Q4 2022 Legacy Housing Corp Earnings Call

March 16, 2023

Offsetting by lower volume from Georgia, higher material and labor costs and higher SG&A.

We continue to hold pricing and reduce our raw material inventory.

We are also looking at ways to reduce SG&A up this year due to salaries and incentive compensation.

Warranty costs and professional fees.

Net income of $67 8 million for 2022 was a 35, 9% increase over 2021.

Basic earnings per share grew to $2 78, and 2022, an increase of 35% from 2021.

Legacy delivered a 19, 6% return on equity over the last 12 months.

For this calculation using the average 2022 shareholders equity value.

At the end of 2022 legacy book value per basic share outstanding was 15.

69.

An increase of 22, 7% from 2021.

We ended the year in a cash neutral position with.

With $2 8 million in cash and $22 $5 million drawn on our credit line.

During the fourth quarter, we put $8 $4 million of excess cash to work in treasuries, yielding approximately four 7%.

Our backlog is healthy across all manufacturing facilities.

We have a small manufacturing footprint and continue to run near capacity.

As the market slows, we anticipate having orders to fill our three plants.

I'm really excited for the next 18 to 24 months at legacy <unk>.

We've moved past the financial reporting issues and the foundation is stable.

Looking at the 2022 balance sheet, we have essentially no debt and over $330 million of principal outstanding across our loan portfolios.

These loan portfolios generate a tremendous amount of predictable cash flow that we can reinvest at high rates of return to grow our book value.

As the economy slows.

Seeing more and more opportunities to deploy capital.

We are constantly evaluating these opportunities and we'll remain disciplined in our approach.

Overall, we're focused on long term capital appreciation.

And think that over the next six.

Six to 18 months is a pretty opportunistic time to put money to work.

Operator. This concludes our prepared remarks, please begin the Q&A.

Thank you and ladies and gentlemen asked a question you will need to press star one on your telephone and wait planning to be announced to withdraw your question Press Star One again, please standby, while we compile the Q&A roster.

And our first question coming from the line of.

Min Cho with B Riley your line is now open.

Great Hi, Duncan congratulations on a really strong quarter here and the strong yen.

Hey, good morning, Thanks very much.

Sure a couple of questions regarding your Georgia facility improvements it sounds like those shipments have definitely improved in the fourth quarter can you talk a little about what the utilization rate as you exited the year and can you remind us what the historical kind of annual revenue is from that facility.

Yes, sure a couple of thoughts.

First as far as where we are with with production that plant. Historically has produced say five to six homes a day.

We're still below where we'd like to be but we're very cautious around around ramping up production until we're 100% positive, but we're not going to have any quality issues going forward. So right. Now we are building three to four at that plant. So it is not significantly below the long term average, but it has.

It's been a work in progress to get up to the historical production level.

We don't publish.

Revenue by manufacturing facility, but you could take.

Production volume and just kind of use in average.

Average home price there.

Okay.

Okay definitely do that.

Also it looks like the number of homes sections.

That were produced and shipped were either either record or near record highs for the fourth quarter and for the full year. I was wondering if you could talk a little bit about that with respect to kind of labor labor availability.

And given the current labor situation.

Fact that number to increase.

Through 2023.

Yeah.

Labor continues to be a problem for us.

And I think a lot of other companies in the U S manufacturing space.

That said, it's not as tight as it was.

We used just.

A very simple barometer the labor market is when we walk into our Fort worth plant in the morning, or there are people who are waiting in the lobby for jobs and I think through Covid, we really we didn't have anybody in the lobby and we're starting to see people who are.

Who are ready to work so labor does continue to be our constraint.

Manufacturing standpoint.

But I think it is I think it is loosening up and we'd like to continue to push production.

And all of these plants.

But that really is the constraint.

Okay and then my final question has to do with your mobile home parks, just any update on the development in Texas I know you are pretty close to kind of starting construction on the.

The <unk> units.

Any updates there yes.

The developments continue to move forward.

Frankly, they're slower than we would like we've just been.

We have been tied up in bogged down with with so much work.

On the administrative front.

That said, we're getting toward a.

A point, where at least for phase one.

We can start.

We can start to think about.

Getting homes into that first phase, but we're still we're months out there and.

That's the first one that will have come online, but we've got several others behind it. So it's unfortunately slower than we would like.

I think a lot of the other.

Industry peers will talk about some of the just regulatory hoops that you have to jump through to actually get one of these turnkey.

And.

It's significant so.

<unk> progress slower, but I think now that we're through.

Some of the.

Financial reporting issues, we're really we're going to make a push there.

Alright, it's understandable great. Good luck to you in 2023.

Thank you very much.

Thank you and our next question coming from the line of Mark Smith with Lake Street Capital. Your line is now open.

Hi, guys.

First question for me just wanted to look at the finance business, just a little bit.

And correct me if I'm wrong.

Looks like you might not be keeping up with kind of the rising rate environment can you talk about if you guys are using the finance business really as a lever to kind of drive product sales.

Sure.

The nice thing about our finance business is it.

Rose off so much cash that we're not borrowing to land.

So if we if we were we had a.

Warehouse facility and we were borrowing in the rate on that went up pretty dramatically we would be in a much different situation than we are today.

So our strategy over the last year or so has been.

To keep our.

Our rates down.

And to keep our prices up and certainly the financing programs and legacy.

Helped drive sales for the business.

Okay.

Perfect and then just looking at production looked really solid.

Some unit sales this quarter can you just talk about kind of where the production was versus kind of inventory you have a little bit more at the end of Q3.

So just kind of wane whats your way, but moved through from an inventory standpoint versus kind of production here during Q4.

Yes, I mean.

We had talked about I think on the last call, especially in Georgia, We had an issue where we had a lot of homes that were stuck in the yard and we werent able to ship so during the fourth quarter.

We were able to work through a lot of those.

And that's certainly that's certainly helped us but we are we are constrained.

From a manufacturing standpoint that said I think heading into a slowdown I'd much rather have three plants and I'm trying to feed the 10 40, So I think overall, we're pretty well positioned going forward.

And that's kind of my next question was just.

How you feel about <unk>.

Manufacturing today do you have.

Labor materials and things that you ought to continue as we look at Q1.

And into 'twenty, three to be able to kind of produce at the levels that you'd like.

Yes, I think from.

We'd always like it.

Abundance of skilled labor, but I think what we have the teams that we have now are doing a good job.

From a material standpoint.

The the supply chains have really loosened up.

And are one of the challenges that we've been working through is you went through two years, where youre purchasing department did everything that they possibly could to get materials and now that materials are abundantly available on prices are coming due.

