# Legacy Housing Corp: Form 10-Q for the period ended Jun 30, 2024

- Company: [Legacy Housing Corp](/companies/legh.md) (CIK 1436208)
- Form: 10-Q
- Filed: 2024-08-08
- Accepted by EDGAR: Aug 8, 2024, 16:45 ET
- Period: 2024-06-30
- Accession: 0001558370-24-011633
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1436208/000155837024011633/legh-20240630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1436208/000155837024011633/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $31.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $62.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $21.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $42.0m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $5.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $11.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $16.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $32.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $235.0k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $511.0k | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $3.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $7.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $16.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $31.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.65 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $1.26 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.67 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $1.29 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 24,780,903 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 24,899,616 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $14.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $2.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-04-01 to 2024-06-30 | $3.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $5.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $60.0k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $139.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $514.9m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $31.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $51.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $463.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,031 characters.

*The following discussion should be read in conjunction with the financial statements and accompanying notes and the information contained in other sections of this Form 10-Q. It contains forward looking statements that involve risks and uncertainties, and is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those anticipated by our management in these forward looking statements as a result of various factors, including those discussed in this Form 10-Q and in our Registration Statement on Form S-1, particularly under the heading “Risk Factors.” Dollar amounts are in thousands unless otherwise noted.*

### Overview

We build, sell and finance manufactured homes and “tiny houses” that are distributed through a network of independent retailers and company owned stores and also sold directly to manufactured home communities. We are the fourth largest producer of manufactured homes in the United States as ranked by the number of homes manufactured based on information available from the Manufactured Housing Institute and the Institute for Building Technology and Safety for the twelve month period ending December 31, 2023. With current operations focused primarily in the southern United States, we offer our customers an array of quality homes ranging in size from approximately 395 to 2,667 square feet consisting of 1 to 5 bedrooms and 1 to 3 1/2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000. For the three and six months ended June 30, 2024, we sold 578 and 1,223 home sections, respectively (which are entire modules or single floors). For the three and six months ended June 30, 2023, we sold 793 and 1,603 home sections, respectively

The Company has one reportable segment. All of our activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others. For example, the sale of manufactured homes includes providing transportation for dealers. We also provide financing options to the customers to facilitate home sales. Accordingly, all significant operating and strategic decisions by the chief operating decision maker, the Chief Executive Officer, are based upon analyses of our company as one operating segment.

We believe our company is one of the most vertically integrated in the manufactured housing industry, allowing us to offer a complete solution to our customers. We manufacture custom made homes using quality materials, distribute those homes through our expansive network of independent retailers and company owned distribution locations and provide tailored financing solutions for our customers. Our homes are constructed in the United States at one of our three manufacturing facilities in accordance with the construction and safety standards of the U.S. Department of Housing and Urban Development (“HUD”). Our factories employ high volume production techniques that allow us to produce, on average, approximately 70 home sections, or 60 fully completed homes depending on product mix, in total per week. We use quality materials and operate our own component manufacturing facilities for many of the items used in the construction of our homes. Each home can be configured according to a variety of floor plans and equipped with features such as fireplaces, central air conditioning and state of the art kitchens.

Our homes are marketed under our premier “Legacy” brand name and, as of June 30, 2024, are sold to consumers, primarily in over 15 states through a network of independent retail locations, 13 company owned retail locations and through direct sales to owners of manufactured home communities. Our 13 company owned retail locations, including 11 Heritage Housing stores and two Tiny House Outlet stores, exclusively sell our homes. For the six months ended June 30, 2024, approximately 49% of our manufactured homes were sold in Texas, followed by 12% in North Carolina, 9% in Georgia, 7% in Oklahoma, and 4% in Michigan. For the six months ended June 30, 2023, approximately 48% of our manufactured homes were sold in Texas, followed by 19% in Georgia, 7% in Louisiana, 4% in Florida, and 3% in Oklahoma.

We offer three types of financing solutions to our customers. We provide consumer financing for our products which are sold to end users through both independent and company owned retail locations. We provide inventory financing for our independent retailers who purchase homes from us and then sell them to consumers. We also provide financing solutions to manufactured housing community owners that buy our products for use in their manufactured housing communities. Our ability to offer competitive financing options at our retail locations provides us with several competitive advantages and allows us to capture sales which may not have otherwise occurred without our ability to offer consumer financing.

