Image source: The Motley Fool. DATETuesday, July 22, 2025, at 11 a, considering recent developments.
Nevertheless, Nevertheless, EDTCALL PARTICIPANTSPresident and Chief Executive Officer — Andy OxleyChief Financial Officer — Jim AllenChief Operating Officer — Mark WalkerVice President — Chris HibbettsNeed a quote from one of our analysts.
[ tected]RISKSManagement cited "While affordability constraints and weaker consumer confidence" as headwinds negatively impacting the pace of new sales and lot deries, in light of current trends.
Conversely, Gross fit margin declined to 20. Conversely, 4% from 22, considering recent developments.
On the other hand, Furthermore, 5% in the prior year quarter, with management attributing part of the decrease to the closeout of "one community with an unusually low margin.
"Lot dery guidance was lowered to "14,500 to 15,000 lots" for FY2025, down from prior expectations, in response to slower market conditions. TAKEAWAYSRevenue: $390 (fascinating analysis).
In contrast, 5 million in GAAP revenue, up 23% compared to Q3 FY2024, driven by higher lot sales volume and pricing mix. Net Income: $32. 9 million, or $0. 65 per diluted, down from $38.
7 million, or $0. 76 per diluted, in the prior year, due to margin compression and lower one-time gains, given current economic conditions.
Lots Sold: Lots sold totaled 3,605, representing an 11% increase from Q3 FY2024 and a 6% sequential increase from the previous quarter (remarkable data).
Additionally, Lots Under Contract: 25,700, up 26% year over year, representing 38% of owned lots and $2. 3 billion in future revenue. Gross fit Margin: Gross fit margin was 20.
Furthermore, 4%, down from 22. 5% in the prior year quarter, in light of current trends. After adjusting for an unusually low-margin community, the normalized gross fit margin was apximately 21.
SG&A Expense: $37, considering recent developments. Additionally, 4 million, or 9. Furthermore, 6% of revenue, up from 9.
2% last year, attributed to new market expansion and a 16% higher community count, given current economic conditions.
Average Lot Sales Price: $106,600, influenced by a greater portion of higher-priced lot deries.
On the other hand, Liquidity: $792 million, including $189 million in unrestricted cash and $603 million in undrawn revolver capacity.
Debt and Capital: Total debt stands at $873 million, with a net debt to capital ratio of 28. 9% and $70. On the other hand, 4 million in senior notes maturing within twelve months as of June 30, 2025.
Meanwhile, Book Value Per : $33. Additionally, 04, up 11% year over year, reflecting growth in stockholders’ equity.
Revenue Guidance: Management reaffirmed full-year revenue guidance of $1, considering recent developments. 5 billion to $1, considering recent developments.
Moreover, 55 billion for FY2025, despite reduced volume expectations. Lot Dery Guidance: Lowered to 14,500-15,000 lots for FY2025, citing slower buyer demand.
Capital Expenditure: $372 million invested in land and development, with apximately 80% allocated to development versus 20% to acquisition (something worth watching), in this volatile climate.
In contrast, Owned Lot Position: 102,300 total lots as of June 30, 2025, with 67% owned and 33% controlled; 10,000 lots at quarter-end (noteworthy indeed).
Backlog Exposure: 27% of owned lots were subject to a right of first offer with D, given the current landscape. At the same time, Horton, as detailed in executed agreements as of June 30, 2025.
Horton Relationship: 15% of D, given the current landscape. Horton starts in the past 12 months, and 23% of its lot purchases in Q3 FY2025 were from lots developed by Forestar Group Inc.
Moreover, New Market Expansion: Entered seven new over the past year, including the Pacific Northwest and Northern California, supporting a 16% increase in community count.
Development Cost Trends: Management stated development costs have "stabilized," remaining "flattish" sequentially.
Pricing Outlook: Higher average lot pricing year to date has been attributed mainly to sales mix, with some support from national lot supply constraints.
Strategic Focus: Continued emphasis on capital efficiency, inventory turnover, and targeting entry-level/first-time buyer segments. However, In contrast, SUMMARYForestar Group (FOR 9.
19%) management attributed a 23% revenue increase to higher lot sales and price mix, while acknowledging net income (GAAP) fell due to lower gross margins and the absence of prior-year asset sale gains.
Year-to-date pricing has exceeded initial expectations for FY2025, leading to maintained revenue guidance of $1. 5 billion to $1 (which is quite significant), in this volatile climate.
However, 55 billion for FY2025, despite reduced lot dery targets of 14,500 to 15,000 lots in response to slowed demand, in today's financial world.
Lot backlog reached a five-year high, reflecting expanded contracts and reinforcing growth visibility.
Leverage remains moderate, and liquidity is described as strong, with management underlining operational flexibility as a competitive advantage.
Jim Allen stated, "Over the last three years, that [gross margin] range has kind of been in the 21% to 23% range," suggesting no trend toward further margin erosion.