Now, we're really working to try to get the biggest discounts that we can but we're not having we're.

We're not having any of the issues that we had during COVID-19 or with appliances and other things not being readily available.

Okay.

The last question for me kind of Big picture just.

Give us some great data in your 10-K on kind of the industry and affordable housing, but any other insights you can give on.

Kind of what Youre seeing from a demand perspective.

Especially with kind of a squeeze consumer out here.

<unk>.

Crude demand for affordable housing.

Mark It's a really interesting time right now right you've got stick.

Stick built home prices near all time highs.

Rates, obviously moved up very quickly.

And underwriting standards have tightened.

I mean, if you look at some of the stats around average stick built home price across the country I mean, it's a it's a pretty big number.

And when you think about our product right, it's significantly less expensive.

I think the.

A demand standpoint, we have two channels of our business we.

We either sell.

Through to a retail customer through independent dealers or through our company owned dealerships.

Where we sell to.

Manufactured housing community owners.

There.

I'd say on the dealer side.

Dealers do have a lot of inventory right now.

And the demand is slower from the dealer channel.

Since like over the last probably three to six months.

Traffic at those dealerships has picked up.

But the conversions to home sales are not as high as we'd like to see them.

On the community side.

Just a lot of people.

So theres a lot of capital that came into the space and so we continue to see pretty good demand.

From a lot of our large historical customers that are either developing.

New communities or doing some infill or expansion.

But.

Overall I think demand is is certainly slowing that said, we feel we feel pretty good with three plants about.

Being able to.

To have the orders to keep these things.

Going at say similar production capacity.

Excellent. Thank you.

Sure. Thanks Mark.

Thank you and as a reminder to ask a question. Please press star one one and our next question coming from the line of Tim.

More from Ian Hudson Group Your line is open.

Thanks, and congratulations on the very strong sales quarter.

December and for the year.

Very impressive margin expansion I know the team is working and putting in a lot of hours I'm talking I was just wondering.

You briefly mentioned in the backlog what is the current backlog you think in terms of visibility on monthly sales and something like five months going out maybe.

You know, Tim we don't we don't publish a backlog.

We have we do have several months of backlog I think one of the one of the challenges going forward is.

Having customers actually accept their orders.

And so even though you've got backlog, we're pushing people who've ordered homes to get them scheduled in and take their homes when they come offline.

But again.

Small manufacturing footprint, even if things slow down and I think we'll be able to.

To to continue to cut deals.

We are selling.

<unk> thousand 30, or 100 200 homes at a time and.

And keep these.

Facilities close to capacity.

That's helpful to hear.

How should we think maybe.

The gross margin possibility for this year I saw that the it looks like the fourth quarter gross margin was 40%. So we can kind of go off of that just kind of thinking about modeling going forward.

Rice's have held up.

Well.

I'm just trying to get a sense of maybe what you're thinking for utilization in the margin profile for the year.

It's tough to say.

I think there's a lot of dynamics that are in play right now.

<unk> been able to hold prices firm and we have I think started to benefit from material prices coming down.

That said, if if demand really does slow down.

We'll have to think hard about hard about pricing, but certainly we're trying to buy materials for as cheap as we possibly can and we're trying to to to hold pricing firm. So I think I'll have a better view kind of by end of end of next quarter when we talk.

Without that but I'd say for now its about the same.

Okay.

Helpful to hear.

You mentioned.

I think we're all aware of the independent dealer channels had some <unk>.

Destocking going on and we've seen the walk in traffic.

Paul I guess the last few months just in general for the industry.

How is the how is the walk in traffic holding up.

The owned retail locations.

Are you guys doing anything to maybe create more digital leads or digital generations to kind of get more consumers in your stores.

Yes, a couple a couple of thoughts on that I mean.

Kenny and I spend a lot of time talking about foot traffic and conversions.

The retail stores, we have seen an uptick in foot traffic.

Really the.

The issue is on the converting that foot traffic to sales and I don't think it's something that's.

Necessarily unique to our retail stores as it is.

Across the industry, where.

Given the price of our product people are interested in it.

But.

They I think a lot of people are hesitant to pull the trigger right now given so much uncertainty in the overall <unk>.

<unk>. So foot traffic has picked up we are working on things to convert more of the traffic to sales.

Historically, we have not had a big.

Online presence.

We have certainly on the heritage side ramp that up with.

And additional hires who's working on marketing for heritage, but.

Again, now that we're through a lot of the financial reporting issues.

I'm looking forward to it in addition to growth really focus in on.

How we can improve the business and from a marketing standpoint, we think that there's a pretty good opportunity. There. It's just having the bandwidth to actually work with our team to get it done.

That's helpful color.

Appreciate that you have.

Another question I had was I was just wondering youre doing a good job on getting the quality assurance back back on track with the Georgia plant.

Have you and the board thought about maybe heading adding ahead of operations to maybe visit all three plants every couple of weeks.

And so the efficiencies and quality control.

Not at this time.

We do have we have really good general managers it at all of these plants.

And as you know Curt and Kenny are all heavily involved in.

This thing moves pretty quickly we're not scheduling a lot of meetings, it's a lot of direct phone calls.

We can we can make changes quickly.

We do operate in a very highly.

Regulated industry.

And so there is a there is a code that we strictly build too and it's just given some of the labor challenges in turnover, sometimes you have yes, the issues there and like we had in Georgia, but I feel good about where we're.

The team is now we've had a lot of people step up and I think if we if we can continue to grow and especially expand the manufacturing footprint then.

Maybe at that time.

A higher like that or an internal person moving into that role makes sense, but I think for the three plants right now we feel pretty good about the management team that we have in place.

Yes.

Makes sense I, I remember and I enjoyed meeting Marco Fort worth plant in late August .

Very impressed by him.

Just maybe switching gears talking now that you've been there nine months.

Up to speed on the accounting enhancements in the Georgia facility coming along with these quality insurance.

Are you now getting any more time to look for acquisition targets.

We're getting there.

One of one of our founders Kenny Shipley always says that the best deals come to you.

And I think what's been interesting over the last.

Really over the last month, maybe month and a half is.

As other manufacturers slowed down.

And financing.

In certain areas of our business.

It becomes less attainable I mean, we are really seeing a lot more opportunities than we have years and years and.

The key is.

When we're allocating capital we're very return focused.

We're focused on the bottom line and growing book value and continuing to reinvest our money at attractive rates of return and if you look at the returns.

The loan portfolio, there are pretty significant and so.

As we look at opportunities.

There is a high bar there and so we've got to make sure that.

We're meeting and exceeding those return.

