Q3 2026 Forestar Group Inc Earnings Call

July 21, 2026

Operator: Good morning, and welcome to Forestar's Q3 2026 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Chris Hibbetts, Vice President of Finance and Investor Relations for Forestar.

Speaker #1: and welcome to Four Stars' third quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation.

Speaker #1: It is now my pleasure to turn the floor over to your host, Chris Hibbetts, Vice President of Finance and Investor Relations for Four Star.

Speaker #2: Thank you, Jenny. Good morning, and welcome to our call to discuss Four Star's 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.

Chris Hibbetts: Thank you, Jenny. Good morning, and welcome to our call to discuss Forestar's Q3 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 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 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.

Speaker #2: Although Four Star 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 Four Star on the date of this conference call, and we do not undertake any obligation to update or revise any forward-looking statements publicly.

Speaker #2: Additional information about factors that could lead to material changes in performance is contained in Four Star'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.

Speaker #2: Our earnings release is on our website at investor.fourstar.com, and we plan to file our 10-Q 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.

Chris Hibbetts: Our earnings release is on our website at investor.forestar.com. We plan to file our 10-Q 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 Chief Executive Officer.

Speaker #2: Now, I will turn the call over to Andy Oxley, our President and CEO.

Speaker #3: Thanks, Chris. Good morning, everyone. I am also joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer.

Anthony Oxley: Thanks, Chris. Good morning, everyone. I am also joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer. The Forestar team achieved solid Q3 results with revenues of $407 million, up 4% from the prior year quarter on 3,659 lots sold. Earnings per diluted share increased 8% to $0.70. Pre-tax income increased 12% to $48.7 million. Book value per share increased 10% from a year ago to $36.40. Our contracted backlog remains strong, with visibility towards $2.3 billion of future revenue. Ongoing affordability constraints and cautious consumer sentiment continue to impact the pace of new home sales. In response, we are managing our inventory investments with discipline and flexibility. We ended the quarter with approximately $1.1 billion of liquidity. We also reached a significant milestone this quarter, delivering our 100,000th lot since D.R.

Andy Oxley: Thanks, Chris. Good morning, everyone. I am also joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer. The Forestar team achieved solid Q3 results with revenues of $407 million, up 4% from the prior year quarter on 3,659 lots sold. Earnings per diluted share increased 8% to $0.70. Pre-tax income increased 12% to $48.7 million. Book value per share increased 10% from a year ago to $36.40. Our contracted backlog remains strong, with visibility towards $2.3 billion of future revenue. Ongoing affordability constraints and cautious consumer sentiment continue to impact the pace of new home sales. In response, we are managing our inventory investments with discipline and flexibility. We ended the quarter with approximately $1.1 billion of liquidity. We also reached a significant milestone this quarter, delivering our 100,000th lot since D.R.

Speaker #3: The Forestar team achieved solid third-quarter results, with revenues of $407 million, up 4% from the prior-year quarter, on 3,659 lots sold. Earnings per diluted share increased 8% to $0.70, and pre-tax income increased 12% to $48.7 million.

Speaker #3: Book value per share increased 10% from a year ago to $36.40, and our contracted backlog remained strong, with visibility toward $2.3 billion of future revenue.

Speaker #3: Ongoing affordability constraints and cautious consumer sentiment continue to impact the pace of new home sales. In response, we are managing our inventory investments with discipline and flexibility, and we ended the quarter with approximately $1.1 billion of liquidity.

Speaker #3: We also reached a significant milestone this quarter, delivering our 100,000th lot since Daryl Horton made his transformative investment in Forestar in 2017. Forestar has grown into a proven, scalable platform, and we couldn't be prouder of what our teams have built to get us here.

