托尔兄弟 (TOL.US) 2025财年第四季度业绩电话会
文章语言：
简
繁
EN
Share
Minutes
原文
会议摘要
Toll Brothers delivered record homes with strong sales despite a soft market, achieving 27.1% adjusted gross margin. The company is exiting its multifamily business to focus on core homebuilding, leveraging proceeds for growth and shareholder returns. Anticipating a gradual market recovery, Toll Brothers projects cautious growth, with plans to expand its community count and maintain strong cash flows, aiming for 11,500 to 11,700 home deliveries in the upcoming fiscal year with 26.5% adjusted gross margins.
会议速览
Toll Brothers' Fiscal Year Success Amid Market ChallengesDespite a tough sales environment, Toll Brothers achieved record results with strong home sales revenues, high margins, and significant cash flows. The company highlights its resilient business model, strategic shifts towards a more balanced portfolio, and successful spec home strategy. Toll Brothers also announces the upcoming sale of its apartment living business, signaling a focus on core operations and luxury market differentiation.
Q4 Housing Market Update: Sales Trends, Pricing Strategy, and Capital AllocationThe company reported mixed sales trends in Q4, with October being the strongest month. Despite seasonal slowdowns, they are optimistic about the spring selling season, supported by stable mortgage rates and long-term housing demand. The company maintained its pricing strategy, emphasizing value-added design options. Financially, they repurchased shares and paid dividends, reinforcing their capital allocation strategy.
Toll Brothers Completes Partial Sale of Apartment Living Business, Expects Strong Cash ReturnsToll Brothers announced the sale of half of its apartment living portfolio to Kennedy Wilson, now set to close in the current quarter. The transaction, alongside expected sales of remaining properties, will generate significant cash proceeds, which the company plans to reinvest in its core homebuilding business and return to shareholders. Despite the delayed sale impacting short-term earnings, the company achieved strong financial results, delivering a record number of homes and revenue growth in the fourth quarter.
Financial Review and Future Guidance: Toll Brothers' Q4 and FY PerformanceDiscussed Q4 and FY financial results, highlighting margin performance, cash flow, and guidance for Q1 and FY, with emphasis on strategic asset management and future growth targets.
Coordinating Communication Amidst Technical Delays and Moderation ChallengesWhile awaiting the return of the moderator, the group coordinates by sending questions via email to ensure the meeting proceeds smoothly, emphasizing patience and teamwork in overcoming technical hurdles.
Land Purchasing Strategies and Market Trends in HomebuildingDiscusses the impact of market trends on land purchasing decisions, emphasizing conservative underwriting, disciplined strategies, and the focus on active adult buyers. Highlights the importance of deal flow, IRR, and gross margin in evaluating potential lands for future revenue, while noting the advantage in softer markets and the non-competition from larger builders.
Discussion on Future Lot Ownership Trends and Cash Flow Conversion TargetsA discussion on anticipated decline in owned lots and a target cash flow conversion range, emphasizing strategies for improved financial efficiency and land acquisition through joint ventures and extended terms.
Conservative Guidance Amid Market Uncertainty and Strategic Speculation in Home BuildingThe company's conservative outlook reflects a strategy to navigate market volatility, with emphasis on efficient operations and increased speculation in anticipation of seasonal demand, impacting gross margins later in the year.
Analysis of Home Delivery Forecast and Spec Strategy ConfidenceDiscussion centered on the confidence in the home delivery forecast, with emphasis on the spec strategy's role and other contributing factors, aiming to exceed the beginning backlog by a significant margin.
Homebuilder's Strategy, Market Position, and Multifamily ExitA homebuilder discusses their robust backlog, construction progress, and strategic selection of projects for summer completion. They express pride in their multifamily business but decide to exit it, focusing on core homebuilding. The builder emphasizes their unique market positioning, particularly in high-price-point regions, and shares insights on inventory and market conditions. Proceeds from the multifamily exit will be used for business growth and shareholder returns.