### Factors Affecting Our Performance

We believe that the growth of our business and our future success depend on various opportunities, challenges, trends and other factors, including the following:

- We have purchased several properties in our market area for the purpose of developing manufactured housing communities and subdivisions. As of June 30, 2024, these properties include the following (dollars in thousands):

| ​ Location | ​ | ​ Description | ​ ​ | ​ Date of Acquisition | ​ | ​ ​ Land | ​ | ​ ​ Improvements | ​ | ​ ​ Total |
| --- | --- | --- | --- | --- | --- | ---: | --- | ---: | --- | ---: |
| Bastrop County, Texas |  | 368 Acres |  | April 2018 | ​ | $4,215 | ​ | $10,607 | ​ | $14,822 |
| Bexar County, Texas |  | 69 Acres |  | November 2018 | ​ | 842 | ​ | 129 | ​ | 971 |
| Horseshoe Bay, Texas | ​ | 133 Acres |  | Various 2018-2019 | ​ | 2,639 | ​ | 2,373 | ​ | 5,012 |
| Johnson County, Texas | ​ | 91.5 Acres |  | July 2019 | ​ | 449 | ​ | - | ​ | 449 |
| Venus, Texas | ​ | 50 Acres |  | August 2019 | ​ | 422 | ​ | 52 | ​ | 474 |
| Wise County, Texas | ​ | 81.5 Acres | ​ | September 2020 | ​ | ​ 889 | ​ | ​ - | ​ | ​ 889 |
| Bexar County, Texas | ​ | 233 Acres | ​ | February 2021 | ​ | ​ 1,550 | ​ | ​ 411 | ​ | ​ 1,961 |
| ​ | ​ | ​ | ​ | ​ | ​ | $11,006 | ​ | $13,572 | ​ | $24,578 |

- We also expect to provide financing solutions to owners of manufactured housing communities in a manner that includes developing new sites for products in or near urban locations where there is a shortage of sites to place our products. These solutions will be structured to give us an attractive return on investment and competitive the gross margins on the sale of homes to these new manufactured housing communities.
- Inflation recently was near its highest rate in the U.S. over the last 30 years. Our ability to maintain gross margins can be impacted adversely by sudden increases in specific costs, such as increases in material and labor. In addition, measures used to combat inflation, such as increases in interest rates, could also have an impact on the ability of home buyers and community developers to obtain affordable financing. We continue to explore opportunities to minimize the impact of inflation on our future profitability.
- Finally, our financial performance will be impacted by our ability to fulfill orders for our manufactured homes from dealers and customers. Our Georgia manufacturing facility has unutilized space available and, with additional investment, we can add capacity to increase the number of homes that we can manufacture in that facility. Our future levels of production will depend in part, on our ability to anticipate sales volumes and product mix, to schedule production efficiently, to maintain proper equipment and to manage levels of inventory and personnel. We actively review organic and inorganic opportunities to add production capacity in attractive regions to meet future demand.

### Results of Operations

The following discussion should be read in conjunction with the information set forth in the financial statements and the accompanying notes appearing elsewhere in this Form 10-Q.

