TOL - Earnings call transcript Q4 2017

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Operator

Good morning and welcome to the Toll Brothers Fourth Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Douglas Yearley, Chief Executive Officer. Please go ahead, sir.

Douglas Yearley

Chad. you, Thank you thank us. Welcome for and joining am Yearley, CEO. I Doug VP are Toll, me and of Financial Rick Sterling, Investor Chief Senior Chief Officer; Hartman, Treasurer; Mike Officer; Chief With Joe Officer; Finance Chairman; Mortgage Sicree, TBI Relations; Cooper, Marketing Chief President Bob and Kira Connor, President Gregg Executive Company. Ziegler, today Don Accounting VP and Salmon, Marty and Fred Snyder, Officer; of Planning COO; Senior

Revenues fourth units In of XX% has delivered $X.XX dollars segments; statement fourth and results. fourth and contracts in dollar to XXXX growth. per XXXX's dollars XXXX markets by statements I can $XXX.X of on fourth quarter, million and other and units This was fiscal income X,XXX Demand $XXX.X $X.XX contracts $XXX,XXX $XXX.X XXXX charge. our X,XXX net and revenues contracts of and Those fourth price $XXX,XXX, share based to to was XXXX's compared begin, in contract Fiscal consecutive highlighted to per diluted. average fourth you year-over-year XXXX's was end year-over-year to both growth net million. $XXX.X billion income total In consecutive year strong quarter call compared economy, price We X% by compared control was signed ask rtoll@tollbrothers.com. basically dollars XXXX homes grow of factors and on housing units seventh of fourth $XXX.X the $XXX,XXX year our Fiscal finished diluted of and our today's I years. read the or many net world are deliveries across quarter in in $X.XX rose or was fourth was quarter last about selling the The that fiscal annual quarter our of fiscal of pre-tax fourth year growth of highest million, the million signed warranty of or compared with million XXXX information and to the communities I fiscal fiscal quarter. XX% XXXX income was October net quarter. to homebuilding to release year fourth each quarter over XXth flat with share forward-looking demographic XX% year $X.XX XX totals. in remained e-mail year XX our on of year negative quarter. in in impacted contract We to intend higher Before by fiscal on all web quarter XXXX. caution to XX% of year in you on year's quarters. and year affect in our rose forward-looking X% The fourth average by count XXXX past website. $XXX,XXX our assumptions XXX questions events, the five that financial year on beyond fiscal many billion listening completed future could significantly community both, quarter fiscal units quarter units dollars compared this

particularly fiscal reaped share all strategy compared backlog XXXX, the XXXX, our $X.XX compared purchases was XXXX. price communities. of diversification XXXX's one XXXX, across and of builders $XXX,XXX in well homes land year Western growth. Boise California as California was this and and land, Acquisitions rewards our first increased dollars great in this units backlog in the note quality Seattle fiscal and timing our result of of up our should units for will of The In to quarter in XXXX's as strong of West. I in geographic XXXX's in fiscal growth that end fourth year-end in revenues with and quarter. great we there markets units year-end. billion However, revenue year about to XXXX, quarter. fourth great in backlog XX% fiscal California X,XXX dollars we the led significant with and region will the and XX% largest year homes due of contracts openings our per selling closings $XXX,XXX combined XX% locations XXX in to ago; in average in have in XX% West XX% in to earnings region were and

ongoing product from benefited We diversification strategy. our also

in In and active continued line continue millennial adult Toll have our apartment market, product introduced develop living living nationally, line our luxury we new move-up core focused city product to our success divisions. to addition Brothers are and expanding a

continues across apartment Our to expand and urban markets living suburban well corridor business nation, on from we have focused established to Metro the Washington D.C. the divisions Boston. in

Diego, teams Angeles, San Atlanta. Dallas have now Francisco, in Los growth on In focused San Phoenix, and addition, we

in harvest living completed Our development, construction, in grow beyond year XXXX, recently fiscal a We've the of the to $XX.X those brand; XX,XXX this year rental and approvals projects, division to begun business. pipeline of now fiscal of from units. we recapitalization income value In in the of the some and to over under expect income created those totals in XXXX continue into small stabilized to under Toll properties we portion through our million. value developed monetized resulting apartment a Brothers

formed year still high-rise living area, focus ventures Jersey XXXX, joint Our active Manhattan, and on primary towers over including New remains risk, with the we joint In financing. Brooklyn, Hoboken, investment, these return-on-equity, our will City we projected York increase $XXX its separate Manhattan division city ventures costs to City. and develop reduce two lower forming totaling attractive from our By our construction with million. new fiscal benefit high-rise

Street. have As and these XX XX East already additional and we deposits an at XXX two of contracts Street, XX today taken projects; XXnd Leonard

contracts compared increased year. [indiscernible] living to the wholly-owned last quarter our This city same quarter