Thresholds to actually deploy capital outside of the loan portfolios, but long way of saying, we're seeing more opportunities. We're spending more time on them and we think that over the next 12 months is a pretty interesting time to put money to work because we are long term focused.

Great. That's really helpful color and clarification on the capital allocation strategy and that's it for my questions. Thanks, a lot.

Yes, Thanks, Tim.

Thank you.

And our next question coming from the line of.

Deforest Hinman your line is open.

Hey, Thanks for taking the questions. A couple of things can you just give us a update on the strategy for the.

The owned.

Housing.

The manufactured housing parks because.

In the.

10-K, we can see I think two of the larger parks the acreage owned actually decreased so I don't know if thats were developing.

The pads and we're selling your pads or we're developing the pads putting units on it and then selling them I believe in the past there was some discussion about.

Operating these.

Parks and generating a rental stream and it.

Steven laid out where.

Yes, we can see the number the dollar.

The amount of leased homes has actually decline.

<unk> declined from some previous level. So can you just.

Give us an update on what exactly is the strategy with the park development.

Yeah happy to.

Yeah.

Couple if there are few questions in there I'll try to I'll try to take them in and if I Miss something just remind me, but first on the on the acreage change.

I don't know I'll have to follow up with you on why the acreage would change yet we haven't.

Purchased any additional land since last quarter and we also haven't sold any additional land or any land since last quarter. So I'll have to follow up with you on why the acreage changed.

Overall.

We we do think that debt.

That potentially owning and operating these.

Communities could be a good long term.

Or could provide long term consistent cash flows that said the development the development of them has.

Has taken longer than expected and I mentioned earlier that the.

The regulatory hurdles that you have to jump through and the time that these regulators take to make decisions is it's really it's mindboggling and for the past couple of years, we've had enough orders were to external customers.

We haven't needed to even if the communities we're ready we haven't needed to.

To put homes on them, because we were at capacity and selling to other customers.

I think ultimately.

The the communities provide us with a lot of.

Optionality.

And there is there is a lot of value to unlock there and so one thing thats kind of top of our agenda.

As we move into.

The middle part of the year is.

We've got the we've got the properties are at various stages of development.

Theres some that it probably makes sense for us to push through and finish.

There is others and we've been approached by a lot of the larger.

Community developers that may make sense to partner on and potentially be able to sell homes into and still retain some type of.

Cash flow and then Theres some that.

That we haven't made much progress on developing that there may be another buyer.

That's more suitable.

To combine this with additional land.

And to build bigger communities. So I think overall, we're still we're still making progress but.

The strategy will dive in into now on exactly what we want to do with.

With each location.

But we're in these things for the right.

We bought the land right, we've been very frugal with how we've.

Allocated capital to these projects.

And there is value to unlock here, it's just figuring out what the right path forward is.

Okay. That's helpful. Just clarify my question one the acreage was I guess from 10-K. This year. The 10-K last year Bastrop County, Texas acreage is down.

32 acres in <unk> County was down.

I think 31, so I didn't know if that was.

We completed development with place units someone approached us and we sold that is that what happened.

No I need to check on it I really I don't know why it would have changed.

Okay.

The one while we really have made.

The most progress on we've got phase, one coming but I don't.

I don't know why it would have changed.

Okay, and then you mentioned some of the large community of developers you have.

Mentioned that.

You are running at pretty high levels of capacity, but you might see some moderation.

Given our.

Our position and our outlook is there any sense.

And approaching some of those larger developers and.

And saying look we can allocate a certain percentage of our.

Monthly weekly quarterly production to your.

To you as a single customer and then they can have a more.

A consistent supply of units because a lot of things I've read makes it sound like there is.

Lots of demand on the park side.

They are coming to market with our rental rate in many areas.

Very attractively priced versus the competition.

Sure.

We.

We think we build a.

A great Park model home.

We buy materials and important materials and manufacture our own components.

It allows us to build these things.

For.

A great price and sell them at a great price, even with with a little bit of margin there.

<unk> had several conversations with some of our larger customers.

About taking homes in quantity.

Under say some type of a supply agreement, where we allocate a certain amount of production a month.

Two.

To them.

At an agreed upon.

Price and so yes, all of those conversations are happening we've got a great.

Park sales team.

And there are certainly customers that or they're certainly developers that are focused on our core markets that we have not historically sold too.

And I've been involved in a lot of those meetings and certainly we're trying to advance those but if we can build the same home.

In large runs I mean that is that's certainly more efficient for us then.

Throwing a bunch of double eitan.

Align and it did.

Slows us down just because they're more inter kit. So yes that is that as a top focus for a lot of people at the company.

Okay. Thank you and then my last question is just on any update on how we're looking at share repurchase authorization from.

Capital allocation perspective, it looks like Theres, a lot of opportunities that you've touched on.

I believe it's a $10 million.

Authorization.

Is that more.

Opportunistic dry powder.

And to some extent, maybe we were locked out actually.

Anything in the market as we've put.

We're working on getting some of the.

Administrative things.

Address that you touched on.

Just give us some color there.

Would that be.

And that could be utilized in 2023. Thank you.

Sure Yes.

It's certainly not just optics I mean that was something that.

When our last share repurchase program expired.

I was pretty adamant about getting back in place we do trade.

We do trade at I think a pretty.

<unk> valuation right now.

And the way that I personally think about that share repurchase program ever.

Every one of these calls we gave.

We gave our tangible book value per share and we think our book value is extremely conservative.

The way that this business was built it was started with $7 million in all of the profits have been reinvested every single year for 18 years at a 10% to 20% return.

And so we do have real assets that are unencumbered.

And I think.

If depending on how the.

The stock market trades through the remainder of the year as we approach that book value per share number that may be.

Deploying capital or by repurchased repurchasing shares maybe.

Our greatest return.

Opportunity from a capital allocation standpoint, if we start trading down near that tangible book value per share number.

Okay. Thank you for the color I agree the shares seem to be undervalued. Thank you.

Thank you I appreciate the questions.

Thank you Shannon we have a follow up question from Min Cho with B Riley Your line is open.

Great. Thank you for the follow up real quick.

I noticed that the ASP per home section was up in the fourth quarter during the third quarter and just wanted to know if this is a function of mix or if you could explain.

Explain that difference and just any thoughts on ASP going forward I'm, assuming for 2023 kind.

Kind of flat to down, but any details would be great.

Sure.

We've.

We've had seven price or I'm, sorry, I think 17 price increases.

Through Covid and but we have not.

Raised prices since.

Midyear 2022.

I think that that's a function of the.

Price increases being fully implemented.

Certainly we'd like to hold prices there is others.

