Q4 2023 Forestar Group Inc Earnings Call

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Yeah.

Speaker 1: Good afternoon and welcome to 4STAR's fourth quarter and fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the call over to Ashley Dagley, Corporate Securities Counsel for 4STAR.

Good afternoon, and welcome to four stores fourth quarter and fiscal 2023 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn.

The call over to Ashley Dagley corporate Securities Counsel for four star.

Speaker 2: Thank you, John . Good afternoon and welcome to the call to discuss Four Star's fourth quarter and fiscal 2023 results. Thank you for joining us. Before we get started, today's call includes forward looking statements as defined by the Private Securities Litigation Reform Act of 1995.

Thank you John Good afternoon, and welcome to the call to discuss <unk> fourth quarter and fiscal 2023 results. Thank you for joining US before we get started today's call includes forward looking statements as defined by the private Securities Litigation Reform Act of 1995.

Speaker 2: Although 4STAR believes any such statements are based on a reasonable assumption, there is no assurance that actual outcomes will not be materially different.

Although <unk> believes any such statements are based on a reasonable assumptions, there's no assurance that actual outcomes will not be materially different.

Speaker 2: All forward-looking statements are based upon information available to 4STAR on the date of this conference call and we do not undertake any obligation to update or revise any forward-looking statements publicly. Additional information about factors that could lead to material changes in performance is contained in 4STAR's annual report on Form 10-K and its most recent quarterly report on Form 10-Q , both of which are filed with the Securities and Exchange Committee.

All forward looking statements are based upon information available resources are on the date of this conference call and we do not undertake any obligation to update or revise any forward looking statements publicly additional information about factors that could lead to material changes in performance is contained in <unk> annual rich.

On Form 10-K, and its most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission.

Speaker 2: Our earnings release is on our website at investor.4star.com, and we plan to file our 10k late next week. After this call, we will post an updated investor presentation to our investor relations site under events and presentations for your budget.

Our earnings release is on our website at Investor <unk> Com and we plan to file our 10-K late next week. After this call. We will post an updated investor presentation to our Investor Relations site under events and presentations for your reference.

Speaker 2: Now I will turn the call over to Dan Bartok, our CEO .

Now I will turn the call over to Dan Bartok CEO.

Speaker 3: Thanks, Ashley. We appreciate you filling in for Katie this quarter.

Thanks, Ashley we appreciate you filling in for Kt this quarter.

Speaker 3: Good afternoon, everyone. As always, we appreciate your interest in 4STAR and taking the time to discuss our fourth quarter and fiscal year results.

Good afternoon, everyone as always we appreciate your interest in <unk> and taking the time to discuss our fourth quarter and fiscal year results. I am pleased to also be joined on the call today by Jim Allen, Our Chief Financial Officer, Mark Walker, our Chief operating officer.

Speaker 3: I am pleased to also be joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer.

Speaker 3: The 4STAR team finished the year strong, highlighted by net income increasing 43% from the prior year quarter to $72.4 million, or $1.44 per diluted share.

The four star team finished the year strong highlighted by net income increasing 43% from the prior year quarter to $72 $4 million or $1 44 per diluted share.

Speaker 3: Pre-tax income in the fourth quarter increased 44% to $95.4 million, and our pre-tax profit margin was 17.4%.

Pre tax income in the fourth quarter increased 44% to $95 $4 million and our pre tax profit margin was 17, 4%.

Speaker 3: Revenues for the quarter increased 44% to $549.7 million, while lots sold increased 27% to $4,986.

Revenues for the quarter increased 44% to $549 $7 million, while lot sold increased 27% to 4986.

Speaker 3: While our fourth quarter performance was substantially stronger than a year ago, the first half of fiscal 2023 was challenging.

While our fourth quarter performance was substantially stronger than a year ago. The first half of fiscal 2023 was challenging.

Speaker 3: Despite the challenges and volatility that occurred this year, we maintained double-digit returns and a strong pre-tax profit margin of 15.4 percent, while generating $364 million of operating cash flow and increasing our liquidity to $1 billion.

Despite the challenges and volatility that occurred this year, we maintained double digit returns.

<unk> pre tax profit margin of 15, 4%.

While generating $364 million of operating cash flow and increasing our liquidity to $1 billion.

Speaker 3: Our book value per share increased 14% from a year ago and our return on equity was 13.2%.

Our book value per share increased 14% from a year ago and our return on equity was 13, 2%.

Speaker 3: As we begin fiscal 2024, 4STAR is well-positioned, both financially and operationally, to capitalize on builder demand for finished lots.

As we begin fiscal 2024, four star is well positioned both financially and operationally to capitalize on builder demand for finished lots we.

Speaker 3: We will continue to focus on investing for our future growth.

We will continue to focus on investing for our future growth.

Speaker 3: turning our inventory, maximizing returns, and consolidating market share in the highly fragmented lot development.

Turning our inventory maximizing returns and consolidating market share in the highly fragmented lot development industry.

Jim will now discuss our fourth quarter and fiscal 2023 financial results in more detail.

