Financial Data and Key Metrics - No specific financial data or key metrics changes were provided in the content [1][2][3][4][5][6] Business Line Data and Key Metrics - No specific business line data or key metrics changes were provided in the content [1][2][3][4][5][6] Market Data and Key Metrics - No specific market data or key metrics changes were provided in the content [1][2][3][4][5][6] Company Strategy and Industry Competition - No specific details on company strategy, development direction, or industry competition were provided in the content [1][2][3][4][5][6] Management Commentary on Operating Environment and Future Outlook - The company included forward-looking statements in the call, which are based on reasonable assumptions but are subject to material differences in actual outcomes [3] - Additional information on factors that could lead to material changes in performance is contained in the company's annual and quarterly reports filed with the SEC [4] Other Important Information - The earnings release is available on the company's website, and the 10-Q filing is planned for later in the week [4] - An updated investor presentation will be posted on the Investor Relations site after the call [5] Q&A Session Summary - No Q&A session details were provided in the content [1][2][3][4][5][6]

Financial Data and Key Metrics Changes - In Q1, net income was $16.5 million or $0.32 per diluted share, down from $38.2 million or $0.76 per diluted share in the prior year quarter [6] - Revenues totaled $250.4 million compared to $305.9 million in the prior year quarter, reflecting a decrease [6][7] - Pre-tax income was $21.9 million, down from $51.2 million in the same quarter last year, with a pre-tax profit margin of 8.7% compared to 16.7% previously [6][8] - SG&A expenses increased by 29% to $36 million, primarily due to a 30% increase in employee count [8] Business Line Data and Key Metrics Changes - The company sold 2,333 lots in the quarter with an average sales price of $105,500 [7] - The owned lot position increased by 23% year-over-year, and community count rose by 25% [5] - The gross profit margin for the quarter was 22%, slightly down from 23.8% in the prior year quarter [8] Market Data and Key Metrics Changes - Demand for finished lots remains solid, with owned lots under contract doubling from a year ago [4] - The company’s total lot position increased by 29% to 106,000 lots, with 64% owned and 36% controlled through purchase contracts [13] - The backlog of contracted lots is expected to generate approximately $2.2 billion in future revenue [14] Company Strategy and Development Direction - The company is focused on investing in land acquisition and development, with a planned investment of approximately $2 billion in fiscal 2025 [12] - The strategic goal is to double market share to 5% over the intermediate term [19] - The company aims to maintain a disciplined approach to capital investment while enhancing long-term value [19] Management's Comments on Operating Environment and Future Outlook - Management noted that while home inventories have increased, affordable housing supply remains limited, with favorable demographics supporting housing demand [8] - The company expects Q1 to be the lowest delivery quarter of the fiscal year, with higher revenues anticipated in the second half [18] - Management expressed confidence in the company’s position to gain market share in the fragmented lot development industry [19] Other Important Information - The company ended the quarter with $645 million in liquidity, including $132 million in cash [14] - The corporate credit rating was upgraded from B+ to BB- [14] - The company’s capital structure provides operational flexibility and positions it to take advantage of attractive opportunities [15] Q&A Session Summary Question: Can you provide more detail on the stabilization of costs in land development? - Management indicated that development costs have stabilized over the past 12 months, with no significant price increases observed [23] Question: How do you expect employee count growth to impact cost leverage in the next year or two? - Management expects SG&A expenses to moderate for the remainder of the year, anticipating high single-digit growth [26] Question: What drove the higher revenue per lot this quarter? - The increase was attributed to a specific infill project with significant lot prices that skewed the average sales price upward [28] Question: How has builder demand been trending year to date? - Builder demand remains strong, particularly for new communities, with existing communities also seeing solid demand [32] Question: Can you elaborate on the cadence of deliveries for the rest of the year? - Management noted that Q1 is typically the lowest delivery quarter, with a majority of deliveries expected in the second half of the year [34]

