Toll Brothers, Inc. · NYSE:TOL
Toll Brothers — Q2 2024 Earnings Presentation
45 slides from Toll Brothers's earnings presentation, Apr 30, 2024
Slide 1: Company Overview
Slide 2: Forward-looking statements
Information presented herein for the second quarter ended April 30, 2024 is subject to finalization of the Company's regulatory filings, related financial and accounting reporting procedures and external auditor procedures. This release contains or may contain forward-looking statements within the m
Slide 3: Executive Summary / Table of Contents
EXECUTIVE SUMMARY DIVERSE PRODUCT MIX POSITIONED FOR FINANCIALS 1. Company Overview 17. The Toll Brothers Advantage GROWTH 35. Book Value and Earnings Per 28. Operational Efficiencies Share 2. Forward-looking Statement 18. Toll Brothers Design Studios 4. America’s Luxury Home Builder Toll Brothers D
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: Toll Brothers Differentiators
TOLL BROTHERS DIFFERENTIATORS 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 bot
Slide 6: Q2 FY 2024 Results
Q2 FY 2024. RESULTS * Q2 2024 Contracts up 29% in dollars, & up 30% in units * Q2 2024 Backlog down 12% in dollars, & down 6% in units * Q2 2024 earnings per share up 60% vs Q2 2023 * Q2 2024 settlements up 6% in both dollars & units * Expect 10% community count growth in FY 2024 ¢ Expect to deliver
Slide 7: Evolution of the Homebuilding Industry
EVOLUTION OF THE HOMEBUILDING INDUSTRY WHY IS HOMEBUILDING A BETTER BUSINESS THAN IN THE PAST? WHAT HAS CHANGED? + Largest players are taking share - Public homebuilders have gone from 27% market share in 2012 to about 51% today + Better access to capital - Small private builders struggle to finance
Slide 8: Public Builders Are Gaining Market Share
PUBLIC BUILDERS ARE GAINING MARKET SHARE LIC BUILDERS CONTINUE TO TAKE SHARE FROM THE PRIVATE BUILDERS AND ARE NOW 50% OF NEW HOME SETTLEMENTS AND PUBLIC BUILDERS DO NOT DO TEARDOWNS PUB ALMOS AND 1,600,000 1,400,000 1,200,000 1,000,000 800,000 CLOSINGS 600,000 400,000 200,000 0 NE-OFFS PUBLIC AND P
Slide 9: Factors Driving Demand
Constrained supply of new & resale homes on the market Home price appreciation in existing homes for our buyers Toll buyers have benefited from a decade of solid stock market / low unemployment Surge of Millennials purchasing first home Boomers making life-style changes Increased desire for high qua
Slide 10: National Footprint Positions Toll Brothers for Growth
NATIONAL FOOTPRINT POSITIONS 24 STATES TOLL BROTHERS FOR GROWTH 60+ MARKETS Total: 386 Note: Data as of April 30, 2024
Slide 11: Geographically Diversified Portfolio
FYE 2023 FYE 2023 LOTS CONTROLLED REVENUE (TOTAL = 70,664) (TOTAL = $9.87BN) North Mid-Atlantic South Mountain Pacific REGENCY AT GLEN ELLEN | MILLIS} MA
Slide 12: Total Addressable Market
Annual TOL Homes 16MM With Income > $200K Total Addressable 16,000,000 Market TOL Annually 9 Reaches .06% of TAM It would take us about ~16 years to sell to just 1% of the total addressable market
Slide 13: Household Income
ALL HOUSEHOLDS $200,000+ INCOME HOUSEHOLDS (in 000s) (in 000s) 134,000 18,000 132,000 131,400 16,000 130,000 14,000 128,000 12,000 10,000 126,000 8,000 124,000 122,500 6,000 122,000 4,000 120,000 2,000 118,000 Cy) 2012 2022 2012 2022 Source: U.S. Census Bureau (P60-249), September 2023
Slide 14: Land Acquisition
