Q3 2025 Legacy Housing Corp Earnings Call

Okay.

Good day, and thank you for standing by.

Welcome to the legacy housing Corporation third quarter 2025 earnings Conference call.

At this time all participants are in a listen only mode.

The speaker's presentation, there will be a question and answer session.

Last question during the session you will need to press star one on your telephone you wouldn't hear an automated message advising your hand is raised to withdraw your question. Please press star one again.

Be advised that today's conference is being recorded I would now.

Like to hand, the conference over to your Speaker today, Curt Hodgson co founder and executive Chairman of the Board. Please go ahead.

Curtis Hodgson: Good morning. This is Curtis Hodgson. I'm here with Kenny Shipley, my Legacy Co-Founder and our Interim CEO. Thanks for joining our Q3 2025 Conference Call. Ron Arrington, our Interim Chief Financial Officer, will read the safe harbor disclosure before we get started.

Good morning, this is curt odds and I'm here with Kenny Shipley, My legacy cofounder and our interim CEO. Thanks for joining our third quarter 2025 conference call Ron.

Ron Arrington, our interim Chief Financial Officer, who will read the safe Harbor disclosure before we get started.

Okay.

Ronald C. Arrington: 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. Therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report filed with the Securities and Exchange Commission. In addition, any projection as to the company's future performance represents management's estimates as of today's call. Legacy Housing assumes no obligation to update these projections in the future unless it is required by applicable law.

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 Airport.

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.

Therefore, we refer you to a more detailed discussion of the risk and uncertainties in the company's annual report filed with the Securities and Exchange Commission.

Any projections as to the company's future performance represent managements estimates as of today's call legacy housing assumes no obligation to update these projections in the future and watch it is required by applicable law.

Curtis Hodgson: Thanks, Ron. As you can tell from the word interim appearing in two of our titles, we've had some senior turnover recently. Our prior CEO, CFO, and general counsel departed last month. Fortunately, Kenny Shipley and I have remained active in the business through these years and are excited to reengage in the day-to-day operations of profitably manufacturing and selling mobile homes. Ron Arrington previously served as our CFO and has led our development team recently, so we haven't skipped a beat in that section. I'm going to turn the call over to Ron now for a review of our Q3 performance. After which, I will speak briefly with our thoughts and some additional corporate updates. Then we'll open the call up for questions.

Thanks, Ron.

You can tell from the word interim appearing in two of our titles we've.

We've had some senior care over recently, but our prior CEO.

CFO and general counsel departed last month.

Unfortunately, kidney, though I have remained active in the business through these years and are excited to reengage in the day to day operations, our profitability profitably manufacturing and selling mobile homes.

Ron Arrington previously served as our CFO and has led our development team recently, so we haven't skipped a beat in that section.

Wanted to turn the call over to Ron now for a review of our third quarter performance after which I will speak briefly what their thoughts.

Corporate updates.

Open the call up for questions.

Kenny Shipley: Ron.

Hi.

Ronald C. Arrington: Thanks, Curt. Let's get straight to the numbers. Home sales decreased by $1.4 million, or 4.8% during the 3 months ended 30 September 2025, as compared to the same period last year. The decrease was primarily driven by a decline in sales to mobile home park customers utilizing Legacy's commercial loan program, as well as a decline in sales to independent dealers participating in Legacy's inventory finance program. These drops were primarily offset by increase in direct sales to customers and revenues from Legacy's company-owned Heritage outlets. Net revenue per unit increased approximately 8% to $68,500 from $63,500 year over year. At the end of Q2 2025, Legacy increased prices to mitigate the impact increases in raw material cost and tariffs on Chinese goods.

Thanks Kurt.

Let's get straight to the numbers.

Home sales decreased by $1 4 million or four 8% during the three months ended September 32025.

As compared to the same period last year.

Decrease was primarily driven by a decline in sales to mobile home park customers utilizing legacy commercial loan program as well as <unk>.

The decline in sales to independent dealers participating in legacy inventory Finance program. These drops were primarily offset by increased.

Direct sales to customers and revenues from legacy company on heritage outlets net revenue per unit increased approximately 8% to 68500 from 63500 year over year at the end of the second quarter of 2002.

25 legacy increased prices to mitigate the impact increase.

And raw material costs and tariffs on Chinese goods.

Ronald C. Arrington: Curtis Hodgson can speak later as to these other steps Legacy is taking to address these challenges. Product sales remained relatively flat in the year-to-date comparison for 2025 versus 2024, declining slightly by $1.2 million or 1.3%. The sales mix changed with declines in direct sales and mobile home park sales offset by increase in company-owned retail store sales and dealer inventory finance program sales. The shift in mix, along with price increase, explains why Legacy's net revenue per unit increased 13% to $68,600. Consumer MHP and dealer loan interest income increased to $10.9 million, up 5.4% during Q3 as compared to the prior year.

Perfect speak later ask of these other steps legacy is taking too.

Address these challenges.

Product sales remained relatively flat.

Year to date comparison for 2025 versus 2024 declining slightly by one 2 million or one 3%.

The sales mix change.

Declines in direct sales and mobile home Park.

Sales offset by increase in company owned retail store sales and dealer inventory finance programs sales. This shift in mix along with price increase explains while legacy net revenue per unit increased 13% to 68600.

Consumer M HP and dealer loan interest income increased to $10 9 million up five 4% during the third quarter as compared to the prior year. This increase was primarily driven by increases.

Ronald C. Arrington: This increase was primarily driven by increases in the consumer loan portfolio and higher interest rates from MHP loans converting to variable rates per their loan agreements. Consumer MHP and dealer loan interest increased to $32.4 million, up 5.3% for the 9 months ended September 2025 as compared to 2024. Over the prior 12 months, Legacy's consumer loan portfolio increased by $21.4 million, up to $188.1 million, up 12.8%. During the same period, Legacy's MHP note portfolio remained essentially unchanged at $201.5 million. Dealer inventory finance loans decreased $1.4 million to $30.3 million, down 4.4%.

Sumer loan portfolio.

Higher interest rates from M. H P loans converting to variable rates per their loan agreements.

Consumer.

N P H.

D var <unk> interest increased to $32 4 million up.

Five 3% for the nine months ended September 2025, as compared to 2024.

Over the prior 12 months.

<unk> consumer loan portfolio increased by $21 4 million up to $188 1 million up 12, 8%.

During the same period.

<unk> M H P.

Portfolio remains essentially unchanged at 201 five.

Dealer inventory finance loans decreased one 4 million to $30 3 million down four 4%.

Ronald C. Arrington: Other revenue consists primarily of contract deposit foreclosures, forfeitures, dealer consignment sales, commercial lease rents, portfolio servicer revenue, and land sales revenue decreased by $3 million or 79% for Q3 2025 compared to Q3 2024. This decrease was primarily due to a significant land sale which occurred during Q3 2024, as well as a decrease in portfolio servicer revenue between comparison periods. For the nine-month comparison period of Q3 2025 versus Q3 2024, other revenues declined $4.1 million, or 63.1% due to the aforementioned sale, as well as a significant reduction of 2025 forfeiture income on MHP deposits for canceled contracts.

Other revenue consists primarily of contract deposit foreclosures.

Forfeitures to your concern.

Sales.

Commercial lease rents.

Portfolio service revenue and land sales revenue.

Decreased by $3 million or 79% for the third quarter of 2025 compared to the third quarter of 2020 for this decrease was primarily due to a significant land sale, which occurred during the third quarter of 2024 as well as a decrease in portfolio of service revenue.

Between comparison periods.

For the nine month comparison period third quarter 2005 versus third quarter 2024.

Other revenue, which declined $4 1 million or 63, 1% due to the aforementioned sale as well as the significant reduction of 2025 forfeiture income on MH fee deposits for canceled contracts.

Okay.

Ronald C. Arrington: The cost of product sales increased $1.6 million or 7.5% during the 3 months ended September 2025 as compared to the same period in 2024. During this same comparison period, product sales declined $1.4 million or 4.6%. This increase in cost of product sales is primarily related to a sizable increase in raw material cost and tariffs offset by a decrease in delivery, shipping, and setup cost as we ship fewer units. I know tariffs are of particular interest, so to put them in perspective, they add roughly $1,200 to the cost of a standard floor plan. Product gross margin was 20.28% for Q3 2025, down from 29.2% for Q3 2024.

The cost of product sales increased one 6 million or seven 5%. During the three months ended September 2020 launch as compared to the same period in 2024. During this same comparison.

Product sales declined $1 4 million or four 6%.

This increase.

Cost of product sales is primarily related to a sizeable increase in raw material costs and tariffs offset by a decrease in delivery shipping.

Set up cost as we shipped fewer units.

