Ladies and gentlemen, thank you for standing by, and welcome to the Legacy Housing Corporation Fourth Quarter 2020 Earnings Call. [Operator Instructions] Please be advised, today's conference may be recorded. I'd now like to hand the conference over to your host today, Mr. Curt Hodgson. Go ahead.

Thank you for joining the call today. 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 take 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. Now let me turn to a discussion of our fourth quarter performance and provide additional corporate updates. I will then turn the call over to our Chief Financial Officer, Tom Kerkaert, to discuss the financials in more detail. We continued a track record of delivering strong results this quarter. Net revenue increased to $48.7 million in the fourth quarter, representing a 12.5% improvement over the fourth quarter of last year. We experienced solid improvement in our income from operations for the quarter as well. Income from operations increased to $13.1 million in the fourth quarter, a 46.8% increase over last year. Legacy has been able to maintain our industry-leading margins across the board in 2020 through a combination of system [indiscernible] price increases and a focus on controlling and reducing costs, both on the production side and the SG&A side. The increase in net revenue and good margins and the decrease in SG&A costs have directly impacted our bottom line. Net income of $10.5 million for the quarter was an impressive 52.9% increase over the fourth quarter from the prior year. The benefit to our shareholders has tracked with our financial performance. Earnings per share grew to $0.43 per share in the fourth quarter, a 54% increase over the fourth quarter of the prior year. Legacy delivered an increase in book value per share of 17.2% year-over-year. Looking to this year, 2021, overall market demand, orders, backlog and loan performance -- or loan portfolio performance remain strong. Production has now rebounded back to pre-COVID levels. We saw about a 20% increase in factory output in the fourth quarter compared to the third quarter. Despite the impact of February's dramatic weather event in Texas and the rest of the South, we're back on track and looking for opportunities to increase production at all 3 of our manufacturing facilities. At this point, I'll turn the call over to Tom.

Thank you, Curt. Following up on Curt's comments regarding revenue, total revenue for 2020 was $176.7 million, a $7.8 million increase over 2019. Product sales accounted for 62% of the revenue increase. Looking back on 2020, we are proud of how our company responded to the wide range of challenges we faced and the obstacles we overcame. Overall revenue from commercial sales to mobile home parks increased by 9% compared to 2019. We saw strong demand during the year, and we're able to translate that into a success story. We expect for that story to continue into 2021. Interest revenue from the company's retail and commercial loan portfolios expanded to $25.4 million for 2020, which represents a 14.3% increase over 2019. Interest revenue from the mobile home park portfolio grew nearly 50% year-over-year. In line with the growth in interest revenue, a key development for 2020 was the growth in our loan portfolios. The commercial loan portfolio increased by 47.6% to $136.3 million, while the retail loan portfolio increased by 6.5% to $112 million net of allowances. In combination, this amounted to a 25.8% increase in the 2020 loan book and is a conduit for the growing future interest revenue. As Curt previously stated, we had significant improvement in income from operations during 2020. We grew our income from operations by 25.8% to $47.6 million. Without detriment to our top line, we were able to reduce SG&A expenses by 25.2% compared to 2019. Reductions in payroll-related costs, service and warranty costs and portfolio loan losses accounted for the lion's share of the expense reduction. Finally, the company improved on its asset utilization with a return on assets of 12.2% in 2020 compared to 11.1% in 2019. Our return on equity grew to 15.8% compared to 14% in the prior year. Also of note is that our inventory turnover improved by 22% in 2020. With that, I'll turn it back over to Curt for final comments and questions.

Thank you, Tom. Now we'll just ask for any questions if there are any.

[Operator Instructions] Our first question comes from the line of Ryan Meyers with Lake Street Capital.

First one for me here, it looks like -- good to see production come back to pre-COVID levels. Just kind of wondering what you guys are thinking about increasing production here in 2021 and kind of what you're seeing so far from a demand environment or how you guys are kind of sort of thinking about next year -- not next year, this year?

