Legacy Housing Corporation (LEGH) Q4 2022 Earnings Report, Transcript and Summary

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. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Mr. Duncan Bates, President, Chief Executive Officer. Please go ahead, sir.

Good morning, everyone. This is Duncan Bates, Legacy's President and CEO. Thanks for joining our call today. Max Africk, Legacy's new 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. We're happy to have you on the team. I'll run through our prepared remarks on Legacy's 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 30.1% improvement over 2021. The increase resulted from several price increases implemented from 2021 to 2022, the conversion of certain independent dealer consignment arrangements to financing arrangements, offset by a decrease in shipments from our Eatonton, 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 Eatonton, Georgia. During the fourth quarter, we rightsized the workforce, brought in a third party to retrain the team in 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 MHP balances. Both 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, 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 in 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's 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 $2.8 million in cash and $22.5 million [ph] drawn on our credit line. During the fourth quarter, we put $8.4 million of excess cash to work in treasuries, yielding approximately 4.7%. 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. 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 will remain disciplined in our approach. Overall, we're focused on long-term capital appreciation and think that over the next 6 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. [Operator Instructions] And our first question coming from the line of Min Cho with B. Riley. Your line is open.

Hi, Duncan. Congratulations on a really strong quarter here and strong year.

Hey, good morning. Thank you very much.

Sure. A couple of questions. Regarding your Georgia facility improvement, it sounds like the shipments have definitely improved in the fourth quarter. Can you talk a little bit about what the utilization rate was 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 production, that plant historically has produced, say, 5 to 6 homes a day. We're still below where we'd like to be, but we're very cautious 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're building 3 to 4 at that plant. So it's 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 an average home price there.

Okay. Definitely do that. Also, it looks like the number of home sections that were produced and shipped were either at 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 availability. And given the current labor situation, do 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 use just a very simple barometer of - the labor market is when we walk into our Fort Worth plant in the morning or their 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 ready to work. So labor does continue to be our constraint from a manufacturing standpoint. But I think it is loosening up, and we'd like to continue to push production at 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 were pretty close to kind of starting construction on the Del Valle [ph] units. Any updates there?

Yes. The developments continue to move forward. Frankly, they're slower than we would like. I mean, we've just been - we've been tied up and bogged down with so much work on the administrative front. That said, we're getting towards a point where at least for Phase 1, 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 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.

All right. 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 open.

Hi, guys. First question for me. I just wanted to look at the finance business just a little bit. And correct me if I'm wrong, it 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 throws off so much cash that we're not borrowing to land. So if we were - we had a warehouse facility, and we were borrowing and 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 rates down and to keep our prices up. And certainly, the financing programs at Legacy helped drive sales for the business.

Okay. Perfect. And then just looking at if production looked really solid from unit sales this quarter. Can you just talk about kind of where the production was versus kind of inventory you had a little bit more at the end of Q3? So just kind of weighing what you were able to 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 weren't able to ship. So during the fourth quarter, we were able to work through a lot of those. And that certainly helped us. But we are constrained from a manufacturing standpoint. That said, I think heading into a slowdown, I'd much rather have three plants that I'm trying to feed than 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 manufacturing today? Do you have the labor materials or things that you want to continue as we look at Q1 and into '23 to be able to kind of produce at the levels that you'd like?

Yes. I think from - we'd always like an abundance of skilled labor. But I think what we - the teams that we have now are doing a good job. From a material standpoint, the supply chains have really loosened up. And our - one of the challenges that we've been working through is you went through 2 years where your purchasing department did everything that they possibly could to get materials. And now that materials are abundantly available and prices are coming down, we're really working to try to get the biggest discounts that we can. But we're not having any of the issues that we had during COVID with appliances and other things not being readily available.

Okay. The last question for me, kind of big picture. Just - 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 you're seeing from a demand perspective especially with cannabis squeeze consumer out here? Or are you continuing to see improved demand for affordable housing?

Mark, it's a really interesting time right now, right? You've got 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, I mean, 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 we sell to manufactured housing community owners. There the - 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. I think since like over the last probably 3 to 6 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, there's just a lot of people - there's 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 certainly slowing. That said, we feel pretty good with three plants about being able to have the orders to keep these things going at, say, similar production capacity.

Excellent. Thank you.

Sure. Thanks, Mark.

Thank you. [Operator Instructions] And our next question coming from the line of Tim Moore from E.F. Hutton Group. Your line is open.