I know tariffs are particular interest so to put them in perspective to add roughly $1200 to the cost of a standard for clients.

Product gross margin was 20 points.

Two 8% for the third quarter of 2025 down from $29 two for the third quarter of 2024.

Ronald C. Arrington: The cost of product sales increased $2.7 million or 4.3% for the nine months ended September 2025 compared to 2024. During the same period, product revenue decreased by $1.2 million or 1.3%. The increase in cost of product sales is primarily related to increases in raw material costs, tariffs, and delivery, shipping, and setup costs, offset by a decrease in labor and factory overhead costs. Product gross margin was 27.7 for the nine months ended September 2025, compared to 31.6 for 2024. Selling, general, and administrative expenses increased to $1.3 million or 20.6% for 3 months ended September 2025 compared to 2024.

The cost of product sales.

Increased $2 7 million or four 3% for nine months ended September 2025 compared to 2024.

During the same period.

Revenue decreased by $1 2 million or one 3%.

The increase in cost of product sales is primarily related to increases in raw material costs tariffs.

And delivery is shifting.

Cost offset.

By decrease in labor and factory overhead cost.

Product gross margin was 27 seven for the nine months ended September 25, compared to <unk> 31 six.

2024.

Selling general and administrative expenses decreased $1 3 million or 26%.

Three months ended September.

25 compared to 24.

Ronald C. Arrington: The increase was a result of a $900,000 increase in legal expenses, a $500,000 increase in loan portfolio loss expenses, and a half million dollar increase in professional and consulting fees, partially offset by a $600,000 decrease in the company's self-insured health benefit plan. SG&A increased $2.7 million or 15.5% for the nine months ended September 2025 compared to 2024.

The increase was the result.

$100000 increase in legal expenses.

500000 increase in loan portfolio loss expenses, and a half million dollar increase in professional and consulting fees, partially offset by $600000 decrease in the car.

Great.

Self insured health benefit plan.

Okay.

Okay.

SG&A increased $2 7 million or 15, 5% for the nine months ended September 2025 compared to 2024.

Ronald C. Arrington: The increase was primarily a result of a $1.7 million increase in loan portfolio expenses, a $800,000 increase in legal costs, a $700,000 increase in service and warranty expenses, and a $400,000 increase in professional and consulting fees, offset by a $700,000 decrease in the company's self-insured health benefit expenses and a $400,000 decrease in corporate and general payroll expenses. Other non-operating income decreased $6.9 million or 72.3% over the nine-month comparison period ending 25 September compared to September 2024. This was primarily due to a significant one-time transaction during the 2024 period. The two largest were a $4.9 million fair market value adjustment and loan restructuring gains, and a $2 million of liability accrual reverses related to various completed MHP contracts.

Kris was primary the result of a $1 7 million increase in the loan portfolio expenses.

$800000 increase in legal costs, a $700000 increase the service and warranty expenses and a $400000 increase in professional and consulting fees offset.

$700000 decrease in the company self insured health benefit expenses, and a $400000 decrease in corporate and general payroll expenses.

Other nonoperating income.

Decreased $6 9 million or 72, 3% over the nine month comparison period.

Timber 25 compare.

Arity September 2024.

This was primarily due to a significant onetime transaction during the 2024 period.

The two largest for us $4 9 million.

Fair market value adjustment and loan restructuring gains.

$2 million.

Of liability accrual reversals related to various completed.

In HP contracts.

Ronald C. Arrington: What's the bottom line for a tough quarter? Net income decreased $7.2 million or 45.3% to $8.6 million compared to $15.8 million in Q3 2024. Net income margin was 21.4%, down from 35.7% for Q3 2024. For the nine months ended September 2025 compared to 2024, net income declined $13 million or 28.7% to $33.6 million from $47.1 million. Net income margin was 26.6% for the nine months ended September 2025 compared to 36.3% in 2024. We ended Q3 2025 with $13.6 million in cash. In July 2023, we closed a new revolving credit facility with Prosperity Bank.

So what's the bottom line for a tough quarter.

The increased net income decreased $7 2 million or 45, 3%.

$8 6 million compared to $15 8 million in the third quarter of 2024.

Net income margin was 21, 4% down from $35 seven for the third quarter of 2024.

Nine months ended September 25, compared to 24.

Net income declined $13 million or $28 70 to $33 6 million from $47 1 million.

Net income margin was 26.6 on R&D lines.

Timber 2025 compared to 36.3 in 2024.

We ended the third quarter of 2025 with 13 $6 million in cash.

July of 2023, we closed a new revolving credit facility with prosperity bank.

Ronald C. Arrington: The facility is for $15 million with a $25 million accordion feature. It is secured by our consumer loan portfolio and currently has a 0 balance. As of 24 September, we had approximately $570,000 in cash and equivalents and a balance of $2.6 on our line of credit. You can see despite the lower sales and net margin, we've continued to strengthen our balance sheet. Legacy has delivered a 9.5 return on shareholders' equity over the last 4 quarters ended 25 September. At the end of the Q3, Legacy's book value per basic share outstanding was $21.85, an increase of $1.90 since the same period of 2024. I'll now turn things back over to Curt.

The facility is for $15 million with a 25 million accordion feature.

It is secured by our consumer loan portfolio Folio, a currently has a zero balance.

As of September 24, we had approximately $570000 in cash and equivalents.

Balance of two six.

Right.

So you could see this despite the lower sales and net margin.

Turning it to strengthen our balance sheet.

<unk> delivered a nine five return shareholders' equity over the last four quarters ended September 25.

And at the end of the third quarter legacy book value per share.

Per basic share outstanding was $21.85 an increase of $1 90 since the same period of 2024.

I'll now turn things back over to Kirk.

Curtis Hodgson: Thanks, Ron. Let's quickly discuss the market, followed by our financial performance updates on key issues and strategic initiatives. The latest data shows continued slowing in the industry as a whole, with the Texas Manufactured Housing Association reporting a seasonally adjusted drop of 3.8% in August and down 6.1% on the raw total from September 2024. Despite the continued housing affordability problem in our markets, macroeconomic headwinds, such as falling consumer confidence and large tariff rises necessitating price increases, are somewhat restraining growth. On the bright side, we held our big annual show in September in Fort Worth. The show was one of the most successful that a company's ever had.

Thanks, Brian.

So let's quickly discuss the market.

Followed by our financial performance updates on key issues and strategic initiatives. The latest data shows continued slowing in the industry as a whole with the Texas manufactured housing Association reporting a seasonally adjusted drop of three 8% in August and down six 1%.

The rock totally from September of 2024.

Despite the continued housing affordability problem in our markets macroeconomic headwinds such as falling consumer confidence large tariff right and large tariff.

Ryzen necessitating price increases.

Our somewhat restraining growth.

The bright side, we held our.

The Big annual show.

In September and Fort worth.

The show was one of the most successful companies ever had orders book, there will ensure higher production rates for the fourth quarter or the third quarter.

Curtis Hodgson: Orders booked there will ensure higher production rates for Q4 over Q3, and carrying on well into Q1 2026. Dealer and park customers ordered homes at our Fall Show. I'd kinda like to dive into some macro topics, well, for a minute. I think, you know, we're not happy with these results and I think that probably explains why the changing of the guard, so to speak, happened last month. Our retail and dealer side of our business saw sales falling for the last year or more. Our community park side of the business saw sales falling for the last year or so. Heritage, our retail side actually had increased sales. Our finance division continued to be profitable, very much so.

Carrying on well into the first quarter of 2006.

The other end part customers order homes at our fall fall show.

I'd kind of like to dive into some macro topics.

For a minute.

So.

Thanks.

We're not happy with these results.

And I think that probably explains why.

The changing of the guard so to speak happened over the last month.

Our retail and dealer side of our business.

Sales falling for the last year or more.

Are there any parts side of the business.

Our sales force.

Going for the last year or so.

Heritage retail.

Aside actually had increased sales.

And Alright Finance division continue to be.

Profitable very much so.

Curtis Hodgson: Low but somewhat increasing charge-offs due to more foreclosures and lower resale prices. As of September 30, I think 99% of our mobile home notes or better were performing as agreed, and about 97.5% of our consumer loans were performing as agreed. By that we mean, are they within 30 days of being current? We monitor these numbers monthly and are confident that our portfolios are very strong. We have began to feel the effects of ICE enforcement on our labor force and on customer demand and on the performance of our retail portfolio. I don't think it's real significant, but we definitely are feeling the effects of fewer Hispanic customers in our market, particularly in Texas, but I think it's also true in the Southeast.

Hello, but somewhat increasing charge offs due to more for closures and lower resale prices.

As of September 30.

I think 99% of our mobile home notes or better.

Forming as agreed and about 97, 5% of our consumer loans were performing as agreed.