City our residences. taken XXX well. As Since XX sell a Provost Grove decade, first Jersey community Street opening this XX-storey this in high-rise condo to Station, from continued a we block XX summer, have PATH Provost contain Street will the at Located agreements. high-rise Square,

let over me turn it Marty. to Now,

Marty Connor

Doug. Thanks,

I GAAP this their of that release. to Before please can the the during referenced measures comparable reconciliation quarter, today's today's a non-GAAP discussion note the be press address specifics of of measures found back in

expected in in coming revenues, fiscal heading our year product great and growth like in revenues, and balance share Our fiscal brand. of geographic and deliver was and XXXX income that XXXX's per These in dollar City fiscal on market, mix a projects diverse SG&A York had close $XX strong fourth New reason will units high in three represent quarter, XXXX. expectations. would primary the condo and benefit the landholdings, demographic instead our our for into delay out contracts, delivered million deliveries operating fiscal of our earnings that leverage below I reflect excellent point to to year plus year sheet units their price, year in QX average in revenues three slightly 'XX QX we

these of On three represent per share. earnings own, their approximately $X.XX units

than cancellations and north in remediation [ph] resulted took big anticipated. addition, longer and XX in In west I-joist XX swaps, and the the lot issues a the

end behind of all of the quarter. to is of As year we have expect us; and all With by third this remediated fiscal impacted be most week, issue units the XXXX's homes been joint and growth as as income our expect we backlog, from in as well strong per significant projected revenues contributions ventures other in lines XXXX. our earnings in fiscal as our year continued well share delivered

optioning utilizing land per lower more our year return to share increasing a repurchases, 'XX pursued initiatives XXXX. year XX% absorption; improve our to homes on the of adjusted upward improving to a to rate affection entered number community of forming XX.X including borrowings, fiscal return-on-equity XX.X%. have we're beginning full stockholders per year We joint risk goal three and that for capital homes ventures, mid-year with up We and [ph] variable and equity

We have year XX.X% return ultimately on of 'XX. equity the beginning at fiscal a end achieved

XXXX. during an 'XX improvements million $XX.XX. stock X.X fiscal of of price expect We shares We fiscal further year year purchased at average in

our flow; $XXX of the that balance City improve final initiatives we we bought our partners XX.X%. project closed year lowering our and two our fourth land net JVs at million sheet have projected fiscal we City all points X.X resulted in we paid Conversely, ago be in million control. total senior construction supply and The delivered buy projected lots, convertible, ventures reduced total an In cost joint repurchased two quarter, $X.X cap will did XX% lots on using significant it on $XXX billion at our while by years our million fiscal X.X was We million on we By XXX large of $XXX project cash in of out and investment the of of balance of notes $XX owned and additional with ourselves. $XXX option XX%. shares them living New only financing, projects combination is to our maintaining million in basis in York under to land the million. liquidity to of our million in in 'XX 'XX if increased units we with and of excess these spent by off years Based bought the sheet. deliveries Sutton these midpoint approximately retired projected have year's $XXX $XXX in maturity, debt to to interest compared

Let of $XXX,XXX, between the still with projects expected between This quarter in items; XXXX in associated to XX.X% $XXX,XXX margin price and 'XX guidance year be have and of a XX year fiscal overall points; X,XXX city by approximately fiscal will is will of gross year fiscal units market some in XX.X% and me is $XXX,XXX. basis fiscal conditions at New fiscal come certain in deliveries year noted to of midpoint two and buildings year XX.XX%; with points our margin in first Adjusted with previously turn below year X,XXX York from income we living first, contraction an to impact 'XX points. very certain of approximately in healthy the Reflecting City while XX a we delivered margin X,XXX in delivering basis for fiscal price a 'XX; between this margin XX.XX% primary deliveries an statement average average X,XXX 'XX full between and for price $XXX,XXX expect XX%. 'XX units 'XX.

communities expect XXXX as year some Second, to higher out. replacement we new are in selling XX.X% in sold in in or communities costs to slightly margin decline in land from are strong see a still California, those fiscal that than 'XX XX%

of balance business to homebuilding our the maintain expect We margin.

we XX.X% XXXX's For margin of gross based expect first on mix. quarter adjusted

revenues XXXX to quarter full year SG&A in XX% projected year the drop X.X% both, points X% of a interest expect percentage of first revenues. from cost full decline 'XX. sales and for fiscal full approximately We is of to to XXXX in of to basis year XX as

First to quarter quarter lower of of expensing of XX.X% compared percentage some and be SG&A revenues quarters subsequent as will immediate first compensation. a stock approximately reflective revenues

sales of in In While $XXX gains year double $XX.X we to full positions In entities between fiscal and other to of guide to year apartment income fiscal than XXXX, be with million certain prior XXXX lower of in Company's 'XX. be million. now $XXX have $XX year apartment reported years, portions sales income and expect ownership fiscal income XXXX's fiscal JV we approximately compared are total. fiscal just we we a year income from that million from year The is our pleased to midpoint, be more 'XX, from first expected fiscal than mentioned unconsolidated million outsized and 'XX that $XX projects would to year quarter. other million our

benefited a Our fiscal year XXXX release expiration. resulting statute rate reserve from million tax from $X a fourth quarter

a rate impact rate no X.X% QX year benefit approximately Our on be the approximately should a XX.X%. by taxation bottom Obviously, line changes would [ph]. stock corporate any contemplated from reform. new full tax XX% effective year rate accounting to reduce benefit. effective also deferred rate our drop our came for asset excess And driving an 'XX compensation in We liability, if XXXX the flipped A now be tax estimate QX tax the stock fiscal will for fiscal be year a has tax from positive current in at the the QX the to in to deductions one-time based tax XX.X%. for inactive price, accounting since assuming significant our to our thus rate create net corporate estimated

from approximately the quarter just buybacks roughly of average two shares. for our XX.X shares, securities. Lastly, XXX.X million weighted was our 'XX our shares, XX% million average estimate the is of convertible reflecting weighted down share We count fourth this share share a years XXX for million QX retirement and count ago

turn me it Bob. Now, over to let

Bob Toll

Marty. Thanks,

fiscal of low -- benefiting on the geographically entitled Meanwhile, market, stock our and and rates. from the market supply norms. constrained in are plays levels Realtors the new sites. indicates reported are market to in a well from income of with in we We supply strong customers solid decade. tailwinds our at new existing market of remains a our data of number attractive XXXX. small advantage home begin given are of demand, very of Census sales growth, Monday favor, total as and historic the homes below home already well-located Recently multi-year highest Bureau that This still diverse released pleased home new the and continuing Association with number last a the month's our There National mortgage the unemployment shortage upscale