Other manufacturers that we are seeing that a decrease prices and so look we'd love to continue at this level, but we'll see ultimately what happens over the next couple of quarters from a demand standpoint.

Alright, and then just also.

In terms of your automation opportunities can you talk to how much of your plant is currently automated if any and what your opportunities are if this is something that you are going to focus on going forward.

Sure, it's something that we talk about.

Regularly and I know if you look overseas.

Where.

There is I would say.

Expanded.

Uh huh.

Code.

We manufacture to a very strict code there is.

Oversee operations in countries, where they have a I'd say more broad code and they are highly automated or our product is.

It's very manual right now and Theres really not much automation and part of that is we don't have plants that are dedicated to building the same product.

Over and over and over again will build.

We will stack production with with.

With orders as as they come in.

And so I think there probably are some automation opportunities.

There is also I think opportunities too.

Get down into.

Regions that have.

A cheaper.

Labor rates.

In Q.

I thought the solitaire deal with Kafka is pretty interesting, where that's the only HUD code manufacturer in Mexico, That's certainly something that we had our eye on.

But I would see us going in that direction before we build a really state of the art like highly.

Automated manufacturing plant.

Understood great. Thank you.

Thank you.

Thank you and our next question coming from the line of Brian Glenn with <unk> Partners. Your line is open.

Hey, welcome Max.

Thank you Duncan, Yeah, Hey, guys nice job Ron.

Yes, it's great to see you guys working hard and getting some results.

I had a quick question about.

In the K there was a contingent repurchase agreement noted.

It looks like that number.

It has gone up from 100000 and $4 million and $8 million.

None of those immaterial bill of material.

Is that it.

It looks like is that strategic on your side to try to get more floor spaces. I know it's related to floorplan financing by a third party or is that just the way the market's gone where you have to put that agreement in place.

Yes, so the way that agreement works is.

I'd say, we have a we have an independent dealer that we sell homes to that.

It uses say 'twenty one for their.

Their floor planning.

Since we are the manufacturer will have an agreement.

With.

Say 'twenty one.

Two.

Repurchase homes in certain certain circumstances.

I need to look at.

The movement in that as well I can follow up but I think a big component of it is.

Two components of it one dealers do have a lot of inventory right now and it's not moving as quickly as I think they would like and the second is.

Home prices are up pretty significantly and so both of those are driving that number now why it went from a few hundred thousand to <unk>.

Several several million I can I can follow up with you on it.

It may be that you know.

We have seen we haven't seen other companies that finance.

Get really aggressive on terms.

And.

Since we hold everything on our balance sheet.

We're pretty conservative about what we will finance and what we won't finance and so I really that may be let's say the third.

The third reason so increased home prices more inventory on dealer lots and then just other finance companies being more conservative so they're getting a larger piece of the business on the consignment side.

Sure. Okay. That's helpful.

I would suspect is actually benefit you guys in larger operators more so than smaller ones because it gives you a chance just.

To use your balance sheet to handle that.

Contingency.

That's right.

Yeah.

And then my second question I know someone asked this jumped into it a little bit if we so without talking about specific competitors, but if we grab.

Some of your peers, which are publicly traded so I know, it's only a slice of the market.

And if you just do I mean, you can do the math anyway, you want but if you jump into just theyre manufactured housing try to come up with a cost of goods sold per home sure that includes depreciation maybe for them. It includes depreciation on underutilized or.

Underutilized facilities or facilities, not running at full capacity, but regardless the numbers big.

It's a substantial number in terms of what you guys can produce home four there was also an assumption in there about double versus single they disclosed that breakdown or not but either any way you slice it it's a big number.

So that gap is really just.

You guys in sourcing and being more vertically integrated.

I think probably a little bit with productivity being slightly dialed down still a high quality product.

But can you elaborate on that.

Yeah, I'll try to give you some additional thoughts there.

We do we do pride ourselves on being vertically integrated and trying to buy materials and.

Source materials from overseas and.

Build our own components I, certainly think that's an advantage.

Other advantages like we've got two founders that probably have more invested at least on the manufacturing side of this industry than anybody else in the country and they've both been in it for over 40 years. So.

A lot of thought and time and effort has gone into.

How do you build a great floor plan and a nice house, that's going to last.

Efficiently and so I think we may do a better job.

Sure.

As far as like using the right materials in the right in the right places, but I think the biggest component.

You hit and this is something that I want to make clear on this call is I don't have to feed 30 or 40 plants.

I've got I've got three plants, and we know that they are profitable even at lower production levels.

And historically a lot of these plants with the right labor.

<unk> done more significantly more in production than what we're currently doing wed love to we'd love to ramp that up and I think there is additional margin there, but it's really hard in todays labor environment and as the market slows and people idle idle plants and.

Don't have orders and companies.

Smaller businesses shut down.

You really you can't get small fast enough.

And I think that some of the larger competitors could could really struggle, there where you've got.

<unk> 40 plants and there is more fixed cost than people realize and in.

In a tight labor environment.

You're you're moving pretty slow to get rid of your core team because it may be next to impossible to hire all those people back.

I think that just having a large manufacturing footprint it.

It could be pretty difficult in a down cycle.

Okay. Thanks, that's helpful.

Great work and again welcome back and Great work to you and Max and Ron Clayton County.

We really appreciate it.

Thank you and I'm showing no further questions at this time I would now like to turn the conference over to Mr. Duncan for any closing remarks.

Perfect. Thank.

Thank you just two final comments, so first I want to thank everybody who joined today's call. We really appreciate your interest in legacy and feel free to reach out with any follow up questions. We've got some contact information in the press release and in second and most importantly.

I want to thank the legacy team, we've got 870 plus team members at our company.

And.

All of them contributed to the results that we put out today.

In a.

A day early after filing our last 10-K five months late so I want to thank everybody for their hard work everyone contributed here and.

That's all so operator this concludes our call.

Yeah.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Yeah.

The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.

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Yes.

Okay.

Yeah.

Yes.

Okay.

Yes.

Yeah.

Yes.

Thanks.

Yes.

Okay.

Sure.

Okay.

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Good day, ladies and gentlemen, thank you for standing by welcome to the legacy Housing Corporation fourth quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you will need to pause.

One one on your telephone you will then hear an automatic message advising Yohanan Suisse. Please note that today's conference is being recorded.

I'll now hand, the conference over to your Speaker host, Mr. Duncan Davies, President and Chief Executive Officer. Please go ahead Sir.

Good morning, everyone. This is Duncan base legacies, President and CEO , Thanks for joining our call today Matt.

Max Afric, Legras legacies, New General Counsel, who will read the safe Harbor disclosure before getting started Max thanks.

