TOL - Earnings call transcript Q1 2021

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Operator

Good morning everyone and welcome to the Toll Brothers First Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is also being recorded. And at this time, I’d like to turn the conference call over to Douglas Yearley, CEO. ahead. go Please

Douglas Yearley

Fred Welcome and hope Jamie. well. you joining Treasurer. Marlett, Financial for me and of Thank Relations; Ziegler, Investor your and Senior families, I Wendy Officer; Chief Connor, you, are Marketing doing Senior and us. VP today Finance Officer; you, Chief Marty thank Cooper, Gregg colleagues With and are VP

I forward-looking caution you had events, about information other I that chance based earnings our I ask to from the factors markets, on significantly to impact read last our statement forward-looking many control release and start, on website. night. our in the our statements on pandemic you have earnings many that could are and I this housing release Before a and beyond results. the economy, affect call read of financial future world assumptions on the you hope

record We that are order to to with quarter exceeded our from growth we first very strengths. We our pleased playing guidance market nearly a as every first benefit and continue metric quarter is our on achieved results.

quarter, per very rose business and performing XX% Pre-tax XX% ago. earnings one to Our income is in rose level. high year a at the compared share

We and margin, and improving are revenues leveraging controls, increasing gross greater our equity. costs SG&A higher with return on

tough history XX% quarter] units homes remains in quarter. are first our year nearly all quarter, key our in homes metrics signed second our and grew in comparison we Three our across fiscal and dollars the over for of into raising when XX% of orders in deliver power XX% and first QX fiscal are fiscal enjoying nearly We weeks to markets. rose the contracts fiscal in strong year most guidance [XXXX’s against our full In XXXX. of XXXX. net all incredibly expect pricing new in Demand

difficult another store our over year, despite overall, markets approximately weather comp the and the and XX% snowy weeks. Our cold of over deposits XX% few up are one-third reservation and to past non-binding same last about impacting

in and units it's is Our third this expansion in XX% deliver May. especially home quarters our margin after we a backlog year, as we last up and visibility which fourth provides project XX% significant and sold dollars gross in

As expect the to fiscal take a current our Based reminder, most homes year strong months we X experience further XX of expansion where margin continue dynamics backlog gross this into power, to XXXX. to we and market pricing months on deliver.

both market time. supply benefit just of favorable Our months homes us data their resale of and continuation on limited remains the buyers supply existing for have very of remained the have above there appreciation Interest results driving selling for tight. of prices for Realtors the three all decade and on support of a record National reflect are reasons. market, to for to extended nearly two released the from a rates by According and a is sale low placed affordability Low low. last continue are buyers price. stemming Rising home These a an upscale sell signaling upgrades. new rates and housing and re-sales period According Home X.X home. a with demographic one-third importance asking contract than home accommodative the policy. favor homes tight means low week, our weeks, in more continues of to homes homes Fed can all under rates less market Redfin, appreciated homes the the Association half supply values. trends, of of administration robust renewed quickly that for to of mortgage more quarters a a at are housing following market underproduction, mortgage to supply of from Approximately and our The sell. trends clearly

also So, sales. supply pace of and the with the frustrated the frantic home of resale process unpredictability is pushing more buyers existing new systematic homes of limited market to

at the been them our the opportunity buyers to build-to-order Toll their lifestyle. homes up, This ground their to their from And offers customize the design important our has choice. it Brothers, to addition, Brothers Toll match evolving to model allowing one number homebuyers. homes is In never advantage more

They customers tend homes, stability, rising home more work stock want home, the and from greater the job prices to do increasingly their ability to they personalize have flexibility to accumulated have the and Our to have means market. from enjoy and wealth it.

on our the in buyers in first from lot year upgrades. fiscal average XX% premiums, This of of our and options, price or of up approximately $XXX,XXX about and XX% quarter average added XX%. quarter, This XXXX the longtime base is

more customize customers Our they margin. are generally spending homes, gross which is our accretive as their to

seeing impact positive and also are We trends. a from demographic migration

offering. home enables tremendous serve over Over operate growth markets wide range states have several geographic broad in us in and our entry we XX expanded of price brand in markets high We the spectrum communities both a past high of years, our XX were and footprint and to now to and barrier have buyers. points

to million to the XX homeownership, As luxury affordable our product to these transition lines designed growing appeal millennials are buyers.

time were XX% of first our approximately quarter, This buyers. customers

made the significant has this of has growth. of has new more the growth believe cemented market, in well work from we pandemic and it sustained sale, the we home eagerly homeownership with value the for end The a and widespread more forward for U.S. of positioned this permanent option, and long-term made the are in the consumer of support among These home supply of our are base. to population. appreciate a large pandemic, minds especially While homes we the the consumer combined home under looking trends, portion

