Forestar : Q1 FY 2023 Investor Presentation

Investor Presentation

Q1 23

FORWARD-LOOKING STATEMENTS

This presentation may include "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Although Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Factors that may cause the actual results to be materially different from the future results expressed by the forward-looking statements include, but are not limited to: the effect of D.R. Horton's controlling level of ownership on us and the holders of our securities; our ability to realize the potential benefits of the strategic relationship with D.R. Horton; the effect of our strategic relationship with D.R. Horton on our ability to maintain relationships with our customers; the impact of COVID-19 on the economy and our business; the cyclical nature of the homebuilding and lot development industries and changes in economic, real estate and other conditions; the impacts of weather conditions and natural disasters; health and safety incidents relating to our operations; supply shortages and other risks of acquiring land, construction materials and skilled labor; competitive conditions in our industry; our ability to achieve our strategic initiatives; continuing liabilities related to assets that have been sold; the impact of governmental policies, laws or regulations and actions or restrictions of regulatory agencies; the cost and availability of property suitable for residential lot development; general economic, market or business conditions where our real estate activities are concentrated; our dependence on relationships with national, regional and local homebuilders; our ability to obtain or the availability of surety bonds to secure our performance related to construction and development activities and the pricing of bonds; obtaining reimbursements and other payments from governmental districts and other agencies and timing of such payments; our ability to succeed in new markets; the conditions of the capital markets and our ability to raise capital to fund expected growth; our ability to manage and service our debt and comply with our debt covenants, restrictions and limitations; the volatility of the market price and trading volume of our common stock; our ability to hire and retain key personnel; the impact of significant inflation, higher interest rates or deflation; and the strength of our information technology systems and the risk of cybersecurity breaches and our ability to satisfy privacy and data protection laws and regulations. Additional information about issues that could lead to material changes in performance is contained in Forestar's annual report on Form 10-K and its most recent quarterly report on Form 10-Q, both of which are or will be filed with the Securities and Exchange Commission.

In addition to providing results that are determined in accordance with GAAP, we present EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. These measures are not considered measures of financial performance or liquidity under GAAP, and the items excluded therefrom are significant components in understanding and assessing our financial performance or liquidity. These measures should not be considered in isolation or as alternatives to GAAP measures such as net income attributable to Forestar Group Inc., cash provided by or used in operating, investing or financing activities or other financial statement data presented in the financial statements as an indicator of our financial performance or liquidity.

Non-GAAP financial measures as reported by us may not be comparable to similarly titled metrics reported by other companies and may not be calculated in the same manner. These measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Reconciliations of such non-GAAP measures to the most directly comparable GAAP measure and calculations of the non-GAAP measures are set forth in the appendix of this presentation.

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FORESTAR OVERVIEW

Forestar Group Inc. ("Forestar" or "FOR") is

a highly differentiated, pure-play,

residential lot developer for the affordably-

priced single-family home market

Operations in 52 markets across 20 states(1)

/ FOR markets / states

1. As of 12/31/22

RETURNS FOCUSED

PRUDENT

DISCIPLINED

STRATEGIC

EFFICIENT

STRONG LIQUIDITY

LEADERSHIP

Track record of solid operational results with increasing margins

Fully-entitled projects with short durations

Investing capital across a diverse, national footprint which mitigates risk

Strong relationship with D.R. Horton, the nation's largest homebuilder

Scaling quickly while maintaining a low overhead model

Balance sheet provides financial and operational flexibility

Proven management team with significant land development experience

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Q1 FY 2023 FINANCIAL HIGHLIGHTS

Solid execution during a challenging market transition

• Generated $216.7 million of revenues and $20.8 million of net income on 2,263 lots sold
• Total liquidity increased 15% to $582.6 million
• Return on equity(1) improved 70 basis points to 13.9%
• Return on inventory(2) improved 90 basis points to 10.4%

Book Value per Share

Gross Profit Margin

Net Debt / Total Capital(3)

	$24.50		21.9%
$21.29		18.0%
15%		390	bps

33.9%

28.7%

(520)	bps

	Q1 FY 2022	Q1 FY 2023	Q1 FY 2022	Q1 FY 2023	Q1 FY 2022	Q1 FY 2023
$ in millions
Note: All comparisons are to the prior year quarter
(1)	Return on equity is calculated as net income attributable to Forestar for the trailing twelve months divided by average stockholders' equity, where average stockholders' equity is the sum of ending
	stockholders' equity balances of the trailing five quarters divided by five				4
(2)	Return on inventory is calculated as pre-tax income for the trailing twelve months divided by average real estate, where average real estate is the sum of ending real estate balances of the trailing

five quarters divided by five

1. Net debt to capital is calculated as debt net of unrestricted cash divided by debt net of unrestricted cash plus stockholders' equity

TRACK RECORD OF PROFITABILITY AND GROWTH

Forestar has delivered strong growth and consistent margin expansion through the execution of its strategic plan and a disciplined, returns-focused approach to capital allocation

Lot Deliveries

Revenue

	62%	CAGR
	10,373
4,132
FY 2019	FY 2020

15,915 17,691

FY 2021

FY 2022

	53%	CAGR
	$1,326
	$932
$428
FY 2019	FY 2020	FY 2021

$1,519

FY 2022

Pre-Tax Income and Margin(1)

	Pre-Tax Income		Pre-Tax Profit Margin
10.7%		11.1%	15.5%
8.4%
			$236
		$147
$46	$78
FY 2019	FY 2020		FY 2021	FY 2022

	Net Income and ROE(1)
	Net Income		ROE
	7.3%	11.7%
4.7%
	$110
$33	$61
FY 2019	FY 2020	FY 2021

16.2%

$179

FY 2022

$ in millions

1. Includes the pre-tax loss on extinguishment of debt of $18.1 million related to the Q3 FY 2021 refinancing of the Company's 8.00% senior notes due in 2024. ROE is calculated as net income attributable to Forestar for the trailing twelve months divided by average stockholders' equity, where average stockholders' equity is the sum of ending stockholders' equity balances of the trailing five quarters divided by five

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