Legacy Housing Corp

Previous wording

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 sixth 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 six month period ending June 30, 2024. 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 nine months ended September 30, 2024, we sold 549 and 1,772 home sections, respectively (which are entire modules or single floors). For the three and nine months ended September 30, 2023, we sold 643 and 2,246 home sections, respectively

Current wording

We build, sell and finance manufactured homes and “tiny houses” that are distributed through a network of independent retailers and company-owned stores and are sold directly to manufactured housing communities. We are one of the largest producers of manufactured homes in the United States. 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, with 1 to 31/2 bathrooms. Our homes range in price, at retail, from approximately $33 to $180. For the three months ended March 31, 2025 and 2024 we sold 427 and 645 home sections (which are entire homes or single floors that are combined to create complete homes), respectively.

Previous wording

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.

Current wording

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 coordinating or providing transportation for dealers. We also provide financing options for 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.

Previous wording

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.

Current wording

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 up to, 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.

Previous wording

Our homes are marketed under our premier “Legacy” brand name and, as of September 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 nine months ended September 30, 2024, approximately 48% of our manufactured homes were sold in Texas, followed by 9% in North Carolina, 9% in Georgia, 8% in Oklahoma, 3% in Michigan and 3% in Florida. For the nine months ended September 30, 2023, approximately 49% of our manufactured homes were sold in Texas, followed by 15% in Georgia, 9% in Louisiana, 4% in Oklahoma, and 3% in Florida.

Current wording

Our homes are marketed under our premier “Legacy” brand name and currently are sold primarily across 15 states through a network of over 125 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 12 Heritage Housing stores and one Tiny House Outlet stores exclusively sell our homes.

Previous wording

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

Current wording

We offer three types of financing solutions to our customers. We provide inventory financing for our independent retailers who purchase homes from us and then sell them to consumers. We provide consumer financing for our products which are sold to end-users through both independent and company-owned retail locations. 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.

Previous wording

Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $6.8 million, or 18.5%, during the three months ended September 30, 2024 as compared to the same period in 2023. This decrease was driven by a decrease in unit volumes shipped, primarily in direct sales, mobile home park sales and inventory finance sales categories.

Current wording

Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $6.5 million, or 21.2%, during the three months ended March 31, 2025 as compared to the same period in 2024. This decrease was driven by a decrease in unit volumes shipped, primarily in mobile home park sales, retail sales, direct sales and other product sales categories.

Previous wording

For the three months ended September 30, 2024, our net revenue per product sold did not change significantly as compared to the three months ended September 30, 2023. We had decreases in direct sales, commercial sales, inventory finance sales and other product sales, partially offset by an increase in retail store sales. Direct sales decreased $0.5 million, or 19.7% during the three months ended September 30, 2024 as compared to the same period in 2023. Commercial sales decreased $1.6 million, or 11.2% during the three months ended September 30, 2024 as compared to the same period in 2023. Inventory finance sales to dealers decreased $4.7 million, or 37.8% during the three months ended September 30, 2024 as compared to the same period in 2023. Retail store sales increased $0.3 million, or 4.8% during the three months ended September 30, 2024 as compared to the same period in 2023. Our revenue has decreased

Current wording

For the three months ended March 31, 2025, our net revenue per product sold increased by 23.1% as compared to the same period in 2024. The increase is primarily due to a decrease in units sold to mobile home parks, which are sold at wholesale prices, and an increase in units sold to consumers, which are sold at higher retail prices. We had decreases in direct sales, commercial sales, retail sales and other product sales, partially offset by an increase in inventory finance sales. Direct sales decreased $0.3 million, or 17.0% during the three months ended March 31, 2025 as compared to the same period in 2024. Commercial sales decreased $6.8 million, or 50.0% during the three months ended March 31, 2025 as compared to the same period in 2024. Retail sales decreased $1.5 million, or 30.3% during the three months ended March 31, 2025 as compared to the same period in 2024. Inventory finance sales increased $2.7 million,

Previous wording

For the nine months ended September 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. Direct sales decreased $6.5 million, or 47.4% during the nine months ended September 30, 2024 as compared to the same period in 2023. Commercial sales decreased $8.2 million, or 18.0% during the nine months ended September 30, 2024 as compared to the same period in 2023. Inventory finance sales to dealers decreased $16.4 million, or 39.2% during the nine months ended September 30, 2024 as compared to the same period in 2023. Retail store sales increased $1.2 million, or 9.1% during the nine months ended September 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

Current wording

or 31.5% during the three months ended March 31, 2025 as compared to the same period in 2024. Other product sales decreased $0.6 million, or 29.6% during the three months ended March 31, 2025 as compared to the same period in 2024. Our revenue has decreased primarily due to a lower volume of shipments and a slowdown in our retail and mobile home park sales.

