Toll Brothers, Inc. · NYSE:TOL
Toll Brothers — Investor Presentation (August 2023)
62 slides from Toll Brothers's investor presentation, August 2023
Slide 1: Toll Brothers at Bella Collina, Orlando, FL
“TOLL BROTHERS AT BELLA COWLINA | ORLANDO, FL
Slide 2: Forward-looking statements
Information presented herein for the third quarter ended July 31, 2023is subject to finalization of the Company'sregulatory filings, related financial and accounting reporting procedures and external auditorprocedures. This release contains or may contain forward-looking statements within the meanin
Slide 3: Executive Summary / Table of Contents
EXECUTIVE SUMMARY 1 RwWN Company Overview Forward-looking Statement Table of Contents America’s Luxury Home Builder Toll Brothers Differentiators Quarter and FY Results Key Financial Metrics Quarterly Results Factors Driving Demand . National Footprint . Geographically Diversified Portfolio . Total
Slide 4: Toll Brothers is America's Luxury Home Builder
TOLL BROTHERS IS AMERICA’S LUXURY HOME BUILDER LEGACY & LEADERSHIP Founded in 1967, NYSE-listed (TOL) in 1986 5th Largest U.S. homebuilder by revenues A Fortune 500 builder in 24 states & 60+ markets - 11 new markets since 2019 Greatest product diversification in the industry Leadership in Luxury ma
Slide 5: The Dominant Player With Few Competitors In The Luxury Home Market
The Dominant Player With Few Competitors In The Luxury Home Market * Nationally-recognized, award-winning brand * Our build-to-order model meets the needs of buyers who have the desire & means to personalize their homes + Luxury communities in desirable locations in both high-growth & high barrier-t
Slide 6: Key financial metrics: contracts, backlog, deliveries
3 Months Ended July 31, Fiscal Year Ended Oc! 2023 2022 % Change 2022 2021 % Change Contracts Units 2,245 1,266 77% 8,255 12,472 (34%) Dollars $2,164 $1,664 30% $9,067 $11,540 (21%) Backlog Units 7,295 10,725 (32%) 8,098 10,302 (21%) Dollars $7,875 $11,185 (30%) $8,874 $9,499 (7%) Deliveries Units 2
Slide 7: Historical financial data FY2016 to Q3 FY2023
Full historical data from 1986, when Toll Brothers became a listed company on the NYSE, can be found using this link - https://investors.tollbrothers.com/-/media/Files/T/TollBrothers-IR/Attachments/2022- historical-financial-1634400.pdf FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 | Q3 FY
Slide 8: Q3 FY 2023 Results
Q3 FY 2023 RESULTS Earnings per share up 59% vs Q3 FY 2022 Settlements up 19% in dollars, & up 5% in units Contracts up 30% in dollars, & up 77% in units Backlog down 30% in dollars, & down 32% in units Expect 10% community count growth in FY 2023 to approx. 385 Expect to deliver 8,900 - 9,500 homes
Slide 9: Factors Impacting Demand
FACTORS IMPACTING DEMAND * Demand has improved markedly since January 2023 after nine months of affordability challenges from rapid rise in interest rates & home prices had sidelined many potential buyers through much of calendar year 2022 * Constrained supply of new & resale homes on the market * H
Slide 10: National Footprint Positions Toll Brothers for Growth
NATIONAL FOOTPRINT POSITIONS 24 STATES TOLL BROTHERS FOR GROWTH 60+ MARKETS n Je r ng Islan rk Cit n iImington collins in Wf DC springs Raleigh Los Angeles '@) Q n Di © Myrtle Beach oe fe Charleston Hilton Head fe, Jacksonville Total: 345, Note: Data as of July 31, 2023
Slide 11: Geographically Diversified Portfolio: lots controlled and revenue