Anthony Oxley: Horton made its transformative investment in Forestar in 2017. Forestar has grown to a proven scalable platform, and we couldn't be prouder of what our teams have built to get us here. Looking ahead, we remain focused on turning our land and lot inventory efficiently, maximizing returns, and consolidating market share. With a strong balance sheet, operating expertise, and a diverse national platform, Forestar is well-positioned to navigate market conditions and extend its leadership position in the highly fragmented lot development industry. We will now discuss our Q3 financial results in more detail. Jim?

Andy Oxley: Horton made its transformative investment in Forestar in 2017. Forestar has grown to a proven scalable platform, and we couldn't be prouder of what our teams have built to get us here. Looking ahead, we remain focused on turning our land and lot inventory efficiently, maximizing returns, and consolidating market share. With a strong balance sheet, operating expertise, and a diverse national platform, Forestar is well-positioned to navigate market conditions and extend its leadership position in the highly fragmented lot development industry. We will now discuss our Q3 financial results in more detail. Jim?

Speaker #3: Looking ahead, we remain focused on turning our land and lot inventory efficiently, maximizing returns, and consolidating market share. With a strong balance sheet, operating expertise, and a diverse national platform, Forestar is well positioned to navigate market conditions and extend its leadership position in the highly fragmented lot development industry.

Speaker #3: We will now discuss our third-quarter financial results in more detail. Jim?

Speaker #4: Thank you, Andy. In the third quarter, net income attributable to Forestar increased 9% to $35.9 million, or $0.70 per diluted share, compared to $32.9 million, or $0.65 per diluted share, in the prior-year quarter.

James Allen: Thank you, Andy. In Q3, net income attributable to Forestar increased 9% to $35.9 million, or $0.70 per diluted share, compared to $32.9 million or $0.65 per diluted share in the prior year Q. Our pre-tax income increased 12% to $48.7 million compared to $43.6 million in Q3 of last year, and our pre-tax profit margin increased 80 basis points to 12%, from 11.2% in the prior year Q. Revenues for Q3 increased 4% to $407 million compared to $390.5 million in the prior year Q. Mark?

Jim Allen: Thank you, Andy. In Q3, net income attributable to Forestar increased 9% to $35.9 million, or $0.70 per diluted share, compared to $32.9 million or $0.65 per diluted share in the prior year Q. Our pre-tax income increased 12% to $48.7 million compared to $43.6 million in Q3 of last year, and our pre-tax profit margin increased 80 basis points to 12%, from 11.2% in the prior year Q. Revenues for Q3 increased 4% to $407 million compared to $390.5 million in the prior year Q. Mark?

Speaker #4: Our pre-tax income increased 12% to $48.7 million, compared to $43.6 million in the third quarter of last year, and our pre-tax profit margin increased 80 basis points to 12% from $11.2% in the prior-year quarter.

Speaker #4: Revenues for the third quarter increased 4% to $407 million compared to $390.5 million, in the prior-year quarter. Mark?

Speaker #2: We sold 3,659 lots in the quarter, with an average sales price of $108,800. We expect continued quarterly fluctuations in our average sales price based on the geographic and lot-size mix of our deliveries.

Mark Walker: We sold 3,659 lots in the Q with an average sales price of $108,800. We expect continued quarterly fluctuations in our average sales price based on the geographic and lot size mix of our deliveries. Our gross profit margin for the Q was 20.7% compared to 20.4% for the same Q last year. Chris?

Speaker #2: Our gross profit margin for the quarter was 20.7%, compared to 20.4% for the same quarter last year. Chris?

Speaker #4: In the third quarter, SC&A expects increased 2% to $38.3 million, compared to $37.4 million, in the prior-year quarter. As a percentage of revenues, SC&A was 9.4%, down from 9.6% in the prior-year quarter.

Chris Hibbetts: In Q3, SG&A expense increased 2% to $38.3 million compared to $37.4 million in the prior year Q. As a percentage of revenues, SG&A was 9.4%, down from 9.6% in the prior year Q. Our headcount declined 9% from a year ago as we remain focused on efficiently managing SG&A while maintaining strong teams across our national footprint to support future growth. We expect our headcounts to remain relatively flat for the remainder of the year. Jim?

