Toll Brothers (TOL) 26 Feb 202020 Q1 Earnings call transcript

Company Profile

Participants

Douglas Yearley	Chairman and Chief Executive Officer
Marty Connor	Chief Financial Officer
Gregg Ziegler	Senior Vice President and Treasurer
Bob Toll	Chairman-Emeritus
Ivy Zelman	Zelman & Associates
John Lovallo	Bank of America
Jack Micenko	SIG
Truman Patterson	Wells Fargo
Matthew Bouley	Barclays
Susan Maklari	Goldman Sachs
Mike Dahl	RBC Capital Markets
Stephen Kim	Evercore ISI
Jade Rahmani	KBW
Elad Hillman	JPMorgan Securities
Jay McCanless	Wedbush Securities
Alex Barron	Housing Research Center
Carl Reichardt	BTIG
Mark Weintraub	Seaport Global

Call transcript

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Operator

Good day, and welcome to the Toll Brothers’ First Quarter 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, Chairman and CEO. Please go ahead.

Douglas Yearley

Elisa. you, Thank you thank us. Welcome for and joining Officer me Connor, Chief are Finance Investor Chief Toll, and Senior Senior Bob Marty Emeritus; and Marketing Marlett, Wendy of Chairman Relations, Gregg Financial Treasurer. of Ziegler, VP With VP today and Officer; Cooper, Fred

and in I call begin, information caution assumptions many on ask this you forward-looking on I listening financial tollbrothers.com. our questions housing and and based web the many release significantly I beyond events, about Relations to read economy, email that earnings Before factors statement markets on are on control affect the you forward-looking other our world at our can Investor to website. statements future on could that results. Those the

XXXX with $X.X quarter and revenue Last $X.XX gross million margin reported home a income adjusted share night, billion of $XX.X per net or first of XX.X% sales diluted. we

Our versus first X% X,XXX and up of units X% and year. was billion last units $X.XX quarter backlog in dollars in

second ago. First quarter strong and California, in year quarter quarter. in Northern demand, had Most in principally per markets, our $XX per buyer lower deliveries, valued XX community a first few at contracts our delayed deliver should and XX% homes compared XX% were earnings contracts one to our due XX% up dollars, were closings, these to anticipated With million. units revenue we closings missed in were and where of than up we share

are Demand and quarter strong almost since of the in first of pricing of in the growth remained contracts California quarter. has many contracts XX% we power in and our California, markets. through year-over-year second our our first region, XXXX two in XX% the years was in start second which Pacific in is now was part ago. up This quarter dollars experiencing quarterly fiscal

expand for We opportunities continue to points. price to product lines our and brand look luxury to new

footprint also are base current segment, and $XXX,XXX communities and efficient. base; or be affordable of quicker leadership communities should These of strategically maintain demographic inventory customer communities luxury in to a turn more our we intend home the to our we XX% capitalize expand with price adding nearly While trends luxury and a on capital more less. offer to our

We in continue to expand markets. our new presence

the We new Portland, These markets Tampa, into past months more markets: have and and acquisitions three months. completed five expansion nine into City the added We’ve in dynamic Myrtle Charleston, in XX Nashville, United Oregon, brought within the Salt past Atlanta, Southeastern us acquisitions States. Beach. Greensboro, three with Lake

record in June Association the seasonally-adjusted near report housing in historically was to Interest rose highest remain low, price are existing strong home Realtors, pace tight. January range. lows. sales and confidence permits in strongest unemployment annual to formations home since healthy. existing the Single-family According so is the supply of XXXX, or consumer at sales the is Household National rates even $XXX,XXX from January the growth $XXX,XXX to remains

in According new the with our and above home the increasing more backdrop, points, market expand XX.X% luxury same supportive of just-released fundamentals price sales report, to we sales product XX% up census With homes continue to priced macro were January than geographies. over the lines, brand, positive $XXX,XXX, as this period. new remain last

turn Marty. me let Now, it over to

Marty Connor

Thanks, Doug.

note measures of measures comparable a referenced that that Before earnings of be of their found I release. want statements. back guidance our to subject the GAAP to our during I forward-looking reconciliation want specifics note to I our normal to today’s also is address can quarter, caveats discussion the in this non-GAAP on the

on and segments. segment reporting an newly file contracts, for coming the based backlog in X-K reporting Additionally, will our historical settlements, days, realigned we detailing

closeout in SG&A additional This line to to our dollar of was combination revenue in communities, communities. were driven These expectations, mix, expected are absolute second below margin our delayed gross for generally leverage, a California results and and Doug by certain quarter. which our in concentrated delayed deliveries, related but our outlined lower came costs with deliveries, older and Northern dollars Our impacted expectations. delivery in in higher settle our volume SG&A also unfavorable

quarter power. the fall our balance the a to buyer’s background XXXX, guidance XX, that market, for due this As of to XX, rates pricing timeframe negative declined margin we the year, want for XXXX rapid you in the orders interest to July summer for I of and XXXX, remind in October became where had each rise from

region, was XXXX. pricing modest. did power Pacific increase California, not first did QX turn orders positive Portland, contracts and this of newly-formed In includes dollars our in which quarter While XXXX, until Seattle, and

in up combination the were lower average in projected volume to homes. Pacific and It and in thirds fiscal change mix and XX% us to our this margin Seattle that XXXX by region of dollars out company XX% months of perspective, the This quarter. in units above Pacific margins. is takes nine fiscal our a months two from margins Orders driven California XX driven region region. deliver less From by to of XXXX carries

our do benefit we XXX basis to the second compared XXXX the of half fiscal improving market late from expect half that in to adjusted home sales gross margin points by XXXX. sales So, began first in approximately

pace evidenced coupled $XX.XX should and expansion environment fiscal margin growth share recent focus count in or X%. stock we contracts also contribute our by on projected the an first This efficiency, and capital of average our fiscal community million in pricing our at demand shares with and price improving our reduced our absorption per to count XX.X by earnings improvement are Most in we of to strong With of equity. of increase share. committed XXXX, million XXXX. XX% this repurchased power $XXX on return year In our quarter

remain repurchases capital our of expect strategy. component a share We significant allocation to

and had cash $X.XX billion ended equivalents Our $XXX and strong. We revolving balance bank million our sheet remains first available with quarter under credit facility. the in

next bank average the weighted in or a no XX maturities half debt our and maturity months have years. debt five and is We public

grow liquidity and sheet, Our business balance maturities land selective strong our through to homebuilder extended and purchases us acquisitions. allows available

our We owned approximately controlled and lots ago. year have by a land X,XXX since increased

