FOR - Earnings call transcript Q3 2024

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Operator

Good afternoon, and welcome to Forestar's Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the call over to Katie Smith, Vice President of Finance and Investor Relations for Forestar.

Katie Smith

Thank you, John. Good afternoon, and welcome to the call to discuss Forestar's third quarter results. Thank you for joining us.

today's Securities forward-looking XXXX. Litigation started, by as get Private the Reform we call statements includes defined Before Act of

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

Additional factors in could on to performance with most Form lead is and filed Securities report are on recent the XX-K information annual XX-Q, and that about which Commission. material both quarterly report contained changes in Form of its Forestar's Exchange

is plan under our Presentations and post next on reference. XX-Q early an investor.forestar.com, at our to site Events to After presentation our Investor release this we we week. website Relations updated & Our call, will your file earnings for investor

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

Anthony Oxley

Good Katie. by joined Officer; on Financial Chief our I'm afternoon, Mark also today Walker, our Allen, Operating and Officer. Jim Chief the call everyone. Thanks,

leaves achievable us development Don was Before country's developer. our its but Horton the His the gave Homebuilding residential of was lot unmatched. want legacy because results, and he people to first. Horton successful aspirational vision D.R. Don's support and and commitment pure-play tremendously are land behind. Forestar he leadership and and for enabled largest people to to become goals us I passing and not easy, the Don acknowledge I over go but put always

D.R. family all improve, Don be day strive at a and us Forestar us proud to of are grow part of do. pushed to the Horton All and to which every incredibly

solid I which the of lots, most line discuss was continues team still with supply our and results. million The is will during be quarter, expectations. markets. $XXX.X for X,XXX generating constrained to revenues in our developed demand residential Forestar lots There Now delivered in

diluted increasing Our $X.XX. resulted and XX% margins team's months strong points share to the in for XX profit XX, performance per of share equity with basis earnings quarter and XXXX June profitability The on remained expanded third value trailing pretax to $XX.XX, ending XX.X%. in book return our per of XXX XX.X% the

blend unique in reach to lot and in Forestar's us competitive our development a discuss and be enabling of fragmented compelling financial industry. Jim turning parcels strength quarter returns a finished in supplier the leading of remain detail. highly operating third We more geographic expertise inventory, advantage, lots. on maximizing share will market is now investing land consolidating results focused significant our

James Allen

million to year of In prior the net lots for X,XXX compared you, share decreased fiscal the $XXX.X to third million sold price compared per to or XX% We diluted prior quarter. per $X.XX share sales Thank million quarter decreased XX% Revenues income in third an quarter, in $X.XX $XX.X Andy. quarter average diluted in or $XX.X quarter. with million to the $XXX.X $XX,XXX. the year our

deliveries. sales of average geographic on our price mix We and in continued expect based lot fluctuations size our quarterly the

compared Our quarter this last of quarter. pretax million prior income to to compared year And our $XX.X pretax was decreased profit $XX.X in the year. quarter XX% million XX.X% the third XX.X% margin in to

sale on was million. this margin quarter profit positively by of $X assets pretax of impacted Our a gain

year the was same million. margin XX% year. the to profit increased XX% for quarter quarter, quarter quarter from the compared prior third for XX.X% $XX.X to SG&A expense last Our In gross the

quarter. entering expense increasing in to employee our X.X% prior percentage the count community the compared new and from X.X% increased of Our SG&A support count. was of including a year expansion a year XX% ago as to revenues platform, markets

we and with our continued high-quality to on support in pleased are to attract team, efficiently teams managing growth. Mark? continue building our investing SG&A talent. we've our our We the while remain progress focused We made

Mark Walker

homes The incentives inflationary favorable, Mortgage supply combined interest supply construction. a existing of elevated norms, and offered of and rates demographic price housing despite buydown supporting pressures. relative at historic choosing new mortgage by rate low continue affordable to points and limited builders to driver with demand resale are new remains be buyers

not management affordable lots for reductions to times the practices of recycle have in in most past is months, focus over possible. way ongoing we the seen develop lots our improved and Our work with of efficient points. Availability to land necessary and cost but partners developing trade price utilize develop homes and have best materials We at have several contractors overall increased. the

upside development to position quarter. Homebuilders themselves our for limited cycle by governmental land closeout which competing the and deliveries positions lot are replace to and delays, impacted during times many growth. looking However, communities are are lot to our to being secure still future

As seeing prices. land a are in result, we any not softening

and on land new acquisition opportunistic opportunities. Jim? flexible However, our disciplined, pursuing team remains