Thank you Dan in the fourth quarter net income increased 43% to $72 4 million.

Our $1 44 per diluted share compared to $50 8 million or $1 <unk> per diluted share in the prior year quarter.

Speaker 4: Revenues for the fourth quarter increased 44 percent to $549.7 million compared to $381.4 million in the prior year quarter.

Revenues for the fourth quarter increased 44% to $549 7 million compared to $381 4 million in the prior year quarter.

Speaker 4: The current quarter includes $64.1 million in track sales and other revenue, and $4.3 million in revenue from deferred development projects.

The current quarter includes $64 1 million and track sales and other revenue and $4 $3 million in revenue from deferred development projects.

Speaker 4: Lots sold during the quarter increased 27% to 4,986 lots with an average sales price of $97,400.

Lots sold during the quarter increased 27% to 4986 lots with an average sales price of $97400.

Speaker 4: We expect continued quarterly fluctuations in our average sales price based on the geographic location and lot size mix of our delivery.

We expect continued quarterly fluctuations in our average sales price based on the geographic location in lot size mix of our deliveries.

Speaker 4: For the fiscal year, net income decreased 7% to $166.9 million or $3.33 per diluted share compared to $178.8 million or $3.59 per diluted share in the prior year.

For the fiscal year, net income decreased 7% to $166 $9 million or $3 33 per diluted share.

Impaired to $178 8 million or $3 59 per diluted share in the prior year.

Speaker 4: Revenue for fiscal 2023 totaled $1.4 billion, which includes $132.2 million of track sales and other revenue and $29 million in revenue from deferred development projects.

Revenue for fiscal 2023 totaled $1 4 billion, which includes $132 $2 million of track sales and other revenue and $29 million in revenue from deferred development projects.

Speaker 4: During fiscal 2023, lots sold decreased 21% to 14,040 lots with an average sales price of $91,000.

During fiscal 2023 lots sold decreased 21% to 14 40 lots with an average sales price of 91.

Speaker 5: Mark, our fourth quarter pre-tax income increased 44% to $95.4 million.

Mark our fourth quarter pre tax income increased 44% to $95 4 million compared.

Speaker 5: compared to $66.4 million in the prior year quarter. And our pre-tax profit margin was 17.4%.

Compared to $66 4 million in the prior year quarter.

And our pre tax profit margin was 17, 4%.

Speaker 5: consistent with the prior year quarter. Our gross profit margin this quarter was 21%, down 200 basis points sequentially, and 200.

Consistent with the prior year quarter, our gross profit margin this quarter was 21%.

200 basis points sequentially.

240 basis points from a year ago.

Speaker 5: Pre-tax income for fiscal 2023 totaled $221.6 million compared to $235.8 million in fiscal 2022.

Pretax income for fiscal 2023 totaled 221 6 million.

Compared to $235 8 million.

In fiscal 2022.

Speaker 5: and their pre-tax profit margin for the year was 15.4%.

And our pre tax profit margin for the year was 15, 4%.

Speaker 5: Our gross profit margin for the year was 21.2%, down 10 basis points from the prior year.

Our gross profit margin for the year was 21, 2%.

Around 10 basis points from the prior year.

Speaker 5: During fiscal 2023, we recorded $19.4 million of non-cash real estate impairment charges to cost of sales, reducing our pre-tax profit margin by 140 basis points. And our gross profit margin.

During fiscal 2023, we recorded $19 4 million of non.

Noncash real estate impairment charges to cost of sales, reducing our pre tax profit margin by 140 basis points and our gross profit margin by 130 basis points excluding.

Speaker 5: excluding real estate impairment charges, our fiscal 2023 pre-tax profit margin and gross profit margin were 16.8% and 22.5% respectively. Jim?

Excluding real estate impairment charges for fiscal 2023 pretax profit margin and gross profit margin was 16, 8% and 22, 5% respectively Jim.

Speaker 4: In the fourth quarter, SG&A expense was $26.4 million or 4.8% as a percentage of revenues compared to $23.7 million and 6.2% in the prior year quarter.

In the fourth quarter SG&A expense was $26 4 million or four 8% as a percentage of revenues compared to $23 7 million and six 2% in the prior year quarter.

Speaker 4: For the year, SG&A expense was $97.7 million, or 6.8% as a percentage of revenues, up 60 basis points from 6.2% in the prior year.

For the year SG&A expense was $97 7 million or six 8% as a percentage of revenues up 60 basis points from six 2% in the prior year.

Speaker 5: We will continue to focus on controlling our S.G. and a cost while ensuring that our infrastructure supports our business. As for current market conditions, the supply of new and existing homes at affordable price points remains limited and demographic supporting housing demand remain favorable despite higher.

We will continue to focus on controlling our SG&A costs, while ensuring that our infrastructure supports our business Mark as for current market conditions, the supply of new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable despite higher mortgage rates and inflationary pressures.

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Speaker 5: Builder incentives have helped bridge the affordability gap for many homebuyers. And low resale supply continues to be a driver of buyers choosing new construction.

