Forestar Group Inc · NYSE:FOR
Forestar — Q2 2021 Earnings Presentation
26 slides from Forestar's earnings presentation, 2021
Slide 1: Investor Presentation Q2 2021
Investor Presentation Q2 2021
Slide 2: Forward-Looking Statements
F O R W A R D ‐ L O O K I N G S TAT E M E N T S 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 outcome
Slide 3: Forestar Overview
F O R E S TA R OV E RV I E W • Forestar Group Inc. (“Forestar” or “FOR”) is a highly Operations in 54 markets across 22 states(1) differentiated, national residential lot developer ─ Develops and sells lots for single-family homes to D.R. Horton and other local, regional and national homebuilders ─
Slide 4: The Forestar Value Proposition
T H E F O R E S TA R VA LU E P RO P O S I T I O N DIFFERENTIATED BUSINESS • Return focused residential lot development business model MODEL DESIGNED TO • Higher turnover, lower risk lot manufacturing strategy focused on returns ADDRESS A MARKET NEED • Under-served lot development market with lack of
Slide 5: Forestar Investment Highlights
F O R E S TA R I N V E S T M E N T H I G H L I G H T S Unique Return- Focused Lot Manufacturing Business Model Strong Balance Strategic Sheet and Liquidity Relationship With Position D.R. Horton Proven / Seasoned Management Team Long-Term Market With Decades of Share Gains Real Estate Experience Hom
Slide 6: Unique Lot Manufacturer Business Model
U N I Q U E LOT M A N U FAC T U R E R BU S I N E S S M O D E L FOR’s unique lot manufacturing model is highly differentiated from that of a typical land developer • Business model designed to operate consistently at scale, while minimizing risk • At scale, FOR’s high turnover, lower risk lot manufac
Slide 7: Business Overview
BU S I N E S S OV E RV I E W 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 cos
Slide 8: Highly Strategic Alignment with DHI
H I G H LY S T R AT E G I C A L I G N M E N T W I T H D H I BENEFITS TO FOR BENEFITS TO DHI • Supports Forestar’s national platform • Long-term consistent supplier of finished • Significant built-in demand for lots lots across DHI’s national footprint (91 STRONG AND markets in 29 states) • Improved
Slide 9: DHI Track Record Provides Roadmap to FOR
D H I T R AC K R E C O R D P ROV I D E S ROA D M A P TO F O R DHI’s 28-year public track record provides a guide 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 U.S. Single-Family New Home S
Slide 10: FOR's Growing Share of DHI's Lot Needs
F O R ’ S G ROWI N G S H A R E O F D H I ’ S LOT N E E D S FOR is quickly becoming an essential lot supplier to DHI DHI Closings FOR Lots Sold to DHI as a % of Closings 90,000 17% 18% 16% 80,000 16% 70,000 14% 12% 60,000 12% 50,000 10% 40,000 7% 8% 30,000 6% 20,000 4% 10,000 1% 2% 0% 0 0% FY 2017 FY
Slide 11: Compelling Growth Story
C O M P E L L I N G G ROW T H S TO RY Based on current market conditions, Forestar expects to grow its lot deliveries 40% to 45% in fiscal 2021 and to generate approximately $1.20 to $1.25 billion of revenue, with a pre-tax profit margin of 10.0% to 10.5% Lot Deliveries Total Revenue $1,200 - $1,250
Slide 12: Return on Equity (ROE)
R E T U R N O N E Q U I T Y ( RO E ) Our high-turnover, lower-risk manufacturing strategy led to a 360 basis point year-over-year improvement in Forestar's return on equity 9.6% 7.3% 7.7% 6.0% 4.7% FY 2019 TTM 3/31/20 FY 2020 TTM 12/31/20 TTM 3/31/21 ROE is calculated as net income divided by averag
Slide 13: Land and Development Investments
L A N D A N D D E V E LO P M E N T I N V E S T M E N T S Forestar expects to invest more than $1.5 billion in land acquisition and development in fiscal 2021 Fiscal Year Ended Quarter Ended $477 $1,054 $377 $850 $182 $320 $503 $290 $271 $188 $227 $477 $154 $110 $115 $125 $295 $560 $551 $161 $166 $18
