Legacy Housing Corporation

Good morning, ladies and gentlemen, and welcome to the Legacy Housing Corporation first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touchstone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Kurt Hodgson, Executive Chairman of the Board. You may begin.

Good morning, folks. Thank you for joining our 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 risk and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of a safe harbor for forward-looking statements that is contained in the Private Security 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 first quarter performance and provide additional corporate updates. I will then turn the call over to our Chief Financial Officer, Thomas Kirkhart, to discuss the financials in more detail. Thank you. This quarter, Legacy continued its track record of delivering strong financial results. Net revenue increased to $39.9 million in the first quarter, representing a 4.4% improvement over last year. This result was stronger than it may seem, considering that our ability to build and deliver houses was severely impacted by the February weather event across the southeast or southern United States. Our Texas-based operations were actually closed for the first time ever for an entire week, and our ability to deliver homes and receive raw materials was disrupted company-wide. In spite of this, we experienced improvement in our income from operations for the quarter, which increased to $10.7 million for 10.6 last year. The inflation and the cost of production has been steep in 2020. We have taken strong actions to mitigate the impact to our bottom line, including price increases and a 14.6% decrease in SG&A spending. We will continue to focus on opportunities to protect and grow margins while we continue to reduce our SG&A footprint. Net income of $9 million for the quarter was a 10.2% increase, over last year if you exclude the impact of the one-time settlement realized in the first quarter last year. Excluding this one-time event, earnings per share grew to $0.37 per share in the first quarter, a 10.1% increase over the first quarter of 2020 adjusted for the one-time settlement event. Legacy delivered a 16.5% return on book value per share on a rolling 12-month basis. We are pleased with our continued success in delivering value to both our customers and to our shareholders. Overall, market demand, orders, and our loan portfolio performance are strong. Of great importance to our future success, which is not reflected in our gap-based outcome, are the strides we have made in creating and developing acreage for mobile home communities. During the first quarter, we completed another acquisition of 233 acres in the San Antonio area, and we secured, finally, our wastewater permitting for the acreage we hold outside of Austin in Bastrop County. Our strategic real estate will be populated by legacy-built houses and will serve to reinforce the demand for our product for years to come. We see this as a major competitive advantage over our peer group and a key to our future continued success. At this point, I will turn the call over to Tom.

Thank you, Kurt. Following up on Kurt's comments regarding revenue, total revenue for the first quarter of 2021 was $39.9 million, which is a 4.4% increase over the first quarter of 2020. Product sales accounted for 65% of the revenue increase. Looking back on the quarter, the bright spots are that we overcame a fair amount of operational challenges and ended the quarter with a shippable backlog. Further, our fleet of revenue-generated leased houses continues to grow and, like interest revenue from our loan portfolios, represents a reliable source of revenue for years to come. Interest revenue from the company's retail and commercial loan portfolios expanded to $6.6 million for the first quarter of 2021. This represents a 3.3% increase over the first quarter of 2020. Compared to March 31, 2020, the commercial loan portfolio increased by 35.8% to $140.3 million, while the retail loan portfolio increased by 7.6%, to $113.7 million out of allowances. In combination, this amounted to a 21.6% increase in the book portfolios over the past year and is a conduit for growing interest revenue into the future. As Kurt previously stated, we had modest improvement in income from operations despite the challenges we had during the first quarter of 2020. Our ability to reduce SG&A expenses without significant detriment to the top line was the key factor in achieving this result. We saw substantial savings compared to the first quarter of 2020 in warranty costs, loan losses, and legal expense. Also, our ability to pass along commodity inflation was vital to the good quarter we just reported. With that, I'll turn it back over to Kurt for final comments and any questions.