XXXX. communities. out to faster grow selling of anticipated, count though position land fiscal first communities and the XXX Even year, we end XXX deep are foundation owned the fiscal full-year at approximately control, and can fiscal we the to expect from by business. that our are end selling an of grow community grow which XXX XXXX. the we or controlled confident approximately At from lots, of Our than continue a the or end at provides XX,XXX we we pace similar we year QX, to community Based in own year land our to we're end, fiscal on already increase year count is of X%

on growth, pursue laser continue and capital sustainable on focused remaining We to return and efficiency profitable improving equity. while

revamped year, standards are Over we the returns. efficient have the focus capital to past on reap land and our this beginning benefits of underwriting completely

deferred and dollars, using more upfront with efficiently, party are sellers higher acquisitions We and payment terms more are land lead more less expect much structuring negotiating In land cash we joint to arrangements. returns. land third venture, fewer which to laying we banking, with controlling short, out by option

Our times, increased cycle focus time. higher improved and more costs, shortened on building turns, homes lower affordable margins building luxury also result inventory should in over

Toll we an expansion combination and to lower and improved on and on be the these relentless Our long-term return upfront of believe positive return equity a year Brothers, also operational are We off XXXX. for for pay and with summary, even foundation market In geographies results. sustainable in price the into fiscal conditions, should and XXXX we the laying expect better equity will short points year long-term. land with tremendous efficiencies costs internal benefit our on focus

over it turn me let Marty. to Now,

Marty Connor

Thanks, Doug.

all and are cylinders. are Our well firing business Sales really is and strong, controlled expanding. is being on margins leveraged. SG&A

on our generating we And return land our flow. we are our quarter, one paid significant improving holdings. stock, We this debt, are cash In number priority. is equity. down back bought and grew It

equity we by offerings, more in fiscal year We expanding points expect fiscal efficiently, buying we land beginning to costs, improvement see approximately ROE, our our on further XXXX. improve XXX affordable return XXXX, are margins. gross luxury grow towards and higher and year driving To controlling our basis in

offerings, of which cycle streamlined costs customization have to the allow process our without should experience. distinguishes reduce and times home optimized and buying We quality us much high product sacrificing that our

this products processes. and area we seek streamline continue refine efforts further as in to our and Our

balance steps are In to we billion approximately improve forecasting million and In improve operating operating of our activities, XXXX, flow. we interest In cash XXXX, reduce addition from operational capital net efficiency, our record. fiscal to $X to over generated XXX are initiatives cash these sheet we fiscal in taking a year expense.

of generation our stockholders, in XXXX, to outstanding we enabled returning us year stock prudently roughly XXXX. shares. outstanding our have strong shares In Since while of fiscal cash of XXXX share. balance million of XXXX, Our a third to That cash with acquisitions will land quarter or $XX.XX our fiscal bought of average debt. fiscal X% builder per fiscal managing year and back first at an approximately in nearly continue price our a we repurchased $XXX.X our

our term approximately mortgages million of repaid our down land of purchase and loan also among money XX other things. reducing $XXX rate floating we This quarter, about some paying by own by bank debt of some $XXX million million, on

We that redemption the retired $XX announced in fiscal this early the March will our for extinguishment to XXXX. million as in charge due $XXX million incur charge second of a second quarter. Please of we also our quarter. notes be approximately and X.XXX% remember were just of the These early model notes debt in you expect of

in mid-XX% our capital and have range we result As approximately impacted over land. of debt retired XX% two expect annually. spend XXX for $XXX ratio the ratio our our first This a to mature year balance acquire second on be our our this retirement XXXX, quarters million the lower income expense to result, interest mid-to-high in with incurred quarter. planned million of of year of to interest our at XXXX, the to scheduled be in net should end have to in February the statement $XX These released ability time. At expect and X.XXX% debt to we notes outstanding end, sheet we Coupled to the to range. fiscal expect reduce million approximately not adjustments fiscal in by of capitalized our

land simultaneously fact, steps first position at of In our year-end approximately lots XXXX at took while quarter. fiscal from to the XX,XXX end XX,XXX we these our expanding approximately

land acquiring structures. are through capital efficient We more

total year-end, one focus, to versus of was continued land As our versus part end first fiscal of owned. optioned the quarter, ship ago. the we our this more to year at land land in buys of to XX% and have XX% up XX% of Optioned

of account, or down of XX,XXX fluctuate is may January ratio of from already we owned that to approximately It and unsold spec our moves the are X.X XX% total, contracted into optioned XX,XXX our of moves of years backlog a lots land important in ratio years. to targeting [on them.] quarter-to-quarter, supply note in our to XX land Taking this have from homes this were and XX:XX model owned from Although near-term. or for XX% X.X as our

most to Doug X our deliver. As of homes months mentioned, take to XX

strong is The we first into of have So, the year half continuing. experienced over fiscal the six have visibility XXXX. we power pricing months past

at year This Our margins solid. first the its in of stands highest XXXX to half in our backlog ever expand is confidence adds can And year into and units significantly dollars. that that of both half backlog back we the and now fiscal XXXX. fiscal

rate backlog units in X.X% cancellation by Our quarter in X.X% non-refundable quarter’s average backlog, of was and of The of an first are approximately this $XX,XXX. supported deposit the contracts.