Thanks, Duncan before we begin may I remind our listeners that management's prepared remarks today will contain forward looking statements, which are subject to risks and uncertainties and management may make additional forward looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward looking statements that is contained in the private Securities Litigation Reform Act.

995 actual results may differ from management's current expectations and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report filed with the Securities and Exchange Commission.

In addition, any projections as to the Companys future performance represent managements estimates as of today's call legacy housing assumes no obligation to update these projections in the future unless otherwise required by applicable law.

Thanks, Max we're happy to have you on the team.

I'll run through our prepared remarks on legacy 2022 financial performance and provide.

Additional corporate updates we will then open the call for Q&A.

2022 was a record year for legacy housing.

Net revenue increased to $257 million in 2022, representing a 31% improvement over 2021.

The increase resulted from several price increases implemented from 2021 to 2020 to the.

The conversion of certain independent dealer consignment arrangements to financing arrangements.

<unk> offset by a decrease in shipments from our Eton Georgia facility.

As we discussed on the third quarter call.

We delayed shipments and slowed production to improve the quality and consistency of homes manufactured at our plant in <unk> in Georgia <unk>.

During the fourth quarter, we right size the workforce brought in a third party to retrain the team and certain manufacturing stations.

And significantly improved quality.

Production is still below historical levels, but we are making progress without sacrificing quality.

Interest revenue from the company's retail and commercial loan portfolios was $28 6 million for 2022 up 5% from 2021.

The increase resulted from higher retail loan balances.

Offset by lower commercial or NH <unk> balances.

The commercial and retail loan portfolios continue to perform well.

Income from operations for 2022 was $78 million, an increase of 32, 4% from 2021.

This increase was primarily driven by price increases the conversion of independent dealers from consignment to financing arrangements.

And an increase in other revenue.

<unk> offset by lower volume from Georgia, higher material and labor costs and higher SG&A.

We continue to hold pricing and reduce our raw material inventory. We are also looking at ways to reduce SG&A up this year due to salaries and incentive compensation warranty costs and professional fees.

Net income of $67 8 million for 2022 was a 35, 9% increase over 2021.

Basic earnings per share grew to $2 78, and 2022, an increase of 35% from 2021.

Legacy delivered a 19, 6% return on equity over the last 12 months.

For this calculation I'm using the average 2022 shareholders equity value.

At the end of 2022 legacy book value per basic share outstanding was 15.

69 <unk>.

An increase of 22, 7% from 2021.

We ended the year in a cash neutral position with.

With $2 8 million in cash and $22 $5 million drawn on our credit line.

During the fourth quarter, we put $8 $4 million of excess cash to work in treasuries, yielding approximately four 7%.

Our backlog is healthy across all manufacturing facilities.

We have a small manufacturing footprint and continue to run near capacity.

As the market slows, we anticipate having orders to fill our three plants.

Yeah.

I'm really excited for the next 18 to 24 months at legacy.

We've moved past the financial reporting issues and the foundation is stable.

Looking at the 2022 balance sheet, we have essentially no debt and over $330 million of principal outstanding across our loan portfolios.

These loan portfolios generate a tremendous amount of predictable cash flow that we can reinvest at high rates of return to grow our book value.

As the economy slows, we're seeing more and more opportunities to deploy capital.

We are constantly evaluating these opportunities and we'll remain disciplined in our approach.

Overall, we're focused on long term capital appreciation.

And think that over the next <unk>.

Six to 18 months is a pretty opportunistic time to put money to work.

Operator. This concludes our prepared remarks, please begin the Q&A.

Thank you and ladies and gentlemen to ask a question you will need to press star one on your telephone and we're planning to be announced to withdraw your question Crestar. One again, please standby, while we compile the Q&A roster.

And our first question coming from the line of.

Min Cho with B Riley your line is open.

Great Hi, John Ken Congratulations on a really strong quarter here and the strong yen.

Hey, good morning, and thank them very much.

Sure a couple of questions regarding your Georgia facility improvement it sounds like the shipments has definitely improved in the fourth quarter can you talk a little about what the utilization rate as you exited the year and can you remind us what the historical kind of annual revenue is from that facility.

Yes, sure a couple of thoughts.

First as far as where we are with with production.

That plant historically has produced say five to six homes a day.

We're still below where we'd like to be but we're very cautious around around ramping up production until we're 100% positive that we're not going to have any quality issues going forward. So right. Now we are building three to four at that plant. So it is not significantly below the long term average, but it has.

Been a work in progress to get up to the historical production level.

We don't publish.

Revenue by manufacturing facility, but you could take.

Production volume and just kind of use in average.

Average home price there.

Okay definitely do that.

<unk>.

Also it looks like the number of homes sanctions.

That were produced and shipped were either on a record or near record highs for the fourth quarter and for the full year. I was wondering if you could talk a little bit about that with respect to kind of labor labor availability.

And given the current labor situation you expect.

That number to increase.

Through 2023.

Yes.

Labor continues to be a problem for us.

And I think a lot of other companies in the U S manufacturing space that said, it's not as tight as it was.

We used just a.

Very simple barometer the labor market is when we walk into our Fort worth plant in the morning, or there are people who are waiting in the lobby for jobs and I think through Covid, we really we didn't have anybody in the lobby and we're starting to see people who are.

Two are ready to work.

So labor does continue to be our constraint.

From a manufacturing standpoint.

But I think it is I think it is loosening up and we'd like to continue to push production.

And all of these plants.

But that really is the constraint.

Okay and then my final question has to do with your mobile home parks, just any update on the development in Texas I know you are pretty close to that kind of starting construction on the.

The <unk> units.

The updates there yes.

The developments continue to move forward.

Frankly, they're slower than we would like we've just been <unk>.

<unk> been tied up in bogged down with with so much work.

On the administrative front.

That said we're getting toward.

A point, where at least for phase one we can start.

We can start to think about.

Getting homes into that first phase, but we're still we're months out there and.

That's the first one that will have come online, but we've got several others behind it. So it's unfortunately slower than we would like.

I think a lot of the other.

Industry peers will talk about some of it just regulatory hoops that you have to jump through to actually get one of these turnkey.

And it's it's significant so making progress slower, but I think now that we're through.

Some of the.

Financial reporting issues, we're really we're going to make a push there.

Alright, it's understandable great. Good luck to you in 2023.

Thank you very much.

Thank you and our next question coming from the line of Mark Smith with Lake Street Capital. Your line is now open.

Hi, guys.

First question for me just wanted to look at the finance business, just a little bit.

And correct me if I'm wrong.

Looks like you might not be keeping up with kind of the rising rate environment can you talk about if you guys are using the finance business really as a lever to kind of drive product sales.

