Q3 2024 Forestar Group Inc Earnings Call

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Unknown Executive: Good afternoon and welcome to Forestar's third quarter 2024 earnings conference call. At this time, all participants are in illicit only mode. A question and answer session will follow the formal presentation, but anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: Good afternoon, and welcome to Forestar's third quarter 2024 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 Katie Smith, Vice President of Finance and Investor Relations for Forestar. Transcribed by https://otter.ai

Speaker Change: Good afternoon, and welcome to four stores third quarter 2024 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation, but anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.

Unknown Executive: Please note, this conference is being recorded and will now turn the call over to Katie Smith, Vice President of Finance and Investor Relations for Forestar.

Katie Smith: I will now turn the call over to Katy Smith, Vice President of Finance and Investor Relations for four star.

Katie Smith: Thank you, John. Good afternoon, and welcome to the call to discuss Forestar's third-quarter results. Thank you for joining us.

Katie Smith: Thank you, John.

Katie Smith: Thank you John Good afternoon, and welcome to the call to discuss <unk> third quarter results. Thank you for joining us.

Katie Smith: Good afternoon and welcome to the call to discuss Forestar's third quarter result. 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. Although Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to Forestar 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 and performance is contained in Forestar's annual report on Form 10-K in its most recent quarterly report on Form 10-Q, both of which are required with the Securities and Exchange Commission.

Katie Smith: Before we get started, today's call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to Forestar on the date of this conference call, and we do not undertake any obligation to update or revise any forward-looking statements publicly.

Speaker Change: Before we get started today's call includes forward looking statements as defined by the private Securities Litigation Reform Act of 1995, although <unk> believes any such statements are based on reasonable assumptions. There is no assurance that actual outcomes will not be materially different.

Katie Smith: All forward looking statements are based upon information available to <unk> on the date of this conference call and we do not undertake any obligation to update or revise any forward looking statements publicly.

Katie Smith: Additional information about factors that could lead to material changes in performance is contained in Forestar'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 Commission. Our earnings release is on our website at investor.forestar.com, and we plan to file our 10-Q early next week. After this call, we will post an updated investor presentation on our Investor Relations site under Events and Presentations for your reference. Now, I will turn the call over to Andy Oxley, our President and CEO.

Katie Smith: Information about factors that could lead to material changes in performance is contained in <unk> annual report on Form 10-K in its most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission.

Katie Smith: Our earnings releases on our website at investor.forstar.com, and we plan to file our TNQ early next week.

Katie Smith: Our earnings release and on our website at Investor day, It forced our dot com and we plan to file our 10-Q early next week. After this call. We will post an updated investor presentation to our Investor Relations site under events and presentations for your reference now I will turn the call over to Andy Oxley, our president and CEO.

Katie Smith: After this call, we will post an updated investor presentation to our Investor Relations site under Events and Presentations for your reference.

Andy Oxley: Now, I will turn the call over to Andy Oxley, our president and CEO. Thanks, Katie. Good afternoon, everyone. I'm also joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer.

Anthony W. Oxley: Thanks, Katie. Good afternoon, everyone. I'm also joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer. Before I go over our results, I want to acknowledge the passing of Don Horton and the legacy he leaves behind. Homebuilding and land development are not easy.

Thanks, Katie good afternoon, everyone.

I'm also joined on the call today by Jim Allen, Our Chief Financial Officer, and Mark Walker, Our Chief operating officer before I go over our results I want to acknowledge the passing of Don Horton and the legacy he leaves behind homebuilding and land development are not easy, but Don was tremendously successful because you have.

Andy Oxley: Before I go over our results, I want to acknowledge the passing of Don Horton and the legacy he leaves behind. Home building and land development are not easy, but Don was tremendously successful because he always put people first. His leadership and commitment to deal with Horton and its people was unmatched. Don's vision and support for Forestar gave us aspirational but achievable goals and enabled us to become the country's largest, pure-play residential lot developer. All of us at Forestar are incredibly proud to be a part of the DR Horton family and strive every day to grow and improve, which Don pushed us all to do.

Anthony W. Oxley: But Don was tremendously successful because he always put people first. His leadership and commitment to D.L. Horton and its people were unmatched.

Speaker Change: We put people first his leadership and commitment to D. R Horton and its people was unmatched.

Anthony W. Oxley: Don's vision and support for Forestar gave us aspirational but achievable goals and enabled us to become the country's largest pure play residential lot developer. All of us at Forestar are incredibly proud to be a part of the D.R. Horton family and strive every day to grow and improve, which Don pushed us all to do. Now, I will discuss our results.

Speaker Change: <unk> vision and support for four store gave us aspirational, but achievable goals and enabled us to become the country's largest pure play residential lot developer all of us at forest are incredibly proud to be a part of the D. R Horton family and strive everyday to grow and improve.

Speaker Change: Don pushed us all to do.

Anthony W. Oxley: There continues to be solid demand for residential developed lots, and supply is still constrained in most markets. The Forestar team delivered 3,255 lots, generating revenues of $318.4 million during the quarter, which was in line with our expectations. Our profitability remains strong with pre-tax profit margins of 16.2% and earnings per diluted share of 76 cents. The team's performance in the third quarter resulted in book value per share increasing 15% to $29.87, and our return on equity for the trailing 12 months ending June 30, 2024, expanded 190 basis points to 13.8%.

Andy Oxley: Now, I will discuss our results. There continues to be solid demand for residential developed lots, and supply is still constrained in most markets. The Forestar team delivered 3,255 lots, generating revenues of $318.4 million during the quarter, which was in line with our expectations. Our profitability remains strong with pre-trax profit margins of 16.2 percent and earnings per diluted share of 76 cents. The team's performance in the third quarter resulted in book value per share increasing 15 percent to $29.87, and our return on equity for the 4 stars unique blend of financial strength, operating expertise and geographic reach is a significant competitive advantage, enabling us to be a leading supplier of finished locks.