LAND ACQUISITION * Control 71,764 home sites * Reduced land owned vs optioned; From 62/38% at FYE 2019 to 52/48% at Q2 FY 2024 + 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 . 70,664 71,764 63,182 48,837 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 Q2 2024 @m Optioned Avg. Owned
Slide 16: Strong Buyer Profile
~ \ Ty Toll Brothers , , STRONG BUYER PROFILE |, Toll Brothers IN Q2 2024, 57% 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. Q ¢ 2» O7 6 of Total 0 /0
Slide 17: The Toll Brothers Advantage
SUMMIT AT WESTCLIFF LOS ANGELES, cA THE TOLL BROTHERS ADVANTAGE INDUSTRY’S MOST PRESTIGIOUS LOCATIONS * Toll Brothers builds communities in the heart of where people want to live + Access to natural features, proximity to schools, commuter routes & entertainment DISTINCTIVE ARCHITECTURE * Extraordin
Slide 18: Toll Brothers Design Studios
ii Ni | il TOLL BROTHERS DESIGN STUDIOS * Build-to-Order model provides unrivaled choice for our home buyers * Goal: 50% of homes pre-sold build-to-order, 50% spec + We operate 34 Toll Brothers Design Studios, a retail-like space where buyers choose both structural & finishing options * Our buyers i
Slide 19: 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 20: Only National Homebuilder Focused on Luxury
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 Top 5 Homebuilders* $1,028 693 sas $539 $545 $4s2 $493 $518 $433 $451 $446 $451 gas. «$377 ' L $382 LGIHOMES CENTU
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Slide 22: Community Count by Buyer Segment
TOLL BROTHERS COMMUNITY COUNT BY BUYER SEGMENT 47% 42% 42% 42% 40% 40% 56% 39% 38% 38% a 20% 9% 20% 20% } ; L L Affordable Luxury Luxury Age Targeted / Empty Nester MFY2020 mFY2021 mFY2022 mFY2023 =Q2FY 2024
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Slide 24: National Regency Brand in 55+ Active Adult Market
D » National Regency brand name in 55+ Active Adult/Empty Nester Market Established presence in 18 states & growing Toll Brothers: Control -14,900 (7,400 owned / 7,500 optioned) lots for Active Adult/Empty Nester communities R E G E N CY Baby Boomers making their next home move Note: Data as of Apri
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Slide 26: Toll Brothers City Living
TOLL BROTHERS CITY LIVING SUCCESSFUL URBAN TRACK RECORD * Formed in 2003 to leverage luxury brand in urban market * Completed construction on 43 buildings totaling ~6,000 units BRAND EXPERIENCE * Currently selling communities in New York City and New Jersey’s Gold Coast * Land in Metro New York City
Slide 27: Toll Brothers Apartment Living
MEO | ORANG 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" largest Mu
Slide 28: Operational Efficiencies Through Innovation
OPERATIONAL EFFICIENCIES THROUGH INNOVATION TOLL INTEGRATED SYSTEMS PANEL & TRUSS PLANT ¢ Manufactures & distributes lumber, panels, trusses, engineered wood products, millwork, windows, exterior and interior trim & doors. ¢ 7 East Coast plants serving Boston to Tampa * Provides Building Materials t
Slide 29: 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 st
Slide 30: Home Builder Acquisitions Spur Growth
HOME BUILDER ACQUISITIONS SPUR GROWTH 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, Ten
Slide 31: Housing Stock is Aging
2005 2007 2009 2011 2013 2015 2017 2019 2021 2022 2023
Slide 32: What Buyers Want Today