Financial Data and Key Metrics Changes - In Q1, net income was $16.5 million or $0.32 per diluted share, down from $38.2 million or $0.76 per diluted share in the prior year quarter [6] - Pre-tax income was $21.9 million compared to $51.2 million in Q1 of last year, with a pre-tax profit margin of 8.7% versus 16.7% in the prior year quarter due to reduced operating leverage [6] - Revenues totaled $250.4 million, down from $305.9 million in the prior year quarter [6][7] - Gross profit margin for the quarter was 22% compared to 23.8% for the same quarter last year [8] Business Line Data and Key Metrics Changes - The company sold 2,333 lots in the quarter with an average sales price of $105,500 [7] - Owned lot position increased by 23% compared to a year ago, and community count increased by 25% over the same period [5] - SG&A expenses increased by 29% from the prior year quarter to $36 million, primarily due to a 30% increase in employee count [8] Market Data and Key Metrics Changes - The total lot position increased by 29% from a year ago to 106,000 lots, with 64% owned and 36% controlled through purchase contracts [14] - Owned lots under contract increased by 51% from a year ago to 25,200 lots, representing 37% of the owned lot position [15] Company Strategy and Development Direction - The company is focused on investing in compelling land parcels, maximizing returns, and consolidating market share in the lot development industry [5] - The goal is to double market share to 5% over the intermediate term while maintaining a disciplined approach to capital investment [20] - The company expects to invest approximately $2 billion in land acquisition and development in fiscal 2025, subject to market conditions [12] Management's Comments on Operating Environment and Future Outlook - Management noted that builder demand remains strong, particularly for new communities, and there has been no softening in land prices [9][33] - The company expects Q1 to be the lowest delivery quarter of the year, with higher revenues anticipated in the second half of fiscal 2025 [19] - Management expressed confidence in the company's ability to gain market share in the fragmented lot development industry [20] Other Important Information - The company ended the quarter with $645 million of liquidity, including $132 million in unrestricted cash [15] - Total debt was $807 million with no senior note maturities until May 2026, and the net debt to capital ratio was 29.5% [15] Q&A Session Summary Question: Can you provide more detail on the stabilization of costs in land development? - Management indicated that development costs have stabilized over the past 12 months, with no significant price increases observed [23] Question: How do you foresee the growth in employee count and new markets affecting cost leverage? - Management expects SG&A expenses to moderate for the remainder of the year, anticipating high single-digit growth [26] Question: What is driving the higher revenue per lot this quarter? - The increase in revenue per lot was attributed to a specific infill project with significant lot prices that skewed the average sales price up for the quarter [28] Question: How has builder demand been trending year to date? - Builder demand remains strong, particularly for new communities, with no significant delays reported from major customers [32]

Core Viewpoint - Forestar Group (NYSE: FOR) is a residential lot supply company that primarily sells parcels of land to homebuilders, with a significant focus on D.R. Horton, the largest homebuilder in the U.S. [1] Company Overview - Forestar Group specializes in supplying residential lots, which are essential for homebuilding developments [1]. - The company has established a strong relationship with D.R. Horton, indicating its strategic positioning within the homebuilding supply chain [1]. Investment Philosophy - The investment philosophy highlighted emphasizes the importance of investing in high-quality stocks and businesses that are managed by disciplined capital allocators, generate exceptional returns on capital, and have the potential for long-term capital compounding [1].

FORESTAR Investor Presentation Q4 2024 FORWARD-LOOKING STATEMENTS Factors that may cause the actual results to be materially different from the future results expressed by the forward-looking statements include, but are not limited to: the effect of D.R. Horton's controlling level of ownership on us and the holders of our securities; our ability to realize the potential benefits of the strategic relationship with D.R. Horton; the effect of our strategic relationship with D.R. Horton on our ability to mainta ...

