Ladies and gentlemen, thank you for standing by, and welcome to the Legacy Housing Corporation Third Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference may be recorded. I would now like to turn the conference over to your speaker, Mr. Duncan Bates, President, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everybody. This is Duncan Bates, Legacy's President and CEO. 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 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. We are excited to share our third quarter 2022 results and discuss our business today. We look forward to hosting earnings calls on a consistent quarterly basis in the future. I am joined today by Curt Hodgson, Legacy's Executive Chairman and Kenny Shipley, Legacy's Co-Founder and Executive Vice President. I will discuss our third quarter performance and provide additional corporate updates. Net revenue increased to $57.3 million in the third quarter, representing a 1.5% improvement over the third quarter of 2021. The increase resulted from price increases implemented over the past year, offset by a decrease in shipments from our Eatonton, Georgia facility. During the third quarter, we delayed shipments and slowed production to improve the quality and consistency of homes manufactured in Eatonton. We are now shipping the delayed homes in addition to our current production and plan to meet or exceed historical production levels by early 2023. Although this process impacted third quarter revenue, the changes will significantly benefit our customers and our business moving forward. Interest revenue from the company's retail and commercial loan portfolios was $7 million for the third quarter, slightly down from the third quarter of 2021. The reduction was due to large payoffs on the commercial loan portfolio. Both the commercial and retail loan portfolios continue to perform extremely well. Income from operations for the third quarter of 2022 was $16.9 million, an increase of 10% from the third quarter of 2021. This increase was primarily driven by seven price increases since the third quarter of 2021, lower cost of sales and an increase in other revenue, offset by lower volume from Georgia and higher SG&A. We plan to continue holding firm on price while reducing our raw material inventory to take advantage of lower material costs over the next few quarters. We will also focus on ways to reduce SG&A up this quarter due to increased warranty costs, salaries and incentive compensation and professional fees. Net income of $14.7 million for the quarter was a 13.4% increase over the third quarter of 2021. Basic earnings per share grew to $0.60 per share in the third quarter, an increase of 11.1% from the third quarter of 2021. Legacy delivered a 22.5% return on equity over the last 12 months. At the end of the third quarter, Legacy's tangible book value per share was $14.84. We took an important step in our capital allocation strategy this quarter by implementing a $10 million stock repurchase program. We will consistently weigh stock repurchases against other capital uses to drive long-term value for our shareholders. Lastly, we ended the quarter in a net cash position with $11.3 million in cash and no drawings on our line of credit. Driven by our in-house financing, our backlog is strong across all manufacturing facilities and provides visibility well into 2023. As the economy slows, we believe investors will begin to see the value of our integrated business model with multiple recurring earnings streams. We are long-term focused and plan to be opportunistic from a growth standpoint as asset prices in our broader industry moderate. Now I'll turn the call back to Curt for final comments and questions.

Thanks, Duncan. It's nice to be back on an earnings call. 2022 has been full of distractions for our entire management team, including those of us that are on this call. We've had auditor challenges, accounting challenges, and regulatory challenges this year more so than probably any year I'm familiar with in this industry. We spent entirely too much time on associated administrative tasks and not enough time running our business and selling our products and doing what we do. Moving forward, this is where I want our management team to get back to focus. There are so many things that we can improve in our business. I mean managing inventory, reducing SG&A, improving manufacturing quality, etc., and we have multiple ways to grow the top and bottom line, land development, new products, some geographic opportunities. Now that we're through the distractions, and I hope that we are through them, Kenny and I plan to work with Duncan on improving and growing the business. Our backlog is strong, probably as solid as anybody's backlog in the industry, and we're very optimistic about 2023. Back to you, Duncan.

Thanks, Curt. Operator, that concludes our prepared remarks. Please begin the Q&A.

One moment please while we compile the Q&A roster. Our first question coming from the line of Mark Smith with Lake Street Capital.

Good to have you back on the call. My first question is, can you provide more details about what occurred in Georgia and what led to the slowdown and focus on operations there?

Duncan, do you want it or do you want me to do it?

I'll let you take it, Curt.

No, you take it.

All right. I'm happy to take it, or go for it Curt.