Our share per book our value ratio was quarter XX.X%. and $XX.XX XXXX debt-to-capital was first

quarter of and are forward, and units price between projecting X,XXX $XXX,XXX Looking with deliveries second between $XXX,XXX. X,XXX we an average of

units and We fiscal between that $XXX,XXX year full projecting are between deliveries X,XXX X,XXX and of price same an of average $XXX,XXX. with

the our half expected sales fiscal in improvement XXX gross sales implies to This in second approximately basis be approximately adjusted revenues project of point full second XX.X% as full to gross fiscal SG&A a revenues SG&A be half. XX.X%. approximately home percentage We quarter home of adjusted a year be year percentage versus of XX.XX%. a We fiscal approximately quarter sales to with home first margin of XXXX home sales the second and XX.X% margin as

community on quarter year-end personnel growth projected generation. our advance of by costs in count our fourth involves discussed call, XXXX investment in revenue XX% conference we As fiscal and other in

we our as causing fiscal IT to addition, to a this is This percentage system implement SG&A upgrades. year. In continue revenues be of higher

and other from approximately quarter approximately gross of rate tax be is we quarter full sales unconsolidated fiscal year but unconsolidated million. income, be XX% sales year and rate XXXX of income XX%. $X profit to approximately land the approximately income, land entities and tax Second expect from entities million, to gross $XXX second expected fiscal profit We other income project

Our was the current the XXXX energy by QX benefited reinstatement tax quarter year fiscal tax rate credit. of

for weighted million diluted average approximately year. the Our share XXX to XXX second expected a weighted quarter is count share of average count be million with

Now, let me Doug. turn it to back

Douglas Yearley

questions. Thank up you, this point, Marty. Elisa, At for open let’s it

Operator

The Instructions] question Ivy [Operator Associates. first comes ahead. Please you. Thank go of Zelman from & Zelman today

Ivy Zelman

Good why the you than first months that low Maybe, going morning. be ago, watermark just would we seeing are be in I XQ Doug, help XQ if you us question. have XQ? to my That’s several understand lower are now indicated questions. that margins when can several

Douglas Yearley

the Sure. Marty’s list. got

So, he��s it Ivy. going take to

Marty Connor

Well, anticipated. The That’s California coming rest production than is bit I Seattle margin saw the previously issues. with mix, also anticipated had it than including and that lower had a production think to little we the slippage due bulk delays of we a less some of it. Northern we is

Ivy Zelman

just you us going hood? maybe, what’s challenges, expected issues When higher management production costs and the say can for and elaborate than under on you closeout operational

Douglas Yearley

talked in site sales. gets Fremont. Crossing in Sure. which a is about once Cal, it had It condominium it had costs lot and built delivered condominium, battling Metro at means San It’s issue The record complicated we it’s it Francisco have very which and had issues terrific have XXX we before, is has through very, We large Northern ran very all least only we at on with called of the I that. – basically into not high last community density units. weather rains, or And winter, a significant we think had but where delays, – worst decades. once. been for overruns We a

now Crossing, and we to at We that lost the – pushed than being delivering. And sold of to started struggle. most certainly margin we units are we in back, continue came community when looked are early have the beginning we California Metro I of that as of XX end in better XXXX, we out those the margin on, better delivering we Northern referenced opened look – and

issues the isolated had in. problem we to major Northern much so California location that pretty one is And have

Ivy Zelman

it performance sounds of given ever Well, it’s execution like you’re that’d it’s problems be because oversight a of saying to management specifically change community, poor and this one community. in related the

not this President who’s the is properly? division it managing So,

Douglas Yearley

not. it’s No,

Ivy Zelman

question your really Okay. Well, let me ask one was guidance. SG&A. surprising SG&A on on other

expectations significance the of Just guidance, included non-recurring understanding deleverage that there, non-recurring there is in any your items?

Marty Connor

in items are there subsequent previously So, every that recur mentioned compensation-related. had we would quarters, were quarter that They of first our components in are quarter. in but that about first non-recurring non-recurring

In addition, XX to a to have end months that we come an in that the continue next systems on life should upgrades months. XX to here spend

Ivy Zelman

system quick, Real right. terms quantify upgrade SG&A? the that impact All of in on IT you Marty, can

Marty Connor

million the of to neighborhood million $X in It’s annually. $X

Ivy Zelman

Thanks, Okay. guys.

Marty Connor

You’re welcome.

Sorry.

