[Management View]
Forestar Group reported a 23% increase in revenue, driven by higher lot sales volume and pricing mix. However, net income declined due to margin compression and the absence of prior-year asset sale gains. The company remains focused on capital efficiency, inventory turnover, and targeting entry-level/first-time buyer segments.

[Outlook]
Management reaffirmed full-year revenue guidance of $1.5 billion to $1.55 billion for FY2025, despite reduced lot delivery targets of 14,500 to 15,000 lots due to slower homebuyer demand. The company plans to continue expanding into new markets and diversifying its customer base.

[Financial Performance]
Revenue increased by 23% YoY to $390.5 million, while net income decreased to $32.9 million from $38.7 million in the prior year. Gross profit margin fell to 20.4% from 22.5% due to an unusually low-margin community. SG&A expenses rose to 9.6% of revenue, reflecting new market expansion.

[Q&A Highlights]
Question 1: Gross margins seem to have declined. Should we expect a 21% margin as a new norm?
Answer: The gross margin was impacted by a low-margin community, but normalized margins would be 21.1%. The range has been 21-23% over the last three years, and no significant margin reduction is expected.

Question 2: Have development costs started to decline, or are they stable?
Answer: Development costs are stable, with some fluctuations in categories, but overall they remain flattish.

Question 3: You trimmed volume guidance but maintained revenue. Is this due to better pricing?
Answer: Higher average selling prices, partly due to lot price increases and mix, have allowed us to maintain revenue guidance.

Question 4: Any regional focus in new market entries?
Answer: New markets include the Pacific Northwest, Northern California, Salt Lake, and Reno, with teams on the ground building support.

Question 5: Is there any interest in converting to a REIT?
Answer: No, as Forestar is focused on development rather than land banking.

Question 6: How might D.R. Horton's slower growth affect Forestar?
Answer: Forestar sees growth opportunities within Horton and is expanding its customer base with other builders.

[Sentiment Analysis]
Analysts expressed concerns about margin pressures but were optimistic about revenue growth and strategic market expansion. Management maintained a confident tone, emphasizing operational flexibility and market share growth.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 |
|-------------------------|---------------|---------------|
| Revenue | $390.5 million| $318.4 million|
| Net Income | $32.9 million | $38.7 million |
| Gross Profit Margin | 20.4% | 22.5% |
| Lots Sold | 3,605 | 3,245 |
| SG&A Expense (% of Rev) | 9.6% | 9.2% |

[Risks and Concerns]
Management highlighted affordability constraints and weaker consumer confidence as ongoing headwinds. The decline in gross profit margin and reduced lot delivery guidance reflect these challenges.

[Final Takeaway]
Forestar Group demonstrated strong revenue growth despite margin pressures, driven by strategic market expansion and higher lot sales. While challenges such as affordability constraints persist, the company's focus on capital efficiency and market share growth positions it well for future success. Management's reaffirmation of revenue guidance and strategic priorities underscores confidence in navigating current market conditions.