Yes, I just returned from Georgia yesterday, which gives me a clearer perspective. We faced some quality issues in Georgia related to supervision challenges, which became increasingly apparent as summer progressed. This resulted in reduced production and heightened regulatory scrutiny from the state of Georgia, our local regulator. Alongside our private regulator in Texas, we have been working on improving our processes and training systems. Consequently, production slowed to about half of normal levels in August, September, and even October. Additionally, we postponed shipping houses from Georgia during this time to conduct thorough inspections and ensure quality. While July shipments were relatively normal, August and September saw shipments drop to roughly 10% of normal levels. The positive news is that shipments have resumed with our new processes, including about 14 today. We have a few hundred houses ready to ship, and we anticipate bringing our yard back to normal levels by Christmas, if not sooner, leading to a stronger-than-usual fourth quarter. Before this slowdown, we were averaging three houses per day in Georgia, but we experienced a 40% decrease in production there. Conversely, Texas production showed a mild increase, going from four to five houses per day. We've invested in hiring independent consultants and training our Georgia staff, simplifying our operations. Our backlog in Georgia is robust, with about 800 houses, translating to roughly 200 days of backlog at the current pace of four per day, with most orders having deposits. I believe we hit bottom around early October and have been recovering since. We haven't shared many details due to the rapidly changing situation. I think we've navigated through the worst of it, although we still need to address some products that were delivered and may have warranty issues. This led to an unexpected increase in our SG&A expenses due to the additional warranty work primarily in Georgia. I hope that answers your question, Mark.

Yes. No, that is helpful. As we look at labor today, are you able to kind of get the people that you need and run as efficiently as you would like today? And then even if you want to talk about kind of cost of labor and what kind of inflationary pressure you've seen there?

Labor remains a challenge for us. We now measure it per square foot, and our labor cost for the two factories currently operating is around $9 per square foot, which has increased from $4 per square foot before COVID. This increase isn't solely due to a doubling of labor; it mainly stems from lower productivity. We are currently employing more people to construct the same number of houses as we did before COVID, but at higher wages. Over the past two months, we've received significantly more applications compared to the previous year. It's unclear whether this is a result of shifts within our industry or the housing sector overall. The applicants are skilled carpenters familiar with using tools, and as the standard housing market slows down, these individuals have sought employment in our factories. This slowdown could be beneficial for us as housing markets decline, with lumber prices currently in the 400s, nearing pre-COVID levels, while steel prices have dropped by 30% from their peak. If the slowdown in housing is persistent, it could provide us some relief with labor, which is starting to become evident at our plants.

Okay. One question just on the loan portfolio. As we look at the MHP notes, we saw good sequential growth in that portfolio, but it looks like the rates were squeezed a little bit there, which surprised me just given that a lot of this is floating rate. Anything to speak to there?

We have decided not to increase rates and might even implement some pricing variations. However, we have not decreased our prices, while almost all of our competitors have. Therefore, the monthly cost to finance a house through our lending division remains the same as it did six months or a year ago. In contrast, some competitors who have lowered their prices and increased rates may have raised the overall monthly cost to mobile home parks by about 5% to 10%. We mainly use our own capital and do not borrow much money. Although it is uncertain how long rates will remain high, we do not plan to raise them. We have landed some significant customers who can obtain competitive borrowing rates elsewhere, and these customers have managed to secure slightly better rates than last year by working with us in line with our pricing strategy. Currently, more than half of our outstanding orders relate to mobile home parks, and around 70% of our backlog has deposits secured.

Okay. Good. And then just the last question for me. I like the announcement of the buyback, but can you guys just talk about other uses of capital that you have, other opportunities and kind of what you're looking at as far as maybe the next 12, 24 months where you would put cash to work.

I'm glad to address that. Over the past six months, our focus has been largely on administrative tasks and getting up to date with our filings, which has delayed the release of our formal growth plan. Traditionally, we've reinvested the cash generated by the business back into our loan portfolios, and we can continue to do so at favorable returns. Currently, the portfolios are largely self-sustaining, meaning we're not in a position where we need to borrow to issue loans. We've begun to identify new opportunities, and Curt and I have collaborated on exploring potential products to manufacture and sell that include financing elements within or adjacent to our industry, such as entering the temporary classroom market. There are specific regions we aim to target. We have identified intriguing possibilities that would allow us to operate within our current industry while reaching areas that have been challenging for us. I believe we could significantly enhance these businesses through our sourcing and financing capabilities. Therefore, we're looking at new products and new regions. Additionally, we've accumulated a substantial land position in Texas, which is at varying stages of development for communities. Despite the current slowdown, the market prices for these communities present notable potential compared to the capital required to develop homes on those sites. Curt and I will dedicate more time to these opportunities as we approach year-end. In summary, we have numerous possibilities to consider, but given our current share price and active buyback program, we will evaluate these opportunities alongside share repurchases.

