Toll Brothers Reports Record FY 2023 Results

Toll Brothers, Inc. (TollBrothers.com), the nation’s leading builder of luxury homes, announced results for its fourth quarter and full year ended October 31, 2023.

FY 2023’s Fourth Quarter Financial Highlights (Compared to FY 2022’s Fourth Quarter)

• Net income and earnings per share were $445.5 million and $4.11 per share diluted, compared to net income of $640.5 million and $5.63 per share diluted in FY 2022’s fourth quarter. Net income in FY 2022’s fourth quarter included an approximate $103 million net after-tax benefit related to a litigation settlement.
• Pre-tax income was $605.0 million, compared to $841.1 million in FY 2022’s fourth quarter.
• Home sales revenues were $2.95 billion, down 18% compared to FY 2022’s fourth quarter; delivered homes were 2,755, down 27%.
• Net signed contract value was $2.01 billion, up 53% compared to FY 2022’s fourth quarter; contracted homes were 2,038, up 72%.
• Backlog value was $6.95 billion at fourth quarter end, down 22% compared to FY 2022’s fourth quarter; homes in backlog were 6,578, down 19%.
• Home sales gross margin was 27.5%, compared to FY 2022’s fourth quarter home sales gross margin of 26.9%.
• Adjusted home sales gross margin, which excludes interest and inventory write-downs, was 29.1%, compared to FY 2022’s fourth quarter adjusted home sales gross margin of 29.0%.
• SG&A, as a percentage of home sales revenues, was 8.2%, compared to 7.7% in FY 2022’s fourth quarter.
• Income from operations was $558.6 million.
• Other income, income from unconsolidated entities, and gross margin from land sales and other was $36.0 million.
• The Company repurchased approximately 4.3 million shares at an average price of $75.70 per share for a total amount of approximately $325.5 million.

Full FY 2023 Financial Highlights (Compared to Full FY 2022)

• Net income was $1.37 billion, and earnings per share were $12.36 diluted, compared to net income of $1.29 billion and $10.90 per share diluted in FY 2022.
• Pre-tax income was $1.84 billion, compared to $1.70 billion in FY 2022.
• Home sales revenues were $9.87 billion, up 2% compared to FY 2022; delivered homes were 9,597, down 9%.
• Net signed contract value was $7.91 billion, down 13% compared to FY 2022; contracted homes were 8,077, down 2%.
• Home sales gross margin was 26.9%, compared to FY 2022’s home sales gross margin of 25.5%.
• Adjusted home sales gross margin, which excludes interest and inventory write-downs, was 28.7%, compared to FY 2022’s adjusted home sales gross margin of 27.5%.
• SG&A, as a percentage of home sales revenues, was 9.2%, compared to 10.1% in FY 2022.
• Income from operations was $1.72 billion.
• Other income, income from unconsolidated entities, and gross margin from land sales and other was $93.1 million.
• The Company repurchased approximately 7.9 million shares at an average price of $72.00 per share for a total purchase price of approximately $565.9 million.

Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “Fiscal 2023 was exceptional for Toll Brothers, as we delivered another year of record results. We generated $9.9 billion of home sales revenues and increased earnings per share by 13% to $12.36 – driven by a 120-basis point increase in adjusted gross margin to 28.7% and a 90-basis point decrease in SG&A expense to 9.2%. Our fourth quarter results were equally strong. We delivered 2,755 homes and $2.95 billion in home sales revenues – $211 million above the midpoint of our guidance. Our adjusted gross margin in the quarter was 29.1% and our SG&A margin was 8.2%, both of which beat guidance by 60 basis points, and we earned $4.11 per diluted share. At year end, our book value per share was $65.49 and we generated a return on beginning equity of 22.8% for the year. Our business is operating at a very high level, and I thank the entire Toll Brothers team for their contributions to our strong performance.

“We have continued to see solid demand through our fourth quarter, as we signed 2,038 net contracts at an average price of $989,000. Contracts were up 72% in units compared to last year’s fourth quarter and down 11% in average price, reflecting our strategic shift in mix. Based on our non-binding deposit activity through the first five weeks of our first quarter, demand remains solid and consistent with normal seasonality.