Builder incentives have helped bridge the affordability gap for many homebuyers and low resale supply continues to be a driver of buyers choosing new construction.

Speaker 5: The supply of vacant developed lots, particularly at affordable price points, continues to be constrained across our footprint.

The supply of vacant developed lots, particularly at affordable price points continues to be constrained across our footprint.

Speaker 5: we are uniquely positioned to take advantage of the shortage of finished law.

And we are uniquely positioned to take advantage of the shortage of finished lots and we are focused on developing lots for homes at affordable price points demonstrated by our average sales price this year of roughly $90000.

Speaker 5: We are focused on developing lots for homes at affordable price.

Speaker 5: demonstrated by our average sales price this year of roughly $90,000.

Speaker 5: Availability of contractors and necessary materials has improved over the past several months, but we have not seen overall reductions in the cost to develop land.

Availability of contractors and necessary materials has improved over the past several months, but we have not seen overall reductions in the cost to develop land.

Speaker 5: We will continue to value engineer projects and work with our trade partners to develop in the most efficient way possible.

We'll continue to value engineer, our projects and work with our trade partners to develop in the most efficient way possible.

Speaker 5: Homebuilders continue to compete to secure land and lot position.

Homebuilders continue to compete to secure land and lot positions.

Speaker 5: Many are looking to replace current closeout communities to position for future growth.

We are looking to replace current closeout communities to position for future growth.

Speaker 5: As a result, we are not seeing any softening in land prices. However, in most markets, we have seen an adjustment back to more normal contract terms. Dan.

As a result, we are not seeing any softening in land prices. However, in most markets. We have seen an adjustment back to more normal contract terms.

D. R. Horton is our largest and most important customer.

Speaker 3: 15% of the homes D.R. Horton closed this year run a four-star developed lot.

<unk>, 15% of the homes D. R. Horton closed this year ran a four star develop law.

Speaker 3: Our mutually stated goal is for one out of every three homes at the R Horton sells to be on a lot developed by four star.

Our mutually stated goal is for one out of every three homes at D. R. Horton sells to be on a lots developed by four star we.

Speaker 3: we have significant opportunity to grow our market share within D.R. Horton.

We have significant opportunity to grow our market share within D. R. Horton.

Speaker 3: We are also working to expand our relationships with other homebuilders.

We are also working to expand our relationships with other homebuilders and have an intermediate term goal of selling 30% of our lots to builders other than D. R. Horton.

Speaker 3: and have an intermediate term goal of selling 30% of our lots to builders other than D.R. Horton.

Speaker 3: We sold lots of 26 unique customers in fiscal 2023 compared to 22 customers in the prior year.

We sold lots of 26 unique customers in fiscal 2023 compared to <unk> 22 customers in the prior year.

Speaker 3: And 14% of our fourth quarter deliveries, or 684 lots, were sold to other homebuilders.

And 14% of our fourth quarter deliveries or 684 lots were sold to other homebuilders.

Jim.

Speaker 4: Four stars underwriting criteria for new development projects remains unchanged at a minimum 15 percent pre tax return on average inventory and a return of our initial cash investment within 36 months.

<unk> underwriting criteria for new development projects remains unchanged at a minimum 15% pre tax return on average inventory and a return of our initial cash investment within 36 months.

Speaker 4: During the fourth quarter, we invested approximately $340 million in land and land development, of which $210 million was for land development and $130 million was for land.

During the fourth quarter, we invested approximately $340 million in land and land development of which $210 million was for land development and $130 million was for land for.

Speaker 4: For the full year we invested approximately $980 million of which $780 million was for land development and $200 million was for land.

For the full year, we invested approximately $980 million of which $780 million was for land development and $200 million was for land and.

In fiscal 2024, we currently expect our investments in land acquisition and development totaled one five to $1 $6 billion Mark our lot position at September 30 was 79002 under lots of which 32400 lots are owned and 26800 lots are controlled through <unk>.

Speaker 5: of which 52,400 lots are owned and 26,800 lots are controlled through purchase contracts. 6,400.

Just contracts 6400 of our owned lots are finished.

Speaker 5: We continue to target a three to four year owned inventory of land and lots and remain focused on managing our development phases.

We continue to target a three to four year owned inventory of land and lots and remain focused on managing our development phases to deliver finished lots at a pace that matches the market demand consistent with our emphasis on capital efficiency.

Speaker 5: deliver finished lots at a pace that matches market demand, consistent with our emphasis on capital efficiency.

Speaker 5: Twenty nine percent of our own lots are under contract to sell representing approximately one point three billion dollars of future revenue.

29% of our own lots are under contract to sell representing approximately $1 3 billion of future revenue.

Speaker 5: These contracts have $121.4 million of hard-earned money deposits associated with them.

These contracts have a $121 $4 million of hard earnest money deposits associated with them.

Speaker 5: Another 32 percent of our own lots are subject to a right of first offer to D.R. Horton based on executed purchase and sale agreements.