Financial Performance - Net income for fiscal 2024 increased 22% to $203.4 million, or $4.00 per diluted share, compared to $166.9 million, or $3.33 per diluted share, in fiscal 2023[3] - Revenues for fiscal 2024 increased 5% to $1.5 billion from $1.4 billion in fiscal 2023, with 15,068 lots sold[3] - Net income for the three months ended September 30, 2024, was $81.6 million, compared to $72.4 million in the same period of 2023, reflecting a year-over-year increase of 12.5%[18] - Basic net income per common share increased to $1.61 for the three months ended September 30, 2024, up from $1.45 in the same period of 2023, marking an increase of 11.0%[18] - The income before income taxes for the three months ended September 30, 2024, was $108.5 million, compared to $95.4 million in the same period of 2023, showing an increase of 13.6%[18] Sales and Lots - Lots sold during fiscal 2024 increased 7% to 15,068 lots compared to 14,040 lots in fiscal 2023[6] - The company delivered over 15,000 finished lots in fiscal 2024, exceeding the high end of its recent guidance range[10] - Residential lot sales from development projects totaled $496.4 million for the three months ended September 30, 2024, compared to $485.4 million in the same period of 2023, indicating a growth of 2.1%[19] - The average sales price per lot was $97,300 for the three months ended September 30, 2024, slightly down from $97,400 in the same period of 2023[20] - The company owned 20,500 lots under contract to sell to D.R. Horton, an increase from 14,400 lots in the previous year, reflecting a growth of 42.4%[20] Assets and Liquidity - The company ended fiscal 2024 with $481.2 million of unrestricted cash and $377.2 million of available borrowing capacity, totaling $858.4 million in liquidity[9] - Debt at September 30, 2024, totaled $706.4 million, with no senior note maturities until fiscal 2026[9] - The total lots owned and controlled increased to 95,100 as of September 30, 2024, compared to 79,200 as of September 30, 2023, representing a growth of 20.1%[20] - The company owned and controlled 95,100 lots as of September 30, 2024, with 21,000 lots under contract to be sold, representing approximately $1.9 billion of future revenue[7] Expenses - Selling, general and administrative expenses rose to $32.0 million for the three months ended September 30, 2024, compared to $26.4 million in the same period of 2023, an increase of 21.3%[18] Investment - Over the last five years, the company invested approximately $6.7 billion in land acquisition and development, delivering over 70,000 finished lots[11] Future Outlook - The company expects to deliver between 16,000 and 16,500 lots in fiscal 2025, generating $1.6 billion to $1.65 billion of revenue[12] Quarterly Revenue - Total revenues for the three months ended September 30, 2024, were $551.4 million, a slight increase from $549.7 million in the same period of 2023, representing a growth of 0.3%[19] Asset Sales - The company reported a gain on the sale of assets of $(4.5) million for the three months ended September 30, 2024, compared to no gain in the same period of 2023[18]

Industry Overview - The Zacks Real Estate – Development industry includes companies involved in owning, developing, and managing various real estate properties, such as commercial, residential, and mixed-use parcels [3] - Companies in this sector often engage in strategic activities like infrastructure improvement and land planning to enhance economic development and attract job creators [3] Current Market Conditions - Recent interest rate cuts by the Federal Reserve have improved buyer sentiment for 2024 and 2025, encouraging real estate development due to lower borrowing costs [4] - The industry is experiencing a significant shortage of new homes due to over a decade of under-building, which is contributing to favorable industry fundamentals [5] - Demand for specific real estate categories, including retail, industrial, logistics, and office spaces, is witnessing healthy growth, driven by post-pandemic consumer preferences and e-commerce trends [6] Economic Challenges - Despite improved investor sentiment, macroeconomic uncertainty and geopolitical tensions are causing supply-chain constraints and inflated material costs, which keep real estate prices high [2][7] - The volume of U.S. commercial real estate transactions decreased by 3% year over year in Q2 2024, totaling $86 billion, indicating subdued sales activity [7] Industry Performance - The Zacks Real Estate Development industry ranks 87, placing it in the top 35% of 252 Zacks industries, indicating bright near-term prospects [8] - Aggregate earnings estimates for the industry have increased by 10.6% and 7.8% for 2024 and 2025, respectively, reflecting growing confidence in earnings growth potential [9] Stock Performance - Over the past year, the industry has gained 28%, underperforming the S&P 500's growth of 33.7% and the broader Finance sector's increase of 31.9% [11] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 6.73X, significantly lower than the S&P 500's 21.57X and the Finance sector's 16.2X [12] Company Highlights - **Howard Hughes Holdings Inc. (HHH)**: Engaged in the ownership, management, and development of various real estate types, with a Zacks Rank 1 (Strong Buy) and a projected 2024 EPS of $3.28, indicating a significant year-over-year increase [14][16] - **Green Brick Partners, Inc. (GRBK)**: A diversified homebuilding and land development company with a Zacks Rank 3 (Hold) and a projected 2024 EPS of $8.35, suggesting a 36% year-over-year increase [17][19] - **Forestar Group Inc. (FOR)**: Focuses on land acquisition and development for residential lots, with a Zacks Rank 3 and a projected fiscal 2024 EPS of $3.72, indicating an 11.7% year-over-year increase [19][23]

Forestar Group Inc (NYSE: FOR ) is a top idea of mine in the real estate development sector. The company essentially acquires land and develops the infrastructure need to support the growth in creating single-family residential communities, selling finished I'm an insurance Case Manager with a deep interest in investing. My investment philosophy is all about buying high quality stocks and great businesses. My favorite businesses are those led by disciplined capital allocators, earn exceptional returns on ca ...

