Core Insights - Forestar Group reported a solid first quarter with revenue growth of 9% year-over-year, reaching $273 million, but net income decreased to $15.4 million due to margin pressures [3][4][7] Financial Performance - Gross profit margin for the quarter was 20.1%, down from 22.0% in the same quarter last year, primarily due to a low-margin tract sale; excluding this sale, the gross margin would have been approximately 21.5% [2][7] - Pre-tax income was $20.8 million with a pre-tax margin of 7.6%, compared to $21.9 million and 8.7% in the prior-year quarter [3][7] Investment and Liquidity - The company invested $415 million in the quarter, with plans to invest about $1.4 billion for fiscal 2026, maintaining a disciplined investment pace [5][17] - Forestar ended the quarter with approximately $820 million in liquidity, including $212 million in unrestricted cash and a net debt-to-capital ratio of 24.6% [18] Lot Position and Customer Relationships - Forestar holds a total lot position of 101,000 lots, with 65% owned and 35% controlled through purchase contracts; 10,400 lots are finished and under contract to sell [6][19] - D.R. Horton is the largest customer, with 16% of homes started in the past year on Forestar-developed lots, and a goal for one in three D.R. Horton homes to be on Forestar lots [15][16] Market Conditions and Operational Outlook - Demand for new homes is pressured by affordability constraints, but mortgage rate buy-down incentives are helping to support demand [12] - The company is focusing on developing lots for entry-level and first-time buyers, which represent the largest segment of the new home market [13][20] Guidance and Future Outlook - Forestar is maintaining its fiscal 2026 guidance for revenue between $1.6 billion and $1.7 billion and lot deliveries of 14,000 to 15,000 lots, while expecting margins to remain at the lower end of the historical range of 21% to 23% [4][20]

Q2 2025 Highlights - Lots Contracted for Sale increased by 41% from Q2 FY 2024 to 25,400 lots[14] - Lot Position increased by 11% from Q2 FY 2024 to 105,900 lots[14] - Book Value Per Share increased by 10% from Q2 FY 2024 to $3236[14] - Revenues increased 5% to $351 million on 3,411 lots sold[17] - Real estate book value increased 30% year-over-year to $28 billion at March 31, 2025[17] Financial Position - Earnings per diluted share of $062 on net income of $316 million[17] - Pre-tax income of $407 million[17] - Net debt to capital of 298%, with total liquidity of $792 million[17] - The company issued $500 million of 650% senior unsecured notes due 2033[17] - The company completed a tender offer to purchase $3294 million of existing 385% senior unsecured notes due 2026[17] Strategic Goals and Market Position - Forestar targets a return on average inventory of >15% and return of phase 1 investment within 36 months[21] - Pre-tax profit margin of 151% for Q2 TTM FY 2025[22] - Forestar is targeting 5% market share within the US single-family residential lot development industry[49] - Owned lots under contract to sell increased 41% year-over-year to 25,400 lots, representing 37% of the owned lot position[84]

Q2 2025 Highlights - Lots contracted for sale increased by 41% from Q2 FY 2024 to 25,400 lots[14] - Lot position increased by 11% from Q2 FY 2024 to 105,900 lots[14] - Book value per share increased by 10% from Q2 FY 2024 to $3236[14] - Revenues increased 5% to $351 million on 3,411 lots sold[17] - Real estate book value increased 30% year-over-year to $28 billion at March 31, 2025[17] Financial Position - Earnings per diluted share of $062 on net income of $316 million[17] - Pre-tax income of $407 million[17] - Net debt to capital of 298% with total liquidity of $792 million[17] Strategic Initiatives - Forestar targets a minimum 15% return on average inventory and return of phase 1 investment within 36 months[21, 55, 99] - Forestar is targeting 5% market share within the US single-family residential lot development industry[49] - Expect to invest approximately $19 billion in land acquisition and development in fiscal 2025[74]