Sure, Ryan. I think that's the question that everybody is asking. Demand is strong, measured by backlog. Because the industry is challenged with production, that demand is unsatisfied. So we're not really sure if production went up, say, by 10% or 20%. Would that be enough to decrease the backlog or not? We're all striving to do that. There's 134 operating plants in the United States, and we're all trying to get production up. As for us, we have additional capacity at 2 of our plans from a physical point of view. It's basically been a manpower issue as we fight COVID and -- let's say, 7 people in the electrical department are out with COVID, then that kind of doesn't work very well in an assembly line format. So like a lot of industries, not just the mobile home business, but everything from lumber to steel to everything, it's been challenging on the production side, which has had the effect of increasing backlog, giving us all a feeling that demand is going through the roof. While I'm a little bit more pessimistic that demand is all that great. It's not like we're adding more households in the United States. The birth rate and the immigration rate are not greater than they were 5 years ago, say. So I'm a little skeptical that the backlogs in all these industries is more caused by supply problems than it is a true demand problem. That said, our backlog has never been better. And this time of the year, March, we're usually what we call up against the [indiscernible]. So -- I mean, we're out to August, September, October. And we charge people a priority if they want it more than that. And I'd say about half of our production is now dedicated to what we call priority, which gives us about another $1,000 per floor in revenue. So I would expect better-than-average margins as long as we can keep up with the material increases that we're having to stomach, but I would expect better-than-average margins for the entire year, and as all 134 plants in the United States endeavoring to increase capacity along the way. Does that answer your question?

Yes, that does. That's helpful. And then kind of a follow-up to that. Are you guys expecting any price increases in 2021, kind of similar to what you did here in 2020?

Every month. We've already had one in January, another one effective February 1. Another one effective March 1. And I'm sure our customers, some of them are on the line, there'll be another one on April 1. Every commodity that we buy -- or many of the commodities we buy, we're having price increases. We've even had to give labor increases because just to get people to come to work, we pay them now $1 an hour more if they just come to work, in addition to their wage. So if they come to work 5 consecutive days, they get another $1 per hour. So there's shortages in everything, including labor. This is a shortage environment that we haven't had in a long, long time. I'm having to remember back to the Rita, Katrina days of '05, if you remember when it was like this. And we're reacting as well as anybody. We have large inventories of raw materials, the largest probably in the industry. So we can weather even a 4- or 5-month delay from our suppliers on almost every component. We have warehouses that our competitors don't have. We buy by the container. We buy by the truckload. And we buy in quantity. And that's what's got us through some rather challenging times. I don't think you'll have any problem with our numbers this year.

That's helpful and that's good to hear. Can you give us an update on how the retail stores have been performing so far? And if there's been any headwinds with not as many people going out or if that's kind of been improving here?

I can take that question, Curt, if you want me to. This is Kenny Shipley. I've been over the stores. And we're -- we have still struggled with these stores. And we see that what we've been doing didn't work and so we've added a couple of new key people, and we're putting some systems in place and some controls where we can -- where we can manage these guys a little bit better, so if we can get the story up and going. I mean, it's just been a real challenge this year.

To complement that question, Ryan, things are progressing fantastic on the development side. We're now up to over 1,000 acres we own that's targeted for development. We got a very difficult to get water treatment permit last week from the regulator here in Texas that will allow us to put 1,200 home sites about 9 miles from the new Tesla facility outside of Austin, Texas. We are plattered -- or preliminary plattered in several markets in Texas. So as far as development is concerned, I think we've made a lot of progress since the last earnings call. I would expect we'll be breaking ground shortly in at least 1 or maybe 2 sites, so...

Our next question comes from Alex Rygiel with B. Riley.

Nice quarter, gentlemen. To continue on that last answer, Curt, can you talk about capital needs with regards to development of some of these properties in 2021 and 2022?

Well, right now, we have $30 million or $40 million on our line and -- which is rather small, and that's a LIBOR plus 2 line. So the cost of capital is rather cheap. And in addition, we're cash flowing $30 million or $40 million per year. So we really could absorb $60 million or $70 million worth of capital needs internally without going out for any capital raise. But we have a lot of people that have assured us if we need a capital raise, then we wouldn't be -- we have alternatives of how to get it. We don't have any acquisition targets. There's one company that we have an eye on. They know that we're looking at them. But that's the same thing I would have said a year ago, if you'd have asked. Getting people to combine has been challenging for us. I'm sure our competitors are having the same issue. And we prefer to grow organically, if we can. At the same token, there's no particular market that I want to add capacity in even with these backlogs, and a lot of that decision is based on my early comments, is it really increased demand or is it just increased backlog? And I don't think that our industry or any industry will know that until we have another 6 or 12 months behind us after this COVID thing goes away. Backlog, it doesn't necessarily mean increase in supply. It just means that it takes longer to get -- increase in demand. And I keep telling people that, and I think I'm right on that. At the retail, retail level, demand does not appear to be up dramatically year-over-year. But our backlog is, like I said, massive. And we have actual cash deposits on a good part of our backlog, which is unusual for us. We used just to have no deposits. So our backlog is pretty solid.