Speaker Change: Now I will discuss our results there continues to be solid demand for residential developed lots and supply is still constrained in most markets. The four star team delivered 3255 watts generating revenues of $318 $4 million.

Speaker Change: During the quarter, which was in line with our expectations. Our profitability remained strong with pretax profit margins of 16, 2% and earnings per diluted share of <unk> 76.

Speaker Change: The team's performance in the third quarter resulted in book value per share increasing 15% to $29 87.

Speaker Change: And our return on equity for the trailing 12 months ending June 32024 expanded 190 basis points to 13, 8%.

Anthony W. Oxley: Forestar's unique blend of financial strength, operating expertise, and geographic reach is a significant competitive advantage, enabling us to be a leading supplier of finished lots. We remain focused on investing in compelling land parcels, turning our inventory, maximizing returns, and consolidating market share in the highly fragmented lot development industry. Jim will now discuss our third quarter results in more detail.

Speaker Change: <unk> unique blend of financial strength operating expertise and geographic reach is a significant competitive advantage, enabling us to be a leading supplier of finished lots and we remain focused on investing in compelling land parcels, turning our inventory maximizing rich.

Andy Oxley: We remain focused on investing in compelling land parcels, turning our inventory, maximizing returns, and consolidating market share in the highly fragmented lot development industry.

Terms and consolidating market share in the highly fragmented lot development industry.

Jim Allen: Jim will now discuss our third quarter results in more detail. Thank you, Andy. In the third quarter, net income decreased 17% to 38.7 million dollars, or 76 cents per diluted share, compared to 46.8 million dollars, or 93 cents per diluted share, in the prior year quarter. Revenants for the quarter decreased 14% to 318.4 million dollars compared to 368.9 million dollars in the prior year quarter. We sold 3,255 lots in our third fiscal quarter with an average sales price of 94,000 dollars. We expect continued quarterly fluctuations in our average sales price based on the geographic and lot size mix of our deliveries.

James D. Allen: In the third quarter, net income decreased 17% to $38.7 million, or $0.76 per diluted share, compared to $46.8 million, or $0.93 per diluted share, in the prior year quarter. Revenues for the quarter decreased 14% to $318.4 million compared to $368.9 million in the prior year quarter. We sold 3,255 lots in our third fiscal quarter with an average sales price of $94,000. We expect continued quarterly fluctuations in our average sales price based on the geographic and lot size mix of our delivery.

Speaker Change: Jim will now discuss our third quarter results in more detail.

Jim: Thank you Andy in the third quarter net income decreased 17% to $38 7 million or <unk> 76 per diluted share compared to $46 $8 million or <unk> 93 per diluted share in the prior year quarter.

Jim: Revenues for the quarter decreased 14% to $318 4 million compared to $368 9 million.

Jim: In the prior year quarter.

Speaker Change: We sold 3255 lots in our third fiscal quarter with an average sales price of $94000.

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

James D. Allen: Our pre-tax income decreased 17% to $51.6 million compared to $62.4 million in the third quarter of last year, and our pre-tax profit margin this quarter was 16.2% compared to 16.9% in the prior year quarter. Our pre-tax profit margin this quarter was positively impacted by a gain on sale of assets of $5 million. Our gross profit margin for the quarter was 22.5% compared to 23% for the same quarter last year. In the third quarter, SG&A expense increased 11% from the prior year quarter to $29.3 million.

Jim Allen: Our pre-tax income decreased 17% to 51.6 million dollars compared to 62.4 million dollars in the third quarter of last year. And our pre-tax profit margin this quarter was 16.2% compared to 16.9% in the prior year quarter. Our pre-tax profit margin this quarter was positively impacted by a gain on sale of assets of $5 million dollars. Our gross profit margin for the quarter was 22.5% compared to 23% for the same quarter last year. The third quarter SGA expense increased 11% from the prior year quarter to 29.3 million dollars. Our employee count increased 33% from a year ago to support the expansion of our platform, including entering new markets and increasing community count.

Speaker Change: Our pre tax income decreased 17% to $51 6 million compared to $62 4 million in the third quarter of last year and our pre tax profit margin. This quarter was 16, 2% compared to 16, 9% in the prior year quarter.

Speaker Change: Our pre tax profit margin this quarter was positively impacted by a gain on sale of assets of $5 million.

Speaker Change: Our gross profit margin for the quarter was 22, 5% compared to 23% for the same quarter last year.

Speaker Change: In the third quarter SG&A expense increased 11% from the prior year quarter to $29 $3 million, our employee count increased 33% from a year ago to support the expansion of our platform, including entering new markets and increasing community count.

James D. Allen: Our employee count increased 33% from a year ago to support the expansion of our platform, including entering new markets and increasing the community count. SG&A expenses, a percentage of revenues, were 9.2% compared to 7.2% in the prior year quarter. We are pleased with the progress we have made building our team, and we continue to attract high-quality talent. We remain focused on efficiently managing our SG&A while investing in our teams to support our continued growth. Mark.

Jim Allen: SGA expense as a percentage of revenues was 9.2% compared to 7.2% in the prior year quarter. We are pleased with the progress we have made building our team, and we continue to attract high quality talent. We remain focused on efficiently managing our SGA and A while investing in our teams to support our continued growth. The supply of new and existing homes at affordable price points remains limited. And demographic supporting housing demand are favorable despite elevated mortgage interest rates and inflationary pressures. Workers rate by down in Senna's offer by builders to buy with low resale supply relative to historic norms continue to be a driver of buyers choosing new construction.

