Financial Performance - For the three months ended September 30, 2022, total net revenue increased by $855,000, or 1.5%, to $57.325 million compared to $56.470 million in the same period of 2021 [163]. - Total net revenue for the nine months ended September 30, 2022, was $181.5 million, an increase of $36.5 million, or 25.1%, from $145.0 million in the same period in 2021 [174]. - Net income for the three months ended September 30, 2022, was $14.735 million, an increase of $1.742 million, or 13.4%, compared to $12.993 million in the same period of 2021 [163]. - Net income for the nine months ended September 30, 2022, was $48.1 million, an increase of $11.7 million, or 32.3%, compared to $36.3 million in the same period in 2021 [174]. - Income from operations for the nine months ended September 30, 2022, was $55.6 million, an increase of $12.6 million, or 29.4%, compared to $43.0 million in the same period in 2021 [174]. Sales and Revenue Composition - Product sales increased by $378,000, or 0.8%, to $48.678 million, driven by higher average sales prices despite a decrease in unit volumes [165]. - Product sales increased by $33.9 million, or 27.8%, during the nine months ended September 30, 2022, driven by higher average sales prices and increased unit volumes [176]. - The net revenue per product sold increased by $5, or 9.2%, to $64.6 due to rising material and labor costs, resulting in higher home sales prices [165]. - The company sold 753 total products during the three months ended September 30, 2022, a decrease of 63 units, or 7.7%, compared to 816 units in the same period of 2021 [165]. - Other revenue increased by $734,000, or 80.6%, to $1.645 million, driven by increases in servicer fee revenue, commercial lease rents, and consignment fees [168]. Costs and Expenses - The cost of product sales decreased by $2.166 million, or 6.1%, primarily due to a decrease in units sold, despite increases in material and labor costs [169]. - The cost of product sales increased by $18.6 million, or 21.7%, during the nine months ended September 30, 2022, primarily due to an increase in units sold and rising material and labor costs [180]. - Selling, general and administrative expenses increased by $5.3 million, or 35.2%, during the nine months ended September 30, 2022, compared to the same period in 2021 [181]. Cash Flow and Financial Position - Cash and cash equivalents increased to approximately $11.3 million as of September 30, 2022, compared to $1.0 million as of December 31, 2021 [185]. - Net cash provided by operating activities decreased by $49.7 million during the nine months ended September 30, 2022, compared to the same period in 2021 [187]. Compliance and Financial Obligations - The Company is required to maintain a tangible net worth of at least $120,000 and a debt to EBITDA ratio of 4 to 1 or less, and was in compliance with these covenants as of September 30, 2022 [196]. - The maximum contingent obligations under the repurchase agreements were approximately $9,905 as of September 30, 2022, compared to $4,908 as of December 31, 2021 [200]. - Operating lease obligations total $3,112, with $176 due in 2022, $1,352 in 2023-2024, $1,154 in 2025-2026, and $430 after 2026 [199]. Internal Controls and Reporting - The Company has identified material weaknesses in internal control over financial reporting, particularly in revenue recognition and accounts payable processing, which are expected to be remediated by the end of fiscal 2022 [208]. - The Company’s disclosure controls and procedures were deemed not effective as of September 30, 2022, due to identified material weaknesses [206]. - There were no changes in internal control over financial reporting that materially affected the Company's controls during the third quarter of fiscal 2022 [209]. Other Financial Information - Interest expense under the New Revolver for the nine months ended September 30, 2022, was $326, down from $827 in the same period of 2021, with an outstanding balance of $0 as of September 30, 2022, compared to $7,993 as of December 31, 2021 [196]. - The effective tax rate for the nine months ended September 30, 2022, was 17.5%, compared to 17.0% for the same period in 2021 [183]. - The Company has not drawn any amounts on the $10,000 credit facility associated with the PILOT agreement, which provides incentives through property tax abatements [197]. - The Company is classified as an "emerging growth company" and has elected to delay the adoption of certain accounting standards until it is no longer classified as such [203]. - The Company has not recorded any reserve for repurchase commitments as of September 30, 2022, considering its obligations on current contracts to be immaterial [200].
Legacy Housing(LEGH) - 2022 Q3 - Quarterly Report