Our next question coming from the line of Tim Moore of EF Hutton Group.

Curt mentioned the Georgia backlog of about 80 units. Can you give us a sense of the overall backlog? Is it six to seven months of possibly slower revenues from the Texas area to plants? Or is it probably less because Georgia got delayed a bit and lost some production for a while.

I believe it's about six months. This could be somewhat conservative as I have concerns about backlog without deposits. We recently participated in a couple of shows where we received several hundred orders, mostly from Texas. I think we can manage our way through to late spring. Additionally, with our usual order flow, we should have our 2023 production largely secured.

Great. That's wonderful to hear. One follow-up question I had was about the Georgia facility. It was nice to get the color around that, what happened in August, September and even October. If you put a revenue number on that, was it something like 100 units? I mean, could that have been $6 million of sales that got pushed into the fourth quarter and maybe January?

I feel confident that we will deliver 100 more units in Georgia during the fourth quarter compared to if we hadn’t accumulated inventory in the third quarter. The number of $60,000 per unit is quite accurate because the wholesale revenue tied to that inventory is approximately $52,000 to $53,000 per unit. This should result in an increase of around $6 million in sales for the fourth quarter above what we would normally expect. By January, I anticipate returning to a pace of four or five units per day, and revenues should align with our expectations. Although we experienced a production decrease of 50% during this period, which we cannot recover, our overall earnings are still strong, and our book value is increasing. This particular issue was something we mentioned in our previous quarterly report but couldn’t quantify at the time. Essentially, we lost out on production for three months, averaging about three units a day for 60 days, resulting in a loss of roughly 200 units that we can’t recover, impacting our revenue.

That's really helpful. Thanks for providing a revenue estimate around that. I think people have a clearer understanding now. Regarding the labor situation, I know you mentioned some points earlier. I'm trying to grasp how the current labor shortages compare to the peak difficulties we faced earlier this year. It seems like there might be localized issues, but overall, is the labor situation better than it was during the significant shortages earlier this year?

I have a feeling that labor costs will keep rising, even if we enter a recession. The unemployment rate is at 3%, and we aren’t paying anyone less than we did in the past. Labor is an issue, as fewer people are willing to work, especially those in construction. While costs per square foot can fluctuate, we expect that to be balanced out by some drops in productivity, but we are doing our best to manage the situation.

Okay. No, that's helpful. For your pricing, I know Duncan mentioned you're holding firm on it. Is there really not more sensitivity by homebuyers and park operators because your competitors are still taking price increases lately, and it's all kind of relative? Is that why you have confidence you don't have to decrease prices anytime soon?

The main reason we haven't lowered prices is that we haven't increased the financing rates either. I've found the significance of financing in this business to be quite surprising. If you look at backlogs in the industry, particularly in specific regions, ours is much stronger, largely due to our in-house financing. This means if someone cannot secure financing from elsewhere, we will provide it, which gives them less leverage to negotiate on price.

That's helpful. That makes sense. And you were about to maybe get into this earlier, but can you provide an update on the land development progress? And does Horseshoe Bay near Austin have any homes up on it already? And just maybe if you can give us some color on where you stand with sewer and water systems and the plan maybe a deal that will happen over the next year? If you can kind of give us some color on that, that would be great.

