Forestar (FOR) 21 Apr 212021 Q2 Earnings call transcript

Company Profile

Participants

Jessica Hansen	Vice President, Investor Relations
Dan Bartok	Chief Executive Officer
Katie Smith	Director of Finance and Investor Relations
Jim Allen	Chief Financial Officer
John Lovallo	Bank of America
Ryan Gilbert	BTIG
Anthony Pettinari	Citi
Truman Patterson	Wolfe Research
Elad Hillman	J.P. Morgan
Deepa Raghavan	Wells Fargo Securities
Alex Barron	Housing Research Center

Call transcript

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Operator

Good afternoon and welcome to Forestar’s Second Quarter 2021 Earnings Conference Call. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the call over to Jessica Hansen, Vice President of Investor Relations for D.R. Horton, the majority shareholder of Forestar.

begin. may You

Jessica Hansen

We to Paul. of to you Thank Forestar’s welcome financial call discuss results. the you, each

Before we Securities get constitute started, today’s call may as of by Act forward-looking include defined the Reform Private Litigation XXXX. statements comments that

does the Forestar call based reasonable there undertake on or to upon not outcomes not information is are All and different. on actual assumptions, be that available any materially statements. to statements date assurance forward-looking obligation Although conference publicly believes any will revise based Forestar of such this no statements any Forestar are update forward-looking

investor Additional lead Report Exchange is which with release After post the performance investor.forestar.com on in This call, XX-Q issues is Form recent information on Annual to and Relations and and week. Presentations are the is updated at filed afternoon’s to Forestar’s by XX-K, will on for about of this next expected earnings most under your its site early presentation that to material Commission. we both and Form reference. Forestar’s Forestar’s Securities quarterly Events filed could contained Investor in be report website changes an XX-Q,

to will call I the Forestar. Bartok, over turn of CEO Now, Dan

Dan Bartok

good and Thank you, everyone. Jessica afternoon

and we like to ago. introduce Katie can Relations In Financial weeks Jim Finance moment the Allen, new who before addition Officer; our few be our joined brief a I’d and am to Investor start. Jessica, call to I of herself pleased Director Chief on Forestar joined today by to Katie Katie? have Smith,

Katie Smith

as looking who as base are. and build know I'm analysts get with Forestar expand shareholder strategy base and our we enthusiastic value investor and new forward Dan Thank helping hello to everyone. to creation Forestar’s just investors to you, and about are I'm also a current excited

Dan Bartok

Katie. you, Thank

of and continue today. that our for as active to Given Forestar, member has will team important Forestar delivered a with have team. our second her us that are quarter, participant not create be we recently excited just to we our key a value shareholders. But strong expectations, achieve she Katie additional an joined The very outperforming milestones

Our X,XXX market. home to are the fiscal on to the capitalizing builders and delivered first lot on We residential of XXXX, expanding is finished lots half track business in the us rapidly putting to we of now this strength last lives and the deliver contractor full-year over the XX,XXX development the for fiscal thank has which teams want I possible. of months, XXXX. base our execution for made strong our over several

share development in and industry. lot continue to undercapitalized the gain fragmented market We

Horton, Forestar’s Horton a to into our translating to lots to third-party delivery D.R. since controlling Forestar. And as is on Horton in interest are acquired our a sold D.R. plan level Executing continues their profitability. grow percentage closings at D.R. builders highest increased lot of year-over-year.

margin gross margins. than several gross communities that quarter XXX margin by to this mix points Mix contributed from XX.X%. larger increased improvement. second year-over-year factors with gross delivered Our a basis to We lots higher profit There of normal. were quarter’s

Forestar, and by We did in quarter. sourced more the we that further also delivering lot in progress projects less lots made were banking

with the from committed lots focused increased Finally, remains strong to business our market We demand returns model. homebuilders. remain for

Forestar’s manufacturing improvement risk equity. basis year-over-year strategy to return a point led lower turnover, high XXX in Our on

in as growth team and returns our more our We discuss will in equity scale their second our and Jim markets. our to detail. platform expect on financial further increase gain income now results continues quarter to grows pre-tax to generate respective in inventory, and