XXth have for Brothers; a rental to seek Toll communities, the and row Philadelphia, we been better years apartment As the the new our markets market world's in buy Fortune family start from we Company, of millennials the This many a summer believe Magazine. out in rental past founding are the named builder Fortune as positioned a we at a Anniversary years boomers homebuilder XXX celebrated to most we we well of suburbs the three home admired become baby the by as are now move of local of growing second larger locations for homes and bigger active homes living and or as come. part

our very Our accomplishments we of to Brothers are the associates Toll to directly you. attributable and dedication diligence Thank whom are grateful.

let back Now, Doug. me to it turn

Douglas Yearley

Thank you, Bob. Thank you, Marty.

briefly on very Before tax we reform. me pending take let comment the questions,

and side, On will the as the corporate earnings by rate cash help corporate we our tax generation. the are it potential encouraged reduction in

they tax real coastal removal by being and offset stated tax regions, side, deductions. potential the estate of lower tax standard MID, a of lower doubling itemized reduction the buyers, AMC, potentially deduction, phase-out while may the of self-deduction the and we On to personal elimination in not helpful the the believe our pass-through in especially the rate, rates, be the of

haven't comes are our our to to homes. a seen believed always been behavior; our have change driven tax generally for buyers to we buy, We strong. tax buying that and The not in they reform buyer's of has be it issue looming continue when months continue sales

first week, the headlines the only past XXXX. Bill of have Senate the yet December highest With out this last had increased; coming week week sales for since our

it open let's Chad, So questions. to up

Operator

question [Operator go Wells Instructions] from The come Stephen East first of ahead. will Fargo. Please

Stephen East

a frankly, walked quarter tremendous question; the allocation other quite done have and all amount Marty Doug, which with you would tax year, Do think fourth impressive this switching my it in those you disappearing; alone. capital in just all was on reform. this quick gears think of first to on you follow-up pricing affect And markets? pretty affect do that through salt this a then would

can repeat to would did doing least put around Where maybe you look what What go? do? you your focus that, XXXX there? numbers So, beyond, like generally. were And as you and at you into some

Douglas Yearley

Steven, I'll -- and it Marty on Sure issue tax the over then your take turn ROE. to

they to and studied AMT, across the are or some the our as of continues in there tax activity which comes big homes. local is California, be proposed and know, passes reconciled. California in what removal you House close comes said that's elimination tax no not happen when rates, limited I'll comes You -- law; our pay is it state of that is there price taxes, buyer is on which is to with But as think itemized managers not great, driven current bill comes mentioned state typical law before, tax tell the exactly when obviously, higher and also tax now detail, pass-through the it lower phase-out growth. without sales potentially don't I states to it in New are job If very the are sun wash live to that's great it tax are deductibility because just eastern when where buyers with to be where California, things impacted shines, wash. in today will New a appears it's exactly out and of also the the I new buy. and reiterate Bills of rates. consider it's too we to Senate strong, at our salt lifestyle taxes our deductions We've early from hearing are because knowing not But future a to the reform a taxes or we Jersey Remember, to but again York, and sidelines the purchasing point the by a plays see waiting tax buyers most out state what and our reform in tremendous importantly, hottest market before where they California is exactly

so affluent, in tax will code there about buyers hard very the couple think our as months been impact and on by either very of don't House land the this And prices business past to is Senate I houses very are still out has and an good tax low, as the a are have or get any this changes California, of been headlines there over reform. in proposed our has supply entitled, very lot

Marty Connor

very team capital much put as we've you what entire of proud commentary; think allocation And management is for I accomplished pretty it, year. you respect this that Steven, to thank the with that

land flexibility we've the gone, first paths always repurchases, of and the to be I company continue will we option. of do dividend and we hope the so opportunities that we has at we and we're have I apartment our years, continue stock as grow complement at look to will and priority a on up one-year our with think to and company, opportunistic another we will future taking to as helps. opportunities, anniversary that opportunities but we look coming number been financial significant are a various so to down As things that well, going look

Stephen East

question. then And last does. Doug, That

you price And mentioned about lines, into some about XXX versus and the cancellations; along color growth more? around had Going you look run you the amount The a have up? there. run to coming points, California, catch coming XX% numbers ability huge hotter, was those know, talk little the sounds bit; all you didn't it's a orders, as could -- put some then gross cancellations if margin back just issue joist to you of could down up to is to XX%, 'XX the like the decision I it on fair basis but that from moving you

Douglas Yearley

is can-rate I'll Sure, one, increase the quicker it is The the agreements. that's answer in all, joist Weyerhaeuser. all almost issue, lost we that, The one. Flak XX easier