Operator

next Lovallo of ahead. today The of question go from Please America. Bank comes John

John Lovallo

for Hey, taking questions. my guys. you Thank

you in XX closings than Marty, you delays? little bit were mentioned that one. seeing lighter But that the a California delayed Northern else I that there first were were XX. just market. closings The Where think were

Douglas Yearley

in for revenue. locations I would XX of the closings $XX eight revenue. a but million missed million Reno that list. of Virginia closings number John, the those I’ll missed be top would closings $XX that in of for beat take $XX Dallas obviously, We XX that Cal. projection, in for Northern of million we million closings the and missed be one. We missed that there the for – Northern missed of in the revenue It’s Jacksonville We $XX of scattered, mean, of most outside that are XX by revenue,

John Lovallo

related it to on then delay materials if time the And following me, that, in maybe, et or or about of just just the labor think excuse timing was backlog Okay. your we the I cetera? closings, – age up the when mean

Douglas Yearley

nine it It’s – not worse are six, timing, we worse. than was labor Materials not ago. months is three,

the of that final municipality. not In from they of our international affecting cases, We’re some Chinese Subcontractors it’s the stretched. cases, some obtaining are In have supply – or tariffs not issues other it’s are stretched, permitting. labor. the been certificate occupancy

have So numbers. and time. miss been an that there an as we, beat their some their are but issue for that dealing been, quarter, divisions divisions and numbers that, that industry, Toll that’s there every we, with are at

more typical. think plus when rest fairly and of around happened at Obviously, of than XX what there Northern XX out units Cal. Cal country the Metro I the Crossing; were take just is Northern And the misses you million

than I So, biggest just upside. defenders. bit little described we downside on the had the the more a And

in more are that concerning We obviously, is particular out in or nothing happened everything us but concern. locations, those labor examining material had that giving jumps there’s

John Lovallo

Okay. final… And the

Marty Connor

shows than aren’t There anticipated that cancellations this and were related. mis-closings few also more production up that as quarter we had

John Lovallo

back And Got stock. start in you how can then to market lastly, buying quickly back get guys it. the

Douglas Yearley

Friday.

John Lovallo

Okay, guys. thank you

Operator

question next of SIG. today from The Micenko go comes Jack ahead. Please

Jack Micenko

the is it morning. Hi. G&A probably or wanted talk I XXX in XXXX. the in looks guide, to Good take up the year-to-year If I back about expenses. Marty, give like envelope, kind of

rest to million period sort sort the normal we conversion all $X XXXX here million of balance I trying the You know, communities. then this to bit as that’s been look the ongoing. X%. And is of like systems through gave the X%, don’t improve looks of new How guessing, repositioning what just I’m I’m much a on the $X us leverage G&A you’re at is probably, inflationary? then like middle feels it as on. think in goes in of should as time of the that of a

Marty Connor

of number kind probably as and time look think the increases in is of communities the to expansion I is see The Most IT we for the goes year-over-year. rest improvement of normal definitely on. of increase around we the be next. compensation thirds two look would

Atlanta deliveries a builders a Nashville, their the nothing product. we’ve but Additionally, and very interim, of expects few in added the this down of late in because who including builder year, attached to have nature

Jack Micenko

then mixed the we kind Okay. big the geography flat lot the thinking shifts, And are the through through and both a down, year wise, is into arrow just XXXX meaning XXXX? of and or or in up of product end does of this ASP some repositioning by the continue that of picture

Douglas Yearley

It will continue.

we to – points expand committed said, are segments. we expand price As buyer our our

a under of contracts As base our XX% had I mentioned, price $XXX,XXX.

the design premium pay lot and and Now pick have and pick to they options they they then remember, buyers finishes. go center our they generally a

I points. will sold shift XXXX, a see under houses homes probably good XX% those – deal recently, an just update but land progressive be new continue But the will think to of all in cases XXX. for that in dramatic I of be is price see cases price delivered $XXX,XXX. you’ll we and the at over most some we flow bought it that is in don’t got So,

So, to going we’re to it’s segment going one be more be will on, it but just that gradual. focus

Marty Connor

to of out, price it the because say doing market I a which diversity tough better to think regions on from so where perspective. are dependent our average makes the points others is it’s price than And going come directionally,

just $XXX,XXX of to little million regions. many a point, compared and higher bit seen is price We’re back the to Pacific region, other which $X we’ve a from low generally selling come homes delayed the

price. So, could average if a that have continues, impact the it meaningful on

Jack Micenko

get presumably, back you’re well to of on shift. And some as continues I that to mix as Sure. product then the would pace, going imagine

Marty Connor

Yes.

Jack Micenko

questions. my taking for Thanks right. All Yes.

Operator

go next Patterson ahead. Please from of today question Truman comes The Wells Fargo.

Truman Patterson

and question. guys for appreciate taking thanks morning good it. my Hi, I

you First, little mid-Atlantic, also the could I’m and demand bit. a in those hoping just the a know I orders declined regions in positioning. land Northeast and in mid-Atlantic, discuss your historically some battleship master then geography? little is discuss salt that those had you there. really on a just side, larger hitting bit you’ve demand could the and And of areas plan positions

Douglas Yearley

flat. flat orders a mid-Atlantic community the counts the and just Truman. North Sure, in growth, having of the result not is our community are

do talked it, our it’s here. very about We we’ve well As home.

North. Being because a difficult we’re us year for anticipated Virginia Philadelphia giving are growth and not strength find position. entitlements a there’s a we with lot so we’ve community positioned to We’ve where hard there. recognized half. think on five and It – Philadelphia have positioned over greater and the We dominant what growth. the without flat top is seen very I accordingly count flat we’re is market national performing to is, year has well. with a and last comfortable and at very opportunities, of the Mid new land the up Atlantic West, the South ourselves and

that’s And and lack grow growth. just a story. lack population job a a to the community so growth I It’s and count think, of I opportunities of think

Marty Connor

kind think In is adult you an that terms the coming then along end. Valley’s of chugging of the central legacy asked Jersey there’s I And larger that Virginia. active in we about job still Loudoun have in communities Truman, to