Another 32% of our own laws are subject to a right of first offer to D. R. Horton based on executed purchase and sale agreements Jim.

Speaker 4: We have significant liquidity and are using modest leverage to keep our balance sheet strong. We ended the quarter with approximately $1 billion of liquidity, including an unrestricted cash balance of $620 million and $380 million of available capacity on our undrawn revolving credit facility.

We have significant liquidity and are using modest leverage to keep our balance sheet strong. We ended the quarter with approximately $1 billion of liquidity, including an unrestricted cash balance of $620 million and $380 million of available capacity on our undrawn revolving credit facility.

Speaker 4: Total debt at September 30th was $695 million, with no senior note maturities until fiscal 2026. And our net debt to capital ratio was 5.5%.

<unk> data at September 30 was $695 million with no senior note maturities until fiscal 2026, and our net debt to capital ratio was five 5%.

Speaker 4: We ended the quarter with $1.4 billion of stockholders' equity, and our book value per share increased 14% from a year ago to $27.43.

We ended the quarter with $1 $4 billion of stockholders' equity and our book value per share increased 14% from a year ago to $27 43.

Speaker 4: Four stars capital structure is one of our biggest competitive advantages, and it sets us apart from other land developers project level land acquisition and development loans are less available today and have continued continue to become more expensive, which impacts the majority of our competitors.

<unk> capital structure is one of our biggest competitive advantages and it sets us apart from other land developers project level land acquisition and development loans are less available today and is contingent continuing to become more expensive, which impacts the majority of our competitors other developers generally.

Speaker 4: Other developers generally use project level development loans, which are typically more restrictive, have floating rates, and create administrative complexity, particularly in a rising rate environment.

<unk> project level development loans, which are typically more restrictive have floating rates and create administrative complexity, particularly in a rising rate environment or.

Speaker 4: Our capital structure provides us with operational flexibility while our strong liquidity positions us to take advantage of attractive opportunities when they arise. Dan, I will now turn it back over to you for closing.

Our capital structure provides us with operational flexibility, while our strong liquidity positions us to take advantage of attractive opportunities when they arise.

I'll now turn it back over to you for closing remarks.

Thanks, Jim.

Speaker 3: We are pleased with the four-star team's execution during fiscal 2023, delivering strong profitability and maintaining double-digit returns. Thank you to all the four-star team members for your efforts this year.

We are pleased with the four star teams execution during fiscal 2023, delivering strong profitability and maintaining double digit returns. Thank you to all of the four star team members for your efforts this year.

Speaker 3: The fourth quarter was especially strong with our delivery of almost 5,000 lots. The variability we experienced throughout fiscal 2023 illustrates the quarter to quarter fluctuations that can occur in the demand and the delivery of finished lots.

The fourth quarter was especially strong with our delivery of almost 5000 lots the variability we experienced throughout fiscal 2023 illustrates the quarter to quarter fluctuations that can occur in the demand and the delivery of finished lots.

Speaker 3: It also illustrates 4Star's ability and its flexibility to adjust to market changes.

It also illustrates <unk> ability and its flexibility to adjust to market changes.

Speaker 3: The current interest rate environment and market factors create a challenging backdrop as we position the company for the next several years of increasing market share.

The current interest rate environment and market factors create a challenging backdrop as we position the company for the next several years of increasing market share.

Speaker 3: As we look forward to fiscal 2024, based on current market conditions, we currently expect to deliver between 14,500 and 15,500 lots and generate $1.4 to $1.5 billion of revenue.

As we look forward to fiscal 2024.

Based on current market conditions, we currently expect to deliver between 14000 515500 lots and generate one four to $1 5 billion of revenue.

Speaker 3: We are closely monitoring each market as we strive to balance pace and price to maximize returns in each project.

We are closely monitoring each market as we strive to balance pace and price to maximize returns in each project.

Speaker 3: We are the market leader in a highly fragmented and under-capitalized industry, and we are uniquely positioned to take advantage of builder demand for finished lots.

We are the market leader in a highly fragmented and under capitalized industry and we are uniquely positioned to take advantage of builder demand for finished lots.

Speaker 3: Our goal remains the same, to double our market share to 5% over the intermediate term.

Our goal remains the same to double our market share to 5% over the intermediate term.

Speaker 3: We will continue to aggregate significant market share over the next few years, while maintaining our disciplined approach and investing capital to enhance the long-term value of 4STAR.

We will continue to aggregate significant market share over the next few years, while maintaining our disciplined approach to investing capital to enhance the long term value for STAAR.

Speaker 3: We have a track record of solid execution and will utilize our platform a strong balance sheet to capitalize on opportunities that build shareholder value.

We have a track record of solid execution, and we will utilize our platform a strong balance sheet to capitalize on opportunities that build shareholder value.

Speaker 3: With our experienced team that has successfully managed through prior market cycles, we are well-equipped to navigate this dynamic environment while investing for our future growth and further strengthening our industry-leading position.

With our experienced team that has successfully managed through prior market cycles, we are well equipped to navigate this dynamic environment, while investing for our future growth and further strengthening our industry leading position.