Speaker Change: SG&A expense as a percentage of revenues was nine 2% compared to seven 2% in the prior year quarter.

Mark: We are pleased with the progress we've made building our team and we continue to attract high quality talent. We remained focused on efficiently managing our SG&A, while investing in our teams to support our continued growth Mark.

Mark Stephen Walker: The supply of new and existing homes at affordable price points remains limited, and demographics supporting housing demand are favorable, despite elevated mortgage interest rates.

Speaker Change: Supply of new and existing homes at affordable price points remains limited and demographics supporting housing demand are favorable despite elevated mortgage interest rates and inflationary pressures mortgage rate buy down incentives offered by builders combined with low resale supply relative to historic norms continue to be a driver of buyer.

Mark Stephen Walker: Mortgage rate buy-down incentives offered by builders, combined with low resale supply relative to historic norms, continue to be a driver of buyers choosing new construction. Our ongoing focus is to develop lots for homes at affordable prices. Availability of contractors and necessary materials has improved over the past several months, but we have not seen overall reductions in the cost of developing land in our cycle times of increases. We utilize best management practices and work with our trade partners to develop crops in the most efficient way possible.

She is in new construction and our ongoing focus is to develop lots for homes at affordable price points availability of contractors and necessary materials have improved over the past several months, but we have not seen overall reductions in the cost of developing land and our cycle times have increased we utilize best management practices.

Jim Allen: Our ongoing focus is to develop lots for homes at affordable price points. Availability of contractors and necessary materials have improved over the past several months. But we have not seen overall reductions in the call of developing land in our cycle times of increased. We utilize best management practices and work with our trade partners to develop lots in the most efficiently possible. However, our development cycle times are still being impacted by governmental delays, which limits it up to a lot of deliveries during the quarter. Home builders are competing to secure land in lot positions, and many are looking to replace closed communities to position themselves for future growth.

Speaker Change: This is to work with our trade partners to develop lots in the most efficient way possible. However, our development cycle times are still being impacted by governmental delays, which limited upside to our lot deliveries during the quarter.

Mark Stephen Walker: However, our development cycle times are still being impacted by governmental delays, which limited upside to our lot deliveries during the quarter. Homebuilders are competing to secure land and lot positions, and many are looking to replace closed-off communities to position themselves for future growth. As a result, we are not seeing any softening of land prices. However, our team remains disciplined, flexible, and opportunistic in pursuing new land acquisition opportunities.

Speaker Change: Builders are competing to secure land and lot positions and many are looking to replace closeout communities to position themselves for future growth. As a result, we are not seeing any softening of land prices. However, our team remains disciplined flexible and opportunistic in pursuing new land acquisition opportunities Jim.

Jim Allen: As a result, you're not seeing any softening at land prices. However, our team remains disciplined, flexible, and opportunistic on pursuing new land acquisition opportunities.

James D. Allen: Jim?

Katie Smith: D.R. Horton is our largest and most important customer. 15% of the homes D.R. Horton started in the past 12 months were on a four-star developed lot. With a mutually stated goal of one out of every three homes D. R. Horton sells being on a lot developed by Forestar, we have a significant opportunity to grow our market share within D. R. Horton. We also continue to work on expanding our relationships with other homebuilders. 11% of our third quarter deliveries, or 352 lots, were sold to other homebuilders. Katie

Jim Allen: Dear Horton is our largest and most important customer. 15% of the homes Dear Horton started in the past 12 months were on a four-star developed lot. With a mutually stated goal of one out of every three homes Dear Horton sells to be on a lot developed by Four-Star, we have significant opportunity to grow our market share within Dear Horton. We also continue to work on expanding our relationships with other home builders. 11% of our third-quartered deliveries are 352 lives were sold to other home builders.

Speaker Change: D. R. Horton is our largest and most important customer 15% of the homes D. R. Horton started in the past 12 months, we are on a four star developed lot.

Speaker Change: With a mutually stated goal of one out of every three homes D. R. Horton sells to be on a lot developed by four star we have significant opportunity to grow our market share within D. R. Horton.

Speaker Change: We also continue to work on expanding our relationships with other homebuilders, 11% of our third quarter deliveries of our 352 lots were sold to other homebuilders Katy.

Jim Allen: Katie? Forestar's 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. We are positioning to return to strong volume growth by accelerating our investments in land acquisition and development.

Katie Smith: Forestar's 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. We are positioning to return to strong volume growth by accelerating our investments in land acquisition and development. During the third quarter, we invested approximately $370 million in land and land development, which was a 72% increase from the prior year quarter. 75% of our investment was for land development, and 25% was for land acquisition.

Speaker Change: <unk> underwriting criteria for new development projects remains unchanged at a minimum 15% pre tax return on average anything Tory and a return of our initial cash investment.

Speaker Change: Within 36 months.

Speaker Change: We're positioned well we are positioning to return to strong volume growth by accelerating our investments in land acquisition and development.

Jim Allen: During the third quarter, we invested approximately $370 million in land and land development, which was a 72% increase from the prior year quarter. 75% of our investment was for land development and 25% was for land acquisition.

Speaker Change: During the third quarter, we invested approximately $370 million and land development, which was a 72% increase from the prior year quarter.

75% of our investment was for land development and 25% for land acquisition.

Jim Allen: This school year-to-date, our investments in land and land development totaled approximately $1.2 billion, and we now expect to invest approximately $1.6 billion in land acquisition and development in fiscal 2024, subject to market conditions.

Katie Smith: Fiscal year to date, our investments in land and land development totaled approximately $1.2 billion, and we now expect to invest approximately $1.6 billion in land acquisition and development in fiscal 2024, subject to market conditions. Mark?