And then secondly, Curt, you've been in the business for a long time so as Kenny. Can you talk a little bit about how rising interest rates impact your business? And then also address sort of the rebound in the Texas economy, the energy market and what you're seeing with regards to the migrant workforce and how that could be a tailwind?

Right now, I mean, at this instance, all the things you just brought up appear to be positive for the company. The cost of housing is substantially related to interest rates. Almost everybody borrows money when they buy their manufactured home or when they buy their regular house. 85% of our sales are financed sales at the retail, retial level when we sell that. And when interest rates go up in housing, interest rates on manufactured housing don't go up. So our cost per month at $550 per home, which is kind of what a single wide is, remains the same, whereas conventional housing can go up dramatically with just a tick up of 1%. If you -- if interest rates were 0 and you could borrow for 1,000 years, we'd all be living in multimillion-dollar mansions because our payments should be so low. And even though that's the extreme, really that's the competition that we've had to deal with for the last few months with the Federal government essentially taking interest rates for houses down below 3%, and 30 years for houses that are even used. And they don't even have a 30-year economic life anymore. So that's been our competition. We're fighting those people that are subsidizing that interest rate in the site-built market. But these subdivisions, these properties we're building, and many of them were designed to take advantage of those very low interest rates. We intend to sell these properties using FHA financing, which, for our products, is effectively around a 4% loan. It's actually on paper less than that, but by the time you put the points in it. And that means that our customers will get the benefit. I mean, you can buy $100,000 mobile home in this environment for $500-some per month, which is pretty incredible. So interest rates are very relevant, and I can't really remember what else you asked because when I got off on my tangent. What else did you ask, Alex?

The Texas economy, the rebound in the energy complex and the migrant workforce as tailwinds.

Yes. I think there's so many tailwinds going on right now. The change in Washington, D.C. is a huge positive for affordable housing across-the-board. One of President Biden's platform was that he was going to subsidize the purchase of a home with a $15,000 refundable tax credit, and I expect that to come to pass. In addition, Texas, in particularly, is going to do well relative to the past because of our relationship to Mexico and our oil business at $64 a barrel. And now we're back on track for fracking, and we are getting some orders for man camp type housing, which we hadn't gotten for the last couple of 3 years. And man camp type housing is probably the best margin business that we have. There isn't anything better than that. So we're hitting on all cylinders. I mean I cross my fingers and hope that nothing will happen to change that. But I haven't seen times as good in our industry for 15 years now. I had a conference call when COVID hit, predicting that the production would be down for the year. And I think it was. But it wasn't so much for demand. We just couldn't run these factories. We couldn't get the people to run the factories. I mean part of it, we're competing against the U.S. government paying people $1,000 a week to stay at home, which is higher than we pay them to come to work. The part of it was, this thickness just makes it hard to run an assembly line. It's just extremely hard. We don't have enough general utility people to cover a whole electrical department, an example that I've given. So when we normally could build 6 or 7 a day, we were struggling to get 4 or 5 a day out of that same facility without any shortage of materials, without any weather problems or anything. It was just a staffing problem that we're pretty well through now. We've staffed up. We're back to normal production. Georgia is actually higher than -- at an all-time high. Commerce is going to be able to increase production. In Fort Worth, we're doing 6 and 7 a day, which is pretty much capacity. So I would expect that we'll be able to eke out some more production out of 2 or 3 of our facilities. We still have relationships in the Midwest where we buy their product on a private brand basis, and they're still producing for us. So I think our top line is going to be just fine. It will be up year-over-year fairly significantly. And if we can keep these margins, we should be able to rock and roll for this year.

[Operator Instructions] We're showing no further questions in queue at this time. I'd like to turn -- this will conclude today's conference call. Thank you for participating. You may now disconnect.