John at this time, we will open the line for questions.

Speaker 1: Thank you. At this time, we will be conducting a question and answer session.

Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.

Speaker 1: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please.

Pressing the star keys.

One moment, please while we poll for questions.

Speaker 1: First question comes from Carl Reichert with BT IG. Carl, please.

The first question comes from Carl Reichardt with BT.

Carl Please proceed.

Speaker 6: Thanks, everybody. So, I think if I heard you guys right, you're looking at land spend plus development spend next year that's up 50%, more than 50%.

Thanks, everybody.

So I think if I heard you guys right Youre looking at.

Land spend or develop and plus development spend next year, that's up 50% more than 50%.

Speaker 6: from this last fiscal year. I was wondering if you could talk a little bit about the split between new lots versus investing development on existing lots, and if there were gonna be any significant alterations in terms of the geographic mix, new markets or just leaning in one direction in markets that you're already in.

From this last fiscal year.

I was wondering if you could talk a little bit about the split between new lots versus investing development on existing lots and if there were going to be any significant alterations in terms of the geographic mix new markets or just leaning in one direction in markets that you're already in.

Yes.

Speaker 3: Yeah, well, we're seeing some significant opportunities right now, and we expect that our land spend will increase pretty significantly over last year. I mean, our last quarter was was probably more reflective of what you'll see in from land spend as far as the actual split between development costs and land and land spend. I don't know that I really have that breakout, but we do expect to use some of our liquidity to increase our balance sheet this year.

Yes, well, we're seeing some significant opportunities right now and we expect that our land spend will increase pretty significantly over last year.

Quarter was probably more reflective of what youll see from land spend as far as the actual split between development cost in land and land spend I don't know that I really have that breakout.

But we do expect to use some of our liquidity to increase our balance sheet this year as.

Speaker 3: As far as markets that we're in, most of what we're doing is building depth within the markets that we're in. We've got the teams in place, we'll continue to make investments in team as we build out our platform. But I don't really see us opening up a lot of new markets. I think you'll see on this one, we re-entered Seattle this year, this last quarter, and then we actually did a deal in West Virginia in the western suburbs of D.C. there.

As far as markets that we're in most most of what we're doing is building depth within the markets that we're in we've got the teams in place we will continue to make investments in team as we build out our platform, but I don't really see us opening up a lot of new markets I think you will see.

And this one we re entered Seattle. This year. This last quarter and then we actually did a deal in west Virginia that in the western suburbs of DC. There. So we have entered a couple of new markets or at least re entered one of entered a new one and it will probably be one or two more of those that we probably reenter.

Speaker 3: So we have entered a couple of new markets, or at least re-entered one and entered a new one, and there'll probably be one or two more of those that we probably re-enter.

Speaker 3: Again, I think most of our focus is going to be on continuing to build market share in the markets that we're already in, Carl.

But again I think most of our focus is going to be.

Continuing to build market share in the markets that we're already occur.

Speaker 6: Okay, thanks, Dan. And then, Jim, you've said this before, you've all said this before, the fluctuation in average revenue per lot or lot prices, and we know it's going to bounce around. Could you give us some type of lower bound and upper bound of the kind of numbers that we might expect based on the lots that you're anticipating on delivering in 24, or even just the pipeline that you have delivering in 24 or beyond?

Okay. Thanks, Tim and then Jim you said that you all said this before the fluctuation.

Average revenue per lot or lot prices, and we know it's going to bounce around.

Could you give us some type of lower bound an upper bound of the kind of numbers that we might expect based on the lots that you are anticipating on delivering in 'twenty four or even just.

The pipeline that you have delivering in 'twenty four or beyond.

Speaker 4: I don't know that we really have that. I mean, our average lot price does bounce around.

I don't know that we really have that.

Our average lot price does bounce around.

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Speaker 4: Because we underwrite and focus on returns as opposed to margins, you know, there's a

Because we underwrite and focus on returns as opposed to margins.

Speaker 4: always going to be changing lot prices and margins due to mix, whether it's geographic or

<unk>.

Always going to be changing lot prices.

And margins due to mix.

Whether it's geographic or lot size mix.

Speaker 4: I don't know that I can give you a real range. I mean, you can see the range we've had this year even from last quarter to this quarter.

I don't know that I can give you a real range I mean, you can see the range. We've had this year even from last quarter to this quarter.

And it's pretty can be pretty significant.

Speaker 3: pretty can be pretty significant. Yeah, I'll add a little bit. What's interesting is when you look back at the year versus any individual quarter, Carl, you know our ASP this year for the year was up about 6% or 5% from the prior year and then last year was up about 5 or 6% from the year before that.

I'll add a little bit.

What's interesting is when you look back at the year versus any individual quarter Carl.

Our asps this year for the year was up about 6% or 5% from the prior year and then last year was up about five or 6% from the year before that.

Speaker 3: You know, if I was doing the chart, I would probably assume something in that range for next year. But again, it could fluctuate. Clearly, from quarter to quarter, it's going to fluctuate based on what we're doing in a given market. But over a year, that's probably the right.