Previous wording

Consumer, MHP and dealer loans interest income increased $1.5 million, or 17.3%, during the three months ended September 30, 2024 as compared to the same period in 2023 due to growth in our loan portfolios. Between September 30, 2024 and September 30, 2023 our consumer loan portfolio increased by $15.6 million, our MHP loan portfolio increased by $22.0 million, and our dealer finance notes decreased by $0.7 million.

Current wording

Consumer, MHP and dealer loans interest income did not change during the three months ended March 31, 2025 as compared to the same period in 2024. Between March 31, 2025 and March 31, 2024 our consumer loan portfolio increased by $20.3 million, our MHP loan portfolio increased by $20.1 million, and our dealer finance notes decreased by $2.4 million.

Previous wording

Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, land sales, service fees and other miscellaneous income and decreased $0.4 million, or 8.7%, during the three months ended September 30, 2024 as compared to the same period in 2023. This decrease was primarily due to a $2.4 million decrease in forfeited deposits and a $1.0 million decrease in dealer finance fees, partially offset by a $2.7 million increase in land sales and a $0.3 million increase in other miscellaneous revenue.

Current wording

Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, land sales, service fees and other miscellaneous income and decreased $1.0 million, or 59.2%, during the three months ended March 31, 2025 as compared to the same period in 2024. This decrease was primarily due to a $1.1 million decrease in forfeited deposits partially offset by a $0.2 million increase in portfolio fees and service revenue and land sales and a net $0.1 million decrease in other miscellaneous revenue.

Previous wording

The cost of product sales decreased $3.5 million, or 13.9%, during the three months ended September 30, 2024 as compared to the same period in 2023. The decrease in costs is primarily related to the decrease in units sold. The cost of other sales increased $2.0 million during the three months ended September 30, 2024 as compared to the same period in 2023. The increase in costs is due to the sale of land.

Current wording

The cost of product sales decreased $3.3 million, or 16.0%, during the three months ended March 31, 2025 as compared to the same period in 2024. The decrease in costs is primarily related to the decrease in units sold. The cost of other sales was $0.5 million during the three months ended March 31, 2025.

Previous wording

Selling, general and administrative expenses during the three months ended September 30, 2024 remained flat compared to the same period in 2023. We had a $0.6 million increase in payroll and healthcare expense, a $0.2 million increase in marketing expense, a $0.1 million increase in other miscellaneous expense offset by a $0.3 million decrease in warranty expense, a $0.2 million decrease in loan loss provision and a $0.2 million decrease in bad debt expense and a $0.2 million decrease in professional fees.

Current wording

Selling, general and administrative expenses increased $0.4 million, or 6.9%, during the three months ended March 31, 2025 as compared to the same period in 2024. We had a $0.6 million increase in legal expense, a $0.5 million increase in loan loss provision and a $0.3 million increase in other miscellaneous expense offset by a $0.4 million decrease in warranty expense, $0.3 million decrease in payroll and related expense and a $0.3 million decrease in professional fees.

Previous wording

Other income (expense) increased $3.5 million, or 781.3%, during the three months ended September 30, 2024 as compared to the same period in 2023. We had (i) a decrease of $0.8 million decrease in Non-operating interest income primarily as a result of the Settlement Agreement described in Note 4, Notes Receivable from Mobile Home Parks, in these Notes to Condensed Financial Statements (Unaudited) for the quarter ended September 30, 2024, (ii) an increase of $3.9 million in income in Miscellaneous, net also primarily as a result of the Settlement Agreement above, (iii) an increase of $0.4 million in income Miscellaneous, net due to a gain on conversion of inventory finance loans, (iv) a decrease of $0.1 million in Interest expense and (v) an increase of $0.1 million in expense in Miscellaneous, net related to other expenses.

Current wording

Other income (expense) decreased $0.6 million, or 35.5%, during the three months ended March 31, 2025 as compared to the same period in 2024. We had a decrease of $0.8 million in Non-operating interest income primarily as a result of the Settlement Agreement described in Note 4, Notes Receivable from Mobile Home Parks, in these Notes to Condensed Financial Statements (Unaudited) for the quarter ended March 31, 2025 offset by a decrease of $0.2 million in interest expense.

Previous wording

Income tax increased $0.1 million during the three months ended September 30, 2024 as compared to the same period in 2023. The effective tax rate for the three months ended September 30, 2024 and 2023 was 18.2% and 17.4%, 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.

Current wording

Income tax decreased $0.9 million during the three months ended March 31, 2025 as compared to the same period in 2024. The effective tax rate for the three months ended March 31, 2025 and 2024 was 19.3% and 18.2%, 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.

Previous wording

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 September 30, 2024, we had approximately $0.6 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.

