Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Legacy Housing Corporation's second quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Duncan Bates, President and Chief Executive Officer. Please go ahead, sir. Good morning. This is Duncan Bates, Legacy's President and CEO. Thanks for joining our second quarter 2023 conference call. Max Africk, Legacy's General Counsel, will read the Safe Harbor disclosure before getting started. Max? 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 of 1995. 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 company's future performance represent management's 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. I will run through our prepared remarks, then open the call for Q&A. Product revenue decreased to $42.3 million, or 23.2% in the second quarter of 2023 compared to the second quarter of 2022. The decrease primarily resulted from a 14.6% decrease in products sold and a 10.1% decrease in net revenue per product as customer demand shifted toward the lower end of our product line. Also, we did not convert any independent dealer consignment arrangements to floor plan financing agreements during this quarter, as we did in the second quarter of 2022. According to Manufactured Housing Institute data, industry home shipments through May 2023 were down 29% year- to- date. However, housing affordability in the U.S. continues to deteriorate, and retail traffic in our industry is accelerating. One of the leading indicators that we track on the retail or dealer side of our business is loan applications. A few recent data points. Loan applications at Heritage Housing, our company-owned retail stores, hit a 12-month high in July 2023. Loan applications at Financial Services, our consumer lending arm, were up 17.6% in the second quarter of 2023 compared to the second quarter of 2022. Applications surged 60.8% in July 2023 compared to July of 2022. On the community or park side of our business, sales to existing customers remained stable. Like other manufacturers, we have battled delayed shipments due to setup-related issues. Our quote activity for new projects beginning late 2023 and early 2024 is strong. We rarely discuss Legacy's commercial product portfolio. Legacy has an extensive line of workforce housing solutions. Inquiries for our commercial products from customers in the energy, agricultural, film, and disaster relief industries are the highest I've seen since joining Legacy. Consumer and MHP loan interest income increased $8.5 million, or 13.2%, during the three months ended June 30th, 2023, as compared to the same period in 2022. This increase was driven by increased balances in the MHP and consumer loan portfolios. Our financing businesses generate predictable, recurring revenue, and we continue to invest in them. Between June 30th, 2023, and June 30th, 2022, our MHP note portfolio increased by $43.9 million, and our consumer loan portfolio increased by $15.1 million. This is net of principal payments and loan loss allowances. Also, this does not include floor plan financing or development loans. I frequently field questions from investors about loan performance. The accountants' figures are in the filing, but the way that I think about delinquent accounts is over 30 days with no payments. At June 30th, 2023, over 99.5% of MHP notes and 98.5% of consumer loans were current. We monitor these numbers closely and are confident in the strength of our loan portfolios. Other revenue primarily consists of dealer finance fees and commercial lease rents, which increased to $1.8 million, or 13.4%, in the second quarter of 2023 compared to the second quarter of 2022. Selling general and administrative expenses decreased 6.3% during the three months ended June 30th, 2023, as compared to the same period in 2022. This decrease was primarily due to the decrease in consulting and professional fees and a decrease in warranty costs. Net income decreased 13% to $15 million in the second quarter compared to the second quarter of 2022. Legacy delivered a 17.3% return on equity over the last 12 months. At the end of the second quarter of 2023, Legacy's book value per basic share outstanding was $16.94, an increase of 18.6% from the same period in 2022. We continue to hold pricing, reduce our raw material inventory, and reduce our SG&A. Legacy has not missed one production day at any manufacturing facility in 2023. Legacy's balance sheet is strong. We ended the quarter with $1.5 million in cash and $4.7 million drawn on our line of credit. On July 28, 2023, we closed a new revolving credit facility with Prosperity Bank. The facility is for $50 million, with a $25 million accordion feature. It is secured by our consumer loan portfolio. Our team has been focused this quarter on internal strategic projects. A few examples: We are updating and adding more modern features to our products. We are revamping our sales processes and hiring additional talented sales professionals. We made a big push on social media and digital advertising at Heritage Housing and are beginning to see results. We also believe there is significant value to unlock on the land development side of our business. We are committed to these projects and are hiring additional team members to prioritize and