Forestar Group Inc.

increased 10% to $1.7 billion in fiscal 2025, which includes $118.1 million of track sales and other revenue. In the fourth quarter, we sold 4,891 lots with an average lot sales price of $115,700. And for the year, we sold 14,240 lots with an average lot sales price of $108,400. We expect continued quarterly fluctuations in our average sales price based on the geographic location and lot size mix of our deliveries. Our gross profit margin this quarter was 22.3%, down 160 basis points from a year ago. Our gross profit margin in the prior year fourth quarter was positively impacted by lot sales from an unusually high margin project. Our fourth quarter pre-tax income increased 4% to $113.1 million, and our pre-tax profit margin was 16.9%. Pre-tax income for the year totaled $219.3 million, and our pre-tax profit margin this year was 13.2%. Our pre-tax income and profit margin for the quarter and the year were positively impacted by a gain on sale of assets of $4.5 million. Chris?

SG&A expense for the fourth quarter was $42.7 million, or 6.4% as a percentage of revenues. For the year, SG&A expense was $154.4 million, or 9.3%. Our average employee count for fiscal year 2025 increased 24% compared to the prior year, which has supported the continued expansion of our platform, including entering new markets and increasing community count. Roughly 90% of new hires in fiscal 2025 were in our local market operations. We are pleased with the progress we have made building our team and our ability to attract high-quality talent. We remain focused on efficiently managing our SG&A while investing in our teams to support our continued growth. Mark?

New home sales have been slower than last year as continued affordability constraints and cautious consumer sentiment 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 homes, mainly at more affordable price points. Our primary focus remains developing lots for new homes at prices for entry-level and first-time buyers, which is the largest segment of the new home market. The availability of contractors and necessary materials remains solid, and land development costs have been stable. We have also seen improvement in cycle times, fight continued governmental delays. Our teams utilize best management practices and work closely with our trade partners to develop lots to drive operational efficiency. Jim?

DR Horton is our largest and most important customer. Fifteen percent of the homes DR Horton started this year were on a four-star developed lot. With a mutually stated goal of one out of every three homes DR Horton sells to be on a lot developed by four-star, we have a significant opportunity to grow our market share within DR Horton. We also continue to work on expanding our relationships with other home builders. 17% of our fiscal 2025 deliveries for 2,489 lots were sold to other customers, which includes 927 lots that were sold to a lot banker who expects to sell those lots to D.R. Horton at a future date. We also sold lots to more than 20 different home builders this year, including six new customers. Chris?

Four Star's underwriting criteria for new development projects remains unchanged at a minimum 15% pre-tax return on average inventory and a return of our initial cash investment within 36 months. During the fourth quarter, we invested $347 million in land and land development, of which approximately 80% was for land development and 20% was for land. For the full year, we invested approximately $1.7 billion in land and land development, of which two-thirds was for land development and one-third was for land. In fiscal 2026, we currently expect to invest approximately $1.4 billion in land acquisition and development. Mark?

Our loss position on September 30th was 99,800 lots, of which 65,100, or 65% are owned, and 34,700, or 35%, are controlled through purchase contracts. 8,900 of our owned lots are finished, which is down 11% from the third quarter. The majority of our finished lots are under contract to be sold. Consistent with our focus on capital efficiency, we target owning a three to four year supply of land and lots and manage our development phases to deliver finished lots at a pace that matches market demand. Owned lots under contract to sell increased 13% compared to a year ago. 23,800 lots or 37% of our own lot supply. $193 million of hard earnest money deposits secure these contracts, which are expected to generate approximately $2.1 billion of future revenue. Another 27% of our own lots are subject to a right of first offer to D.R. Horton based on executed purchase and sale agreements.

Kim? We have significant liquidity and are using modest leverage to keep our balance sheet strong. We ended the quarter with $968 million of liquidity, including an unrestricted cash balance of $379 million and $589 million of available capacity on our undrawn revolving credit facility. During September, we redeemed the remaining $70.6 million of 3.85% senior unsecured notes that were due in 2026. Total debt at September 30th was $803 million with no senior note maturities until fiscal 2028, and our net debt to capital ratio was 19.3%. We ended the quarter with $1.8 billion of stockholders' equity, and our book value per share increased 11% from a year ago to $34.78. Four Star's capital structure is one of our biggest competitive advantages, and it sets us apart from other land developers. Project-level land acquisition and development loans are less available today and have continued to be more expensive, which impacts the majority of our competitors. Other developers generally use project-level development loans, which are typically more restrictive, have floating rates, and create administrative complexity, particularly in an elevated interest rate environment. Our capital structure provides us with operational flexibility while our strong liquidity positions us to take advantage of attractive opportunities when they arise. Andy, I'll now turn it back over to you for closing remarks. Thanks, Jim.