Truman Patterson

the California of have of in I how clearly going and of and guess. you guys this fearful first that for in do think Asian that playing forward? then near market, kind could the guys the you heavily least but out impacted kind industries is term. in be you coastal that. day quarter, demand at near coronavirus in orders seen thank California, both inland What term concerns Okay, the in the some topic And of buyer rebounded are given

Douglas Yearley

So, pushed virus we closings have we’re the in the intelligence in believe XX hope receiving the been we teams we second our from to California, quarter out, sales California. think, to and out that’s due

and were the see much have, smaller than at three least we Toll Chinese purchased. years orange are been ago now has as We the don’t where buyers County many. most have Brothers orange right nearly County We of for in

in is buyers of County, chatter will Northern County supply steel side, feeling we about right the we’re the but only out also Northern issue, California, now in but California in the are is where really throughout some see to lighting, where few operate. directly yet. an With respect that and or appliances, Chinese become small or there’s buyers components coming China. which some the of County. or Longer-term, foreign manufactured LA full have feeling that appliance not whether either We Diego being interruption in we’re were the We Cal very concentrated orange San

Marty Connor

foreign In backlog And to it’s the that right to buyers now. sales approximately fourth X%. percentage our quarter, of was down our

Truman Patterson

Okay.

Just one follow-up…

Marty Connor

excuse our quarter, Sorry, In Truman, first me. excuse first quarter, me.

Truman Patterson

Okay.

you. Thank Okay.

Just by to have from? the you virtually of coronavirus, understanding follow-up from China an alternate all the comes China. you It’s my do and supply that in that outside U.S. impacted being on lighting actually writing chain supply that source China can

Douglas Yearley

product And any worst a until little always would the hit, that chandelier can house up Yes, the if we arrives. make probably one to sconce be be was temporary a the do. lit with through get there’s impactful, case while you lights because it and and least lighting

Truman Patterson

Okay. Thank you.

Marty Connor

you. Thank

Operator

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

Matthew Bouley

taking questions. for you thank my Hi.

mentioned around specifically, margin margins of I the to within of Pacific in the that Delta kind ask So, wanted lower that XXXX you Pacific. lower and mix

that is to we of challenges, profitability, kind kind a there business? risk turn part do of as the the the mentioned move rest move the towards So that expected challenges average. half margins the underlying the those as in to the continue second you or of higher, you. margins Thank you I Pacific second Is of they’re the the that expect to you’ve fleet sequentially weather the past actually operational-ish guess. that, Pacific margins alluded above are

Douglas Yearley

you. question. Thank a It’s Sure. good

So margin is the out than average. Pacific company coming of the higher the still

versus However, lower. it the XX fiscal down to XXXX creep to basis is margin And points the going actual is No. in XXXX XXXX year XX California average? projected and XXXX basis points to company Is lower. fiscal Seattle,

Marty Connor

was other – the make I’d to agree In of to but our the think think couple mix that, volume. XX% I points I with Pacific respect XXXX, shift. with other total the around

from approximately around to to single-family generally also our which expect margins, X% of We X% be total business, in down decline XX%. is to XXXX. has higher it which And going XX%

Matthew Bouley

I Got question level it. margins you for you of has margin. backlog result have color. broader that that kind because about just gross been strong strong and a visibility, Thank guess always And a a a Understood. longer obviously, – a the of as of generally then of level visibility guys there’s then backlog and

as Is again, as suspect has these geographies, the your of kind reason Metro you move of Crossing, at has et level that do suspect that the business issues there So, mix – of the past we visibility changed? cetera. product to also just has changed, any kind mix unforeseen changed margin

Marty Connor

No, believe I Matthew. so, don’t

we quarter. unique circumstances had some this think I

we – And our that is sorry, delivered X% matter didn’t of a compared margin. have quarter. our is deliveries for I’m specs total to up X% generally to normal lower XX%, sales that of quarter as quarter, specs units which for percentage up or this our this or X% X% little even Another – a was mention for this

our result a impact this we’re I of going pieces, on long-term think to lot visibility see but of moving a as don’t So, quarter.

Matthew Bouley

it. you for details. I appreciate the Thank Okay.

Douglas Yearley

you. Thank welcome. You’re

Operator

Susan comes Goldman question Sachs. Please ahead. go from of next Maklari today The

Susan Maklari

Good morning.

Marty Connor

Good morning.

Susan Maklari

labor out? the trades be the be Are similar kind what the further from that mentioned about – as not peers on is question anticipating availability further you’re of of this first times hearing just looking it, delivery My results in quarter, lot will having probably. the we labor, XX% out any Could the you more your your real growth extended? And are reporting think look and of your constrained yourselves change but you and kind a that around, of order ground? seeing you from

Douglas Yearley

it’s Susan, great a question.

and there numbers, is As order we, in continue seen stretched Are there’s we in leads be yet? But we that. in continues we which trades – these pressure will be trades certain talking markets, to would industry, it. going time going I it, less robust Costs post need to as if it we’ve we of certain the velocity an also than feeling expect and about are time. the to No. in seen be up manage the that construction field the this will pressure. pressure, with have to some beginning cost then not spring think season cycle have yes,

Susan Maklari

aware All or Okay. kind there is a going for And these the with we then you integration you talk of that how just that. bit unexpected anything about you’ve Thank recent surprised of? and you some little more of has maybe can that done? acquisitions right. should anything was be

Douglas Yearley

all It’s all They’re well. going early.

and accounting we’re put that compressed operations. once So, they below accounting dealing margins purchase really normal will what purchase with be we have us rules have behind

the good of but One surprises. so ago, acquisitions far so that obviously was so two early, very very, with is weeks no

Susan Maklari

Okay. Thank All you. right.

Douglas Yearley

welcome. You’re

Marty Connor

Thank you.