Capital structure was positioned as a key differentiator, with management referencing competitor challenges accessing ject-level development loans.
New market entry and increased diversification of the customer base were highlighted as priorities to drive future growth opportunities.
Mark Walker noted, "The availability of contractors and necessary materials remains solid, in this volatile climate. What the re reveals is land development cost has stabilized.
Additionally, "INDUSTRY GLOSSARYLot Banker: An intermediary acquiring lots for resale to builders, often viding bridge financing or inventory management.
On the other hand, Right of First Offer: A contractual arrangement giving a specified party, here D. Horton, the first opportunity to purchase lots before they are offered to others.
On the other hand, On the other hand, Full Conference Call TranscriptAndy Oxley: Thanks, Chris. Moreover, Good morning, everyone.
Nevertheless, I'm also joined on the call today by Jim Allen, our Chief Financial Officer, and Mark Walker, our Chief Operating Officer. The Forestar Group Inc, in light of current trends.
Team dered a solid third quarter generating $32. 9 million of net income or $0. 65 per diluted on $390. 5 million of revenue. Lots sold increased 11% year over year and 6% sequentially to 3,605 lots.
Additionally, Additionally, lots under contract to sell increased 26% from a year ago to 25,700 lots representing 38% of our owned lot position and $2.
3 billion of future revenue, which is the highest contracted backlog we have had during the last five years (which is quite significant).
Moreover, While affordability constraints and weaker consumer confidence continue to impact the pace of new sales, we maintained strong liquidity through disciplined investment in inventory.
Moreover, Our experienced operators are adjusting the pace of development where appriate, and we are moderating our land acquisition investments (remarkable data).
Over 80% of our investments this quarter were for land development, in today's financial world.
However, We remain focused on turning our inventory, maximizing returns, and consolidating market in the highly fragmented lot development industry.
Our unique combination of financial strength, operating expertise, and a diverse national foot enables us to consistently vide essential lots to builders and navigate current market conditions effectively.
On the other hand, We will now discuss our third quarter financial results in more detail (noteworthy indeed). Jim Allen: Thank you, Andy.
In the third quarter, net income was $32, in today's market environment. 9 million or $0 (this bears monitoring). However, 65 per diluted, compared to $38. 7 million or $0.
76 per diluted in the prior year quarter. Revenues for the third quarter increased 23% to $390. 5 million compared to $318. 4 million in the prior year quarter.
Our gross fit margin for the quarter was 20 (which is quite significant). 4% compared to 22 (noteworthy indeed). 5% for the same quarter last year.
However, The current year quarter was negatively impacted by the closeout of one community with an unusually low margin.
Furthermore, Excluding the effect of this item, our current year quarter gross margin would have been apximately 21. Our pretax income was $43.
6 million compared to $51 (fascinating analysis), in light of current trends. 6 million in the third quarter of last year. And our pretax fit margin this quarter was 11. 2% compared to 16.
2% in the prior year quarter, in this volatile climate. However, The prior year quarter was positively impacted by a $5 million gain on sale of assets.
Pretax fit margin in the prior year quarter, excluding the gain on sale, would have been 14. Lots sold in our third quarter increased 11% to 3,605 lots, with an average sales price of $106,600.
Our average sales price this quarter was impacted by an outsized mix of lot deries from communities with higher price point lots.
We expect continued quarterly fluctuations in our average sales price based on the geographic and lot size mix of our deries, considering recent developments.
Chris Hibbetts: In the third quarter, SG&A expense was $37 (noteworthy indeed). 4 million or 9 (this bears monitoring), amid market uncertainty.
In contrast, 6% as a percentage of revenues compared to 9 (something worth watching). 2% in the prior year quarter (something worth watching).
Our increase in SG&A is primarily driven by the expansion of our operating platform, including entering seven new alongside D. Horton's foot, and increasing community count by 16% in the last year.
We're pleased with the gress we have made building our team, and we continue to attract high-quality talent (which is quite significant).
We remain focused on efficiently managing our SG&A while in our teams to support future growth.
However, Mark Walker: New sales have been slower than last year as continued affordability constraints and weaker consumer confidence continue to weigh on demand.
However, mortgage rate buy-down incentives offered by builders are helping to bridge the affordability gap and spur demand for new s, particularly at more affordable price points, in today's financial world.
Our primary focus remains lots for new s at prices that target entry-level and first-time buyers, which is the largest segment of the new market.
The availability of contractors and necessary materials remains solid. The land development cost has stabilized.
Conversely, We have also seen imvement in cycle times despite continued governmental delays.
Our teams utilize best management practices and work closely with our trade partners to develop lots to drive operational efficiency. On the other hand, Jim Allen: D.
Nevertheless, Horton is our largest and most important customer. 15% of the s D, in light of current trends. Horton started in the past twelve months were on a Forestar Group Inc. Developed lot.
At the same time, And 23% of their lot purchases this quarter were lots developed by Forestar Group Inc. However, With a mutually stated goal of one out of every three s D.