Jim Allen

in year $X.X per the second you, net In per diluted million $X.XX quarter. share, Thank XXX% diluted $XX.X $X.XX to increased share Dan. quarter, prior million, income to Forestar’s the or compared or

prior of same in XX% the quarter lots XX% the quarter Forestar’s to quarter year $XXX.X sold average sold the an prior the Residential of $XX,XXX. sold lots to during quarter quarter the quarter. the for the of We year. up million. the Horton during XX% total quarter quarter second prior sold Forestar’s XX% of from Dan? lots fiscal builders up the increase total during the Lots was the XX% year year. price in from in same quarter from year, revenues from lots were X,XXX increased second The XX% Horton the represented from in from in than projects, sales lots, development other of XXXX. D.R. sold quarter builders XX six second lots down quarter D.R. last this

Dan Bartok

margin was profit of $XX.X a XX.X%. million, Our with quarter pre-tax for pre-tax income the

in Our margin in the XXX XX.X% year quarter. prior quarter, the basis up second XX.X% was gross profit points from

increase mentioned margins. was I an earlier, was primarily a outsized to driven which higher sale normal lot lots with in mix due margin margin, improvement of from As gross in largely than by development communities gross delivering our

managing efficiently Jessica? remain growth. than support We while fluctuations the we timing percentage significantly expect most in our we believe manage a And quarterly expense, compared the as sales. to focused gross X.X%, out due deliveries revenues our in our expenses X% the significant quarter. on our our public lot and our in continue continue percentage track of second We will business margins year SG&A lower was SG&A mix an of of to building to to and quarter SG&A at pre-tax the homebuilders. prior to platform

Jessica Hansen

initial development inventory projects Forestar’s within XX on criteria a includes the of new months. and a for minimum XX% annual cash return investment return underwriting pre-tax

totaled quarter, the half land, was development investments for half million, was of lots, second During land land and roughly and which in $XXX for development.

million. and in development investments March, land, ended months six $XXX totaled the For lots,

billion subject Forster XXXX $X.X conditions. market lots, continues fiscal to in at development least land, to and to in expect invest

revenue. XX,XXX and increased controlled future of Horton representing lots March $X.X sell Forestar’s from a year Of to XX,XXX are XX of are to contracts. lots, Forestar’s ago position XX% are purchase lot through least XX,XXX under lots at XX% to owned, owned which lots contract at billion XX,XXX D.R.

lot first forced by the grow subject Lots agreements. lot year to master at were company's of owned continue March position a improvement XX, owned under by ago. of portfolio percentage lots a owned Forestar margins. XX% in offer writer the up Forestar’s Forestar’s D.R. as Another supply the to Horton supporting XX% a XX% are Forestar, gross long-term from company's forced Of to

to owned three to Forestar land inventory a continues four and of year year target lots. Jim?

Jim Allen

remains focused and sheet Forestar liquidity on a strong with balance ample maintaining modest leverage.

on the proceeds equity cash of shares X.XX% to million and of will ended quarter, XX.X%. at the $XXX notes mature of aftermarket million. ratio million Earlier and utilized debt was million During month, at the $XXX the which principal $XX.X This our week, The $XXX extinguishment maturity to used issuance a in for the net Total our year we unamortized call and our the issued quarter, refinancing XX, senior We redeem expect quarter savings. XXXX XX capital purposes. recognize capacity in the XXXX. loss we we revolving was in of costs related credit million in notes. notes of debt facility. proceeds amount size transaction credit of million, we from remainder transaction X used will with first on of March million time in the common equity debt the X% unrestricted After the $XXX represents The our program scheduled of $XXX and $XXX XXXX. and million for offering net proceeds per increased million will of will $XX.XX, stock $XXX quarter-end including Last result liquidity, interest corporate million debt amended this and X% is general our XX% premium the million for portion Dan? March third to be $XX.X facility redeem to substantial tomorrow. from XXXX revolving that to to senior share was our and facility notes, close priced full, due available stockholders book to to write-off increase we up a be the $XXX to ago. extended of date At of value

