Q3 2025 Forestar Group Inc Earnings Call
Operator: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Good morning and welcome to 4 stars. Third quarter 2025 earnings conference call. At this time, all participants are to listen. Only mode a question and answer session will follow the formal presentation.
Operator: Please note, this conference is being recorded.
John: I will now turn the call over to Chris Hebetz, Vice President of Finance and Investor Relations for Forestar. Thank you, John.
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 Chris habets, Vice President of Finance, and investor relations for 4-star.
Andy Oxley: Good morning, and welcome to our call to discuss Forestar's third quarter results.
Andy Oxley: Before we get started, I want to remind everyone that 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.
Andy Oxley: 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.
Thank you. John. Good morning and Welcome to our call to discuss 4 stars third quarter results. Before we get started, I want to remind everyone that today's call includes forward-looking statements as defined by the private Securities. Litigation Reform Act of 1995 although 4-star believes any such statements or based on reasonable assumptions. There is no assurance. That actual outcomes will not be materially different. All 4 looking statements are based upon information available to 4-star 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 4 star, annual reports
Andy Oxley: Our earnings release is on our website at investor.forestar.com, and we plan to file our 10-Q later this week.
On form 10K, in its most recent quarterly report on form 10 Q, both of which are filed with the Securities and Exchange Commission.
Andy Oxley: 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, Chris.
Andy Oxley: Good morning, everyone.
Speaker Change: Our earnings release is on our website at investor.org and we plan to file our 10q later this 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.
Andy Oxley: I'm also joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer. The Forestar team delivered a solid third quarter, generating $32.9 million of net income or $0.65 per diluted share on $390.5 million of revenue. Lots sold increased 11% year over year and 6% sequentially to 3,605 lots. Additionally, lots under contract to sell increased 26% from a year ago to 25,700 lots, representing 38% of our owned lot position and $2.3 billion of future revenue, which is the highest contract to backlog we have had during the last five years.
Speaker Change: Thanks Chris, good morning everyone. I'm also joined on the call today by Jim Allen, our Chief Financial Officer and Mark Walker. Our chief operating officer the 4-star, team delivered a solid third quarter generating 32.9 million of net income or 65 cents per diluted. Share on 390.5 million of Revenue.
Andy Oxley: While affordability constraints and weaker consumer confidence continue to impact the pace of new home sales, we maintain strong liquidity through disciplined investment in Our experienced operators are adjusting the pace of development where appropriate, and we are moderating our land acquisition investments. Over 80% of our investments this quarter were for land development. We remain focused on turning our inventory, maximizing returns, and consolidating market share in the highly fragmented lot development industry. Our unique combination of financial strength, operating expertise, and a diverse national footprint enables us to consistently provide essential finished lots to homebuilders and navigate current market conditions effectively.
Speaker Change: Lots sold, increased 11% year-over-year and 6% sequentially to 3,655 Watts. Additionally, Lots under contract to sell increased 26% from a year ago to 25,700. Lots representing 38% of our owned lot position and 2.3 billion dollars of future Revenue, which is the highest contract to backlog. We have head during The Last 5 Years.
Speaker Change: Well affordability, constraints and weaker consumer confidence. Continued to impact the pace of new home sales. We maintained strong liquidity. Through disciplined investment in inventory. Our experienced operators are adjusting the pace of development were appropriate. And we are moderating our land acquisition Investments,
Speaker Change: Over 80% of our investments, this quarter were for Land Development.
Jim Allen: We will now discuss our third quarter financial results in more detail, Jim. Thank you, Andy. In the third quarter, net income was $32.9 million, or $0.65 per diluted share, compared to $38.7 million, or $0.76 per diluted share in the prior year quarter. Revenues for the third quarter increased 23% to $390.5 million, compared to $318.4 million in the prior year quarter. Our gross profit margin for the quarter was 20.4% compared to 22.5% for the same quarter last year. The current year quarter was negatively impacted by the closeout of one community with an unusually low March. Excluding the effect of this item, our current year quarter gross margin would have been approximately 21.1%.