### Comparison of Three Months ended June 30, 2024 and 2023 (in thousands)

| ​ ​ ​ ​ Net revenue: | ​ ​ ​ ​ | ​ ​ Three months ended June 30, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ $ change ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ % change ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Product sales | ​ | $31,652 | ​ | $42,316 | ​ | $(10,664) |  | (25.2)% |
| Consumer, MHP and dealer loans interest | ​ | 9,844 | ​ | 8,488 | ​ | 1,356 |  | 16.0% |
| Other | ​ | 999 | ​ | 1,832 | ​ | (833) |  | (45.5)% |
| Total net revenue | ​ | 42,495 | ​ | 52,636 | ​ | (10,141) |  | (19.3)% |
| Operating expenses: | ​ |  | ​ |  | ​ |  |  | ​ |
| Cost of product sales | ​ | 21,558 | ​ | 29,709 | ​ | (8,151) |  | (27.4)% |
| Selling, general administrative expenses | ​ | 5,574 | ​ | 5,527 | ​ | 47 |  | 0.9% |
| Dealer incentive | ​ | (667) | ​ | (100) | ​ | (567) |  | 567.0% |
| Total operating expenses | ​ | ​ 26,465 | ​ | ​ 35,136 | ​ | ​ (8,671) | ​ | (24.7)% |
| Income from operations | ​ | 16,030 | ​ | 17,500 | ​ | (1,470) |  | (8.4)% |
| Other income (expense) | ​ |  | ​ |  | ​ |  |  | ​ |
| Non‑operating interest income | ​ | 986 | ​ | 626 | ​ | 360 |  | 57.5% |
| Miscellaneous, net | ​ | 3,015 | ​ | 159 | ​ | 2,856 |  | 1,796.2% |
| Interest expense | ​ | (235) | ​ | (195) | ​ | (40) |  | 20.5% |
| Total other | ​ | 3,766 | ​ | 590 | ​ | 3,176 |  | 538.3% |
| Income before income tax expense | ​ | 19,796 | ​ | 18,090 | ​ | 1,706 |  | 9.4% |
| Income tax expense | ​ | (3,607) | ​ | (3,070) | ​ | (537) |  | 17.5% |
| Net income | ​ | $16,189 | ​ | $15,020 | ​ | $1,169 |  | 7.8% |

Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $10.7 million, or 25.2%, during the three months ended June 30, 2024 as compared to the same period in 2023. This decrease was driven by an industry wide decrease in unit volumes shipped, primarily in direct sales, mobile home park sales and inventory finance sales categories.

Net revenue attributable to our factory-built housing consisted of the following during the three months ended June 30, 2024 and 2023:

*(in thousands)*

| ​ ​ ​ ​ ​ Net revenue: | ​ ​ ​ | ​ ​ Three months ended June 30, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ $ Change ​ | ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Product Sales | ​ | $31,652 | ​ | $42,316 | ​ | $(10,664) | (25.2)% |
| Total units sold | ​ | 514 | ​ | 678 | ​ | (164) | (24.2)% |
| Net revenue per unit sold | ​ | $61.6 | ​ | $62.4 | ​ | $(1) | (1.3)% |

For the three months ended June 30, 2024, our net revenue per product sold decreased primarily due to a shift in product mix to smaller units. We had decreases in direct sales, commercial sales and inventory finance sales, partially offset by an increase in retail store sales and other product sales. Direct sales decreased $0.4 million, or 10.1% during the three months ended June 30, 2024 as compared to the same period in 2023. Commercial sales decreased $4.6 million, or 29.2% during the three months ended June 30, 2024 as compared to the same period in 2023. Inventory finance sales to dealers decreased $6.5 million, or 41.6% during the three months ended June 30, 2024 as compared to the same period in 2023. Retail store sales increased $0.2 million, or 3.7% during the three months ended June 30, 2024 as compared to the same period in 2023. Our revenue has decreased primarily due to a lower volume of shipments, a shift in product mix generally to smaller units and a slowdown in our dealer and mobile home park sales. Our current business is dependent on dealer sales, as reflected in direct sales and inventory finance sales, and our sales have slowed due to high levels of inventory on dealer lots and seasonality. Our retail sales have improved as we have focused on improving the performance of our company owned stores. Our mobile home park business has been impacted by higher interest rates, and transaction volumes and new development have declined.

Consumer, MHP and dealer loans interest income increased $1.4 million, or 16.0%, during the three months ended June 30, 2024 as compared to the same period in 2023 due to growth in our loan portfolios. Between June 30, 2024 and June 30, 2023 our consumer loan portfolio increased by $15.8 million, our MHP loan portfolio increased by $16.6 million, and our dealer finance notes increased by $0.9 million.

Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees and other miscellaneous income and decreased $0.8 million, or 45.5%, during the three months ended June 30, 2024 as compared to the same period in 2023. This decrease was primarily due to a $1.0 million decrease in dealer finance fees, a $0.2 million decrease in commercial lease rents, partially offset by a $0.4 million increase in other miscellaneous revenue.

The cost of product sales decreased $8.2 million, or 27.4%, during the three months ended June 30, 2024 as compared to the same period in 2023. The decrease in costs is primarily related to the decrease in units sold.