accelerate progress. In addition to internal projects, we are consistently evaluating inorganic growth opportunities. The new bank line gives us the flexibility to pursue these opportunities if they hit our return threshold. Operator, this concludes our prepared remarks. Please begin Q&A. Certainly. Ladies and gentlemen, to ask a question, you will need to press star one, one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question coming from the line of Alex Rygiel with B. Riley Securities. Your line is open. Hey, Alex. Good morning, Duncan. How are you? I'm good. How are you? Doing well. A A couple quick questions here. Do you have any sales remaining to be booked from transitioning from that consignment program? Yeah, we have about 120 or so, houses that are still in the old consignment program. What does the timeframe or timeline look like for converting those? You know, I think we'd like to do it by, by year-end. There's some. You know, these are kind of the, the final holdout of dealers, so it's taken a little bit of time to work through this. Then you brought up an interesting point as it relates to inquiries for commercial product being very, very high. Can you remind us, you know, when these commercial orders come in, I suspect they're kind of fairly large in size from time to time, so maybe talk about how big some of these could be? Yeah, you know, there's, there's two pieces. I mean, we've got some dealers in Texas, you know, that have relationships with, say, larger oil field services or E&P companies or agricultural businesses. They're, you know, they're selling lower volume, just, you know, two here, three there, four there. We are seeing, some inquiries from, from larger products, you know, that I would say are closer to, you know, sales that we would see on the, on the community or park side of our business. You know, they range from us selling a couple of these things, you know, to potentially selling hundreds of these things. We've got, you know, a lot of quotes out now. We're trying to reel people in, and, it'd be great if something hits. Lastly, where's the Georgia plant as it relates to production levels? Yeah. Is that an opportunity to utilize that facility for these commercial opportunities? We have built this product in Georgia. You know, I didn't comment on Georgia in our prepared remarks because, frankly, we feel great about, you know, where that plant spends, where it sits today. You know, we've made a tremendous amount of, or we've implemented a tremendous amount of changes there. We've got a new sales manager, new general manager. We've shifted people around. We've hired a lot of people. Right now, we're running three to four a day at Georgia. And, you know, our hope is to continue to ramp that up, as, you know, as, as depending on demand. Georgia's in a good spot, and, you know, now we've just got to get out and, and keep, keep selling. That's great. Thank you. Thanks, Alex. Thank you. Our next question, coming from the line of Mark Smith with Lake Street Capital. Your line is now open. Hey, Duncan. first off, can, can you just walk us through a little bit more in-depth, sales mix, both channel and kind of price points, kind of where things changed, where the headwinds are, maybe where emphasis is to, drive maybe better, sales in different channels? Yeah, sure. I'll try to, try to take that a couple pieces at a time. I mean, if you, you know, you look at the Q, the price or the revenue per product sold is, is down. You know, that contributes to the decline in sales, in addition to just lower volume. You know, I think what, what's happened is we've built a great park model home. We've got some large customers that continue to take a lot of these. You know, they're just. We're selling lower, you know, we're selling park model homes, and we're selling less optioned homes to dealers as they start to build inventory again. Okay. I think you said in your prepared remarks that as we look at kind of a standard consumer home, are you seeing more demand at those lower price points than you are the, the higher price points? Yeah, absolutely. I think, you know, this consumer, you know, with inflation has been, you know, has been hit pretty hard. And although chattel rates have not gone up as much as, you know, traditional mortgages, just with inflation and every other aspect of their lives, you know, they're, they're looking at a little bit lower, lower end or less optioned homes than they were 12 months ago. Okay. That leads to my next question. As, as we think about, you know, both loan, loan portfolios, consumer and MHP, you know, any, any thoughts around rates? It looks like it came up a little bit here in the quarter. You know, can, can you take more or, you know, Can you reach a, a breaking point where you just can't, you know, raise rates anymore? Yeah. You know, our strategy for the past, a little over 12 months, has been hold price firm and hold rates, you know, hold rates firm. That said, you know, there's some, there's some nuances on, on either side of the business. You know, on the, on the consumer loan portfolios, I mean, we've, we've held our base rates, the rates are subject, you know, to our underwriting process. You know, that, that really depends on the consumer's