Sure Mark.

The nice thing about our finance business is it.

Rose off so much cash that we're not borrowing to land.

So if we were we had.

Warehouse facility and we were borrowing in the rate on that went up pretty dramatically we would be in a much different situation than we are today.

So our strategy over the last year or so has been.

To keep our.

Our rates down.

And to keep our prices up and certainly the financing programs and legacy.

Helped drive sales for the business.

Okay.

Perfect and then just looking at production looked really solid.

Some unit sales this quarter can you just talk about kind of where the production was versus kind of inventory you have a little bit more at the end of Q3.

So just kind of wane whats your way, but move through from an inventory standpoint versus kind of production here during Q4.

Yes, I mean.

We had talked about I think on the last call, especially in Georgia, We had an issue where we had a lot of homes. So we're stuck in the yard and we werent able to ship so during the fourth quarter.

We were able to work through a lot of those.

And that's certainly that's certainly helped us but we are we are constrained.

From a manufacturing standpoint that said I think heading into a slowdown I'd much rather have three plants and I'm trying to feed and then 40. So I think overall, we're pretty well positioned going forward.

Okay, and that's kind of my next question was just.

How you feel about <unk>.

Manufacturing today do you have.

Labor materials and things that you ought to continue as we look at Q1.

And into 'twenty, three to be able to kind of produce at the levels that you'd like.

Yes, I think from.

We'd always like it.

Abundance of skilled labor, but I think what we have the teams that we have now are doing a good job.

From.

A material standpoint.

The the supply chains have really loosened up.

And are one of the challenges that we've been working through is you went through two years, where youre purchasing department did everything that they possibly could to get materials and now that our materials are abundantly available on prices are coming.

Down.

Working to try to get the biggest discounts that we can but we're not having.

We're not having any of the issues that we had during COVID-19 or with appliances and other things not being readily available.

Yes.

Okay.

The last question for me kind of Big picture.

You guys gave some great data in your 10-K on kind of the industry and affordable housing, but any other insights you can give on.

Kind of what Youre seeing from a demand perspective.

Especially with kind of a squeeze consumer out here or are you continuing to see crude demand for affordable housing.

Mark It's a really interesting time right now right you've got stick.

Stick built home prices near all time highs.

Rates, obviously moved up very quickly.

And underwriting standards have tightened.

So I mean, if you look at some of the stats around.

Average stick built home price across the country.

It's a pretty big number.

And when you think about our product right, it's significantly less expensive.

I think the.

From a demand standpoint, we have two channels of our business.

We either sell.

Through to a retail customer through independent dealers or through our company owned dealerships.

Or are we sell to.

Manufactured housing community owners.

There I would say on the dealer side.

Dealers do have a lot of inventory right now.

And the demand is slower from the dealer channel.

I think since like over the last probably three to six months.

Traffic at those dealerships has picked up.

But the conversions to home sales are not as high as we'd like to see them.

On the community side.

Theres just a lot of people there.

There is a lot of capital that came into the space.

And so we continue to see pretty good demand.

From a lot of our large historical customers that are either developing.

New communities or doing some infill or expansion.

But overall.

Overall I think demand is is certainly slowing.

That said, we feel we feel pretty good with three plants about being able to.

To have the orders to keep these things.

Going say similar production capacity.

Excellent. Thank you.

Sure. Thanks Mark.

Thank you and as a reminder to ask a question. Please press star one one and our next question coming from the line of Tim.

More from Ian Houghton Group your line is open.

Thanks, and congratulations on the very strong sales quarter.

December and for the year.

Very impressive margin expansion I know the team is working and putting in a lot of hours I'm talking I was just wondering.

You briefly mentioned in the backlog what is the current backlog you think in terms of visibility on.

Monthly sales and something like five months going out maybe.

You know, Tim we don't we don't publish a backlog.

We have we do have several months of backlog I think one of the one of the challenges going forward is.

Having customers actually accept their orders.

And so even though you've got backlog, we're pushing people who've ordered homes to get them scheduled in and take the homes when they come offline.

But again.

Small manufacturing footprint, even if things slow down I think we will be able to.

To to continue to cut deals.

We are selling.

<unk> thousand 30, or 100 200 homes at a time and.

And keep these.

Facilities close to capacity.

That's helpful to hear.

How should we think maybe.

The gross margin possibility for this year I saw that it.

It looks like the fourth quarter gross margin was 40%. So we can kind of go off of that just kind of thinking about modeling going forward.

Mrs have held up pretty well.

I'm, just trying to get a sense of maybe what youre thinking perm utilization and the margin profile for the year.

No.

It's tough to say.

I think there's a lot of dynamics that are in play right now.

We have been able to hold prices firm and we have I think started to benefit from material prices coming down.

That said, if if demand really does slow down.

We'll have to think hard about hard about pricing, but certainly we're trying to buy materials for as cheap as we possibly can in and we're trying to to to hold pricing firm. So I think I'll have a better view kind of by end of end of next quarter when we talk.

Without that but I'd say for now its about the same.

Okay. Good that's.

That's helpful to hear.

You mentioned, which I think we're all aware of the independent dealer channels had some.

Destocking going on and we've seen the walk in traffic.

Paul I guess the last few months just in general for the industry.

How is the how is the walk in traffic holding up at your company owned retail locations.

Are you guys doing anything to maybe create more digital leaves or digital generations to kind of get more consumers in your stores.

Yes, a couple a couple of thoughts on that I mean, Ken Eni.

And a lot of time talking about foot traffic and conversions at the at the retail stores.

We have seen an uptick in.

In foot traffic.

Really the.

The issue is on the converting that foot traffic to sales and I don't think its something.

It's necessarily unique to our retail stores as it is.

Across the industry, where.

Given the price of our product people are interested in it.

But.

They I think a lot of people are hesitant to pull the trigger right now given so much uncertainty in the overall.

Economy. So foot traffic has picked up we're working on things to convert more of the traffic to sales.

Historically, we have not had a big.

Online presence we have.

Certainly on the heritage side ramp that up with.

And additional hires who's working on marketing for.

Our heritage, but I think again now that we're through a lot of the financial reporting issues.

I'm looking forward to it in addition to growth really focus in on.

How we can improve the business and from a marketing standpoint, we think that there is a pretty good opportunity. There. It's just having the bandwidth to actually work with our team get it done.

That's helpful color I appreciate that you have another question I had was I was just wondering youre doing a good job on getting the quality assurance back back on track with the Georgia plant.

Have you and the board thought about maybe heading adding ahead of operations. So maybe visit all three plants every couple of weeks.

