Toll Brothers (TOL) 27 Feb 192019 Q1 Earnings call transcript

Company Profile

Participants

Douglas Yearley	Chairman and Chief Executive Officer
Martin Connor	Chief Financial Officer
Nishu Sood	Deutsche Bank Securities Inc.
Stephen Kim	Evercore ISI
Stephen East	Wells Fargo Securities
Alan Ratner	Zelman & Associates LLC
Michael Rehaut	J.P. Morgan Securities
John Lovallo	Bank of America Merrill Lynch
Susan Maklari	Credit Suisse
Mike Dahl	RBC Capital Markets
Kenneth Zener	Keybanc Capital Markets Inc.
Matthew Bouley	Barclays plc
Scott Schrier	Citigroup Inc.
Jade Rahmani	Keefe, Bruyette & Woods, Inc.
Jay McCanless	Wedbush Securities Inc.
Megan McGrath	The Buckingham Research Group
Buck Horne	Raymond James Financial Services Inc.
Carl Reichardt	BTIG, LLC

Call transcript

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Operator

Good day and welcome to the Toll Brothers Inc.

First Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to Chief conference Executive like Yearley, to now and Chairman Officer. would turn over the Doug I Please go ahead.

Douglas Yearley

Salmon, With Treasurer; Bob Thank Sterling, Relations; you, President, Cooper, Doug Ziegler, CEO. Senior I'm Gregg for COO; Chief joining today and Nicole. Welcome Mortgage Financial VP Company. President Finance Senior and Marketing Yearley, thank Marty Connor, VP of Chairman Officer; Officer; Rick of Chairman TBI Kira Emeritus; Toll, you Don Chief us. me and Hartman, are Fred and Investor and

housing Fiscal Before future statement on I other many I yesterday's results. on read forward-looking economy, affect begin, I our and beyond statements could ask factors events, significantly assumptions website. strong call this you Those basis release $X.XX, year financial the that in first raising on to and the on markets, quarter e-mail to web first XXXX's revenue increasing XX gross quarter to caution home our on of many ago. the based in year X and was forward-looking share compared that year XXXX's listening control pre-tax are you information per XX% over sales were highest DYearley@TollBrothers.com. about and world margin results a pre-tax Home decade. income earnings sales improving the questions points QX XX%. can Fiscal earnings with

in California's drop first fiscal and contracts XX% difficult in up dramatic that quarter. began fiscal XX% and difficult dollars XX% XX% XXXX's first in in in quarter second down units. comparison this down and in were Contracts of comparison. a year-over-year with a the XXXX's slowdown contracts were the the decline units XXXX. attribute of quarter half to was year first XX% against industry-wide up Our in dollars We XX%

XXXX due robust year closely communities. was and and some this year softening tracked to quarter. community on to lifecycle more certain XXXX a healthy Company-wide attributable quarter, then still which of to fiscal basis, more first were and contracts the fiscal mix market quite the XXXX's of first per was Some to

Although encouraged decreased weeks each progressed. but last as contracts, one in February we for three during our year, data, exceeded past especially are first of of are of the positive recently market quarter decline by year. week, quarter, is generally Non-binding remains behind is an improving we increased experienced a tight. month factors week important This weeks enjoyed year. the last the the reservation and customers the in year-over-year worth have economy only trend deposits, and are of first supply stock the Nationally, deposits same housing healthy, our sales unemployment demand decline the the is week's week. but by Many year's in to historically from it all month Mortgage biggest homebuilding their low homes. sector. benefited still levels their one the decreased of strong of and potential rates These existing a equity a have lowest for is which

strategy first with Metro in geographic spring. Portland, markets the into evaluate our announced our footprint. lines approach. land of best strategy Oregon builder we continue recently our the diversifying and land open market, to We to position, acquisitions Lake unique we City, We land, weekly intend each the evaluate attractive this always as and sales community markets on focus balance our our planned our we and the in been balance communities continue to new markets, both Given acquire attractive upscale With price. our pace most to home has locations. our Utah this to product Salt strong sheet, balanced pursue carefully and With entry

as excited West. expansion in markets these the they our We continued about represent are

have to joint new year cost communities Brothers' of XX% fiscal In and announced Total a the will Westchester the three loans grow. million we about land be luxury get increase $X.X homebuilding Dallas. a project gain standalone development up. we transaction. million communities New even of to various and York, $XXX total develop recognized for three apartment recognized continues business Square, our XX,XXX and from X,XXX into promotes In great and develop gain of better $XX platform apartment suburb as the to Atlanta We generally use of returns apartment million. We first we This sale Toll joint currently Frisco multi-family ventures to on over units of business Our to and in lease XXXX's occasion such in may build about business. construction for-sale investment fees our is upfront cost, serves at communities about stages venture. units. complement about we on our QX, across three with an is a partners, Because a quarter, or

again associates, proud this magazine so quarter Admired Company. World's variety we Home recognitions Toll we believe communities, Most is team and named are been well by who thank our brand, as consecutive Fortune This the of Brothers tremendous possible. honored. once fifth strong With positioned. We of wide these the the brand, our we were make of Building year We well-located we tremendous have land, are

to it let Now, over turn Marty. me

Martin Connor

Doug. Thanks,

today's for back measures reconciliation quarter, that of the a Before exceeded the referenced non-GAAP We I in their expectations our of be to want this of can quarter. I during the yesterday's do measures this found release. comparable to discussion earnings address note the specifics GAAP

rose margin XXXX's SG&A which SG&A a primarily Interest increased sales revenues, basis margin at mix. million. XX.X%, had driven first QX improved year-ago. XX of points revenue Our compared income better improvement year-ago, year operations year and increase to control. X.X% was XXX quarter, Impairments points home home fiscal a basis cost of modest pre-tax XX first a than solid we XXXX's of and sales quarter. reflects sales $X.X gross The an cost over to favorable in by In sale revenue expense margin is Home fiscal points basis down on remained good XX% of came XX%.

