Slide 1: Investor Presentation Q4 2023
Investor Presentation Q4 2023
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation may include “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Although Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materia
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: Q4 FY 2023 Highlights
Q4 FY 2023 HIGHLIGHTS Solid execution with strong profitability • Earnings per diluted share increased 41% to $1.44 • Pre-tax income increased 44% to $95 million on $550 million of revenues, with a pre-tax profit margin of 17.4% • Net debt to capital(1) improved from 26.9% to 5.5%, and total liquidi
Slide 5: FY 2023: Strong Execution Driving Financial Performance
FY 2023: STRONG EXECUTION DRIVING FINANCIAL PERFORMANCE Strong Operational Revenues of $1.4 billion on 14,040 lots sold Execution Robust Pre-tax income of $221.6 million, with a pre-tax profit margin of 15.4% Margins Low-Cost SG&A was 6.8% of revenues Structure $4.7 million of revenue per employee I
Slide 6: Solid Performance While Positioning for Future Growth
SOLID PERFORMANCE WHILE POSITIONING FOR FUTURE GROWTH Forestar expects to grow its lot deliveries ~3% to 10% in fiscal 2024, generating between $1.4 billion and $1.5 billion of revenue. Lot Deliveries Revenue 17,691 $1,519 $1,400 - $1,500 $1,437 15,915 14,500 - 15,500 $1,326 14,040 $932 10,373 FY 20
Slide 7: 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 8: 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 9: Project-Level Land Development Financing Snapshot
PROJECT-LEVEL LAND DEVELOPMENT FINANCING SNAPSHOT According to the NAHB’s Survey on Acquisition, Development & Construction Financing, credit continued to become more expensive on loans for acquisition and development in the second calendar quarter of 2023 Percent of Respondents Saying Land Developm
Slide 10: Constrained Lot Supply
CONSTRAINED LOT SUPPLY • Availability of lots is improving from historic lows; however, the calendar 2Q 2023 data still reflects a significantly undersupplied market nationally • The improvement in lot availability is likely short lived given the recent acceleration of single-family housing starts •
Slide 11: 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* Organic Inorganic Maximize Annual Lot Deliveries Growth Growth Returns • Gain market share within • Expand into new markets •
Slide 12: Manufacturing Approach to Land Development
MANUFACTURING APPROACH TO LAND DEVELOPMENT Forestar has a fundamentally strong business model with sustainable results and a continued focus on maximizing returns Short duration, fully- Large scale with Returns-focused, with strict Predictable operating Strong liquidity and entitled lot national foo
Slide 13: Unique Approach to Lot Development — DuPont Analysis
UNIQUE APPROACH TO LOT DEVELOPMENT — DUPONT ANALYSIS 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) 69.1% 23.9% 16.5% 14.4% 33.3% 13.2% 5.9% 15.4% 10.0% 9.4% 3.
Slide 14: Diversified National Footprint
DIVERSIFIED NATIONAL FOOTPRINT 54 MARKETS | 22 STATES Portfolio of 79,200 lots as of September 30, 2023 / FOR markets / states DHI states where FOR does not currently operate Of total lot position at 9/30/23, 52,400 are owned and 26,800 are controlled through purchase contracts *Although Forestar do
Slide 15: 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 (118 markets in • Significant built-in demand for lots RELATIONSHIP 33 states) • Improved access to c
Slide 16: 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 17: 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 18: FOR Is an Essential Lot Supplier to DHI
FOR IS AN ESSENTIAL LOT SUPPLIER TO DHI FOR maintains solid market share within DHI and has a goal to supply approximately one third of DHI's annual lot needs DHI Homes Started FOR Lots Sold to DHI as a % of Homes Started 100,000 30% 90,000 80,000 25% 70,000 19% 60,000 20% 50,000 16% 16% 40,000 13%
Slide 19: Land and Development Investments
LAND AND DEVELOPMENT INVESTMENTS Forestar is opportunistic when investing in new projects and focuses on managing development in phases to deliver finished lots at a pace that matches market demand, consistent with its focus on capital efficiency and returns As of the Fiscal Year Ended As of the Qua
Slide 20: Lot Position
LOT POSITION • Forestar's owned and controlled lot position has decreased as the majority of investment has shifted towards land development, while selectively replenishing lot supply to support future growth • Forestar's strong liquidity will be used to increase opportunistic land purchases • Fores
Slide 21: Solid Balance Sheet and Liquidity Position
SOLID BALANCE SHEET AND LIQUIDITY POSITION • Forestar is well-positioned with conservative net leverage(1) of 0.3x, net debt to capital(2) of 5.5% and a strong liquidity position of ~$1 billion at 9/30/23 • Balanced financing plan includes both debt and equity — net debt to capital(2) target of ≤ 40
Slide 22: 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 " We have a team of high performers who can tackle DON TOMNITZ DAN BARTOK even the most difficult Executive
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: Income Statement
INCOME STATEMENT 3 MONTHS ENDED 12 MONTHS ENDED 9/30/23 9/30/22 9/30/23 9/30/22 Residential lots sold: 4,986 3,914 14,040 17,691 Development projects 4,986 3,861 14,040 16,454 Lot banking projects — 53 — 383 Deferred development projects — — — 854 Average sales price per lot(1) $ 97,400 $ 88,800 $ 9
Slide 26: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Reconciliation of Adjusted Non-GAAP Financial Measures to their GAAP equivalents 3 MONTHS ENDED 12 MONTHS ENDED 9/30/23 9/30/22 9/30/23 9/30/22 Net income $ 72.4 $ 50.8 $ 166.9 $ 178.8 Income tax expense 23.0 15.6 54.7 57.0 Interest charged to cost of sales 10.2 7.4 26
Slide 27: Balance Sheet
BALANCE SHEET 9/30/23 9/30/22 Cash and cash equivalents $ 616.0 $ 264.8 Real estate 1,790.3 2,022.4 Investment in unconsolidated ventures 0.5 0.5 Other assets 63.9 55.3 Total assets $ 2,470.7 $ 2,343.0 Debt $ 695.0 $ 706.0 Accrued development costs 104.1 122.3 Earnest money on sales contracts 121.4
Slide 28: Stockholder's Agreement
STOCKHOLDER’S AGREEMENT • FOR Board of Directors must include at least three independent directors (currently has four) • 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 29: 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