Slide 1: Investor Presentation Q1 2024
Investor Presentation Q1 2024
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: Q1 FY 2024 Highlights
Q1 FY 2024 HIGHLIGHTS Solid execution with strong profitability • Earnings per diluted share increased 81% to $0.76 • Pre-tax income increased 84% to $51 million on $306 million of revenues • Lots sold increased 39% to 3,150 lots • Net debt to capital(1) of 14.9%, with total liquidity of $845 millio
Slide 5: Returns Focused Execution
RETURNS FOCUSED EXECUTION Forestar is delivering profitable growth through the execution of its strategic plan and a disciplined, returns focused approach to capital allocation Talented Team + Solid Profitability + Strong Customer Relationship = Industry Leading Residential Lot Developer Return on A
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 $1.5 $1.4 - $1.5 $1.4 15,915 14,500 - 15,500 $1.3 14,040 $0.9 10,373 FY 2020 FY 2021
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, land development loan availability is the worst in over a decade in the third calendar quarter of 2023 Percent of Respondents Saying Land Development Effective Inter
Slide 10: Constrained Lot Supply
CONSTRAINED LOT SUPPLY • Availability of lots is improving from historic lows; however, calendar 3Q 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 • New
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 built a unique lot manufacturing model that enables it to be a consistent supplier of lots to homebuilders, while producing strong risk-adjusted returns Short duration, fully- Large scale with Returns-focused, with strict Predictable operating
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) 20.7% 17.6% 51.6% 14.4% 14.1% 33.3% 8.7% 16.0% 10.1% 7.5% (1
Slide 14: Diversified National Footprint
DIVERSIFIED NATIONAL FOOTPRINT 57 MARKETS | 23 STATES Portfolio of 82,400 lots as of December 31, 2023 / FOR markets / states DHI states where FOR does not currently operate Of total lot position at 12/31/23, 55,400 are owned and 27,000 are controlled through purchase contracts 14
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% 16% 40,000
Slide 19: Land and Development Investments
LAND AND DEVELOPMENT INVESTMENTS • Accelerating 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 efficien
Slide 20: 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, the portion of its land and lot supply that is controlled via purchase contracts is increasing, supporti
Slide 21: Solid Balance Sheet and Liquidity Position
SOLID BALANCE SHEET AND LIQUIDITY POSITION • Forestar is well-positioned with conservative net leverage(1) of 0.9x, net debt to capital(2) of 14.9% and a strong liquidity position of ~$840 million at 12/31/23 • Balanced financing plan includes both debt and equity — net debt to capital(2) target of
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 DON TOMNITZ ANDY OXLEY Executive Chairman CEO Formerly President & CEO of DHI for over Joined FOR in Januar
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 12/31/23 12/31/22 Residential lots sold: 3,150 2,263 Development projects 3,150 2,263 Average sales price per lot(1) $ 96,400 $ 90,100 Revenues(2) $ 305.9 $ 216.7 Gross profit 72.9 47.5 Selling, general and administrative expense 28.0 22.9 Gain on sale of assets — (1.
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 12/31/23 12/31/22 12/31/23 12/31/22 Net income $ 38.2 $ 20.8 $ 184.3 $ 159.1 Income tax expense 13.0 7.1 60.6 51.1 Interest charged to cost of sales 6.1 5.0
Slide 27: Balance Sheet
BALANCE SHEET 12/31/23 9/30/23 12/31/22 Cash and cash equivalents $ 458.9 $ 616.0 $ 216.4 Real estate 2,009.8 1,790.3 2,067.7 Investment in unconsolidated ventures 0.5 0.5 0.5 Other assets 64.6 63.9 56.5 Total assets $ 2,533.8 $ 2,470.7 $ 2,341.1 Debt $ 705.3 $ 695.0 $ 706.4 Accrued development cost
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