Speaker #4: Our headcount declined 9% from a year ago, as we remain focused on efficiently managing SC&A while maintaining strong teams across our national footprint to support future growth.

Speaker #4: We expect our headcount to remain relatively flat for the remainder of the year. Jim?

Speaker #3: D.R. Horton is our largest and most important customer. Fourteen percent of the homes D.R. Horton started in the past twelve months were on a Forestar-developed lot.

James Allen: D.R. Horton is our largest and most important customer. 14% of the homes D.R. Horton started in the past 12 months were on a Forestar-developed lot. With a mutually stated goal of one out of every three homes D.R. Horton sells to be on a lot developed by Forestar, we have significant opportunity to grow our business with D.R. Horton. We also continue to expand our relationships with other home builders, selling 289 lots, or 8% of our Q3 deliveries to 12 other customers this Q. Mark?

Jim Allen: D.R. Horton is our largest and most important customer. 14% of the homes D.R. Horton started in the past 12 months were on a Forestar-developed lot. With a mutually stated goal of one out of every three homes D.R. Horton sells to be on a lot developed by Forestar, we have significant opportunity to grow our business with D.R. Horton. We also continue to expand our relationships with other home builders, selling 289 lots, or 8% of our Q3 deliveries to 12 other customers this Q. Mark?

Speaker #3: With a mutually stated goal of 1 out of every 3 homes Daryl Horton sells being on a lot developed by Forestar, we have significant opportunity to grow our business with Daryl Horton.

Speaker #3: We also continue to expand our relationships with other homebuilders, selling 289 lots, or 8% of our third-quarter deliveries, to 12 other customers this quarter.

Speaker #3: Mark?

Speaker #2: Our total lot position at June 30 was $91,700 lots. Of which 62,200, or 68%, were owned, and 29,500, or 32%, were controlled through purchase contracts.

Mark Walker: Our total lot position on 30 June was 91,700 lots, of which 62,200, or 68%, were owned and 29,500, or 32%, were controlled through purchase contracts. 9,600 of our own lots were finished at quarter end, and the majority are under contract to sell. Consistent with our focus on capital efficiency, we target owning a three- to four-year supply of land and lots to manage development phases to deliver finished lots at a pace that matches demand. At quarter end, 23,500, or 38% of our own lots were under contract to sell. $202 million of hard earnest money deposits secure 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 in the highly fragmented lot development industry.

Speaker #2: 9,600 of our own lots were finished at quarter-end, and the majority are under contract to sell. Consistent with our focus on capital efficiency, we target owning a three- to four-year supply of land and lots, managing development phases to deliver finished lots at a pace that matches demand.

Speaker #2: A quarter-end $23,500, or 38% of our own lots, were under contract to sell. 202 million of hard-earnest money deposits secured these contracts. Which are expected to generate approximately $2.3 billion of future revenue.

Speaker #2: Our contracted backlog is a strong indicator of our ability to continue gaining market share in the highly fragmented lot development industry. Another 31% of our own lots are subject to a right-of-first offer to Daryl Horton, based on executed purchase and sale agreements.

Mark Walker: Another 31% of our own lots are subject to a right of first offer to D.R. Horton based on executed purchase and sale agreements. Chris?

Speaker #2: Chris?

Speaker #4: 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.

Chris Hibbetts: 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 Q3, we invested $312 million in land and land development. Roughly 80% of our investment was for land development and 20% was for land acquisition. Although we have moderated our land acquisition investment over the last year to more efficiently manage our inventory, our team remains disciplined, flexible, and opportunistic when pursuing new land acquisition opportunities. Our current land and lot position will enable us to return strong volume growth in future periods. We still expect to invest approximately $1.4 billion in land acquisition and development in fiscal 2026 subject to market conditions. Jim?

Speaker #4: During the third quarter, we invested $312 million in land and land development, roughly 80% of our investment was for land development, and 20% was for land acquisition.