the of of full approximately we Delivery slower ever, and As full-year our the nearly on for mid-March total units, quarter with environment XX,XXX our sales for the deliveries expect quarter. XX,XXX our Doug X,XXX We May second impacted are guidance now COVID guidance fiscal-year. in key reflects all also XXXX. the mentioned, through increasing highest metrics second of between

delivery of in where in deliveries December, second guided the earnings our The XX% quarter to half. we of half is in fiscal consistent fourth on guidance quarter guidance year and XXXX second call first with XX% the

quarter delivered price for be per $XXX,XXX and price $XXX,XXX. for between expected home. $XXX,XXX is $XXX,XXX Our estimated second to Average full-year be is between average and delivered to the the

by have increased fiscal We the XX projected points for margin our basis XX.X%. gross full adjusted year to

approximately a the margin half expect of XX% the year quarter. This XX.X% in second implies gross gross in adjusted be margin fiscal We to XXXX. second

of half first the in year XXXX. margin gross fiscal higher even expect We

interest full-year is X.X%. the to It cost We what XXXX. quarter versus we also approximately in fiscal in and second X.X% of expect be sales expect

this expect fiscal As result continue we to decline and expense in of reductions earlier, to a the debt discussed I XXXX beyond. interest

XX.X%. percentage full-year approximately for guidance We XX our points as by SG&A revenue to a of improved basis the have

Our is quarter XX%. estimate for the fiscal second

cost permanent continue compared before effective in margin XXXX. full-year cost look our are fiscal across basis costs. commission markets to to optimize total, improvement by savings, We and expected points, lowered XX operating achieve engagement. overall for increasing prior while guidance, our We've we reviewed to to impairments further projecting year buyer In also improved our with ways our marketing more including broker all structure spend structure

with XXX at in counts We growth XXX expect fiscal end and fiscal at XXXX. quarter to of our community be the end similar year second year

Turning and to other of income flow. cash sources

quarter, shops Jersey associated of condo first able of XX a generated million to expected, garage gain with than retail sets close million. the parking $XX approximately of were and Hoboken, and During we sooner New projects sales two pre-tax of originally cash a our which

one a guidance Our close of others and later in ago, quarter the year. sales the anticipated these in QX to

equity. which In addition, partnerships selling generated land Brothers the into $XX newly owned during in Apartment we by retain joint ventures, two Toll the million cash quarter, we Living of formed of XX% we

able for additional to seen have market the and will this now year. stabilized expect we strengthen be sales assets complete apartments We we

our entities million full full-year year XX to million quarter. approximately moves for sales result, X land second up other for from guidance with income, the projected and for income the XX unconsolidated As million approximately a

me back Now, Doug. call the let to turn

Douglas Yearley

The you, this in Thank put, aligned meet are we importance take demand The Simply seeing of are home for growth the of actions are is for hard segment the And clearly we've several us future. every Marty. working business additional growing and the continued taken over the past to positioned home our diversify a incredible the to desire as strengths market. have to actions years ensure choice to builder. our time. with we our

team questions, the and Toll questions. trade open we to let's sincerely produced this the thank want entire up to for partners Brothers it it results open our quarter. Jamie, extraordinary up we Before for I

Operator

our Evercore question. first possible Stephen is with phone [Operator your Instructions] Kim mute? ISI. on from Mr. please go And question question. comes with today Is from ahead go Please Kim, your your ahead it

Stephen Kim

you that. Yes, sorry hear you. Can Thank me? about

Douglas Yearley

We morning. can. Good

Stephen Kim

morning. Great. Good Yeah.

we're across what hearing and is board guess surprising. terribly the consistent very I So, all not

but of it of course how just what over the how, hypothetically jump, hypothetical to two, hear do point know obviously, though, what you you buyer. cater You like rapidly, in articulate on be you a rate. of let's a people's demand My say in price that the as not kind guys And think anticipate these great in what a as by rate know, on curve, to the reaction If transmit points down a general it would minds is buyer kind a are going guys the basis have really and I moving be be to be would would that within that were you kind of you days obviously. reaction rise] folks would a, little response? the nearly or niche love were you you the [fazed rates you we unique market to see position, XX or – – sense rates timeframe see? that to into What’s, very is to the and bit month your lower may really mortgage mortgage particular a

Douglas Yearley

on month. to than question. I mortgage point [move quarter know that answer mind. not what's worried. on is $XXX,XXX everyone's I'm happy $XX a rate] More A in a Sure.