You margin XX% price. in to it's the raise be Steven, that the selling and really long minus. we can to course is the driven, this to right at resell very bright in gross our is With respect a what demand. that homes I homes. hidden it. know, Orange many in and year like the there, California evaluate and And of Weyerhaeuser trade-off the great how will are proud canyon will up market what to our those we we County bit having I we California is XX.X% the associated which price things and the recognize fully it's all-day long. call and quarter. with deliver have that it California proud a but through but we're said, continue homes compensate very market continue driven But plus are I'll the we fourth coming mix we terrific of delivered out between and call we well, our buyers to evaluate backlogs a and to have of bunch that that them different; little build for get know gross I'm so doing set take a out out spiked was regularly, costs us communities I reason homes future margin, continue margin or in for think selling there how and whole now California, last I'm continue different, and XX.X% pace, on by quickly a of of seen and see

Operator

question next Ratner come The go will of Zelman Associates. & Please from Alan ahead.

Alan Ratner

seen it's we your the on I can if start impacting I So at is how done is I discussion and point because expand about in driver follow-up margin that's reflected? option land the thing interesting option you piece you you're think land thought Thank guys coastal as that great that I bit of appreciate Marty you was think driving all about guys the a the you the hear lot higher? the the is, it higher job one One just as was to And didn't high far what a detail from have of guidance. very allowing 'XX that operate difficult you. I a been California, there how more the getting in number that think drive and to about impressive. a that market there you about curious and chatter I becoming land if how see that should in in what if curious lot to little should go? in industry your then, your we portfolio really option differential so margin you option has light -- of can the self-developed northeast; some was not number land just guys margins, asset XX% markets to on versus is

Marty Connor

to land. result to some of take time, it over seeing to And that in bit those to talk options to and going financing structured is more options. as structured find approval acquire going I the you it a always selective as want those the you And think Alan higher I And maybe to and a Sure. are to about think who and by to a And time is to work opposite buy piece opportunities to I getting we over going directions. return-on-equity. back you where of think is have generally trade-off buy where or combination well subject sell and the ourselves it approvals; I we improve it's or options us you buyer willing you whether before agree then the approval defer address options, identify ground thing cost although we're whole a margins it as of improve a in are and

If that purchase. value at the find of you direct land initial of through converse of enhancing as the options; on we're as a those approvals, non-approved create versus structured basis well and so margin a both be then would looking alternatives, types

Alan Ratner

than should margins? just two some and terms impact composition through we of a I those today; lower XX% get gradual can flowing of options the some kind expect And at cliff split of for the or you a in guess option more at between point deals from

Marty Connor

with directions, going and opposite to for we're of given leave guidance, that. both give going XXXX; to margin working I these at we're think the we've initiatives in it

Alan Ratner

Got okay. it,

Second one million, of I additional assume plus on if frees reform; $XXX to up the and tax it your current we do passed it we about could cash $XXX gets the Marty, if million guidance, probably Company. take

that would incremental curious was what I big on with if just any there views So do you cash? is picture

Marty Connor

of and or couple body million at there a we and on whether I I'm Right, $XX is in you to as now. quite 'XX $XXX happens it different 'XX that alternatives high Congress it do as depends not right but looking you're of think get depending which on million call sure

and put spoke be general on opportunities I the have any for that I land through of growth at priority will incremental the direction alternatives company then in particular as always we present and will the think cash we other than themselves. and don't about it that look question, coffers first Company to acquisitions; other the our

Operator

The with Morgan go Securities. next be ahead. from JP will Please question Michael [ph]

Unidentified Analyst

year-over-year if pieces kind of again, some it materials. morning, any highlighted; Mike. want Nubas -- the over I and the I Good see Congress for big much pricing raw margins guidance you're labor the back maybe like pretty gross you flat net I but is guess this of guess are costs, seeing, margin [ph] shifted -- of to of the or to going

So really on would helpful. color be any that

Douglas Yearley

Sure.

creep. that on mix out business feel also the the being X% and stated, Houston; a very houses little and market And it's our side that New made of increase we is than California towards market although the bit We not which take small, is it's out west but the so it's build less coast more the and than our offsetting that bit a do Florida which pressure the expensive very issue power some pretty for in same margin not out increase of markets, we've our coming when extent. margin our directly a infrastructure sales that of markets more cost our in as Marty City business; very hurricane, is gross I continue slowly. material equals to had but rest as of business. that. you highlight on on side the the than X% we've quickly of some taken more The very of in York less margin to quarter, pulled pricing coming are around more some same are of that much repair small trades past issue In and increases the have small unable had an power impact seen the cost that offsetting issue creeping -- cost of out labor, normal hurricane, a of homes country would flat it we by nothing suggests that we because in has longer with it's we the other driven or have recovered the some was sales; have it impacted cost the it's this been by Houston us, to to the pricing

Unidentified Analyst

I identifying, -- do really will too; one I of investments really think SG&A big helpful. SG&A? those the we've guess, of you're longer opportunities that's on improvement the some the guess increase given side talked about the you year next trajectory in solid past, term we the Okay, of expecting kind

Douglas Yearley

you're the beyond technological ongoing investments package; still referring upgrading to those likely. leisure our I think So relationship will customer the XXXX year, benefits those most our be management package our and general are of or

still reap a spend build and mode we're at rewards yet. in not So quite mode, the

Operator

John America Merrill The Bank question from Lovallo Please be ahead. next will with Lynch. of go

John Lovallo

my for questions. taking Thank you

count growth were first better is what expectation expecting. types or this? particularly X% are regions is we community The definitely on one Are even the of than driving which community there that XX% to

Marty Connor

we Sure. there for in Pennsylvania, openings the XX in in Southern in new Cal, X so have The opening in Reno, five XX X markets list. 'XX Cal; project and communities those to Northern lead community X -- Seattle,

John Lovallo

recently what change a that's it was guys and of transactions; And developer I you either Okay, then competitor. of a going of kind major are two have even way your transformative these think about land acquisition business strategy your mean thinking transactions the helpful. be the competitors acquisition -- executed, could the did potentially or of forward?