I'll take that one. We have a total of seven properties in the State of Texas, three in the Fort Worth area, two in the Austin area, and then two in the San Antonio area. The three in Fort Worth have been essentially dormant during these distraction periods because management was so involved in these other issues. And then in Austin, breaks down Horseshoe Bay. We are very slowly making progress in Horseshoe Bay. I would say we have about a $6 million investment so far in Horseshoe Bay. We haven't really needed the production so we haven't been focused on it, but we are very slowly adding a couple of houses in the quarter to it. I think we sold about four. We are opening a sales lot there in Marble Falls nearby. That will help. We've been three years trying to open that sales lot getting through the city of Marble Falls. I think we're 95% of the way through. We're building the entrance this week and that should help. The Del Valle project, which is the goal over 1,000 units, we have virtually every permit we need finally from the electric people, the water people, the county people, the water treatment people. So, entitlements have been difficult to get politically, but I don't think there's anything that we need to commence construction there other than getting on with it. We're probably 10% complete, water in and a good part of it, rough roads in on a good part of it. The electric has been paid in advance, kind of funny how that works. They say, well, we could prepare a contract, it will take eight months per contract or you could just send us the money. So, we're gambling. We sent the electric company $1.6 million without even a contract. That's just the nature of the way things are nowadays. So, we're progressing there. The project in San Antonio, one in San Antonio proper, over 300 lots. We now have all the titles that we need on the entitlements we need, and we're moving towards getting that done and one in Atkins. It's a pretty small property, nice property. I play with the idea of selling it because I've got an appraisal on that that's three times what we have in the land. I don't know that we'd be better off developing into a mobile home property as opposed to selling it for three times what we paid for it. So, that's probably a decision that we'll make this fall. So, there's the update on the seven Texas properties. We don't own any other properties besides those seven.

That's terrific. That was very helpful to hear. And my last question is really around your unique vertical integration advantages. Considering that there's such an affordable housing shortage in the U.S. and it's been compounded drastically the last two years with, I don't know, the average housing price up, single family up, 40%, 50% and higher interest rates. I'm just wondering, can you use this economic environment to maybe take advantage of beefing up some of your vertical integration advantages and expanding into more things like possibly air conditioning or specialist building products or countertops? Do you think that those would make sense to get more vertically integrated on? Is there anything that's jumping out at you?

I've looked into sheetrock manufacturing before, but that's quite a large business to enter. However, we are as vertically integrated as anyone in our industry. During the declines, it made sense for us to engage in the trucking business if we could do it at a lower cost than others. Yesterday, we moved 24 houses in Georgia, with 20 of those being moved by independent contractors, honestly at a cost lower than what we believe our costs are. Some of the slowdown, especially in regular housing like countertops, might allow us to purchase better than we have in years through typical channels. We need to retrain our purchasing department on a different approach. A year ago, we would just ask for supplies without inquiring about prices. Now, with inventory levels rising and supply availability, we have to return to the basics of competitive purchasing. Everyone seems to be facing this shift. It's a different mindset than just a year or eight months ago. Earlier this year, we faced shortages, shipping items missing refrigerators, dishwashers, or sometimes even furnaces. Now, we have no shortages across the company. We have ample supply of everything we install in a mobile home, and that's been the case over the past six to eight months.

That's terrific to hear. That's nice to know that's not a bottleneck anymore, and hopefully, it stays that way. Well, it's been nice to see the enhancements in the accounting system and be on time reporting this month. So, I really appreciate it, and that concludes my questions.

One moment, our next question in queue. And our next question coming from the line of Alex Rygiel B. Riley Financial.

Curt, real quick, can you address the macro environment here? We've got mortgage rates that have increased significantly. We've got slowing demand at a very fast pace for stick-built new housing. Clearly, there's uncertainty about sort of the economic outlook over the intermediate term. So, maybe with that backdrop, can you sort of talk about how that has, or could, impact Legacy in your strategy?

Alex, I was hoping you could provide some insight. The site builders are facing challenges because potential buyers are reluctant to purchase homes at the current mortgage rates of 7.5% or 8%. In our industry, financing costs haven't increased much, even among competitors. It will be interesting to see whether the manufactured home sector will align with the site builders or if it will diverge. I anticipate continued declines in the site-built home sector. For example, in Austin, Texas, if you want to buy a starter house at today's mortgage rates, you need to earn $150,000 a year, a significant increase from six months ago. I’m uncertain about the future of 30-year mortgage rates, but I doubt they will drop back to previous levels quickly. Therefore, I believe the single-family housing market will face difficulties for some time. Our team is exploring opportunities to acquire properties at below replacement cost, which we believe will become available soon. This raises the question of how it affects us. Earlier, we discussed our healthy backlog, but that might not be the case industry-wide. Our competitors are not consistently operating, nor are they as integrated with financing as we are, leading to some softening in their backlog. While the industry showed record production as of September, with a year-over-year increase of 14%, we need to consider that October and the early part of November are not yet reflected. I expect to see pressure across all sectors, and if we enter a recession, it could be quite serious. Historically, higher interest rates have not negatively impacted our business model. For instance, in 1982, when mortgage rates hit 8%, it was a successful year for the mobile home industry. I hope we can experience something similar this time, but it's uncertain. We are adaptable and can scale down if necessary. We have sufficient cash reserves and borrowing capabilities to take advantage of any opportunities that arise. I would be surprised if our book value does not continue to increase during this period. I believe we will continue to see double-digit increases in book value annually at Legacy for the foreseeable future, unlike the homebuilding sector and some of our main competitors who are tied to an ongoing model that may not succeed.