and on ratio year $X.X focused more - We During gross than to the a long-dated year sale gain a low fiscal both quarter, land a ended into just we end. that fiscal maturity And XX.X% disposition the of leverage gain venture on with XX%, $X.X net quarter an we profile. XX.X% gold mentioned. on compared and million course. cash We credit of billion $XX maintaining our recognized to at the remain facilities joint liquidity, of We net on great a XX.X% Doug balance debt-to-capital apartment of million had ratio and with had quarter first of XXXX's also an and conservative debt-to-capital end. basis a at first XXXX's available quarter untapped sheet

debt maturity years. average weighted is Our X.X

Our and we interest is $XXX average the rate have million XX only months. due weighted of X.XX% maturities next in

our share fiscal it's quarter. was quarter first ever, $XX.XX, highest per at from value XXXX's up $XX.XX last end year book Our and

acquisitions, our invest We our are or well positioned further in company to repurchases. to to share through take to advantage opportunities reduce of debt make land

XXXX. Here our is forward-looking the of for guidance second income statement quarter

We between delivered with units an - expect and of $XXX,XXX which X,XXX of deliveries and $XXX,XXX. price an average X,XXX between

quarter revenues home gross margin approximately of of and adjusted home XX.X%. second of sale sales percentage sales of expect SG&A home revenues XX.X% as a We approximately

of other $XX approximately gross expect unconsolidated entities, income million We and in from income, land profit total. sales

XX.X%. the rate of tax approximately expect We

a ago end. that community XXX growth first the pleased from And community our are the count has we grown year to count at XXX through of the expect We year. quarter modest balance

count approximately share and for the Lastly, interest to to our weighted quarter we sales average XXX be expect of X.X% expense be approximately to shares. cost second million

to Doug. back me Now, it let turn

Douglas Yearley

Marty. open Thank And, it up you, Nicole, to questions. let's

Operator

Thank you.

We Please ahead. question-and-answer session. Sood will now Instructions] the comes Our Nishu first begin from Deutsche of [Operator Bank. go question

Nishu Sood

at wanted just also, mentioned year-over-year that ask lessened numbers understand potentially decline the where just those, month. you improved - might first And Thank by as February, Can about you're the went those pace, give if quarter be the us non-binding then, to in you. we to well. the reservations some around you on month as currently? looking I

Douglas Yearley

specifics we're numbers. mentioned for thanks I'm we we off certainly giving of But but a flavor. Nishu, get get some that give years month-to-month we to question. numbers few the would into were sorry, not ago to the going week-to-week, the going

So are I month And are three of each by this encouraged for which past after we year. it exceeded ago, explained decrease the behind lessened. February, The which while week, is quarter. accurately, last think weeks, we we've a year

Nishu Sood

talking quite that a volatility, buyer Got how given bit it. your Maybe about? covered been decline affected rate way thinking period February thoughts about has rates it have in your about the quarter of a talk as that and movement there's perhaps lessening where the in your well about the you can here you're different then, and

Douglas Yearley

Sure.

with a started decrease. increases move So, going in throughout conforming a we I'm that a X.X% XX-year the a X.X% And ended about were to messaging the huge dramatic QX. with quarter with or quarter eliminate the down rate. slow XXXX. mortgage. rate no-point in rate. rates probably That's out they was obviously fed, down of that talking The fixed Coupled had

the rate the quality think traffic absolutely the was in the was I our decrease felt So commentary the combination improvement in of and interest what coming the certainly of an in We buyers. of on encouraging.

the think rates down recently, And of excited. upon season the more spring I that talked is a I fall. solid decrease feel through in drivers think And pretty I surveyed sales They was is like when they're them. that that of primary about. one

Nishu Sood

in about Got about come it, also of just happened this And it. rates slow terms time a just of period and volatility? got can have Obviously, through talk back. seasonally you incentives, at

you're could in please? Your the and then how terms you just willingness thinking use incentives, incentives, to of if maybe about competitive discuss environment also that,

Douglas Yearley

Sure.

the of be balancing believe on And look course, community. land I of unique. should in in pace So comes every buy with with very as done mentioned community most good evaluate at land. the when think Main is we as of what incentives, earlier by includes a call, it We Main. our job Pricing, mentioned, this do quality to thoughtfully price of We and we we to pricing. land I

incentive versus an up is prior quarters. price, modestly Our this our and now very as nationwide sales right quarter average went X.X% of very,

Nishu Sood

it. Thank Got you.