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section provides the unaudited consolidated financial statements for the quarter ended June 30, 2024, prepared in accordance with U.S. GAAP - The unaudited financial statements include all necessary adjustments for a fair presentation of interim period results, as per management's opinion[153](index=153&type=chunk) - These financial statements should be read in conjunction with the audited financial statements from the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023[153](index=153&type=chunk) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2024, total assets increased to **$2,675.0 million**, driven by real estate, with total liabilities at **$1,162.1 million** and equity at **$1,512.9 million** Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$2,675.0** | **$2,470.7** | | Cash and cash equivalents | $359.2 | $616.0 | | Real estate | $2,238.7 | $1,790.3 | | **Total Liabilities** | **$1,162.1** | **$1,100.8** | | Debt | $706.1 | $695.0 | | **Total Equity** | **$1,512.9** | **$1,369.9** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the nine months ended June 30, 2024, net income rose to **$121.8 million** on **$958.0 million** revenue, though the third quarter saw a decline in both metrics Statement of Operations Summary (in millions, except per share data) | Metric | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $958.0 | $887.1 | $318.4 | $368.9 | | Income before income taxes | $161.6 | $126.2 | $51.6 | $62.4 | | Net income | $121.8 | $94.5 | $38.7 | $46.8 | | Diluted net income per share | $2.40 | $1.89 | $0.76 | $0.93 | [Consolidated Statements of Total Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Total%20Equity) Total equity increased to **$1,512.9 million** by June 30, 2024, primarily driven by **$121.9 million** in net income and common stock issuance proceeds Changes in Total Equity (in millions) | Description | Amount | | :--- | :--- | | Balance at September 30, 2023 | $1,369.9 | | Net income (9 months) | $121.9 | | Issuance of common stock | $19.7 | | Other adjustments | ($0.5) | | **Balance at June 30, 2024** | **$1,512.9** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$277.6 million** for the nine months ended June 30, 2024, primarily due to increased real estate investments, leading to a **$256.8 million** decrease in cash Cash Flow Summary (Nine Months Ended June 30, in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(277.6) | $136.2 | | Net cash provided by investing activities | $3.7 | $0.8 | | Net cash provided by (used in) financing activities | $17.1 | $(0.8) | | **(Decrease) increase in cash** | **$(256.8)** | **$136.2** | | Cash at end of period | $359.2 | $401.0 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, segment operations as a single real estate entity, D.R. Horton's **62%** majority ownership, and the **$706.1 million** debt structure, including an undrawn **$410 million** credit facility - As of June 30, 2024, D.R. Horton owned approximately **62%** of the Company's outstanding common stock, classifying it as a related party under GAAP[35](index=35&type=chunk)[137](index=137&type=chunk) - The company operates as a single real estate segment, focused on acquiring land, installing infrastructure, and selling residential lots to homebuilders[156](index=156&type=chunk)[178](index=178&type=chunk) Debt Composition as of June 30, 2024 (in millions) | Debt Instrument | Carrying Amount | | :--- | :--- | | 3.85% senior notes due 2026 | $398.2 | | 5.0% senior notes due 2028 | $298.0 | | Other note payable | $9.9 | | **Total Debt** | **$706.1** | - The company maintains a **$410 million** senior unsecured revolving credit facility, with no outstanding borrowings and **$385.2 million** of available capacity as of June 30, 2024[20](index=20&type=chunk)[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong demand for residential lots, driving an **8%** revenue increase for the nine-month period, expanding lot position to **102,100**, and maintaining strong liquidity, despite quarterly impacts from reduced inventory - Demand for residential lots, especially at affordable price points, remained strong, contributing to an **8%** revenue increase for the nine months ended June 30, 2024[65](index=65&type=chunk) - The