That would mean.

Are they within 30 days of being current.

These numbers monthly and are confident that our portfolios are.

Very strong okay.

We have began to feel the effects of ice enforcement.

Our labor force and on customer demand.

And on the performance of our retail portfolio.

I don't think is real significant.

But we definitely are.

Feeling the effects of.

How about fewer Hispanic customers.

Particularly.

In Texas, but I think it's also true in the southeast.

Curtis Hodgson: We began hiring at key positions. We had kind of a lull in hiring. I think our past management can't really be credited with hiring anybody of consequence. We've already hired a new general manager for Fort Worth. We're, if you know, Norman Newton is now with the company. He was re-released earlier. We're actively looking for a new CEO with industry experience. Our hiring is, since in the last few weeks when Kenny and I got back involved, we're focusing on filling the seats with some quality people. Our working capital is too high. I've been noticing this in our financials for some time. We have too much raw material, probably double what we should have, and our finished inventory is also high.

We began hiring key positions, we had kind of a lull in hiring.

I think our past management.

I can't really be credited with hiring anybody as a consequence, we've already hired a new general manager for Fort worth.

Sure.

Now with the company.

He was released earlier, we are actively looking for NAC.

With industry experience.

So our hiring is since in the last few weeks, when Kenny and I got back about.

We're focused in on filling the seats with some quality people.

Our working capital is too high.

I've been noticing that isn't in our financials for some time.

We have too much raw material, probably double what we should have.

Finished good inventory is also high.

Curtis Hodgson: At any given time, we have as many as 200 houses in the yard, which is probably double what it should be. Our finished goods inventory was $24 million, including work in progress, at the end of the quarter. I think that's probably double what it should be. If we can reduce our working capital, or let's say our unproductive working capital, that'll free up $10, $20 million to be reinvested into the business. We remain in a strong cash position. We'll be able to complete the AmeriCasa purchase without incurring any debt. On a positive, I don't know who all is on the call and what their knowledge of Texas is, the data centers in Texas are all underway.

At any given time, we have as many as 200 houses in the yard which is probably double what it should be.

Our finished good inventory was.

$24 million, including work in progress at the end of the quarter.

I think that's probably double what it should be so if we can reduce our working capital.

I'd say, our unproductive working capital that will free up $10 million to $20 million.

Two.

That could be reinvested into the business.

We remain in a strong cash position will be able to.

To complete the.

The America purchase without incurring any debt.

On a positive I don't know who all is on the call and what they are.

Knowledge of Texas is but.

The data centers in Texas.

Are all underway.

Curtis Hodgson: There's gonna be at least 5,000 housing units, probably created in the next 24 months to tend to that, to those housing needs, almost all of which will come from the 30-plus manufacturing facilities located in the state of Texas. You know, ours being a couple of those. Business in Texas anyway, looks like it's gonna be really good for the next year or two. I'd like to discuss a little bit about the AmeriCasa Solutions acquisition. We've known this partnership between Jeffrey M. Fiedelman and Norman Newton for at least a decade. They've been a customer of ours. They've had a portfolio with us the whole way.

There's going to be.

At least 5000 housing units.

Probably Korea, the next 24 months.

Tend to that to those housing needs for almost all of which will.

Will come from the 30, plus manufacturing facilities located in the state of Texas.

<unk> being a couple of those so business in Texas anyway.

It looks like it's going to be really good for the next year or two.

Yes.

I'd like to discuss a little bit about the America Arthur acquisition.

We've known.

This partnership between Jeff Gainsborough and norm Newton for.

Or at least a decade, they've been a customer of ours they've had a portfolio is it the whole way, we're basically buying them out everything they have in the mobile home business and norm Newton has agreed.

Curtis Hodgson: We're basically buying them out of everything they have in the mobile home business, and Norman Newton has agreed to come to work as a director of revenue for the company. He has particular expertise in passively, or should I say, absentee managing of dealerships, which is a real, been a real challenge for us. He has a vibrant dealership that we're acquiring in Houston, and it doesn't have an owner on the premises, and he's proven that his HomeX model works pretty good, and we hope to be able to use his HomeX model over our 12 other locations that we have at the retail level. We are acquiring some other things in this process. It's kind of a hodgepodge of things.

Agreed to Kevin to work as a director of <unk>.

Revenue.

For the company he has particular expertise.

Passively or should I say absentee managing.

Dealerships, which has really been a real challenge for us.

Vibrant dealership that we're acquiring in Houston.

It doesn't have an owner on the premises and he's proven that is modeled pretty good and we hope to be able to use this model over our 12 other locations that we have at the retail level.

Yes.

We are acquiring from other things and this process is kind of a hodgepodge of things.

Curtis Hodgson: The net result is about $9 or $10 million will be allocated among the retailership that we're acquiring in Houston, the nearshoring that we're affiliating with in Colombia, which I visited myself, and what we call the HomeX model, which is Norm's proprietary system, including software of managing retail locations remotely. We're looking forward to that, integrating that with our system so that we can do more retailing at our company stores. I think that the likelihood of that is extremely high. We continue to deliver strong operating margins and consistent profitability.

The net result is about nine or $10 million.

It will be allocated among.

The retailers ship that were acquiring in Houston.

The near shoring that were affiliating with in Columbia, which I visited myself and the what we call them.

<unk>.

FX model, which is.

Norms proprietary system, including software.

Managing.

Retail locations remotely. So we're looking forward to that integrating that with our system. So that we can do more retailing at our company stores.

I think that.

The likelihood of that is is extremely high.

We continued to deliver strong operating margins.

And consistent profitability and in fact, we've never had a quarterly loss.

Curtis Hodgson: In fact, we've never had a quarterly loss in our entire history, not just from the 6 years plus that we've been public, but for the actually the 40 plus years that Kenny and I have maintained our partnership. The loan portfolios are on track to deliver about $40 million straight to the bottom line this year. As far as valuation, Kenny and I started this company in 1997 with about $700,000. We took in about $60 million of outside money when we went public. The combination of that has now grown to $522 million over the 20 plus years that we've done this. We'll continue to grow that book value. That's pretty much after taxes.

In our entire history, not just from the six years plus that we've been public.

But for the actually the 40 plus years of kidney ni.

Maintaining our partnership.

<unk> per foot portfolios are on track to deliver.

$40 million straight to the bottom line this year.

As far as valuation.

Danny and I started this company.

97% with about $700000 we.

We've taken about $60 million of outside money.

When we went public.

And the combination of that has now grown to $522 million.

Over the 20 plus years that we've done this and we will continue to grow.

Pat.

That book value.

And thats pretty much after taxes.

Curtis Hodgson: We make it, we save it, we invest it, that's what we've always done. That's the basic values that we'll be getting back to. I think we got a little distracted over the last couple of years, we intend to get back to doing what we do, which is selling a good product for a fair price, financing it, and distributing it in a variety of ways. Our book value consists mostly of finance notes. Realize that that book value wasn't ever in place at any given time. It's what we evolved to. We basically finance notes to enhance our own yields, we like to finance business from a return on investment point of view too. The Norm portfolio that we're acquiring, which is a little over $10 million notes, bears interest at over 16%.

We make it we say, but we invested in <unk>.

What we've always done it and thats the basic value that will be getting back to you I think we got a little.

Distracted over the last couple of years.

We intend to get back to doing what we do which is selling a good product for a fair price.

Nancy distributing unit and a variety of ways.

Our book consists.

Mostly it finance now has realized that that book value wasn't ever.

However in place at any given time, it's what we evolved to basically finance notes to enhance.

Our own yields, but we like the finance business from a return on investment point of view too.

The norm portfolio that we're acquiring which is.

Little over $10 million notes.

Bears interest at over 16%.

Curtis Hodgson: We have experience with his portfolios because we have one in common with him. It's always performed very well. We expect that the portfolio we're acquiring from Norm will perform well and make everybody money. We publish our book value per share each quarter. As Ron mentioned, as of 30 September, our book value is $21.85 per share. We've also bought back through time, Ron might be able to quantify this, I don't know, but I want to say it's somewhere in the neighborhood of $20 million or more of stock, which sits on our balance sheet as treasury stock. With our stock trading essentially the same price, we're looking at this changing of the guard as an opportunity to maybe reinvigorate our growth and innovation, which should increase profit margins and create a stock premium.

And we have experience with.

His portfolios because we have one comment with them, it's always performed very well and we expect that.

That portfolio, we are acquiring for norm.

Perform well make everybody money.

Republics, our book value.

Sure each quarter as Ron mentioned.

As of September 30, our book value is $21 85.

The $1 85 per share.

We've also bought back through time.

Might be able to quantify this I don't know, but I want to say, it's somewhere in the neighborhood of $20 million or more.