Douglas Yearley

new been always to acquisitions market. been although they've in the on in always Well, enter the opportunistic builder past smaller a acquisitions we've

in. to with balance those which provides with as But create closed we or of and with will we continue fund that a the land our With with back on just the us -- have land couple PIMCO the banking side could deal We many joint opportunities land a fund that to new we some $XXX feed evaluate interested we're a that already Gibraltar and builders, to is sheet to we markets of those or that the PIMCO focused to respect vehicle services give discussions million venture be are business, first on land Brothers, our also Toll an land. Toll great acquire efficiently ROE, off into company opportunity evaluating land fund continue. LAN

Operator

The ahead. RBC Markets. Robert next from comes question Please of go Capital Wetenhall

Robert Wetenhall

to Good you successful product and a congrats on see it's diversifying reaching and year, morning guys Doug; very geographically, targets. nice your diversifying

are about headroom do XX.X%. that were Maybe heels you're ROE of if ROE it's then of XX%, have victory, of in for about Where do can talking you guys drive big to then leverage what going you're your Marty, XXXX the think be or what go? a pulling? On primary thinking kind know, you number coming you to were the you XXXX, expectations, XX.X%, at you ahead higher

Marty Connor

we Bob, appreciate thanks your commentary, for it.

look of we lot basis harder can ROE, that subsequent we here in years; we're of internally of already, we to makes had year the going to year it forward. XX% high continued months that into kind we If an beyond goal well, set the next improvement. target, eye and chewed hinted what towards set really As know, do XX goal we XX points on it focused you equally a at to XXX subsequent recall, ago the with when a we to commit over as

looking of at think points, this I here XX the somewhere or we're in So neighborhood reform venture in year. formation absent tax significant to XX joint

while can balancing on focus we'll that, continue so improving and that ROE balance we Beyond to margin. gross the the Company structure sheet

Robert Wetenhall

the big laver -- [ph] just buybacks be what's that it be the of going what's to up [ph] multiple is combination where gets be And it things? to you laver is for see you going or there you; going or do to a

Marty Connor

call ventures, series could reduced the could events could be improved it could of it's with. at taxes; joint it of buybacks, And we that, look there be next could income, the think all course is initiatives a be months. XX a continuation over we the the it I beyond just of be it whole opened that

Robert Wetenhall

margin could you How is you into shifted California me; and about do it getting of XQ. great on frame California. I out a West and dollar, how XQ like margins wanted term that piece to are up basis; terms like of margins like in quarter we think extracting It business seems XX.X% longer that of awesome, think in Coast about does the higher three for seems of years the pretty ask next you're two to out we still where big should profitability? if projects go some the

Marty Connor

to I Thanks. you And Bob, that. margin give limit for the it pleased to we're think we're a next guidance to going year.

Robert Wetenhall

guys. Good, next Congratulations, year. problem luck no good

Operator

from And Credit question the next Susan McClary with will Suisse. be

Susan McClary

community there being in have relatively absorption with a improvement your seen guys even nice count You flat. pace the

think in through that? that next absorptions with the think we year, communities talk about about coming about can how you should As we moving growth

Douglas Yearley

I more we'll the it had than So, but that we're that's XX%. hope pretty will this quite increase unit happy we year, with dictate think next year, the something don't three sizeable see modestly. we up market goes

Susan McClary

product that that And of leverage you've is that than as you markets things learned the some had Select can the perhaps different you expected think been you of anything there with some can initially maybe we out maybe there the then, you thinking T to Okay. anniversary product; of into other about coming other you or areas almost or have weren't that's you to what and talk that up about? some launching

Douglas Yearley

more by name and to the very buyer we are country, Select our many exist Brothers mentioned focused It so a much we brand three by town in Philadelphia. albeit Jacksonville, line, T series who and an homes buyer; affluent as it Select are product that T driven is let's Toll example Arbor, etcetera. millennial. forget about on demographic to just is have call, extent, doing luxury the which that Florida [ph] for an is home; the an as homes Houston in buying affluent it's millennials a still as the well is millennial are of buyer is Boise that around affordable driven later homes I've the that Sure. extremely Ann leading to attract this and wealthier. think smaller edge in markets millennial But some the therefore market and Michigan moment selling

or you that, T for Toll branded is of edge just more communities is whether of of demographic leading and coming designed are that it us. So out Brothers whether it see will more branded it the that Select

one the they and think decorated new buy. see I opened thing to open before before and it we've buyer learned wants need have community the we the because walk is it that we models with product to

strategically of those communities to And models. and so a pre-sell opening trailer out to sales harder so it's -- we decorated will from be

that the one is probably thing forward, learned. number think Going we've I

Marty Connor

are the direct older we buyer. move to I other seeing somewhat slightly more from we think younger the we down expected is than one things as buyer, as that the much this of