Speaker #4: Although we have moderated our land acquisition investment over the last year to more efficiently manage our inventory, our team remains disciplined, flexible, and opportunistic when pursuing new land acquisition opportunities.

Speaker #4: Our current land and lot position will enable us to return strong volume growth in future periods. We still expect to invest approximately $1.4 billion in land acquisition and development in fiscal 2026, subject to market conditions.

Speaker #4: Jim?

Speaker #3: 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 approximately $1.1 billion of liquidity, including an unrestricted cash balance of $395 million and $670 million of available capacity on our undrawn revolving credit facility.

James Allen: 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 approximately $1.1 billion of liquidity, including an unrestricted cash balance of $395 million and $670 million of available capacity on our undrawn revolving credit facility. Total debt at 30 June was $793.8 million with no senior note maturities in the next 12 months, and our net debt to capital ratio was 17.7%. We ended the quarter with $1.9 billion of stockholders' equity, and our book value per share increased 10% from a year ago to $36.40. 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 have become less available and more expensive in recent years, impacting most of our competitors who generally rely on this type of financing.

Jim Allen: 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 approximately $1.1 billion of liquidity, including an unrestricted cash balance of $395 million and $670 million of available capacity on our undrawn revolving credit facility. Total debt at 30 June was $793.8 million with no senior note maturities in the next 12 months, and our net debt to capital ratio was 17.7%. We ended the quarter with $1.9 billion of stockholders' equity, and our book value per share increased 10% from a year ago to $36.40. 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 have become less available and more expensive in recent years, impacting most of our competitors who generally rely on this type of financing.

Speaker #3: Total debt at June 30 was $793.8 million, with no senior note maturities in the next 12 months. Our net debt-to-capital ratio was 17.7%.

Speaker #3: We ended the quarter with $1.9 billion of stockholders' equity, and our book value per share increased 10% from a year ago to $36.40. Four Star's capital structure is one of our biggest competitive advantages, and it sets us apart from other land developers.

Speaker #3: Project-level land acquisition and development loans have become less available and more expensive in recent years, impacting most of our competitors who generally rely on this type of financing.

Speaker #3: These loans 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.

James Allen: These loans 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. Andy, I will hand it back to you for closing remarks.

Jim Allen: These loans 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. Andy, I will hand it back to you for closing remarks.

Speaker #3: Andy, I will hand it back to you for closing remarks.

Speaker #4: Thanks, Jim. Four Star team delivered solid results in the third quarter, including increased revenues and profits, while further strengthening our balance sheet. As outlined in our press release, we are maintaining our fiscal 2026 lot delivery guidance of 14,000 to 14,500 lots, and our revenue guidance of $1.6 billion to $1.7 billion.

Anthony Oxley: Thanks, Jim. Forestar team delivered solid results in Q3, including increased revenues and profits while further strengthening our balance sheet. As outlined in our press release, we are maintaining our fiscal 2026 lot delivery guidance of 14,000 to 14,500 lots and our revenue guidance of $1.6 billion to $1.7 billion. Our teams have a proven track record of adjusting quickly to changes in market conditions. We closely monitor each of our markets and balance the pace and price of lot sales to maximize returns across our projects. With more than 200 active projects across our broad national footprint, we have operational flexibility to allocate capital strategically based on local demand and market dynamics.

Andy Oxley: Thanks, Jim. Forestar team delivered solid results in Q3, including increased revenues and profits while further strengthening our balance sheet. As outlined in our press release, we are maintaining our fiscal 2026 lot delivery guidance of 14,000 to 14,500 lots and our revenue guidance of $1.6 billion to $1.7 billion. Our teams have a proven track record of adjusting quickly to changes in market conditions. We closely monitor each of our markets and balance the pace and price of lot sales to maximize returns across our projects. With more than 200 active projects across our broad national footprint, we have operational flexibility to allocate capital strategically based on local demand and market dynamics.