Operator

Capital next Markets. Dahl of RBC from question Mike ahead. The go comes Please today

Mike Dahl

Good Thanks questions. taking for my morning.

on First in question. comment the and gross made going just back to to response question you Matt’s margin

I projected done think only the little people down California some be in margins surprised Seattle, only are bps a XX XX. that might

half that, out us at down including those took that respect bit our of what’s the communities broaden a just sense in maybe, in And in pricing just pricing magnitude? a little projected talk of a margins you versus as to of research more up wanted California your embedded again, the vast give of the about own the the to dynamic, second So, first little any more half just XQ. you give be end Can part year you second power, that majority I half guess are to on versus first can half. what in I of with color the

Gregg Ziegler

we overall we’re see where we for XXXX. margin margin answer Gregg. it’s gross decline price to increases. – let I��ll talking for company I’ll would it about gross answer fiscal and relates fiscal fiscal Doug we were average Seattle, talking on an in XXXX Mike, versus about, XXXX, When as on about gross and the California Hey answered margin with

its so negative California increases, price on has overall let gross mix then I’ll XX Seattle with same on for points. overall company points on answer. story margin, a basis And Doug impact only And in at pricing decline XX basis

Douglas Yearley

mid-January. yes, because another on what increase of communities go taking So weekend that are their good allowing decision is in a through I pricing we we crease own, company-wide right; coming with the Monday, to sales It price community-by-community and There’s you’re had when national up. many sales company-wide on described those as prices pricing just a sell the does March except X January increase. and what in-between

increased also our have We the studios. in prices design

the We before of purchased are have options into that our studio. the also the increased at the being design move structural – from you prices community

We to premiums. are lot looking increase also where possible

different to and decrease way, a incentives. lot of So, the also looking way by there’s we��re

be that And are they used continue through am have of they will and hopeful tools this been so to because and being all spring. those effective right strong of demand, I effective now, the

Mike Dahl

that follow-up is the of second some fiscal into quick will it That’s changes be get you of fair that in XXXX. but benefits helpful, just some Doug. kind half, of carryover them And that may on one, these say a lot to

Douglas Yearley

be is sold described in just into what year most part, September, this are of April. a will early most some for benefit forward, August fiscal what homes that and can the XXXX. And or have I’m home inventory early to I here sales with still we course, talking XXXX. but From even communities of is about Yes. that There March spec deliver

Mike Dahl

thanks. really question My the share count. Okay, is on last

count So, necessarily in the end the it’s of reflected the maybe, a towards quarter. much quarter, I first stock confused think of the it by been wouldn’t how given you guide share so little purchased. much have was And

be You part say is deployment more quarter full year up share big shares? count then share to going I’m back XXX remain million? a reconcile why forward, second buying to And going only a trying the to why the is are the going you’re bit stepping yet little if buybacks progressively count of capital

Marty Connor

it’s then function the from share average to just that it’s days implies. full quarter, the X Mike, January the a year, really whole In weighted And count the the of just XX math math. it’s first XX the November thing. for

Mike Dahl

What was count, your Marty? quarter-end share

Marty Connor

in Hold get to second, going We’ll Mike. to on that a a you minute, find that. we’re

Mike Dahl

Okay, thanks.

Douglas Yearley

for look question. let’s that we next while Elisa, answer, on the move to

Operator

Certainly, Kim Please question ISI. from ahead. go comes the next Stephen Evercore of

Stephen Kim

the I color. very much, Thanks of lot guys. appreciate a

touch base margin, second of XXXX last one about going versus, the mentioned on points be you in that to XXX half margin time I gross this was basis Just to the up kind seems to first Marty. half, year dramatic the XXXX think, that did And observe things out. just I as well. and that this more would you call in XXXX of have to

you versus Metro I deliveries is a at to you that I’m coming something difference lingering that? really so half front see the it going a be, still Crossing margin, was effect between we the curious for of low as to this to aren’t half. of because back account why And got maybe more striking else? And wondering want Or is going to

Marty Connor

order it’s of growth the I right? cadence in really the the think prior year,

Stephen Kim

Okay.

Marty Connor

orders, discounting. it. orders in it when fourth have didn’t to our until bit in your positive get in until a Generally, little decline fourth quarter a orders. of take when in quarter, price year you XXXX. We positive you a last aggressive into rather a a tendency than quarter more decline we have There’s Each you the have a had

the of increase happening in are until sales. most we’ve so increases reported first not an And after

Stephen Kim

Okay, got it.

bit So of it’s lag. a little a more

it’s environment you addressing, I the you enjoying with – about like guys? we really we’re margin here of been where here reflective see what is housing XXXX we’ve is that’s Mike that more really think, to what start kind of Really, talking really about that So a recently. XXXX were for is more

Douglas Yearley

Yes. That’s right.

Marty Connor

That’s right.

Stephen Kim

that respect backlog pivot, if talk you’re your your on And homes. I somewhat about likely to with the ratios. impact was you Okay. of to lower-priced could moving curious then turnover

see at we or wondering guidance ratios. backlog your that year, I imply significant to part actually conservatism several an whether improvement to Typically, typically that quarters closings look or in think turns a by over And up. backlog next if your not the turn? product was have I that smaller turnover I the for or a faster was think, on opportunity doesn’t seem if there’s lower it pick

Marty Connor

wouldn’t consider additional in numbers. conservatism the it I think I

I seeing where we that’s slow periods And think down. to in have what I in we’ve backlog guidance orders, given. increasing conversion our you’re think the tends

Stephen Kim

true. That’s Right.

guess. But higher probably enjoy somewhat turnover XXXX would again, set okay. ratios, Okay, to up be would I

Marty Connor

That’s the of velocity the price lower plan with and some quicker respect entire shift to the homes. points to

Stephen Kim

arc or going dumb you Geoff pay a we as a you talking lower that, whether transition. well.” think wondering of or then “Hey, Sure. And dumb you way corridor, bit about dumb the a to concept to absorb I I Northeast if Edmunds. this to we’ll when I’m not, move a going Bob, which outside that bought you first And price this points? know apply bit related tax to acknowledge, kind not And I’m that this pivot back should so we’re tax thinking of somewhat we XXXX not? tax, why of of move as remember into

Bob Toll

for in it’s to to appropriate still the – the your you’ll going up underwriting. dumb and surprised, be tax think you’re dumby. I Otherwise, end

for you various don’t with the have underwriting much pretty these that the we significant rolling same. you. have, buys We machine are things once So make

Stephen Kim

That’s Got Great. a good it. answer.