James Allen

a to share most goal D.R. months largest stated the to be sells developed Horton out D.R. is developed D.R. started D.R. by X X Horton. XX have and on homes Horton past lot. every customer. our we grow of X-star lot the a With mutually important in of our Horton home XX% Forestar, significant within market on were opportunity a of

sold third expanding of quarter our also homebuilders. lots or our homebuilders. Katie? continue other work relationships were on XXX with XX% to We to deliveries other

Katie Smith

Forestar's within projects our average pretax a on underwriting unchanged of and a criteria return XX% months. investment return remain cash inventory development for initial XX new minimum at

We positioning development. land -- are growth positioned we return investments in and to to our strong volume are by acquisition accelerating

and invested During land the land approximately land development totaled XX% our land and prior acquisition. now the which in subject from in conditions. Mark? investment was for year-to-date, billion land $XXX expect development, for increase market development to XX% approximately year quarter. was and land a quarter, of fiscal XX% was million in we billion, third XXXX, and investments our invest we Fiscal land and approximately $X.X acquisition $X.X in development to

Mark Walker

to deliver are contract our our finished focus target XX% the at revenue. XX% future purchase since ago pace demonstrating quarter representing to on of owned remain of increased end matches on to lot includes is and land year was lots XX supply development hand X,XXX in at to that owned we've to and approximately XX,XXX at end, X- capital with phases Our market soon continue sell, Consistent of lowest This efficiency, and XX% demand. Lots of June our after XXX,XXX lots. had XXXX, managing XX% lots or lot under continue total of owning X-year owned lots we billion to which to XX,XXX controlled. quarter or lots was position finished September that customers $X.X our at number focused from a a completion. June the on XX lots

Our backlog continue of indicator ability industry. is in the contracted development to market gaining strong lot our highly a share fragmented

to a owned on agreement. Jim? first Another are Horton offer D.R. subject to purchase lots right executed and sale of our XX% of based

James Allen

balance and net XX% revolving and of objectives. no cash from $XX.XX. including We senior and quarter have our million $XXX significant Total share to liquidity ended had At quarter end, June on XX.X%. We debt and of $XXX book $X.X growth keep approximately million our value we year increased are debt-to-capital sheet million the billion and using our unrestricted million available note undrawn maturities ratio our per an capacity to $XXX strong liquidity, $XXX modest at balance support facility. our fiscal leverage a with until stockholders' was was credit with ago XX equity, XXXX of of

years, Project-level expensive land sets become Forestar's a loans, developers. apart and our complexity, volatile floating more in rate is advantages, environment. land have impacting which acquisition typically competitors. Other less developers of are recent in most have loans rates it one capital generally from us use more project-level of are available especially structure restrictive, our other create competitive administrative and and development development biggest and

to while provides Our I'll capital you when take flexibility, arise. Andy, operational liquidity us structure advantage it strong they attractive hand to our opportunities for us closing of with remarks. back positions

Anthony Oxley

closing, of Thanks, opportunity ahead us. In Jim. there's believe I tremendous

industry. share lot a positioned to highly gain in uniquely is market fragmented Forestar development

most combined footprint Continued execution and of plans, positions of lot success. for national our diverse us our supply operational with further finished across constrained strategic

expanding continue existing to mortgage Forestar growth. drive of to fundamentals accelerating continue affordable remain. buydowns are price but underlying shortage to provides construction, the supply and development a buyers land long-term growth. homes low at combined the points, our position will rate including and strong rates affordability with consistent for housing clear Elevated and in incentives, D.R. new Horton We builder believe team path impact We a our with our relationship to of interest investments for

delivering between billion and fiscal still compared As fourth we billion year-to-date quarter, and release, for to expect lots. outlined deliver with XX,XXX are XX,XXX XXXX and generate we between expect of now $X.X guidance. on our in to lots revising of the expectations to fiscal guidance press prior XX,XXX our results our $X.X We XX,XXX Based revenue.

a and is significant and we positioned to for lots. fragmented are operate finished make opportunity builder There We demand of undercapitalized expand the leader in in. markets the to highly presence a industry are market in our advantage uniquely

to the remains double over goal our Our the same, to X% term. share market intermediate

we'll Forestar's this to significant to to operational value market few disciplined dedicated I'm financial and direction open strategic expect capital strong We and years of line future. John, With questions. over the long-term in aggregate enhance allocation foundation a about Forestar. for share clear the a team place, maintaining our excited while at time, approach a next

Operator

question from Carl Reichardt first BTIG. comes The with Instructions] [Operator

Carl Reichardt

So how issues really. can for wanted of then Two government government developed. detail limiting things you lots to delays quarter. I lots there in think places many on And talked were phrase getting used the upside, I delays, some more a delayed? I the And was you about create in were there's think, lot One, that. ask

specifically out most some curious sort the door a comes details lot I'm the to what So getting on hurting of to as just when into it is customers.

