Forestar Group Inc.

Good afternoon, and welcome to Four Star's first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode, and the floor will be open for your questions and comments following the presentation. I will now turn the call over to Katie Smith, Director of Finance and Investor Relations for Four Star.

Thank you, Catherine. Good afternoon, everyone, and welcome to the call to discuss Four Star's first quarter results. Thank you for joining us. Before we get started, today's call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although Four Star believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to Four Star on the date of this conference call, and we do not undertake any obligation to update or revise any forward-looking statements publicly. Additional information about factors that could lead to material changes in performance is contained in Four Star's annual report on Form 10-K, filed with the SEC. This afternoon's earnings release is on our website at investor.fourstar.com, and we plan to file our 10-Q tomorrow. After this call, we will post an updated investor presentation to our investor relations site under events and presentations for your reference. Now, I will turn the call over to Dan Bartok, our CEO.

Thank you, Katie, and good afternoon, everyone. In addition to Katie, I am pleased to be joined on the call today by Jim Allen, our Chief Financial Officer. As reflected in our results, we had a strong start to our fiscal year, so I'd like to start the call by thanking the four-star team. People are the key to our business, and I continue to be extremely proud of our excellent performance, our team's ability to execute, and the operational platform that we have built. Our outstanding first quarter is a direct result of the team's capabilities and commitment to Four Star. During the quarter, we maintained our momentum by achieving significant revenue growth and margin expansion. A highlight of the first quarter is an 84% increase in our net income to $40.5 million, or 81 cents of earnings per diluted share. Four Star achieved an 83% increase in pre-tax income to $53.5 million, and our pre-tax profit margin expanded 360 basis points year over year to 13.1%. Revenue increased 33% to $407.6 million, primarily driven by a 27% increase in lot deliveries to 4,516 lots. We continue to make progress delivering more lots from Four Star sourced projects. 22% of our lots sold in the quarter were Four Star sourced, compared to 13% in the first quarter of 2021. This, combined with our strategy of pricing lots closer to the time of completion, enabled Four Star to take advantage of favorable market conditions when setting finished lot prices. We are maintaining our focus on development projects and are doing less lot banking than a year ago. As a result, our gross profit margin expanded 360 basis points to 18% compared to 14.4% in the fourth quarter of 2021. We continue to increase our market share in the highly fragmented lot development industry. Four Star made further progress selling lots to third party customers while growing our lots sold to D.R. Horton as a percentage of DR Horton's closings, both year-over-year and sequentially. We estimate our national market share is now 2.2%, up from 1.4% a year ago, based on Four Star's trailing 12-month lot deliveries and new single-family homes sold in calendar year 2021. Our intermediate term goal is to achieve 5% national market share. representing one out of every 20 new homes sold in the U.S. being built on a four-star developed lot. Our increasing profitability is translating into higher returns for our shareholders. Four-star achieved a 13.2% return on equity for the trailing 12 months ended December 31, 2021. This was a 550 basis point improvement from the same period a year ago, and our seventh consecutive quarter of ROE improvement. This continued improvement further demonstrates that our high turnover, lower risk manufacturing strategy is fundamentally stronger than that of a traditional land developer. We expect our platform will gain additional maturity and scale as our team continues to capture market share in their respective markets. This will drive further improvements to our returns on equity and inventory. We'll now discuss our first quarter financial results in more detail. Jim?