Forestar (US:FOR)2025-01-21 17:02Financial Data and Key Metrics Changes - In Q1, net income was $16.5 million or $0.32 per diluted share, down from $38.2 million or $0.76 per diluted share in the prior year quarter [6] - Revenues totaled $250.4 million compared to $305.9 million in the prior year quarter, reflecting a decrease [6][7] - Pre-tax income was $21.9 million, down from $51.2 million in the same quarter last year, with a pre-tax profit margin of 8.7% compared to 16.7% previously [6][8] - SG&A expenses increased by 29% to $36 million, primarily due to a 30% increase in employee count [8] Business Line Data and Key Metrics Changes - The company sold 2,333 lots in the quarter with an average sales price of $105,500 [7] - The owned lot position increased by 23% year-over-year, and community count rose by 25% [5] - The gross profit margin for the quarter was 22%, slightly down from 23.8% in the prior year quarter [8] Market Data and Key Metrics Changes - Demand for finished lots remains solid, with owned lots under contract doubling from a year ago [4] - The company’s total lot position increased by 29% to 106,000 lots, with 64% owned and 36% controlled through purchase contracts [13] - The backlog of contracted lots is expected to generate approximately $2.2 billion in future revenue [14] Company Strategy and Development Direction - The company is focused on investing in land acquisition and development, with a planned investment of approximately $2 billion in fiscal 2025 [12] - The strategic goal is to double market share to 5% over the intermediate term [19] - The company aims to maintain a disciplined approach to capital investment while enhancing long-term value [19] Management's Comments on Operating Environment and Future Outlook - Management noted that while home inventories have increased, affordable housing supply remains limited, with favorable demographics supporting housing demand [8] - The company expects Q1 to be the lowest delivery quarter of the fiscal year, with higher revenues anticipated in the second half [18] - Management expressed confidence in the company’s position to gain market share in the fragmented lot development industry [19] Other Important Information - The company ended the quarter with $645 million in liquidity, including $132 million in cash [14] - The corporate credit rating was upgraded from B+ to BB- [14] - The company’s capital structure provides operational flexibility and positions it to take advantage of attractive opportunities [15] Q&A Session Summary Question: Can you provide more detail on the stabilization of costs in land development? - Management indicated that development costs have stabilized over the past 12 months, with no significant price increases observed [23] Question: How do you expect employee count growth to impact cost leverage in the next year or two? - Management expects SG&A expenses to moderate for the remainder of the year, anticipating high single-digit growth [26] Question: What drove the higher revenue per lot this quarter? - The increase was attributed to a specific infill project with significant lot prices that skewed the average sales price upward [28] Question: How has builder demand been trending year to date? - Builder demand remains strong, particularly for new communities, with existing communities also seeing solid demand [32] Question: Can you elaborate on the cadence of deliveries for the rest of the year? - Management noted that Q1 is typically the lowest delivery quarter, with a majority of deliveries expected in the second half of the year [34]