FOR - Earnings call transcript Q1 2025

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Operator

Good morning, and welcome to Forestar's First Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note this conference is being recorded.

I will now turn the call over to Chris Hibbetts, Vice President of Finance and Investor Relations for Forestar. Chris.

Unknown Executive

Jenny. you, Thank welcome Quarter and call discuss to Good to First results. Forestar's morning, the

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

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

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

at on file release is our Our later our this XX-Q to earnings and week. website we plan investor.forestar.com

to post After Relations this will Events we reference. site call, investor an our Presentations your under Investor and for presentation updated

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

Anthony Oxley

to and Thanks, welcome Chris, team. the

For joined as Operating of January by planned those joined with yet, Chris Chief Officer. Chief Mark Horton transition D.R. Smith Jim on also Financial part the Katie our joining call X. our a Allen, in team I'm who on met, and Walker, our haven't December he today Officer;

at earnings level quarter and owned our doubled of remains delivered highest have team diluted lots percentage lots year and the Forestar X,XXX of contract The lots per a under ago, contract during June $X.XX. of lots from under revenues our is owned for of million the share generating and XXXX. since solid finished the Demand $XXX.X

making key in markets. expand our team significant new adding acquisition local land continues including Forestar and our personnel markets The entering development and investments and platform, operating in to

XX% increased position over lot period. has increased count has year compared XX% our the and a community same owned to Our ago,

turning parcels and our in land fragmented compelling market share in highly investing on the consolidating returns inventory, industry. focused remain We maximizing development lot

financial significant operating and finished of leading enabling blend a supplier expertise unique us reach is geographic advantage, Forestar's lots. strength, to be of a competitive

Jim quarter first more our now results detail. will discuss in

James Allen

million diluted net compared Thank you, income to in $XX.X $XX.X In share first $X.XX $X.XX per share per the million quarter, was the quarter. year or or Andy. diluted prior

leverage. first Our pretax last result the year, income year a was margin $XX.X our XX.X% prior the operating as quarter in quarter to pretax and million to was X.X% million quarter $XX.X compared this compared profit in reduced of of

We to prior quarter million $XXX.X of compared Revenues sales in price average the for the year in lots $XXX.X the million with $XX,XXX. totaled quarter. sold quarter X,XXX an

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

of lowest quarter the to be first year. expect quarter will the continue our delivery We fiscal that

was the sales Our a year gross prior impacted to compared The lot XX% to year. of same margin XX.X% by profit for quarter legacy positively unusually margin high for last an closeout community. the quarter the related quarter was

was margin from profit lot first XX.X%. high-margin approximately that legacy prior our quarter sales year the community, Excluding Chris? gross

Unknown Executive

ago. the quarter employees XXX first count the to primarily year a XX% employees to In compared to expense XXX million, employee to increase quarter, from a due SG&A in XX% increased prior year $XX

lot compared a deliveries. as We prior primarily quarter, the was have and markets increased our decrease entering community in XX.X% the platform, increasing employee revenues our result to of new percentage count including the in of X.X% to expansion as of support year-over-year operating a count. SG&A year

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

Mark Walker

generally supply builders and Mortgage address level new of offered affordability limited and remains low by demographic the buydown from and continued helped increased rate affordability favorable, demand despite price levels, challenges. inventories points remained demand. has the historically have housing incentives to supporting affordable home existing of homes Although at spur

Our at points. price ongoing develop primarily focus affordable lots for to homes remains

and Availability the cost stabilized. of and land necessary has developing materials of has improved, contractors

cycle the continue management delays we to and While continue We norms. our above with way to cycle work modest see efficient possible. develop partners times improvement extend utilize times, lots in government historical best to practices trade in most

themselves are for Homebuilders to are lot and communities to positions land closeout and secure current looking future many competing to growth. replace position

result, seen any not we softening have in land As a prices.