Selling, general and administrative expenses remained flat during the three months ended June 30, 2024 as compared to the same period in 2023. We had a $0.8 million decrease in warranty costs and a $0.7 million decrease in payroll and related expense, a $0.2 million decrease in bad debt expense, offset by a $0.8 million increase in legal expense, a $0.4 million increase in property tax expense a $0.2 million increase in loan loss provision, and a $0.1 million increase in marketing expense and a net $0.2 million in other miscellaneous expense.

Dealer incentive expense decreased $0.6 million during the three months ended June 30, 2024 as compared to the same period in 2023.

Other income (expense) increased $3.2 million, or 538.3%, during the three months ended June 30, 2024 as compared to the same period in 2023. There was (i) an increase of $2.6 million in miscellaneous income as a result of a gain of $1.3 million on the sale of real property in Georgia and a reversal of $1.3 million of accrued liabilities, (ii) an increase of $0.3 million in other miscellaneous income, and (iii) an increase of $0.3 million in interest income for other notes receivable net of allowances.

Income tax increased $0.5 million during the three months ended June 30, 2024 as compared to the same period in 2023. The effective tax rate for the three months ended June 30, 2024 and 2023 was 18.2% and 17.0%, respectively, and differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes.

### Comparison of Six Months ended June 30, 2024 and 2023 (in thousands)

| ​ ​ ​ ​ Net revenue: | ​ ​ ​ ​ | ​ ​ Six months ended June 30, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ $ change ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ % change ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Product sales | ​ | $62,484 | ​ | $85,497 | ​ | $(23,013) |  | (26.9)% |
| Consumer, MHP and dealer loans interest | ​ | 20,477 | ​ | 16,193 | ​ | 4,284 |  | 26.5% |
| Other | ​ | 2,777 | ​ | 3,803 | ​ | (1,026) |  | (27.0)% |
| Total net revenue | ​ | 85,738 | ​ | 105,493 | ​ | (19,755) |  | (18.7)% |
| Operating expenses: | ​ |  | ​ |  | ​ |  |  | ​ |
| Cost of product sales | ​ | 42,024 | ​ | 58,670 | ​ | (16,646) |  | (28.4)% |
| Selling, general administrative expenses | ​ | 11,463 | ​ | 10,938 | ​ | 525 |  | 4.8% |
| Dealer incentive | ​ | (529) | ​ | 32 | ​ | (561) |  | (1,753.1)% |
| Total operating expenses | ​ | ​ 52,958 | ​ | ​ 69,640 | ​ | ​ (16,682) | ​ | (24.0)% |
| Income from operations | ​ | 32,780 | ​ | 35,853 | ​ | (3,073) |  | (8.6)% |
| Other income (expense) | ​ |  | ​ |  | ​ |  |  | ​ |
| Non‑operating interest income | ​ | 2,288 | ​ | 1,321 | ​ | 967 |  | 73.2% |
| Miscellaneous, net | ​ | 3,752 | ​ | 912 | ​ | 2,840 |  | 311.4% |
| Interest expense | ​ | (511) | ​ | (285) | ​ | (226) |  | 79.3% |
| Total other | ​ | 5,529 | ​ | 1,948 | ​ | 3,581 |  | 183.8% |
| Income before income tax expense | ​ | 38,309 | ​ | 37,801 | ​ | 508 |  | 1.3% |
| Income tax expense | ​ | (6,980) | ​ | (6,505) | ​ | (475) |  | 7.3% |
| Net income | ​ | $31,329 | ​ | $31,296 | ​ | $33 |  | 0.1% |

Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $23.0 million, or 26.9%, during the six months ended June 30, 2024 as compared to the same period in 2023. This decrease was driven by an industry wide decrease in unit volumes shipped, primarily in direct sales, mobile home park sales and inventory finance sales categories.