Mark Walker

talk primary call government of is It little Mark. X our the context. cycle getting certified September a the through to where it, closed increase recently as months. too, an that we've bit also past XX, to sample small news. period, little on There's transacted. bit it's you and just phases ground times. cycle a X affects as the a these to The Over development. I'll in those give cycle getting approvals that about bit finished related getting delays some taking chain, little of of that. a things. to cycle primarily Carl, to related related December behind experienced but until times, week XX 'XX for of receive supply we've well those the we subsequent let's just really it development to approvals. There's that a begin XX-month times. good lots to much it a longer a just really There's contractor Yes. bit approvals, beginning those couple to was time From availability, seen size X additional have call January had really projects government given seen And We've news lots stabilize over delivered let's was reduced today, little approvals

impacts those in seeing we're little from governmental although our are delays, opportunity So cycle times. of seeing we bit a

Katie Smith

this Yes. is And Katie. Carl,

didn't moved really line quarter, with of the this moved but was quarter As it we of far expectations, our lot our remarks. It lumpier have quarter, as which in to any delays. out we in sales that to loss the due out just alluded the was

Carl Reichardt

Okay.

big of in just too, so community And that. lines, of right letting here, one then of a along in you're we've curious lots indicate growth that I'm can. change And number mix under per squeeze some deposits then about of door acceleration. a now? sort into the the sort Is if a control those couple, got Okay. I'll contract, out there of I lots

expecting volume little a stronger growth. about some talked You bit

going you year this look give might sort to to of for we you? grow you're year Is as a see? about count. of think as can 'XX, double-digit could next sense in X% you be out of year Or where kind what growth kind So your in we a lot acceleration achievable us midpoint,

Anthony Oxley

in not blend we mean really and country. there's it's change have So size as of across geographically different the I the we a a go the communities.

you're think So I consistent. to I pretty respect With would lot close. say that's deliveries

XXXX for at mid-single this the being we and 'XX While for giving based on into growth guidance we're point, double-digit see conditions not correct potential market digits is 'XX. for the do

Mark Walker

a little delays, address I to was the too. of bit going

a to in XQ call you closing back acquisition our from, reduced look rates, interest pulled just and 'XX activity, the quarters and XQ back due pace. we If basically land balancing or XQ year experienced fiscal let's to price XQ. sharp development 'XX, the months and We've it, of

not lot are If seeing the so And of as being you the It's XQ XX% XX which we low think lots those the able the right increase and right are those of hit well majority to lots to was what beginning XXX a is 'XX. have purchased that in cycle about now, a the our in that are of from and under production And vast over development. to of we lots as point, kind impact shelved you of acquisition of delayed the times. already, deliver cycle next days.

Operator

question comes Anthony with next Citi. The from Pettinari

Anthony Pettinari

the guidance guidance, but that color pricing volume Or revenue if guidance a unchanged, just purely the is is down impact? bit, is On a -- better? any is Or that mix there? is

Katie Smith

Yes.

guidance, the range to price, end and it rounds take low So that billion. our when we the down if were year-to-date of looking at $X.X you average

the with and what the next expect And has so same. ASP we be this line roughly to quarter. been just We it would year in it for that's why kept

Anthony Pettinari

you're curious any from Got pulling terms on obviously, any attractive? it. back particularly as a say you accelerate acquisition? specifically Florida focus or then where seeing call state? might a are Anything that land can out And and that markets there presence or of Got in Or there you perspective. you markets a there. of about have Just are you're that then oversupplied regional alternately, new lot And it.

Anthony Oxley

rapid interest would there. Affordable strong. a demand. So Colorado point an price really can't say that we're or some strong higher do are be there's years. affordable Probably also is then very price product, by not product, in But first-time very where buildup a in that. affordable seeing over seeing generally, see anywhere. the the softness I inventory on impacted again, of homebuyer where Florida, of softness strong, example rates. there's where couple Texas, point we pretty last appreciation we been we're price really seeing Florida, Carolinas

Operator

no have further queue. We Instructions] in [Operator questions

will of turn the the I We call to have over question-and-answer reached Andy the for end remarks. now Oxley And session. closing

Anthony Oxley

Forestar share. fourth again We and focus share to forward flexible everyone's team to results. XXXX disciplined, everyone continue to look you and work. speaking October the and on quarter call you on our and John, Thank in we market thank the today with as Stay opportunistic you, hard consolidate for your and appreciate to time fiscal

Operator

concludes you conference, and for disconnect participation. this time. your This Thank today's at lines may you your

Forestar (FOR) 18 Jul 242024 Q3 Earnings call transcript