Forestar (US:FOR)2026-01-20 17:02Financial Data and Key Metrics Changes - Revenues for the first quarter reached $273 million, a 9% increase from $250.4 million in the prior year quarter [4][5] - Net income was $15.4 million or $0.30 per diluted share, compared to $16.5 million or $0.32 per diluted share in the prior year quarter [5] - Pre-tax income was $20.8 million, down from $21.9 million in the same quarter last year, with a pre-tax profit margin of 7.6% compared to 8.7% [5][6] - Book value per share increased 10% from a year ago to $35.10 [4][13] - The company ended the quarter with $820 million of liquidity, including $212 million in unrestricted cash [13] Business Line Data and Key Metrics Changes - The company sold 1,944 lots in the quarter with an average sales price of $121,000, influenced by a mix of lot deliveries from higher price point communities [4][5][6] - Gross profit margin for the quarter was 20.1%, down from 22% in the prior year quarter, but would have been approximately 21.5% excluding a low-margin tract sale [6][12] Market Data and Key Metrics Changes - Demand for new homes is being impacted by affordability constraints and cautious consumer sentiment, although mortgage rate buydown incentives are helping to spur demand [8] - The company’s total lot position was 101,000 lots, with 65% owned and 35% controlled through purchase contracts [10] Company Strategy and Development Direction - The company remains focused on turning inventory, maximizing returns, and consolidating market share in the lot development industry [5] - The strategic goal is to maintain a three- to four-year supply of land and lots while managing development phases to match market demand [10][12] - The company plans to invest approximately $1.4 billion in land acquisition and development in fiscal 2026, subject to market conditions [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that home affordability constraints and cautious consumer sentiment will continue to be near-term headwinds for new home demand [15][16] - The company is confident in the long-term demand for finished lots and its ability to gain market share in the fragmented lot development industry [16] Other Important Information - The company’s capital structure is viewed as a competitive advantage, providing operational flexibility and strong liquidity to capitalize on opportunities [13][14] - The company’s underwriting criteria for new development projects remains unchanged, targeting a minimum 15% pre-tax return on average inventory [12] Q&A Session Summary Question: Discussion on gross margins and future expectations - Management indicated that the gross margin was impacted by the mix of projects delivering lots, and they expect margins to remain in the historical range of 21%-23% [18] Question: Customer pricing pushback and market conditions - Management noted a shift from large bulk takedowns to structured quarterly takedowns, with no significant changes in pricing observed [21] Question: SG&A spending expectations - Management expects SG&A to remain stable, with headcount and labor costs being the primary components [22] Question: Inventory and market strategy in Texas and Florida - Management is being selective in development activities in Texas and Florida due to higher resale inventory but remains optimistic about long-term fundamentals in these markets [27] Question: Impact of phased developments on cost structure - Management stated that pulling back on phased developments does not significantly impact the cost structure and helps reduce cycle times [28]