Net revenue attributable to our factory-built housing consisted of the following during six months ended June 30, 2024 and 2023:

*($ in thousands)*

| ​ ​ ​ ​ ​ Net revenue: | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ $ Change ​ | ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Product Sales | ​ | $62,484 | ​ | $85,497 | ​ | $(23,013) | (26.9)% |
| Total units sold | ​ | 1,061 | ​ | 1,366 | ​ | (305) | (22.3)% |
| Net revenue per unit sold | ​ | $58.9 | ​ | $62.6 | ​ | $(3.7) | (5.9)% |

For the six months ended June 30, 2024, our net revenue per product sold decreased primarily due to a shift in product mix to smaller units and to a large sale of homes in the first quarter of 2024 from our leased home portfolio to a mobile home park customer at a lower than average price than our typical new home. We had decreases in direct sales, commercial sales and inventory finance sales, partially offset by an increase in retail store sales and other product sales. Direct sales decreased $6.0 million, or 53.8% during the six months ended June 30, 2024 as compared to the same period in 2023. Commercial sales decreased $6.6 million, or 21.0% during the six months ended June 30, 2024 as compared to the same period in 2023. Inventory finance sales to dealers decreased $11.7 million, or 39.9% during the six months ended June 30, 2024 as compared to the same period in 2023. Retail store sales increased $1.0 million, or 12.0% during the six months ended June 30, 2024 as compared to the same period in 2023. Our revenue has decreased primarily due to a lower volume of shipments, a shift in product mix generally to smaller units and a slowdown in our dealer and mobile home park sales. Our current business is dependent on dealer sales, as reflected in direct sales and inventory finance sales, and our sales have slowed due to high levels of inventory on dealer lots and seasonality. Our retail sales have improved as we have focused on improving the performance of our company owned stores. Our mobile home park business has been impacted by higher interest rates, and transaction volumes and new development have declined.

Consumer, MHP and dealer loans interest income increased $4.3 million, or 26.5%, during the six months ended June 30, 2024 as compared to the same period in 2023 due to growth in our loan portfolios. Between June 30, 2024 and June 30, 2023 our consumer loan portfolio increased by $15.8 million, our MHP loan portfolio increased by $16.6 million, and our dealer finance notes increased by $0.9 million.

Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees and other miscellaneous income and decreased $1.0 million, or 27.0%, during the six months ended June 30, 2024 as compared to the same period in 2023. This decrease was primarily due to a $2.0 million decrease in dealer finance fees, a $0.3 million decrease in commercial lease rents, partially offset by a $1.1 million increase in forfeited deposits and a $0.2 million increase in other miscellaneous revenue.

The cost of product sales decreased $16.6 million, or 28.4%, during the six months ended June 30, 2024 as compared to the same period in 2023. The decrease in costs is primarily related to the decrease in units sold.

Selling, general and administrative expenses increased $0.5 million, or 4.8%, during the six months ended June 30, 2024 as compared to the same period in 2023. This increase was primarily due to a $1.0 million increase in legal expense, a $0.5 million increase in property tax expense, a $0.1 million increase in marketing expense, a $0.1 million increase in professional fees, and a net $0.1 million increase in other miscellaneous expense partially offset by a $0.7 million decrease in payroll and related expense, a $0.5 million decrease in warranty costs, and a $0.1 million decrease in loan loss provision.

Dealer incentive expense decreased $0.6 million during the six months ended June 30, 2024 as compared to the same period in 2023.

Other income (expense) increased $3.6 million, or 183.8%, during the six months ended June 30, 2024 as compared to the same period in 2023. There was (i) an increase of $2.6 million in miscellaneous income as a result of a gain of $1.3 million on the sale of real property in Georgia and a reversal of $1.3 million of accrued liabilities, (ii) an increase of $0.6 million in interest income for other notes receivable net of allowances, (iii) an increase of $0.6 million in other miscellaneous income, and (iii) an increase of $0.2 million in interest expense.

Income tax increased $0.5 million during the six months ended June 30, 2024 as compared to the same period in 2023. The effective tax rate for the six months ended June 30, 2024 and 2023 was 18.2% and 17.2%, respectively, and differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes.

### Liquidity and Capital Resources

### Liquidity

We believe that cash flow from operations and cash at June 30, 2024, and availability on our lines of credit will be sufficient to fund our operations and provide for growth for the next 12 to 18 months and into the foreseeable future. On July 28, 2023, we terminated our credit agreement with Capital One, N.A. and entered into a new credit agreement with Prosperity Bank that expanded and extended our credit availability (see ***Lines of Credit***, below).