<unk>, which is on our balance sheet as treasury stock.

With our stock trading essentially the same price we're looking at this changing the guard as an opportunity to.

Maybe reinvigorate our growth and innovation, which should increase profit margins and create stock premium.

Curtis Hodgson: On the flip side, if the stock continues to trade, somewhere around book value, we will use our own liquidity as usual to repurchase shares. I think the bottom is fairly well protected, subject to our limitations of how much we can buy back, in any given day. As you know, with the new buyback laws, every time we buy back shares, we do pay, I think it's a 1% tax to the federal government. I believe we can continue building shareholders' equity even in this high interest, slowing growth economy, and our share price will begin to reflect this. I think when we get the uncertainty behind us, we'll get back to some reasonable P/E ratio. Any strategic moves are icing on the cake.

On the flip side of the stock continues to trade.

Somewhere around book value, we will use our own liquidity as usual.

Repurchase shares so I think the bottom is fairly well protected subject to limitations of how much we can buy back in any given day and as you know with the new buyback laws every time, we buy back shares we do pay I think it was a 1% tax to the federal government.

I believe we can continue building shareholder equity.

Even in this high interest slowing growth economy, and then our share prior price will begin to reflect this.

I think when we get the uncertainty behind US, we'll get back to some reasonable p/e ratio.

These strategic moves are icing on the cake in my opinion. This is a great time to be in our legacy.

Curtis Hodgson: In my opinion, this is a great time to be an owner of Legacy, particularly if you're in at today's price, as you'll own part of a company that's never lost money in any year since its founding. As for affordability is now front and center in the US and housing, we are positioned to provide that affordable housing to thousands of family over the coming years. For those of you that are not from Texas is a nice place to be right now. The economy is still doing great and we haven't had any hiccups as far as the economy is concerned. I want to address a couple of questions on an email that was sent to me recently. We have a lot of real estate on our books. The Austin project is coming along nicely.

Our legacy, particularly if youre in at today's price.

Joel one part of a company that has never lost money in any year since its founding.

As for affordability.

<unk> is now front and center in the U S. In housing we are positioned to provide that affordable housing to thousands of family.

For the coming years.

Those of you that arent upfront, Texas, Texas is a nice place to be right now the economy is still doing good.

Greg.

And we haven't had.

Any hiccups as far as the economies concerned I want to address a couple of questions.

E Mail that was sent to me recently.

We have a lot of real estate on our books.

The Austin project.

It's coming along nicely, it's a little slower than we liked.

Curtis Hodgson: It's a little slower than we like. We have 3 or 4 hurdles before we're up and running. The wastewater treatment plant needs to be installed, which will not happen until probably Q2 2026. We're also working on getting access from the state highways that adjoin our property. The infrastructure in the middle of the property is coming along really well and will be very far along by the time we solve those other 2 problems. We're trying to negotiate with the school system to put an elementary school in the middle of it, which will be the primary amenity of the parcel. As for other real estate we own, we are not, we have no shovels in the dirt anywhere else.

We have three or four hurdles before we're up and running the wastewater treatment plant.

They used to be installed which will allow private which will not happen until probably the second quarter of 2026.

We're also working on getting access from the state highways at a join our property.

The infrastructure in the middle of the property is coming along really well and it will be very far along by the time, we solve those other two per ounce. We were trying to negotiate with the school system to put it all in Mexico, and the middle of it which will be the primary amenity of the parcel.

Other real estate we own.

We are not.

We have no shovel in the dirt anywhere else.

Curtis Hodgson: It is all, I don't know, entitled to be mobile home properties. It's a little bit challenging when the property's worth two, three, four, five times more than you paid for it. Just because we bought it for $10,000 an acre to make a mobile home park out of it, doesn't mean we would come to the same conclusion now that it's valued at $40,000 or $50,000 per acre, which is the case in several of our properties. We are entertaining divesting ourselves of the properties. I would estimate of the six or seven remaining properties on the books, besides Bastrop County, we probably have $4 to 5 million of gains should we choose to liquidate those properties. If anything, that's on the low side.

It is all in.

Entitled to be mobile home properties.

It's a little bit.

<unk>.

When the property is worth 2345 times more than you paid for it.

Just because we bought it for $10000 an acre to make a mobile home park out of it doesn't mean, we would come to the same conclusion now that it's valued at 40 or $50000 per acre, which is the case in several of our properties were entertaining.

Divesting ourselves of the property.

Other properties I would estimate of the fixture seven.

Remaining properties on our books besides faster accounting.

We probably have.

$4 million to $5 million of.

Gains should we choose to liquidate those properties and if anything that's on the low side.

Curtis Hodgson: I was asked about the long-term margin targets for the industry. I think a lot of companies have been absorbing the increase in cost caused by tariffs and other factors. I think when they start looking at their financial statements like we just did ours, we'll probably all be in lockstep with each other to slowly increase prices for the products that we're marketing. Right now it's been pretty cutthroat from one manufacturer to the other. I'm hoping that when people realize that the tariffs are not temporary, the labor increases that we've paid or the labor wage increase that we're paying are not temporary, I think we probably need to reevaluate the operating margins in the industry as a whole. That's pretty much it.

I wanted to ask about the long term margin targets for the industry I think a lot of companies have been absorbing it.

The increase in costs caused by tariffs and other factors I think when they start looking at their financial statements like we just did ours.

We will probably.

I'll be in lockstep with each other to slowly increase prices for the products that we're marketing right now it's been.

Pretty cutthroat from one manufacturer to the other.

And I'm, hoping that.

When people realize that the.

Tariffs are not temporary labor increases that we've paid.

Labor wage increase that we're paying.

Barry.

I think we probably need to reevaluate the operating Marty margins in the industry as it as a whole.

That's pretty much it.

Curtis Hodgson: I can probably turn it over to question answers or questions.

I can probably turn it over to questions question and answers.

<unk>.

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. Please stand by while we compile the Q&A roster. Our first question comes from the line of Daniel Moore with CJS Securities. Your line is now open.

Thank you as a reminder to ask a question. Please press star one on your telephone away for your name to be announced to withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Yes.

Our first question comes from the line of Daniel Moore with CJS Securities. Your line is now open.

Daniel Moore: Morning, Curt. Morning, Ron. Appreciate the color. Thanks for taking questions. Let me start with the AmeriCasa asset purchase. Just talk to, you know, their revenue model. What are the features of the future HomeX platform, you know, and how is their software expected to enhance sales growth?

Good morning, Kurt morning, Ron I appreciate the color and thanks for taking the questions.

Maybe just start with the America Casa The America asset purchase just talk to their revenue model. What are the features of the future Hall next platform.

And how does their software I expect it to enhance sales growth.

Curtis Hodgson: Well, we weren't really looking at their financials on the purchase. We were intrigued by the HomeX product. We've experimented a little bit with it. Several of our dealers are using it. They pay a royalty to use it. If we can find a way to manage these locations remotely, whether it be from Dallas or Houston or Bogota, we will solve a lot of the mystery. Our manufacturing peer group all maintain their own retail locations, and they struggle with how to get volumes up as well. Industry-wide, I would guess that the average retail location that is affiliated with a manufacturer sells 2, 3, 4 mobile homes per month. 2's maybe break even, 3 is profitable, 4 is highly profitable.

Well, we weren't really looking at their financials on the purchase.

We were intrigued by the Max.

Our product.

We've experimented a little bit with it.

Several of our dealers are using it they pay a royalty to use it.

If we can find a way to manage it.

These locations remotely whether it be from Dallas or Houston or Bogota.

Then we will solve a lot of the Missouri.

Our manufacturing peer group all maintained.

One retail locations.

They struggled with how to get volumes up as well industry wide I would guess that the average retail location that is affiliated with the manufacturer.

234 mobile homes per month.

Maybe breakeven three is profitable for us highly profitable.

Curtis Hodgson: Basically we're just trying to get our sales up on a location basis. The primary reason we made a deal with Norm was to have access to that remote management technology, and I think that's it. As far as his 1 lot in Houston, it shines. He sells roughly 10, 12 houses a month every month, which is more than double what we sell at our locations. Kenny and I have both visited it. It's pretty impressive in that front. I mean, are we paying a little bit of premium? It kind of depends on what the management system's worth.

So basically we're just trying to get.

Our sales up on a location basis. The primary reason why we made a deal with norm was to have access to that remote management technology.

Technology, and I think that's it as far as one lot in Houston.

It shines he sells roughly 10 to 12 hours a month.

Every month, which is more than double what we saw at our at our locations.

Kenny and I, both visited it is pretty impressive.

On that front.

Paying a little bit of premium kind of depends on what the management assistant tourist if its worth.