Dan Bartok

execute and about excited are lot development their our ability model. to the We team

the and now positioned industry. to between fragmented to economic approximately housing to first lots billion market billion $X.X continues Based half highly we to share Forestar year, XX,XXX in fiscal today's of the results XX,XXX development and expect market lot revenue on uniquely $X.XX fiscal deliver generate be of market and cycles for and gain through conditions, the in to XXXX.

full-year one-time are the expecting pre-tax for range of to We are XXXX be associated notes. charges of profit the in the fiscal calling excluding X% margin now our to XX.X%], with [XX%

be our are operating cap XX% to expect better We home model continue to returns for range of At and than results scale, expect to to and the in quarter produce builders. third rate financial the that mid tax we fourth most our XX%.

Forestar’s to like I'd questions, highlights. to turn remind we investment of everyone Before

is that very We manufacturing typical unique have developer. than model land lot business a different a

[un-entitled] We land. have no

housing for on are market. priced focused lots We developing affordably the

market have experienced seasoned market in cycles. team through consolidating a We management and share navigating

balance position strong a have sheet liquidity net leverage. We with and low

We have most nation's at competitive unique Horton, consistently To SG&A for due continued execute we’ll questions. expand highly are lower And our our largest home and been relationship This builder. managing with than an have profitable public a are importantly, significantly D.R. percentage advantage most we business builders. nationally are open continuing strategic on time summarize, now for positioned to relationship at while we lines to minimizing success. up all us plan our to risk. allows our platform and this Paul, the

Operator

Thank Instructions] [Operator you. you. Thank

Please America. with Our John question. from proceed with of your Bank first question comes Lovallo

John Lovallo

guys. tonight. Hi Thank for my questions taking you

The when margin first the And is one you I updated cut apologize, on you out guide. margin. mentioned gross Dan, pre-tax the

said I think to you correct? was think I XX.X%, that XX%

Dan Bartok

correct. that's Yes,

John Lovallo

Thanks. great. Okay,

well guess be on and trying about that how you this then, it I repeatable margin was we mentioned So little might gauge what bumpy, bit a be. ahead several were gross the what the And could know, we're XX.X but also to of you margin, thinking. just drivers is talked

any maybe, in in along there on that you is margin thoughts So development was could lots know average what on any the deals average quarter? banking those way the you the on lines, and disclose

Dan Bartok

You it those quarter couple know also don't illustrates strong anticipate how be. aligned John, of we quarters. it that next can the gross margins great over our was But everything had us. we repeat a great results No, really such for quarterly of a lumpy and really

said margins. really was on returns. margins. happening you we just you certain it It shorter You was be know, I have longer higher – margin to had focus know, think that on know, the we more and and going it were was the longer really not delivered projects a our because or less ones lots remain as life focused returns of than just And before, to on gross more was,

Jessica Hansen

in sales. margin lot overall the the development speaking, decline sales did associated then we margin banking those of And the given margin generally underwriting breakdown a returns [haven’t] just sales the development XX% margin again rather for a between and to And of gross because than sale about lot lower with banking Lot gross lot are to gross quarter. that. the

John Lovallo

know, on know, the you in sort And this you obviously, well? how been in had prices understood. able raise the up keep to are existing on, you deals, price prices with able as raise also aggressively ability to increases, know pretty Okay, Forestar different have been then, phases as new to, Have has environment, you builders curious and deals? met aggressively the of

Dan Bartok

months You us. maybe opportunities prices. ahead X to to of we're XX X lots, know, months definitely of have we to generally mean, had I raise months pricing delivery

really can't short-run. the So, in we do it

how it you'll was power. But we're is as that absorbing. the pricing So, really I rapidly a gradual returns, about focused see so improvement again, also think on of subdivision

really velocity we subdivision to in raise gets so a curtailed. be careful the much that So, particular not too to want

Jessica Hansen

Forestar’s And lots for on at homes in if the John, points. look focus ASP really, down, coming mix, terms been you that's at selling price affordable by driven the of

sales be prices those we've to variability, low so]. they it's bit high still think X.XX saw And so call to going XXs lot [X sales sales but or low mean, XXs, where high little lot average projects. an higher home quarters, deliveries Today, a used to generally, to they've that price. out more for it settled forward, in I of priced XXs, higher to previous we from going XXs