Speaker Change: We remain focused on turning our inventory, maximizing returns and consolidating market share in the highly fragmented. Lot development industry, our unique combination of financial strengths operating expertise and a diverse National footprint and enables us to consistently provide essential finish, lots to home, builders, and navigate current market conditions, effectively, we will now discuss our third quarter Financial results in more detail. Jim
Jim Allen: Thank you Andy in the third quarter. Net income was 32.9 million or 65 cents per diluted. Share compared to 38.7 million or 76 cents per diluted share in the prior year quarter.
Jim Allen: Revenues for the third quarter, increased 23% to 390.5 million compared to 318.4 million in the prior year quarter.
Jim Allen: Our gross profit margin for the quarter was 20.4%, compared to 22.5% for the same quarter last year.
Jim Allen: Our pre-tax income was $43.6 million compared to $51.6 million in the third quarter of last year and our pre-tax profit margin this quarter was 11.2% compared to 16.2% in the prior year quarter. prior year quarter was positively impacted by a $5 million gain on sale of assets. Pre-tax profit margin in the prior year quarter, excluding the gain on sale, would have been 14.6%. Lots sold in our third quarter increased 11% to 3,605 lots with an average sales price of $106,600. Our average sales price this quarter was impacted by an outsized mix of lot deliveries from communities with higher price point loss.
Jim Allen: The current year quarter was negatively impacted by the closeout of 1 Community. With an unusually low margin, excluding the effect of this item. Our current year quarter growth, margin would have been approximately 21.1%
Jim Allen: Our pre-tax income was 43.6 Million compared to 51.63% compared to 16.2% in the prior year quarter.
Jim Allen: The prior year quarter was positively impacted by a $5 million gain on sale of assets.
Jim Allen: With them 14.6%.
Jim Allen: We expect continued quarterly fluctuations in our average sales price based on the geographic and lot size mix of our deliveries. In the third quarter, SG&A's expense was $37.4 million, or 9.6% as a percentage of revenues, compared to 9.2% in the prior year quarter. Our increase in SG&A is primarily driven by the expansion of our operating platform, including entering seven new markets, alongside DR Horton's footprint, and increasing community count by 16% in the last year. We are pleased with the progress we have made building our team, and we continue to attract high-quality talent.
Jim Allen: Lots. Sold in our third quarter increased 11% to 365 Lots with an average sales. Price of 106,600, our average sales price this quarter was impacted by an outsized. Mix of lot. Deliveries from communities with higher price point. Lots
Jim Allen: We expect continued quarterly fluctuations in our average sales price based on the geographic and lot size mix of our deliveries.
Jim Allen: In the third quarter sgna expense was 37.4 million or 9.6% as a percentage of revenues. Compared to 9.2%. In the prior quarter, our increase in sgna as primarily driven by the expansion of our operating platform including entering 7, new markets alongside Dr. Horton's footprint and increasing Community count by 16% in the last year.
Jim Allen: We remain focused on efficiently managing our SG&A while investing in our teams to support future growth.
Mark Walker: Mark? New home sales have been slower than last year, as continued affordability constraints and weaker consumer confidence continue to weigh on demand. However, mortgage rate buy-down incentives offered by builders are helping to bridge the affordability gap and spur demand for new homes, particularly in more affordable prices.
Jim Allen: 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 sgna while investing in our teams to support. Future growth part. New home sales have been slower than last year as continued, affordability. Constraints in the weaker consumer confidence continued to weigh on demand.
Mark Walker: Our primary focus remains developing lots for new homes at prices that target entry-level and first-time buyers, which is the largest segment of the new home market. The availability of contractors and necessary materials remains solid. The land development cost is stabilized. We have also seen improvement in cycle times despite continued governmental delay. Our teams utilize best management practices and work closely with our trade partners to develop lots to drive operational efficiency.
Jim Allen: However mortgage rates out by down incentives, offered by, Builders are helping to bridge the affordability, Gap and spur demand for new homes, particularly and more affordable price points.
Jim Allen: Our primary focus remains developing lots for new homes at prices that Target entry-level, and first-time buyers, which is the largest segment of the new Home Market.
Jim Allen: The availability of contractors and necessary materials remains solid, the Land Development cost is stabilized.
Jim Allen: We have also seen Improvement in cycle time, despite continued governmental delays.
