Toll Brothers Reports FY 2024 2nd Quarter Results

Published

FORT WASHINGTON, Pa., May 21, 2024 (GLOBE NEWSWIRE) -- Toll Brothers, Inc. (NYSE:TOL) (TollBrothers.com), the nation’s leading builder of luxury homes, today announced results for its second quarter ended April 30, 2024.

FY 2024’s Second Quarter Financial Highlights (Compared to FY 2023s Second Quarter):

  • Net income and earnings per share were $481.6 million and $4.55 per diluted share, compared to net income of $320.2 million and $2.85 per diluted share in FY 2023’s second quarter.
  • Net income and earnings per share included $124.1 million and $1.17, respectively, related to the sale of a parcel of land to a commercial developer. Excluding these gains, net income and earnings per share were $357.5 million and $3.38 per diluted share in FY 2024’s second quarter.
  • Pre-tax income was $649.8 million, compared to $430.6 million in FY 2023’s second quarter.
  • Home sales revenues were $2.65 billion, up 6% compared to FY 2023’s second quarter; delivered homes were 2,641, also up 6%.
  • Net signed contract value was $2.94 billion, up 29% compared to FY 2023’s second quarter; contracted homes were 3,041, up 30%.
  • Backlog value was $7.38 billion at second quarter end, down 12% compared to FY 2023’s second quarter; homes in backlog were 7,093, down 6%.
  • Home sales gross margin was 25.8%, compared to FY 2023’s second quarter home sales gross margin of 26.4%.
  • Adjusted home sales gross margin, which excludes interest and inventory write-downs, was 28.2%, compared to FY 2023’s second quarter adjusted home sales gross margin of 28.3%.
  • SG&A, as a percentage of home sales revenues, was 9.0%, compared to 9.1% in FY 2023’s second quarter.
  • Income from operations was $623.5 million.
  • Other income, income from unconsolidated entities, and gross margin from land sales and other was $203.7 million, which includes $175.2 million from the land sale referred to above.

Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “We are very pleased with our second quarter results. We delivered 2,641 homes at an average price of $1.0 million, generating home sales revenues of $2.65 billion, a 6% increase compared to last year’s second quarter. Our adjusted gross margin was 28.2%, 60 basis points better than guidance, and our SG&A expense, as a percentage of home sales revenues was 9.0%, 70 basis points better than guidance. These strong home building results, together with a previously disclosed $175 million pre-tax land sale gain, contributed to record second quarter earnings of $4.55 per diluted share, up 60% compared to last year. In addition, we signed 3,041 net contracts for $2.9 billion in the quarter, up 30% in units and 29% in dollars compared to the second quarter of 2023. Based on these outstanding results, and with continued solid demand as we start our third quarter, we are increasing our full year revenue and earnings guidance. We now expect to earn approximately $14.00 per diluted share in fiscal 2024 with a return on beginning equity of approximately 22%.

“Demand for new homes continues to be driven by a resilient economy, favorable demographics and a lack of supply that reflects both the chronic underproduction of housing in the U.S. and the historically low levels of resale inventory caused by the lock-in effect of higher rates. Our strategy of widening our price points to include more affordable luxury homes and increasing our supply of spec homes has helped us grow market share. It also enables us to reduce cycle times, improve inventory turns and leverage our fixed costs, driving revenue growth and higher operating margins. With these strategies firmly in place and producing results, and with our more capital efficient land strategy, we are confident that we can continue to generate attractive returns well into the future.

“We have a healthy balance sheet with low net debt and ample liquidity, and we continue to generate significant operating cash flows. In the second quarter, we repurchased $181 million of common stock and increased our quarterly dividend by 10%. Our solid financial position, more efficient operations and strong cash flow generation should allow us to continue investing in growth while also returning cash to stockholders.”

Third Quarter and FY 2024 Financial Guidance:
 Third Quarter Full Fiscal Year 2024
Deliveries2,750 to 2,850 units 10,400 to 10,800 units
Average Delivered Price per Home$950,000 - $960,000 $960,000 - $970,000
Adjusted Home Sales Gross Margin27.7% 28.0%
SG&A, as a Percentage of Home Sales Revenues9.2% 9.6%
Period-End Community Count400 410
Other Income, Income from Unconsolidated Entities, and Gross Margin from Land Sales and Other$— $260 million
Tax Rate26.0% 25.5%

Financial Highlights for the three months ended April 30, 2024 and 2023 (unaudited):
 2024 2023
Net Income$481.6 million, or $4.55 per share diluted $320.2 million, or $2.85 per share diluted
Pre-Tax Income$649.8 million $430.6 million
Pre-Tax Inventory Impairments included in Home Sales Costs of Revenues$28.4 million $11.1 million
Home Sales Revenues$2.65 billion and 2,641 units $2.49 billion and 2,492 units
Net Signed Contracts$2.94 billion and 3,041 units $2.28 billion and 2,333 units
Net Signed Contracts per Community8.0 units 7.0 units
Quarter-End Backlog$7.38 billion and 7,093 units $8.38 billion and 7,574 units
Average Price per Home in Backlog$1,040,200 $1,105,900
Home Sales Gross Margin25.8% 26.4%
Adjusted Home Sales Gross Margin28.2% 28.3%
Interest Included in Home Sales Cost of Revenues, as a percentage of Home Sales Revenues1.3% 1.5%
SG&A, as a percentage of Home Sales Revenues9.0% 9.1%
Income from Operations$623.5 million, or 22.0% of total revenues $425.7 million, or 17.0% of total revenues
Other Income, Income from Unconsolidated Entities, and Gross Margin from Land Sales and Other$203.7 million $0.9 million
Pre-Tax Land and Other Impairments included in Land Sales and Other Costs of Revenues$0.6 million $4.7 million
Quarterly Cancellations as a Percentage of Beginning-Quarter Backlog2.8% 3.9%
Quarterly Cancellations as a Percentage of Signed Contracts in Quarter5.7% 11.5%