Analysis of SGNA Expenses and Lot Cost Inflation in a Soft MarketDiscussion covers SGNA expenses increase due to wage inflation, health care costs, and sales commissions adjustments in a soft market. Lot costs are expected to remain flat as negotiations for better pricing are underway.
Analysis of Closings Guidance Amidst Lower Backlog and Potential Sales Pace AdjustmentsThe dialogue explores the factors behind the anticipated decline in closings, considering the impact of a lower starting backlog, timing of community openings, and potential adjustments in sales pace to safeguard margins, without attributing these factors directly to any individual.
Calculating Sales Projections Based on Current Backlog and Construction PlansThe discussion revolves around projecting sales based on the existing backlog, spec homes under construction, and planned permits, assuming no increase in sales pace.
Analysis of Gross Margin Decline and Incentive Impact in Q1 and Full YearThe dialogue discusses the factors contributing to the sequential decline in gross margins for Q1 and the full year, attributing it primarily to changes in incentives, with an explanation of the shift from $68,000 to $80,000 per house impacting margins from 27.3% to 26%, despite expectations of flat incentives and land cost inflation.
Consumer Confidence and Housing Market Trends: A Closer LookThe dialogue discusses the impact of consumer confidence and mortgage rates on the housing market, highlighting the importance of affordability and the psychological effects of time on buyers' decisions. While some data points are encouraging, overall guidance remains conservative due to ongoing market challenges.
Discussion on Share Buyback Strategy Amid Cash Generation and Business SalesThe dialogue revolves around the company's share buyback strategy, considering cash generation and the sale of the apartment business. The current guidance is deemed prudent, with a potential for evaluation and adjustment throughout the year.
Analysis of Construction Costs and Labor Trends for 2026 and BeyondA discussion on anticipated stick and brick costs, labor expenses, and their implications for future home building, noting a modest decrease in construction costs and no projections for further reductions.
要点回答
Q：What are the overall results of Toll Brothers' performance in fiscal year 2023?
A：Toll Brothers delivered a strong performance in fiscal year 2023 with record sales of 11,292 homes, $10.8 billion in home sales revenues, an adjusted gross margin of 27.1%, an operating margin of 15.7%, and earnings of $13.49 per diluted share. They grew their community count, generated strong operating cash flows of $2.7 billion, returned approximately $200 million to stockholders through share repurchases and dividends, and generated a return on beginning equity of 27.0%.
Q：What is the differentiation of Toll Brothers' luxury business in the housing market?
A：Toll Brothers' luxury business is differentiated in the housing market as it serves a more affluent customer who is less impacted by the affordability pressures that affect the broader housing market. Their fourth quarter and full year results underscore the resilience of their business model.
Q：What is the status of Toll Brothers' spec homes strategy?
A：Toll Brothers' spec homes strategy has allowed them to appeal to buyers looking for a quicker move-in and has further widened their addressable market. Specs accounted for approximately 60% of their deliveries in fiscal year 2023. They expect a similar ratio in the current year.
Q：How did the fourth quarter signing numbers compare to the same period last year?
A：In the fourth quarter, Toll Brothers signed 2,598 net agreements for $5 billion in down payments, which is a comparison to the same period last year.
Q：What is the current pace of sales and how does it compare to historical data?
A：The pace of sales was approximately 10 contracts per community per month. Sales modestly improved as the quarter progressed, with October being their strongest month since the start of fiscal year 2023. Per community deposit activity was almost identical to the same six weeks last year.
Q：What trends in demographics and housing demand support new home sales?
A：Demographics favorable for housing demand include millennials in their prime homebuying years and Gen Z right behind them. There is a structural undersupply of homes in the country, and the average age of homes is increasing. These trends, along with the stabilizing mortgage rates in the low hood range, support demand for new homes.
Q：How is Toll Brothers' business positioned in terms of customer demographics?