So the efficiencies and quality control.

Not at this time.

We do have we have really good general managers and all of these plants.

And as you know Curt and Kenny are all heavily involved in.

This thing moves pretty quickly we're not scheduling a lot of meetings. It's a lot of direct phone calls and we can we can make changes quickly.

We do operate.

Very highly <unk>.

Our regulated industry and so there is a there is a code that we strictly build too and it's just given some of the labor challenges in turnover, sometimes you have.

The issues, there and like we had in Georgia, but I feel good about.

The team is now we've had a lot of people step up and I think if we.

If we can continue to grow and especially expand the manufacturing footprint than maybe at that time.

A higher like that or an internal person moving into that role makes sense, but I think for the three plants right now we feel pretty good about the management team that we have in place.

That makes sense I I remember and I enjoyed meeting Marco Fort worth plant in August .

Very impressed by him.

Just maybe switching gears talking now that you've been there are nine months.

Up to speed on the accounting enhancements in the Georgia facility coming along with these quality insurance.

Are you now getting any more time to look for acquisition targets.

We're getting there.

One of one of our founders Kenny Shipley always says that the best deals come to you.

And I think what's been interesting over the last.

Really over the last month, maybe month and a half is.

As other manufacturers slowed down.

And financing.

In certain areas of our business.

It becomes less attainable I mean, we are really seeing a lot more opportunities than we have at years and years and.

The key is.

When we're allocating capital we're very return focused we're focused on the bottom line and growing book value and continuing to reinvest our money at attractive rates of return and if you look at the returns.

The loan portfolio, there are pretty significant and so.

As we look at opportunities.

There is a high bar there and so we've got to make sure that.

We're meeting and exceeding those return.

Great. That's really helpful color and clarification on the capital allocation strategy and that's it for my questions. Thanks, a lot.

Yes, Thanks, Tim.

Thank you.

And our next question coming from the line of.

Deforest Hinman your line is now open.

Hey, Thanks for taking the questions. A couple of things can you just give us a update on our strategy for the <unk>.

The owned.

Housing.

Manufactured housing parks because.

In the.

10-K, we can see I think two of the larger parks the acreage owned actually decreased so I don't know if thats.

We're developing.

The pads and we're selling your pads or we're developing pads putting units on it and then selling them I believe in the past there was some discussion about.

Operating needs.

Parks and generating a rental stream and it's even laid out where.

We can see the number the dollar amount of leased homes has actually declined.

<unk> declined from some previous level. So can you just.

Give us an update on what exactly is the strategy with the park development.

Yes happy to.

Yeah.

Couple if there are few questions in there I'll try to I'll try to take them in and if I Miss something just remind me, but first on the on the acreage change I don't know I'll have to follow up with you on why the acreage would change yet we haven't.

Purchased any additional land since last quarter and we also haven't sold any additional land or any land since last quarter. So I'll have to follow up with you on why the acreage changed.

Overall.

We we do think that that.

That potentially owning and operating these.

Communities could be a good long term.

Or could provide long term consistent cash flows.

That said the development the development of them has.

He has taken longer than expected and I mentioned earlier that the regulatory hurdles that you have to jump through and the time that these regulators take to make decisions is it's really it's mind boggling.

And for the past couple of years, we've had enough orders were to external customers.

Where we haven't needed to even if the communities we're ready we haven't needed to.

To put homes on them, because we were at capacity and selling to other customers.

I think ultimately.

The community is provide us with a lot of.

Optionality.

And there is there is a lot of value to unlock there and so one thing thats kind of top of our agenda.

As we move into.

The middle part of the year is.

We've got we've got the properties are at various stages of development.

Theres some that it probably makes sense for us to push through and finish.

There is others and we've been approached by a lot of the larger.

Community developers that may make sense to partner on and potentially be able to sell homes into and still retain some type of.

Cash flow and then Theres some that.

That we haven't made much progress on developing that there may be another buyer.

That's more suitable.

To combine this with additional land.

And to build bigger communities. So I think overall, we're still we're still making progress but.

The strategy will dive in into now on exactly what we want to do with.

With each location.

But we're in these things for the right.

We bought the land right, we've been very frugal with how we've.

Allocated capital to these projects.

And there is value to unlock here, it's just figuring out what the right path forward is.

Okay. That's helpful. I would just clarify my question one the acreage was I guess from 10-K. This year. The 10-K last year Bastrop County, Texas acreage is down.

32 acres in <unk> County was down.

Like 31, so I don't know if that was.

We completed development, we place units someone approached us and we sold is that what happened.

No I need to check on it I really I don't know why it would have changed.

Okay.

The one while we really have made.

The most progress on we've got phase, one coming but I don't.

I don't know why it would have changed.

Okay, and then you mentioned some of the large community of developers you have.

Mentioned that.

You are running at pretty high levels of capacity, but we might see some moderation.

Given our.

Our position and our outlook is there any sense.

And approaching some of those larger developers.

And saying look we can allocate a certain percentage of our.

Monthly weekly quarterly production to your.

To you as a single customer and then they can have a more.

A consistent supply of units because a lot of things I've read makes it sound like there is.

Lots of demand on the park side.

They are coming to market with our rental rate in many areas.

Very attractively priced versus the competition.

Sure.

We.

We think we build a.

A great Park model home.

We buy materials and important materials and manufacture our own components.

That allows us to build these things.

For.

A great price and sell them at a great price, even with with a little bit of margin there.

<unk> had several conversations with some of our larger customers.

About taking homes in quantity.

Under say some type of a supply agreement, where we allocate a certain amount of production a month.

Two.

To them.

At an agreed upon.

Price and so yes, all those conversations are happening we've got a great.

Park sales team.

And there are certainly customers that or they're certainly developers that are focused on our core markets that we have not historically sold too.

And I have been involved in a lot of those meetings and certainly we're trying to advance those but we can build the same home.

In large runs I mean that is that's certainly more efficient for us then.

Throwing a bunch of double wide 10.

Aligned and it slows.

Slows us down just because they're more intricate.

Yes that is that is top focus for a lot of people at the company.

Okay. Thank you and then my last question is just on any update on how we're looking at the share repurchase authorization from.

Capital allocation perspective, it looks like there is a lot of opportunities that you've touched on I believe it's a $10 million.

Authorization.

Is that more.

Opportunistic dry powder.

And to some extent, maybe we were locked out actually.

Doing anything in the market as we've put.

We're working on getting some of the.

Administrative things.

Dress that you touched on.

Just give us some color there.

Or would that be something that could be utilized in 2023. Thank you.

Sure Yes.

It's certainly not just optics I mean that was something that.