credit quality. On the, on the MHP side of the business, you know, our financing program has a, has a base rate, it flips to variable. You know, we've held the base rates consistent. Over the next, say, 24 months, you're going to see a lot of these flip to, to variable, and you've got community customers that, when that flip happens, will be, you know, inclined to, to refi their projects and pay us off. Okay. The last question from me, you know, you, you said that kind of the, the park and land development projects are, are, you know, something that you're focused on now. Any update on, on where these projects stand today? Any goalposts we should be looking for over the next couple quarters? Yeah, you know, we've had, we've had so much going on over the last 12 months, where I feel like, you know, we've, we finally got the foundation stable and, you know, we've had issues at the Georgia plant. We've. Obviously, the market's slowed down. I mean, we're, we are spending all of our time, you know, focused on the business. You know, as we move forward, we've, we've got to accelerate, you know, these Legacy projects. A big topic internally, was land development this quarter, and actually putting together a plan on, you know, for what, for what we're, we're going to do going forward. Right now, we're in the process of assembling a team. We're committed to these projects. They haven't, you know, they haven't stalled. I think, I think we just feel like they're not moving as quickly, as, as they need to. You know, we're primarily focused on, you know, the kind of the, I'd say, the crown jewel of this portfolio, which is Bastrop County. You know, we're making good progress now on phase one. You know, I'd, I'd hope. I think I need another, say, another month or two to put out, you know, some actual goalposts, but that certainly is the game plan. Okay. Thank you. Thanks, Mark. Thank you. Our next question coming from the line of Tim Moore with EF Hutton. Your line is open. Thanks. Duncan, a few of my prepared questions were already asked, but I actually have four remaining ones. Okay. You, you, you mentioned that Legacy, and it's pretty obvious, and a great attribute. You've held kind of the base interest rate pretty much the same on, like, you know, the steep 3% rise in single-family mortgage rates, you know, over the past year and a half or so. You know, you mentioned the, the green shoots in loan applications in July, and that was terrific. Sounds like walk-in traffic's better at the retail locations and up a lot. My question is, you know, I'm just trying to pinpoint the possible conversion of timing for how many months it might take from loan applications to convert to an order, you know, to, to ship lead time when you can actually book revenues. You know, is that something like three months? You know, in other words, you know, if there is an inflection point, and I'm not putting words in your mouth, for July, and maybe that's continuing in August, you know, does that convert something like October, November sales? Yeah. You know, I, I wish I had a crystal ball and, you know, could tell you exactly when that is happening. You know, the, the dealer channel, the dealer channel of our business has been, you know, pretty slow for a few quarters. You know, the, the consumer backed off. You had dealers that were, you know, had a lot of inventory and install, you know, their, their consignment or floor plan financing arrangements, or interest rates, you know, go up pretty significantly. What we're, what we're hearing from our customers now and what we're seeing, you know, at our own stores is, you know, there does seem to be a pickup in that channel. You have dealers that are selling homes, reordering homes. You've got a lot of foot traffic at the dealer level. Obviously, we're seeing it in the loan applications. I think it's gonna be, you know, a steady progression. Like, I don't think you just overnight, there's this, you know, huge boom on the dealer side of the business. It does feel like we're getting some momentum. Dealers are clearing out their inventory. They're starting to reorder. You know, we've seen we've seen a uptick in applications. We've also seen an uptick in the credit quality of those applications. Seems like there's, you know, there's consumers out there that maybe are dropping down into this category. Are able to put up larger down payments than we've seen historically. You know, we're monitoring it closely. We'll, you know, we hope it continues, and, and, we'll obviously, you know, we'll keep the market updated, quarterly as we see things. Great, Duncan. That's, that's really good color, and nice to see the credit quality increase on the applications. How are, you know, how's the demand and the interest levels from the park operators? I know that, you know, held up pretty good. How's that been doing in the last few months? Yeah, you know, it's, it's slower than we'd like. It seems like a lot of these guys are facing, you know, pretty serious delays on the setup side, and, and I don't know if it's you know, it doesn't seem like it's as much setup crews as like, you know, getting the utility operators to cooperate or the counties to cooperate with certificates of occupancy and things like that. You