LEGH

Leadership Transition

• Kurt Hodgson retired as executive chairman and from the board of directors after decades of building the company from a small Texas partnership into one of the largest manufactured home producers in the US.
• Kenneth Shipley continues to lead the firm as Chief Executive Officer.

Overall Financial Performance

• Total net revenue was $66.3 million, up 32.3% year-over-year. Net income reached a company record $23.5 million, up nearly 60% year-over-year, and diluted earnings per share hit 99 cents, up from 60 cents in Q2 2025.
• Cost of product sales rose 29.2% in line with higher unit volumes, including deliveries for the large workforce housing order. Selling, general and administrative expense was $6.9 million, up 21.1%, driven by higher professional fees, payroll, and service costs, partially offset by lower incentive compensation and property taxes.
• The quarter recorded a $600,000 benefit from loan loss provision, compared to a $1.1 million expense a year ago, reflecting strong portfolio credit quality.
• The effective tax rate was 11.2% (vs 17.3% YoY), driven by the Federal Energy Efficient Home Tax Credit (Section 45L) and reversal of uncertain tax position accruals. Section 45L terminated June 30, 2026, so the effective rate is expected to rise closer to the 21% statutory rate in H2 2026.
• The balance sheet remains very strong: the firm ended the quarter with $29 million in cash, generated $24.4 million in operating cash flow in H1 2026 (up from $11 million YoY), had no outstanding borrowings on its $50 million revolver (full facility available), and held $562.2 million in total stockholders' equity with a book value per share of $23.64.

Operational Updates

• Deliveries for the 380-unit large workforce housing order began in Q2 2026, with 113 units shipped and full deliveries expected to continue through the remainder of 2026.
• Management reports significant new interest in workforce housing beyond traditional oilfield projects, including new opportunities tied to data center construction, with a growing, healthy order book heading into H2.
• The primary near-term constraint on growth is securing and retaining sufficient trained production labor; the firm is implementing new recruiting and retention programs to address this.
• All loan portfolios maintain solid credit quality with no deterioration that would require changes to loss reserving.
• The 21st Century Road to Housing Act, signed into law in July 2026, is viewed as meaningfully favorable to the industry; it removes the permanent chassis requirement for HUD code homes, modernizes construction standards, raises FHA loan limits, and reauthorizes community grant funding, which is expected to expand placement opportunities and improve customer financing over time, with no negative provisions for Legacy Housing.
• Tariff rates were stable in the quarter, and the firm received $700,000 in tariff refunds following a Supreme Court ruling, which benefited gross margin. Tariff rates on Chinese goods remain well above pre-2018 levels, so the firm continues mitigating costs via supplier diversification, increased domestic sourcing, and selective price adjustments.
• Litigation related to the 2025 acquisition of AmeriCasa's assets is ongoing in Texas Business Court; Legacy filed suit over alleged seller misrepresentations and post-closing misappropriation, and sellers have filed counterclaims Legacy believes are without merit. Legacy wrote off its $560,000 minority investment in Corpus Americasa during the quarter.
• A $48.6 million mobile home park borrower note matured in July 2026 and was not repaid in full; Legacy has since received a $2 million principal paydown, agreed to a modified forbearance agreement (18-month interest-only period followed by amortizing payments at market rate, with additional collateral and increased personal guarantees), and expects no loss on the exposure.

Capital Allocation

• With a strong cash position and essentially no debt, the firm is well positioned to fund growth. Share repurchases continue to be viewed as a sensible use of capital when the stock trades near book value.

Management did not issue formal numeric full-year guidance in this call, but provided the following forward-looking outlooks:

• Effective tax rate is expected to rise to near the 21% statutory rate in the second half of 2026, following the expiration of the Section 45L energy efficient home tax credit on June 30, 2026.
• Deliveries for the existing 380-unit workforce housing contract are expected to continue throughout the remainder of 2026, remaining on schedule.
• The Bastrop County manufactured home community development project is expected to be ready for home placements before the end of 2026, after final regulatory approvals are completed.
• Management expects meaningful potential for additional large workforce housing orders from data center and other new development projects across its operating regions, supported by its growing sales pipeline.

1. Product Sales: Generated net revenue of $53.8 million, an increase of 40% year-over-year, accounting for 81.15% of total net revenue. 718 units were shipped, up 27.3% year-over-year, with average net revenue per unit rising to approximately $74,900. 2. Loan Portfolio Interest Income: Generated $11.5 million, up 5.4% year-over-year, accounting for 17.35% of total net revenue, with growth driven primarily by the consumer loan segment. At quarter end, the consumer loan portfolio stood at ~$202.2 million, mobile home park notes receivable at ~$209 million, and dealer inventory finance receivables at ~$23.2 million.

• The primary near-term risk to converting existing order opportunities into revenue is the difficulty of securing and retaining sufficient trained skilled production labor.
• Regulatory permitting delays for the Bastrop County real estate development project have already extended the project timeline, and further unexpected delays remain possible.
• Tariff rates on most Chinese-sourced inputs remain substantially higher than pre-2018 levels, creating ongoing input cost pressure that requires continued mitigation.
• The AmeriCasa acquisition litigation is ongoing, and an unfavorable outcome could result in adjustments to acquisition accounting and potential financial losses in future periods.
• While the modified mobile home park loan is fully collateralized, there remains uncertainty about future borrower repayment that could result in unanticipated losses.
• New opportunities created by the 21st Century Road to Housing Act (such as duplex and two-story unit production) carry unquantified challenges alongside their potential benefits that the firm is still evaluating.

Q: Analyst asks if the 267 remaining units in the existing workforce housing backlog have grown, if pricing for remaining units will hold at the current high level, and if the firm is expanding operations in Georgia after previously considering strategic changes there due to low volume and profitability. / A: Legacy has grown its sales teams across Texas and Georgia, and the company holds a healthy total backlog across all business lines (not just workforce housing), including growing penetration of the independent dealer and mobile home park segments. Pricing for future workforce housing units varies based on unit size, and specialized workforce units have higher costs (due to extra construction steps and non-standard features) that support higher pricing. The firm has restarted growth efforts in Georgia, rebuilt the sales team, and now holds backlog there, so exiting or other strategic changes are off the table as volume and profitability improve.

Q: Analyst asks for an update on the Bastrop County land development project, including timeline and potential monetization, and asks about lot value trends. / A: The Bastrop County manufactured home community project is very close to receiving final regulatory approvals, with the DOT driveway access and final plat nearing completion, and the sewer treatment plant under construction. Management expects to place first homes in the community before the end of 2026, and strong housing demand in the Austin market means the project will be a strong opportunity. A silver lining to the multi-year permitting delay is that lot values have appreciated well ahead of inflation in the fast-growing Bastrop/Austin area.

Q: Analyst asks why the average selling price for workforce housing units is so high, and if the firm is exploring AI and technology to cut costs or improve efficiency. / A: Workforce housing units are much larger than Legacy's standard manufactured homes, with non-standard features that add construction costs, and project customers (oil and data center developers) are willing to pay a premium for fast delivery. Legacy has recently added a new financial analysis team that is using AI and technology to audit material and labor costs down to individual components, identify process improvement and capital investment opportunities across the full value chain. AI is already being used to speed up sales quoting, improve loan underwriting, and more accurately price repossessed homes for faster sale, with further rollouts planned across manufacturing.