Speaker #4: Our teams have a proven track record of adjusting quickly to changes in market conditions. We closely monitor each of our markets and balance the pace and price of lot sales to maximize returns across our projects.

Speaker #4: With more than 200 active projects across our broad national footprint, we have operational flexibility to allocate capital strategically based on local demand and market dynamics.

Speaker #4: Although home affordability constraints and cautious consumer sentiment are expected to remain near-term headwinds for 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.

Anthony Oxley: Although home affordability constraints and cautious consumer sentiment are expected to remain near-term headwinds for 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.

Andy Oxley: Although home affordability constraints and cautious consumer sentiment are expected to remain near-term headwinds for 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 #4: Consistent execution of our strategic and operational plans, combined with constrained supply of finished lots across many of our markets, positions us well for further success.

Anthony Oxley: Consistent execution of our strategic and operational plans, combined with constrained supply of finished lots across many of our markets, positions us well for further success. With a clear strategy, an experienced team, and strong operational and financial foundation, we are optimistic about Forestar's future. Jenny, at this time we will open the line for questions.

Andy Oxley: Consistent execution of our strategic and operational plans, combined with constrained supply of finished lots across many of our markets, positions us well for further success. With a clear strategy, an experienced team, and strong operational and financial foundation, we are optimistic about Forestar's future. Jenny, at this time we will open the line for questions.

Speaker #4: With a clear strategy, an experienced team, and a strong operational and financial foundation, we are optimistic about Forestar's future. Jenny, at this time, we will open the line for questions.

Speaker #5: Thank you. The floor is now open for questions. If you have any questions, please press star 1 on your phone keypad now. We ask that while you're posing your question, you please pick up your handset if you're listening on a speakerphone to provide optimum sound quality.

Operator: Thank you. The floor is now open for questions. If you have any questions, please press *1 on your phone keypad now. We ask that while you're posing your question, you please pick up your handset if you're listening on a speakerphone to provide optimum sound quality. If you would like to ask a question, please wait a moment whilst we poll for the questions. Thank you. Our first question is coming from Ryan Gilbert of BTIG. Ryan, your line is live.

Speaker #5: So, star 1, if you would like to ask a question, please wait a moment while we poll for questions. Thank you. Our first question is coming from Ryan Gilbert of BTIG.

Speaker #5: Ryan, your line is live.

Speaker #6: Hi, thanks. Good morning, everyone. I was hoping you could give us an update on the competition that you're seeing in the land market from other land developers and land bankers as well.

Ryan Gilbert: Thanks. Good morning, everyone. I was hoping you could give us an update on the competition that you're seeing in the land market from other land developers and land bankers as well. Horton talked to maybe a slower than expected home buyer market in the quarter. I'm wondering if that translated into the land market as well.

Speaker #6: Horton talked to maybe a slower-than-expected home buyer market in the quarter, and I'm wondering if that translated into the land market as well.

Speaker #3: Land market's been relatively stable. Haven't seen much change in land price. We have seen a little bit of improvement on being able to negotiate terms for, for example, getting land on takedowns.

Anthony Oxley: Land market's been relatively stable. Haven't seen much change in land price. We have seen a little bit of improvement on being able to negotiate terms. For example, getting land on takedowns, getting through full entitlement and permitting. We're able to focus on shovel-ready deals. Overall, I would say we'd see a somewhat less development activity across the board, in quite a few markets. Most markets are still slightly undersupplied, so we think that gives us opportunity for future growth.

Andy Oxley: Land market's been relatively stable. Haven't seen much change in land price. We have seen a little bit of improvement on being able to negotiate terms. For example, getting land on takedowns, getting through full entitlement and permitting. We're able to focus on shovel-ready deals. Overall, I would say we'd see a somewhat less development activity across the board, in quite a few markets. Most markets are still slightly undersupplied, so we think that gives us opportunity for future growth.