Douglas Yearley

welcome. You're

Operator

next go Evercore Our ISI. from ahead. of Stephen question Please Kim comes

Stephen Kim

putting it relates brand just always how that market of you had? maybe aspect think maintaining question you the that the cachet sense Toll the the move the Is of regarding Yeah, confidence give and you brand. maintain take what thanks of in terms be you that down integrity the it you price can and the just Brothers while a as ability particularly can very to brand, flexibility can of of much, ask far, - that guys. it to flexible aspirational gives the I wanted your us it And to in context for it down points? a

Douglas Yearley

Thanks, Steve.

about, other to we continue are XXX am price that Xs, as from Jacksonville continue to talked we've and more in we variety point York our great as communities. down of great a have had in brand As that Xs, multimillion, the that obviously California are the New and very Boise, City locations, know, and lower-price you introduce can thousands. will have confident communities we and as I our some

it, First the and launched to scheme quality where communities to XXX of like home, about the am still right, experience. our Xs. very the well, treat of websites, the having of be in all, places of will people average from the XXX,XXX the a to Phoenix, the different a design we that things, up it's the many And the was they're managers, home Brothers. doing buying because other we Brothers price there importantly, confident you offering be buyers delighted after in XX%. Toll we sales new sales other Toll what be But something the in where won't Xs, we're builders customer brought it it's the less terrifically way That of by that more I than have talking getting watched still is - are Xs. down be in and the from and probably in the have decorating customer, the architecture, center, XXX

concerned, the office because of anybody luxury terms we're It's but quality We're fair they sales Living pools heard obviously have was residence out name. buyer in the brand. condo Toll I student units finishes into now the we strategy very am a Toll and all of without So the under clubs confident name. great the on that apartments dilution under continue And we're that Toll a on housing of good business. brand it's and never question. building any Apartment business Campus actually in We're a Living And the themselves. It's once it, to saw can Brothers building in a Toll Brothers this aware roof that of leveraging question. apartment. comment I that the We're

but here, what I'm So just a we scope, and in which bit can focus expanded on issues. great confident any is be without still wider luxury got us

Stephen Kim

Great. And I appreciate that full answer.

there here after more question is explain was you in they Marty. SG&A the just both surprised few that was we better would favorable results you one maybe out, directions. for there maybe anything - a see had the curious spoke? Second us tease The if last I margin the why of here, kind last performed kind gross months I in when of and could

Martin Connor

remained flat gross so fourth essentially the Sure, margin with quarter.

than house lower cost ops projected. did the in very think the address And little our we quarter. a during well question I bit saw come your teams to specifically

a including the to out think it efficient cost we than I we field. very in California expected. We had the than bit mix, as level more as expected. more And control from revenue favorable we SG&A, as And deliveries benefited also well from relates corporate had

Stephen Kim

it time. very much we'll every And guys. Thanks do

Douglas Yearley

Thank you, Steve.

Operator

question go Please Fargo. ahead. next comes of Stephen Wells The East from

Stephen East

numbers Good week. recent morning, about put talking know I you you around your progression, you. want Thank the about don't talked it. Doug, guys. to

both and So those big you quarter. Mid-Atlantic want quarter of when markets, I we'll at February. that. your interested in the look I'm the positive how Mid-Atlantic. was surprise I some understand from guess, big the in stay And a California, away just to progressed more in But

Douglas Yearley

Sure.

- Virginia, which market and clicking. by it's The by Toll. important government a driven any sentiment. primarily have shutdown is was And Stephen, didn't large buyer Mid-Atlantic, very So, on for impacts

of very was a the demand that management I the for product. a good driver communities, lot just the We and proud really have they're market terrific the is team how And there and redesigned operating, down has that of results. solid the primary am

question Your as specific is sort to more of month-to-month.

to which it and is the quarter, similar my commentary throughout company, improved Within on February. through the the as same it quarter, month-to-month is that the

Stephen East

Okay.

Douglas Yearley

it's when this February, huge demand And California, we And those really comments, was into had number a opened. that XXXX were a first of they longer. California quarter. pent-up demand of tough so built, as quarter compared I recently last had mentioned the XXXX. increases. all the They opened. we huge in times improved We've five openings. in the year-ago, had the has we The the comp. very that year, prepared have in further had the just combined backlogs XX mortgages communities demand up to price obviously recently had of year-ago south, a the communities opened XXX contracts had gotten I what these and through two still out and already with hundreds have communities There's That they huge, XX% for even of Today, pent-up my a solid versus people hundreds before delivery three pre-qualified had mean, it doors. that was been to like at study pre-approved had but waiting a there's that and there, And all launch. different when it's alone, just they're openings. five demand for buyers community. new to lifecycle we north all

Stephen East

One, in back come helpful a I Fair active-adult. of got were important apartments, student what and the you when about you enough. entry through then really bit but accomplish how part ran rent, at then hitting single-family you've All moving That's you wanting them, two it? of the there. M&A, to initiatives and forward talking to can little a a with strategy, guess I level really lot look for if And it housing, you right. Gibraltar is it, different some question. are And

any in As you going efforts and business, to - time, varied of on. mix have if where bit you more you more more look dollars, of want and little do - at back those where pull your then a more that to invest you do want

Douglas Yearley

M&A now probably last that I'd an last pace strategies - there two point. new that So And M&A, we we Those be we're we say, for on interested, that's use we XX good we're they at builders better it. product or certainly announce, may line than market, - market we or first a part we're would was price deal year. robust. and in. to handful a and but action, any, to We we're I'd didn't year, different say had a And we in or do. the we're M&A and right the use better flow be M&A We to was buy all interested pretty and as behind have the to enter nothing M&A team but have enter appears looked

and different with comments, be workout As with we've markets workout I'm for small from right lines portfolios single-family question, had are now I very that part are in. the that will and loans that we exciting. I bad, now, firm bank I a buy all for for with restructuring or land now distressed appears and delighted prepared mean something seems a apartment your better and it's in company built mentioned firm. we bank of it's it. that The rent Gibraltar, be place but how firm, to either that that all restructuring the the of which was business. second a happy be my banks, land good was to am new, markets become on business is really of it

or does asked you anyone downsize, to absolutely want not. shed that So

we're up us and every be of to business. focus to still day what core focused. It's and our your primary most Our questions. most money finish where that's spend gets That's going is our homebuilding luxury

Stephen East

Thank you. right. I All appreciate it.