### Cash

We maintain cash balances in bank accounts that may, at times, exceed federally insured limits. We have not incurred any losses from such accounts, and management considers the risk of loss to be minimal. As of June 30, 2024, we had approximately $0.1 million in cash, compared to $0.7 million as of December 31, 2023. We consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

### Cash Flow Activities

*(in thousands)*

| ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Net cash provided by (used in) operating activities | ​ | $14,265 | ​ | $(7,464) |
| Net cash provided by investing activities | ​ | $2,142 | ​ | $3,937 |
| Net cash (used in) provided by financing activities | ​ | $(17,095) | ​ | $2,240 |
| Net change in cash | ​ | $(688) | ​ | $(1,287) |
| Cash at beginning of period | ​ | $748 | ​ | $2,818 |
| Cash at end of period | ​ | $60 | ​ | $1,531 |

### Comparison of Cash Flow Activities from June 30, 2024 to June 30, 2023

Net cash provided by operating activities was $14.3 million during the six months ended June 30, 2024, compared to net cash of $7.5 million used in operating activities during the six months ended June 30, 2023. This change was predominantly the result of decreased MHP loan originations net of collections, decreased consumer loan originations net of collections, and decreased dealer inventory loan originations net of collections.

Net cash provided by investing activities of $2.1 million during the six months ended June 30, 2024 was primarily attributable to $4.8 million of collections of loans we made to third parties for the development of manufactured housing parks and $1.6 million in proceeds from the sale of property, offset by $2.6 million used in improvements and development of property, plant and equipment and $1.7 million used to issue notes to third parties for the development of manufactured housing parks. Net cash provided by investing activities of $3.9 million during the six months ended June 30, 2023 was primarily attributable to $8.5 million received from the sale of treasury notes, $1.1 million received from the sale of leases homes, $0.9 million of collections of loans we made to third parties for the development of manufactured housing parks and $0.2 million of collections from other purchased loans, offset by $5.3 million of loans we made to third parties for the development of manufactured housing parks and $1.5 used in improvements and development of property, plant and equipment.

Net cash used in financing activities of $17.1 million during the six months ended June 30, 2024 was attributable to net payments of $11.8 million on our lines of credit, $5.4 million of stock repurchases and $0.1 million received from the exercise of stock options. Net cash provided by financing activities of $2.2 million during the six months ended June 30, 2023 was attributable to net proceeds of $2.2 million on our lines of credit.

In November 2022, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $10.0 million of the Company’s common stock. We repurchased 170,342 shares for $3.5 million in the open market during the three months ended June 30, 2024, and we repurchased 261,529 shares for $5.4 million in the open market during the six months ended June 30, 2024. As of June 30, 2024, we had a remaining authorization of approximately $4.6 million. On August 6, 2024, our Board of Directors authorized the repurchase of an additional $10.0 million of the Company’s common stock under the share repurchase program.

### Lines of Credit

On July 28, 2023, the Company entered into a new Credit Agreement (the “Revolver”), by and among the Company as borrower, the financial institutions from time to time party thereto, as lenders, and Prosperity Bank as administrative agent. Subsequently, the Company repaid in full the balance due on its prior line of credit with Capital One, N.A. and all commitments under this prior line of credit were terminated. The Revolver provides for a four-year senior secured revolving credit facility with an initial commitment of $50,000 and an additional $25,000 commitment under an accordion feature. The Revolver is secured by the Company’s consumer loans receivables and all escrow accounts associated with the consumer loans receivables. At the Company’s option, borrowings will bear interest at a per annum rate equal to, (i) Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.5% or 2.75% based upon the Company’s average quarterly borrowings under the Revolver or (ii) a base rate plus an applicable margin of 2.5% or 2.75% based upon the Company’s average quarterly borrowings under the Revolver. The Company paid certain arrangement fees and other fees in connection with the Revolver of approximately $271, which were capitalized as unamortized debt issuance costs and included within lines of credit balance in the accompanying balance sheets and are amortized to interest expense over the life of the Revolver. The Revolver matures July 28, 2027.