Fiscal year to date, our investments in land and land development totaled approximately $1 $2 billion and we now expect to invest approximately $1 $6 billion in land acquisition and development in fiscal 2024 subject to market conditions, Mark our total our position at June 30 increased 40% from a year.

Mark Walker: Mark? Our total opposition at June 30th increased 40% from a year ago to 1,200 to 100 lots in quarter-end, of which 57,900 or 57% was owned and 44,200 or 43% was controlled. Consistent with our focus on capital efficiency, we continue to target owning a three- to four-year supply of land and lots and remain focused on managing our development and phases to deliver lots at a pace that matches market demand.

Mark Stephen Walker: Our total lot position at June 30th increased 40% from a year ago to 1,000 to 100 lots a quarter end, of which 57,900 or 57% was owned and 44,200 or 43% was controlled. Consistent with our focus on capital efficiency, we continue to target owning a three to four year supply of land and lots and remain focused on managing our development in phases to deliver lots at a pace that matches market demand.

Speaker Change: Our ago to 1000 to 100 lots at quarter end of which 57900 or 57% was owned and 44200 or 43% was control consistent with our focus on capital efficiency, we continue to target, earning a three to four year supply of land in Los and remain focused on man.

Speaker Change: <unk>, our development phases to deliver lots at a pace that matches market demand loss.

Mark Stephen Walker: Lots owned at June 30th include 5,900 finished lots. This is the lowest number of finished lots we've had on hand at quarter end since September 2022, demonstrating that our customers continue to purchase lots soon after completion. 35% of our own lots are under contract to sell, representing approximately $1.8 billion of future revenue. Our contracted backlog is a strong indicator of our ability to continue gaining market share in the highly fragmented lot development industry. Another 29% of our own lots are subject to a written first offer to D.R. Horton based on executed purchase and sale agreements. Jim.

Mark Walker: Lots owned at June 30th includes 5,900 finished loss. This is the lowest number of finished loss we've had on hand at quarter-end since September 2022, demonstrating that our customers continue to purchase lots soon after completion. 35% of our own loss or under contract to sell, representing approximately $1.8 billion of future revenue. Our contracted backlog is a strong indicator of our ability to continue gaining market share in the highly fragmented lot development industry.

Speaker Change: At June 30th includes 5900 finished loss. This is the lowest number of finished lots we've had on hand at quarter end since September 2022, demonstrating that our customers continue to purchase laws soon after completion.

35% of our own lots are under contract to sell representing approximately one $8 billion of future revenue. Our contracted backlog is a strong indicator of our ability to continue gaining market share in the highly fragmented lot development industry. Another 29% of our own laws are subject to a right of first offer.

Mark Walker: Another 29% of our own loss are subject to a right-of-first-offer to DR Horton based on executed purchase and sale agreement.

Speaker Change: Dr. Horton based on executed purchase and sale agreements Jim.

Jim Allen: Jim? We have significant liquidity and are using modest leverage to keep our balance sheet strong and support our growth objectives. At quarter-end, we had approximately $745 million of liquidity, including an unrestricted cash balance of $360 million and $385 million of available capacity on our undrawn revolving credit facility. Total debt at June 30th was $706 million with no senior note maturities until fiscal 2026, and our net debt to capital ratio is 18.7%. We ended the quarter with $1.5 billion of stockholders' equity and our book value per share increased 15% from a year ago to $29.8.

James D. Allen: We have significant liquidity and are using modest leverage to keep our balance sheet strong and support our growth objectives. At quarter end, we had approximately $745 million of liquidity, including an unrestricted cash balance of $360 million and $385 million of available capacity on our Undrawn Revolving Credit Facility. Total debt at June 30th was $706 million, with no senior note maturities until fiscal 2026, and our net debt to capital ratio was 18.7%. We ended the quarter with $1.5 billion of stockholders' equity, and our book value per share increased 15% from a year ago to $29.87.

Speaker Change: We have significant liquidity and are using modest leverage to keep our balance sheet strong and support our growth objectives at quarter end, we had approximately $745 million of liquidity, including an unrestricted cash balance of $360 million and $385 million of available capacity on our undrawn.

Speaker Change: <unk> credit facility.

Speaker Change: Total debt at June 30 was $706 million with no senior note maturities until fiscal 2026, and our net debt to capital ratio was 18, 7%.

Speaker Change: We ended the quarter with $1 $5 billion of stockholders' equity and our book value per share increased 15% from a year ago to $29 87.

Jim Allen: 47 cents. Forestar's 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 and have become more expensive in recent years, impacting most of our competitors. Other developers generally use project-level development loans, which are typically more restrictive, have floating rates, and create administrative complexity, especially in a volatile rate environment. Our capital structure provides us with operational flexibility, while our strong liquidity positions us to take advantage of attractive opportunities when they arise.

James D. Allen: Forestar's 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 and have become more expensive in recent years, impacting most of our competitors. Other developers generally use project-level development loans, which are typically more restrictive, have floating rates, and create administrative complexity, especially in a volatile rate environment. Our capital structure provides us with operational flexibility, while our strong liquidity positions us to take advantage of attractive opportunities when they arise. Andy, I'll hand it back to you for your closing remarks. Thanks, Jim.

Speaker Change: <unk> capital structure is one of our biggest competitive advantages and it sets us apart from other land developers.

Perfect level land acquisition and development loans are less available and have become more expensive in recent years impacting most of our competitors.

Speaker Change: Their developers generally use project level development loans, which are typically more restrictive have floating rates and create administrative complexity, especially in a volatile rate environment or.

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

Andy Oxley: And he'll hand it back to you for closing remarks.

Speaker Change: Andy I'll hand, it back to you for closing remarks.