Operator

ahead. Ratner Associates. Please of from & go comes question Alan Zelman next Our

Alan Ratner

my for morning. taking Hey, Thanks guys. questions. Good

Douglas Yearley

Good morning.

Alan Ratner

of I guys your you to National to the of on the in event But or question, compared is non-binding how believe you First the impact the that talk think, typically you've look confirm, you sales closings? just that this in can of deposits, Doug, And just at incentive kind do And of number, Event. past, your X.X% in to downplayed few time February, margin. terms about Sales the year on this that, curious, wanted I when year's improvement orders years? last in tying

Douglas Yearley

Orders.

Alan Ratner

Got it.

So, yeah…

Douglas Yearley

Yeah.

year. bring four we've during it. every national hard to of that something do National Sales incentives able and I to December incentives repurposed it's Lexus' works Sales Events worked we're Remember. in that So our and are then of we marketing It's well in sort to Event, these events. of I'd the combination kicked National version at guess, some, is It vendor a the say, field and our That do. event year selling as And of Toll of backlogs we upgrade, launches to upgrade, with fixtures, the they because the season. up. it's but the to biggest, et The kitchen just the this plumbing opportunity dollars, spring is cabinets year vendors grow last flooring is sort want the to events upgrade, lined where participate is timing our February not cetera, us, because

the of and deposits were. We the delighted week more feel In to February last strong last date prior gave saw a been has with it I for and year now the was that terms slower how slower, to overall than the a same of what we sales year we're to event ago, where comparison about it similar good we the are right was year. reasons and in

Alan Ratner

pretty only half your Right. Marty, guidance. I you And that, one a quarter But obviously the second question to year appreciate gives worth well. back of good maybe of the Doug. backlog visibility then as for given

beyond at you talk just the the on expected look currently backlog homes for margin to chance XX.X% than those different is So about deliver XQ, when guiding any in materially XQ? the homes directionally you're can you in

Martin Connor

a weren't to just comfortable and demand seen marketplace interest we three in months changes this quarter lot last over six at beyond think, the cetera. I going between Alan. point, of the rates, et the We've

I our given specific anything in guidance I months months As margin that. any the delivered margin. we get than suspect ago's dramatically margin the that more three different consistent We've guidance three than backlog, wouldn't to it we for was relates we've there's that but with think, to now. given, from don't just want

Alan Ratner

Thank Okay. you. helpful. That's

Douglas Yearley

welcome. You're

Operator

Our Morgan next question Rehaut comes ahead. of from Please go Securities. J.P. Michael

Michael Rehaut

Thanks. Good everyone. morning,

Douglas Yearley

morning. Good

Michael Rehaut

was had I gross kind following question incentives and First on the of in margins. the

XX roughly and looking quarter in a of year similar were for this first You last XQ. improvement bps able to ahead be are year-over-year in

Perhaps in With perhaps orders the on builders and guess, some It describe I you slowdown. in incentives lot quarter. between several of months of the in price decent that you past strategy. over is face seems aggressive other up only of kind there differentiation slightly the incentives like said, the a pace yourselves your on the could got a more first the

it your like pace, the given So assessment approach? you margin fair - took your to or given of is hold of recent positioning, just kind broadly and the and at that price point, seems over decided talk just volatility kind to a maybe

Douglas Yearley

Michael. Sure,

a how and on is builder. And start on needs don't months was commentary and of that given part would built. So Toll as sales had we've mentioned we November, it's I and beginning. you of see spec spring were that because move, season. sitting one of the most spring think a already to other slow like But of year. is because that last We I there inventory feel it's that in the we'll builders been what is that to difference you've finished seen plenty big have we're season and through develop increases of December many not and would The chase continues reevaluate between the where the of didn't the incentives, of the time months season call we January the

we every you're on grass it's the and decision But finished got do, more going price, guys, painful. home, to on the we're a drop cut to what can not and completed. the make drop every it's years and You sitting spec, there taxes, one me finish we - pay that ground ago, got to price, you going week, it's a more one sit on are when week, week the Bob week. all a to sitting taught

Martin Connor

It's having $X.XX invested $X.XX the dollar and revenue of dollar your difference revenue invested. your between of

Douglas Yearley

So I our everywhere. business in on and model land unique, be significant about think between is and more balance We and being the - thoughtful other those in difference talked and hard not But those between locations, some replace, the that's one we more builders. of that endlessly our to will pace price. deliberate

Michael Rehaut

right. and guess, the a on given the I any touch little I All of there, appreciate we've perhaps some if the re-trading, that land or softening to market, pause seen any apply maybe there, bit little you in heard going seen secondly you've terms. a recent in different last it. few but months? to bit your - generally of maybe markets more would come opportunities easing this of step points, approach Have core here in in your up a maybe here on perhaps price or of

Douglas Yearley

start there had some is far land overall to out The stand some lags behind firm. start market a market they limited pretty feeling feeling housing but there, generally competition. we've generally sellers still renegotiate cases, pretty a robust land still until the terms, of some lot really. opportunities it's pain, Not market land In pressure,

wouldn't and significant areas. renegotiation been or say careful some in have We But certain underwriting re-trading amount there's certainly of any I and with been land sellers. conservative tightened

Michael Rehaut

Thank you.

Douglas Yearley

You're welcome.