FYE 2022 FYE 2022 LOTS CONTROLLED REVENUE (TOTAL = 79,049) (TOTAL = $9.712BN) 12% North Mid-Atlantic South Mountain Pacific ENCLAVE AT BOXBOR WESTBOROUGH, MA
Slide 12: Total Addressable Market
TOTAL ADDRESSABLE MARKET (TAM) 2B Annual TOL Homes 26MM With Income > $150K 20% growth Addressable Market 26,000,000 SE TOL Annually ME caches 04% of TAM N. It would take us about 20+ years to sell to just 1% of the total addressable market
Slide 13: Expansion Through Acquisitions
IN ADDITION TO STARTING MULTIPLE DE NOVO DIVISIONS, WE HAVE ACCELERATED OUR EXPANSION THROUGH ACQUISITIONS. Rialto Homes San Antonio, Texas 2022 StoryBook Homes Las Vegas, Nevada 2021 Keller Homes Colorado Springs, Colorado 2020 Thrive Residential Nashville, Tennessee & Atlanta, Georgia 2020 Sabal H
Slide 14: Land Acquisition
LAND ACQUISITION * Control 70,226 home sites * Reduced land owned vs optioned; From 62/38% at FYE 2019 to 50/50% at Q3 FY 2023 + Use land banking, JVs, staged/structural takedowns & seller financing + We operate in the most difficult land approval markets in U.S. - once you get it approved, it’s gol
Slide 15: Growing Percentage of Lots Optioned vs. Owned
GROWING PERCENTAGE OF LOTS OPTIONED VS. OWNED (AT FYE) 80,867 76,049 70,226 59,230 48,628 47,167 48,837 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q3 2023 Mm Owned mmm Optioned Avg. Owned
Slide 16: Strong Buyer Profile
STRONG BUYER PROFILE Toll Brothers MORTGAGE COMPANY IN Q@3 2023, 52% OF BUYERS CHOSE TOLL BROTHERS MORTGAGE COMPANY, IN-HOUSE LENDER EXCLUSIVE TO TOLL BROTHERS CUSTOMERS, OFFERING EXCEPTIONAL EXPERIENCE & OPERATIONAL BENEFITS IN MANAGING BACKLOG THROUGH CLOSING. 95% % of Total Settlements _Incl.Cash
Slide 17: Greatest Product Diversification in the Industry
GREATEST PRODUCT DIVERSIFICATION IN THE INDUSTRY + Entry-Level ° Affordable Luxury * Luxury Move-Up * Active Adult * Urban Infill * Urban Redevelopment * Large-Scale Master Plans * High-Rise Urban Condos * Suburban High-Density + Urban & Suburban Rental * Student Housing Rental * Single-Family Renta
Slide 18: Leadership in the Luxury Market
LEADERSHIP IN THE LUXURY MARKET TOLL BROTHERS IS THE ONLY NATIONAL HOMEBUILDER FOCUSED ON THE LUXURY MARKET. OUR MAIN COMPETITORS ARE SMALL PRIVATE BUILDERS, NOT THE LARGER PUBLIC HOMEBUILDERS. AVERAGE DELIVERED PRICE $479 $481 $487 $501 $513 $440 $454 $415 385 TU $924 $708 $624 $542 LGl HOMES DR HO
Slide 19: Leadership in Luxury
IN
Slide 20: Westcliffe at Porter Ranch, CA
Slide 21: Coastal Oaks at Nocatee, St. Johns, FL
oa, Bae : We Ree ~ a <. Toll Brothers: ; COASTAL OAKS AT NOCATEE | ST. JOHNS, FL pete alte x : iets
Slide 22: Chester Springs Crossing, PA
Slide 23: Increasing Focus on Affordable Luxury
INCREASING FOCUS ON AFFORDABLE LUXURY TOLL BROTHERS COMMUNITY COUNT BY BUYER SEGMENT 46% 48% 43% 42% 40% 39% 34% sm 18% 20% 19% 20% 39%, 40% | | Affordable Luxury Luxury Age Targeted / Empty Nester FY 2019 mFY2020 mFY2021 mFY2022 mQ3FY 2023
Slide 24: Carriage Hill West, Nampa, ID
CARRIAGE HILL WEST | NAMPA, ID
Slide 25: Cantaro at Rancharrah, Reno, NV
Slide 26: Montebello, Alpharetta, GA
Slide 27: Active Adult Market
i) (iia BROTHERS Al ee met han
Slide 28: National Regency brand in 55+ Active Adult market
* National Regency brand name in 55+ Active Adult/Empty Nester Market * Established presence in 18 states & growing R E G E N CY * — Control -15,000 (6,500 owned / 8,500 optioned) lots for Active BY TOLL BROTHERS Adult/Empty Nester communities * Baby Boomers making their next home move Note: Data as
