Forestar Group Inc · NYSE:FOR
Forestar — Q2 2025 Earnings Presentation
30 slides from Forestar's earnings presentation, Apr 17, 2025
Slide 1: Investor Presentation Q2 2025
Investor Presentation Q2 2025
Slide 2: Forward-Looking Statements
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
Slide 3: Forestar Overview
FORESTAR OVERVIEW RETURNS Track record of solid operational results FOCUSED Forestar Group Inc. (“Forestar” or “FOR”) is a highly differentiated, pure-play, PRUDENT Fully-entitled projects with short durations residential lot developer for the affordably- priced single-family home market Investing c
Slide 4: Q2 FY 2025 Highlights
Q2 FY 2025 HIGHLIGHTS • Earnings per diluted share of $0.62 on net income of $31.6 million • Pre-tax income of $40.7 million • Revenues increased 5% to $351 million on 3,411 lots sold • Real estate book value increased 30% from a year ago to $2.8 billion at March 31, 2025 • Issued $500 million of 6.
Slide 5: Forestar Investment Highlights
FORESTAR INVESTMENT HIGHLIGHTS Unique Return- Focused Lot Manufacturing Business Model (Slides 6 - 8) Strong Balance Sheet Strategic Relationship and Liquidity Position With D.R. Horton (Slide 22) (Slides 9-10) Proven Management Team With Decades Long-Term Market of Real Estate Share Gains Experienc
Slide 6: Manufacturing Approach to Land Development
MANUFACTURING APPROACH TO LAND DEVELOPMENT Forestar has built a unique lot manufacturing model that enables it to be a dependable supplier of lots to homebuilders, while producing strong risk-adjusted returns Short duration, fully- Large scale with Returns-focused, with strict Predictable operating
Slide 7: Manufacturing Approach to Land Development
MANUFACTURING APPROACH TO LAND DEVELOPMENT Forestar’s lot manufacturing strategy has positioned the Company closer to a building products manufacturer than a traditional land developer Return on Equity(1) Pre-Tax Profit Margin(2) 86.2% 11.1% 10.7% 10.5% 10.0% 9.7% 8.0% 24.4% 16.1% 15.1% 7.3% 6.2% (4
Slide 8: Returns Focused Execution
RETURNS FOCUSED EXECUTION Forestar is driving shareholder value creation through the execution of its clear, strategic plan and a disciplined, returns- focused approach to capital allocation Talented Team + Solid Profitability + Strong Customer Relationship = Industry Leading Residential Lot Develop
Slide 9: Highly Strategic Alignment with DHI
HIGHLY STRATEGIC ALIGNMENT WITH DHI BENEFITS TO FOR BENEFITS TO DHI • Supports Forestar’s national platform • Long-term consistent supplier of finished lots SYMBIOTIC across DHI’s national footprint (126 markets in • Significant built-in demand for lots RELATIONSHIP 36 states) • Improved access to c
Slide 10: Master Supply Agreement
MASTER SUPPLY AGREEMENT The Master Supply Agreement formalizes the business relationship with DHI as both companies identify real estate opportunities and protects FOR's interests via the Right of First Offer process A Right of First Offer (ROFO) is very 1 Lots Sourced by DHI different than a Right
Slide 11: DHI Track Record Provides Roadmap to FOR
DHI TRACK RECORD PROVIDES ROADMAP TO FOR DHI’s 30-year public track record provides a blueprint to FOR to achieve its own growth, consolidation and market share gains Total New U.S. Single-Family Houses Sold ('000s) DHI’s Homes Closed as a Percentage of New U.S. Single-Family Houses Sold Represents
Slide 12: Intermediate Term Growth Goals
INTERMEDIATE TERM GROWTH GOALS Forestar has a visible path to capturing 5% market share within the highly-fragmented U.S. single-family residential lot development industry* Annual Lot Deliveries 5.0% >2.0x FOR's current size 2.1% 0.7% FY 2019 Market FY 2024 Market Current Target Share Share *5% mar
Slide 13: Diversified National Footprint
DIVERSIFIED NATIONAL FOOTPRINT 65 MARKETS | 24 STATES Portfolio of 105,900 lots as of March 31, 2025 / FOR markets / states DHI states where FOR does not currently operate Of total lot position at 3/31/25, 68,400 are owned and 37,500 are controlled through purchase contracts 13
Slide 14: Intense Focus on Risk Mitigation
INTENSE FOCUS ON RISK MITIGATION Strategic Operational Financial Strict underwriting requiring Significant local knowledge and Robust analytical process to minimum 15% return on average expertise determine best capital allocation inventory and return of the entire across markets phase 1 investment (
Slide 15: Uniquely Positioned to Provide Finished Lots
UNIQUELY POSITIONED TO PROVIDE FINISHED LOTS Builders' preference for ‘land lighter’ models enhances opportunity, and in times of economic uncertainty, many homebuilders shift their land strategies to slow raw land purchases and focus on purchasing finished lots Optioned Land/Lot Position as a Numbe
Slide 16: Constrained Lot Supply