Speaker #3: Getting through full entitlement and permitting, so we're able to focus on shovel-ready deals. Overall, I would say we see somewhat less development activity across the board.

Speaker #3: In quite a few markets, but most markets are still slightly undersupplied. So we think that gives us opportunity for future growth.

Speaker #6: Got it. Sorry, we're slightly undersupplied from a finished lot perspective.

Ryan Gilbert: Got it. Sorry, slightly undersupplied from a finished lot perspective?

Speaker #3: That's correct.

Anthony Oxley: That's correct.

Andy Oxley: That's correct.

Speaker #6: Okay. Got it. I'd appreciate any directional thoughts on 2027, just given the decline in your controlled lot count. Do you think that the land position puts you in a position to grow market share in 2027?

Ryan Gilbert: Okay. Got it. I'd appreciate any directional thoughts on 2027, just given the decline in your controlled lot count. Do you think that the land position puts you in a position to grow market share in 2027?

Speaker #3: Yeah. Our own lot supply—we want to target that to be around a three- to four-year supply. Today—I'm sorry—a year supply. Three- to four-year supply.

Mark Walker: Yeah. Our own lot supply, we want to target that to be around three to four months of supply. Today.

Anthony Oxley: Years. Sure.

Andy Oxley: Years. Sure.

Mark Walker: I'm sorry, year supply. Three to four year supply. Today, it's a little bit over, just north of four, so we feel good about our own lot supply. We have the finished lots on the ground, this year to execute. Moving on to next year, in terms of consolidating market share, we feel really good about our opportunity to grow our market share, not just within D.R. Horton, but with other builders.

Speaker #3: Today, it's a little bit over, just north of 4. So we feel good about our own lot supply. We had the finished lots on the ground this year to execute, and moving to the next year in terms of consolidating market share, we feel really good about our opportunity to grow our market share, not just within DR Horton, but with other builders.

Speaker #3: And we have a very robust pipeline of future projects, so we think we can expand in the Horton footprint as well as with some third parties.

Anthony Oxley: We have a very robust pipeline of future projects. We think we can expand in the Horton footprint as well as with some third parties.

Andy Oxley: We have a very robust pipeline of future projects. We think we can expand in the Horton footprint as well as with some third parties.

Speaker #6: Okay. Great. Then any change in the, I guess, the M&A pipeline or opportunities for growth via M&A? I'm just kind of looking at the cash balance building over the course of the year.

Ryan Gilbert: Okay, great. Any change in the, I guess the M&A pipeline or opportunities for growth via M&A? I'm just kind of looking at the cash balance building over the course of the year.

Speaker #3: Yeah, I think there are opportunities. We continue to see opportunities. So that's part of the reason we want to have strong liquidity—so we can take advantage of opportunities when they arise.

Anthony Oxley: Yeah, I think there are opportunities. We continue to see opportunities, so that's part of the reason we want to have strong liquidity is to be able to take advantage of opportunities when they arise.

Jim Allen: Yeah, I think there are opportunities. We continue to see opportunities, so that's part of the reason we want to have strong liquidity is to be able to take advantage of opportunities when they arise.

Speaker #6: Okay. Great. Thank you.

Ryan Gilbert: Okay, great. Thank you.

Speaker #5: Thank you very much. Just a reminder there, you can still join the queue by pressing star 1 on your phone keypad. Our next question is coming from Trevor Allenson of Wolf Research.

Operator: Thank you very much. Just a reminder there, you can still join the queue by pressing *1 on your phone keypad. Our next question is coming from Trevor Allinson of Wolfe Research. Trevor, your line is live.

Speaker #5: Trevor, your line is live.

Speaker #3: Hi. Good morning. Thank you for taking my question. At times in the past, when the market's been weaker, you guys have used that as an opportunity to pick up headcount to try to help grow your share.