When our last share repurchase program expired I.

I was pretty adamant about getting back in place we do trade.

We do trade at I think a pretty.

Cheap valuation right now.

And the way that I personally think about that share repurchase program.

Every one of these calls we gave.

We gave our tangible book value per share.

And we think our book value is extremely conservative.

The way that this business was built it was started with $7 million and all the profits have been reinvested every single year for 18 years at 10% to 20% return.

And so we do have real assets that are unencumbered.

And I think.

If depending on how the.

The stock market trades through the remainder of the year as we approach that book value per share number that may be.

Deploying capital or buy repurchase or repurchasing shares may be.

Our greatest return.

Opportunity from a capital allocation standpoint, if we start trading down near that tangible book value per share number.

Okay. Thank you for the color I agree the shares seem to be undervalued.

Thank you I appreciate the questions.

Thank you and I'm sure we have a follow up question from Min Cho with B Riley Your line is open.

Great. Thank you for the follow up real quick.

I noticed that the ASP per home section was up in the fourth quarter during the third quarter and just wanted to know if this is a function of mix or if you could explain.

Explain that difference and just any thoughts on ASP going forward I'm assuming for 2023.

Kind of flat to down, but any details would be great.

Sure.

<unk>.

We've had seven price or I'm, sorry, I think 17 price increases.

Through Covid and but we have not.

Raised prices since.

Midyear 2022.

I think that that's a function of.

The price increases being fully implemented.

Certainly we'd like to hold prices there's others.

Alright, and then just also.

Sure, it's something that we talk about.

Regularly and I know if you look overseas.

Where.

There is I would say.

Expanded.

Code.

We manufacture to a very strict code there is.

Oversee operations in countries, where they have a I'd say more broad code.

They are highly automated or our product is.

Is very manual right now and Theres really not much automation and part of that is we don't have plants that are dedicated to building the same product.

Over and over and over again will build.

We will stack production with with.

With orders as as they come in.

And so I think there probably are some automation opportunities.

Also I think opportunities to get.

Get down into.

Regions that have.

A cheaper.

Labor rates.

In Q.

I thought the.

Solitaire deal with Kafka is pretty interesting.

The only HUD code manufacturer in Mexico.

Certainly something that we had our eye on.

But I would see us going in that direction.

Four we build a really state of the art like <unk>.

<unk>.

Automated manufacturing plant.

Yes.

Understood great. Thank you.

Thank you.

Thank you and our next question coming from the line of Brian Glenn with <unk> Partners. Your line is open.

Hey, welcome Max.

Thank you Duncan yeah.

Guys nice job Ron.

Yes, it's great to see you guys working hard and getting some results.

I had a quick question about <unk>.

In the K there was a contingent repurchase agreement noted and it looks like that number.

It has gone up from like 100000, and $4 million and $8 million.

No that is a material bill of material.

Is that.

It looks like is that strategic on your side to try to get more floor spaces. I know it's related to floor plan financing by a third party or is that just the way the market's gone where you have to put that agreement in place.

Yes, so the way that agreement works is.

I'd say, we have a we have an independent dealer that we sell homes to that.

Users say 'twenty one for there.

Their floor planning.

Since we are the manufacturer will have an agreement.

With.

Say 'twenty one.

Two.

Repurchase homes in certain certain circumstances.

I need to look at.

The movement in that as well I can follow up but I think a big component of it is.

Two components of it one dealers do have a lot of inventory right now and it's not moving as quickly as I think they would like and the second is.

Home prices are up pretty significantly and so both of those are driving that number now why it went from a few hundred dollars into <unk>.

Several several million I can I can follow up with you on it.

It may be that you know.

We have seen we have seen other companies that finance.

Get really aggressive on terms.

And.

Since we hold everything on our balance sheet.

We're pretty conservative about what we will finance and what we won't finance and so I really that maybe a third.

Sure. Okay. That's helpful.

I would suspect is actually benefit you guys in larger operators more so than smaller ones because it gives you a chance just.

To use your balance sheet to handle that.

Contingency.

That's right.

Yeah.

And then my second question I know someone asked this you jumped into it a little bit if we so without talking about specific competitors, but if we grab.

Some of your peers, which are publicly traded so I know, it's only a slice of the market.

Elisa or.

Underutilized facilities or facilities not running at full capacity, but regardless the number is big.

Substantial number in terms of what you guys can produce home four there was also an assumption in there about double versus single, if they disclosed that breakdown or not but either any way you slice it it's a big number.

So that gap is really just you guys in sourcing and being more vertically integrated.

I think probably a little bit less productivity being slightly dialed down still a high quality product.

But can you elaborate on that.

Yeah, I'll try to give you some additional thoughts there.

Do we do pride ourselves on being vertically integrated and trying to buy materials.

Source materials from overseas and <unk>.

Build our own components I, certainly think that's an advantage.

Other advantages look we've got two founders that probably have more invested at least on the manufacturing side of this industry than anybody else in the country and they've both been in it for over 40 years. So.

A lot of thought and time and effort has gone into.

How do you build a great floor plan and a nice house, that's going to last.

Efficiently and so I think we may do a better job.

As far as like using the right materials in the right in the right places, but I think the biggest component that you hit and this is something that I want to make clear on this call.

I don't have to feed 30 or 40 plants.

I've got I've got three plants.

And we know that they are profitable even at lower production levels.

And historically a lot of these plants with the right flavor.

And as the market slows and people idle idle plants and.

Don't have orders and companies are small.

While our businesses shut down.

Though you really you can't get small fast enough and I think that some of the larger competitors could could really struggle there where you've got.

40 plants and there is more fixed cost than people realize and in a.

Tight labor environment.

You're you're moving pretty slow to get rid of your core team because it may be next to impossible to hire all those people back. So I think that just having a large manufacturing footprint.

It'd be pretty difficult in a down cycle.

Okay. Thanks, that's helpful.

Work and again welcome back some great work to you went back and Ron Clayton County.

Thanks, I really appreciate it.

Thank you and I'm showing no further questions at this time I would now like to turn the conference over to Mr. Duncan for any closing remarks.

Perfect. Thank.

Thank you just two final comments, so first I want to thank everybody who joined today's call. We really appreciate your interest in legacy.

And feel free to reach out with any follow up questions. We've got some contact information in the press release and in second and most importantly, I want to thank the legacy team. We've got 870 plus team members at our company.

And.

All of them contributed to the results that we put out today.

In a.

A day early after filing our last 10-K five months late so I want to thank everybody for their hard work everyone contributed here and.

That's all so operator this concludes our call.

Okay.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Q4 2022 Legacy Housing Corp Earnings Call

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