Anthony W. Oxley: Thanks, Jim. In closing, I believe we have a tremendous opportunity ahead of us. Forestar is uniquely positioned to gain market share in the highly fragmented lot development industry. Continued execution of our strategic and operational plans, combined with constrained finished lot supply across most of our diverse national footprint, positions us for further success. We are expanding our team and accelerating our investments in land and development to position Forestar for consistent long-term growth. Elevated mortgage interest rates continue to impact affordability, but the underlying fundamentals of a housing shortage remain.

Andy Oxley: Thanks, Jim. In closing, I believe there's tremendous opportunity ahead of us. Forestar is uniquely positioned to gain market share in the highly fragmented lot development industry. Continued execution of our strategic and operational plans, combined with constrained finish lots of pie across most of our diverse national footprint, positions us for further success. We are expanding our team and accelerating our investments in land and development to position Forestar for consistent long-term growth. Elevated mortgage interest rates continue to impact affordability. But the underlying fundamentals of housing shortage remain. We believe the low supply of existing homes and affordable price points, combined with builder incentives, including rate buy downs, will continue to drive buyers to new construction.

Anthony W. Oxley: Thanks, Jim in closing I believe Theres tremendous opportunity ahead of us for STAAR is uniquely positioned to gain market share in the highly fragmented lot development industry continued execution of our strategic and operational plans combined with constrained finished lot supply across most of our diverse Nash.

Speaker Change: Hello footprint positions us for further success, we are expanding our team and accelerating our investments in land and development to position <unk> for consistent long term growth.

Anthony W. Oxley: We believe the low supply of existing homes at affordable price points, combined with builder incentives, including rate buy-downs, will continue to drive buyers to new construction, and our strong relationship with DR Horton provides a clear path for growth. As outlined in our press release, we are revising our fiscal 2024 guidance. Based on our fiscal year-to-date results and expectations for the fourth quarter, we now expect to deliver between 14,600 and 15,100 lots, compared with prior guidance of delivering between 14,500 and 15,500 lots.

Speaker Change: Elevated mortgage interest rates continue to impact affordability, but the underlying fundamentals of the housing shortage remain we believe the lowest supply of existing homes at affordable price points combined with builder incentives, including rate buy downs will continue to drive buyers to new construction and our strong relation.

Andy Oxley: And our strong relationship with DR Horton provides a clear path for growth.

Speaker Change: We shipped with D. R. Horton provides a clear path for growth.

Andy Oxley: As outlined in our press release, we are revising our fiscal 2024 guidance. Based on our fiscal year-to-date results and expectations for the fourth quarter, we now expect to deliver between 14,600 and 15,100 lots, compared with prior guidance of delivery in between 14,500 and 15,500 lots. We still expect to generate 1.4 to 1.5 billion dollars of revenue. We are the market leader in a highly fragmented and under-capitalized industry and are uniquely positioned to take advantage of builder demand for finish lots. There is a significant opportunity to expand our presence in the markets we operate in. Our goal remains the same: to double our market share to 5% over the intermediate term.

Speaker Change: As outlined in our press release, we are revising our fiscal 2024 guidance based on our fiscal year to date results and expectations for the fourth quarter. We now expect to deliver between 14000 615100 loss compared with prior guidance of delivering between <unk>.

Speaker Change: 14000, 515500 lots, we still expect to generate one four to $1 5 billion of revenue.

Anthony W. Oxley: We still expect to generate $1.4 to $1.5 billion of revenue. We are the market leader in a highly fragmented and undercapitalized industry and are uniquely positioned to take advantage of builder demand for finished lots. There is a significant opportunity to expand our presence in the markets we operate in. Our goal remains the same, to double our market share to 5% over the intermediate term. We expect to accumulate significant market share over the next few years while maintaining our disciplined approach to capital allocation to enhance the long-term value of Forestar. With a clear strategic direction, a dedicated team, and a strong operational and financial foundation in place, I'm excited about Forestar's future. John, at this time, we'll open the line for questions.

Speaker Change: We are the market leader in a highly fragmented and under capitalized industry and are uniquely positioned to take advantage of builder demand for finished lots. There is a significant opportunity to expand our presence in the markets. We operate in our goal remains to say to double our market share two five.

Purcell: Purcell over the intermediate term, we expect the aggregate significant market share over the next few years, while maintaining our disciplined approach to capital allocation to enhance long term value of four star.

Andy Oxley: We expect to aggregate significant market share over the next few years while maintaining our disciplined approach to capital allocation to enhance long-term value of Forestar. With a clear strategic direction, a dedicated team, and a strong operational and financial foundation in place, I'm excited about Forestar's future.

Speaker Change: With a clear strategic direction, a dedicated team and a strong operational and financial foundation in place I'm excited about <unk> future.

Unknown Executive: John, at this time, we'll open the line for questions. 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. The 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 pressing the star keys. One moment please, while we pull for questions. Questions. Once again, please press star one if you have a question or a comment.

Speaker Change: John at this time, we'll open the line for questions.

John: Thank you.

Operator: At this time, we will be conducting a question and answer session. 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, while we poll for questions. Once again, please press star 1 if you have a question or a comment. The first question comes from Carl Reichardt with BT IG, please proceed.

Speaker Change: At this time, we will be conducting a question and answer session. If you'd 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 pressing the star keys.

Speaker Change: One moment, please while we poll for questions. Once again, please press star one if you have a question or comment.

Carl Reichardt: The first question comes from Carl Reichardt with BTIG. Please proceed. Thanks. Hi everybody. Nice to talk to you. So I think you talked about government delays limiting upside. I think was the phrase you used in the quarter, and I wanted to ask for some more detail on that. Two things really. One, whether delays; how many lots were delayed? And then there's a lot of places government can create issues in getting lots developed. So I'm curious just on some details as to what specifically is hurting the most when it comes to getting lots or not out the door into customers.