Marty Connor

head dumb have you have where wrong contractors or to from and entry over you organic which we brand of is low-priced and the for we’re and adult, builder four pricing land houses, yet a an there’s a you enter other and has upgrades the was some that And you really market, go the and when if When architecture absolutely, three doing, a tax a we into is the enter active the new learning price at big conversation machine de can point, for example, builders market which can. contractors, simpler buy a selections, at the through a about novo, I trades market less – lower which it. And can’t I that the you, to we’re the you think division similar tax, huge want I presidents. operation no start a a is with new work wrong we buy it a it comes that that to kind start-up. and and what product architecture to and and dumb remember resembles, of associated what buy new get line pretty

and is I offer what we that. and offset of that little think brand bit of have some we we through better, examples a our

we’re described learning, around as think I still having you but kind new and enter market. dumb in you further that the of along we’re So understanding it our what definition when than tax the arms old

Stephen Kim

Thanks rentership. from that’s great. that, me Yes, helpful. about is a Last very actually for guys. question question

the have of Can the You’ve from BB the you been of points personal and for has markets in issue strong you up stigma. the – forward-thinking price that little and you’re and your the And about color you a bit you made terms the for curious that believe And is get also very that you’re give is do develop, rentership Living if presence, declining? rentership so? when to build-to-rent given single-family trying think relationship that the what its losing of in is and such side whether of forward? with you market industry market. the receptivity I’m close toning stigma you a going early believe And rentership implications of us communities seeing do the market the

Douglas Yearley

Yes.

nine-foot pool it room, or or lock the roof, the whatever on I location, the travel winter of with we I live a the are in and the think the many communities the the new it’s world unit, the lobby, it it’s ceilings, like and the of and that you. simulation the to ability apartment head multifamily And residence Florida of and to that leave feel of club, gym, the declining. function building golf others condo the think living the finishing the quality

So, we reasons they would the – for who when and are now rent. our we look typically renters, for they at been have the demographic financial reasons, we deciding, lifestyle buyers, but not to how that want at are amazed of wealth

not it a there little I declining. we that XX,XXX-plus Apartment through Living of BB positioning definitely it bit, group. think yes, so through ourselves is the Living, units but our And while only to are And is advantage take think developing stigma, we through that, are I

Marty Connor

many of are and those and have to, those frictional products, some be perspective of I there to implies to are perspective, that single-family in because people rental think of that in business but seen a from our in there liquidating the cost they financial from be study products, estate. disposition real terms in a having because maybe ownership challenges the they want their past choose

So, last the earlier, of quarter. I XXX.X answer day the Dahl’s Mike would million shares question we of agree with outstanding have Doug. to And from as just

Stephen Kim

guys. a Thanks lot,

Douglas Yearley

Stephen. Thanks,

Operator

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

Jade Rahmani

much. very you Thank

to more could recurring those are an space potential than creating sense? On the on volatile you vehicle typically sale others the on are Do D.R. be the pursuing if the have I and on which that apartment you any unpredictable Lennar in was in whether permanent a based sector, combination And if gain REIT my type have with in the In rather makes earnings capital to which there in that are any market. business, thoughts like assets. hold the any homebuilding REIT Horton rental wondering earnings, experience, and valuations strategies? maximized also, similar interest

Marty Connor

Sure.

venture we think a or choose or to portfolio. separate those a assets But REIT-like to I very that we in that we or flow that’s is strategy joint balance valued cash long-term the operations, entity from that multiples hold hold, remains those on grow sheet from to seen. via may form So, study be REIT operations certainly, for of funds REITs us as appealing multifamily at assets get continue the whether to –

combinations lines at of with along any terms discussions other moment. In builders, the those the not are we having

Jade Rahmani

in Living? of amount equity rental business, as City invested just remind you capital well the business the us the can each of as And apartments

Marty Connor

$XXX So, just the now reduce rental around interests apartment where expect of And course venture projects, an million, under is future we investment as land. right million billion. although have $X.X joint year that in by already Living we the $XXX has sell this purchased we City to business during of the

Jade Rahmani

you. Thank

Marty Connor

Thank you.

Operator

go of Michael Please comes Rehaut question JPMorgan from next Securities. The ahead.

Elad Hillman

Hi, this is Elad Hillman on for mike.