If I was if I was doing the chart I would probably assume something in that range for next year, but again it could fluctuate clearly from quarter to quarter is going to fluctuate based on what we're doing.

Given market, but over a year probably right.

Speaker 6: Okay, that was my default if you didn't answer it and then if I can sneak one more in so the guidance on deliveries for twenty four.

Okay that was my default if you didn't answer it.

And then if I can sneak one more in so that the guidance on deliveries for 'twenty four.

Speaker 6: Sort of matches up more or less with your biggest customer in terms of their delivery volume. Obviously, there's timing differentials, and I know that. So, is that basically to say that you expect that outside of your largest customer in terms of sales to other builders, you'd grow them at a similar rate as to what you'd grow your business to DR Horton? Or do you expect that mix to fluctuate more distinctly in 2024 in terms of expanding that base, since I know you want to do that?

Sort of matches up more or less with your biggest customer in terms of their delivery volume, obviously theres timing differentials I may know that.

Is that basically to say that you expect that outside of your largest customer in terms of sales to other builders you'd grow them at a similar rate as to what you'd grow your business to D. R. Horton or do you expect that mix to fluctuate more distinctly in 2024 in terms of expanding that base. Since I know you want to do that.

Speaker 3: Yeah, I at this at this point looking at the year in front of us, I would just I would assume that it's going to stay the mix is going to stay pretty much the same. To be honest with you. I think we're getting a lot more interest from other builders as I think their development partners are also having difficulty. You know, getting financing, but but overall, when I look at the lots that will be delivering in 24, you know, that's all stuff we own already and in development. So I would expect that that that, you know, probably.

Yes.

At this point looking at the year in front of US I would just I would assume that it's going to stay that mix is going to stay pretty much. The same to be honest with you I think we're getting a lot more interest from other builders as I think they are development partners are also having difficulty.

Getting financing, but overall when I look at the lots that we will be delivering in 'twenty four.

Thats all stuff, we own already and in development.

So I would expect that that debt.

<unk> pro rata share will stay pretty flat.

Speaker 6: I appreciate the answers. Thanks so much, guys. Say hi to Katie.

Okay I appreciate the answers. Thanks, so much guys say advocating.

Alright, Thanks Carl.

Speaker 1: The next question comes from Truman Patterson with Wolf Research.

The next question comes from Truman Patterson with Wolfe Research. Please proceed.

Speaker 5: Hey, good afternoon, everyone. And I apologize, my my phone has been cutting out. So if this is a

Hey, good afternoon, everyone and I apologize my my.

<unk> has been cutting out so if this is a.

Speaker 5: a duplicate but i i did want to follow up uh... on on one of carl's questions

A duplicate but I did want to follow up.

On one of <unk> questions.

Speaker 5: uh... you know when we're looking at your fiscal fourth quarter uh... while pricing it increase like ten percent year-over-year to ninety seven thousand and

When we're looking at your fiscal fourth quarter, while pricing increase like 10% year over year to 97000, and if I'm looking at your 24 guide it looks like Asps remain at that level moving forward.

Speaker 5: I'm looking at your 24 guide, looks like ASPs remain, you know, at that level moving forward.

Speaker 5: Is there any geographical makeshift or perhaps consumer makeshift, you know, I'm thinking larger lots, more of a move up focus or

Is there any geographical mix shift or perhaps consumer mix shift I'm thinking larger lots more of a move up focus or is this kind of.

Speaker 5: is this kind of uh... true pricing power that your you're currently recognizing

True pricing power that you're currently recognizing.

Let me take it.

Speaker 5: Yeah, I think it's true, just true pricing power. I mean, with inflationary costs are going up, obviously it's market by market, community by community. Again, geography and just the mix, the lots themselves, but you know, we are again, pricing our lots to market and trying to face our deliveries in tune, but we can grab additional returns. We'll go out and grab additional returns, but I don't think it's anything particular to lot size.

Yes, I think it's true pricing power I mean with inflationary costs are going up obviously, it's market by market community by community.

Again, geography, and just the mix of lots themselves but.

We are again pricing, our lots to market and trying to phase our deliveries and Tim that we can grab additional returns will go out and grab additional returns, but I don't think it's anything particular to lot sizes sell for the fourth quarter.

Speaker 3: sell for the fourth quarter. Yeah, I think geography. I think fourth quarter is mostly geography. That spike is not a run rate. It was clearly a mixture of some more expensive losses.

I think geography, I think fourth quarter is mostly geography that spike is that a run rate.

It was clearly a mixture of some more expensive lots.

Speaker 5: Okay, okay, gotcha. And then just looking at your closings range of 14.5 to 15.5 lot sales, trying to understand what would get us toward kind of the lower end or the higher end of that range. And I'm thinking really, you know, whether there are any development or muni delays that are kind of built into this, or if it's just, you know, purely a function of market demand and, you know, potentially, you know, changing interest rates or anything along those lines.

Okay. Okay got you and then just looking at your closings range of $14 five to 15 and a half lot.