Curtis Hodgson: If it's worth, say, $5 million, which is what I kind of put on it, I would look at it as though we have paid fair market value for all the assets we're acquiring on the AmeriCasa thing. Of course, we won't know until we integrate it with our own model to see what it is, but I'm very optimistic that that acquisition is going to help us sell more direct to retail consumers.

$5 million.

I kind of put on it I.

We'd look at it as though we have paid fair market value for for all the assets. We're acquiring from the America asset of course, we won't know until we integrated with our own model to say what it is.

Very optimistic.

That acquisition is Peter help us sell more direct.

Retail consumers.

Daniel Moore: Really helpful. I, just, making sure I heard correctly, the size of the chattel mortgage loan portfolio that you're acquiring, I heard 16%. Was it $30 million or was that off? I'm sorry.

Really helpful.

Just making sure I heard correctly the size of the chattel mortgage loan portfolio that you're acquiring I heard 16% was it $30 million or is that off im sorry.

Curtis Hodgson: The portfolio, the deal is, when we close, we'll acquire all loans in that portfolio that are current, defined by, within 30 days of currency. We think that the face value of that part of the transaction will be $10.8 million plus or minus a couple $100,000. The effective interest rate or the interest rate on that is just over 16%. It's pretty similar to our portfolios. It's almost exact. On that piece, it's right up our alley. We can absorb it rather easily, and I have confidence that it'll be accretive to our financials.

The portfolio deal is when we close we will acquire all loans in that portfolio that are correct.

Bye bye.

Within 30 days of currency and.

And we think that the.

The face value of that.

Part of the transaction will be $10 $8 million, plus or minus a couple hundred thousand.

And.

The effective interest rate or the interest rate on that is.

Just over 16%.

It's very similar to our portfolios some more exact.

And that thesis is right up our alley.

Rather easily and I have confidence that it will be.

Accretive to our to our financials.

Daniel Moore: Got it. You mentioned in the press release you expect normal production out of the Texas manufacturing facilities through year-end. Obviously, you know, great to hear the encouraging, you know, show that you had at the end of September in Fort Worth. What does kind of normal mean maybe relative to, you know, Q4 last year? Just talk about what your expectations are from the Georgia plant as well over the next quarter or 2.

Got it and then you mentioned in the press release, you expect normal production.

Texas manufacturing facilities through year end.

Great to hear the encouraging.

Show that you had at the end of September and Fort worth.

Just kind of normal mean, maybe relative to Q4 last year and just talk about what your expectations are from the Georgia plant as well over the next quarter or two.

Curtis Hodgson: I don't have Q4 in front of me from last year. I think we'll be through most of the Q4, which now of course we're a month into. I think we'll average six to seven in Texas per day and probably two to three in Georgia. Let's call it company-wide eight to 10. I don't really know. I'd have to dig out to see how we did in Q4 last year. Eight to 10 is profitable. As one shareholder eloquently pointed out, it doesn't look like the production and sales of mobile homes made money in Q3. That is correct. Q4, that part of the business should contribute pretty nicely to our earnings. Q1 looks even better than that.

I don't have Q4 in front of me from last year, but I think we will be.

Through most of the Q4, which now of course, we're a month into.

I think we will average six to seven in Texas.

Per day.

And.

Probably.

Students free in Georgia, So that's.

Let's call it companywide eight to 10.

And I don't really know I'd have to dig out see how we did in Q4 last year.

<unk> is profitable so one shareholder eloquently pointed out it doesn't look like the.

Production and sales of mobile wallets for anybody in Q3 that is correct.

But Q4 that part of the business.

It contributed pretty nicely to our earnings.

In the first quarter looks even better than that.

Daniel Moore: Perfect. Lastly, you mentioned that the industry pricing. Have you taken or plan to take additional price increases? I know it's a tough environment, you know, but to offset some of the increase in raw material costs and tariffs. You know, over the next 1 to 3 quarters, and I'll jump back in queue. Thank you.

Perfect and then lastly.

You mentioned that the industry pricing have you taken or plan to take additional price increases.

Tough environment.

But to offset some of the increase in raw material costs and tariffs.

The next 123 quarters, and I will jump back in queue. Thank you.

Curtis Hodgson: Well, we went first. We had an announced price increase in June. I think we were first in the industry to do it, and it may have dissuaded some of our regular buyers from buying. Since then, our competitors have joined in to slight price increases. We're talking overall probably 3%, 4% has been the price increases. Again, we're all trying to use up excess capacity. 34 plants operate in the state of Texas, probably only 3 or 4 of them operating at capacity. We duke it out on pricing, financing, features, and all sorts of things. I mean, I heard recently of a manufacturer that was offering 1 year free flooring to dealers if they buy a house. We're concerned about profitability.

We went first we had announced price increase in June.

I see.

We were first in the industry to do it and it may have.

This way to some of our regular buyers are buying but since then our competitors have joined into slight price increase that we're talking.

Overall, probably three 4%.

It has been the price increases, but again, we're all trying to use that excess capacity 34 plants operating in state of Texas.

The only three or four of them operating at capacity. So we've got we do get out on pricing financing features.

And all sorts of things I've heard recently about manufacturers offering one year free flooring theaters.

They buy a house, we're concerned about profitability.

Curtis Hodgson: We were able to make hay while the sun shines during COVID, we don't intend to give it back by building a mobile home unless we can make a margin on it. It's tempting to say, Okay, let's just keep the factories running, or whatnot, we're not gonna be giving back this tangible book value we have. I don't see the market declining, especially in Texas with the data center, workforce housing, lift that we're gonna be having in the next 24 months. I am a little more concerned about Georgia and where its, where its unit sales are gonna come from in the Southeast.

We're able to make hay, whether sunshine's during COVID-19.

But we don't intend to give it back by by building a mobile home.

That's where it can make a margin on it.

It's tempting to say, okay, let's just keep the factories running or whatnot.

We're not going to be giving back this tangible book value we have.

I don't see the market declining, especially in Texas with the data center.

Workforce housing lift that we're going to be having in the next 24 months.

I am a little more concerned about Georgia.

It's.

Whereas unit sales are going to come from.

Southeast.

Daniel Moore: Very good. I'll jump back with any follow-ups. Thank you.

Very good I'll jump back when it follow ups. Thank you.

Operator: Thank you. Our next question comes from the line of Alex Rygiel with Texas Capital Securities. Your line is now open.

Thank you. Our next question comes from the line of Alex <unk> with Texas Capital Securities. Your line is now open.

Alex Rygiel: Good morning, Curt and Ron. How are you?

Good morning, Ron how are you.

Curtis Hodgson: Fine, Mr. Rygiel. How are you?

Buyback Rigel how are you.

Alex Rygiel: Doing well. Thanks. A couple quick questions here. Are you looking at other acquisitions at this time, and can you talk a bit about expanding your company-owned retail stores?

Doing well. Thanks couple of quick questions. Here. So are you looking at other acquisitions at this time and can you talk a bit about expanding your company owned retail stores.

Curtis Hodgson: Well, I mean, I would say that if we do any acquisitions, it will dovetail well with the one we just did. The one we just did is designed to increase our ability to profitably distribute through company stores. I think you hit the nail on the head, Alex, that if there is an acquisition, it would probably be retail centers in our market areas. The independent dealers are getting difficult to make money on. Besides that, a lot of them are aging out. They're people that are maybe older type ages. Very few retail centers, independent retailers are owned by anybody under 50 years old. That is the reason is being filled by company stores, not just by competitors. There may be more of a push to internet sales.

Well I mean.

Yes.

I would say that if we do any acquisitions it will dovetail well with the one we just did the one we just did.

Is designed to increase our ability to profitably distribute through company stores. So I think you hit the nail on the head Alex that there is an acquisition that would probably be retail centers in our market areas.

The independent dealers are getting.

Difficult to make money on.

Besides that a lot of them are aging out there people.

David.

Yes.

A few retail centers independent retailers are owned by anybody under 50 years or so.

Okay.

Okay.

Okay.

Competitors in there.

It may be.

More of a quote to internet sales.

Curtis Hodgson: We may be emphasizing used house sales. Yeah, we wanna be more in the retail business than we have been in the past. Very small percentage of our revenue has been from our own retail centers, and I would hope to grow that to maybe as much as 50% by the end of next year.

May be emphasizing used out of sales, yes, we wanted to be more than retail.

That we have been in the past very very small percentage of our revenue.

And from our own retail centers, and I would hope to grow that.

Maybe as much as 50% by the end of next year.

Alex Rygiel: Very helpful. Then secondly, can you talk a little bit more about your kinda consumer loan portfolio and how it's performed kinda more recently, how the trends have been playing out over the last few months, and if there's been any kinda notable change there?

Very helpful and then secondly.