Fiscal 2025 was another successful year for Four Star. We delivered revenue growth of 10% and increased our book value per share by 11%. We continue to execute our strategy to expand the business through significant investments in land and land development and growth of our team. These investments helped us enter seven new markets and increase our community count by over 10%. We further strengthened our balance sheet through extending near-term debt maturities and increasing our liquidity. As we look forward to fiscal 2026, based on current market conditions, we expect to deliver between 14,000 and 15,000 lots and to generate $1.6 to $1.7 billion of revenues. We currently expect our first quarter will be our lowest delivery quarter of the year, and we expect our revenues in the second half of fiscal 2026 to be higher than the first half. We are closely monitoring each market as we strive to balance pace and price to maximize returns for each project. While we expect home affordability constraints and cautious home buyers to continue to be near-term headwinds for new home demand, We are confident in the long-term demand for finished lots and our ability to gain market share in the highly fragmented lot development industry. We are well-positioned to continue success with our lot portfolio across our diverse national footprint, operating expertise, and strong balance sheet. Ali, at this time, will open the line for questions.

Thank you, sir. Ladies and gentlemen, at this time we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question today is coming from Trevor Allenson with Wolf Research. Your line is live.

Hi, good morning. Thank you for taking my question. Looking at your 26 guidance, it looks like you're expecting deliveries to be up low single digits. That's roughly the same growth as your largest customer. As we think about you deepening your penetration with Horton customers, Why would you not grow faster as we look into next year? Is it an expectation that sales to other builders come down, or is it just some conservatism? What's driving kind of the inline growth with Gordon?

Thanks, Trevor. You know, it's just their size. You know, if they grow at low single digits, we need to grow at mid-single digits just to maintain pace with them. They've entered some new markets. We've entered six or seven new markets for the year. We are growing market share in the markets where we are in, but it's just a matter of us catching up with them in those additional markets. We have the land. We have the team in place. So we are positioned, if the market is there. We could increase those units, but it's really going to depend on the spring selling season to see what the year gives us. Okay.

Makes sense. That's helpful. And then you talked about employee count being up 24% in fiscal 25. You built out your team ahead of some anticipated growth here over the next couple of years. With that in mind, How should we think about your head count moving forward and then your leverage on SG&A in fiscal 26?

Thanks. Well, our head count has remained basically flat since the first quarter of fiscal 25. Most of that increase in head count actually occurred in fiscal 24, but only partially recognized in fiscal 24. I would expect our head count to continue to remain flat or maybe even drift down a slightly as we move into fiscal 26. Thank you for all the color and good luck moving forward.

Thank you, Trevor.

Thank you. Just as a reminder, ladies and gentlemen, that's star one if you have any questions or comments. Our next question is coming from Anthony Pesonari with Citigroup. Your line is live.

Hi, this is Asher Sonnen on for Anthony. Thanks for taking my question. I just wanted to ask, you know, I think last week we saw a builder talking about how they were getting some cost concessions and extended takedown schedules on their lot. So I was just wondering, you know, with Gordon or your third-party customers, are you seeing any pushback on lot prices or maybe extended takedown schedules or anything like that?

From a land acquisition perspective, we've been successful renegotiating time and terms, but not so much land value. Throughout the years, our teams and we have developed a proven underwriting, due diligence, and market research strategy that helps us ensure that we're purchasing land at current market rates. In terms of lot pricing, we haven't seen a whole lot of pushback on our lot pricing today. Again, we manage that project by project to maximize returns.

Okay, thanks. That's helpful. And I just wanted to drill down a little bit. I think you guys have a big presence in Texas and Florida. I was wondering if you could talk geographically around those regions, specifically what kind of trends you're seeing there.

Yeah, we are seeing some pressure in some markets in Texas. It's choppy. Probably see a little bit more pressure in Florida, parts of Florida. But those are, you know, really large markets, and particularly at the affordable price point where we tend to concentrate our business, we're still seeing good absorptions.

Great. That's all fun. If you won't mind me sneaking in one more just modeling question, in terms of the cadence of deliveries in 2026 in your guide, I think, you know, 2025 was pretty back half-weighted. I'm just wondering if there's any thinking around 2026.

Yeah, I mean, I think we're projecting 26 to be a similar cadence of 25. Certainly, our deliveries will be larger in the second half of the year, similar to this year.

Okay. Thank you very much. I'll turn it over.

Thank you. Once again, ladies and gentlemen, if there will be any final questions or comments, please indicate so now by pressing star 1 on your telephone keypad. Okay, as we have no further questions on the lines at this time, I'd like to turn the call back over to Mr. Andy Oxley for any closing remarks.

Thank you, Ali, and thank you to everyone on the four-star team for your focus and hard work. As we enter fiscal 2026, continue to stay disciplined, flexible, and opportunistic while focusing on consolidating market share. We appreciate everyone's time on the call today and look forward to speaking with you again in January to share our first quarter results.

Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time and we thank you for your participation.