“As we approach the start of the spring selling season in January, we are encouraged by the recent 75 basis point drop in mortgage rates. With resale inventories at historic lows, buyers continue to be drawn to new homes, and we expect lower rates with lower inflation to add to this already solid demand. Our strategy of broadening our home offerings to include lower price points, coupled with our focus on increasing our supply of spec homes and growing our community count, has positioned us well for this market. At the end of fiscal 2023, we were operating from 370 communities, up from 348 at year-end 2022. We plan to further increase community count by approximately 10% in fiscal 2024.

“Over the long-term, the outlook for the new home market remains bright, supported by favorable demographics, the supply-demand imbalance that has resulted from over a decade of underproduction, and the aging of the country’s existing housing stock. With our industry-leading luxury brand, Toll Brothers is well positioned to capitalize on these trends. Our strong balance sheet, low leverage, and ample liquidity, including significant projected cash flows from operations in fiscal 2024, should allow us to continue investing in our business while returning cash to shareholders well into the future.”

Additional Information

• The Company ended its FY 2023 fourth quarter with approximately $1.30 billion in cash and cash equivalents, compared to $1.35 billion at FYE 2022 and $1.03 billion at FY 2023’s third quarter end. At FY 2023 fourth quarter end, the Company also had $1.79 billion available under its $1.91 billion revolving credit facility, which is scheduled to mature in February 2028.
• On October 20, 2023, the Company paid its quarterly dividend of $0.21 per share to shareholders of record at the close of business on October 6, 2023.
• Stockholders’ Equity at FY 2023 fourth quarter end was $6.80 billion, compared to $6.01 billion at FYE 2022.
• FY 2023’s fourth quarter-end book value per share was $65.49 per share, compared to $54.79 at FYE 2022.
• The Company ended its FY 2023 fourth quarter with a debt-to-capital ratio of 29.6%, compared to 29.7% at FY 2023’s third quarter end and 35.7% at FYE 2022. The Company ended FY 2023’s fourth quarter with a net debt-to-capital ratio⁽¹⁾ of 17.7%, compared to 20.5% at FY 2023’s third quarter end, and 23.4% at FYE 2022.
• The Company ended FY 2023’s fourth quarter with approximately 70,700 lots owned and optioned, compared to 70,200 one quarter earlier, and 76,000 one year earlier. Approximately 51% or 35,900, of these lots were owned, of which approximately 17,100 lots, including those in backlog, were substantially improved.
• In the fourth quarter of FY 2023, the Company spent approximately $430.9 million on land to purchase approximately 3,352 lots.
• The Company ended FY 2023’s fourth quarter with 370 selling communities, compared to 345 at FY 2023’s third quarter end and 348 at FY 2022’s fourth quarter end.

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

For the full fourth quarter results click here.

About Toll Brothers

Toll Brothers, Inc., a Fortune 500 Company, is the nation’s leading builder of luxury homes. The Company was founded 56 years ago in 1967 and became a public company in 1986. Its common stock is listed on the New York Stock Exchange under the symbol “TOL.” The Company serves first-time, move-up, empty-nester, active-adult, and second-home buyers, as well as urban and suburban renters. Toll Brothers builds in over 60 markets in 24 states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, and Washington, as well as in the District of Columbia. The Company operates its own architectural, engineering, mortgage, title, land development, insurance, smart home technology, and landscape subsidiaries. The Company also develops master-planned and golf course communities as well as operates its own lumber distribution, house component assembly, and manufacturing operations. Toll Brothers was named the #1 Home Builder in Fortune magazine’s 2023 survey of the World’s Most Admired Companies®, the eighth year it has been so honored. Toll Brothers has also been named Builder of the Year by Builder magazine and is the first two-time recipient of Builder of the Year from Professional Builder magazine. For more information visit TollBrothers.com. Toll Brothers discloses information about its business and financial performance and other matters, and provides links to its securities filings, notices of investor events, and earnings and other news releases, on the Investor Relations section of its website (investors.TollBrothers.com).

Source: Toll Brothers, Inc.