A：Toll Brothers is positioned to serve the move-up and move-down market segments, which consist of older, more affluent buyers with greater financial flexibility and equity in their existing homes. This strategy aligns with the current market trends where first-time buyers have a higher median age and most sales are to existing move-up or move-down buyers.
Q：What percentage of buyers who took a mortgage in the fourth quarter were cancellations?
A：In the fourth quarter, the contract cancellation rate was 6% of the buyers who took a mortgage.
Q：How much common stock was repurchased in the fourth quarter, and what was the average price per share?
A：In the fourth quarter, the company repurchased $249 million of its common stock at an average price of $120.44 per share, with a full-year purchase of $602 million.
Q：What was the purchase price for the sale of the apartment living business?
A：The purchase price for the sale of the apartment living business to Kennedy Wilson is $1.1 billion.
Q：What were the delivery numbers and revenue figures for the fourth quarter and full fiscal year?
A：In the fourth quarter, the company delivered 3,163 homes with home sales revenue of $3.4 billion, and for the full fiscal year, it delivered 3,163 homes with home sales revenue of $13.5 billion.
Q：How did the average price of contracts signed compare to the prior year's fourth quarter?
A：The average price of contracts signed in the fourth quarter decreased compared to the prior year's fourth quarter, but the exact figures were not provided in the transcript excerpt.
Q：How much cash flow from operations did the company generate in fiscal script, and what was the balance at the end of the fiscal year?
A：The company generated approximately $1.5 billion of cash flow from operations in fiscal script and ended the fiscal year with over $5 billion of liquidity, including $1.5 billion of cash and $2.4 billion available under its revolving bank credit facility.
Q：How much was invested in land acquisition and development in fiscal script, and how much was returned to stockholders?
A：In fiscal script, the company invested $5 billion in land acquisition and development and returned approximately $500 million to stockholders through share repurchases and dividends.
Q：What is the projected adjusted gross margin for the first quarter and the full year?
A：The projected adjusted gross margin for the first quarter is approximately 25% and for the full year is expected to be approximately 10.25%.
Q：What is the projected growth in community count and the target for the number of communities by the end of the fiscal year?
A：The company expects to grow the community count by 500 to 600 communities by the end of the fiscal year and is targeting a community count of the same range.
Q：What are the current trends in land purchasing decisions and the composition of the buyer segments?
A：The current trends in land purchasing involve conservative underwriting, focusing on the combination score of gross margin and IRR, and buying land in anticipation of 27 to 28 years of revenue. The composition of the buyer segments includes a well-performing active adult group and a shift towards older, more affluent buyers. The age demographics of the buyers are consistent with the provided numbers, with first-time buyers approaching the lower end of the demographic range.
Q：What is the expected behavior of the active adult group and the age demographics of the buyers?
A：The active adult group is expected to perform well, as they are older and more affluent buyers invested in the equity of their existing homes. The age demographics show that the first-time buyer segment is nearing the lower end of the demographic range, while the average buyer is approaching 50 years old.
Q：What is the company's strategy for land acquisition and how does it plan to manage market conditions?
A：The company's strategy for land acquisition involves being conservative and disciplined in underwriting, focusing on the combination score of gross margin and IRR, and buying land for future growth. They are experiencing good deal flow, and with extensions in land seller agreements and other strategies, they aim to maintain or improve their land position. This strategy is designed to manage market conditions and support company growth.
Q：What are the expectations for the number of lots owned by the end of the next year and cash flow conversion?
A：The company expects the number of owned lots to be flat or modestly down by the end of the next year compared to the current figure. This is due to land banking, joint ventures, and extended terms with land sellers. As for cash flow conversion, it is expected to be in the low 40s, indicating a modestly lower cash flow from operations in 2026 compared to 2025.
Q：What is the conservative approach of the company's guidance for the year?