CONSTRAINED LOT SUPPLY • Availability of lots is improving from historic lows; however, calendar 4Q 2024 data still reflects a significantly undersupplied market nationally • New home construction has been constrained by the availability of lots, labor and materials shortages, increased regulation a
Slide 17: Project-Level Land Development Financing Snapshot
PROJECT-LEVEL LAND DEVELOPMENT FINANCING SNAPSHOT According to the NAHB’s Survey on Acquisition, Development & Construction Financing, land development loan availability continues to be expensive and hard to secure Effective Interest Rate of Financing NAHB AD&C Financing Survey Index Land Developmen
Slide 18: Land and Development Investments
LAND AND DEVELOPMENT INVESTMENTS • Investing in new projects while maintaining a disciplined and conservative approach to underwriting • Continuing to focus on phased development to deliver finished lots at a pace that matches market demand, consistent with its focus on capital efficiency and return
Slide 19: Lot Position
LOT POSITION • Owned and controlled lot position is increasing to support future growth; targeting a 3- to 4-year owned inventory of lots • Consistent with Forestar's focus on capital efficiency, its land and lot supply that is controlled via purchase contracts remains robust • Balance sheet and liq
Slide 20: Contracted Revenues
CONTRACTED REVENUES • Contracted backlog is a strong indicator of FOR's ability to continue gaining market share in the highly fragmented lot development industry • Owned lots under contract to sell increased 41% from a year ago to 25,400 lots or 37% of FOR's owned lot position • $212 million dollar
Slide 21: Committed Leadership with Decades of Experience
COMMITTED LEADERSHIP WITH DECADES OF EXPERIENCE Management team includes land development veterans experienced in consolidating market share and navigating through industry and economic cycles DON TOMNITZ ANDY OXLEY Executive Chairman CEO 14 Formerly President & CEO of DHI for over Joined FOR in Jan
Slide 22: Solid Balance Sheet and Liquidity Position
SOLID BALANCE SHEET AND LIQUIDITY POSITION • Forestar is well-positioned with net leverage(1) of 2.9x, net debt to capital(2) of 29.8% and a strong liquidity position of $792 million at 3/31/25 • Issued $500 million of 6.50% senior unsecured notes due 2033 • Completed a tender offer to purchase $329
Slide 23: Appendix
APPENDIX bey FORESTAR
Slide 24: Business Overview
BUSINESS OVERVIEW Forestar Capital Deployment and Cash Generation Source land Place land under Close acquisition Lot development Deliver finished acquisition contract and complete of entitled land (~70% finished lot cost) lots to builders opportunities due diligence (~30% finished lot cost) • Phased
Slide 25: Forestar Supplies the First Input to Building a Home
FORESTAR SUPPLIES THE FIRST INPUT TO BUILDING A HOME Key Components to Building a Home: • Finished Lot (~20-30% of ASP) • Concrete • Lumber • Roofing materials • Siding / Brick • Windows • Insulation • HVAC / Plumbing / Electrical • Cabinets / Flooring / Paint • Appliances Note: ASP refers to the av
Slide 26: Stockholder's Agreement
STOCKHOLDER’S AGREEMENT • FOR Board of Directors must include at least three independent directors (currently has five) • As long as DHI owns at least 20% of FOR’s outstanding equity: – DHI has the right to designate individuals to FOR’s Board based on DHI’s ownership percentage – DHI has the right
Slide 27: Shared Services Agreement
SHARED SERVICES AGREEMENT • Shared Services Agreement between FOR and DHI defines the terms under which DHI may provide administrative, compliance, operational and procurement services to FOR • Scope and cost of services provided to FOR are mutually agreed upon by FOR and DHI management teams and ar
Slide 28: Income Statement
INCOME STATEMENT 3 MONTHS ENDED 6 MONTHS ENDED 3/31/25 3/31/24 3/31/25 3/31/24 Residential lots sold: 3,411 3,289 5,744 6,439 Development projects 3,334 3,280 5,625 6,430 Lot banking projects 77 9 119 9 Average sales price per lot(1) $ 101,700 $ 98,400 $ 103,200 $ 97,400 Revenues(2) $ 351.0 $ 333.8
Slide 29: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Reconciliation of Adjusted Non-GAAP Financial Measures to their GAAP equivalents 3 MONTHS ENDED 12 MONTHS ENDED 3/31/25 3/31/24 3/31/25 3/31/24 Net income $ 31.6 $ 45.0 $ 168.2 $ 202.4 Income tax expense 9.1 13.9 54.4 65.5 Interest charged to cost of sales 6.4 6.5 25.5
Slide 30: Balance Sheet
BALANCE SHEET 3/31/25 9/30/24 3/31/24 Cash and cash equivalents $ 174.3 $ 481.2 $ 416.2 Real estate 2,759.4 2,266.2 2,115.9 Investment in unconsolidated ventures — 0.3 0.5 Other assets 109.0 92.4 66.1 Total assets $ 3,042.7 $ 2,840.1 $ 2,598.7 Debt $ 872.5 $ 706.4 $ 705.7 Accrued development costs 1