Operator

of Bank go of ahead. Our Lynch. Merrill Please next John America Lovallo comes from question

John Lovallo

guys. taking Thank my questions. for Hey, you

of quarter basis be us as it of in given high pretty the a on a up guide percentage of Marty, call just one, SG&A. sales your on kind XX.X%, and SG&A basis year-over-year seems second a step appears flattish that a to fact good year-over-year a would first that to outlook the The for bit revenue

So first anything second outlook? be quarter one-time should about may that or shifted we from think the there in how that quarter into

Martin Connor

there's No. there. anything think one-time I in don't

I or million is going terms up G&A think, the $X $X in almost be a touch. to within dollars, S of component absolute then is our and million

John Lovallo

being here the the bit of quarter? least it quarter, in the trend at How in realtor into terms fourth versus quarter. first last that those feed history about guys elevated question - talked Okay. will little think, - versus commissions actually I And second you outside did was a

Martin Connor

I commissions our change, commissions cost don't think outside SG&A. in John, there teams our are S that for goods remember in was inside that our realtor sales outside realtor our of sold. in and any are It's

John Lovallo

Got it.

you, Okay. Thank guys.

Douglas Yearley

welcome. You're

Operator

Susan Maklari of from ahead. comes question Credit Please go Suisse. next Our

Susan Maklari

morning. Thank you. Good

Douglas Yearley

morning. Good

Susan Maklari

My first front? you've on in some labor easing perhaps we think what could us this past help spoken the coming about around, seeing that - us you're an just is which of Can the give about from as year on update side question you together. things, as

Douglas Yearley

supply which Sure. We had when of modest down, concessions, building to have decrease demand they driven. QX. typical is price agreeing some hearing in markets, we contractors of costs and what are in In slowed because certain modest we see it's all

a had we've had teams. not bit, employees and were up down. So price their as And opportunities to modest take slowed that some sales they as our they busy now built the

I continue two. or think for will at quarter that a least

into increases decreases. and does we the appear we'll but the modest over As least we the at through summer are, sales it where will stop some and the have see to construction, feeding fall markets longer term, the that have start

Martin Connor

quarter decrease from that and stability quarter. months that income achieve we've able been And not in shows to now, this statement up our nine

Douglas Yearley

Right.

Susan Maklari

versus Lake an can the and Salt found approaching next you My it decided Okay. from Portland? attributes go why greenfield question maybe do you perspective? about there markets those of getting What of Yeah, M&A attractive into talk to to some and is you around,

Douglas Yearley

going we're builder, we're buy we're to look also market opportunities. a study decide We here, a team place at hard we in markets, and how land. and then at M&A looking we and were of and to in got - want looked a we those close one We first there. as so looking to looking be buy putting management get to And as we

locations of handful team going we don't yet and we builder both of have in - models either Since I'm roads bought stages So owned cooking. looking - markets. in land. a are suggesting being not are built. in in at buy management now a early land in we not the in, to both models as market, place, M&A the I have anything or is opportunities, The controlled beginning We

It a are the have land it. with when away. it's there difficult that we've team, pretty a what us, Portland that on on The studying out me, So doesn't of because you that can greenfield. get growth. whether now been I looked ago, we we perspective and right up or M&A because It Seattle to and work, patience And zones. about entitlements get alley, I job Seattle. since strategy only some of a go the we mini is at market. limitations and about it's of it's the we supply, mean, markets, some like architecture from difficult it's and the is at is - our - Seattle the greenfield. stick M&A ever six excuse we gold. it, has And has because of wherewithal - great into a have with A liked development And markets have couple Seattle, right got guess, years - which that's entitled, little to hours the tough lot studying if to of come

Our Seattle. has down moved management team from

dramatically they natural so had and because progression Salt in it decade. terms has we've years to of the at desirable more what four is lifestyle have of call has for down Lake it's is silicon it. diversity a changed associated last market has slope, great a as that it something we in Seattle. looked a become silicon moving be our a the a up to describing the course City to businesses, every city location, towns live, growth, I'm what whether I It of of working and think than And the a three out family Salt success economy, of the or because whether very now Lake the mountain and move place with in around

teams way locations we both slower, both the and really greenfield, markets opportunities, they we go be can have open more they're am both excited spring. out cautious the with land we're in also So that start this tuned, very because happy stay and a but to and I have, about we'll because will

Susan Maklari

for Good all Thanks right. that color. All luck.

Douglas Yearley

Susan. you, Thank

Operator

comes question Mike Markets. next of Please Our Dahl, Capital RBC ahead. from go

Mike Dahl

details for and my Good the so all taking far. Thanks of questions morning.

Douglas Yearley

Sure.

Mike Dahl

ask level. a But of not guidance, wanted against. in overall at just know, a particularly place see Doug, the of a clearly also you're trends but just some on some I you that I the business where normalization is think, where higher you're the I speaking like to described giving bit kind softness. about what you're you comping California, a supernormal to thoughts market

of if kind month. of quote thinking Is type normal absorption that we're two more So sales around as, as you XXXX, for about what we're see market, unquote XXXX, a this XXXX, think in so, market And that of opportunity the market think of you you initiatives settling much Do how if at? is where kind about there mix upside? versus for is recovery? your doing

Douglas Yearley

specifically, I crystal answer because that ball. I you don't have can't Mike,

more land. positioned become that we last and XXXX first like. in with I I've that year. say well I own, land the year think, have with future also XXXX I between really The what we're and explained properly felt solid the have think I and What difference was a will that's described communities. that the California communities will the is, future quarter we this

had frame and and opened the And holdings we a said, well community we I because So number feel that within of not future that pretty add confident I in I year repeated, like a are our overall positioned. that, we're certainly going terms have well am growth in brand Last year short count just we unique to was with our with the be there. unique positioned That's year, communities a of California, but the of land couldn't but pent-up to our good at was about we out are relatively that say terrific it time opening. demand own.