know, we, we tend to serve a, I think, a different, a little bit different customer base than our larger competitors. I mean, most of our customers on the park side are regional entrepreneurs. A lot of these guys sold, you know, portions of their portfolios when the prices really went crazy last year. You know, we've got some big customers that are deploying capital now. You know, they're ordering houses fairly consistently. You know, we are, like. And w e are making a sales push for, you know, for new customers, but it's a little bit slower than we'd like. You know, I think, just based on our quote activity, it feels like, you know, end of the year, early next year, you know, these, like, that channel will, you know, will gain traction like the dealer channel is now. That's helpful color, Duncan. Just have two more questions. Sure. You know, how, how are the labor constraints of the three plants compared to maybe last summer? You mentioned that you haven't missed one production day this year so far, which is phenomenal, and you're hiring more with the social media push. Do you think, you know, let's just theoretically, you know, I'll throw it out there, that maybe volumes start coming back pretty good, you know, in November, December, that you'll have enough labor in place and retained? Yeah, you know, geez, labor, labor's been a challenge for a while, you know, all the way, all the way back through COVID. I think, you know, for us and for the other manufacturers, it's, you know, the, the constraint is not how much space you have or how big your yard is, or how big your plant is. It really is a labor constraint. What I, I mentioned this, I think, on another call, but this is a very, a very simple parameter that we use to, you know, to think about the labor market is, at, at our Fort Worth plant, there's a, there's a waiting room on the front. If you talk to Kurt and Kenny, they'll tell you, you know, through COVID, they didn't have a single person show up, you know, looking for a job. We're consistently getting, you know, three, four, five people that come in and, you know, each day and apply. It, it does feel like the labor market's loosening up a little bit, and, and I feel much better about ramping up, you know, production now or, you know, over the next couple of quarters than I would, you know, during COVID. Great, that's helpful. It's funny you mention that, because I remember, recall seeing three people filling out applications in your Fort Worth lobby when I was there doing a tour last August. Exactly. Exactly, and if there's nobody out there, that's a problem. No, no, there was a line. That was a good barometer. That was made me feel better, although than, than Georgia happened. You know, just, just one last question. Given the $50 million availability that you mentioned and, you know, the possible accordion option feature, if, if you take that up, should we read into that at all, that maybe, you know, now that some of the operational pickups are well behind you, Georgia's firing on all cylinders, the plants are doing well operationally, that there could be an acquisition or a vertical integration target on the near-term horizons? You know, we're, we're looking hard. We've been working on it for a little while, you know. I don't care what size business you're operating, banks can be difficult to deal with now, and so it's actually, it's a $50 million line with a $25 million accordion feature, so we can take that up to $75 million. We've got some, we've got some firepower. The other thing that's interesting is it's, it's only secured by our consumer loan portfolio, and so we've got, you know, other, other assets out there unencumbered. We're, we're looking. I, I just, you know, we've been focused internally. There's still a lot of work to do internally. You know, but if the right opportunity comes up, you know, we're ready to go. I mean, we've been looking at all types of things. You know, I, I think we're not going to chase something that's expensive, or risky. You know, we're gonna, we're gonna stay patient, continue to invest in our own business at, you know, at high rates of return. If, if something comes up that we really like, you know, we, we're positioned to be aggressive on it. Great, that's very helpful, color. I always remember your ROI hurdle. I mean, you've done a great job reinvesting back in the business, and maybe you'll have some other external options. That's it for my questions. I hope that you, Kurt, Kenny, and the rest of the team have a wonderful summer. Ron. Yeah, thanks, Tim. Appreciate it. You too. Thank you. I'm not showing any further questions in the queue at this time. I'd now like to turn the call back over to you, Mr. Bates, for any closing remarks. Sure, a couple final remarks. I want to thank everybody, who joined today's earnings call. We appreciate your interest in Legacy Housing. Next, our annual fall show, which is Legacy's largest sales event, is October first through the third in Fort Worth, Texas. It's a great opportunity to see our new products and meet the team, a link to the RSVP is on our website. Operator, this concludes our call. Ladies and gentlemen, that does end our conference call today. Thank you for your participation. You may now disconnect.