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

James Allen

homes X-star and developed our D.R. Forestar. the important to Horton of sells, a every of a D.R. Horton lots. out one most XX% on by months the Horton were of be goal in XX X lot mutually With D.R. developed started largest past customer. homes is a on stated

opportunity have Horton. within We significant to market our share grow D.R.

to Chris? our other new We homebuilders, X lots homebuilders, with including deliveries expanding our also continue customers. quarter relationships other on to XXX are work X% first sold were of

Unknown Executive

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

return strong by acquisition in investments quarters. in development We several land to growth increased positioning and volume to the over our are supported future last periods,

quarter. which year the During and development. was for was approximately land we the of was $XXX land quarter, prior XX% investment a first million from and invested XX% XX% development, for acquisition our in land land increase

acquisition conditions. to is pace expect invest XXXX, loaded approximately still for pipeline and the the the this of We our billion land Our in remainder $X of acquisition fiscal in year, acquisition in and market to Mark? fiscal year. land to subject expect investment moderate land front-end development we

Mark Walker

lots, increased of lots under controlled total our increased owned XX% to or capital XX,XXX which with efficiency, ago generate focus $XXX at and deliver development own target ago at which year hard matches and demand. supply a to phases on secured a year from million our contract approximately of manage owning through a to XX,XXX $X.X XX% Owned X- quarter that to sell or XX we end. our position XXX,XXX X,XXX finished contracts. of at of were land December was earnest were of pace XX% XX% Consistent future to XX% finished Our XX,XXX X-year purchase lot the and money our of were contracts, deposits to revenue. lots lot these expected from lots billion or lots lots position. own market

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

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

James Allen

sheet keep facility, the our million have balance aggregate from revolving an We from significant and $XXX million of balance which, the our other strong support our growth liquidity, including cash with liquidity $XXX to the modest increased of available million leverage on million lender company maturity date We $XXX $XXX and to its ended of among reduced amended unrestricted and using December, quarter In XXXX are objectives. capacity credit things, commitments million. October and to the December extended credit facility. pricing $XXX XXXX,

and the XXXX, pleased our to net December share with XX.X%. XX% per to a upgrade quarter month, taking from note our an equity from increased credit and debt-to-capital receive of at were book ended maturities $XX.XX. stockholders' May with to We value was year $XXX to no $X.X a Total was billion rating corporate until ratio ago our us debt senior million, S&P BB-. B+ XX We also from earlier this

our advantages, loans biggest of expensive one us developers. years, sets Forestar's most land land development recent impacting have acquisition of capital from our Project more structure it less available other is competitive in competitors. and and level, apart and are become

Other complexity, developers generally use rate are project-level which create typically environment. in administrative especially a volatile development have restrictive, more and loans, rates floating

Our opportunities they with operational take capital structure while us positions our to strong provides us of advantage arise. flexibility, attractive as liquidity

will for closing you to I hand back remarks. it Andy,

Anthony Oxley

Jim. Thanks,

of are platform. expansion with pleased our We the continued operating

have D.R. talent, a development, being land significant team. in We of best-in-class new by Horton's have opportunities and with markets team and entered breadth our made footprint alongside evaluated our new investments growing land

believe there's opportunity ahead. I tremendous

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

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

for unchanged. fiscal guidance Our XXXX remains

and of on conditions, expect market between XX,XXX to to Based generate $X.XX current lots to and XX,XXX billion billion revenue. we deliver $X.X

quarter delivery can expect our the XXXX first in half The half. and revenues the of we still illustrates than fiscal delivery second occur lots. of our variability quarter we We fiscal of first throughout year, fluctuations experienced lowest expect our that XXXX be the quarter-to-quarter and finished will be higher the in

balance maximize to We are of price to each project. returns as our pace strive markets each and closely we monitoring for

We uniquely industry undercapitalized leader builder and finished lots. take to market highly for in fragmented advantage are positioned the of a demand and

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

maintaining and while strong aggregate to enhance strategic With next value future. over the a when expect our capital approach place, Forestar. about share a and years significant to investing in long-term a direction, market disciplined few dedicated I'm foundation team Forestar's excited financial of the clear operational We

line time, the Jen, at we'll this for questions. open

Operator

[Operator Instructions].