The first question comes from Carl Reichardt with BT I G. Please proceed.

Carl Edwin Reichardt: Thanks. Hi everybody. It's nice to talk to you.

Carl Edwin Reichardt: Thanks, Hi, everybody I used to talk to you.

Carl Edwin Reichardt: So I think you talked about government delays limiting upside I think was the for <unk> used in the quarter and I wanted to ask for some more detail on that two things really one where there are delays how many lots were delayed.

Carl Edwin Reichardt: So I think you talked about government delays limiting upside, which I think was the phrase you used in the quarter, and I wanted to ask for some more detail on that. Two things, really. One question: were there delays? How many lots were delayed? And then there's a lot of places the government can create issues in getting lots developed. So I'm curious just about some details as to what specifically is hurting the most when it comes to getting lots sort of out the door into customers.

Carl Edwin Reichardt: And then there's a lot of places government.

Speaker Change: Great issues in getting lots developed so I'm I'm curious just on some details as to what specifically is hurting the most when it comes to getting lot sort of out the door into customers.

Mark Stephen Walker: Hey Carl, it's Mark. There are a couple things. The primary delays related to government approvals are really related to getting finished lots certified on the ground and getting those transacted. It also affects beginning development as well as getting those approvals for subsequent phases to begin development. I'll talk a little bit about cycle times, too, just to give you a little bit of context. Over a 15-month period, let's call it September 22 through December 23, we experienced an 8- to 9-week increase in cycle times.

Mark Walker: Hey, Carl, it's March. There's a couple things. The primary delay is related to government approvals is really related to getting finished lots certified on the ground and getting those transacted. It also affects beginning development, as well as getting those approvals for subsequent phases to begin development.

Speaker Change: Yeah, Hey, Karl as Mark there's a couple of things. The primary delay is related to government approvals is really related to get finished lots certified on the ground.

Speaker Change: Getting those transacted. It also affects beginning development as well as getting those approvals for subsequent phases to begin development, we'll talk a little bit about cycle times too just to give you a little bit of context over a 15 month period, let's call. It September 22 through December 23, we experienced the eight to nine week inquiries and the cycle times and that was primarily related to.

Mark Walker: I'll talk a little bit about cycle times too, just to give you a little bit of context over a 15-month period, which was called September 22 through December 23. We experienced an eight to nine week increase in the cycle times, and that was primarily related to supply chain contractor availability, but really these government approvals. It was just taken much longer to receive those approvals. There's a little bit of good news behind that from January of '24. Let's call it till today. We've seen our cycle time stabilized really over the past six months. There's a little bit of additional good news.

Mark Stephen Walker: That was primarily related to the supply chain, contractor availability, but really these government approvals. It was just taking much longer to receive those approvals. There's a little bit of good news behind that. From January 24, let's call it until today, we've seen our cycle times stabilize. So really, over the past six months, there's been a little bit of additional good news. We've had a small sample size of projects that have just delivered lots that have recently closed, where we've seen some reduced cycle times. Although we're seeing those impacts from governmental delays, we are seeing a little bit of opportunity in our cycle times.

Speaker Change: Supply chain, a contractor availability, but really these government approvals that was just taken much longer to receive those approvals.

Speaker Change: There is a little bit of good news behind that from January 24 of this call until today, we've seen our cycle times stabilized really over the past six months, there's a little bit additional good news we've had a small sample size of projects that have just delivered lots that have recently closed where we've seen some reduced cycle times. So although we're seeing those impacts from governmental delays, we are seeing a little.

Mark Walker: We've had a small sample side of the projects that just delivered lots that have recently closed, where we've seen some reduced cycle times. So although we're seeing those impacts from government delays, we are seeing a little bit of opportunity in our cycle times. Yeah.

Speaker Change: Bit of.

Speaker Change: The opportunity in our cycle times.

Katie Smith: Yeah, and Carl, this is Katie. As far as lots moved out of the quarter, we really didn't have any that moved out of the quarter due to the delays. It was just lumpier lot sales this quarter, but it was in line with our expectations, which we alluded to in our remarks.

Katie Smith: Carl, this is Katie. As far as lots moved out of the quarter, we really didn't have any that moved out of the quarter due to the delays. It was just lumpier lot sales this quarter, but it was in line with our expectations, which we alluded to in our marks.

Speaker Change: Carl This is Katie as far as lost moved out of the quarter. We really didn't have any of that moved out of the quarter due to the delays and it was just lumpier lot sales this quarter, but.

Carl: In line with our expectations, which we alluded to in our remarks.

Carl Reichardt: Okay, thanks, Katie and Mark. Okay.

Carl Edwin Reichardt: Okay, thanks Katie and Mark. Okay, and then just a couple. I'll squeeze into one here if I can. Is there a change in the sort of the mix of number of lots per community that you're letting out the door right now? I'm curious about that.

Speaker Change: Okay, Thanks, Katy and Mark Okay, and then just a couple of I'll squeeze into one here if I can.

Carl Reichardt: And then just a couple of all squeezing to one here if I can.

Mark Walker: Is there a change in sort of the mix of number of lots per community that you're letting out the door right now? I'm curious about that. And then sort of along those lines, too. So we've got a big growth in lots under control contract deposits. It indicates some acceleration. You talked a little bit about expecting some stronger volume growth. So as we look out on 25, you know, you midpoint, you're going to grow about 6% this year in lot count. Is next year or kind of a year where you think double digit growth could be achievable for you?

Speaker Change: There is a change in sort of the mix of number of lots per community that you're letting out the door right now and I'm curious about that and then.