So, very affordable price much point. an

John Lovallo

quarter one of could push here, benefit certainly second I through year, on the in sneak may just weather tough move Forestar’s forward? that impact more know, the if the kind you some results in quarter, a as And any Great. you in

Dan Bartok

know, to You They give to teams. delivered. really really credit our got I

time was an pretty like tough, you fact, of projects. there in spread we was because know, delivered we that, I'll kind impact, And we impact great for are you lots quarter. you the In country we than take several that know, being know, impact across anticipated every us a diversified. just nominal. weather you If faster being was the had pretty fortunate know, The really but were

John Lovallo

Alright, thanks very guys. much

Operator

you. Thank

BTIG. with from your Gilbert question question. Please with comes next Ryan Our proceed

Ryan Gilbert

Hi, thanks very much.

it was XXXX, I just baking back the like because of delivered much were if question that gross First sounds the from comparable look communities, was real quarter when lower. guess, being is, margin I land outsized of gross of mix margin, kind the going your first was to it lots gross pretty mix, driver here to at the margin

about you maybe So, communities, you the the those your higher in and replicate have gross why just know, can and, of ahead? ability you of such communities, talk characteristics margins, they those to kind know, quarters

Dan Bartok

project the higher focused in duration where always size by heavily a Forestar of projects. margin deals sourced the duration the will because of little our nature, And a returns gone than it's driven gross highly in have project. bit Yeah, we a longer longer result a of shorter

like have happen of good just weeks both. to to and came great it stars You again, of quarter, a a last projects lot in know, happened about the mix just couple was of of that it which have lots, just to to it we you frankly, be the a know, aligned, – the happened And delivered result.

next be have, scale the question But the I snapshot operating when know, to the of at I that. over But, know, to every be that know, think think know You our more kind in achieved, all cycles, and it couple don't of and down road John alluded visibility efficiently I at gives us part repeated. really projects can the I being we're know, of you cycle. we having you that know, you of expect quarters, a what repeatable, our you project of

So, of But, I month happen to snapshot it. you what's gives know, would highly achievable. us quarter, good or doubt I is next think it it next a again, going

Ryan Gilbert

great. that's Okay,

higher guess sourced right I it? we that see going as move So, first that's to you're Forestar a this to it, gross did kind that just you that said, repeat next, the of years of the are to you over Is XX.X in couple lots of the just margins what know, you of mix way in XXXX. quarter you closer versus the to to about XX.X did the quarter call think

Dan Bartok

you for going sourced caution well Yeah, know, that doing lumpy from quarter-to-quarter. that. if yeah. vary deals. know, say, align and that's do small Forestar But were it's the big say, And still way even time, again, it's you every I as can then to as it's, again, stars I I can we the yeah, I deals deals, this quarter And happened sure would

Jessica Hansen

lumpy we're Ryan, year-over-year today you base is going that see perspective. case and basis, gross It's on our forward. talking about annual would margin the improve will an replicable And be necessarily Forestar’s quarterly that metrics to just not lumpy that from

Ryan Gilbert

Thank it. got Okay, you.

areas chain if, the here supply of for you of elsewhere pace home bottlenecks selling even builders you the is, guess other your And you a wondering to and able I for know, lots question, ready you supply supply take that Second get the take ability kind finished you're in the that know, I'm down constraints, we're builders. can know, lots, builders side to to hurting be lot to, hearing know to down? about or chain

Dan Bartok

on say will quarter, know, we haven't we're but a we builders, that in that. go and allocations, them, supply point see us, didn't lots way sold the know, of we're You little see you constraint, hearing I this know, concrete at inventory wood, to impacts, I you lot you And, at about been from finished of markets finished least impacted clearly time, we although for concrete starting the by this a up. lot our the on really from knock some know,

I are Horton than seeing I not get lots want to ground. other can't anything like ability sales every that. So, We’re not that's lots because as of our we’re and Horton, you or what whether something more we're think, But seeing to get take of to them. right know, repeatable this the on down by ground I'm their A so on impact of on and builder, now, lot XX% houses we any really quarter? far, answer the

Ryan Gilbert

in I'll Appreciate great. queue. back Okay, jump it. the Thanks.

