NOBILITY HOMES INC 10-Q

Item 2. Management’s Discussion and Analysis of Fin ancial Condition and Results of Operations Results of Operations Total net sales in the first quarter of 2026 were $10,502,846 compared to $12,241,742 in the first quarter of 2025. Net income was $1,628,326 in the first quarter of 2026, compared to a net income of $1,980,422 in the first quarter of 2025. Total net sales decreased during the first three months of 2026 as compared to same period in 2025 due to a decrease in the number of new retail homes sold in our Company owned retail sales centers (43 homes versus 67 homes) partially offset by an increase in the number of homes sold to independent dealers (57 homes versus 31 homes) which have lower margins. In addition, we are building and selling lower-priced homes to offset costs for customers due to the higher interest rates. We believe that potential customers have delayed or deferred purchasing decisions, or are generally opting to purchase lower cost homes, when considering the higher interest rate environment and the uncertainty of the economy, which continue to negatively impact sales. There also remain delays in the receipt of certain key production materials from suppliers, as well as back orders, price increases, tariffs and labor shortages which continue to cause delays in the completion of the homes at our manufacturing facility. We also continue to experience inflation in several building products resulting in increases in our material and labor costs. We expect these challenges will continue throughout fiscal year 2026. According to the Florida Manufactured Housing Association, shipments for the manufacturing housing industry in Florida for the period from November 2025 through January 2026 increased by approximately 2% from the same period last year. The following table summarizes certain key sales statistics and percentage of gross profit for the three months ended January 31, 2026 and February 1, 2025. Three Months Ended (Unaudited) January 31, February 1, 2026 2025 New homes sold through Company owned sales centers 43 67 Homes sold to independent dealers 57 31 Total new factory built homes produced 96 87 Average new manufactured home price - retail $ 159,480 $ 154,016 Average new manufactured home price - wholesale $ 68,173 $ 69,095 As a percent of net sales: Gross profit from the Company owned retail sales centers 23 % 22 % Gross profit from the manufacturing facilities -including intercompany sales 22 % 25 % Maintaining our strong financial position is vital for future growth and success. Our many years of experience in the Florida market, combined with home buyers’ increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country. On June 5, 2025, we celebrated our 58 th anniversary in business specializing in the design and production of quality, affordable manufactured and modular homes. With multiple retail sales centers in Florida for over 35 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida. Insurance agent commission revenues in the first quarter of 2026 were $78,897 compared to $58,374 in the first quarter of 2025. Revenues are generated by new and renewal policies being written which affect agent commission earned. The Company establishes appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at January 31, 2026 and November 1, 2025. Gross profit as a percentage of net sales was 30% in the first quarter of 2026 compared to 32% in the first quarter of 2025. The gross profit in the first quarter of 2026 was $3,197,106 compared to $3,970,785 in the first quarter of 2025. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The gross profit as a percentage of net sales decreased due to an increase in the number of homes sold to independent dealers and a decrease in the number of homes sold at our Company owned retail sales centers that generate higher margins. Selling, general and administrative expenses as a percent of net sales was 13% in the first quarter of 2026 compared to 14% for the first quarter of 2025. Selling, general and administrative expenses in the first quarter of 2026 was $1,369,656 compared to $1,676,650 in the first quarter of 2025. The dollar decrease in selling, general and administrative expenses for the first three months of 2026 versus 2025 were due to decrease in the number of new home sold at our Company owned retail sales centers. 11 Table of Contents We earned interest income of $255,849 for the first quarter of 2026 compared to $285,278 for the first quarter of 2025. The amount of interest income is primarily a function of change in the interest rates and the amount invested. Our earnings from Majestic 21 in the first quarter of 2026 were $26,191 compared to $25,805, for the first quarter of 2025. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporation and 50% by the Company. The earnings from the Majestic 21 loan portfolio vary quarter to quarter, but overall, the earnings will continue to decrease due to the amortization, maturity and payoff of the loans. We received distributions from 21 st Mortgage Corporation in the first quarter of 2026 of $21,446 compared to $38,152 in the first quarter of 2025. The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21 st Mortgage Corporation and the Company. The distributions from the escrow arrangement, relating to certain loans financed by 21 st Mortgage Corporation, are recorded as income by the Company when received. The earnings from the FRSA loan portfolio will vary quarter to quarter, but will continue to decrease due to the amortization and payoff of the loans. The Company realized pre-tax income in the first quarter of 2026 of $2,181,132 as compared to $2,649,213 in the first quarter of 2025. The Company recorded an income tax expense in the amount of $552,806 in the first quarter of 2026 as compared to $668,791 in first quarter 2025. We reported net income of $1,628,326 for the first quarter of 2026 or $0.50 per share (basic and diluted), compared to $1,980,422 or $0.61 per share ($0.60 diluted), for the first quarter of 2025. Liquidity and Capital Resources Cash and cash equivalents were $11,083,302 at January 31, 2026 compared to $13,230,504 at November 1, 2025. Certificates of deposit were $14,184,546 at January 31, 2026 compared to $13,109,325 at November 1, 2025. Short-term investments were $622,994 at January 31, 2026 compared to $583,128 at November 1, 2025. Working capital was $45,560,911 at January 31, 2026 as compared to $46,866,425 at November 1, 2025. During January 2026, the Company repurchased 100,000 shares of common stock from our President at $29.70 per share ($2,970,000). A cash dividend was paid from our cash reserves in April 2025 in the amount of $1.25 per share ($4,086,247) and on March 6, 2026, we declared a one-time cash dividend of $1.50 per common share for the fiscal year 2025 payable on April 13, 2026, to shareholders of record as March 30, 2026. Prestige new home inventory was $17,073,000 at January 31, 2026 compared to $16,605,049 at November 1, 2025. We own the entire inventory for our Prestige retail sales centers, which includes new and pre-owned homes, and do not incur any third-party floor plan financing expenses. The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary for its operations. The Company also has approximately $4.8million of cash surrender value of life insurance which it would be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of January 31, 2026, the Company continued to report a strong balance sheet which included total assets of approximately $65.9 million which was funded primarily by stockholders’ equity of approximately $59.4 million. Critical Accounting Policies and Estimates In Item 7 of our Form 10-K, under the heading “Critical Accounting Policies and Estimates,” we have provided a discussion of the critical accounting policies and estimates that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. No significant changes have occurred since that time. Forward-Looking Statements Certain statements in this report are unaudited or forward-looking statements within the meaning of the federal securities laws. Although Nobility believes that the amounts and expectations reflected in such forward-looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, the potential adverse impact on our business caused by competitive pricing pressures at both the wholesale and retail levels, inflation, tariffs, increasing material costs (including forest based products) or availability of materials due to supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, increase in interest rates, availability of financing for retail and wholesale purchasers, consumer confidence, adverse weather conditions that reduce sales at retail centers, the risk of manufacturing plant shutdowns due to storms or other factors, the impact of marketing and cost-management programs, the impact of higher interest rates on mortgage financing, reliance on the Florida economy, impact of labor shortage, impact of materials shortage, increasing labor cost, cyclical nature of the manufactured housing industry, impact of rising fuel costs, catastrophic events impacting insurance costs, availability of insurance coverage for various risks to Nobility, market demographics, management’s ability to attract and retain executive officers and key personnel, increased global tensions, market disruptions resulting from terrorist attacks, or other events such as a pandemic, any armed conflict involving the United States and the impact of inflation. 12 Table of Contents