Just to and some closings, you that XQ from Metro you gives and what could confidence confidence first, of your you’ll these both given deliver at they of of mentioned? all the delayed delays closing you Crossing the won’t on on be further or XQ other most level be locations expand the able

Douglas Yearley

built We’ve Yes. conservatism in numbers. in our

a into seeing month quarter. second We the are already

now delivering. deliveries Some delayed of those are

now waiting uncertain. ago, far started are day Crossing, get still things along units three, as We occupancy inspections enough delivering six certificates months when every for we Metro to when of and at were with two, opposed more four, to were

are that have – reasons QX. main the those those we mis-closings for confidence So will occur more in why the

has we am on We are very other fixing you, markets, problems Metro by focused, I right, have embarrassed community and I is that is should project. a Metro otherwise have assure Crossing huge Living It misses, It terrifically large performing Crossing. the getting have. more in been I mentioned isolated, in lesson City what It a those division. had one learned. a very like been built

to It stick, it It it is of high-rise it podium. top on complicated. While more five a or is is was storeys in that similar all condo. four incredibly

it and we it. painful. But lessons, We fixing has are been learned have

Elad Hillman

kind the the level for changing the or little we trends? pricing back to lower gross lower going to margins would luxury? normal margin, to And to even And than in to you. margins maybe, XXXX? looking regional given the longer-term. more mix that, XX%, Thank Okay. XX% FY mix new back way also bit What it be right level but adjusted to expect mentioned, Should about or affordable you be XX% better closer just the some and of of think a and margins

Douglas Yearley

not to that out going crystal with get far We’re the ball.

– we are leave which we we’ll we’re and very think by power our pricing experiencing and now. selling is it what where encouraged today’s today, we release said environment the I was right

Elad Hillman

you. Thank Okay.

Marty Connor

you. Thank

Operator

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

Jay McCanless

taking questions. Thanks morning. my for good Hey,

this The builders similar from now lever don’t environment one raising any years push were had, the too flexing beginnings implementing are feels XXXX was hard? right learned But so prices that hear higher. of prices. very lessons push encouraged now affordability there I the ago to And I the you’re two when or you pricing that to guys first you were

Douglas Yearley

Yes.

took rise in blindsided shock. think increases, like pushed XXXX. out industry. was price the in feel me, pricing I our interest hard. power the our wind the or back a by I the don’t got summer significant of fall think don’t sales caused excuse of we We then, that it and pricing rates we too of It sticker

was exception of all that was hit price fairly period but being the I out But it Prices what we think I to and the a think took measured. places, were time few then look did not back going I West, that were deliberate. particularly of with it down aggressively. up, rates. we

Marty Connor

it the we have X.X%. their the mentality. Yes, interest in underappreciated relative psyche to from impact changed changed I rates, think much, their X.X% the consumer affordability Might not move that but

Douglas Yearley

thinking year, that in be before could Fed closing, because going only months the to XX up messaging you're over And when you're mortgage And takes your XX days remember, house, low you And X forward the X.X%, lock. build it next Xs. then not can't until X.X% the we're the to to to but lock I X.X%. can that into to when

bigger coming. point than around was messaging move. It a a one just was had what it impact So that more

Jay McCanless

you Got that. Thank for it.

demand there up the potential and could is quarter, had the out you you're bit that run maybe talk the this bit The little just specs in the more And to faster the little behind What's then issues a other a close this Northwest? closeouts hotter anticipated? land question some than of a margins had, that? also, the I all about little and older you that bit what gross seeing you get all

Douglas Yearley

then start-up there, XXX% just margin, I'll and because deliver. of what, Seattle, the it Marty, in one small Northwest, best Seattle was and Portland very is in first up five, is of six first to contracts the down… focus quarter. the we're slow a highest ago, our market, on bit just Seattle beginning for to a was years So

Marty Connor

Two years.

Douglas Yearley

strong And in passage because believe. seeing economy ago, be now right, in itself are what growth I new it think it put I limited the it's three was absorbed five The come sticker the economic And always I has back roaring. what or there's a time we got that worked from supply us, years tremendous of had when to in some baffled Two very was saw that shock entitlements the a are so coming difficult. shock, the – because to was has market. just demand resembles been sticker back. just now just out There effect. has market and bubble And increases now from And has continued That such a pricing and bit roaring. years we there ago. the think all was in four we Seattle, we job settled it, of place that

margin, give the to it terms of Marty. In you, I'll

Marty Connor

Sure.

quarter, respect two, four closeout pave selling the costs And the referenced it left the with aren't associated necessarily in after margin had says municipality are were the they we few homes. issues those than bonds that whatever we early to way the either homes the don't what We ourselves take a community be four community, of wants finally deliver road our those better three, the may with going in that this margin So trees, estimates. costs because happened part we we off higher years costs estimate community. last association to as are a gross that three some like we or as get or there. These to the particular

that last I your burn the answer say, question margin is don't be to we few would a going So Jay, to do. through homes something to community pushing through I'll that, think, look to in

Jay McCanless

the Okay. that. Well, those didn't closing know two thank on loop you related. I if for were

taking Thanks. questions. you appreciate So all my

Marty Connor

you. Thank

Douglas Yearley

you. Thank

Operator

Center. Please The next Research ahead. Barron comes Housing of question Alex today from go

Alex Barron

second about what the those to in builders guys, in that operating most you business that? particular What switch some hi to changes prompted is or regions. was, the what for do it acquisitions? rationale wanted the you or you're Yes, liked that then And that the Is motivated the I way reflecting question recent the understand thanks. region? the

Douglas Yearley

So definition is responsibility SEC presidents. reorganization the geographically management went bit of we our five territories. And the regions better who regional for a in here to of regions – certain under align region by driven new rules through a with has

now Ring, to Regional Seth Oregon resides and example, promoted and was Seattle. For who in Southern for has responsibility California, President California,

is examples of changed. Seth. rules, region has regionals. definition – same that because apply And to why that is the Pacific tied reason to SEC the five And the So all those

had Southeast. – acquisitions, we on the acquire our fond are and the know growth been to great Greensboro With there's eye respect we the our a eye of there. into We terrific in We've We Southeast, too our been quite Atlanta. recent had presence builder has down on coming We to small Atlanta. Charleston found and

Marty Connor

Greenville.