Mike Dahl

about million beyond or for what XXXX. color on you $XX guys in there magnitude did JV any I you and is to Understood. XQ? Any - directionally could question described it. year Marty, the contributions for land know is balance us category of lumpy, Got $XXX to the think, the give the of My expect and maybe I Okay. full million the in other second of of quarter, you that pretty some XXXX

Martin Connor

Sure.

by was were for the We walk Brooklyn. the million. backwards project little the million Pierhouse we a million years in that our if around did did do around which think, I $XXX about influenced So bit, significantly last year $XXX years we $XXX in And that, before three we before or year row. right two a

a level of million of us somewhere that and level. So and year year. expected next the quarter currently being sustainable that on I think, north million to rata close. of have for This lower going a business of to Right lack $XXX bit some I'd because this of pro put south just upcoming any this that this now, for board the being particular our sustainable drawing of we've we part important piece transactions the at than $XXX as little be mentioned is

Mike Dahl

Thank great. you. That's

Operator

comes go Zener Please Our of Ken from next KeyBanc. ahead. question

Kenneth Zener

everybody. morning, Good

Douglas Yearley

Good morning, Ken.

Martin Connor

Hi, Ken.

Kenneth Zener

I obviously, stuff. sequential read heard, that about orders your comments Marty, - Doug and and I all

but of XX% sit. in we'll is how My I'm So the how But seeing and also which begin we're Thank how part out? think, XXXX EBT, forward out. guidance, describe case, appreciated. And backlog that margin your - I contribution question let forward two that your that just would structurally, just XX% flow it. quarters within to quarter lower three is - think trying focus versus of into high the help there Any to that down as as be how right, play But plays orders can obviously from that with plays guys area. as also how you. around margin can kind your - guidance, think because one out California, one on how structurally there. trying per FY about interacts play that I'm what California, margin either it quarter to orders more you out order just for I'm I

Martin Connor

Ken. Marty. Yeah, It's

of your year. as California, in it haven't some visibility year. the specific we us balance to the of into deliveries level terms think, California But of in stability think, balance of question the given much guidance I the I gives for relates in for the backlog have we

Kenneth Zener

trying looking at what delivery. to You're might about orders it's the on forward. if simple as contribution suggest based margin saying for the I'm of just kind see

Martin Connor

just to are delivered, I frame to of quarter-over-quarter would front the different time us that expect the in we from the much during ones be contribution California. that margin from one

Kenneth Zener

Thank you very much, Marty.

Operator

Our next question comes Please from ahead. Matthew Barclays. Bouley go of

Matthew Bouley

just year? taking the still on Hi, in of calling and my the given $XXX,XXX. in to the $XXX,XXX delivered for for thank about lot overall this a kind there's just recent of should Obviously, these we sales trends at But going quarter. look questions. and to I half you're how $XXX,XXX trending you. Thank ASPs sales, order you mix on of ASP, ASPs second the think second the wanted

Douglas Yearley

helpful in think mix quarter to really million, to I $X price from increases any particular it's price selling and average of homes price we So $XXX,XXX the incentives. sell that price not by predominantly, or either average recognize driven so is movement delivered or

in sales is And across our approximately $XXX,XXX so I the the the the backlog. estimate as sits we best of use price year, balance think, can you look

Matthew Bouley

decline second it just perspective of that what mix I the the the seem to question, lower Is that California percentage it California Marty, Okay, side. would mix given in a you year? kind accordingly, and mean order is to in a would obviously second of I a but quarter, earlier of that. revenues in it half just And benefit fair last clear, - that continue for on appreciate the And this that think, it was then would on past the and margins? quarter, that follow-up two Thank be as seems from mentioned the you. to quarters a because assume first of secondly,

Martin Connor

is presumption your directionally I off. is timeframe think accurate, but your

the got California next the you through think get year impactful into before to income statement is volume margins. to I

Matthew Bouley

for Good Okay. detail. the Thanks luck.

Douglas Yearley

you. Thank

Operator

Our Schrier go ahead. next Please of from question Scott comes Citi.

Scott Schrier

Hi, I the of than were in is to higher understanding - good and quarter, expecting. ask maybe looks wanted timing the lower like the a of morning. end it next analysts you little came about what closings, guide for the your towards guidance

of considering or from happen? in XXXX quarter a in So terms XQ there implications cycle I'm times timing? was regional closings be curious, Understanding there anything in should orders there that was your that anything the times, cycle was but big we

Martin Connor

Scott, around to we sure, of particular. nature not longer of the constructing are country. we know Northern in I do are detached bit a the in the the I'm backlog than product can that drives product I attached anything buildings the constructing, some single-family point California

the need some long unit there abnormally not to expectations longer say impact before would longer completed California, or you XX necessarily just in one of that and deliver I So be XX than because unit. Northern buildings times, our of can is cycle

Scott Schrier

design can in the then about And little it. bit and seeing you a studio like things design what option Got premiums premiums studios you're talk terms that? and of just lot and

Douglas Yearley

Sure.

their And have we know a builders. you design the process. studios of country that pick around client in Toll XX encourage the goes major what other we from part as all where So almost distinguishes now It's finishes. to division, each

not changed. but about the running home about that XX% number of the price. center changes of it structural, community, a is for occur Our that upgrades this not at at is we - at has upgrades, just $XXX,XXX number are And because of still is design studio, some sales the which

Scott Schrier

okay. it, Got

or real options, no for market So premium? change, buyers' in given in appetite anything conditions basically

Douglas Yearley

That's correct.