Trevor Allinson: Hi, good morning. Thank you for taking my questions. At times in the past when the market's been weaker, you guys have used that as an opportunity to pick up head count to try to help grow your share. I think here recently, including in the prepared remarks, you continue to talk about keeping your head count flat. I guess what I'd ask, what's different this time with weaker conditions? Why are you not being more aggressive to pick up head count like you have in past periods?

Speaker #3: I think here recently, including in the prepared-to-markets, you've continued to talk about keeping your headcount flat. So I guess what I would ask, what's different this time with weaker conditions?

Speaker #3: Why are you not being more aggressive to pick up headcount like you have in past periods?

Speaker #4: So we had pretty significant

Anthony Oxley: We had pretty significant head count growth in 2024 and the H1 of 2025. We intentionally moderated that in the H2 of 2025 and have been relatively flat, slightly down this year. We will see an increase in head count as we go into 2027, as we develop out more land capabilities, particularly out West.

Andy Oxley: We had pretty significant head count growth in 2024 and the H1 of 2025. We intentionally moderated that in the H2 of 2025 and have been relatively flat, slightly down this year. We will see an increase in head count as we go into 2027, as we develop out more land capabilities, particularly out West.

Speaker #3: ant significant headcount growth in '24 in the first half of '25. We intentionally moderated that in the second half of '25 and have been relatively flat, slightly down this year.

Speaker #3: We will see go into '27. As we develop out more land capabilities, particularly out west. Okay. Okay. Gotcha. Makes sense. Second then on cycle times, can you update on us on how those are trending?

Trevor Allinson: Okay. Gotcha. Makes sense. Second, on cycle times, can you update us on how those are trending? Maybe where those stand versus a year ago, or what you would consider a normalized cycle time for you guys. Historically, the municipalities have been frequently cited as the biggest bottleneck. Are you seeing any relief there?

Speaker #3: Maybe where those stand versus a year ago or what you would consider a normalized cycle time for you guys. And then, historically, the municipalities have been frequently cited as the biggest bottleneck.

Speaker #3: Are you seeing any relief there?

Speaker #4: Okay, I'll talk about cycle times first. It really comes back to a couple of things. Contractor availability continues to free up—not just free up, but also we're seeing what we would say are A-rated contractors we're able to utilize.

Mark Walker: Okay, I'll talk about cycle times first. It really comes back to a couple things. Contractor availability continues to free up. Not just free up, but also we're seeing what we would say are A-rated contractors we'll be able to utilize. We do manage our developments in phases. Cycle times over the past trailing, we'll say 36 months, have come down close to six months. They settled in around 12 months. We're currently operating in the 12-month cycle time. We do think there's further opportunities for efficiencies to reduce our cycle times and our costs. You hit the nail on the head. I think basically our complete to close in terms of governing jurisdictions, that's kind of been our bottleneck, to reduce our cycle times further. I do believe there's opportunities to reduce our cycle times as we go into the future.

Speaker #4: We do manage our developments and phases. Cycle times over the past trailing, let's say, 36 months have come down close to 6 months. They settled in around 12 months.

Speaker #4: We're currently operating on a 12-month cycle time. We do think there are further opportunities for efficiencies to reduce our cycle times and our costs. And you hit the nail on the head.

Speaker #4: I think, basically, our complete-to-close timing, in terms of governing jurisdictions, has kind of been our bottleneck to reducing our cycle times further. But I do believe there are opportunities to reduce our cycle times as we go into the future.

Speaker #3: Okay, great. Definitely encouraging. And maybe one more, if I can. Gross margins in the quarter were at the lower end of your 21% to 23% historical range. I know there's always mix impacts, but we've also seen diesel costs come up here. Were there any impacts in the quarter from diesel as well, or was that primarily a mix impact?

Trevor Allinson: Okay, great. Definitely encouraging. Maybe one more, if I can. Gross margins in the quarter were at the lower end of your 21% to 23% historical range. I know there's always mix impacts. We've also seen diesel costs come up here in staff. Were there any impacts in the quarter from diesel as well, or was that primarily a mix impact?