Slide 14: Growing Lot Position
G ROW I N G LOT P O S I T I O N Consistent with Forestar’s focus on capital efficiency, the portion of its land and lot supply that is controlled via purchase contracts is increasing, supporting higher returns in the future 84,500 77,500 25,800 60,500 25,200 52,300 18,100 38,300 16,500 8,600 58,700
Slide 15: Expanding Lot Sourcing Capabilities
E X PA N D I N G LOT S O U RC I N G C A PA B I L I T I E S • Forestar sourced lots have increased to 48% of total owned lots, up from 31% a year ago, which is expected to drive increases in gross and pre-tax profit margins • Forestar is targeting a 3- to 4-year owned lot inventory 58,700 52,300 42,4
Slide 16: Diversified Footprint Markets | 22 States
D I V E R S I F I E D F O OT P R I N T 5 4 M A R K E T S | 2 2 S TAT E S Portfolio of 84,500 lots as of March 31, 2021 / FOR markets / states DHI states where FOR does not currently operate FOR division offices open as of 4/19/21 Lot Position by State and Markets as of 3/31/21 Of total lot position
Slide 17: Uniquely Positioned to Provide Finished Lots
U N I Q U E LY P O S I T I O N E D TO P R OV I D E F I N I S H E D L O T S Builders' preference for ‘land lighter’ models enhances opportunity, and in times of economic uncertainty, homebuilders shift their land strategies to slow raw land purchases and focus on purchasing finished lots Optioned Lan
Slide 18: Seasoned Leaders with Decades of Experience
SEASONED LEADERS WITH DECADES OF EXPERIENCE Management team includes land development veterans experienced in consolidating market share and navigating through industry and economic cycles DON TOMNITZ DAN BARTOK JIM ALLEN Executive Chairman CEO CFO Formerly President & CEO of DHI for Joined FOR in D
Slide 19: Financial Position and Policy
F I NA N C I A L P O S I T I O N A N D P O L I C Y • Forestar is well-positioned with low net leverage of 34.1% and strong liquidity position of ~$500 million • In April 2021, Forestar issued $400 million of 3.85% senior notes due 2026 replacing $350 million of 8.00% senior notes due 2024, which wil
Slide 20: Q2 2021 and FYTD 2021 Highlights
Q2 2021 AND FYTD 2021 HIGHLIGHTS • Operating highlights • Residential lots sold increased 84% to 3,588 lots in Q2 FY 2021 compared to 1,951 lots in Q2 FY 2020 • 84,500 lots at 3/31/21, of which 58,700 were owned and 25,800 were controlled through purchase contracts • 37,100, or 63%, of owned lots we
Slide 21: Appendix
APPENDIX CR «8. ‘» FORESTAR 2
Slide 22: Income Statement
I N C O M E S TAT E M E N T 3 MONTHS ENDED 6 MONTHS ENDED 3/31/2021 3/31/2020 3/31/2021 3/31/2020 Residential lots sold: 3,588 1,951 7,155 4,373 Development projects 3,174 1,272 6,276 2,678 Lot banking projects 414 679 879 1,695 Average sales price per lot(1) $ 78,100 $ 79,700 $ 82,100 $ 85,600 Reve
Slide 23: Balance Sheet
BA L A N C E S H E E T 3/31/2021 9/30/2020 3/31/2020 Cash and cash equivalents $ 167.2 $ 394.3 $ 438.2 Real estate 1,698.6 1,309.7 1,199.2 Investment in unconsolidated ventures 0.9 3.6 5.7 Other assets 32.2 32.3 24.5 Deferred tax asset, net - - 8.0 Total assets $ 1,898.9 $ 1,739.9 $ 1,675.6 Debt $ 6
Slide 24: Master Supply Agreement (MSA)
M A S T E R S U P P LY AG R E E M E N T ( M S A ) • 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 • Provid
Slide 25: Stockholder's Agreement
S TO C K H O L D E R ’ S AG R E E M E N T • 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 –
Slide 26: Shared Services Agreement
S H A R E D S E RV I C E S AG R E E M E N T • 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 manag