Forestar (US:FOR)2023-04-20 23:03Financial Data and Key Metrics Changes - Consolidated revenues for Q2 2023 totaled $301.5 million, a decrease from $421.6 million in Q2 2022 [2] - Net income attributable to the company was $26.9 million, or $0.54 per diluted share, compared to $47.8 million, or $0.96 per diluted share, in the prior-year quarter [54] - Gross profit was $55.9 million, down from $87.5 million in the prior-year quarter, with a gross profit margin of 18.5%, a decline of 230 basis points [32][27] - The net debt to capital ratio improved to 25.2% from 29.9% in the prior-year period [4] Business Line Data and Key Metrics Changes - The company sold 2,979 lots during the quarter with an average sales price of $84,700 [31] - 11% of second quarter deliveries were sold to customers other than D.R. Horton, compared to 18% in the prior-year quarter [3] - The lot position decreased by 5,900 lots or 7% sequentially and by 20,100 lots or 21% year-over-year [37] Market Data and Key Metrics Changes - The company expects U.S. single-family housing starts to decline between 15% to 30% compared to 2022 [66] - The average sales price per lot fell mid-single digits quarter-over-quarter, attributed to geographic and lot size mix rather than a decline in lot prices [77][78] Company Strategy and Development Direction - The company aims to double its market share to 5% over the intermediate term, focusing on expanding relationships with homebuilders [3][42] - The capital structure is viewed as a competitive advantage, allowing operational flexibility and fixed cost debt [39] - The company is strategically positioned to take advantage of opportunities arising from tighter financing conditions for smaller developers [87] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current housing market challenges, emphasizing operational discipline and cost management [52] - There is uncertainty regarding the housing market's trajectory for the remainder of the year, but the company remains flexible to adjust to builder demand [11] - The company is closely monitoring market conditions and is prepared to ramp up development as demand improves [92] Other Important Information - The company incurred non-cash real estate impairment charges totaling $19.4 million, which significantly impacted gross profit margins [32] - SG&A expenses were reduced to $22 million, or 7.3% of revenues, marking the fourth consecutive quarter of reduced SG&A costs [56] Q&A Session Summary Question: What percentage of deals have achieved cash return within 36 months? - Management indicated that they are likely exceeding the 36-month return target based on historical performance [46] Question: How does contractor availability compare to pre-COVID levels? - Management noted that contractor availability is improving but has not yet returned to pre-COVID levels [71] Question: Are there any signs of land price relief or distressed deals? - Management stated that while there is increased availability, significant discounts on land prices have not yet been observed [76] Question: What is the outlook for average sales price (ASP) moving forward? - Management expects ASP to remain stable for the rest of the year, influenced by geographic and lot size mix [101]