Can you talk a little bit more about your kind of consumer loan portfolio and how it's performed kind of more recently, how the trends have been playing out over the last few months and if theres been any kind of notable change there.

Curtis Hodgson: You know, we don't have much notable change, there is anecdotal evidence. We had the benefit of everything that was on our books pre-COVID was at prices substantially below current prices. Every mobile home loan on our books that was pre-COVID had the benefit of being right-side up, so to speak, from a consumer's perspective. Every time one did repo, we actually made money on it. I mean, if the guy owed $30,000 on his mobile home and turned it back to us, we sold it for $40,000. For years, when we did repo one, it was actually kind of a windfall. Since COVID, those notes that have been created in the last 4 years don't have a, you know, corresponding benefit from price increases.

Yes, no we don't have much notable change, but there is anecdotal evidence.

We had the benefit of everything that was on our books pre COVID-19 was at prices substantially below current prices. So every mobile home.

One on our books that was pre COVID-19.

The benefit of being right side up so to speak.

Consumers perspective, so every time when did repo, we actually made money on it the guy owed 30000 hours on its mobile home and turn it back to as we sold it for 40000 hours. So for years, when we did repo one.

It was actually.

Kind of a windfall.

But since Covid those notes that have been.

Created in the last four years don't have a corresponding benefit from price increases. So now when we repo note that was say in 2022, when we go to so if they owe us $40000.

Curtis Hodgson: Now when we repo a note that was made, say, in 2022, when we go to sell it, if they owe us $40,000, maybe we only sell it for $35,000, and we have a little bit of impairment to take on it. The recovery rate on the repos is not as good as it once was. Let's just say, in my opinion, it's more realistic that that one time nearly doubling of prices that we had during COVID, kept us from having any losses when we did repossess something. Now as far as the percentages that are in trouble, and this is kinda the good news, is, we just don't have more than 2% at the retail level that are problematic, which is still historically a low amount.

We can only sell it for 35000 hours and we have a little bit impairment to take on it. So so the recovery rate on our repos is not as good as it once was but thats just my opinion, it's more realistic.

That one time nearly doubling of prices that we had during COVID-19.

Kept us from having any losses, when we did repossess something.

Now as far as the percentage that are in trouble.

This is kind of the good news is.

We just don't have.

More than a couple of percent at the retail level that are problematic.

Which is still historically low amount.

Curtis Hodgson: Anecdotally, we're in Texas. You know, I live here. Kenny lives here. We all know somebody now that's subject to deportation or a relative that is subject to deportation. A lot of our nodes and a lot of our basic demand comes from, you know, for lack of a better word, an immigrant market. We're kind of expecting some difficulty there, but it hasn't shown up in the numbers yet.

Anecdotally.

We're in Texas I live here Kenny lives here and we all know somebody now thats subject to depart deportation or relative that is subject to deportation.

A lot of our notes and a lot of our basic demand comes from.

And for lack of a better word an immigrant market.

So we're kind of expecting some difficulty there, but it hasnt shown up in the numbers yet.

Alex Rygiel: That's good to hear. Then, circling back to capital allocation through the years, like you mentioned, you have been a buyer of stock. Can you talk about that a little bit more? Also have there been any insider repurchases or has there been an open period for insider purchases at all?

That's good to hear.

And then circling back to capital allocation through the year. So like you mentioned <unk> has been a buyer of stock.

Can you talk about that a little bit more and also has there been any insider repurchases or has there been an open period for insider purchases at all.

Curtis Hodgson: I haven't bought any, and I don't think Kenny's bought any. Unfortunately, from an insider point of view, that's pretty much the only visibility that we do on our Form 4. In our circle of influence, which is not an insider, I do know of at least one party that's bought pretty heavily in the last couple of months. I don't know of any party in my own circle that has been a seller at these levels ever since, say, sub 24. I don't know anybody that's even considered being a seller that I have much influence over. I would say at what level are we protected? Well, I don't make the decision. Kenny doesn't make the decision. We kind of make the decision when we talk to each other. We do have the authority to make the decision.

I haven't bought any and I don't think anything about it.

Unfortunately from inside or point of view, that's pretty much the only visibility that we do on our form fours.

In our circle of influence, which is not an insider.

I do know of at least.

One.

Party this pretty heavily in the last couple of months.

And I don't know of any party in my own circle.

A seller at these levels.

Ever since saved 724.

No anybody that's even consider being a selling et cetera that I have.

Much influence over so I would say.

At what level will we protected well I don't make the decision Kenny doesn't make a decision.

Make a decision when we talk to each other we do have the authority to make decisions.

Curtis Hodgson: As you know, the company can't buy today. We're in blackout. We could buy later in the week. It's always a little bit discretionary when we could buy. When we're not in a blackout, I think you can assume any time that we think it's a good investment, we'll be there with our cash resources. Not only do we have cash in the bank today, but we have an unused $50 million loan that I think is still pretty solid with Prosperity Bank. We cash flow money. All the improvements to our land in Bastrop County have all been paid for with free cash flow. I think we're now pressing about $30 million of money we put into Bastrop County.

And as you know the company Camp for instance, we can't buy today, we're in blackout.

So we could buy later in the week.

It's always a little bit.

Discretionary when we goodbye, but when we're not in a blackout.

I think you can assume anytime that we think it's a good.

Good investment.

We'll be there with our CAG resource so not only do we have cash in the bank today, but we are in a new $50 million alone I think is still pretty solid with prosperity.

Wayne.

Free cash flow money, all the improvements to our land Bastrop County have all been paid for with free cash flow and I think we're now pricing about $30 million.

Money, we put into backdrop counting and I would guess.

Curtis Hodgson: I would guess by the time it's all said and done, we'll put another $20 or $30 million into Bastrop County, and then we'll have room for 1,100 mobile homes. Be a thing of beauty. We probably keep a couple of days a month or 3 days a month, active in one of our factories, just like I said, as we're bringing that one properties demand.

By the time, it's all said and done will put another $20 million to $30 million in the backdrop of accounting and then we'll have room for 1100 mobile homes via a thing of beauty.

Probably keep a couple of days.

A month or three days a month active in one of our factories, just satisfying that one properties demand.

Alex Rygiel: Sorry. One last question as it relates to Bastrop County. What's your best guess right now as to when you might start to sell homes, place homes on that property?

Alright, and one last question as it relates to.

Bastrop County.

Okay.

Your best guess right now as to when you might start to sell pumps.

Curtis Hodgson: We have 110 lots that were designed to be pretty simple lots, that we would begin marketing as soon as we solve just 1 piece of the puzzle, and that's connecting to the state highways on one side or the other. They would go under market. The beauty part about that is when we did this, we thought we'd be selling those things for $70,000 or $80,000 a piece. The current value of those lots is retail, probably more like $120 or maybe even $120, $130. In a way, not selling them for $80 has yielded us as an above average rate of return just by not selling them.

Basically you have 130.

We have 110 lots that were designed to be fee simple lots.

We would begin marketing instead of resolve just one piece of that puzzle and that's connecting to the state Highway Center.

Side or the other they would go into the market.

Any part about that is when we did this.

We thought we'd be selling those things for 70 years or 80000 hours of base.

In the current value of those lots as retail is probably more like 120, or maybe even 120 130 <unk>.

Not selling them for Eddie has yielded an above average rate of return.

Not selling them.

Curtis Hodgson: Anybody has a lot, a three-quarter acre lot in this market is getting well over $100,000 for a place to put a mobile home, sometimes $130,000. We're kind of expecting now to get $115,000, $120,000 when we go to market on those. We'd like to get that going, if nothing else, to fill it up with legacies that we build at our 2 plants in Texas.

And if anybody has a lot of.

Three quarter acre lot.

And this market is getting well over $100000 for a place to put in mobile home sometimes.

130, we're kind of expecting now to get $1 15 $1 20.

When we go to market on those.

No.

We'd like to get that.

Nothing else to fill it up with legacy that we build at our two plants in Texas.

Alex Rygiel: Thank you.

Thank you.

Operator: Thank you. Our next question comes from the line of Mark Smith with Lake Street. Your line is now open.

Thank you. Our next question comes from the line of Mark Smith with Lake Street. Your line is now open.

Mark Smith: Hi, guys. First question for me, just wanted to ask, you talked quite a bit about kind of demand and production in Texas. Curious if you can just give us your thoughts around kind of Georgia and the Southeast, how that market's doing and kind of how things are running at the plant.

Hey, guys first question for me just wanted to ask you talked quite a bit about kind of demand and production and taxes curious if you can just give us your thoughts around kind of Georgia, and the southeast how that market's doing and kind of how things are running at the client.