company's total lot position expanded to **102,100** lots by June 30, 2024, comprising **57,900** owned and **44,200** controlled lots[64](index=64&type=chunk)[240](index=240&type=chunk) - The company is well-positioned to consolidate market share, supported by low net leverage, strong liquidity, a diverse lot portfolio, and its strategic relationship with D.R. Horton[212](index=212&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Nine-month revenues increased to **$958.0 million**, driven by a **7%** rise in lots sold and higher average sales prices, with D.R. Horton sales as a primary contributor, while SG&A expenses also increased Residential Lots Sold | Period | Lots Sold | Average Sales Price | | :--- | :--- | :--- | | Nine Months Ended June 30, 2024 | 9,694 | $96,300 | | Nine Months Ended June 30, 2023 | 9,054 | $87,300 | | Three Months Ended June 30, 2024 | 3,255 | $94,000 | | Three Months Ended June 30, 2023 | 3,812 | $87,700 | Lot Sales Revenue by Customer (Nine Months Ended June 30, in millions) | Customer | 2024 | 2023 | | :--- | :--- | :--- | | D.R. Horton | $846.6 | $677.4 | | Other Customers | $86.7 | $112.9 | | **Total** | **$933.3** | **$790.3** | - SG&A expense increased to **$86.5 million** for the nine months ended June 30, 2024, from **$71.3 million** in the prior year, primarily due to increased headcount supporting business growth[238](index=238&type=chunk) - No impairment charges were recorded in the three and nine months ended June 30, 2024, contrasting with **$19.4 million** in the nine months ended June 30, 2023[70](index=70&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$359.2 million** cash and **$385.2 million** available credit, a net debt to total capital ratio of **18.7%**, and raised **$19.7 million** from common stock issuance - As of June 30, 2024, the company held **$359.2 million** in cash and cash equivalents, with **$385.2 million** available on its revolving credit facility[99](index=99&type=chunk) - The ratio of net debt to total capital stood at **18.7%** as of June 30, 2024[241](index=241&type=chunk) - Net cash used in operating activities totaled **$277.6 million** for the nine months ended June 30, 2024, primarily due to increased real estate investment[227](index=227&type=chunk)[135](index=135&type=chunk) - The company issued **546,174** shares of common stock under its at-the-market program, generating **$19.7 million** in net proceeds during the nine months ended June 30, 2024[167](index=167&type=chunk)[228](index=228&type=chunk)[246](index=246&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on its debt, managed through a mix of fixed and variable-rate instruments, with predominantly fixed-rate debt and no outstanding variable-rate borrowings as of June 30, 2024 - The company's primary market risk is interest rate risk, which is managed through a combination of fixed and variable-rate debt[84](index=84&type=chunk)[252](index=252&type=chunk) - As of June 30, 2024, fixed-rate debt totaled **$709.9 million**, with no outstanding borrowings on the **$410 million** variable-rate revolving credit facility[116](index=116&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[253](index=253&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2024[117](index=117&type=chunk) [PART II — OTHER INFORMATION](index=26&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, for which management believes adequate reserves are established, expecting no material adverse effect on financial position or long-term results - The company is involved in various legal proceedings arising in the ordinary course of business[86](index=86&type=chunk)[118](index=118&type=chunk) - Management believes adequate reserves are established, and the outcome of these proceedings is not expected to materially affect the company's financial position, long-term results, or cash flows[86](index=86&type=chunk)[170](index=170&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL documents - The report includes CEO and CFO certifications as required by Sections 302 and 906 of the Sarbanes-Oxley Act[255](index=255&type=chunk) - Interactive Data Files, including XBRL Instance Document and various Linkbase Documents, are electronically submitted with the report[255](index=255&type=chunk) [SIGNATURE](index=28&type=section&id=SIGNATURE) The quarterly report concludes with the formal signature of James D. Allen, Executive Vice President and Chief Financial Officer, dated July 22, 2024 - The report was formally signed by James D. Allen, Executive Vice President and Chief Financial Officer, on behalf of Forestar Group Inc[113](index=113&type=chunk)[124](index=124&type=chunk) - The signature date for the report is July 22, 2024[113](index=113&type=chunk)