Sales.

Trying to understand what would get us towards the lower end or the higher end of that range and I'm thinking really whether there any development or muni delays that are kind of built into this or if it's just.

Purely a function of market demand and potentially changing interest rates or anything along those lines.

Speaker 3: Yeah, I mean, I think, you know, low end, we're going to continue to, you know, to focus on returns and making sure that we're moving lots and that the subdivisions are active, you know, the interest rate environment out there today makes it a little challenging to guess, you know, how the rest of the year is going to play out.

Yes, I mean, I think low end, we're going to continue to nil.

The focus on returns.

Making sure that we're moving lots and that the subdivisions or active.

The interest rate environment out there today it makes it a little challenging to guess how the rest of the year is going to play out.

Speaker 3: But I think we've made our best guess. I think we've taken what our knowledge is of the difficulties in different municipalities into account as we do our forecast. So I feel good about that range.

But I think we've made our best guess I think we've taken.

What our knowledge is the difficulties in different municipalities into account as weak as we do our forecasts, but I feel good about that range.

Speaker 3: You know, the upside could be, you know, I think we'll have the last underdevelopment and a strong finished lot inventory that if for some reason rates come down and home sales accelerate, I think we'll be in a position to definitely be at the high end of that.

The upside could be I think we'll have the lots under development at us in a strong finished lot.

Inventory of that if for some reason rates come down and home sales accelerated I think we'll be in a position to definitely be at the high end of that range.

Speaker 5: Okay, perfect. And if I could squeeze one more in, one more in, that you all brought up value engineering, your lot positions, could you just elaborate on that a little bit?

Okay, perfect and if I could squeeze one more in.

One more in you all brought up value engineering your lot position could you just elaborate on that a little bit yes.

Speaker 5: Yes, we go through and plan our projects. We're looking to be as efficient as possible with timing and call. So, looking to value engineer basically our plans up front for better calls, but also for, and we've been very disciplined and phasing our developments and remain very flexible to be able to turn on.

As we go through and plan our projects we're looking at.

Fisher's Basel with timing and call so looking to value engineer basically our plans upfront that our calls but also for and we've been very disciplined in phasing our developments.

Remain very flexible to be able to turn on.

Speaker 5: Um, more developments or increase step on the gas within an existing development or if we need to take her foot off the gas, but from a value engineering standpoint, it's really related to cost and timing. But we'd look at that on every project. And when we're going through due diligence.

More developments or increase step on the gas within an existing development work, we need to take our foot off the gas.

Value engineering standpoint is really related to cost and timing, but we would look at that on every project and what we're going through due diligence even after we own an asset.

Speaker 5: even after we own an asset, as we phase an asset. So it's something that the teams are doing day in, day out. All right. Thank you all. And good.

As we face an asset so it's something that the teams are doing day in day out.

Alright, Thank you all and good luck in the coming year.

Thanks Rhonda.

Speaker 1: Up next we have Mike Rehat with JPMorgan. Mike, please proceed.

Up next we have Mike Rehaut with Jpmorgan, Mike. Please proceed.

Hi, guys. Good afternoon, Doug worldwide on for Mike.

Speaker 7: You guys mentioned, you know, throughout this call, you know, your advantage and...

You guys mentioned throughout this call.

Vantage.

Industry has no other competitors don't have the same scale as you guide I was wondering if you can give any kind of trends you saw throughout the quarter as kind of rate volatility.

Speaker 7: I was wondering, you know, if you can give, if any, what kind of trends you saw throughout the quarter as the kind of rate volatility progressed throughout the summer, any trends that you saw?

Progress throughout the summer or any trends that you saw in <unk>.

Speaker 7: In addition to that, what you're expecting, at least in the early stages of 2024 or mid, you know, likely.

In addition to that what you are expecting at least in the early stages of 2024.

Likely continued rate.

Speaker 3: You're a little fuzzy on the speaker here, but are you looking more from a lots of man standpoint or from a development competition standpoint? More so from a development standpoint.

Youre a little fuzzy on.

The speaker here, but are you looking more from a from a lot demand standpoint or from a development competition standpoint.

More so from a development competition standpoint.

Speaker 3: Well, we're definitely seeing opportunities where other developers are having a hard time getting financing in place and their and their costs of that financing has run up. So we're potentially either deal that they've tied up that they can now not close on or get developed.

Well, we're definitely seeing opportunities where other developers are having a hard time getting financing in place and they're there.

And their cost of that financing has run up so we're potentially either deals that they have tied up that they can now not close on or get developed.

Speaker 3: or literally their banks are saying, you know, no more.

Literally they are banks.

No more.

Speaker 3: I think we saw more of that this last quarter than we did in prior quarters, and it feels like a trend, like maybe it will continue to be a little bit more difficult while we have a high interest rate environment and the banks are nervous. But we're definitely seeing, at least from our standpoint, we're seeing more opportunities to pick up positions that other people can't perform on.

I think we saw more of that this last quarter than we did in prior quarters.

