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Performance growth was driven by a 4% revenue increase and 12% pretax income growth, supported by a scalable platform that recently reached the 100,000th lot delivery milestone.

Management attributes the current demand environment to ongoing affordability constraints and cautious consumer sentiment, which have impacted the pace of new home sales.

The company is utilizing its national footprint of over 200 active projects to strategically allocate capital based on local demand and market dynamics.

Operational discipline is focused on turning land and lot inventory efficiently to maximize returns while maintaining a 3 to 4 year supply of land and lots.

Forestar's capital structure is cited as a primary competitive advantage, as project-level loans have become more expensive and restrictive for smaller, fragmented competitors.

The relationship with D.R. Horton remains a core growth driver, with Forestar aiming to eventually provide one out of every three lots sold by the homebuilder.

Fiscal 2026 guidance is maintained with lot deliveries expected between 14,000 and 14,500 and revenue projected at $1.6 billion to $1.7 billion.

The company plans to invest approximately $1.4 billion in land acquisition and development in fiscal 2026, subject to prevailing market conditions.

Management expects headcount to remain relatively flat for the remainder of the year following a 9% year-over-year decline, with increases planned for 2027 to support Western expansion.

Strategic focus remains on gaining market share from smaller developers who lack access to the same liquidity and efficient capital structures.

Future growth is supported by a contracted backlog of $2.3 billion, which management views as a strong indicator of future revenue visibility.

Gross profit margins of 20.7% were at the lower end of the historical 21% to 23% range, primarily due to geographic mix and a slower absorption environment.

The company holds $1.1 billion in total liquidity, including $395 million in cash, providing a buffer against market volatility and enabling opportunistic M&A.

Development cycle times have stabilized at approximately 12 months, down from peaks of 18 months, though municipal permitting remains a primary bottleneck.

Direct horizontal construction costs have stabilized over the last 12 months, with increases in some categories offset by reductions in others.

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Management noted that land prices have remained relatively stable, but they are seeing improved ability to negotiate better terms, such as land takedowns and shovel-ready deals.

The market for finished lots remains slightly undersupplied in most regions, providing an opportunity for Forestar to grow share as overall development activity slows.

The company intentionally moderated hiring in the second half of 2025 after significant growth earlier in the cycle.

Headcount is expected to increase in 2027 as the company expands its land development capabilities, particularly in the Western United States.

Management clarified that diesel costs were not a significant factor in the quarter; margin compression was primarily a result of product mix and managing the price-versus-pace trade-off.

Horizontal costs have stabilized over the past year, and the company is seeing better availability of 'A-rated' contractors.