For the three months ended June 30, 2024, interest expense under the Revolver was $235, and for the three months ended June 30, 2023, interest expense under the prior line of credit was $195. For the six months ended June 30, 2024, interest expense under the Revolver was $511, and for the six months ended June 30, 2023, interest expense under the prior line of credit was $285. The outstanding balance of the Revolver as of June 30, 2024 and December 31, 2023 was $11,861 and $23,680, respectively. The interest rate in effect as of June 30, 2024 and December 31, 2023 for the Revolver was 7.67% and 7.95%, respectively. The amount of available credit under the Revolver was $38,139 and $26,320 as of June 30, 2024 and December 31, 2023, respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of June 30, 2024, the Company was in compliance with all financial covenants, including that it maintain a maximum leverage ratio of no more than 1.00 to 1.00 and a minimum fixed charge coverage ratio of no less than 1.75 to 1.00.

### Contractual Obligations

The following table is a summary of contractual cash obligations as of June 30, 2024:

| ​ ​ ​ Contractual Obligations | ​ | ​ ​ Payments Due by Period (in thousands) ​ ​ Total | ​ ​ ​ ​ 2024 | ​ ​ ​ 2025 - 2026 | ​ ​ ​ 2027 - 2028 | ​ ​ After 2028 |
| --- | --- | ---: | ---: | ---: | ---: | ---: |
| Lines of credit | ​ | $11,861 | — | — | 11,861 | — |
| Operating lease obligations | ​ | $1,664 | 249 | 925 | 490 | — |

### Off Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, net sales, results of operations, liquidity or capital expenditures. However, we do have a repurchase agreement with a financial institution that provides inventory financing for independent retailers of our products. Under this agreement, we have agreed to repurchase homes at declining prices over the term of the agreement (24 months). Our obligation under this repurchase agreement ceases upon the purchase of the home by the retail customer. The maximum amount of our contingent obligations under such repurchase agreements was approximately $1,040 and $3,030 as of June 30, 2024 and December 31, 2023, respectively, without reduction for the resale value of the homes. We may be required to honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these repurchase agreements. We consider our obligations on current contracts to be immaterial, and accordingly we have not recorded any reserve for repurchase commitment as of June 30, 2024.

### Critical Accounting Estimates

Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. Our critical accounting estimates are identified and described in our Annual Report on Form 10-K for the year ended December 31, 2023.

### Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 1 – Nature of Operations, Recent Accounting Pronouncements to our June 30, 2024 Condensed Financial Statements, included in Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report.

### Emerging Growth Company Status

The Company’s status as an “emerging growth company” ended on December 31, 2023. An “emerging growth company,” as defined in the JOBS Act. Section 107 of the JOBS Act, provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

## Controls and procedures

As filed, 5,383 characters.

### Disclosure Controls and Procedures

We are subject to the periodic reporting requirements of the Exchange Act which requires designing disclosure controls and procedures to provide reasonable assurance that information we disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report. Based on the evaluation of our disclosure controls and procedures as of June 30, 2024, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of such date due to material weaknesses in internal control over financial reporting.

In light of the conclusion that our disclosure controls and procedures are considered ineffective as of June 30, 2024, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regard to this quarterly report. Accordingly, the Company believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this quarterly report.

### Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed in our Annual report on Form 10-K filed with the SEC for the year ended December 31, 2023 we identified material weaknesses in our internal control over financial reporting during the preparation of our financial statements. Under standards established by the PCAOB, a material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

The material weaknesses in financial reporting as of June 30, 2024 are summarized as follows:

- We determined that we have not sufficiently or adequately designed or implemented control activities and have a lack of documentation, review and approval of certain control activities. Additionally, those activities are not sufficiently monitored and tested;
- We determined that we do not have sufficient qualified accounting personnel to support the preparation of financial statements that are in compliance with U.S. GAAP and SEC reporting requirements; and
- We determined that we have not sufficiently or adequately designed or implemented information technology general controls over in-scope business processes and financial reporting systems.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the second quarter of fiscal 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or fraud. Additionally, controls can be circumvented by individuals or groups of persons or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements in our public reports due to error or fraud may occur and not be detected.

Filed Aug 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-011633. Last ingested by Listed: Oct 30, 2026, 17:37 ET. No prices; not investment advice.