Toll Brothers Reports FY 2023 2nd Quarter Results

FORT WASHINGTON, PA — Toll Brothers, Inc. (NYSE: TOL) announced results for its second quarter ended April 30, 2023.

FY 2023’s Second Quarter Financial Highlights (Compared to FY 2022‘s Second Quarter):

• Net income and earnings per share were $320.2 million and $2.85 per share diluted, compared to net income of $220.6 million and $1.85 per share diluted in FY 2022’s second quarter.
• Pre-tax income was $430.6 million, compared to $295.8 million in FY 2022’s second quarter.
• Home sales revenues were $2.5 billion, up 14% compared to FY 2022’s second quarter; delivered homes were 2,492, up 4%.
• Net signed contract value was $2.3 billion, down 26% compared to FY 2022’s second quarter; contracted homes were 2,333, down 19%.
• Backlog value was $8.4 billion at second quarter end, down 28% compared to FY 2022’s second quarter; homes in backlog were 7,574, down 36%.
• Home sales gross margin was 26.4%, compared to FY 2022’s second quarter home sales gross margin of 24.1%.
• Adjusted home sales gross margin, which excludes interest and inventory write-downs, was 28.3%, compared to FY 2022’s second quarter adjusted home sales gross margin of 26.1%.
• SG&A, as a percentage of home sales revenues, was 9.1%, compared to 11.1% in FY 2022’s second quarter.
• Income from operations was $425.7 million.
• Other income, income from unconsolidated entities, and gross margin from land sales and other was $0.9 million.
• The Company repurchased approximately 1.4 million shares at an average price of $58.14 per share for a total purchase price of approximately $83.8 million.

Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “We are very pleased with our second quarter results. As mortgage rates have stabilized and buyer confidence has improved, the increase in demand that began in January has continued through our second fiscal quarter and into the start of our third quarter. This improvement in demand, combined with our strategy of increasing our supply of spec homes into the spring selling season and our focus on operational efficiency, has resulted in second quarter performance that well exceeded our guidance.

“In our second quarter, we delivered 2,492 homes at an average price of approximately $1.0 million, generating home sales revenues of approximately $2.5 billion. We continued to benefit from cost reduction initiatives that have made our operations more efficient. We exceeded our adjusted gross margin guidance by 130 basis points and our SG&A expense, at 9.1% of home sales revenues, was 200 basis points lower than last year’s second quarter. As a result, we generated record second quarter net income of $320.2 million and earnings of $2.85 per share diluted, up 46% and 54%, respectively, compared to the second quarter of FY 2022. In light of these results and the healthier demand environment, we are raising our full year guidance for almost every metric.

“There continues to be a substantial shortage of homes for sale in the U.S., as housing starts have not kept up with population growth for at least the past 15 years. Now, the supply of homes for sale is being further limited by a historically tight resale market as homeowners are reluctant to give up their low-rate mortgages. We believe the resulting supply – demand imbalance will continue well into the future, adding to the long-term tailwinds that have supported the housing industry in recent years. These include favorable demographics, migration trends, and more flexible work arrangements.

“Importantly, with 71,300 lots owned or controlled, we continue to have sufficient land under control to increase community count in FY 2023 and beyond. Our financial position and liquidity remain very strong, and we expect to generate significant cash flow from operations in FY 2023. In the second quarter, we retired $400 million of senior notes, extended our term loan and revolving bank credit facilities out five years, repurchased $84 million of common stock and paid $23 million in dividends. At quarter end, our net debt to capital ratio was 23.5%. We expect to continue to invest in the growth of our business while reducing debt and returning cash to stockholders for years to come.”

Additional Information:

• The Company ended its FY 2023 second quarter with approximately $761.9 million in cash and cash equivalents, compared to $1.3 billion at FYE 2022 and $791.6 at FY 2023’s first quarter end. At FY 2023 second quarter end, the Company also had $1.8 billion available under its $1.9 billion revolving credit facility, which is scheduled to mature in February 2028.
• On March 9, 2023, the Company announced a 5% increase in its quarterly cash dividend from $0.20 to $0.21 per share. On April 21, 2023, the Company paid its quarterly dividend of $0.21 per share to shareholders of record at the close of business on April 6, 2023.
• Stockholders’ Equity at FY 2023 second quarter end was $6.4 billion, compared to $6.0 billion at FYE 2022.
• FY 2023’s second quarter-end book value per share was $58.67 per share, compared to $54.79 at FYE 2022.
• The Company ended its FY 2023 second quarter with a debt-to-capital ratio of 30.6%, compared to 34.1% at FY 2023’s first quarter end and 35.7% at FYE 2022. The Company ended FY 2023’s second quarter with a net debt-to-capital ratio⁽¹⁾ of 23.5%, compared to 27.5% at FY 2023’s first quarter end, and 23.4% at FYE 2022.
• The Company ended FY 2023’s second quarter with approximately 71,300 lots owned and optioned, compared to 71,300 one quarter earlier, and 85,800 one year earlier. Approximately 51% or 36,300, of these lots were owned, of which approximately 17,900 lots, including those in backlog, were substantially improved.
• In the second quarter of FY 2023, the Company spent approximately $227.0 million on land to purchase approximately 1,700 lots.
• The Company ended FY 2023’s second quarter with 350 selling communities, compared to 328 at FY 2023’s first quarter end and 328 at FY 2022’s second quarter end.
• The Company repurchased approximately 1.4 million shares of its common stock during the quarter at an average price of $58.14 per share for an aggregate purchase price of approximately $83.8 million.
• On February 14, 2023, the Company entered into a new $1.905 billion senior unsecured revolving credit facility that matures on February 14, 2028. In addition, the Company extended the maturity of $487.5 million of its $650 million term loan to February 14, 2028, with $60.9 million due on November 1, 2026 and the remaining $101.6 million due on November 1, 2025.
• On April 17, 2023, the Company repaid all $400.0 million of outstanding principal of its 4.375% senior notes due April 2023.

(1)   See “Reconciliation of Non-GAAP Measures” in the Company’s original declaration for more information on the calculation of the Company’s net debt-to-capital ratio.

For more information visit TollBrothers.com.

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