[Fiscal 2024 Third Quarter and Nine Months Results](index=1&type=section&id=Fiscal%202024%20Third%20Quarter%20and%20Nine%20Months%20Results) Forestar Group Inc. reported mixed results for Q3 and the first nine months of fiscal 2024, with Q3 showing declines in net income and revenue, while the nine-month period demonstrated significant growth in both metrics and lots sold [Third Quarter Financial Performance](index=1&type=section&id=Third%20Quarter%20Financial%20Performance) Forestar Group Inc. experienced a **17% decrease in Q3 FY2024 net income** to $38.7 million and a **14% revenue decline** to $318.4 million, despite maintaining a 16.2% pre-tax profit margin and expanding return on equity to 13.8% [Q3 Key Financial Metrics](index=1&type=section&id=Q3%20Key%20Financial%20Metrics) **Q3 FY2024 vs. Q3 FY2023 Financial Performance:** | Metric | Q3 FY2024 | Q3 FY2023 | Change (YoY) | | :-------------------- | :---------- | :---------- | :----------- | | Net Income | $38.7 million | $46.8 million | -17% | | Diluted EPS | $0.76 | $0.93 | -18.3% | | Pre-tax Income | $51.6 million | $62.4 million | -17% | | Pre-tax Profit Margin | 16.2% | - | - | | Consolidated Revenues | $318.4 million | $368.9 million | -14% | | Return on Equity (TTM) | 13.8% | 11.7% | +190 bps | | Book Value per Share | $29.87 | - | +15% | [Q3 Operational Metrics](index=1&type=section&id=Q3%20Operational%20Metrics) **Q3 FY2024 Lots Sold:** | Category | Q3 FY2024 | Q3 FY2023 | Change (YoY) | | :-------------------------------- | :-------- | :-------- | :----------- | | Total Lots Sold | 3,255 | 3,812 | -15% | | Lots Sold to Other Customers (excl. D.R. Horton) | 352 | 625 | -43.7% | [Nine Months Financial Performance](index=1&type=section&id=Nine%20Months%20Financial%20Performance) For the first nine months of fiscal 2024, Forestar achieved significant growth with **net income up 29% to $121.8 million**, pre-tax income up 28% to $161.6 million, and revenues increasing 8% to $958.0 million [9M Key Financial Metrics](index=1&type=section&id=9M%20Key%20Financial%20Metrics) **Nine Months Ended June 30, 2024 vs. 2023 Financial Performance:** | Metric | 9M FY2024 | 9M FY2023 | Change (YoY) | | :-------------------- | :---------- | :---------- | :----------- | | Net Income | $121.8 million | $94.5 million | +29% | | Diluted EPS | $2.40 | $1.89 | +27% | | Pre-tax Income | $161.6 million | $126.2 million | +28% | | Revenues | $958.0 million | $887.1 million | +8% | [9M Operational Metrics](index=1&type=section&id=9M%20Operational%20Metrics) **Nine Months Ended June 30, 2024 Lots Sold:** | Category | 9M FY2024 | 9M FY2023 | Change (YoY) | | :-------------------------------- | :-------- | :-------- | :----------- | | Total Lots Sold | 9,694 | 9,054 | +7% | | Lots Sold to Other Customers (excl. D.R. Horton) | 852 | 1,107 | -23.1% | [Capital Structure and Liquidity](index=1&type=section&id=Capital%20Structure%20and%20Liquidity) Forestar maintained a strong liquidity position of **$744.4 million** at quarter-end, supported by **$359.2 million in unrestricted cash** and a healthy **18.7% net debt to total capital ratio**, with no senior note maturities until fiscal 2026 Capital Structure and Liquidity (as of June 30, 2024): | Metric | Amount | | :-------------------------------- | :------------- | | Unrestricted Cash | $359.2 million | | Available Borrowing Capacity | $385.2 million | | Total Liquidity | $744.4 million | | Total Debt | $706.1 million | | Net Debt to Total Capital Ratio | 18.7% | | Senior Note Maturities | None until FY2026 | - During the nine months ended June 30, 2024, the Company issued 546,174 shares of common stock under its at-the-market equity offering program for proceeds of **$19.7 million**, net of commissions and other issuance costs[10](index=10&type=chunk) - The Company's lot position at June 30, 2024 increased **40% to 102,100 lots**, of which **57,900 were owned** and **44,200 were controlled** through land and lot purchase contracts[6](index=6&type=chunk) - Of the Company's owned lot position at June 30, 2024, **20,400 lots (35%) were under contract to be sold**, representing approximately **$1.8 billion of future revenue**[6](index=6&type=chunk) [Management Outlook and Strategic Priorities](index=2&type=section&id=Management%20Outlook%20and%20Strategic%20Priorities) Management expressed confidence in solid demand and profitability, revising fiscal 2024 lot delivery guidance while maintaining revenue targets, and emphasizing strategic growth and market consolidation [Management Commentary](index=2&type=section&id=Management%20Commentary) Chairman Donald J. Tomnitz highlighted solid Q3 FY2024 demand for finished lots, strong profitability with a **16.2% pre-tax profit margin**, and the company's unique position to address the constrained supply of affordable vacant developed lots - Demand for finished lots remained solid during the third quarter of fiscal 2024[11](index=11&type=chunk) - Forestar maintained strong profitability with a **pre-tax profit margin of 16.2%** and delivered attractive double-digit returns[11](index=11&type=chunk) - The supply of vacant developed lots, particularly at affordable price points, continues to be constrained across most of the country, positioning Forestar uniquely to take advantage of this shortage[12](index=12&type=chunk) [Fiscal 2024 Guidance](index=2&type=section&id=Fiscal%202024%20Guidance) Forestar revised its fiscal 2024 lot delivery guidance to **14,600-15,100 lots** (from 14,500-15,500) while maintaining revenue guidance of **$1.4 billion to $1.5 billion**, reflecting current year-to-date results Revised Fiscal 2024 Guidance: | Metric | New Guidance | Prior Guidance | | :---------------- | :------------------- | :------------------- | | Lot Deliveries | 14,600 to 15,100 lots | 14,500 to 15,500 lots | | Revenue | $1.4 billion to $1.5 billion | $1.4 billion to $1.5 billion | [Strategic Focus](index=2&type=section&id=Strategic%20Focus) The company remains focused on growing its platform, optimizing inventory turnover, maximizing returns, and consolidating market share, supported by a strong balance sheet, ample liquidity, and a disciplined capital allocation approach - Forestar remains focused on growing its platform, turning inventory, maximizing returns, and consolidating market share in the highly fragmented lot development industry[13](index=13&type=chunk) - The company's contracted backlog, strong balance sheet, and ample liquidity position it to continue gaining market share and invest in land opportunities for future growth[13](index=13&type=chunk) - Forestar will maintain a disciplined approach to capital allocation to enhance long-term value[13](index=13&type=chunk) [Company Information and Disclosures](index=2&type=section&id=Company%20Information%20and%20Disclosures) This section provides an overview of Forestar Group Inc. as a leading residential lot developer and a D.R. Horton subsidiary, alongside important forward-looking statements and associated risk factors [About Forestar Group Inc.](index=2&type=section&id=About%20Forestar%20Group%20Inc.) Forestar Group Inc. is a leading national residential lot development company operating in **60 markets across 24 states**, a majority-owned subsidiary of D.R. Horton, having delivered over **14,600 residential lots** in the trailing twelve months - Forestar Group Inc. is a residential lot development company with operations in **60 markets and 24 states**[14](index=14&type=chunk) - The Company delivered more than **14,600 residential lots** during the twelve-month period ended June 30, 2024[14](index=14&type=chunk) - Forestar is a majority-owned subsidiary of D.R. Horton, the largest homebuilder by volume in the United States since 2002[14](index=14&type=chunk) [Forward-Looking Statements and Risk Factors](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) This section addresses forward-looking statements, highlighting key risks such as D.R. Horton's ownership, cyclical industry conditions, economic factors like inflation and interest rates, supply chain issues, and governmental policies - Portions of this document may constitute 