Mark Walker: D.R. Horton is our largest and most important customer. Fifteen percent of the homes D.R. Horton started in the past 12 months were on a Forestar-developed lot, and 23 percent of their finished lot purchases this quarter were lots developed by Forestar. With a mutually stated goal of one out of every three homes D.R. Horton sells to be on a lot developed by a four star, we have a significant opportunity to grow our market share within D.R. Horton.
Our teams utilize best management practices and work closely with our trade Partners to develop. Lots to drive operational efficiency. Yeah.
Jim Allen: We are Horton is our largest and most important customer 15% of the home's. Dear Horton started in the past 12 months we're on a 4-star developed lot and 23% of their finished lot purchases. This quarter were lots developed by 4-star
Mark Walker: We continue to work on expanding our relationships with other homebuilders and intermediaries. Fifteen percent of our third quarter deliveries, or 530 lots, were sold to other customers, which includes 331 lots that were sold to a lot banker who expects to sell those lots to D.R. Horton at a future date. We also sold lots to eight other homebuilders, one of which was a new customer.
Jim Allen: with the mutually stated goal of 1, out of every 3 homes. DR. Horton sells to be on a lot developed by 4-star. We have significant opportunity to grow our market share within DR. Horton
Mark Walker: Mark? Our total lot position at June 30th was essentially flat from a year ago at 102,300 lots, of which 68,300, or 67 percent, was owned, and 34,000, or 33 percent, were controlled through purchase contracts. 10,000 of our own lots were finished at quarter end, and the majority are under contract to sell.
Jim Allen: We continue to work on expanding our relationships with other home builders and intermediaries, 15% of our third quarter, deliveries or 530. Lots were sold to other customers which includes 331. Lots that were sold to a lot. Banker who expects to sell those lots to Deer Horton at a future date. We also sold lots to 8 other home. Builders 1 of which was a new customer mark
Jim Allen: Our total opposition. A June 30th was essentially flat from a year ago at 102,300. Lots of which 68,300 or 67% was owned and 34,000 or 33% were controlled through purchase contracts.
Mark Walker: Consistent with our focus on capital efficiency, we target owning a three to four year supply of land and lots and managed development phases to deliver finished lots at a pace that matches market Owned lots under contract to sell increased 26% from a year ago to 25,700 lots, or 38% of our owned lot position. $230 million of hard-earned money deposits secured these contracts, which are expected to generate approximately $2.3 billion of future revenue. Our contracted backlog is a strong indicator of our ability to continue gaining market share, a highly fragmented lot development.
Jim Allen: 10,000 of our own. Lots were finished, a quarter end and the majority are under contract to sell.
Jim Allen: Consistent with our focus on Capital efficiency. We target owning a 3 to 4 year supply of land and lots and managed development phases to deliver finished lives at a pace that matches market demand.
Jim Allen: Own Lots under contract to sell increased 26% from a year ago to 25,700. Lots for 38% of our own lot position.
Jim Allen: 230 million of hard, earnest money, deposits, secure these contracts, which are expected to generate approximately 2.3 billion dollars of future Revenue.
Mark Walker: Another 27% of our own lots are subject to a write-or-purse offer to D.R. Horton based on executed purchase and sale agreements.
Jim Allen: Our contracted backlog is a strong indicator of our ability to continue gaining market, share the highly fragmented, lot development industry.
Mark Walker: Chris? 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. During the third quarter, we invested approximately $372 million in land and land development, which was relatively flat with the prior quarter. Roughly 20% of our investment was for land acquisition, and 80% was for land development. Although we have moderated our land acquisition investment, our team remains disciplined, flexible, and opportunistic when pursuing new land acquisition opportunities.
Jim Allen: Another 27% of our own lives are subject to a writer first to offer to DR. Horton based on Executive purchase and sale agreements for us.
Jim Allen: Our star's underwriting criteria for new development, projects remains unchanged at a minimum of. 15% pre-tax return on average inventory and a return of our initial cash investment within 36 months, during the third quarter, we invested approximately 372 million in land and Land Development, which was relatively flat with the prior year course.
Jim Allen: Roughly 20% of our investment was for land acquisition and 80% was for Land Development.