And then Duncan, as I sort of drill down on the balance sheet here, it looks like customer deposits, the balance and the balance sheet was about $12 million at the end of the third quarter. That's up quite a bit from like a $5.7 million or $6 million a year ago. So, what's changed there? Obviously, understanding that there's a fair amount of homes that are sitting in the yard in Georgia that probably equates to some of that. But have you also increased the deposit requirement by the buyer? And has that provided you greater visibility in closing predictability or whatnot?

Yes, Alex, I may have to get back to you on the exact increase. To my knowledge, we've not increased the actual deposit amount. That said, Georgia is a contributor. And we also have a large customer that we're building a significant amount of homes for that put down a very significant deposit for us to build homes over the next few years. So, I think that's a big piece of it as well.

And then lastly, either Duncan or Curt, consignment sales came down in the third quarter. I believe that's mostly sales to some of your independent dealers. How does inventory out in sort of the channel look right now? And is there any risk that as you kind of go into year-end, there's some sort of slowed purchase activity because of elevated inventory or weakening consumer demand?

Curt, do you want to take that one? Dealer inventory?

Alex, I was a little distracted, but can you clarify what you mean by inventory? Are you referring to raw materials, finished goods, or something else?

No, finished goods, finished homes in the channel, though, inventory out the channel. Inventory that's at your independents out in the yards.

I believe the company-owned stores have sufficient finished goods inventory, particularly in relation to sales. It seems that everyone has slowed down on stocking company-owned stores with more inventory, likely including us. I expect inventory levels to remain stable, possibly slightly elevated, but I don't anticipate any positive changes from increased inventory. Regarding raw materials, I'm in contact with numerous suppliers and it appears that inventories are accumulating at all levels, including distribution. Companies will likely be tightening their inventories. I was not particularly happy with our financial statements, which indicated higher inventories for both raw materials and finished goods because we became accustomed to acquiring more on the raw materials side, resulting in excess inventory. Overall, it seems that inventories are increasing across the board, and the economy will need to address this soon. It has been a while since I last spoke, but I believe you would agree that inventory levels are high and on the rise in nearly everything. We are very aware of this, but I hope our raw material inventory will significantly decrease in the next reporting period, while our finished inventory will remain stable or may even decrease slightly, so there won't be an increase in either finished goods or raw material inventory by the end of the year.

One moment our next question in queue. And our next question coming from the line of Brian Glenn with Alcott Partners.

Duncan for your first public call, it sounds like you've been doing this a long time. Congrats to both you and to your whole team on delivering what you said you were going to do.

Thanks. I really appreciate it. It's been a long few months. One of our team members reminded me that we've accomplished a year's worth of public filings in a proxy in about 120 days. So, we're excited to move past this point.

Yes, that's great. I appreciate all the efforts, and Curt, great job on the leadership hire. I have two questions that I'll try to keep brief. First, looking at your balance sheet over the past two years, I see that assets have grown by $100 million, which is quite significant and has been solely funded through organic equity growth, a commendable achievement. Liabilities have decreased slightly. Is this reduction purely a result of how the company is managed, or was it a conscious decision? There's clearly no need for leverage when you achieve 20% returns on equity, so was this a strategic choice in anticipation of future opportunities, or is it simply a trend observed over consecutive quarters?

Curt, do you want me to take that one?

Sure.

All right, you can fill in. This business has always been run extremely conservatively by Curt and Kenny. And I think if you're walking around the office, they'll tell you that they've built Legacy by making it and saving it and have always been extremely frugal and have continued to perform well in the industry and not gone bust for longer than anyone. And so, I think it's a conservative approach. From my standpoint, we're excited about the next couple of years and potentially having a slowdown here because I think there will be opportunities to make investments in this industry and in surrounding industries at attractive prices because of our conservative nature and because of our balance sheet. But I can assure you that we're not going to go out and overpay for anything. So, I'll stop there. And Curt, anything to add?