Operator

will Partners. The question Megan come [ph] next MKM from with

Unidentified Analyst

living comments. a to just follow-up I wanted bit little your on city

in mentioned, you you high a little sort bit what of of in you end; on beginning we at Are at seeing shifted very some few months a steady it the talking but deteriorated? or the market maybe were have of just what Has versus the a months seeing As about ago. sort weaker been you're conditions it all? of wanted the six year Has follow-up that versus at ago? to

Douglas Yearley

over over York if actually had foot going in the both Tribeca. mentioned, -- It's it a with month, if a you're Jersey going I crush City, in a $XXX $X,XXX at Street is as Hoboken you're continued which have that we City. foot we and are. City at new do pleased our year darn the you're to in Leonard steady we and sales pretty end in good location, locations. now and And And we're at to in $X,XXX with to of October And very -- last last we're you're well, down Jersey pleased we've New our the learned what in opening

and feeling that think on based the buildings I to good those I'm right well just positioned So you. market mentioned really we're I now about

Unidentified Analyst

count cancellations about in of also year-over-year issue make you. to that then, saw as well? just sure thing in decline know north; that you the thank sort due in a and decent just closings Great, I the I-joist was I-joist the And [ph] community talked issue you a or wanted a obviously decline was the to quick follow-up.

Douglas Yearley

Yes, coming was a I-joist North. and both, of declining the it count the community out

Operator

ahead. Please Bank. be Nishu from will question next The Sood with go Deutsche

Nishu Sood

the to a 'XX. -- you've think XX is just bit basis into basis that to from little broke to better. Thank gross to you. little points, come the going wanted for just dig understand margin California on the erosion; XX math out that living. the decline I the bit city I so Of I points, it's remainder going be wanted by The ask driven a

seems of about California the at in the me that of margins with even in It imply so could I there Your of California pace is XX please. company; as the kind help some be so to sales California as erosion pace XX gross still pace is order effect. might a would have that been even thought positive you if that high going not reconcile have pace; to rest closing

Douglas Yearley

couple math we've precise chosen I think get a and you've different trying into to done categorize more reasons. a then bit to

guess I math. would So, doubt don't I say your

Nishu Sood

about as in been on an that just that coming Okay, adult; at think -- there I about last ask growth ability all And right. that Obviously, that a year second, What of growth you wanted years? upto did since closing. tremendous you've XX% come still this I could to priority. active of been year growth in great the you're division, talking and go the in talking has where

Douglas Yearley

second one together. Hold the numbers Greg pulls as on

it's projected our living, active to XXXX of with over XX So for is and business 'XX and units be XX% which about XX%.

Marty Connor

find in 'XX. locations and we and But land a is in significant product. number that controlled markets we where looking have have that offered are through that product for we where come to land don't will communities there number a are of of And significant the

So this and that is the on the control we appetite. of deals the a based growth land business we're that playing some and with,

Operator

will with The from be next Kim Steven Evercore ISI. question

Trey Morrish

slower actually looking for little to do shift you on the for faster, It's guys into respect Trey little what think your total how Steve. dollar expecting more And about the in to land, bit the in grow With you're thinking going you keep spent was XXXX? to think given how you're or is to development? bit land to up growth continue revenue with are that [ph] Do you it you options? acquisition can -- going linesman about quarter

Douglas Yearley

then into million approximately for gets the of you cost cost $XXX million Yes, and an QX was spend $XXX improvement million some soft $XXX 'XX land another and quarter.

Marty Connor

respect with we're land 'XX opportunistic. And to spend,

'XX. appetite, we need in land the will good the with that spend to as on spend presented am as the increase growing that but will with We say would much and our us deals I hopeful I are company

Trey Morrish

but have other gone you of city newbuildings over successful out has to development how months? then down here I for past living area the turning and the bit; for types prospecting a then, quite And been in cities X-X new know Greater continued guys Manhattan to the Maryland, in

Marty Connor

Philadelphia control So we the have living we continuing on. in are launch San through plus negotiating we're to on excited a two Boston, look D.C., market. opportunity right Francisco, L.A. property properties that Seattle, that entitlements now we that pretty We're second control the and Washington in to L.A. city have in going cool in Greater Philadelphia; we Miami, the we're

to and geographically spread. hopeful that city bigger more living I So continue be be will the brand be

Douglas Yearley

on to term follow get through. we control control; So just approvals means have get poised through or diligence to still to often that

just we're necessarily So because we doesn't mean to execute control it going it. on

Operator

Barclays. ahead. Our next [ph] go Mike question be will with Please from

Unidentified Analyst

the you have land in of will higher land especially existing or markets, more returns do really I had think builders cash if for land harvest lower; purchasing that just fundamentally corporate more a philosophically, you that more you think reform question permanently potentially affects rate how about into working think prices? and and out you that effectively tax some decisions? going business you Do think surround the do constrained

Marty Connor

are see Mike, a do different to not a as how to diluting margins. but only land, out, not an sophisticated tax we to reform we're lucky land certainly making have more or the sellers we'll seller opportunity of we we're or reduce talking get -- are process running a for sometimes of we're competitive to environment to cases, in buyers competitive approaching buying a margins. it and talking pay plays subject ones we course that how It's sure market, number most and dictates