Mark Walker: Our current land and lot position will allow us to return to strong volume growth in future periods, and we still expect to invest approximately $1.9 billion in land acquisition and development in fiscal 2025, subject to market conditions. We have significant liquidity and are using modest leverage to keep our balance sheet strong and support our growth objectives. We ended the quarter with $792 million of liquidity, including an unrestricted cash balance of $189 million and $603 million of available capacity on our undrawn revolving credit facility. Total debt at June 30th was $873 million, with $70.4 million of senior note maturities in the next 12 months, and our net debt to capital ratio was 28.9%.
Jim Allen: Although we have moderated, our land acquisition investment, our team remains disciplined flexible and opportunistic, when pursuing new land acquisition opportunities, our current land, and lot Position will allow us to return to strong volume growth in future periods. And we still expect to invest approximately 1.9 billion dollars in land acquisition and development in fiscal 2025 subject to market conditions. Jim
Jim Allen: Including an unrestricted, cash balance of $99 million, and 603 million of available capacity on our undrawn revolving credit facility.
Mark Walker: We entered the quarter with $1.7 billion of stockholders' equity, and our book value per share increased 11% from a year ago to $33.04. 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 as they arise.
Jim Allen: total debt at June 30th, was 873 million with 70.4 million of senior note maturities in the next 12 months and our net debt to Capital ratio was 28.9%
Jim Allen: We entered the quarter with 1.7 billion dollars of stockholders equity and our book value per share. Increased 11% from a year ago to 334
Speaker Change: 4 stars, capital structure is 1 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.
Andy Oxley: Andy, I will hand it back to you for closing. Thanks, Jim. As outlined in our press release, we are maintaining our fiscal 2025 revenue guidance of $1.5 billion to $1.55 billion while lowering our lot delivery guidance to 14,500 to 15,000 lots in response to current market conditions. Our team has a proven track record of adjusting to changes in market conditions quickly, and we are closely monitoring each of our markets as we strive to balance pace and price to maximize returns for each project. While we expect home affordability constraints and cautious homebuyers to continue to be a near term headwind for new home demand, we are confident in the long term demand for finished lots and our ability to gain market share in the highly fragmented lot development industry.
Speaker Change: Other developers generally use project level development loans which are typically more restrictive, a floating rates and created 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 as they arise.
Andy Oxley: Andy, I will hand it back to you for closing remarks.
Andy Oxley: Thanks Jim. As outlined in our press release. We are maintaining our fiscal, 2025 Revenue, guidance of 1.5 billion to 1.55 billion dollars.
Andy Oxley: While lowering our lot delivery, guidance to 14,500 to 15,000 Lots in response to current market conditions. Our team has a proven track record of adjusting to changes in market conditions quickly, and we are closely monitoring each of our markets, as we strive to balance pace and price to maximize returns for each project.
Andy Oxley: Continued execution of our strategic and operational plans, combined with constrained finished lot supply across the majority of our diverse national footprint, positions us for further success.
Andy Oxley: With a clear direction, a dedicated team, and a strong operational and financial foundation in place, I am excited about Forestar's future.
John: 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.
While we expect home affordability, constraints and cautious home buyers to continue to be a near-term headwind for new home demand. We are confident in the long-term demand for finish lots and our ability to gain market, share in the highly fragmented. Lot development, industry continued execution of our strategic and operational plans. Combined with constrained finish lot Supply across the majority of our diverse National footprint. Positions us for further success with a clearer Direction, a dedicated team, and a strong operational and financial foundation in place. I am excited about 4 stars future.
Operator: If you would like to ask a question, please press star one on your telephone. confirmation tone will indicate your line is in the question queue.
Operator: for a start to if you would like to remove your question from the Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment.
Speaker Change: Don 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 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press start to if you would 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: 1 moment, please while we pull for questions.
Trevor Allenson: The first question comes from Trevor Allenson with Wolf Research. Hi, good morning. Thank you for taking my questions.
Speaker Change: once again, please press star 1, if you have a question or a comment,
Speaker Change: the first question comes from Trevor alanson with wolf research, please proceed.