Thanks. Congratulations on the very strong sales quarter beat in December and for the year, very impressive margin expansion. I know the team is working and putting in a lot of hours. Duncan, I was just wondering, you briefly mentioned the backlog. What is the current backlog you think in terms of visibility on monthly sales is something like 5 months going out maybe?

Tim, we don't publish a backlog. We have - we do have several months of backlog. I think 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, we've ordered homes to get them scheduled and take the homes when they come offline. But again, small manufacturing footprint, even if things slow down, I think we'll be able to continue to cut deals where we're selling 20, 30 or 100, 200 homes at a time and keep these facilities close to capacity.

That's helpful to hear. How should we think maybe about the gross margin possibility for this year? I saw that the - it looked like the fourth quarter gross margin was 40%. Should we kind of go off of that? Just kind of thinking about modeling going forward and if your prices have held up pretty well. Just trying to get a sense of maybe what you're thinking for utilization and 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. We have been able to hold prices firm. And we have, I think, started to benefit from material prices coming down. That said, if demand really does slow down, we'll have to think hard about pricing. But certainly, we're trying to buy materials for as cheap as we possibly can, and we're trying to hold pricing firm. So I think I'll have a better view kind of by end of next quarter when we talk about that. But I'd say for now, it's about the same.

Good. Good. That's helpful to hear. You mentioned which I think we're all aware of, but the independent dealer channels had some destocking going on, and we've seen the walk-in traffic fall, I guess, the last few months, just in general for the industry. How is the walk-in traffic holding up at your company-owned retail locations? And are you guys doing anything to maybe create more digital leads or digital generation to kind of get more consumers in your stores?

Yes. A couple of thoughts on that. I mean Kenny and I spend a lot of time talking about foot traffic and conversions at the retail stores. We have seen an uptick in foot traffic. Really, 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 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. And we've certainly on the heritage side, ramp that up with an additional hire who's working on marketing for heritage. But I think, again, now that we're through a lot of the financial reporting issues, I'm looking forward to in addition to growth, really focusing 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 and get it done.

That's helpful color. I appreciate that. I mean, another question I had was, I'm just wondering you're doing a good job in getting the quality assurance back on track with the Georgia plant. Have you and the Board thought about maybe adding ahead of operations to maybe visit all three plants every couple of weeks to just ensure the efficiencies in quality control.

Not at this time. We do have - we have really good general managers at all of these plants. And as you know, me, Curt and Kenny are all heavily involved, and this thing moves pretty quickly. We're not scheduling a lot of meetings. It's a lot of direct phone calls, and we can make changes quickly. We do operate in a very highly regulated industry. And so there is a code that we strictly build to. And it's just given some of the labor challenges and turnover, sometimes you have issues there and like we had in Georgia. But I feel good about where 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 hire [ph] 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 remember an enjoyed meeting Marc at your Fort Worth plant in late August. I was very impressed by him. Just maybe switching gears, talking now that you've been there 9 months and up to speed on the accounting enhancements and 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 the 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 half is as other manufacturers slow down and financing in certain areas of our business becomes less attainable. I mean we are really seeing a lot more opportunities than we have at years, in 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 on the loan portfolio, they're pretty significant And so as we look at opportunities, there's 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 a 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. And that's really helpful color and clarification on the capital allocation strategy. That's it for my questions. Thanks a lot.

Yes. Thanks, Tim.

Thank you. And our next question coming from the line for [indiscernible] Your line is open.

Hey. Thanks for taking the questions. A couple of things. Can you just give us an update on the strategy for 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 that's - we're developing the pads and we're selling the 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's even laid out where we can see the number - the dollar amount of leased homes is actually, I think, declined from some previous levels. So can you just give us an update on what exactly is the strategy with the park development?

Yes, happy to. A couple of - there are a few questions in there. I'll try to take them and if I miss something, just remind me. But first on the acreage change, I don't know. I'll have to follow up with you on why the acreage would change. 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 do think 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 of them 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 really - it's mind-boggling. And for the past couple of years, we've had enough orders where two external customers where we haven't needed to - even if the communities were ready, we haven't needed to put homes on them because we were at capacity and selling to other customers. But I think ultimately, the communities provide us with a lot of optionality, and there's a lot of value to unlock there. And so one thing that's kind of top of our agenda as we move into the middle part of the year is we've got the properties. They're at various stages of development. There's some that it probably makes sense for us to push through and finish. There's 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 there's some 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 making progress, but the strategy we're diving into now on exactly what we want to do 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 on the acreage was, I guess, from 10-K this year, the 10-K last year, Bastrop County, Texas acreage is down 32 acres and Bexar County was down like 31%. So I don't know if that was - we completed development with place units, someone approached us and we sold it. 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 we really have made the most progress on. We've got Phase 1 coming, but I don't know why it would have changed.