Curtis Hodgson: Like you probably got this Mark from my mood when I guess I just a minute ago or my tone of voice. I am not that confident in the Southeast, know that we can carry on at 2 or 3 a day, but that's a very large manufacturing facility and doesn't really make sense at 2 or 3 a day. We've got to find a way to develop distribution in that market. The mobile home park model is not as good as it was. People now are paying a lot more for the house. They're paying a lot more for the home. They're paying a lot more to set it up. They're paying more to hook it up to utilities.

You probably got this mark from my.

My mood when you guys said just a minute ago are mind my tone of voice I am not.

That confidence in the southeast.

Yeah.

So that we can carry on it two or three a day, but that's a very large manufacturing facility.

It doesn't really make sense at two or three a day. So we've got to find a way to develop it.

Distribution in that market.

Mobile home Park, Mark model is not as good as it was.

People now are paying a lot more for the house they are paying a lot more for the home. They are paying a lot more to set it up you're paying more to hook it up utilities and <unk>.

Curtis Hodgson: Unfortunately, the rents that they typically get when they put one in their mobile home parks haven't increased accordingly. The model is not as solid as it was, say, 5 years ago, which was a big part of what we built in the market when everybody built, filling up a bunch of mobile home parks in a model that did make sense when all those prices were down and the rents were pretty much the same as they are today. The underlying demand in the Southeast has got to be to the guy who's going to live in it in rural America or some sort of opportunistic disaster housing, which has oftentimes happened in that market that we participated in.

Unfortunately, the rents that they typically get when they put one of their mobile home parks haven't increased.

Accordingly so.

So the model is not as solid as it was say five years ago.

Which was a big part of what we built in the market, where everybody built filling up a bunch of mobile home parks and our model does it makes sense when all of those prices were down in the rents were pretty much the same as they are today.

So the underlying demand.

In the southeast is got to be to the Guy who is going to live in rural America, or some sort of opportunistic disaster housing, which is oftentimes happened in that market that we participated in.

Curtis Hodgson: If you assume that park sales is going to be much lower than it has been historically, demand has to come from direct consumer sales for privately owned land or from some sort of disaster relief. If you can tell me how many hurricanes there'll be in the Southeast next year, I could probably give you a pretty good feel for how good the market's going to be.

If you assume that park's sales is going to be.

Much lower than historically.

It has been historically the demand has to come from direct consumer.

Sales for privately owned land or from some sort of disaster relief. So if you can tell me how many hurricanes in the southeast next year I could probably give you a pretty good feel for how good the market's user base.

Mark Smith: Yeah.

Curtis Hodgson: That's really kind of the demand there. As you know, the Southeast doesn't have the tailwinds that Texas has, but it has better tailwinds than in many parts of the country. The demographics in all those states that we serve in the Southeast are still positive. We know it's not because of birth rate. It's positive because people are still moving to Georgia, and they're still moving to North Carolina, and they're still moving to Florida. There's a emigration from one part of the United States to another that goes on in that market. We get some positive demographics there, and we sell to operators that are taking advantage of that. I talk to them all the time. They're struggling to make the economics work.

Right.

And that's really kind of that the demand there as you know.

The South East doesn't have a tailwind Texas <expletive>.

But it has better tailwind in many parts of the country. So the.

The demographics and all of those states that we serve in the southeast are still positive.

And we know is that because of the birth rate.

It's positive because people are still moving to Georgia, and Theres still a mood in North Carolina, and they're still moving to Florida. So theres a immigration from one part of the United States and other.

That goes on in that market. So we get some positive demographics, there and we sell to operators that are taking advantage of that I talked to them all the time.

They are struggling to make the economics work now if interest rates come down.

Curtis Hodgson: Now, if interest rates come down a little bit and their models, instead of being, say, at a 6 cap rate or at a 5 cap rate, then they can make more sense out of it. We've had a nice reduction in interest rates over the last month or so. They actually punished mobile home stocks for it because they thought that would make site-built housing more attractive. Maybe it does, but it sure helps communities that are trying to make sense out of community-owned rentals and community-owned mobile homes. When their borrow rate goes down a point, it really helps their model quite a bit.

A little bit in their models instead of being say at a six cap rate or at a five cap rate.

Then they can make more sense out of it and we've had a nice reduction.

As it relates to over the last month or so they actually punish about what home stocks part because they thought that would make site built housing more attractive.

Maybe it does but it sure helps communities that are trying to make sense.

Community on rentals and community owned mobile homes.

When they're right there bar rate goes down a point.

It really helps their bottle quite a bit so.

Curtis Hodgson: I know this didn't address the answer that you want, a specific answer, but I think I made it clear that there's only two ways to really do well in the Southeast, the community model and disaster relief housing. That's the likelihood that all those plants in the Southeast, which there's roughly 20 operating in that market that we compete against, there's not enough demand at the retail level to keep 20 factories working. I can see the industry as a whole making some difficult decisions in the Southeast, absent getting some disasters next year that give us more tailwinds.

I know this didn't address the answer that you want a specific answer.

But I think I made it clear that.

There's only two ways to.

It really do well in the southeast.

The community model.

Disaster relief housing.

The likelihood that all of those plants in the southeast which is roughly 20 operating in that market that we compete against there is not enough.

Demand at the retail level to keep 20 factories working so I can see the industry as a whole, making some difficult decisions in the southeast absent getting some disasters next year.

That gives us more tailwind.

Mark Smith: Okay. Then I did want to ask about gross profit margin. I know you don't give guidance, but just any insight you can give us on the outlook there, maybe where the pressures are coming. I know you discussed tariffs, but I guess maybe two things here. Do you think that you've seen topped out the inflationary pressure, whether it's from tariffs or anything else? Then two, do you think that you've taken ample price to cover the pressure that you've seen or could see?

Okay.

And then I did.

Wanted to ask about gross profit margin I know you don't give guidance, but just kind of any insight you can give us on the outlook there maybe where the pressures are coming I know you discussed tariffs, but I guess, maybe two things here do you think that you've seen kind of topped out.

<unk> pressure, whether it's tariffs or anything else and then two do you think that you've taken ample price to cover the pressure that you've seen or could see.

Curtis Hodgson: Well, I think the price increases we did are going to cover the effects of tariffs in particular. The world believes that tariffs are a one-time inflationary event. If that's the case, the price increases may be over. We've also increased our line workers' wages by 10% this year. We've, you know, obviously, the Chinese imports have gone from a 25% tariff to, as of what time is it? 11:00 AM. As of 11:00 AM today, the tariff rate currently is 45%. That could change by 2:00 PM this afternoon. I mean, I don't know. It moves around.

Well I think the price increase that we did are going to cover.

The effects of tariffs in particular.

The words believes that tariffs are a one time an inflationary event.

And if that's the case then the price increases may be over but we've also increased our line workers' wages by 10% this year.

And we've obviously of the Chinese imports have gone from a 25% tariff too as of what time is it.

11 o'clock as of 11 am today, the tariff Kuwait currently is 45%, but that could change by two o'clock. This afternoon.

Okay.

It moves around so the net result of our cost of goods sold on just what happened last week decreasing the tariff from 55.

Curtis Hodgson: The net result of our cost of goods sold on just what happened last week, decreasing the tariff from 55% to 45%, our cost of goods sold will go down roughly $1 million with just that one happening, just like they went up before when they went up that much. I don't really look at inflation as something that either does happen or doesn't happen. At 70 years old, I can remember $0.04 stamps. You know, I can remember $0.29 gasoline. I think inflation is inevitable. At what pace? That's, you know, the only thing that we might disagree on.

245%.

Our cost of goods sold will go down roughly $1 million with just that one.

Happening just like they went up before they went up that much I don't really look at.

And inflation as well.

Something that either does happen or it doesn't happen at 70 years old I can remember for stamps.

Remember, 2009% gasoline I think inflation is inevitable.

<unk>.

That's that's.

That's the only thing.

That we might disagree on but I would guess that our.

Curtis Hodgson: I would guess that our average wholesale price now is about $60,000 per floor, and I think that if I was to give this same earnings call, say, 24 months from now, 2 years from now, I think that it's gonna be closer to $70,000 than $60,000. The margins are real simple. The financial statements sometimes make it seem more complicated. You got a selling price, you got materials, you got labor, and you got allocable overhead. On the material side, all factories are pretty similar. I would say 80% of the capacity buys their materials within a few percentage points of each other's. Labor, there's quite a disparate labor bill, kind of depending on the complexity of the product you're building.

Our average wholesale price now is about $60000 per floor.

And I think that if I was to give the same earnings call.

24 months from now two years from now I think that would be it's going to be closer to closer to 70000 60000.

The margins are real Sep.

Financial statements, sometimes make it more complicated.

Selling price you got materials, you've got labor and you've got allocable overhead.

On the materials side, all factories are pretty similar.