Trevor Allenson: First one's on gross margins. You called out the single community had, I think, I think you said roughly a 70 base point impact on margins. Excluding that, it still seems like gross margins took a step down both sequentially and year over year in the quarter.
Jim Allen: Should we think about this 21% gross margin rate being a good run rate going forward? Or was it were there other kind of one time impacts in the quarter that impacted your margins? Just one moment. range of 21 to 23%. So at the at the lower end of the range for this quarter, but But we haven't, you know, we really haven't seen anything that would indicate, you know, significantly lower margins going forward. Okay.
Hi, good morning, thank you for taking my questions. Uh, first 1's on Gross margins, you called out the single Community. Had I think it, I think you said roughly a 70 basis point impact on margins. Uh, excluding that, it still seems like gross margins took a step down both sequentially and year-over-year in the quarter. Should we think about this 21%? Um gross margin rate being a good run rate going forward or was it were there other kind of 1-time impacts in the quarter that that impacted your margins?
Just 1 moment.
Speaker Change: the range of 21 to 23% so at the uh at the lower end of the range for this quarter but um,
But we haven't, you know, we really haven't uh, seen anything that would indicate um you know, significantly lower margins uh going forward.
Jim Allen: You guys cut out for quite a long time.
Jim Allen: I really only caught the end of that question.
Jim Allen: Could you kind of repeat the beginning or the answer? Could you repeat the beginning of it? I'm not sure if other people had the same technical difficulty, but I think I only caught probably the last five or six words of your answer. Okay. Sorry about that. Yeah, it's really mostly mixed. I mean, again, if you exclude that one closeout community and in our margins, our normalized margin for the quarter would have been 21.1%. We try to do that every quarter, adjust for unusually high or low lot sales, margin lot sales, or, you know, kind of one time items. Over the last three years, that range has kind of been in the 21 to 23% range.
Speaker Change: Can you repeat the beginning of the? Um, I'm not sure if other people had the same technical difficulty, um, but I think,
Speaker Change: I only caught probably the last 5 or 6 words of of your answer. Okay, sorry about that. Um,
Yeah, it's really mostly mixed. I mean, again, if you exclude, uh, exclude that 1, uh, closeout community and, um,
Speaker Change: You know, our margins, our normalized margins, for the quarter would have been 21.1%. We tried to do that every quarter, adjust for unusually, high or low. Um,
Speaker Change: Um lot sales margin lot sales or you know kind of 1 time items.
Jim Allen: So this quarter was a little bit lower. But, you know, and we're continuously managing, you know, price and pace at each community to maximize returns, we we underwrite returns not to margin. So, you know, we're always going to have a mix of higher or lower margins, depending on which communities are delivering in the period. You know, this quarter was kind of at the lower end. But at this point, you know, we we see no, you know, no indication of, you know, you know, reduced margin.
Um over the last 3 years, that range has kind of been in the 2123 range, so this quarter was a little bit lower.
Speaker Change: But um you know, and we're continuously managing, you know, price and Pace at each Community to maximize returns. We we underwrite to returns not to margin so you know, we're always going to have a mix of higher or lower margins um depending on which communities are delivering in the period.
Speaker Change: so um, you know this quarter was kind of at the lower end, but at this point, you know, we we see no, you know, no indication of you know, um,
Speaker Change: You know, reduced margins.
Trevor Allenson: Okay, all right. That's very helpful. And apologies if others could hear you clearly and had you repeat the answer there.
Jim Allen: Second question is around development costs. You mentioned, again, that they've stabilized. I think you used similar language the last quarter. Have you started to see the development costs actually decline sequentially, or is it just more of a stabilization, as you say, and those are kind of flattish quarter over quarter? It's flattish, and they've been stabilized for quite some time now. Sometimes we see some upticks in some categories and some downward mobility in others as well, but for the most part, we're just classifying it as stable.
Speaker Change: Okay, I that's very helpful and apologies if you uh if others could hear you clearly and and I had you repeat the answer there. Um, second question is is around development costs. You mentioned again, uh, that they've stabilized. I think you use similar language the last quarter. Have you started to see the development costs actually declined sequentially. Um or is it just more of a a stabilization as you say and those are kind of flattish quarter of quarter. Yeah it's it's flat-ish um and they've been stabilized for quite some time now. Um sometimes we see some some upticks in some categories and some downward mobility and others as well but for the most part we're just classifying as stable
Trevor Allenson: Okay, makes sense.