It feels like a trend like may be it will continue to be a little bit more difficult, while they have high interest rate environment.

The banks are nervous, but we're definitely seeing.

At least from our standpoint, we're seeing more opportunities to pick up positions that other people can't perform alone.

Great. Thank you guys Thats it for me.

Thanks.

Speaker 1: The next question comes from Anthony Pettinari with Citi. Anthony, please proceed.

The next question comes from Anthony Pettinari with Citi. Anthony. Please proceed.

Speaker 8: Hey, good afternoon on the full year guide, you know, I'm just from a big picture perspective. I don't think you've provided for your guidance.

Hey, good afternoon.

On the full year guide I'm just from a big picture perspective, I don't think you provided full year guidance for the past, maybe four or five quarters can you talk about what's giving you confidence.

Speaker 8: past maybe four or five quarters. Can you talk about what's giving you confidence now in terms of giving the next year outlook, you know, given we still have, you know, a fair amount of rate volatility?

Now in terms of giving the next year outlook.

Given we still have a fair amount of rate.

Great volatility and macro uncertainty.

Speaker 3: I think I think I attribute to a couple of things, you know, last year, between still a lot of supply chain problems and understanding what was happening at the municipal levels for us to get kind of final sign offs and deliveries, I feel like that has leveled off or at least we have a better understanding of what those impacts are, where last year it was it was a little bit of a wild guess, which is why we didn't give guidance.

Well I think.

I would attribute to a couple of things last year between still a lot of supply chain problems in understanding what was happening at the municipal levels for just to give kind of a final sign off in deliveries that feel like that has leveled off or at least we have a better understanding of what those impacts are.

Last year. It was it was a little bit of a wild guess, which is why we didn't give guidance or.

Speaker 3: The other is the interest rate environment. At this point, if you would have told me that builder sales would still be this strong when mortgage rates are approaching 8%, I would have probably laughed at you.

The other is the interest rate environment.

At this point.

<unk> told me that builder sales would still be the strong when mortgage rates are approaching 8% I would've probably laughed at you.

Speaker 3: And yet the market think the builders continue to be selling homes and finding the right market price. So I, I think that I feel like there's that a little bit more consistency in the builders of being able to deliver, even in this in this higher interest rate environment.

And yet the market state the builders continues to be selling homes and finding the right market price. So I think that I feel like there is that a little bit more consistency and the builders of being able to deliver even in the higher interest rate environment. So I think both of those things make us feel pretty good about giving that guidance.

Speaker 3: So I think both of those things make us feel pretty good about giving that guidance.

Since.

<unk>.

At this point.

Speaker 8: Okay, that's very helpful. And then just in terms of the full year guide, you know, understanding the business is choppy. Is there a way to think about kind of quarterly cadence of deliveries implied in the full year guide? Is there any kind of seasonal dynamic that we should kind of keep in mind or any kind of specific cadence kind of baked into your current contracts?

Okay, that's very helpful.

And then just in terms of the full year guide understanding the business is choppy.

They're a way to think about kind of quarterly cadence of deliveries implied in the full year guide is there any kind of seasonal dynamic.

Yeah, we should kind of keep in mind or any kind of specific cadence kind of baked into your current contracts.

Speaker 3: You know, it's really hard to put any kind of a guess on that. The one thing I would say, when I look back the last few years, our fourth quarter has always seemed to be the better quarter.

Hi.

It's really hard to put any kind of guess all of that but the one thing I would say when I look back the last few years, our fourth quarter has always seem to be the better quarter.

Speaker 9: But I don't know that it's contractually any reason for that or how lots are being delivered. It's just, again, it feels like the, when you look back and try to analyze the numbers, there appears to be a trend there. But it really varies from quarter. I mean, just look at the last four quarters of this year, how different, you know, one quarter was to the next, I wouldn't be able to give you a good cadence.

But I don't know that its contractually any reason for that or how what lots are being delivered.

Again, it feels like the when you look back and try to analyze the numbers appears to be a trend there, but it really varies from core I mean, just look at the last four quarters of this year have different one quarter was to the next.

<unk>.

Yes.

Wouldn't be able to give you a good cadence.

Okay understood.

I'll turn it over.

Okay. Thanks.

Speaker 1: We've reached the end of the question and answer session, and I will now turn the call over to Dan Bartok for closing remarks.

We have reached the end of the question and answer session and I will now turn the call over to Dan Bartok for closing remarks.

Thank you John.

Speaker 3: Thanks to everyone on the four-star team for your focus and hard work as we enter fiscal 2024. Continue to stay disciplined, flexible, and opportunistic while focusing on consolidating market share.

So thanks to everyone on the four star team for your focus and hard work as we enter fiscal 2024 continue to stay disciplined flexible and opportunistic while focusing on consolidating market share.

Speaker 3: We appreciate everyone's time on the call today and look forward to speaking with you again in January to share our first quarter results. Thank you.

We appreciate everyone's time on the call today and look forward to speaking with you again in January to share our first quarter results. Thank you.

Speaker 1: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.