Speaker #4: Not really. It's primarily mixed and just the environment, just a slower absorption environment. As we manage price and pace on a project by project basis, our margins have been kind of the lower end three or four years.

Anthony Oxley: Not really. It's primarily mix and just the environment, just a slower absorption environment. As we manage price and pace on a project-by-project basis, our margins have been kind of the lower end of our historic range over the last three or four years.

Andy Oxley: Not really. It's primarily mix and just the environment, just a slower absorption environment. As we manage price and pace on a project-by-project basis, our margins have been kind of the lower end of our historic range over the last three or four years.

Speaker #3: Okay, makes sense. Thank you for all the color, and good luck moving forward.

Trevor Allinson: Okay. Makes sense. Thank you for all the color. Good luck moving forward.

Speaker #5: Thank you very much. And our next question is coming from Ryan Gilbert of BTIG. Ryan, your line is live.

Operator: Thank you very much. Our next question is coming from Ryan Gilbert of BTIG. Ryan, your line is live.

Speaker #6: Hi. Thanks. Just a quick follow-up from me. I think Horton mentioned some relief on horizontal construction costs on the call. And I'm wondering if that's something that you're seeing as well.

Ryan Gilbert: Hi, thanks. Just a quick follow-up from me. I think Horton mentioned some relief on horizontal construction costs on the call. I'm wondering if that's something that you're seeing as well. To the extent you are seeing some cost relief, when you would expect that to flow through the income statement.

Speaker #6: And to the extent you are seeing some cost relief, when would you expect that to flow through the income statement?

Speaker #4: Our costs have stabilized. I would tell you over the past 12 months. I mean, we're seeing some reductions in some categories, and we're seeing some increases in others.

Anthony Oxley: Our costs have stabilized, I would tell you, over the past 12 months. We're seeing some reductions in some categories. We're seeing some increases in others. I would say relative to direct costs, they're pretty stable. We haven't seen a big decrease in cost.

Jim Allen: Our costs have stabilized, I would tell you, over the past 12 months. We're seeing some reductions in some categories. We're seeing some increases in others. I would say relative to direct costs, they're pretty stable. We haven't seen a big decrease in cost.

Speaker #4: But I would say relative to direct costs, they're pretty stable. We haven't seen a big decrease in cost.

Speaker #6: Okay. Got it. Thanks, guys.

Ryan Gilbert: Okay, got it. Thanks, guys.

Speaker #3: Thank you.

Anthony Oxley: Thank you.

Andy Oxley: Thank you.

Speaker #5: Thank you very much. While we appear to have reached the end of our question and answer session, I will now hand back over to Andy for any closing comments.

Operator: Thank you very much. Well, we appear to have reached the end of our question-and-answer session. I will now hand back over to Andy for any closing comments.

Speaker #3: Thank you, Jenny. And thank you to everyone on the four-star team for your dedication and commitment. Let's stay focused, flexible, and opportunistic as we continue to strengthen our market position.

Anthony Oxley: Thank you, Jenny, and thank you to everyone on the Forestar team for your dedication and commitment. Let's stay focused, flexible, and opportunistic as we continue to strengthen our market position. We appreciate everyone's time on the call today and look forward to speaking with you again to share our Q4 and full year results on Thursday, 29 October.

Andy Oxley: Thank you, Jenny, and thank you to everyone on the Forestar team for your dedication and commitment. Let's stay focused, flexible, and opportunistic as we continue to strengthen our market position. We appreciate everyone's time on the call today and look forward to speaking with you again to share our Q4 and full year results on Thursday, 29 October.

Speaker #3: We appreciate everyone's time on the call today and look forward to speaking with you again to share our fourth quarter and full year results on Thursday, October 29.

Speaker #5: Thank you very much. This does conclude today's event. You may disconnect at this time and have a wonderful day. We thank you for your participation.

Operator: Thank you very much. This does conclude today's event. You may disconnect at this time, and have a wonderful day. We thank you for your participation.

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