I think Powell] clear [Sherry it yesterday. made

think made homeownership clear. to extremely administration important I to has it priority. find the be be a They

know, about first a homeowner time, You $XX,XXX, credit. they've tax talked

importance get point, half low worried. the will even to home, the now this see a market, And resale relatively many our move to about, if just rate]. we are the other of buyer a you [tick for market, desire is modest impact continue of mid-Xs, the take talked tightness quarter factors not in The that over if think things choice. the a point, I to of it's get just priority the rates, I'm and the so that to significant. a high-Xs we There in not we

They the to homes When and weeks [messaging that from have of within they a just the through right stats hear the buyers a Our Fed, those where about seen they're homeownership, now the asking I not buyers cash. invested XX% of administration I that went of not one of sell. tremendous from our number Biden are our price, I the I'm have have home wealthier, very – all performed while well. always they'd stands think going it's levers, in worried equity XX%. I'm never buyer. existing know equity it's They're that out] have markets over low rates, from on thought trading now. mentioned of to They're our from and makeup the I in of buyers are benefiting and XX% trading important, and I minimize have two their LTV, home. we've the but

I okay. think we're

you above, I I two certainly. a different has they in move and rates, that and if that quarters rate moved think favor, three that feel three, was right conversation, could so But to now, in good or if know, we're really a things many fours other into Now, and our the shape. even with good there's be

Stephen Kim

their something with and always portion seems just – in and city, of view, closer way that responded bit example, older a if give you is processing talk if something a yeah, versus little we but but in the going just your let's the I'm to buyer of for more over a in Yeah, to of to pool, life different of in, thinking? they months permanent years their about whether have housing buyer your hear after how making think you access we've out you agree buyer six portion certainly has coming [indiscernible], a and as know, older the hearing just, seeing your of in – the imagine you're you we you your curious I know, this you all, – lot move you for could end could we be is, equipped And end, buyer sense a you the younger know love choices course in the about, in terms around talked you're had if buyer you I us pool you well sort pandemic past, worry different say that have buyer older the us, about are last, younger I the that the would indeed, the more to handle typical at interested hearing that’s your that's For previous move could going to know, like – to to I more of there's segment little your in a change. I but the wanted rate. the what so do you, deferring, younger versus would the to forward, in to forth. been been the differently buyer been know, bit and what articulate of amenities, amenities was had spectrum? seeing

Douglas Yearley

Sure.

prices, best we you price, lower are our buyers, significantly. is underwriting So, the primarily you down of have affordable ROE’s those the have in gross exceeding returning houses we come high as on millennials, and our they're predicted and part is this generating fastest focused at what business. luxury, which actually offerings more more and is performing Whenever growing very and faster and margin

talked pool is they're are the about, are benefiting the to absolutely year old] XX So and [XX-year as in they from life XX being number of the market million later out birth with in and therefore buying million that, we've millennials I because think wealthier. we boomers that than the one buyer

home. opportunity be series luxury that their company. so, a growth that our is first tremendous three affordable can And for And their is BMW

the the talked is they to resale over giving As they've The slower and risk. more bread that butter out them very, course is very are a sell what been at markets been for thought, our than of built move during their performing venture The up. we quickly company and move opportunity because more can about more hot they and as pandemic, to up house ever so a well. been buyer, bit the adult, as which has XX careful they've active buyer

demographic vaccine is first, are the we As pick action significantly. up that seeing that offered being to

Operator

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

Alan Ratner

Hey, the results. guys, good morning. great Congrats on

Douglas Yearley

morning. Good

Alan Ratner

more to the you're a makes and that know, color. and for the walked great little guys through about part differently, business a and underwriting Thanks of all talk you strategy kind love standards, about bit digging little bit I'd certainly how first about, the of a I thinking you bit information land think sense.

things context don't you the in is, are know and within or the with butter. you want of we've land company obviously a You you demand, rate, components months, and know, are to about they're pretty larger a X the absorption. how moving deals, of others, know, the land? know thinking you're know, for up balance other sheet, absorption the close your you one up you strengthened end lot further out. tying XX with not through obviously, you of months, from to And of heard off community the that peak burned that's of more bread the But You builders example,

you are taking of variables? margin? do forward going land assuming gross about you're account part think what buying well, know, today that You other So, all and you the as into it how on

Douglas Yearley

Sure.