Slide 33: 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 34: Increased Focus on Capital Efficiency & Return on Equity
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 * Controlli
Slide 35: Book Value and Earnings Per Share
TOLL BROTHERS S&P 500 BOOK VALUE S&P 500 AVERAGE EARNINGS CAGR: 4% $65.49 PER SHARE GROWTH CAGR: 8% $12.36 $10.90 gig4 $1.97 $2.18 Pf [| [] 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013, 2014 «2015-2016 2017, 2018) 2019 2020. 2021 20222023 Fiscal Year Fiscal Year
Slide 36: ROE and Dividend Growth
TOLL BROTHERS S&P 500 ROE CAGR: 4% 17.1% : 8.8% 2013 «2014 «2015. 2016 «= 2017-2018 = 2019-2020 =. 2021 Fiscal Year Note: Return on Beginning Equity = Net Income / Prior Year Ending Equity. 24.3% 2022 22.8% 2023 S&P 500 DIVIDEND GROWTH CAGR: 9% $0.24 2017 $0.41 $0.44 $0.44 2018 2019 2020 Fiscal Year
Slide 37: Stock Repurchase / Dividend
STOCK REPURCHASE / DIVIDEND SUMMARY AY SHEISE Cosi (rege ils (Total $/Quarterly ee gun 2024P TBD $500MM TBD $95MM/$0.23 YTD 2024 1,502,763 $181MM $120.59 $47MM/$0.22 2023 7,860,340 $566MM $72.00 $91MM/$0.21 2022 10,999,502 $543MM $49.34 $89MM/$0.20 2021 7,421,423 $378MM $50.97 $77MM/$0.17 2020 15,95
Slide 38: Balance Sheet Protection
BALANCE SHEET PROTECTION Net Debt-To-Capital 2000-2023 (FYE) 9/ 45.8% 48.0% 46.0% 40.7% 411% 39.5% 40.9% 35.3% 34.5% 31.7% 2008 - 2011: 32.3% ° 33.2% 32.9% 33.3% 27.4% as market plummeted, ° 26.7% Toll's balance sheet 23.3% 25.1% 23.4% strengthened naee 4% 94 17.7% 5% 13.3% 14.8% 7.0% lJ 1 2000 2001
Slide 39: Debt Maturity Profile
DEBT MATURITY PROFILE AS OF APRIL 30, 2024 Cash & Equivalents $1.03 BN Moody’s Baa3 (Positive) Revolver Availability $1.79 BN Standard & Poor’s BBB- (Stable) Fitch Inc. BBB (Stable) TOTAL LIQUIDITY $2.82 BN $400M fixed at 1,5% through 10/25; $250M floating [ 4] (currently 6.5%) wa NSN $488 $61 $102
Slide 40: Appendix
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Slide 41: Quarterly and Fiscal Year Results
3 Months Ended April Fiscal Year Ended October 31, Contracts Units Dollars Backlog Units Dollars Deliveries Units Dollars Earnings Per Share Net Income 2024 3,041 $2,941 7,093 $7,378 2,641 $2,647 $4.55 $481,617 2023 2,333 $2,275 7,574 $8,376 2,429 $2,490 $2.85 $320,216 % Change 30% 29% (6%) (12%) 6%
Slide 42: Historical Financial Summary
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/tol-38yr-financial-summary.pdf FY 2016 FY FY 2020 FY 2021 FY 20: Revenue - Home Sales (000s) $5,169,508
Slide 43: Adjusted Gross Margin & EBITDA
ADJUSTED GROSS MARGIN & EBITDA 2 2016 2017 2018 2019 2020 2021 2022 2023 Q22024 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 9,866,026 2,647,020 Cost of Revenues 3,190,957 4,047,615 4,448,452 5,536,812 5,534,217 5,534,103 6,538,454 7,237,409 7
Slide 44: Net Debt-to-Capital
NET DEBT-TO-CAPITAL Loans payable 472,854 94,491 106556 99,817 __107,222__ 652,619 1,000,439 _871,079 _637,416 686,801 _1,111,449_1,147,955 1,011,534 __ 1,185,275 1,164,224 1,113,126 Senior notes 1578,212_1536,005 1,484,204 2,065,334 2,305,765 2,638,241 2,689,801 2,694,372 2,462,463 2,861,375 2,659,
Slide 45: Specs, Backlog and Homes in Process
Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Specs: Completed 456 362 631 868 1,010 921 Incomplete 1,999 1,837 1,951 2,158 2,256 2,342 Total 2,455 2,199 2,582 3,026 3,266 3,263 Specs, Pre-Footing 812 1,258 1,258 1,575 1,347 1,500 Backlog: Backlog Pre-Footing 1,306 1,655 1,683 1,611 1,295 1,416 Ba