Dan Bartok

Ryan. Thanks,

Operator

you. Thank

next with Anthony Our Please question. question your with Pettinari from Citi. comes proceed

Anthony Pettinari

afternoon. good Hi,

for you implies more think if just consumes talk so, to guidance at low-to-mid in is for or that if over before I the I sort think party And you of to about know, XXs. the third I normalizes midpoint know, purchasing there build can that fast that know I grow or that Your Horton’s terms offsets about we in deliveries Horton should think and that D.R. about sort XX% is it you D.R. of or is delivery back are delta, or guidance just the above than growth wonder could, going? could way closings keep inventory? a clip maybe lot the there, length to year, the know, year, Or of pace kind think correct? you gain performance your think of Horton's sales? you D.R. of time It you share

Dan Bartok

the but right don't think number Horton’s this XX% now, of quarter, I remember that I lot we remember needs. Yeah, approximately delivered I seeing exact

get to, we stated needs. previously, think you to the XX%, goals Horton’s us and that I stated know, Horton for to lot of XX%

again, lots we discussion. we we But the the when think target, doesn't are double mean I can move now, before doesn't get the So, to, there. of get right taking number that's target their for

to get still there's number. that just growth significant to So,

you a the is bit. to business starting party third addition, builder know, little In in kick

I but think numbers X,XXX delivered XXX year bit here. the lots, lots but – was seem the know you I low, a You only know, I know, still think Forestar first I little

of builder kind that more the that to deliver process. of the is to becomes Forestar deals source another we have XXX So, available. And beginning more lots

So, areas. in I to think growth you're see going both

to greater starting the going but that on at we percentage feel is builders the I be really growth the think are about guidance. good a low third party base,

So…

Jessica Hansen

capital with consolidate continue to the And are I land positioned their just today, whole, a Forestar’s markets, so mean, they as to to capital access well to with compared industry the share. development

for their lots said, really getting just versus them today. D.R. Dan only it's third also Horton at to the parties. to unlimited grow selling ground not more There's know, through, where both As potential you on more share from still

Anthony Pettinari

And to I mix? think more exercise lots quarter, know, in Okay, that's a lots around could getting accelerating owned option the your number, increased is very from lots function of bringing around into option current is of to difficult kind on X,XXX think as that options much your more you it, think by by, or then book this smaller lots there I prior just XXX. Is I helpful. the read up and Or development a to to environment? for the you set lot it anything is increased

Dan Bartok

You execution our it's know, of know, I you plan. really been, think just

we seen to continues platform. a lots grow. You as We as that have this need a growth know,

pipeline, in know, the we've that pretty strong on put to we're think we show You been contract lots of earlier. have, a have And the projects having proud that owned number of that. I closing

and roughly having XX,XXX, got shows of You control just know, a pretty strong that deals. platform still still future of lots you blocks,

six meantime, and just teams as land there we're you our was very to pace. or think there's strong I going that'll put good will know, the to development as you – a you ago a On acquisition year it not deals have know, today months but our to try and is, to the our a, know, And, accelerating. prices the continue In necessarily underwrite be execute you know, going side ago, think been deals flip be we don't out and conservatively continued on built books. we be teams, many

Anthony Pettinari

Okay, it that's very over. helpful. I'll turn

Operator

you. Thank

comes Research. proceed your question next Our with question. Patterson Wolfe from with Please Truman

Truman Patterson

Hey, good afternoon, everyone.