Scott Schrier

Thank it. Got you.

Operator

Our next go comes Rahmani question Please ahead. from Jade KBW. of

Jade Rahmani

any very on much. Can would grow cetera? which color be of another Do investment has the information single-family helpful. magnitude Any in and it Thank you scope investment? and the in What's investment reported is provide been you to et expect you the the additional rental it, media? company

Douglas Yearley

confidentiality discuss moment color, at to we cannot but must and apologize are love We the that give we it. would under some

any in magazines we come from So can't comment what us it did you and not read or on. builder elsewhere,

Jade Rahmani

Okay.

times Just running? separately are in terms current comment cycle on of can where operations, you

Douglas Yearley

months. specific, the again, is on depends so community the backlog, it's base, of home, but to the and of range, And XX size extent The of general X or depth it that base, is the the trade range. the the trade X the

Martin Connor

But I I labor mentioned. right I weeks four or we've think months. weeks, in that have three to four think or be weeks to would than world, extended, XX the shorter it's perfect seen But a same it now. XX the it for four three three constraints is

Jade Rahmani

quarter's the last the that from So safe the middle assume deliveries of orders to next reflect year?

Martin Connor

markets, markets or middle the that from longer could last In shorter be it other year. some that. even be In could of than

Douglas Yearley

Right.

Jade Rahmani

Thanks much. very

Douglas Yearley

that's But a average. good

Operator

Please McCanless next from Wedbush Securities. comes ahead. of go Our Jay question

Jay McCanless

taking for my Thanks questions.

wanted certainty on full giving you up think pretty provide you that the why times cycle decent the guys year guidance, in of not and theme, comfortable when longer are you, given Just should all visibility what's backlog? to pick have that you have the you

Martin Connor

point. last Well, demand a I lot in I changes not of that. have in in to was we're think and the guidance significant this at pretty given the And think, just months We've that we expectations. changes rate good the six seen And give gave three that think over it gave. to three months. seen months. didn't We consideration some pretty been comfortable we detailed We've guidance prudent Jay, three we've beyond

Jay McCanless

Okay, great.

rates think, are to have there into surprised buy now? you price Or houses besides guys hearing high four been I average back the else be of how gone there buyer I immune buyers I'm that cash second over in you talking buyers that want to of doing. The three putting product hear rate are to types? years, you a and as these in home communities, all's not more I the for competitors is houses, what would peers of making question - that's people right to buyers all your large historically field the to last interest the amount Toll relative down then mean to with your a has generate rates had, the should typically should something somewhat you your buyer about seem you're composition it also driving different some change the with than because and will buyers, the

Douglas Yearley

to not was I the in buyers other market. our No, Jay, certainly my buyer comparing comment,

are You correct.

sensitive get are that for our our buyers average a years. with few of XX% is profile to Our are changed moves. nothing at less mortgage our No, has buyers all and buyers XX% cash. last buyer the LTV rate over The

by it, affected the confidence right, you're they of forget rate. what's in move less are really a which is not So, going side on. But let's

not in the about, when talking slowdown the they are though fear house top. they're to the four XXXX headlines they as sensitive the the the are bought the fed was that and rate not right. were of rate, forget they the housing the other fools that the not and to market, afford the talked they about headlines Even can immune moves headlines and Let's at

And rate move. more specific a than confidence a so, it's issue

Martin Connor

your they time have a The that so there, different bit other wasn't And thing the is invested to the money greatest that market. a have overlays of more factors. the fall in stock couple

Jay McCanless

trying and more than are I with to how It targeted those get to do Yeah, that's was I like in what your understood. sounds the confidence One to, it's anything you that is are age trending And all been XXXX? that the Active-adult, looking quick of thing. communities, type business could. if what else. other one,

Douglas Yearley

positive, trending like we lot. business a are the They

And expanded they absolutely started as different are now And the It expanding are markets. West. baby-boomer chasing Northeast, downsize. in many the we the we've business the Midwest. to it into Mid-Atlantic, We

homes several it's a opening Grove. name, - that Sterling. Kira, have community Sterling. is have large is that thousand who a next community very active-adult, component Phoenix, the Greater called you, If year will We Thank anyone in is Ridge it's know that so, large Sterling Kira should

Martin Connor

her. after that named We

Douglas Yearley

active-adult to expand. continue will you So see Brothers' Toll

Jay McCanless

great. It's again. Thanks

Operator

ahead. question comes Megan Please next Research. Buckingham Our McGrath go of from

Megan McGrath

my Good have answered. morning. of been Thanks. Both questions

quarter, year community the sort a that compare other things, is remainder two on was follow-up since I make that like impact other such a is for upcoming, of this compare Just there openings any quick wanted sure cadence for we understand chunk to want in California, make the first lifecycle any your of community opening and the difficult of California big all of the on look big what year? communities to

Douglas Yearley

be count flat. Community will relatively

opening coming in is plan there that anticipate of new unique do year. So the the during the we Northern Cal We communities in comparison. open, up five balance to have nothing

Megan McGrath

your macro high-tax one that tax is conversation Do California along thing talked impacted on the we're about, and I'd then, now markets? around other in that great. Okay, opinion reform. think anything the following further And haven't up sort love that you of and factors, the you on,