to a professional deal – an year [an terms ROE. the focusing cash contract and pay significantly at the land IRR], our we there's either builders. private over it. out Wall margin, either restructuring us with pandemic, We're but equity, the other the good in And joint party look And friends doing needed on third and or pandemic, it's then on basis. banker, underwriting we we And banking, before land who less back industry, I feeds seller, So, continue doing front it a significantly. with a or gross more higher. internally at assign land we time. just where Street that we're standards underwriting as We're flow. with the homebuilding then ventures our We we then about we call we connected the to increased we see to during tightened look deal even started comforted the obviously am

grabbed and to And we another we that way get larger project at in financing. understand one we So, but XXXX get master in of half the put will company, lots. and we we have they're a And the the have builders to like comfortable XXX we and to we have, back old venture, the to offered the now joint built here's we recognize love lot And the the get [indiscernible] partner. opportunity, deals. that entire and would going news. rewarded an one of are good level yes, days, X,XXX, We that community, us. call offer friends off good that instead go it markets our smarter to partner sheet us. want a going is that to it, balance off is And our the split them, they be Brothers the other All Toll planned the

the we And And way the we We our that and like certainly get. like that. the foods homes are higher. shopping and whole We take price the of they they center. action market model the

So, we're with us in helps favor, and flow. deal that really

which it's all those most the will is not focus an new on underwriting of absolute components, that really waver from. So, unrelenting important of returns I these

Marty Connor

those coming other with to add return the a also is there land more that the builders focused space into we And builders. the ventures bank land are form on to on equity. would I capital or Alan, other joint

mentioned. So, for as share, are looking to Doug chances

Alan Ratner

So, a those And that and different companies. trying be it ton just the gross one of partner differences that come Are similar we and capital is absorb to at, underwriting know, because what homes on I'm notable the a new deliver would reason sense, decades logical price margin pace underwriting? you that. is you're to or it delivering well? performance figure been land they appreciate guess that for composition they the on, I for to going based going any I pretty up, still a point homes perhaps wholly-owned your a going that you've a I’m I or selling with you're deals look helpful. to you makes about? higher very though ultimately at in is because that lot these into based are the as efficient? how lower to especially where these out are you're tying think of going of then another as for doing more there's performance That’s thinking if deals No. generate know, be communities should turn a you as communities of curious

Douglas Yearley

There are differences, except carry the pay than gross notable XX%, X%, land some margin. will of pressure you a not And banker, ROE you higher when certainly be some that XX% and the on lands. know, you the to bank land legacy land could have

Marty Connor

we've terms financing Generally bank the is financing bond enjoyed. than in the not much cost different of public

really pressure it's that land the So, just deals banking show margin. a little on the gross

Douglas Yearley

not. should going deals will of increased have a by not venture deals we should seller Because terms underwriting lot metrics the that to banking margin better I land but account. some the I'm The The with take joint again, land think pressure, that have much. not. that compromise into to

Alan Ratner

curious up a know, you're breakout traditional option? What's rough today? splits JV? tying split Do you of you What's Just have give bank? What's the there? if a us land of, you land rough can

Marty Connor

don't think that I are point, share at we prepared to this Alan.

I we've to XX%. land pretty with think progress I'm pleased option our made moving significant the up

is Over of which need launch we've banked shifted time. in $XXX of million the nearly to past deals, backer which land we XX just the until land is XX% years, to couple [A&D],

$XXX deals another million, of XXXX, is which into deferred. for XX% look half we dozen As there's

Alan Ratner

going bit going something the about Should kind buyback, or a the this to in very as more agnostic little you've of the programmatic you Perhaps return is quarter range, forward in it Got you've it. like the sneak on the thinking That's know, it little you that be quite in I one try book gotten be very has a is know, past, that's this been Marty, I'm maybe, well. stock approach that we you times one that bit to somewhat going to helpful. value know, same to I quick more a up going go. or one am wrong? lower and focus. before sounds opportunistic It just devaluation expect stepped bit conscious when now?

Marty Connor

I be think to more opportunistic. hope opportunity be to to it's going have programmatic. not We the

Alan Ratner

Got luck. guys. Good Thanks it. lot, a

Douglas Yearley

Thanks Alan.

Operator

comes Dahl Markets. with from Please ahead Our next your go Mike Capital question. from RBC question

Mike Dahl

Thanks the the from and side. and there. mortgage stuff more about how less to rapid Good for and home new some on price Wanted the environment taking side existing home appraisal about up of follow rate but increases the given my the side on standpoint, been just questions. have a

curious, are or the by hear have anything in know think the do on side? kept large Just price broad starting strength with based you in issues the you happening the appraisals appraisal pace the tightness that's market about what’s to the, and and given you field,

Douglas Yearley

and are country. question. around the and issues just do sale closings Great asked for ops homes our rapidly. offered the yesterday team appraisal the We list and MLS we I having nationwide get we not our any into

comps is Obviously the of resale in the appraisers have the in prices the market helping us. and MLS. see are to the that resale increase opportunity quickly the an strength So, pretty market, in

okay. So, far, we're so

Mike Dahl

Okay.

