Forestar (US:FOR)2023-01-24 23:56Financial Data and Key Metrics Changes - In Q1 2023, net income attributable to the company was $20.8 million or $0.42 per diluted share, down from $40.5 million or $0.81 per diluted share in the prior year quarter [11] - Consolidated revenues for the quarter totaled $216.7 million, compared to $407.6 million during Q1 2022 [11] - Gross profit margin increased by 390 basis points to 21.9%, while pre-tax profit margin was 12.9%, a decrease of 20 basis points from the previous year [81] Business Line Data and Key Metrics Changes - The company sold 2,263 lots during the quarter with an average sales price of $90,100, which is expected to fluctuate based on geographic location and lot size mix [80] - 7% of first quarter deliveries were sold to customers other than D.R. Horton, down from 11% in the prior year quarter [14] - Approximately 30% of owned lots are under contract to sell, representing about $1.5 billion of future revenue [17] Market Data and Key Metrics Changes - New home sales fell 15% in November and housing starts were down 25% in December from a year ago, leading to a revenue decline of nearly 50% [4] - Single-family home starts fell roughly 25% in December from the previous year [12] - The company noted that while materials like concrete and cement are challenging to secure, the cost to develop residential lots continued to decline [12] Company Strategy and Development Direction - The company has been proactively reducing land acquisition over the past 18 months and staging development activity to prepare for increased demand for residential lots [9] - The capital structure and operational flexibility are highlighted as competitive advantages, allowing the company to navigate changing economic conditions effectively [22] - The company plans to leverage its platform and balance sheet to take advantage of opportunities to build shareholder value [26] Management's Comments on Operating Environment and Future Outlook - Management commented on the housing market's transition and the expectation that homebuilders will shift towards buying finished lots from third-party developers [24] - The company is maintaining a strong balance sheet with significant liquidity and modest leverage, ending the quarter with over $580 million of liquidity [21] - Management expressed optimism about the company's ability to execute well and consolidate market share despite the challenging environment [33] Other Important Information - The company incurred $2.4 million of option deposits and due diligence write-offs in the quarter [16] - Total debt at December 31 was $706 million, with a net debt to capital ratio of 28.7%, down from 33.9% in the prior year [20] Q&A Session Summary Question: Will the company continue to increase its market share with D.R. Horton? - Management expects that market share within D.R. Horton will increase, although the pace may be gradual [41] Question: Are there opportunities to buy discounted land or distressed deals? - Management indicated that they have not seen significant oversupply in the market and are monitoring specific markets like Arizona and Colorado for potential risks [43] Question: What is the outlook for average sales price (ASP) in 2023? - Management anticipates that ASP may trend down slightly from $90,100 due to market conditions and geographic mix [46] Question: Are other developers exiting the market? - Management noted that smaller developers are struggling to secure financing, leading to a slowdown in transactions [51] Question: How is the company managing pricing and potential impairments? - Management stated that they have not seen widespread impairments and are actively monitoring projects for indicators of impairment [58]