Slide 29: Regency at Folsom Ranch, Folsom, CA
REGENCY AT FOLSOM RANCH} FOLSOM,
Slide 30: Ramella Ranch, Reno, NV
RAMELLA RANCH | RENO, NV
Slide 31: Regency at Kimberton, Phoenixville, PA
Slide 32: Regency at Avenir, Palm Beach Gardens, FL
Slide 33: Suburban High-Density
Slide 34: Toll Brothers City Living
ROC K WEL” | NIM my URUK en, 2 Le C= —) SE2222/ a 2S aa= SUCCESSFUL URBAN TRACK RECORD * Formed in 2003 to leverage luxury brand in urban market * Completed construction on 45 buildings totaling ~7,200 units BRAND EXPERIENCE * Currently selling communities in New York City and New Jersey’s Gold Coas
Slide 35: Toll Brothers City Living
others
Slide 36: —
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Slide 37: Toll Brothers Apartment Living
HENRILPPHOENIX, AZ COMPLEMENTS FOR-SALE BUSINESS * Building on Toll Brothers brand name + Income generated from operations, fees, gains on sale or refinancing * Combine premier locations with luxury, for-sale finishes, services, & amenities in urban & suburban markets BROAD EXPERIENCE + Named 6'" la
Slide 38: IN PAL ap
IN PAL ap me ST Te Toy - (lg am ; eo i Cate fo oe UL in i a. Win a es es 5 or Aaa get ss 7 ay au , a) Li - a Ts Ted ee | a ~ 7 Ts Td 4 vl am 1 j thers”. pyluorhi.obablsal —_—
Slide 39: Toll Brothers Apartment Living Pipeline
TOLL BROTHERS APARTMENT LIVING PIPELINE 28,332 TOTAL UNITS 85 PROPERTIES ‘Southern California Cameo, 262 Units The Lindley, 362 Units Rafferty, 218 Units Victoria Blvd, 306 Units Oceanside NCTD, 547 Units Warner Center, 276 Units IN Denver Santa Fe, 243 Units Nashville @ STUDENT HOUSING UMD - Terrap
Slide 40: Unrivaled Choice: The Toll Brothers Advantage
UNRIVALED CHOICE * Highly personalized & hands-on Design Studio experience guided by a professional design consultant * Selections from premium products, state-of-the-art appliances, & luxury fixtures & finishes PRESTIGIOUS LOCATIONS * Toll Brothers builds communities in the heart of where people wa
Slide 41: Toll Brothers Design Studios
= = TOLL BROTHERS DESIGN STUDI ~— DANBURY, CT Build-to-Order model provides unrivaled choice for our home buyers Goal: 80% of homes pre-sold build-to-order, 20% spec We operate 34 Toll Brothers Design Studios, a retail-like space where buyers choose both structural & finishing options Our buyers inc
Slide 42: What Buyers Want Today
Slide 43: John Burns' Highest Ranking Selling Communities in Submarket Desirability Index
JOHN BURNS’ HIGHEST RANKING SELLING COMMUNITIES IN ‘SUBMARKET DESIRABILITY INDEX DFH GRBK TMHC~ TPH ccs LGIH NVR mame Wid. Avg. Wtd. Avg, All Builders The weighted average Submarket Desirability Index™ is the proprietary measurement John Burns uses to determine which actively selling communities are
Slide 44: Toll Integrated Systems Panel & Truss Plant
TOLL INTEGRATED SYSTEMS PANEL & TRUSS PLANT + Manufactures & distributes panels, trusses, trim, doors, millwork, & windows + — Provides Turnkey Framing Services to 10 states (9 Divisions) * — Supplied components for 29% of our homes in FY 2022 + — Improves timeline & quality; reduces costs, waste, &
Slide 45: Environmental, Social and Governance
* — Inaugural report released April 19, 2021 * Metrics updated in FY 2022 for FY 2021 * — Utilizes industry-specific standards from the Sustainability Accounting Standards Board (SASB) * Benchmarks efforts on a range of environmental, social & governance matters * — Visit the report at TollBrothers.