You the the constraints, up supply know, just machinery about questions are to potential wanted to seeing one and really know, follow I horizontal on development, some you labor delay developments the, needs? seeing industry specific to prior know, know, enough doing? you Dan, all? characterize, of but of you you could how First, you really beginning to any a, just kind that's the meet your know, at you of think Are you tightness, your is growth you

Dan Bartok

machinery problems. any and have labor a really seen standpoint, from know, You we not

and our our you're I someone's grown to we're payer, we're the a a, that markets becoming, know, in quick crews bigger we've think of in as markets reputation busy, where keep building large pretty scale, their going platform. you kind building of force

I lot. have really the know, now a has The And is only recently, far, good the developing our so seeing incurred. has been of those costs, nothing to real small contractor actually improve. prices well been that plastic so actually continues how gone as about I pass bit It's you they're think cost in overall So, through been really we've little shortage, Those a and a issues up. actually more concretes is you I'm it’s the pipes. price to base, as and is [indiscernible], in, in feel have piece relatively able know, accelerated. But as of outsized,

Truman Patterson

the that, know, think do right has, do really know, you ample any Okay, Forestar on, now? constraints? to machinery, know, think that industry facing you capacity know, the not you you horizontal, Is really labor in unique you you you know, or

Dan Bartok

other You I in calls than to aren’t you been on to get team that accomplished. other but what builder know, the answer those talk able I'm in that. areas. that know, seeing can I've people I our maybe shortages I don't been can any on hearing we've to past, that, some know has listened able not other that in not get personally,

Truman Patterson

know, seeing okay. in builder communities? Horton, has so, thoughts any sort land there just finally, know, in, lumber after from, know, really builders just lot still ask – just are outside are underwriting or is recently appreciation more you right. Okay, know, you Are you wanting so, price you know, behavior materially baking past builder of very And any seeing? month you larger What there. picture, go And they pushback are D.R. you inflated competition, of you I'll big your about, the

Dan Bartok

really land. can't that. they're I'm taking going almost development deal because details of definitely any them prices some every and And to No, cases, to, you not higher of, seeing their know, need know, of offering, how profit. know, obviously, kind the I for we're, in the underwriting. we land you speak getting We're profits you we you type out won in know, that to underwrite development haven't obviously to

they we of seen the You that now, into know, little bit projects. I'm You smaller some that. to projects. we've offers bigger develop them yet. bigger of of and deals, it's just us little projects – for know, we've that That's ready seeing go a a deals created little that even offers in are of I kind kind the run I’m price? getting that smaller it's, the they bit But pricing mostly development some frothy in intended how so I'm do a seeing are their the like, land get smaller, to pricing had a that up competition on extra right to you think haven't put know, in the for

Truman Patterson

is more there the of XX markets, expansion? know, you were geographic final on you're in footprint Okay, know, your just you know, I you corporate or think the infrastructure, end pretty us me, you an about divisional okay. you year could And then give inning are the as and, And what you comfortable are, with of believe where at? you update you that for one finally,

Dan Bartok

growth that most of already in. our going occur we're say markets is I'd in to No, the

in a I think the markets, couple again, XX we and closed pick we there's markets. up did quarter smaller But markets.

of top XX, XXX of now markets We the end in on have the we're quarter. of board people as think I probably now. XX XX the

continue to teams in in. building out we teams. build our markets It that is were about mostly So, already the

no. probably yet the markets deck I some markets already investor in. the to see you'll know But our we're new I access mean, We a that of being in don't will selective they predominance on have or if growth basis. enter the

Jessica Hansen

afterwards]. It'll be [put

Dan Bartok

that at where or in our going good look of know, top investor there's, always to you Florida more know, of you the each producing have the you'll markets. you that's and And several we you that's state. Texas When They're that deck, there's be positions, XX% focus. are, our there, see and predominant the know, footprint, lot markets in map

for be see, the also where our the dollars. values to the land of is putting, Again, where Georgia you know, we're Arizona, You'll you going know, find bulk and rolling. we that’s best Carolina’s

Truman Patterson

Okay, and good the thank you on luck quarter. upcoming

Dan Bartok

Great, a lot. thanks

Operator

you. Thank

Our next proceed with with Morgan. question Michael comes J.P. from Rehaut Please your question.

Elad Hillman

Mike. Elad this question. on my Congrats for Hi, is on thanks results the and taking Hillman for

was margins So, you to disclose a gross curious compared first, to of were for going just last this back quarter if moment, I Forestar’s could percent what deliveries quarter?