Douglas Yearley

that we Myrtle Greensboro Greenville. in built sorry. Carolina. Greenville, builder Charleston a North And Sorry, and Beach. in found is Greenville, in they threw

and eye also on weeks our a higher density that mid-rise, infill our an acquisition we Nashville, more had We builds found town of ago. Atlanta in builder Nashville. Thrive home, few recent that's both and And

put of opportunistic to terms that deals able all were – in we terms in kind think us. together were sense we for they and of make strategic So location

the rationale. So that was

Alex Barron

right. Appreciated. Thank All you.

Marty Connor

Alex. Thanks,

Operator

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

Carl Reichardt

just thought, surprised the Hi, little Thanks talk squeezing on bit surprising I talking you me in about rate can mentioned in. the units. relatively was the realize can you than number what for rationale it Thanks. guys. the about you? for a But and was higher you of rate, small Marty, cans that can we're or

Marty Connor

think there was anything the don’t in I necessarily Well, rationale.

where job but been I the are in run think Crossing their maybe patient, out. cans have many concentrated elevated has Metro patience of those the consumers

selling little over us what in up. expect But when the see around you this is that's And a the that a market I surprised was up. rate tough, when market quarter better It for might we bit runs think elevated environment. that can few the Our cancellations past don't It X%. remained despite generally is quarters. go years to good, elevated

Douglas Yearley

been a markets, are of some our markets there may those be higher points Carl, are build within have the cancel. these where unable little time of rate our it acquired lower agreements there some cancellation that And you expand much many that price requirements Metro that to said, we lower. buyers. been the as those rate, and as we with even choose not when because And builders frame required bit On there's cancellation have pain do to in Marty deposit could the units has be elevated, price at we points, deliver because under Crossing, was as

higher the to contract bought the and most of another those price in silver they right underlying and so price. either is So did. transferred unit units the increases canceled, have that there they some within The those Crossing get lining resale or have of has the significant than early had only to process out, been had that we have buyers, who Metro

Carl Reichardt

you, side. just back on I appreciate that. Doug. just strategic then Thank the question And a Okay. labor

– build. from a As have don't builders turns mix you we fast settle who to of and We busy. their upgrades, expect lower this. up know, to keep to as the And offer way options spec in of been number more do them the we much moved simpler has narrative labor, so end it's capture to

Your with time, going product, to over upgrades. complex, even offering options more and still be transition more typically is the

building you're or So, markets scale, the in of Is where a markets it pool this of can What where the to feel some those competing in continues retain master builders? what can scarce. even do in you given the that labor be low a with you plan that you share curious different subs, are it complexity lot subs, product is capture how to your the don't have other other of pricing? do what relative can you Or to or on end? guys you –

Douglas Yearley

luxury have make we lower that will will a sure we access subs. we venture into to point, Before price affordable at the

will around get make arms in their and sure early hands the pricing. plans our We we have

simpler. successful been there's will the be where a They will better built Toll lot customization. more street. because community are typical a more the alike have look We than Every house down houses prices in negotiating

And some so go for we is cases trade willing new some less market efficiencies. to because And the have in in work it's that to in base that a cases same the of trades. we

and similar company can because and price, the excavator the With homes at a can house handle other very typical they like the the just concrete the the think framer Toll the mechanical front-end handle I Toll the and the trades builders, trades others. higher to are they

But that trade has much there. confident, complicated have a us when you us different finishes, which and higher We a the a and base work, get long to we're time, work, trim we into to tend loyal the is more with tile they'll believe of the been for working be quality. is

And problems. we market really will is segment do haven't venture a our in we into price those opportunity so labor market. trades or right different seen at a that point that will far, long diligence answer But the before find price on the we to

Carl Reichardt

appreciate. I a good front-end I both. finish a lot the the trade that. versus Thanks point. is Great. appreciate That’s

Marty Connor

Thanks, Carl.

Douglas Yearley

Thanks.

Operator

And from ahead. go comes Weintraub the question last of Seaport Mark today Global. Please

Mark Weintraub

you. Thank

you January as as and if was I were quite alluded yet? in apologize You in any did rationale up January repurchase openings the quarter. buy what the obviously the had back stepped did and there bit increasing share but fourth a this, you to you any stock for it you much in

Marty Connor

So, I think you mean February?

Mark Weintraub

That’s correct. February, yes.

Marty Connor

out are mid-January from We Friday. until blacked

are mentioned, keen this of week. Friday As Doug we on

time, since our own. So, XXbX-X do we put stock it might the we any but of that do – prices that's much generally than on a of lower during markets. choose place kind runs program have in period in not a open bought mid-January. its It's, We on to

to as capital that. It's is on a return allocating focus on for equity. rationale with buybacks as Our simple

beginning find Our now. close year's in we to next was book stock, that same shares, We right those when bought trading ourselves value. all environment

Mark Weintraub

than it you quarters. – It's prior at were the even somewhat buying few higher Okay. levels not dissimilar,

beyond… I'm in anything outlook? of understand, this So increased just confidence was at trying reflective to there Or play else was the

Marty Connor

on I bit was little going be, know conservative think our a in XXXX, more in we were did we where demand to holding stages of to when cash.

more Now turn as bit in our a been we've demand we've favor, seen little aggressive.

Mark Weintraub

Okay. Thank you.

Operator

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

Douglas Yearley

thank much. very Elisa, Thanks you everybody.

we have would of For colleagues to and all what prestigious passion great the the by locations we conclude up to worked their for wrap service. in grateful customer and I I'm provide very is homes who like acknowledging of think exceptional our your build and today. tirelessly their all Brothers all to Toll questions performance. understand, some in like and our are now. we of diversifying. been our the dedication. We strategy. now market has lumps some it with we're We We taken isolated the have a recent like how talked bit right like Thankfully about. we've We areas right guidance

on I to and learn thank to very and move will continue gain we those we trust are focused support. We you. and will And and hard will we work forward everybody's

Operator

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

You now may disconnect.

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