Slide 46: Where Is The Market Now
WHERE IS THE MARKET NOW DEMAND EQUATION Continued population growth Household formations are strong From 2010 to 2020, new-home construction fell 6.8 million units short of what was needed to meet household- formation growth and replace obsolete units (WSJ) Homeownership rate rising, but still below
Slide 47: Key Market Trends
KEY MARKET TRENDS MARKET TRENDS Millennials are now buying their first homes, some with parental assistance Baby Boomers consider their next move: the home they want to retire in, asecond home, or a multi-generational living option Economy & population growth in the Southeast, Texas, Mountain States
Slide 48: Median Age of Owner-Occupied Housing
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021
Slide 49: Industry Is Undersupplied As Households Increase
Households (000) INDUSTRY IS UNDERSUPPLIED AS HOUSEHOLDS INCREASE HOUSING STARTS HAVE NOT KEPT PACE WITH HOUSEHOLD GROWTH 125,000 100,000 75,000 50,000 1970-1979 1980-1989 1990-1999 2000-2007 Average Annual Average Annual Average Annual Average Annual Housing Starts Housing Starts Housing Starts Hou
Slide 50: Buyer Credit
<620 620-659 660-719 720-759 760+ • • • •
Slide 51: Increased Focus on Capital Efficiency & Return on Equity
LAND PURCHASING: REDUCE OWNED LAND Structuring land acquisitions more efficiently Option more land as a % of total Increased use of staged/structured takedowns, as well as seller financing Use third-party land banking & JVs Controlling more land with fewer dollars leads to higher returns OPERATIONS
Slide 52: Debt Maturity Profile
As of July 31, 2023 FYE Cash & Equivalents Revolver Availability TOTAL LIQUIDITY $O 2023 $1.03 BN $1.78 BN $2.81 BN SO SO 2024 2025 Moody’s Baa3_ (Stable) Standard & Poor’s BBB- (Stable) Fitch Inc. BBB- (Positive) $400MM fixed at 1.5% 2026 2027 $O 2028 2029 2030 ™Public Debt (Senior) ™ Bank Debt* “B
Slide 53: Strong Bank and Capital Market Relationships
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Slide 54: Book Value Per Share
$15.61 $18.51 $19.68 $22.02 $24.15 $26.14 $28.82 $32.57 $35.99 $38.53 $44.08 $54.79 $61.95
Slide 55: Balance Sheet Protection: Revenues
$2 $2 $2 $3 $4 $6 $6 $5 $3 $2 $2 $2 $2 $3 $4 $4 $5 $6 $7 $7 $7 $8 $10 Revenues (BNs)
Slide 56: Stock Repurchase Summary
2023 3,560,927 $240MM $67.53 $68MM/$0.21* Q3 2023 1,931,418 $147MM $76.26 $23MM/$0.21 Q2 2023 1,440,481 $84MM $58.06 $23MM/$0.21 Q12023 187,322 $9MM $49.95 $22MM/$0.20 2022 10,997,564 $543MM $49.34 $89MM/$0.20 2021 7,421,423 $378MM $50.97 $77MM/$0.17 2020 15,951,855 $634MM $39.75 $57MM/$0.11 2019 6,
Slide 57: Adjusted Gross Margin & EBITDA
ADJUSTED GROSS MARGIN & EBITDA 201 2016 2017 2018 2019 2020 2021 2022 Q3 2023 Revenues — home sales 4,171,248 5,169,508. 5,815,058 7,143,258 7,080,379 6,937,357 8,431,746 9,711,170 2,674,602 Cost of Revenues 3,190,957 4,047,615 4,448,452 5,536,812 5,534,217 5,534,103 6,528,454 7,237,409 1,931,949 Gr
Slide 58: Net Debt-to-Capital
NET DEBT-TO-CAPITAL 2009 20 2011 20 2013 20) 2015 201 2017 2018 2019 2020 2021 2022 __Q3 2023 Loans payable 472,854 94,491 106,556 99,817 107,222 652,619 1,000,439 __871,079 637.416 _—686,801__11.449__1,147,955 1,011,534 185,275 1,163,116 Senior notes 1,578,212 1,536,005 1,484,204 2,065,334 2,305,76
Slide 59: Median age of housing by year built
Built 1969 or earlier Built 1970 to 1979 Built 1980 to 1989 Yt Built 1990 to 1999 Built 2000 to 2009 Built 2010 or later Ds WESTCLIFF AT PORTER RANCH [a POS-ANGEIRES, CA Note: 2021 Fyear ACS Estimates
Slide 60: Housing tenure data
11 or less 12 to 21 22 to 31 32 to 41 42 or more 2011 2021
Slide 61: Book value per share
$19.68 $22.02 $24.15 $26.14 $28.82 $32.57 $35.99 $38.53 $44.08 $54.79
Slide 62: Dividends per share
$0.32 $0.44 $0.44 $0.44 $0.68 $0.77