However, Horton sells to be on a lot developed by Forestar Group Inc. Moreover, , we have a significant opportunity to grow our market within D.
We continue to work on expanding our relationships with other builders, and intermediate 15% of our third quarter deries or 530 lots were sold to other customers, which includes 331 lots that were sold to a lot banker who expects to sell those lots to D.
Moreover, Horton at a future date, considering recent developments. On the other hand, We also sold lots to eight other builders, one of which was a new customer.
Mark Walker: Our total lot position at June 30 was essentially flat from a year ago, at 102,300 lots, of which 68,300 or 67% was owned and 34,000 or 33% were controlled through purchase contracts (something worth watching).
Meanwhile, 10,000 of our owned lots were at quarter-end, and the majority are under contract to sell.
Consistent with our focus on capital efficiency, we target only a three to four-year supply of land and lots and manage development phases to der lots at a pace that matches market demand (fascinating analysis), in this volatile climate.
Conversely, Owned lots under contract to sell increased 26% from a year ago to 25,700 lots or 38% of our owned lot position, in this volatile climate.
$230 million of hard-earned money deposits secured these contracts, which are expected to generate apximately $2 (noteworthy indeed). 3 billion of future revenue.
Additionally, Our contracted backlog is a strong indicator of our ability to continue gaining market in a highly fragmented lot development industry (an important development), given the current landscape.
Another 27% of our owned lots are subject to a right of first offer to D. Horton based on executed purchase and sale agreements. Chris Hibbetts: Forestar Group Inc.
's underwriting criteria for new development jects remains unchanged at a minimum 15% pretax return on average inventory, a return of our initial cash investment within thirty-six months.
During the third quarter, we invested apximately $372 million in land and land development, which was relatively flat with the prior year quarter.
Roughly 20% of our investment was for land acquisition, and 80% was for land development (this bears monitoring).
Although we have moderated our land acquisition investment, our team remains disciplined, flexible, and opportunistic when pursuing new land acquisition opportunities (quite telling).
Our current land and lot position will allow us to return to strong volume growth in future periods, and we still expect to invest apximately $1, in light of current trends.
9 billion in land acquisition and development in fiscal 2025, subject to market conditions.
Jim Allen: We have significant liquidity and are using modest leverage to keep our balance sheet strong and support our growth objectives.
We the quarter with $792 million of liquidity, including an unrestricted cash balance of $189 million and $603 million of available capacity on our undrawn revolving credit facility (this bears monitoring).
However, Total debt at June 30 was $873 million, with $70, considering recent developments. 4 million of senior note maturities in the next twelve months.
Additionally, And our net debt to capital ratio was 28. We the quarter with $1, in light of current trends.
7 billion of stockholders' equity, and our book value per increased 11% from a year ago to $33 (this bears monitoring). Forestar Group Inc.
's capital structure is one of our biggest competitive advantages, and it sets us apart from other land developers.
Ject-level land acquisition and development loans are less available and have become more expensive in recent years, impacting most of our competitors.
Other developers generally use ject-level development loans, which are typically more restrictive, have floating rates, and create administrative complexity, especially in a volatile rate environment, in today's financial world.
On the other hand, Our capital structure vides us with operational flexibility while our strong liquidity positions us to take advantage of attractive opportunities as they arise.
On the other hand, Andy, I will hand it back to you for closing remarks. Andy Oxley: Thanks, Jim (noteworthy indeed), given the current landscape.
As outlined in our press release, we are maintaining our fiscal 2025 revenue guidance of $1, considering recent developments. 5 billion to $1.
55 billion while lowering our lot dery guidance to 14,500 to 15,000 lots in response to current market conditions.
Our team has a ven track record of adjusting to changes in market conditions quickly, and we are closely monitoring each of our as we strive to balance pace and price to maximize returns for each ject, in today's financial world.
Additionally, While we expect affordability constraints and cautious buyers to continue to be a near-term headwind for new demand, we are confident in the long-term demand for lots and our ability to gain market in the highly fragmented lot development industry, considering recent developments.
Continued execution of our strategic and operational plans, combined with constrained lot supply across the majority of our diverse national foot, positions us for further success.
With a direction, a dedicated team, and a strong operational and financial foundation in place, I am excited Forestar Group Inc.
On the other hand, John, at this time, we'll open the line for questions, amid market uncertainty. Operator: Thank you. Meanwhile, At this time, we will be conducting a question and answer session.
If you would to ask a question, please press 1 on your telephone keypad. Moreover, You may press 2 if you would to remove your question from the queue.
It may be necessary to pick up your handset before pressing the star keys. Furthermore, One moment, please, while we poll for questions.
Once again, please press 1 if you have a question or a, considering recent developments. The first question comes from Trevor Allinson with Wolfe Re, amid market uncertainty. Please ceed.
Additionally, Trevor Allinson: Hi, good morning. Thank you for taking my questions, amid market uncertainty. First one's on gross margins. You called out the single community.