Your first BTIG. question from coming Reichardt is of Carl

Carl Reichardt

the stabilization? on other the I where really a is entitlement as land development. you costs can to and to I'm development dynamics. of follow-on, starting issue, related process and cycle a as more on you're that of particular detail the stabilization and little wanted bit, a expand Andy, little aspects horizontal of assuming And just not before, see we approval that discussed kind the time

Mark Walker

Mark. it's Carl,

XX months, we've stabilization, the our seen costs stable. have that of trailing really over terms development In past and the call been

a Our the were done updated budgets across the not making ago. the life like increases our throughout seeing job, come of desks project. has XX We're months we team great maybe price sure are really

sign positive very for costs. a that's So

times, times of cycle cycle decreased XX In this terms days we our quarter. again,

XXX peak. about off days it's the So

cycle completion that year. the see the times, can something normalized a work by entitlement this fiscal seeing we're of fiscal to to cycle continue time particularly to down, we come get hang-ups, are down year, at government hope end with the the going we to the so substantial And continue on That's still the with jurisdictions. we

Carl Reichardt

in count on that then to about more build next more one build years? cost new market that markets in after see employee negative out lots in are year -- of an of this the in How this in next And we And we'd new is couple out thinking leverage pool Or improvement leverage, expect increase XX% you coming? you recognizing Should that you that. leverage as employee then year expect half and look growth that count have that or setup. the you that's to have the as quarter, X? I especially back of the something obviously, substantial,

James Allen

Carl, our remainder single high of for still digits would of still based expect the the expect we yes, on be the guidance, SG&A for our moderate year. kind -- expense would revenue We're to to we see it year.

Carl Reichardt

a it's Horton like little we just last about But but then relative And lot this per this I quarter high versus there modeled pricing seems easier. because revenue that talked to higher X% that particular on year's lot. last, per dollars, think Was revenue although obviously, can increase something it through go just in per you it's drove be a depending the lot lot we land particular of in recognizing might you. lag what we supply, that terms expect some in year, the or there you ball sell? What to as revenue seeing on are particularly

James Allen

It that quarter. just pretty ASP this had We prices, skewed up for that particular was the for project significant lot quarter. one infill really mix with

Anthony Oxley

that lot And in price. to low grades we're much escalate predicting pretty mid-single-digit

Operator

Anthony question next Citigroup. your And coming Anthony. of from Pettinari is

Asher Sohnen

have of on of to trending otherwise takedowns? This their kind I other just or maybe seen is for Horton you ask, Anthony. Asher or then any customers your demand delay alter wanted lock has scheduled how year-to-date? And Sohnen builder

Mark Walker

ability we into builder door board. If demand essentially on the and communities the we it's this a are are project that. open in where new we strong, get we're new new buildup, on there's project. get can Builders to deal remains If lining inventory There communities. particularly existing will when And occasion do quarter-over-quarter, up some builder, with by to bring at same. communities seeing and

demand for our remains We finished have Demand in builder past. But strong lots the solid. overall. is that doing been

Asher Sohnen

deliveries help the just this No, a that's separately, in just just balance more quarter. talked softness but to about of on the you Great. the the little year, the of And bit Great. the of a kind details you are with little first us bit -- prepared and remarks, cadence then given in over good. going

Anthony Oxley

was quarter. really had really -- it Well, fourth we strong a

a the as the have little a over November, December what seasonally much in was It October last years we to we quarter so improved year. is pretty in we've have And And second several the then deliveries our that got back lowest we through, majority of first softer. our half is go normal. and that seen of

see similar same what So much was. XXXX that we progression pretty to

Operator

call into I'm now else to not turn anyone will any seeing Andy questions. for closing over I come Okay. for the Instructions] remarks. the queue [Operator back

Anthony Oxley

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

Operator

very Andy. you much, does conference. Thank today's This conclude

You disconnect this may have day. phone Thank wonderful your for your time, a lines you at and participation.

Forestar (FOR) 21 Jan 252025 Q1 Earnings call transcript