Mark Stephen Walker: And then sort of along those lines too, so we've got a big growth in lots under control, contracts, and deposits indicate some acceleration. You talked a little bit about expecting some stronger volume growth. So as we look out on 25, you know, midpoint, you're going to grow about 6% this year in lot count. Is next year a kind of a year where you think double-digit growth could be achievable for you? Or can you give us sort of a sense as to what kind of acceleration we might see? Thanks a bunch, all.

Speaker Change: Sort of along those lines too so we've got a big growth and lots under control and contract deposits indicates an acceleration you talked a little bit about expecting some stronger volume growth. So as we look out on 25 mid point youre going to grow about 6%. This year and my account is next year as kind of a year, where you think double.

Speaker Change: <unk> growth could be achievable for you or can you give us sort of a sense as to what kind of acceleration we might see thanks a bunch.

Mark Walker: Or can you give us sort of a sense as to what kind of acceleration we might see. Thanks a bunch, all.

Mark Stephen Walker: So, there's really not a change in the size of the communities. I mean, we have a blend, and it's geographically, you know, different as we go across the country. So I would say that's pretty consistent with respect to lot deliveries. I think you're close. While we're not giving guidance for 2025 at this point, the mid-single digits is correct for 2024, and we do see the potential, based on market conditions, for double-digit growth into 2025.

Mark Walker: So there's really not a change in the size of the communities. I mean, we have a blend, and it's geographically, you know, different as we go across the country. So I would say that's pretty consistent with respect to lot deliveries. I think you're close; while we're not giving guidance for 2025 at this point. You know, the mid single digits is correct for 24, and we do see the potential based on market conditions being for double digit growth into 25. I do want to appreciate that.

Speaker Change: So there is really not a change in the size of the communities.

Speaker Change: I mean, we have a blend and it's geographically.

Speaker Change: Different.

Speaker Change: It will go across the country.

Speaker Change: <unk>.

Speaker Change: So I would say that.

Speaker Change: Pretty consistent with.

Speaker Change: Respect to lot deliveries.

Speaker Change: I think youre close while we're not giving guidance for 2025 at this point.

Speaker Change: You know the mid single digits is correct for 24, and we do see the.

Speaker Change: The potential based on market conditions being forward.

Speaker Change: Double digit.

Speaker Change: Growth into 'twenty five.

Mark Stephen Walker: Yeah, I was going to address a little bit of the delays, too. If you look back from, let's call it 4Q of the 22 fiscal year and 3Q of 23, we've pulled back on land acquisition and development activity, just basically due to the sharp interest rates balancing price and pace. We experienced reduced months or quarters of closings in 1Q and 2Q, and if you think about the vast majority of what we purchased in acquisitions were shovel ready, you kind of are seeing that impact of those lots not being able to deliver as well as the delayed cycle times.

Speaker Change: Great.

Mark Walker: Yeah, go ahead, sorry. Yeah, it's going to direct a little bit of the delays too. If you look back from what's called 4Q of 22 fiscal year and 3Q of 23, we've pulled back a land acquisition development activity, just basically do the sharp interest rate balancing price and pace. We experienced a reduced months or quarters of closing into 1Q and 2Q. If you think about the vast majority of what we purchased in acquisition to shovel ready, so you kind of they are seeing that impact of those lots, not being able to deliver as well as the delayed cycle times.

Speaker Change: Oh, Yeah go ahead, sorry, yes, it can address a little bit of a delay as to if you look back from let's call. It <unk> 'twenty two fiscal year <unk> to 'twenty three with pullback on land acquisition development activity, just basically due to the sharp interest rate balancing price and pace, we experienced reduced.

Speaker Change: <unk> quarters of closings of <unk> and <unk>. If you think about the vast majority of what we purchase and acquisition to shovel ready. So you kind of they are seeing that impact of.

Speaker Change: Are those lots.

Speaker Change: Being able to deliver as well as the delayed cycle times right. Now we have a lot of lots that are under development is 30% increase from our will hit our low point, which was the beginning of <unk> in 'twenty three and those lots are.

Mark Walker: And right now we have a lot of lots that are under development. It's a 30% increase from our, we'll call our low point, which was the beginning of 3Q of 23, and those lots are in the cycle introduction and ready to head over the next 90 to 180 days.

Mark Stephen Walker: And right now, we have a lot of lots that are under development. It's a 30% increase from our, we'll call it, our low point, which was the beginning of 3Q of 23. And those lots are in the cycle, in production, and ready to hit over the next 90 to 180 days.

Speaker Change: In the cycle and production ready ready to hit over the next 90 to 180 days.

Carl Reichardt: Okay, that's great there. Thanks so much. I appreciate it.

Carl Edwin Reichardt: Okay, that's great to hear. Thanks so much, all. I appreciate it.

Speaker Change: Okay, that's great to hear thanks, so much I appreciate it.

Unknown Executive: Once again, if you have a question or a comment, please indicate so by pressing Star One.

Operator: Once again, if you have a question or a comment, please indicate so by pressing star one. The next question comes from Anthony Pettinari with Citi. Please proceed.

Speaker Change: Once again, if you have a question or comment please indicate so by pressing star one. The next question comes from Anthony Pettinari with Citi. Please proceed.

Anthony Petinari: The next question comes from Anthony Petinari with City, please proceed. A good afternoon. For the on the guidance, you know, if the volume guidance is down a bit, but revenue is unchanged, is that is pricing better or is that just purely a mix impact or any any color there? Yeah, so when we were looking at guidance, when the low end of our range, and if you take the year-to-date average price, that it rounds down to 1.4 billion. And so that's why we just kept it the same. Okay, we would say for a key to be roughly in line with what it has been this year in the next quarter.