Marty Connor

and of nice a issues, comps It's to does before those the process. arise be group through nice kind they of job any control own sorts too. mortgage of our of Our working to mortgage

Mike Dahl

end a just on the no issues sell, that And similar in in getting And of have terms it. either, that. full Got a your to up their comp? terms customers on home of appraisal follow quick

Douglas Yearley

heard We not that. have

Mike Dahl

of weather that in I little think, terms quite second sensitivity kind widespread, because issues to versus the I throughout year-on-year. highlighted obviously difference there's you question, of up, two-thirds I to of there comps of comments about quarter, that just might the Okay. half also the non-binding seems some have the half down you think a been think your a but second your by was the potentially it earlier talking know, dramatic My the fiscal the of which first second just frame I quarter, quarter and wanted be

imply, would know, up kind north you fiscal when, what way did, just of QX, a for in a well, sales a the non-binding, right you'd when maybe normally mid-XXs be function obviously, kind and now in you pace based to think that that, So weather? is range is you which about that sequentially of fair sequential of quoted thinking comps quarter, of seeing XQ, know, just about you're you three-month and for we're

Douglas Yearley

I’m Well, deposit with XX% same-store, XX% growth, delighted. delighted

We of on communities have our allocation. one-third

a price We back month and two a interested XX in we have X reopened raised her month closed the the XX effectively for and by sites and have take and morning first shut on people and of the then Saturday down. homes

doing drive – So price. we’re and that to

sure in of roads make to have we doing front We’re lots. that

to We’re backlogs hot]. doing [we’re that where extended manage

our So, in considering the now, up XXXX. ability in drive price to right and of QX QX even more business price, our was significantly

pricing great have power. We

it. of advantage taking We’re

We’re horrible country of we operate. managing the we many And two where in had backlogs. parts our for weather weeks

starter by one three So, I’ve COVID last I from the am that’s those specs payment. of for had monthly have houses remember, until we same past these a two where And really that being into or – didn’t looked month home finished finished could is because renter the metrics other year, for we the hurt a in up weeks. at got the best XX% mid-May, move mid-March builders

remember, but comp as wasn’t how move question just that. the your But weeks, of know easy as, you just the is three I’m reminding I in we question, everyone forward. us very know second at very look pleased. should terms your So, very, last I that of for quarter

Mike Dahl

actually what think incredibly I of versus asking. guess, be any seems But attracting of just you All comps still track, be – was to That sensitive I that. deceleration put just you that what can And market yes, that makes cognizant strong more to Okay. sense sense. tourists certainly was kind I up. makes and and of the That know quarters.

So, and luck. good thanks

Douglas Yearley

Thank you.

Operator

Our from next question comes Please Susan from your question. go ahead Goldman Maklari with Sachs.

Susan Maklari

morning, Good you. Thank everyone.

Douglas Yearley

Good Susan. morning,

Marty Connor

Susan. Good morning,

Susan Maklari

us of My just, over maybe about you know flowing work you you’re at a more color on the on the looking around first question through little that give how in doing thinking be commented spend broker structure policy should time? there. you we cost is some Can and that the

Douglas Yearley

Sure.

brokers to client So, depending the realtor XX% X% market that represented between of in comes realtor. local upon between sales. X.X% and X% with paid third-party and – we and XX%, traditionally third-party our a about The

new the We competition, other have kept eye what on homebuilders our an doing. are

where a the we’re certainly appropriate other but kept based line. what eye conditions broker. drops lead, in third-party of that market bottom and upon when come without broker And of And that what going have course an pioneer local builders are that are now We doing right are, we’re on to we regard, commission. to – clients lowering a the appropriate in this not number not

Marty Connor

it’s other it It the applied when In that be the the not it to. sale interior Sometimes options, what total base is structural past to just applied price. plus lowering may applied in be but house options. to base was house cases, may

standardized in base being more getting applied the it we’re to country house the price. around So,

Susan Maklari

Got you.