A：The company is conservatively projecting its performance for this year, not assuming any improvement in market conditions or reduction in sales incentives, and is delivering homes faster to take advantage of the spring sales opportunity.
Q：What is the projected impact of new community openings on the company's ability to deliver homes?
A：The company expects to have a number of new communities opening in the first half of the year, which will increase the number of homes that can be delivered in less than six months.
Q：What factors are considered in the company's guidance and how does it relate to market conditions?
A：The company's guidance does not incorporate assumptions about future market conditions such as declining interest rates, reduced affordability pressures, or improving consumer confidence.
Q：How does the company plan its spec home strategy in relation to market demand?
A：The company plans its spec home strategy by focusing on delivering homes when buyers want them, typically in the summer months when the school year starts. This approach is different from maintaining a consistent monthly cadence for spec starts.
Q：Why is there a bigger incentive on spec homes than on build-to-order homes?
A：There is a bigger incentive on spec homes compared to build-to-order homes, and the company expects more spec homes to deliver in the latter part of the year, which is why they are being conservative in their gross margin guide.
Q：What factors contribute to the company's confidence in meeting the delivery guide for the upcoming fiscal year?
A：The company's confidence in meeting the delivery guide stems from having homes in backlog, quick move-in spec homes under construction, bill-to-order homes expected to be sold and settled in the new fiscal script, and spec permits that are ready to start construction.
Q：Can you elaborate on the decision to exit the remaining multifamily business and how the proceeds will be used?
A：The company has decided to exit the remaining multifamily business because as a public homebuilder, they are not receiving full credit for the earnings generated from the business. They plan to use the proceeds from the sale to grow the business and return cash to shareholders.
Q：What factors drove the unexpected sequential growth in fourth quarter orders?
A：The unexpected sequential growth in fourth quarter orders was driven by demand across various geographies and buyer segments, with particularly strong results in the north region.
Q：What are the characteristics of the housing market where the company excels?
A：The company excels in a housing market characterized by tight resale markets, limited land availability for new homebuilders, and few competitors, which allows them to benefit from the challenging market conditions.
Q：Why has the company performed well in coastal California despite challenges in other areas?
A：The company has performed well in coastal California because there is limited resale at their price points and no other builders present at those price levels, resulting in continued strong performance with limited competition.
Q：What sales figures were achieved in central New Jersey and Irvine Ranch Orange?
A：In central New Jersey, sales were reported at $1 million in the last 8 weeks, and in Irvine Ranch Orange, there were 47 sales at over $6 million in the past months, with some sales even in the off season of October and November.
Q：What is the company's unique positioning in the market?
A：The company has a unique positioning in the market, as they operate in areas where there are large public builders constructing at lower price points, which places them in a niche above those lower-priced offerings, especially in their core business of $1 million homes.
Q：What is the projected change in S&A (Sales and Administrative) dollars and what factors could influence it?
A：The projected change in S&A dollars is a conservative guide of 5 basis points, which is leverage on less revenue. It could change if sales and deliveries improve, and it includes factors like inflation in wages, health care costs, and higher sales commissions in a softer market.
Q：How does the company view lot cost inflation and is it factored into the guidance?
A：The company sees lot cost prices as flat and the guide also reflects this. Lot cost inflation is not embedded in the guide as it is assumed that land prices will remain stable.
Q：Why is the expected decline in closings in the upcoming year not primarily due to timing of community openings?
A：The expected decline in closings is not due to timing of community openings or a slower sales pace but is mainly driven by the lower beginning backlog of 1,188 homes. The company assumes sales will continue at the same pace, with no expectation of improvement, starting from this low backlog number.
Q：What is the reason for the sequential decline in gross margins?
A：The sequential decline in gross margins is primarily due to the increase in incentives from $68,000 to $80,000 per house, which accounts for the full 27.3% down to 26% margin change. The company projects to continue on this same script for the remainder of the year.
Toll Brothers, Inc.
Follow
