Slide 1: Investor Presentation Q1 2023
Investor Presentation Qi |23 SS FORESTAR
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 with increasing FOCUSED margins 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
Slide 4: Q1 FY 2023 Financial Highlights
Q1 FY 2023 FINANCIAL HIGHLIGHTS Solid execution during a challenging market transition • Generated $216.7 million of revenues and $20.8 million of net income on 2,263 lots sold • Total liquidity increased 15% to $582.6 million • Return on equity(1) improved 70 basis points to 13.9% • Return on inven
Slide 5: Track Record of Profitability and Growth
TRACK RECORD OF PROFITABILITY AND GROWTH Forestar has delivered strong growth and consistent margin expansion through the execution of its strategic plan and a disciplined, returns-focused approach to capital allocation Lot Deliveries Revenue GR 17,691 AGR 62% CA 15,915 53% C $1,326 $1,519 10,373 $9
Slide 6: The Market Opportunity
THE MARKET OPPORTUNITY As the leading pure-play residential lot supplier in the nation, Forestar has become a reliable source for finished lots and will continue to gain market share 2022 U.S. Single-Family Housing Starts ~65% of new housing starts were for single-family homes ~1,007,000 Estimated T
Slide 7: 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 8: 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 Margin Annual Lot Deliveries Growth Growth Expansion • Gain market share within • Expand into new markets •
Slide 9: Manufacturing Approach to Land Development
MANUFACTURING APPROACH TO LAND DEVELOPMENT Forestar has built a fundamentally strong business model with repeatable results, rooted in a relentless focus on returns Short duration, fully- Large scale with Returns-focused, with strict Predictable operating Strong liquidity and entitled lot national f
Slide 10: 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 11: 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) 23.4% 34.1% 18.2% 13.9% 12.3% 16.4% 15.8% 6.9% 9.8% 7.8% (0.
Slide 12: 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 (109 markets in • Significant built-in demand for lots RELATIONSHIP 33 states) • Improved access to c
Slide 13: DHI Track Record Provides Roadmap to FOR
DHI TRACK RECORD PROVIDES ROADMAP TO FOR DHI’s 29-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 14: FOR Is an Essential Lot Supplier to DHI
FOR IS AN ESSENTIAL LOT SUPPLIER TO DHI FOR has consistently expanded its 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 60,000 18% 19% 20% 50,000 1
Slide 15: Land and Development Investments
LAND AND DEVELOPMENT INVESTMENTS Forestar remains very selective when investing in new projects and is focused on managing development in phases to strive 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
Slide 16: 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 • It is a common industry practice for homebuilders to source land acquisition opportunitie
Slide 17: Lot Sourcing Capabilities
LOT SOURCING CAPABILITIES FOR's improvement in gross profit margin is primarily due to increased margins on lot sales from development projects sourced by Forestar TTM FOR Sourced Lots Sold as a % of Total Lots Sold TTM Gross Profit Margin 36% 35% 22.4% 21.3% 25% 20.0% 20% 18.7% 18.1% 14% 12/31/21 3
Slide 18: Solid Balance Sheet and Liquidity Position
SOLID BALANCE SHEET AND LIQUIDITY POSITION • Forestar is well-positioned with conservative net leverage(1) of 2.1x, net debt to capital(2) of 28.7% and a strong liquidity position of ~$580 million at 12/31/22 • Balanced financing plan includes both debt and equity — net debt to capital(2) target of
Slide 19: 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 high performing team that are relentless DON TOMNITZ DAN BARTOK problem solvers. Executive Chai
Slide 20: Diversified National Footprint
DIVERSIFIED NATIONAL FOOTPRINT 52 MARKETS | 20 STATES Portfolio of 82,300 lots as of December 31, 2022 / FOR markets / states DHI states where FOR does not currently operate Lot Position by State and Markets as of 12/31/22 Of total lot position at 12/31/22, 61,500 are owned and 20,800 are controlled
Slide 21: Appendix
APPENDIX bey FORESTAR
Slide 22: 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 23: Income Statement
INCOME STATEMENT 3 MONTHS ENDED 12/31/22 12/31/21 Residential lots sold: 2,263 4,516 Development projects 2,263 4,381 Lot banking projects — 135 Average sales price per lot(1) $ 90,100 $ 89,000 Revenues(2) $ 216.7 $ 407.6 Gross profit 47.5 73.4 Selling, general and administrative expense 22.9 21.5 E
Slide 24: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Reconciliation of Adjusted Non-GAAP Financial Measures to their GAAP equivalents 3 MONTHS ENDED 12 MONTHS ENDED 12/31/22 12/31/21 12/31/22 12/31/21 Net income attributable to Forestar Group Inc. $ 20.8 $ 40.5 $ 159.1 $ 128.7 Net income attributable to noncontrolling in
Slide 25: Balance Sheet
BALANCE SHEET 12/31/22 9/30/22 12/31/21 Cash and cash equivalents $ 216.4 $ 264.8 $ 162.5 Real estate 2,067.7 2,022.4 1,960.1 Investment in unconsolidated ventures 0.5 0.5 0.5 Other assets 56.5 55.3 39.4 Total assets $ 2,341.1 $ 2,343.0 $ 2,162.5 Debt $ 706.4 $ 706.0 $ 704.9 Accrued development cost
Slide 26: Master Supply Agreement (MSA)
MASTER SUPPLY AGREEMENT (MSA) • Defines business relationship between DHI and FOR as both companies identify residential real estate opportunities • Provides DHI the right of first offer (ROFO) to purchase up to 100% of the lots from DHI sourced projects at market prices • Provides DHI the ROFO to p
Slide 27: 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 28: 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