Okay. seen weeks this know the of and between Can then in the lumber last inflation have mentioned is, some the you of as course materials. be Has about you rising question and so, X% over to topic changed hitting is people that just inflation, thinking talking to call you record you’re year? can give prices around how color my talk couple follow-up about some big if it of And there. the And all? labor especially we’ve other been us movements expected there? I on and at about up you that levels last

Douglas Yearley

Sure.

significantly up more expect up went So labor bit fairly also because be and labor lumber is up we modestly to a pre-COVID.

all really lumber materials. for cover seen very other our that additional to contingency so, labor much in just go backlog future we plus prices we are increases and in that have And our more. confident properly sales the in up we’re and labor number the we haven’t budgeted seeing, But

in we our also gross even when margin the talk we’ve and second in cost the the and power in of proper think pricing year the XX building our side. XXXX to the recently, contingencies time to higher higher gross that we had So, half margin build months is months what then about because X of

Susan Maklari

you. Got

All Okay. right.

generally like, speaking, sounds or it offset can’t the So, that maybe you X% so, a nothing that with little but higher pricing? than

Marty Connor

to have we’ve Price we what lumber, and see offset in increases what and seen expect materials. to labor, able been

Susan Maklari

Thank luck. guys. right. Good you, Okay, all

Marty Connor

than Susan. more offset, Actually

gross that. showing Sorry we’re the why margin More improvement. is than about offset, which

Susan Maklari

Yeah.

sense, makes That Marty. Okay. Thanks.

Operator

Jade question. Instructions] [Operator next Our from KBW. question your Rahmani go from with comes Please ahead

Jade Rahmani

very you what’s terms It sure how the that out up New those much. versus seems that but you the ventures side? have pick sales seeing like of on in of wholly-owned? Are City Thank number joint a York you on Living improved, not plays contracts

Douglas Yearley

We are.

York first agreements and includes City, buildings of a to the out had year in coming Jersey similar City, Hoboken five the quarter we We XX ago and that New Manhattan, have and that’s sales pre-COVID.

in improvement pleased we’ve seen I’m So, very York recently. with New the

Jade Rahmani

Living as of just then currently City a is remind us And you. Can much how each expect what Apartment you invested and businesses Living you follow-up. the capital in Thank over and keep the joint venture continuing recently, the next XX months? there? Just of track been that announcements all made like trying lot progress seems a you’re to make it have of to

Marty Connor

that City that for That’s Apartment and is sheet million own Living, will quite there stabilized that lease-up unrealized projects. essentially and venture, land up of is million In are have between balance $XX sell $XXX $XXX refinance when joint phase Living gets and where a is million. we invested. on is a venture gain in in out There completed And business, an $XXX $XXX million the that $XXX of $X deals deals for level. Sure. around future we then our $XXX million in made In have we’re million in partners. fully to is just we out it million approximately it’s $XX and $XXX somewhere million other that million million. that joint apartment soliciting projects are stabilized we are actually of bit in projects

Douglas Yearley

million we into to to where sell $XXX equity the only million joint million put $XXX we down third-parties stabilized as And refinance $XXX properties. as keep of comes XX% land with we properties and ventures when and believe we that we other

Marty Connor

happen over the next to XX should That months. months XX

Jade Rahmani

very you much. Thank

Douglas Yearley

You’re you. welcome. Thank

Operator

Our question. UBS. ahead Nishu next Sood comes go from Please from question your with

Nishu Sood

build to wanted backlog how to is the just generation ask it generating much especially cash $X I the about an XXXX, $XXX Thanks. billion considering impressive given in XXXX. you flow number for year, was have volatility, million last investments After the understand land that you inventory out, just strong would increasing how obviously and there million? $XXX just land kind get of as is demand us your the the of that components walk Can through you flow running to well. and generally

Marty Connor

the some function of and time. the to non-core in really income in assets we of it’s the think the way just land later and buying a of the generating, I liquidations about we’re of we’re Well, some it buy talked restructuring then

of So, projection. confidence all that us give the kind things those for

to still land. We’re spend $X.X going buy to billion

land, We’re still to going million all after but billion cash to spend $X.X that $X.X develop that, have to positive we’ll of flow. billion $XXX even

Nishu Sood

the Got community you. was Got issue your – mentioned a just allocation, a on you. good And earlier, you third second obviously, Doug, on have. question is of to

much next communities pace absorption your of year continues mean, the of the run strong. we quarters? that here? couple as And Given selling on I as expected, to increase are faster that sales go goes very the the how obviously, become that on through pace very, does out than a just governor does

Douglas Yearley

Yeah.