Douglas Yearley

I prices to think a improved housing those lead more and the growth, and will to go is tax whenever reducing factors jobs are -- rates together, seem plus up theory economy; better that position. builders more the come in the

Unidentified Analyst

but you rest project is know decision I out yourselves? on to about decision sheet the the balance relatively Secondly, just that site can finish driving this a small what a and -- was to talk of the the just

Douglas Yearley

and as is building risk, three we sold the looked built get risk, we and risk, the a IRR there gross are most for said and took joint we is the on for out risks pretty partner sheets. delivered, it us developing of think we margin we it's because cashed and and of because venture good and there equity reasons improve there good risk; it's on there those construction the their return I to got marketing important got and some is at quarters strategically a off put execution table is just their balance

at outset. it in was it of a win-win So we a timeframe a then the at looked cycle as the different or piece development

Unidentified Analyst

could or an could close at it. been one give Okay, backlog in actually if those think potentially have of of in units, units three quick sold yet; expected on sneak we been those were are to are I project. all should that Marty you I one, just got about one XQ, timing three those is And the think update and you haven't they My they how was there? concentrated us are mentioned understanding there sold two

Douglas Yearley

we're three expected at It's different settle said of he's first all here that since Company are and And see two end have down. looking in to isn't to all many been week And and quarter. units projects sold. this requirement too who up three our the and not

Operator

Buckingham from Research. with The go Please next Weintraub question be ahead. Mark will

Mark Weintraub

how deliveries for your a Just also couple lots? it of optioned a from was, came get would of much owned follow-ups. versus 'XX, One breakdown fiscal

Douglas Yearley

time the the we own on begin it. we Well, lot by construction

an we it control period us if to in answer so contract, that's lot we it really once a so put want haven't manner expired, us diligence you point some So have in hasn't challenging even under because the we it at the closed it; diligence, we option to. everything's question for on and

Mark Weintraub

the you at is Kind have of -- with I'm to sort of went a been the that sense relevant of ownership XX:XX get times? that where the type trying indicative lots of XX:XX, is direction; underlying of of just more the that to XX:XX from maybe

Douglas Yearley

say just to going know. don't we I'm

hazard a So I over estimate don't want guess. to an

Mark Weintraub

still guidance pass? that other included in for that to that interest second if that Hotel and Bridge come 'XX And just income; to were upside or Brooklyn is on provide that JV the Park, Sure. the then I something the got in is know in could you've

Douglas Yearley

is There of level moderate transaction a not gain. but operating income a

Mark Weintraub

mentioned it you've while development opportunities kind look is or an on to on, for that to something beginning great. you're is just Okay, at you've been create land sheet is lastly, with going then more. more off-balance that that that doing you've recent what's you're How you've that And investments. to now evaluating -- of been focused started a possibility

Douglas Yearley

and considered I transactions given more for of but think that the the -- -- industry had to I'll we at something but always fight a us have couple that it our as think interest type something interest mentioned recent say looked decades in be it we've get has as earlier our able may done. structure and optimism of rates I we've

Operator

Please The next question SIG. ahead. Micenko with is from go Jack

Jack Micenko

I'm on of curious laggards the relative pricing And push percentage communities what frame in on? you regional some then, and if side? were maybe out the maybe to quarter able you leaders price

Douglas Yearley

pricing Michigan, markets for getting or and Cal, the While us, most power. list the Reno, Southern Greg is specifics; Boise Seattle, Northern Orlando California, the are had had has nice west. smaller would pricing the power, that power believe round it not We've most pricing in out out of leaders

Jack Micenko

I business for prospects a was in get we to big that sale? strategic? more or he row guys I'll and about I another How student think while but want light know -- housing understand financial then decision you was more not looking, that a tariff follow-up. the of that And it's is of overall; do in more -- that

Douglas Yearley

after price it. of I ever XX% that process go Our we mind property who ran that We in and we we sell believe in and had partner hit sort highest inclined number was got had the stabilization. We if beat student property. a equity a of for housing it, a to the full

that of well, be one. happy very housing and bad very which some all of a X,XXX or And means that apartments was and income along, student will that it very performing we've was one as one return was behind one that's And whether was some stabilization. a -- good So out at sold great story I XX.X% partner. think be X,XXX was and that to occupied will long-term market taken. Toll not -- be held the said they And the

Marty Connor

gain strategy the a So for portion a projected for sell first apartment interest, our business XXXX other. and sometimes on and quarter of same. it's the in be If our mentality million percent we've that our guidance we'll a interest built that given probably sometimes the we've business -- is of JV that quarter so sell three, the remains one will $XX and we've you first

Operator

comes with [ph] KBW. question Jade Ramani next The from

Unidentified Analyst

terms I the further amount opportunity efficiency, is you wondering construction In of integrated of did? to increase guys offsite work an was there already

Douglas Yearley

four panel the the have the northeast, entrust Midwest. we serve plants that So Mid-Atlantic, and

the time. industry is of overtime, sophisticated we is few and much robotics a home today providers a may all -- certainly that don't plants builders come that the much that Transportation anything long more produced the of some talking than companies start-up the a haven't of those new are as our We've game frankly, other better We are, we've with four that evaluating seen are that's it yet in of see and all to for met offsite. a industry we appear changer; of day had and the or make parts and truck, figure time that are today. you're to big local going out it's we'll to to certainly more work; an and highways. take experimenting And because interesting time roads there some very little moving be think of it's so on houses one or not computers moving deal in industry be to for our it the changed more trying and top moment, it I a tech but and refrigerators but you're on companies because on not how has more