Trevor Allenson: Thank you.
Trevor Allenson: Thank you for all the color and good luck moving forward.
Speaker Change: Okay, makes sense. Thank you. Thank you for all the color and good luck moving forward.
Asher Sohnen: The next question comes from Anthony Pettinari with Citigroup, please proceed.
Anthony Pinari: The next question comes from Anthony pinari with Citigroup, please proceed.
Asher Sohnen: Hi, this is Asher Sohnen on for Anthony. Thanks for taking my question.
Asher Sohnen: I wanted to clarify about the guide. I mean, you trimmed your volume guidance, but reiterated revenue, you know, which I guess implies better pricing. Is that just a function of maybe the mix of which communities are delivering and other puts and takes on pricing that we should think about? Yeah, I mean, if you just kind of look back to our original guidance, and the ASP implied in that, you know, today, we've realized a higher ASP, which is partly due to lot price increase, but largely due to mix as well. So if you just look at the average selling price to date, what that implies for the fourth quarter.
Asher Sonnen: Hi, this is Asher. Sonnen on, for Anthony, thanks for taking my question. I wanted to clarify about the guide. I mean, you trimmed your volume guidance, but reiterated Revenue, you know, which I guess implies better pricing is that just a function of, maybe the mix of which communities are delivering or or the other puts and takes on pricing, that we should think about.
Asher Sohnen: at least us leading our revenue guidance at the same level.
Asher Sonnen: Yeah, I mean, if you just kind of look back to our original guidance and the, the ASP implied in that, you know, to date, we've realized a higher ASP. Um, which is, is partly due to a lot of price increase, but, but largely due to, to mix as well. And so, if you just look at the average selling price to date, um, what that implies for the fourth quarter, um, it it leads to us leading our Revenue guidance at the same same level,
Asher Sohnen: Great, thanks.
Asher Sohnen: And then just just to clarify on that last point, what is what what would you point to as driving those lot price increases? Yeah, I mean, we didn't have a real good. Yeah, yeah, I mean, yeah, in our original guidance, we had implied a low single digit ASP increase, you know, just based on the kind of national shortage of finished lot.
Speaker Change: Great, thanks. And then just just to clarify on that last Point. What is, what what would you point to as driving those lot? Price increases?
Speaker Change: Um, yeah. I mean
Asher Sohnen: So it really is community by community where the lots are located for the price. But then, like I said, a large part of our ASP increase is just due to mix. Okay, understood. Thanks.
Speaker Change: Yeah, yeah. I mean, we had a Yeah, in our original guidance. We had uh, implied, a low single digit, ASP increase. Um, you know, just based on the kind of national shortage of of finish lots. And so it, it really is community by community and where the lots are are located, um, for the price. But then, like I said, a lot, a large part of our ASP increase is just due to mix.
Speaker Change: Of where those located.
Asher Sohnen: I'll turn it over.
Speaker Change: Okay, understood thanks. I'll turn it over.
Alex Isaac: The next question comes from Michael Rehat with JP Morgan, please proceed. Hi, good morning.
Michael Rehat: The next question comes from Michael. Rehat with JP Morgan please proceed.
Alex Isaac: This is Alex Isaac on for Mike. Appreciate you taking my question.
Mark Walker: I want to ask about the new markets you entered and I'm just curious if there's any like regional focus, as well as also like what you're seeing on the ground between the regions that you operate in. Yeah, so as we've talked about, we are opening up in the Pacific Northwest, Northern California, Salt Lake, Reno. So those, those are all new markets for us. And we have team members now boots on the ground and are in the process of building out support around those as market conditions allow.
Michael Rehat: Hi, good morning. This is Alex. Isaac on for Mike, appreciate you taking my question. Um I want to ask about the new markets you entered and serious if any like Regional Focus as well as also like what you're seeing on the ground, you know, between the regions that that you operate in.