Dan Bartok

that Yeah, that's we're really not something disclosing.

more to information think deliveries sales the on of XX% But now side. Forestar projects. not the trend more see see I we're probably towards owned you'll what continue about know, providing owned though, sales and of is You from you'll our lots is Forestar sourced a And lots.

Elad Hillman

quarter quarter? I but particular Okay, Texas any, maybe you more that a maybe wondering regional geographic about little understood. and And mentioned, then was bit from markets, the benefited this perspective top to could Florida, if being producing talk anything also, You a standouts?

Dan Bartok

kind as infrastructure building states Yeah, have key is strong deliver behind really continuing one think, investment lot any in. Arizona and there are state just as don't positions. really is differences I our lot that a the made division those we've producing, you of two They Atlanta third you know, it a are know, was that to we of quarter-to-quarter where I change a is to great create would sales in think from well. the other any

Elad Hillman

that market, are easily or in M&A front development to and still more ways of of thanks. the land kind from maybe, term that? terms near is be is question And thinking the further the about, my a last you are consolidating more in guys Great, kind you able of just to out then this land know, acquire something you

Dan Bartok

You the all know, we think about it time.

We have discussions possible candidates. from you know, time-to-time with,

top I market. right now We at buy prefer the strong. is pretty to the of market not think the

actually we for I think any stress look the before do we'll road some transactions. down

Elad Hillman

Sounds good. Thank you.

Dan Bartok

you. Thank

Operator

Thank you.

Fargo question question. next Deepa Please with Raghavan proceed Wells comes your with from Our Securities.

Deepa Raghavan

evening, my team. for Good taking Thanks question. Dan,

Dan Bartok

Hello.

Deepa Raghavan

Hi.

guide updated you Anything think first weightage to pull half is guidance, an implication especially last half half. was the almost lots, first some in changed demand implies one I on is in your a the So my maybe half second call, of split in and earnings strong second was be second for there there of the even this it there's regard second cadence, versus just XX,XXX year the forward half? demand with or guys conservatism lot to going half, year, mentioned second XX,XXX

Dan Bartok

I softer before and clearly I it you than development experienced. teams to don't our lots we to give our anticipated. delivered than second think we what may credit that steered demand we contractors have really a really driven quarter to was faster be just the know when,

from quarter teams our of So, why them able execution just pull we it give But, to forward year. for whole strong guidance the all were I kind platform, just by credit. which the you the a we've is not but increased our one to and know, next, was

Deepa Raghavan

just to or you to – I when maintain covenants such off? need such when when I much your can Okay, understand kind little want you need equity you ratios felt the On got talk trigger of were equity access is a any your balance stronger you now? mindful why that to debt needed that it. mean capital any you do raises, issuances? to does sheet raise bit on

Dan Bartok

to want one? that take you Jim,

Jim Allen

Sure. on. said kind ratio a to capital, and that of We’ve debt mindful XX% our debt-to-capital being of equity target net an want eye we keep always of raise balance we

you capital. in to disciplined time equity utilizing tool efficiently think use opportunistic the yeah, we’ll know, a ATM proven future. this I a effective first So we for take to raise It's primary very continue and approach the be And to the to quarter. the ATM

Jessica Hansen

And raises forward and anticipate part would both opportunistic equity of their debt capital plans. of long-term going as

Deepa Raghavan

guys even we [Indiscernible]. or second want half? year, the this for one-time we and within out this there the me, one for any from out may call half even to you be Anything you either should final second off shifts Any of if to year’s try rest A half last mindful first as are year? one. housekeeping – model the items

Jessica Hansen

out pretty There's and quarter. I not call quarter. quarter we were both in a minimal think year's this sales year's would much last track this is clean

the proactively So, will outside on really extinguishment take to the pretty debt note in we which I scripted thing of quarter, only third that, was we take of straightforward. the but loss think of

Dan Bartok

what go And so I margin outsized, number we margin, again, a other than continued use said the this forward wouldn't basis. on a quarter that on bit was before little in

Deepa Raghavan

helpful. That it. Thanks Got much. was very

Operator

you. Thank

from with comes your Barron question Research next proceed Center. Housing Please question. Our Alex with