able level We’re our to and right backlog it, just XX%. the focused on down to bringing is to up be demand through build

year too. per can Right built high-XXs low-XX now that has that the a settlement at taste. be community been This company in comfortable historically. we’re We’re average

we by So, allocation. that capacity increases. delivering we have we down. efficiently is through continued the have within order homes this the through certainly growth that Part XX%, is represented it of growth price client, building timeframe will and the of that recognize to XX% this XX%, but to come manage that Part

the that quarter – second a is comp. confident again, very very easy I’m So,

comfortable come the we to level will be – going to growth with. That the as year, into extremely is growth you’re order part So distorted. the latter of to be order distorted. that we’re that get down number the back see that But going

have a opened, order still have low, so some or show that the to base start-up pretty new where some a couple opened and in of since just is we significant you bit growth operations recently because can We of it’s old. build it because years a markets it’s new only

on eye community doing I count a thing these balancing keen as factors pace. strong with focus will it. I we’ll overall, the of communities keep we But numbers. And to growth have think with And forward, mentioned And allocated. we right exactly price into And that some pace. this certain move so being the we mention we’re continue assumes that continued

talked than we will of selling to land in by the past we the more buy done the that we land we more]. a for land buy even land numbers that that grow out the have this know But we’ve and two to grow XXXX to even today we have So, balance builder have had as match the XXXX faster and in [XXXX and the we or company XXXX. represented through we about we both may with anticipated to we growth

Nishu Sood

Got you. That’s much. helpful. Thanks so

Douglas Yearley

You’re welcome. Thank you.

Operator

Please Our ahead from with next your question. question go SIG. from Jack Micenko comes

Jack Micenko

conversation guys. in. Wanted Thanks house to this me the Hey, side. for to take fitting inventory

buyer today? communities in classify time You about new What’s talk is go we – does for Toll talk mix? more affordable you nester imagine as so there luxury of probably the or the How to about XXXX, it. however traditional let’s the XXXX? proxy Toll versus that into you much want that Can mix product mean, I’d affordable and empty lifestyle product or a of cycle shorter move use some I luxury? Where too. traditional XX% have between that downs Toll more first-time the

mix conversation, trying think where part just it’s to been, where and ROE understanding the it’s – of about the headed of it’s because Just how to inventory, actual that?

Douglas Yearley

Sure.

continuing your I So, XX our business, quarter, cycle even rationalization will we time are even you on this systems luxury Marty, it’s faster the of business, more come quickly get of traditional Affordable today. tighter can streamlining some Marty I’ll see with answer better running our talked last about we’ve give even mentioned But plans to the traditional mix? that with and homes, field, was down days luxury market, say, optimization the in we as going to that’s than cycle that the the shorter business. at because cycle time about is even getting it We bigger and and down but business. also time. give mix, in question down better the is

Marty Connor

Sure.

of XX% and to year year is XX% this next luxury around XX% of year. and affordable XX% Luxury this is XX% year. It at adult next down year. And should So, communities active is to this next communities. XX% go will around year grow

Douglas Yearley

point we’re to want affordable of, proud has advantage luxury. choice. Toll still I so still out, luxury And of choice applies That to affordable

Jack Micenko

because it. Got it. leave offline. pitch there Thanks I’ll I’ll we’re at X:XX. it Got guys.

Douglas Yearley

Thank you.

Marty Connor

Thanks, Jack.

Operator

question go with ahead And our McCanless your question. Please next from Wedbush comes from Securities. Jay

Jay McCanless

prices lumber to how quickly were some Hey, in of of those all realize savings quickly, if gross the just to fall you instead continuing margin? higher, could move

Douglas Yearley

Very quickly.

Marty Connor

benefit lumber I contract think it’s the because out production see are X already before. to that months to start X have we’d houses in the the months that

Douglas Yearley

Yeah. I net meant on the sales.

been Of margin away to not. you’re it of that course, sold, the in the But in of number hit months. for home if doesn’t if the terms – has right framers are obviously next lumber because a see going the bought, out lumber there

Marty Connor

Yes.

in and the immediately. it our But months XX through almost you, gets budgets You’ll our income it statement. when later projections remind is see

Douglas Yearley

it if of build. that quickly. Of course, the has take for But lumber contract we’re it up since shortest obviously advantage used advantage comes. lower to it lumber to it tie contracted going we then to We of off not takes when for been and yet old days. long-term in working we that take the with can can the we’re be so possible And contracts now, pricing nimble and long

the states think our operations. and able the where the to little have because that of to that Northwest out we’re Mid-Atlantic direct Those business, better. we visibility U.S. Southern and I think a – markets bit in And more we’re those the have manage opportunity we’re even I of out the buying Midwest, by on plants and and Pacific Northeast railcar panel are We plants handle also rail lumber all trust lines of

Jay McCanless

Okay, great. it. in. Thanks for I appreciate fitting me

Operator

session. question-and-answer like turn conference call to and to the over that, management closing gentlemen, ladies And will for any back today’s we with remarks. end I’d

Douglas Yearley

your And Thanks warm Take places those Have in Philadelphia. much. Jamie, everyone. of are very week. care. like you interest. We stay much very for appreciate that Thanks. you thank a great

Operator

you we’ll And ladies for that with attending. and today's thank We conclude call. conference gentlemen

You your may lines. not disconnect

Toll Brothers (TOL) 24 Feb 212021 Q1 Earnings call transcript