Michael Rehat: Yeah. So, um, as we've talked about we are opening up in, uh, the Pacific Northwest, um, northern California, Salt Lake, uh, Reno. So those, uh, those are all new markets for us and, uh, uh, we have
Michael Rehat: Team members now boots on the ground. Um, and are in in the process of building out support around those. As market conditions, allow
Mark Walker: Those are all new markets in the last year, but we didn't have any new markets necessarily in this quarter. Okay, that sounds right. Appreciate that.
Speaker Change: the color. Those are all new markets in the last year, uh, but we didn't have any new markets necessarily in this quarter. So,
Mark Walker: And then one other question, you mentioned, you know, the capital structure, there's been some questions that we received related to some of the other competitors in the land development space and their REIT structure. Is there any interest? Or would there be any consideration of conversion to a REIT for Forestar? Or has that been something that you've considered? No, not really. I mean, we're, you know, we're a developer, as opposed to, you know, a land banker, you know, just providing So, I think that's really our business model. That sounds right.
Speaker Change: Any, um, consideration of conversion conversion to a re, you know, for 4 star or has has that in something that you've considered.
Speaker Change: No, not not really. I mean, we're you know, we're um, a developer um, as opposed to, you know, a land Banker, you know, just providing financing. So I think that's that's really our our business model and our Focus.
Alex Isaac: Appreciate all the color.
Speaker Change: That sounds right? Appreciate all the color.
Operator: Once again, if you have a question or a comment, please indicate so by pressing star one on your touchtone phone.
Barry Hames: The next question comes from Barry Hames with Sage Asset Management. Please proceed. Thanks so much for taking my question. DR Horton, on their call, talked about a slower growth in their community count as they go through the next few quarters, you know, into next fiscal year. You know, I think they talked about having been in double digits and getting down to more of a mid-single digit. You know, it sounded like maybe over a couple quarters, but could you talk about how that might affect your thoughts going forward as you start thinking about the next fiscal year?
Speaker Change: Once again, if you have a question or a comment, please indicate so by pressing star 1 on your touchtone phone. The next question comes from Barry Haynes with sage Asset Management, please proceed,
Mark Walker: Thanks so much. Well, we still have, you know, a lot of growth opportunity within Horton because at the moment, we're about 15% of their lot. And our mutually stated goal is to basically double that in the intermediate term. So I think that we will continue to see growth and market share consolidation within Horton. But also, you know, we are increasing our customer base with other builders as well. And continuing to add new customers to the mix. So we think we have significant opportunity to grow both within the Horton footprint and outside.
Barry Haynes: Uh, thanks so much for taking my question. Um, uh, dear Horton on their call, uh, talked about, uh, a slower growth in their Community count as they go through the next few quarters, you know, into next fiscal year. You know, I think they talked about having been in double digits in in getting down to more of a mid single digit. Uh, you know, it sounded like maybe over a couple of quarters but could you talk about how excuse me, how that might affect, um, your your thoughts going forward as you start thinking about the next fiscal year? Thanks so much.
Barry Haynes: Well, we still have you know uh a lot of growth opportunity within Horton because at at the moment we're about 15% of their Lots.
Uh, and are mutually stated goal is to basically double that in the intermediate term. So, uh, I think that we will continue to see growth and market share, uh, consolidation, uh, within Horton. But also, you know, we are, uh, increasing our customer base, uh, with other builders as well. Um, and in continuing to add new customers to the mix. So we think we have significant opportunity to grow both within the Horton footprint and and outside.
Barry Hames: Great. Thanks so much. Appreciate it.
Barry Hames: Thank you.
Speaker Change: Great. Thanks so much. Appreciate it.
John: If there are any remaining questions, please indicate so now by pressing star 1. Thank you, John.
Barry Haynes: Thank you.
If there are any remaining questions please indicate. So now by pressing star 1,
Andy Oxley: 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.
John: We appreciate everyone's time on the call today and look forward to speaking with you again to share our fourth quarter results on Tuesday, October 28.
Speaker Change: Thank you, John. And thank you to everyone on the 4-star team for your focus and hard work. Stay disciplined, flexible and opportunistic. As we continue to consolidate market. Share
Speaker Change: We appreciate everyone's time on the call today and look forward to speaking with you again to share our fourth quarter results, on Tuesday, October 28th.
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.