I would say 80% of the capacity buys their materials within a few percentage points of each other's labor there is quite a disparity.

But it is spirit.

Labor deal kind of depending on the complexity of the product Youre building, if you're building a very simple product.

Curtis Hodgson: If you're building a very simple product, you might get labor all the way down to $4 or $5 sq ft. If you're, if you have a very complex product, you're gonna get labor in the $10 to $15 dollar range per sq ft. The only thing that can help that, the more you build that's exactly the same, the more productive the assembly line gets. As far as allocable overhead, that's very specific about what we're allowed to do on a GAAP basis. You know, a purchasing agent can be allocated, but a CEO can't. While our gross margin may be suffering a little bit over the next 12 months, our net margin, because now we're talking about eliminating SG&A or controlling SG&A.

Might be you might get labor, all the way down to four or $5 square foot.

And then if you're if.

If you have a very complex product youre going to get labor in the 10 to 15.

Dollars range per square foot and the only thing that could help that the more the more you build thats exactly the same they're more productive.

On the line gets as far as alcohol overhead.

That's very specific about what we're allowed to do on a GAAP basis purchasing agent can be allocated.

Kent.

So while our gross margin may be suffering a little bit over the next.

12 months, our net margin.

Now, we're talking about eliminating SG&A or controlling SG&A.

Curtis Hodgson: You know, while the founders were gone, SG&A went up. I think Ron was very clear in his outline on that. With SG&A up 15%, 16% at a time when sales were down, I think you will see the immediate reversal of that trend and some relief in probably Q4, followed by significant relief in Q1 on SG&A as a percentage of sales. I hope that, you know, puts a little color on your question.

While the founders were Gong SG&A went up I think Ron was very clear.

Outlined on that with SG&A up 15%, 16% at a time when sales were down I think you will see the immediate reroute reversal of that trend and some relief.

And probably the fourth quarter, followed by significant relief in the first quarter on SG&A as a percentage of sales I hope that.

That's a little color on your question.

Mark Smith: Oh, that's helpful. If I can squeeze in one more, just I don't know if you're able to talk at all about kind of numbers behind the acquisition and, you know, potential impact on the balance sheet, just as far as the size of this acquisition.

That's helpful. If I can squeeze in one more just I don't know if youre able to talk at all about kind of numbers behind the acquisition and potential impact on the on the balance sheet just as far as the size of this acquisition.

Curtis Hodgson: It's simple. You know, we're on a call that's available to the public. We didn't give much detail on Friday's announcement, I don't mind telling you what it is. This is roughly a $22 million deal all in. About half of which is retail paper, the other half are the assets that I've described. We wouldn't be doing this if we didn't think it was gonna have a positive aspect on the company. If I was just guessing, I would guess that our retail selling as a company, which is currently about 250, 300 units a year, I would expect that to be 50% higher, maybe 60% higher in 2026 than it was in 2025.

Well it's simple.

We're on it we're on a call thats available to the public.

Didn't give much detail on friday's announcement, but.

But I don't mind, telling you what it is.

Roughly at $22 million deal.

About half of which is retail paper.

And the other half are the assets that I've described.

We wouldn't be doing this if we didn't think it was going to have a positive aspect of the company.

I was just guessing.

I would guess that.

Our retail selling as a company.

It's currently about.

200, 5300 units a year.

I would expect that to be.

50% higher maybe 60% higher in 2020.

Fix then it wasn't until 2025, if that doesn't come to past then.

Curtis Hodgson: If that doesn't come to pass, then the acquisitions, the purpose of the acquisition, didn't get accomplished. It's really that's the jewel in it. Everything else we bought at pretty much we would be willing to pay on a one-off basis anytime, at any time. We have a 28% interest in a mobile home park as part of the deal. We know that market really well. It's worth a little over $1 million or more to us. A lot of what we acquired was hard asset value with the only, the only uncertainty being how well can we integrate the Colombia presence and the HomeX model into our retail system.

Then the acquisitions for the purpose of the acquisition.

I didn't get accomplished it's really that.

The jewel and everything else we bought it.

Much.

You would be willing to pay on a one off basis.

Anytime.

At anytime we have an edge wave of 28% interest in a mobile home park as part of the deal we know that market really well.

It's worth, but a lower $1 million or more to us. So a lot of what we acquired was hard asset value with the only the only uncertainty being.

How well can we integrate.

The Columbia.

Columbia presence.

Hum.

Model and through our retail.

Curtis Hodgson: If that, if that turns out to be, what I think it is, I would think our retail sales will go up by at least 50%. If we really perform well, it could even be double in 2026 relative to 2025. Let's face it, we make a lot more money when we can retail one than we can make one selling it wholesale for $60,000 or more. The margin in this industry is about 40%, 50% up, so if we build it for $60,000, we retail it for $90,000. The more that we can retail, the better.

He'll system.

If that turns out to be.

But I think it is.

I would think on a retail sales will go up by at least 50%.

If we really performed well it could even be double in 2026 relative to those 25, let's face it we make a lot more money when we can retail one that we can make one selling at wholesale for 60000 monitors for the margin this industry's about 40.

<unk> 40, 50 years, and so if we build it for 60.

Retail for 90.

Okay.

The more that we can retail the better I think Ron mentioned that a good part of the reason why our average price per.

Curtis Hodgson: In fact, I think Ron mentioned that a good part of the reason why our average price per home went up is because we retailed a higher percentage of what we built in 2025 than we did in 2024. It was just nominal compared to the leap that we're planning on taking with this acquisition. This acquisition is pretty much what can we do at the retail level to improve, you know, that part of our distribution. Filling in the gap that is kind of, you know, leaving us because of the park problems that I referred to earlier on the call.

For home went up is because we retailed at a higher percentage of what we built in 2025 and 2024, but it was just nominal compared to.

The leap that we're planning on taking with this acquisition <unk> acquisition of us.

Pretty much what can we do at the retail level to improve that part of our distributions.

Filling in the gap there is kind of leaving us because of the park problems.

Referred to earlier on the call.

Mark Smith: Just confirming within that kind of increase within retail stores, that's including the site that you're buying in as your retail location as well as kind of improvements in retail stores at the existing Heritage sites today?

And just confirm it within that kind of increase within retail stores.

Excluding the site that youre buying.

As your retail location as well as kind of improvements in retail stores at the existing heritage sites today.

Curtis Hodgson: Correct. Yeah. We probably retailed, and I'm just guessing because I know we do monthly, so I'm going to go ahead and multiply by 12. I can still do that in my head. I'm going to guess we're at about 300 now. The Houston location itself should add 100 to that going forward. Then the integration of the systems into our existing retails should add another 100 to it. On a good day, maybe even another 200. What I'm saying is we should be up 60% in 2026 versus 2025 on the number of units we retail, and it could be as much as 100%. There's a little more guidance than what you asked for.

Correct, yes.

We'd probably retailed.

And I'm, just guessing because I and I know, we do monthly so I am going to go ahead and multiplied by 12, I guess, though that my head.

We had a guess.

We're at about 300 now.

The Houston location itself.

That 100 to that.

Going forward.

The integration of the systems into our existing retails.

Should add another 100 to it and then a good day, maybe even another 200, so what im saying is we should be up 60% and 26 versus <unk> 25 on the number of units we retail.

And it could be as much as a 100% there is a little more guidance on what you asked for but.

Curtis Hodgson: On the other hand, the press release around the acquisition was a little bit, you know, gray, let's put it that way. Now you have Coloradans. We haven't closed it yet, so you never know. It could blow up. It's a binding contract. The contingencies are being put together, and we expect to close before Thanksgiving.

The other hand the.

A press release.

On the.

Acquisition was a little bit.

Let's put it that way.

Colorado, we haven't closed yet so you never know it could blow up.

The binding contract.

Thank you.

Contingencies are being put together and we expect to close before Thanksgiving.

Mark Smith: Excellent. That's very helpful. Thank you.

Excellent that's very helpful. Thank you.

Operator: Thank you. This concludes the question and answer session. I would now like to hand the call back over to Curtis Hodgson for closing remarks.

Thank you. This concludes the question and answer session I would now like to hand call back over to Curt Hodgson for closing remarks.

Curtis Hodgson: Well, it was a much longer call than I expected, I had to ad-lib a bunch of it, I think I did a reasonable good job. I'd like to thank everybody who joined in today's earnings call. We appreciate your interest in our company, look forward to delivering you better results in the future than we did in this last quarter.

Well, it's a much longer call than I expected and I had to add a bunch of it but I think I did a reasonably good job I'd like to thank everybody who joined in today's earnings call. We appreciate your interest in our company.

Look forward to delivering even better results.

He actually than we did in this last quarter.

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.

This concludes today's conference. Thank you for your participation you may now disconnect.