaller. Across the United States' 134 operating plants, the volume for general consumer homes is probably around 50,000 to 60,000 units a year. For many plants, that volume isn't enough to be highly profitable. Unless there's meaningful federal support or increased development in large metros, plant capacity relative to market demand will remain constrained. On the positive side, the data center-driven demand could add 20,000 to 40,000 units nationwide, which would help the industry.
As it relates to where demand is for homes and ASP per product sold, how much of the ASP increase is due to pricing you implemented versus a higher ASP mix from workforce housing products?
We faced pressure not to raise prices despite tariffs. Labor cost per square foot is significantly higher than pre-COVID levels; labor efficiency declined and wages rose, and we haven't seen off-setting productivity gains. Our labor cost per square foot is more than double what it was at the onset of COVID, while wages are up roughly 50% to 60%. Commodities like copper, steel, and lumber are also higher than pre-COVID. We led a price increase in mid-2025 of about 8% to 9%; initially that depressed sales because others could undercut us, but now competition has moved in line. Wholesale prices are in the 50s per square foot now and I expect industry-wide wholesale pricing to approach the 60s per square foot within 12 months. That reflects both increases in pricing and shifts in product mix toward higher-value offerings.
On SG&A in Q4, can you give more breakdown on what is one-time in nature? You called out $1 million legal costs and some loan loss reserves. What run rate should we look at for SG&A in 2026?
I'll turn that question over to Jon as he has the detailed view on SG&A.
Thanks. SG&A contains several nonrecurring items; it's not just sales and office overhead. The big driver was the loan loss reserve; as we became more conservative in our estimates, that increased materially. I believe most of that reserve build is behind us, so that change should drop back. Legal expenses have dialed back as some cases settled. So I expect SG&A as a percentage of sales to move back toward a more normal historical rate. The wildcard is credit quality: if repossessions yield lower recoveries due to the used home market, that can affect SG&A. Historically we saw a post-COVID period where repossession recoveries were favorable; they're now more normalized. There are many moving parts, but the trend should be favorable in 2026 versus 2025.
Let me add that our SG&A includes our finance organization and public company costs. When you divide SG&A by product sales, it may look high because it contains items peers might not carry in the same way, such as a robust finance department. Being public carries fixed costs—audit fees and regulatory expenses—that don't scale down with sales. So when sales decline, SG&A ratio can appear higher even if absolute SG&A remains steady.
Yes, that's helpful. Thank you, guys.
Our next question comes from Alex Rygiel with Texas Capital Securities.
A couple of quick questions. What's the final hurdle in Austin for deliveries? I know there are items related to wastewater treatment, road connection and discussions with school boards.
Those same issues appear at our monthly development meetings. The wastewater treatment plant necessary to connect the thousand spaces is substantially delivered; the remaining items should arrive this year. We have enough delivered to run about 40% capacity of the plant. We have taken bids for assembly and are close; expect a four- to six-month lead time for that. Once the school board is convinced we will put 1,000 rooftops in the area, they should support building the school. We have DOT approval for highway connections, though it took longer than expected. I said earlier I expect to put houses in there this calendar year. If I'm wrong, please remind me in December. The regulatory environment has been harder and slower than anticipated—permits, comments, plan revisions are time-consuming. Building anything now takes much longer than it used to, even site-built custom homes.
Remind me again: how many homes do you need to deliver to that site prior to considering liquidating the whole asset?
Zero. We consider monetization options anytime a compelling offer arrives. But the project was designed to complement factory distribution and company-owned retail. One of our factories could run at capacity for two to three years serving that project alone. Austin commands a premium from a housing perspective—its location is exceptional with proximity to downtown, Tesla, the airport and other development. We can sell lots there and command attractive rents. The project is a key part of our development portfolio and the vision is to create neighborhoods with amenities, carports, communal parking and a community feel. If the concept works, we believe we can command premiums and sell lots; cost basis is attractive versus what we expect to realize.
Regarding the Georgia plant, production there sounds limited. What is the longer-term plan for that plant?
Our options are straightforward: either accept that we can't make a profit there and sell the property to a competitor, or find ways to make it profitable. We do have ancillary businesses there—like a lamination facility—that sell $4 million to $5 million a year with decent margins. The factory itself hasn't contributed meaningfully to the bottom line in several years, and this quarter didn't improve that view. We've been discussing alternatives regularly. We won't continue to subsidize operations that don't make sense; we will either turn it or dispose of it in 2026 if necessary. It hasn't contributed to earnings for a long time.
Lastly, as it relates to AmeriCasa: I know the acquisition included a Houston location that you hoped could sell 10 or 12 units a month. Can you give an update on the success of the acquisition and the strategy to go direct to retail?
The acquisition was an attempt to try something new with company-owned retail. We acquired some hard assets and technology. The management change we anticipated did not materialize; Norman Newton's employment agreement is no longer in effect and he's not with the company. So the additional management boost didn't come to pass. The hard assets were a reasonable deal, and we picked up software and some middle managers, and about a dozen Bogota, Colombia employees. So it wasn't for naught, but my initial excitement about a new retail model has waned since the last earnings call.
I would now like to turn the call back over to Curt Hodgson for any closing remarks.
Well, I just want to thank everybody who joined today's earnings call. We appreciate your interest in Legacy, and we're transparent in what's going on. I would have liked better numbers, but the provisions we took caused most of the disappointment. We're going to continue to improve from an earnings point of view. I have been making money since I was young, and I'm not going to stop now. I'm not satisfied with the earnings per share, but I recently became more involved in the company and anticipated an easier path; it hasn't been a piece of cake. I do think we will have a pretty good year in 2026. So hang on; don't sell at $18 a share. Thank you, I appreciate you all participating. Goodbye.
Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.