Alex Barron

based constraints you know, understand know, me look you hoping job quarter. guys Yeah, thanks trajectory growth is know, just but it think into to that are as XXXX, Forestar, help you of or could you us growth about know, is year, or your was next you to a lot function inventory? for availability how I there and beyond great fast guidance guys labor you you the I on, growing how on the gave for your

Dan Bartok

is lot it of capital. Yeah, I inventory, part is part of think it

said you we can pretty grow that the know, what capital the, with past earnings pace about we current comfortable we've year-over-year and capital feel XX% a that at is think our the I rate events. base, additional guidance, without in

in us that future capital help years. should that accelerate Additional

Alex Barron

pay another in obviously, keep to XXXX issuance, getting more debt I but down the of And new paying with debt not the you of to mean, Okay. Why lower I behind cost to down question other have allow the keep capital rationale bonds, just you're why now? know that terms growing? a

Dan Bartok

to really close we our cap. again, to and net balance attention a pay strong to Well, trying very keep debt we're sheet, conservative

point, the total with feel debt have. that we of we level comfortable this amount at So

our of costs significantly about know, funds, interest really which, a our lowers year-over-year basis. a on it's cost lowering on you So,

one-year think refinancing I another payback the roughly maturity of and a it's couple years. of cost of that extended

interest cost help know, You that roll future our years will goods in costs increase sold margins. of and eventually through saved

Jessica Hansen

for model, we to to our I of going continue we credit some to the to Forestar to where on, future. seen continue cost down going the to believe leading capital we've ratings, go which to was really a inaugural offering before Forestar thought which that, prove think And opportunity it to we Alex, always new do to had was new higher that is is already ultimately were chance out the business an their demonstrate have is in that progress movement and the

[coupon opportunistic note]. to So that high refinance was really, it just

Dan Bartok

$XXX million also the [had] the we at quarter. liquidity of of end And

So, ability I you how know, and have when in, capital. the we know, mean, opportunistic we, you be to we raise

Alex Barron

it. Got

Okay. Well, again. of And best thanks luck the for year.

Dan Bartok

Great. Thank you.

Operator

Thank you.

Gilbert your Please question. question Ryan last comes proceed from with BTIG. Our with

Ryan Gilbert

been about part a willingness for recent some use to a your banking, or extent or seeing land new just land appreciate, feel of participants Thanks seems at the with the market, like financial what banking, a increased entrants, that kind around, builders and you had proliferation maybe there's Dan, of know, like them for question the in Hi. an banking, customers. on in land you land competing the least land of follow-up. kind of I it you're on taking the perspective marketplace development either you're I

Dan Bartok

have new in at know, or bit you entrants speak, expectations, of in people we're some anything we're an about it seen but seen was little business, hearing expectation before. some cost than yet, say haven't least seeing of Yeah, their I we're are it's maybe lot I Ryan, so we interesting business land there were makes land banking that investment that do happen what maybe into lowering hearing, easier. of to to the which the and think return And the lower funds I

hearing any, things the competing after, seeing chasing they're I'm them, competing as not I far know you don't we're same as I'm with we that with as – you it's that know, we're don't, that as know, far the are. You going them. I know, projects not

not saying. where the competition I'm what any I prior is bit align that with from little lowering over builders. maybe were repeat, expectations off them. a take think know, you really to they're return their they But help just they're I'm more least sheet. builders with balance Trying some their At them to align to that's stuff maybe again, trying then it years. from interesting seeing direct to But

Ryan Gilbert

That is interesting.

much. Okay, great. very Thanks

Dan Bartok

Okay. Ryan. Thanks,

Operator

no to this are over would the back Dan like to questions turn time. for comments. There at Bartok further I closing floor

Dan Bartok

focus on Thank look coming and to your We the and in growing results. and our you third on continue operations to hard And the again you, with look our We you improving forward quarter for work. everyone forward thank speaking team call years. to together over Forestar Paul. Thanks, the appreciate share time working everyone's today to everyone. July to

Operator

conference. This concludes today's

wonderful your you may a at You Have disconnect time. this participation. for lines your evening. Thank

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