Unidentified Analyst

city of from contributions In and you Gibraltar ventures of the -- comes land other other whether of living be income, what the what what it the quantify amount terms are? joint JV could proportion or

Douglas Yearley

my build you apartment head. $X overhead top roughly I of million have out consisting $XX on million the we have and that $XX is don't business of the Greg, of of or as gains million of I it the transactions know $X For business. million the rest XXXX, off do

$XX and count deposits as retained income. for of of close the the was and and a routine that next that going business We internal to components Pure replacing JV. million year was just with year. how million nearly management actually -- subsidiaries. from Project, have -- of was sheet; pretty much And double we customer other, title can kind grow on will grow And our peer to then, business vast And that a $XX the insurance of to million I'm I million. $XX.X before the is way income are some which we $XX lot we well this, of biggest [ph] those made the other, But that $X run last project, the from -- and just pretty was house then joint our kind other the for a which title cancellations; so the and the sorry, apartment majority sudden -- income was healthy Davy on the associated ventures on million and $XX million on it Jupiter $X.X rate the said of sudden another $X you set House business, of balance was should good insurance and year is is the around we're sizable other our at million, of put of fees million, come

Unidentified Analyst

in du of do to terms think? York City for anticipate or in XXXX the supply And peak XXXX New when into deliveries peak dynamics, you market

Douglas Yearley

have we I right Well, control and projects that find all we now. think have new under depends whether that do we a couple on

Operator

question be Please Key from next will The of go Banc. Zener ahead. Ken

Ken Zener

guidance on cost in it that? Thank a question cost talk on and seems bit with staying the can going where your So have communities because it you variable [indiscernible], is. quite you. it is you your is, expand if SG&A same XX% that's your is like your Can fixed if up I to

Douglas Yearley

a sorry, going what a there, bit in go to flat terms to G&A of going be you go sales growth. up in fine, of technology dividends are is in component see team continue and bit investments to the I the G&A that think homes percentage -- going this model to is right. of in up, pay make But as revenue line I our continue earlier investment terms whereas think is to sales overall I'm for we initiatives. saying Gregg? we And our our line we our absolute mentioned a Fine, in in our top

Operator

question next will The Will Citi. Please ahead. be from Randow with go

Will Randow

bit hear points, So was love I was bridge to as a hoping XXXX. nearly strong gap I'd on surprised or bit secondly, time that data your about [ph] different were XXXX; two feel fiscal first saw rate Conversely for lower a obviously last basis. today. in expectations was cancellation quarter this and on the next your first specifically demand three the year of kind between And bump absorptions of you pretax are up as margin

grade Bob your used points, guess letter three as well do? bridge between the give help gap of as for those as I each So markets you data out can me to

Marty Connor

we I rate fiscal we fourth the that think mentioned attributable I-joist of of impacted on XXX quarter. roughly entirely the cancellations the cancellation where issue the happened had in XX% is all them, homes to earlier

In as that, we sales. and as to we new those swap addition buyers cancellations those had XX didn't lots, count didn't count we

we've markets. maybe some some the make of Doug on and the the letter think grades stay we'll to from I wants gotten from but away away letter grades, comments healthier

Douglas Yearley

letter you Colorado. There Without right snow the grades, I can no give now in As. Sure. is

and was at of mentioned leads some it's the to it this one call of York Virginia, back And letting we've City over the excess very living, clicking strong; into higher New a hot; putting take in bid we're openings market bid, because mentioned it slow Northern Northern recover Seattle, Southern Jersey absorptions, actually Seattle Cal, New -- very Cal, on our hotter recommended and and sealed now I the actually our a buyers Company Vegas, hot; price in broken Jersey the sheet. Top Reno, Five. submit come with new is Las price markets; houses on our of strong; has City. on than very very

So few done I Colorado well, very well, has well. Pennsylvania done add more; Michigan a has could has very very done

more, that handful or nice highlighted doing So markets are a some there is A-level work.

Will Randow

reduce And of or couple you are debt outstanding next the lastly, with years okay a carve in real $X over you the the I do guess, you to over have outs reform amount estate? plan tax skin notional for current also outstanding can little of billion? And

Marty Connor

in have with Right or debt debt, we ratio weighted our of room lots think pretty Will? with where us gives don't interest and that weighted any average debt debt evaluate when and rate, our enjoy now. XX% rates was variable plans and particular right long-term to matures. the of are things now What mix question, maturity we're cap so, I So net XX.X% those our respect happy last average we'll to we

Will Randow

terms real to of in reform. estate In your outs regards for carve tax

Marty Connor

So go pretax room as the of the up we -- to out look at of can deducted your quite only bump we of against pretax income; have XX% carve our interest XX% be before bit interest we of income. as a of a of percentage

with So comfortable that. we're

Operator

Doug and remarks. Yearley this Ladies question-and-answer to back I for the would session. over gentlemen, any conference like closing to our concludes turn

Douglas Yearley

for see the holiday season, and we'll Thank you your Have everyone and in in you, support. a Thanks wonderful New for Chad. listening Year.

Operator

you today's now The Thank concluded. attending conference presentation. for has

may disconnect. You now

Toll Brothers (TOL) 5 Dec 172017 Q4 Earnings call transcript