No, I don't think there's much to add. I believe we've reached a point of balance, and unless we find new opportunities in the industry or different products, our cash position will continue to grow, which is not our intention. We'd prefer to utilize some leverage. We're looking for deals or ways to use our capital, especially since we're currently borrowing at a very low rate. However, there haven't been many opportunities recently. There was a recent acquisition we pursued about a year ago, but it's not the right time to invest in production capacity based on past metrics. If we could consider future metrics, that might change things, but prices are still above replacement costs. If we aim to grow, organic growth seems to be the better path at the moment, as there aren't many acquisition opportunities available right now. Perhaps the situation will change, and if it does, we'll be ready as we always have been. If not, we'll need to seek opportunities within our industry or related industries to generate returns that are better than our borrowing rate, which I believe is possible. There are certainly opportunities to achieve an 8%, 9%, or 10% return on invested capital if we can find them. We're currently evaluating a few prospects. The seven developments we're considering represent a significant use of capital, likely between $50 million to $100 million when finished, and I'm comfortable with that. I have no doubt that securing these opportunities will be more challenging in a few years, so we want to position ourselves to capture as many as we can.

That's helpful. One of your peers mentioned a trend at the industry level, not just limited to them. You alluded to it earlier; there seems to be a contraction in floor plan financing. When you consider opportunities, please clarify whether the market is still so crowded that entering a third-party dealer network with your own financing at the floor plan level on a consignment basis feels too constrained. Are there alternative opportunities you're exploring, or is this one you're considering?

Curt, I'm happy to take that. I mean, we've been in the consignment financing business for a long time. And Curt and Kenny have put a lot of dealers in business across the South with their financing over the years. And so, we have a really loyal independent dealer network that sells our homes and we finance them. We've been going through a little bit of a change with our consignment business to get to more of an industry standard where we're actually selling the homes and financing them versus just like a share consignment agreement where they can give them back to us. And so, that's a change that investors will see over the next couple of quarters as we continue to shift towards like to a true sale that we're financing with no takebacks and we're well on our way to doing that. So, I'll stop there.

Okay. That's helpful. I'll go ahead and ask a third question if you don’t mind. Duncan, you and I have discussed companies outside of the industry and it's always been interesting. There’s a company based in Dallas that operates outside our sector with a different business model focused on salvage vehicle auctions. What I've learned from them over the past ten years is that time is something you can't simply buy. While the average person may see a mobile home park as having a local opposition aspect, I think that term is unfair because it doesn't reflect the views of the residents living there. That said, there are challenges, as you've mentioned, particularly in obtaining the necessary permits for developing those seven and potentially more sites in the future. In the other business I referenced, one of their competitive advantages, despite many differences from Legacy, is their capacity to navigate a lengthy permitting process, which can take six to eight years to establish a yard. You seem to be facing similar challenges, which is unique and difficult for competitors to replicate, especially those with weaker balance sheets or a less robust national presence. The question is, do you also perceive it this way? Is there a strategic advantage in having the capacity to wait two, three, or four years while you carry that asset on your balance sheet, regardless of its financing, to ultimately see it through to completion?

Yes, I think that is certainly the case. One of the biggest challenges in this business is finding suitable locations. Curt and Kenny, who have extensive experience in Texas, understand attractive areas and the dynamics that contribute to worthwhile community investments. We acquired this land years ago, and it takes a significant amount of time to prepare it for home construction. Moving forward, we aim to speed up that process while constantly seeking new opportunities. Additionally, we will maintain flexibility in how we manage these properties for the long term. There's been a considerable increase in institutional capital entering this sector. During my time here, I've noticed large real estate investment firms exploring community development. As more capital flows into this area, and if restrictions begin to loosen, we should have more locations available for homes. However, that remains a challenge for us, and it's something we are addressing with our community development efforts.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Mr. Duncan Bates for any closing remarks.

Great. Thank you. No, all I would like to say is I'd like to thank everybody for joining our call, and we look forward to hosting this on a regular quarterly basis in the future. So, thanks for your support.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference call. You may now disconnect. Have a great day.