Current wording

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 March 31, 2025, we had approximately $3.4 million in cash, compared to $1.1 million as of December 31, 2024. We consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Previous wording

Net cash provided by operating activities was $28.1 million during the nine months ended September 30, 2024, compared to net cash of $5.3 million used in operating activities during the nine months ended September 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.

Current wording

Net cash provided by operating activities was $4.9 million during the three months ended March 31, 2025, compared to net cash of $10.8 million provided by operating activities during the three months ended March 31, 2024. This change was predominantly the result of decreased net income, increased consumer loan originations net of collections, change in accounts receivable, change in inventories, change in accounts payable and accrued liabilities and change in other assets – leased mobile homes.

Previous wording

Net cash used in investing activities of $1.5 million during the nine months ended September 30, 2024 was primarily attributable to $5.8 million of collections of loans we made to third parties for the development of manufactured housing parks, $1.6 million in proceeds from the sale of property and $0.1 million in proceeds from collections of purchased loans, offset by $7.3 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 used in investing activities of $7.6 million during the nine months ended September 30, 2023 was primarily attributable to $13.9 million used to issue notes to third parties for the development of manufactured housing parks, $4.6 million used in improvements and development of property, plant and equipment, offset by $8.5 million received from the sale of treasury notes, $1.1 million received from the sale of leases homes, $1.0 million of collections of loans we made to third parties for the development of manufactured housing parks and $0.3 million of collections from other purchased loans.

Current wording

Net cash used in investing activities of $2.0 million during the three months ended March 31, 2025 was primarily attributable to $1.3 million used in improvements and development of property, plant and equipment and $1.0 million used to issue notes to third parties for the development of manufactured housing parks, offset by $0.2 million in proceeds from the sale of property and $0.1 million of collections of loans we made to third parties for development of manufactured housing parks. Net cash provided by investing activities of $2.7 million during the three months ended March 31, 2024 was primarily attributable to $4.1 million of collections of loans we made to third parties for development of manufactured housing parks, offset by $0.9 million used in improvements and development of property, plant and equipment and $0.6 million used to issue notes to third parties for the development of manufactured housing parks.

Previous wording

Net cash used in financing activities of $26.8 million during the nine months ended September 30, 2024 was attributable to net payments of $21.6 million on our lines of credit, $5.4 million of stock repurchases and $0.2 million received from the exercise of stock options. Net cash provided by financing activities of $10.6 million during the nine months ended September 30, 2023 was attributable to net proceeds of $10.5 million on our lines of credit and $0.1 million received from the exercise of stock options.

Current wording

Net cash used in financing activities of $0.7 million during the three months ended March 31, 2025 was attributable $0.7 million of stock repurchases. Net cash used in financing activities of $13.7 million during the three months ended March 31, 2024 was attributable to net payments of $11.9 million on our lines of credit, $1.9 million of stock repurchases and $0.1 million received from the exercise of stock options.

Previous wording

during the three months ended September 30, 2024, and we repurchased 262,530 shares for $5.4 million in the open market during the nine months ended September 30, 2024. As of September 30, 2024, we had a remaining authorization of approximately $14.6 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.

Current wording

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. 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. We repurchased 262,530 shares of common stock for $5,398 in the open market during the year ended December 31, 2024.

Previous wording

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.

Current wording

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. 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.

Previous wording

For the three months ended September 30, 2024, interest expense under the Revolver was $175, and for the three months ended September 30, 2023, interest expense under the Revolver and prior line of credit was $302. For the nine months ended September 30, 2024, interest expense under the Revolver was $686, and for the nine months ended September 30, 2023, interest expense under the Revolver and prior line of credit was $588. The outstanding balance of the Revolver as of September 30, 2024 and December 31, 2023 was $2,111 and $23,680, respectively. The interest rate in effect as of September 30, 2024 and December 31, 2023 for the Revolver was 7.61% and 7.95%, respectively. The amount of available credit under the Revolver was $47,889 and $26,320 as of September 30, 2024 and December 31, 2023, respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of September 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.

Current wording

For the three months ended March 31, 2025 and 2024, interest expense under the Revolver was $0 and $276, respectively. The outstanding balance of the Revolver as of March 31, 2025 and December 31, 2024 was $0. The interest rate in effect as of March 31, 2025 and December 31, 2024 for the Revolver was 6.76% and 7.61%, respectively. The amount of available credit under the Revolver was $50,000 as of March 31, 2025 and December 31, 2024. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of March 31, 2025, 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.

Previous wording

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 $856 and $3,030 as of September 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 September 30, 2024.

Current wording

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 repurchase agreements with financial institutions providing inventory financing for independent retailers of our products. Under these agreements, we have agreed to repurchase homes at declining prices over the term of the agreement. Our obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer. The maximum amount of our contingent obligations under such repurchase agreements was approximately $672 and $805 as of March 31, 2025 and December 31, 2024, 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 March 31, 2025.