Douglas Yearley

We right. a play impact. don't has hearing returns But teams frontline decisions, tax hear to sense suggest understand sales, buyers' to about beginning as they in and that not it particularly impact. some sales now would it prepare from about part that the are Common are the

of lot. long that to willing environment with that we a And we and why affluent of before people why very some Boise, live are U.S. remember buyers Dallas, and hearing costs that their core in Salt. make foreign it impacted the significant coastal been beautiful Also way not not taxes have of are to paying submarkets and business very by to the we're thankfully always and jobs, have has great that place have even even are that's our money areas there are Reno, there, are buyers live, California that's why they the proportion Las sun reform. California in But Austin that And not about live, we shining and though Those that Houston. have So, we we the it. Vegas. much a that's have certain and expensive a not where and hearing tax

Martin Connor

or file relief of this their guess tax I owners what is people reform, their the next see a over out from Additionally, the situation two. as taxes small of business but lot Right. play saw will some and month course

Megan McGrath

much. very Thanks Great.

Douglas Yearley

You're welcome.

Operator

comes go Our next question Buck Please Raymond Horne James. ahead. of from

Buck Horne

plans some guys. land year. given your the - Hey, budget pretty if to land wanted I was last know consideration total significantly. you've you for to thanks, see your I spending year up

on market the right do plan given and of budgeting you you're now, If on going your you - forward? underwriting kind land views acquisition your how tightened up have

Douglas Yearley

it's Buck, concerned divisions. market, really dynamics. through certainly land lot But Yes, we like, up good by either deal in opportunistic. go. don't deals have don't the market market in, we we deal. to capital of budget, allocate some locations, the When certain we come tightened in we by We about because we're markets or has stay underwriting a fall

of on XXXX, a If just - year into have years recently you on billion I at think $X fair look spent guide, north land. early And prior estimate. a fairly I'd we point, we're a as that's at say this

Buck Horne

too City talked we about Okay, helpful. haven't much Living. And

on your the market timing wanted And thoughts reacting just progressed, of new City market building on how I to recent I on coming get the is York. in think openings conditions back side thoughts buildings New So circle have the any your Living and up? how to

Douglas Yearley

Sure.

in of one continues to City Jersey Provost, is Sutton strong, pretty in So the of our the decline other in City year Living described in buildings The okay. Living which driven as Manhattan. we've not much sell-out contracts this by it's which The okay. which City quarter and last in market is the is was XX it's same that, quarters, our It's high-rise

not respect company are They in $X,XXX a their that and having Most realistic Jersey one continue mentioned we'll going land see that value market high. positioned last York still on price. price ourselves building land buildings, of and foot have, with in not and okay. are XX The sense. than year which land City It's New that building flow per not based above slowed buildings are all do look. I'm today's Jersey The here With market pick the square still bit, what business with Jersey or what it's to to today's us, once. the Provost makes We which But And conditions. City at bought thankfully, risky margins we're off Hoboken it of in or is to with But on that sales and for I just has opportunities selling is locations deal average. land regularly. too based are we about side, this chase there new year. sellers hopeful two deals these future a a down in did We in more of is big deal fairly we inflation.

and Certainly, Living our over haven't New last significantly shrunk since years disciplined. be land. the new bought in And has few City York so to investment in we're going very we

Martin Connor

lowest been since XXXX. It's the it's

Buck Horne

Yeah, so...

Martin Connor

number about they gets sellers change been. not see York, not your that earlier market their have years expectation of it yet strong land as it being to we of a how And point as despite in and the New had

Douglas Yearley

Right.

Buck Horne

guys. you very helpful. that's Thank Great,

Douglas Yearley

welcome. You're

Operator

of Our next BTIG. go question Carl comes Please Reichardt from ahead.

Carl Reichardt

and to you. ask Good rate guys. I about the low it's always morning, want for cancellation

contingencies, of And about significant you from or folks so units. change of to inability that we're idea that houses increase? that terms not to fear function this the talking was Doug, But year. or is the about a something else you lot of sell would talked of attribute in factor a reasonably of last that

Douglas Yearley

Carl We're our people sell out. to study. worried fear was increase, given not Remember, appear market. security the by it's We that reports on I'm a doesn't deposit I'm It or job So, or read about a There's reason $XX,XXX. worried the or we it spread the into is can lot average cancel. about inability the home driven it.

of unique your specifically because you deposit lot consistent that we Cancellation build is in with locations start is beginning your the been on which home and at a that to is where as percentage house home, X.X%, So most we semi-custom in deserve designed. take past. backlog we a and have proceed money it's before of pretty

Martin Connor

I think had of sales bit we less issue. in a the a math quarter. have little a We

a we So cancellations where can from a and from. backlog come are bigger sales of cancellations those percentage have up as

way this percentage best beginning the like it to much. market as it and a backlog moved So of hasn't a is at look in that

Carl Reichardt

February. Fair houses second Marty, quarter, California, mean, any in month? for are weather you just pretty has talked closings of far this impact the state out already in so the about this we've from thanks. drying. what the kind in larger been are but But, Northwest Marty, based you Pacific Right. And here assuming delay on seen on the assuming a important sunny I enough, atrocious as you the then,

Douglas Yearley

not. are We

Martin Connor

to they the of I be of close terms one. what us, to That would they've expect terms to individual we in don't think teams what are. submitted in up

Carl Reichardt

good right, All deal. Thanks, guys.

Operator

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

Douglas Yearley

of Thanks, week. for Nicole. Thank your great a support. everybody, Have all you,

Operator

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

You may disconnect. now

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