Anthony James Pettinari: Hey, uh, good afternoon. For the guidance, you know, if the volume guidance is down a bit, but revenue hasn't changed, is that because pricing is better, or is that just purely a mix impact? Or any color there?

Hey, good afternoon.

Speaker Change: Hum.

Speaker Change: The guidance is.

The volume guidance is down a bit but revenue is unchanged is that oh pricing.

Anthony James Pettinari: Better or is that just purely a mix impact or any.

Any color there.

Speaker Change: Yeah.

Unknown Executive: Yeah, so when we were looking at guidance, the low end of our range, and if you take the year-to-date average price, that it rounds down to 1.4 billion. And so that's why we just

Speaker Change: Yeah. So when we were looking at guidance that the low end of our range and if you take that year to date average price.

Speaker Change: That it rounds down to $1 4 billion and so that's why we just kept it the same.

Unknown Executive: Okay, we would expect ASCE to be roughly in line with what it has been this year and in the next quarter. Got it, got it.

Speaker Change: Okay.

Speaker Change: Got it.

Speaker Change: Roughly in line with what it has been this year and into next quarter.

Anthony Petinari: Got it, got it.

Unknown Executive: And then are there any markets that you might call out as oversupplied or where you're pulling back in terms of new land acquisition? Or, you know, alternately, are there any markets that you're seeing accelerate or look particularly attractive, just curious, from a regional perspective? And then, obviously, a lot of focus on Florida, and you have a presence there. Any, anything you can say specifically about that state?

Speaker Change: Got it got it.

Anthony Petinari: And then, are there any markets that you might call out as oversupplied, or where you're pulling back in terms of new land acquisition? Or, you know, alternatively, are there any markets that you're seeing accelerate or look particularly attractive? Just curious for a regional perspective. And then, you know, obviously a lot of focus on Florida, and you have a presence there. Any anything you can say specifically about that state. So generally, on affordable price point, or first time home buyer product, we're really not seeing inventory buildup anywhere affordable in Florida, in Texas, very strong. Carolinas also very strong. Probably where we do see some softness is where there's been pretty rapid price appreciation over the last couple of years, then impacted by the higher interest rates.

Speaker Change: And then are there any markets that you might call out is oversupplied are or where you are pulling back in.

Speaker Change: In terms of new land acquisition or Alternatively are there any markets that you are seeing accelerate or particularly attractive just curious from a regional perspective, and then obviously a lot of focus on Florida and you have a presence there.

Speaker Change: Any anything you can say specifically about the about.

Speaker Change: About that state.

Speaker Change: Hum.

Unknown Executive: So, generally... On the affordable price point or first-time homebuyer product, we're really not seeing inventory buildup anywhere. Affordable in Florida, in Texas, very strong, and the Carolinas, also very strong. Probably where we do see some softness is where there's been pretty rapid price appreciation over the last couple of years, then impacted by higher interest rates. Colorado would be an example of that, but again, where there's an affordable price point product, we are seeing strong demand. Florida, you know, I can't really say that we're seeing softness, or lack of softness there.

Speaker Change: So generally.

Speaker Change: A portable price point.

Speaker Change: Our first time homebuyer product, we're really not seeing inventory buildup anywhere.

Speaker Change: Affordable in Florida.

Speaker Change: Texas very strong Carolinas.

Speaker Change: Carolinas also very strong.

Speaker Change: Probably where we do see some softness is where there has been a.

Speaker Change: Pretty rapid price appreciation over the last couple of years, then impacted by the higher interest rates, a Colorado would be an example of that.

Anthony Petinari: Colorado would be an example of that. But again, where there's an affordable price point product, we are seeing strong demand. And Florida, you know, I can't really say that we're seeing softness there. Okay, okay, that's very helpful.

Speaker Change: But again, where there is a affordable price point product, we are seeing strong demand.

Speaker Change: Florida.

Speaker Change: You really say that we're seeing softness softness there.

Unknown Executive: Okay, okay, that's very helpful. I'll turn it over.

Speaker Change: Okay. Okay. That's very helpful I'll turn it over.

Anthony Petinari: I'll turn it over.

Unknown Executive: If there are any remaining questions, please indicate so by pressing star one on your touch tone. Stone.

Operator: If there are any remaining questions, please indicate so by pressing star one on your touchtone phone. Okay, we have no further questions in queue. We've reached the end of the question and answer session, and I will now turn the call over to Andy Oxley for a closing remark. Thank you, John.

Speaker Change: If there are any remaining questions. Please indicate so by pressing star one on your Touchtone phone.

Unknown Executive: Okay, we have no further questions in queue.

Speaker Change: Okay. We have no further questions in queue. We have reached the end of the question and answer session and I will now turn the call over to Andy actually for closing remarks.

Andy Oxley: We've reached the end of the question-and-answer session, and I will now turn the call over to Andy Oxley for closing remarks. Thank you, John, and thank you to everyone on the Forestar team for your focus and hard work. Stay disciplined, flexible, and opportunistic as we continue to consolidate market share.

Anthony W. Oxley: Thank you, John, and thank you to everyone on the Forestar team for your focus and hard work. Stay disciplined, flexible, and opportunistic as we continue to consolidate market share. We appreciate everyone's time on the call today and look forward to speaking with you again in October to share our fourth quarter and fiscal 2024 results.

Anthony W. Oxley: Thank you John and thank you to everyone on the four star team for your focus and hard work stay disciplined flexible and opportunistic as we can still continue to consolidate market share.

Andy Oxley: We appreciate everyone's time on the call today and look forward to speaking with you again in October to share our fourth quarter and fiscal 2024 results.

We appreciate everyone's time on the call today and look forward to speaking with you again in October to share our fourth quarter and fiscal 2024 results.

Anthony W. Oxley: Okay.

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

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

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