Legacy Housing(US:LEGH)2023-11-09 21:31Financial Performance - For the three months ended September 30, 2023, total net revenue decreased by $7.4 million, or 12.9%, to $49.9 million compared to $57.3 million in the same period of 2022[150]. - Product sales decreased by $11.7 million, or 24%, primarily due to a decrease in unit volumes and net revenue per unit sold[150]. - The total units sold during the three months ended September 30, 2023, was 582, a decrease of 171 units, or 22.7%, from 753 units sold in the same period in 2022[151]. - Net income for the three months ended September 30, 2023, was $16.1 million, an increase of $1.4 million, or 9.2%, compared to $14.7 million in the same period in 2022[150]. - Total net revenue for the nine months ended September 30, 2023, was $155.43 million, a decrease of $26.03 million or 14.3% compared to the same period in 2022[1]. - Product sales decreased by $33.06 million, or 21.3%, primarily due to a decrease in unit volumes and net revenue per unit sold[161]. Revenue Sources - Consumer and MHP loans interest income increased by $1.8 million, or 25.7%, due to an increase in the average outstanding MHP note portfolio balance and consumer loan portfolio balance[152]. - Consumer and MHP loans interest income grew by $3.73 million, or 17.6%, attributed to an increase in average outstanding loan portfolio balances[163]. - Other revenue increased by $2.5 million, or 150.8%, primarily due to a $2.4 million increase in forfeited deposits[153]. - Other revenue increased by $3.29 million, or 71.0%, driven by higher forfeited deposits and dealer finance fees[165]. Expenses and Costs - The cost of product sales decreased by $8.7 million, or 25.9%, during the three months ended September 30, 2023, primarily related to the decrease in units sold[154]. - Selling, general and administrative expenses decreased by $0.6 million, or 9.2%, primarily due to a decrease in warranty costs[155]. - Operating expenses decreased by $24.43 million, or 20.2%, mainly due to a reduction in the cost of product sales and selling, general, and administrative expenses[166][167]. Cash Flow and Financing - Net cash used in operating activities increased by $6.1 million, primarily due to increased MHP originations and decreased dealer inventory loan originations[174]. - Net cash used in investing activities was $7.56 million, mainly for loans to third parties and purchases of property, plant, and equipment[175]. - Net cash provided by financing activities was $10.57 million, primarily from net proceeds on lines of credit[176]. - As of September 30, 2023, the outstanding balance of the New Revolver was $13.01 million, with an interest rate of 7.95%[183]. Taxation - The effective tax rate for the three months ended September 30, 2023, was 17.4%, compared to 16.1% for the same period in 2022[157]. - The effective tax rate for the nine months ended September 30, 2023, was 17.3%, slightly lower than the 17.5% for the same period in 2022[169]. Internal Controls and Compliance - The company identified material weaknesses in internal control over financial reporting, particularly in revenue recognition and inventory management, as of September 30, 2023[192]. - Remediation efforts are ongoing, with the company committed to completing improvements to internal controls by the end of fiscal year 2023[197]. - Disclosure controls and procedures were deemed ineffective as of September 30, 2023, due to identified material weaknesses[191]. - Management continues to implement a broad range of remedial procedures to address material weaknesses in financial reporting[199]. - There were no significant changes to internal control over financial reporting identified during the third quarter of 2023[200]. Company Status - The company is classified as an "emerging growth company" and expects this status to end on December 31, 2023[188]. - The company has adopted FASB's ASC 326 for determining Current Expected Credit Losses, impacting its accounting estimates[186]. - The company has not recorded any reserve for repurchase commitments as of September 30, 2023, considering them immaterial[185]. - As of September 30, 2023, the company has total contractual obligations of $15,099,000, with $13,013,000 due after 2027 and $2,086,000 in operating lease obligations[185]. - The maximum contingent obligations under repurchase agreements were approximately $4,767,000 as of September 30, 2023, down from $8,925,000 as of December 31, 2022[185].