'forward-looking statements' as defined by the Private Securities Litigation Reform Act of 1995, and actual outcomes may be materially different[15](index=15&type=chunk) - Key risk factors include the effect of D.R. Horton's controlling ownership, cyclical nature of the homebuilding and lot development industries, impact of inflation and higher interest rates, supply shortages, and governmental policies[16](index=16&type=chunk) - Other factors include the cost and availability of property, dependence on relationships with homebuilders, competitive conditions, and the ability to manage debt and retain key personnel[16](index=16&type=chunk) [Detailed Financial Statements and Operational Data](index=4&type=section&id=Detailed%20Financial%20Statements%20and%20Operational%20Data) This section provides comprehensive financial statements, including balance sheets and statements of operations, along with detailed operational data on revenues, residential lots sold, and the company's overall lot position [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2024, Forestar's total assets increased to **$2,675.0 million**, driven by real estate assets, with total liabilities rising to **$1,162.1 million** and stockholders' equity growing to **$1,511.9 million** Consolidated Balance Sheets (in millions): | Item | June 30, 2024 | September 30, 2023 | | :-------------------------------- | :-------------- | :----------------- | | **ASSETS** | | | | Cash and cash equivalents | $359.2 | $616.0 | | Real estate | $2,238.7 | $1,790.3 | | Total assets | $2,675.0 | $2,470.7 | | **LIABILITIES** | | | | Debt | $706.1 | $695.0 | | Total liabilities | $1,162.1 | $1,100.8 | | **EQUITY** | | | | Stockholders' equity | $1,511.9 | $1,368.9 | | Total liabilities and equity | $2,675.0 | $2,470.7 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q3 FY2024, revenues were **$318.4 million** with **net income of $38.7 million**, while for the nine months, revenues reached **$958.0 million** and net income was **$121.8 million**, detailing key operational expenses Consolidated Statements of Operations (in millions, except per share amounts): | Item | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenues | $318.4 | $368.9 | $958.0 | $887.1 | | Cost of sales | $246.9 | $283.9 | $730.6 | $698.7 | | Selling, general and administrative expense | $29.3 | $26.4 | $86.5 | $71.3 | | Income before income taxes | $51.6 | $62.4 | $161.6 | $126.2 | | Income tax expense | $12.9 | $15.6 | $39.8 | $31.7 | | Net income | $38.7 | $46.8 | $121.8 | $94.5 | | Diluted net income per common share | $0.76 | $0.93 | $2.40 | $1.89 | [Revenues, Residential Lots Sold and Lot Position](index=6&type=section&id=Revenues%2C%20Residential%20Lots%20Sold%20and%20Lot%20Position) This section details revenues by project type and residential lots sold for both the three and nine months, alongside a comprehensive overview of the company's lot position, distinguishing between owned, controlled, and contracted lots Revenues by Type (in millions): | Revenue Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Development projects | $295.7 | $334.2 | $922.3 | $790.3 | | Lot banking projects | $10.3 | — | $11.0 | — | | Tract sales and other | $12.1 | $23.8 | $18.6 | $68.2 | | Total revenues | $318.4 | $368.9 | $958.0 | $887.1 | Residential Lots Sold: | Lot Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Development projects | 3,163 | 3,812 | 9,593 | 9,054 | | Lot banking projects | 92 | — | 101 | — | | Total lots sold | 3,255 | 3,812 | 9,694 | 9,054 | | Average sales price per lot | $94,000 | $87,700 | $96,300 | $87,300 | Lot Position (as of June 30, 2024 vs. September 30, 2023): | Lot Category | June 30, 2024 | September 30, 2023 | | :-------------------------------------------------- | :-------------- | :----------------- | | Lots owned | 57,900 | 52,400 | | Lots controlled under land and lot purchase contracts | 44,200 | 26,800 | | Total lots owned and controlled | 102,100 | 79,200 | | Owned lots under contract to sell to D.R. Horton | 19,500 | 14,400 | | Owned lots under contract to other customers | 900 | 600 | | Total owned lots under contract | 20,400 | 15,000 | | Owned lots subject to right of first offer with D.R. Horton | 16,700 | 17,000 | | Owned lots fully developed | 5,900 | 6,400 |