Okay. And then you mentioned some of the large community developers. You have mentioned that you're running at pretty high levels of capacity, but you might see some moderation. Given our position in our outlook, is there any sense in approaching some of those larger developers and saying, look, we can allocate a certain percentage of our monthly, weekly, quarterly production to you as a single customer, and then they can have a more consistent supply of units because a lot of things I've read makes it sound like there's lots of demand on the park side, and they're coming to market with a rental rate in many areas, it's very attractively priced versus the competition.

Sure. We think we build a great park model home. We buy materials and import 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 a little bit of margin there. We have had several conversations with some of our larger customers about taking homes in quantity, under, say, some type of supply agreement where we allocate a certain amount of production a month 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 there are certainly developers that are focused on our core markets that we have not historically sold to, 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's certainly more efficient for us than throwing a bunch of double-wide in align and that slows us down just as they're more intricate. So yes, that is a top focus for a lot of people of 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's a lot of opportunities that you've touched on. I believe it's a $10 million authorization. I mean, is that more opportunistic dry powder? And to some extent, maybe we were locked out of actually doing anything in the market as we've put - we're working on getting some of the administrative things addressed that you touched on. Just give us some color there. And 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 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 give our tangible book value per share. And we think our book value is extremely conservative. I mean we - 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 and a 10% to 20% return. And so we do have real assets that are unencumbered. And I think if - depending on how 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 repurchase - or 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. Appreciate the questions.

Thank you. 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. I just wanted to know if this is a function of mix or if you could 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. We've had seven price - or I'm sorry, I think, 17 price increases through COVID. And - but we have not raised prices since kind of 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 other manufacturers that we're seeing that have decreased 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.

Right. 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're going to focus on going forward?

Sure. It's something that we talk about regularly. And I know if you look overseas, where there's, I'd say, expanded code - we manufacture to a very strict code. There's overseas operations in countries where they have a, I'd say, more broad code, and they are highly automated. Our product is very manual right now, and there's 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, we'll build - we'll stack production with orders as they come in. And so I think there probably are some automation opportunities. There's also, I think, opportunities to get down into regions that have a cheaper labor rates and there - I thought the Solitaire deal with Cavco 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. All right, thank you.

Thank you.

Thank you. And our next question coming from the line of Brian Glenn with Olcott Partners. Your line is open.

Hi. Welcome, Max. A - Max Africk Thank you.

Hey, Duncan. Nice job guys. Nice job, Ron [ph] 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. And it looks like that number has gone up from - it was like $100,000 and $4 million and $8 million. I know it's noted as immaterial, it's still immaterial. Is that - it looks like - is that strategic on your side to try to get more floor space? I know it's related to floor plan financing by a third party? Or is that just the way the market has gone, where you have to put that agreement in place?

Yes. So the way that agreement works is, say, we have an independent dealer that we sell homes to that uses, say, 21st for their floor planning. Since we are the manufacturer, we'll have an agreement with say, 21st to repurchase homes and 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 - there are 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 just 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 several million, I can follow up with you on. It may be that 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 may be, let's say, 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. And I would suspect it actually benefits you guys and 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.

Yes. 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. And if you just do - I mean, you can do the math anyway you want, but if you jump in to just their 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 number is big. It's a substantial number in terms of what you guys can produce a home for. There's also an assumption in there about double versus single if they disclose that breakdown or not, but either any way you slice it, it's a big number. And so that gap is really just you guys in-sourcing and being more vertically integrated. And I think probably a little bit of this product to just being slightly dialed down, still a high-quality product. But can you elaborate on that?

Yes. I'll try to give you some additional thoughts there. 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. Another advantage is, 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 places. But I think the biggest component that 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 three plants and we know that they're profitable even at lower production levels. And historically, a lot of these plants with the right labor have done more - significantly more in production than what we're currently doing. We'd love to ramp that up, and I think there's additional margin there, but it's really hard in today's labor environment. And as the market slows and people idle plants and don't have orders and companies, smaller businesses shut down, though you really - you can't get small fast enough and I think that some of the larger competitors could really struggle there where you've got 40 plants, and there's more fixed cost than people realize. And in a tight labor environment, 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 could be pretty difficult in a down cycle.

That's it. Thanks. That's helpful. Great work, and again, welcome, Max, and great work to you and Max and Ron and Kurt and Kenny.

Thanks. 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 Bates for any closing remarks.

Perfect. 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 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 day early after filing our last 10-K, 5 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.

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