Financial Highlights for the six months ended April 30, 2024 and 2023 (unaudited):
 2024 2023
Net Income$721.2 million, or $6.80 per share diluted $511.7 million, or $4.56 per share diluted
Pre-Tax Income$960.9 million $684.4 million
Pre-Tax Inventory Impairments included in Home Sales Costs of Revenues$29.9 million $19.1 million
Home Sales Revenues$4.58 billion and 4,568 units $4.24 billion and 4,318 units
Net Signed Contracts$5.01 billion and 5,083 units $3.73 billion and 3,794 units
Home Sales Gross Margin26.6% 26.1%
Adjusted Home Sales Gross Margin28.5% 28.0%
Interest Included in Home Sales Cost of Revenues, as a percentage of Home Sales Revenues1.3% 1.5%
SG&A, as a percentage of Home Sales Revenues10.2% 10.4%
Income from Operations$931.9 million, or 19.5% of total revenues $651.0 million, or 15.2% of total revenues
Other Income, Income from Unconsolidated Entities, and Gross Margin from Land Sales and Other$212.3 million $17.7 million
Pre-Tax Land and Other Impairments included in Land Sales and Other Costs of Revenues$0.6 million $17.7 million
    

Additional Information:

  • The Company ended its FY 2024 second quarter with approximately $1.03 billion in cash and cash equivalents, compared to $1.30 billion at FYE 2023 and $754.8 million at FY 2024’s first quarter end. At FY 2024 second quarter end, the Company also had $1.7 billion available under its $1.9 billion revolving credit facility, which is scheduled to mature in February 2028.
  • On March 12, 2024, the Company announced a 10% increase in its quarterly cash dividend from $0.21 to $0.23 per share. On April 19, 2024, the Company paid its quarterly dividend of $0.23 per share to shareholders of record at the close of business on April 5, 2024.
  • Stockholders’ Equity at FY 2024 second quarter end was $7.31 billion, compared to $6.80 billion at FYE 2023.
  • FY 2024’s second quarter-end book value per share was $70.98 per share, compared to $65.49 at FYE 2023.
  • The Company ended its FY 2024’s second quarter with a debt-to-capital ratio of 28.0%, compared to 28.0% at FY 2024’s first quarter end and 29.6% at FYE 2023. The Company ended FY 2024’s second quarter with a net debt-to-capital ratio(1) of 18.7%, compared to 21.4% at FY 2024’s first quarter end, and 17.7% at FYE 2023.
  • The Company ended FY 2024’s second quarter with approximately 71,800 lots owned and optioned, compared to 70,400 one quarter earlier, and 71,300 one year earlier. Approximately 52% or 37,000, of these lots were owned, of which approximately 18,500 lots, including those in backlog, were substantially improved.
  • In the second quarter of FY 2024, the Company spent approximately $472.0 million on land to purchase approximately 3,470 lots.
  • The Company ended FY 2024’s second quarter with 386 selling communities, compared to 377 at FY 2024’s first quarter end and 350 at FY 2023’s second quarter end.
  • The Company repurchased approximately 1.5 million shares at an average price of $120.60 per share for a total purchase price of approximately $181.2 million.

(1)   See “Reconciliation of Non-GAAP Measures” below for more information on the calculation of the Company’s net debt-to-capital ratio.

Toll Brothers will be broadcasting live via the Investor Relations section of its website, investors.TollBrothers.com, a conference call hosted by chairman and chief executive officer Douglas C. Yearley, Jr. at 8:30 a.m. (ET) Wednesday, May 22, 2024, to discuss these results and its outlook for the third quarter and FY 2024. To access the call, enter the Toll Brothers website, click on the Investor Relations page, and select “Events & Presentations.” Participants are encouraged to log on at least fifteen minutes prior to the start of the presentation to register and download any necessary software.

The call can be heard live with an online replay which will follow.

ABOUT TOLL BROTHERS

Toll Brothers, Inc., a Fortune 500 Company, is the nation’s leading builder of luxury homes. The Company was founded 57 years ago in 1967 and became a public company in 1986. Its common stock is listed on the New York Stock Exchange under the symbol “TOL.” The Company serves first-time, move-up, empty-nester, active-adult, and second-home buyers, as well as urban and suburban renters. Toll Brothers builds in over 60 markets in 24 states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, and Washington, as well as in the District of Columbia. The Company operates its own architectural, engineering, mortgage, title, land development, insurance, smart home technology, and landscape subsidiaries. The Company also develops master-planned and golf course communities as well as operates its own lumber distribution, house component assembly, and manufacturing operations.

In 2024, Toll Brothers marked 10 years in a row being named to the Fortune World’s Most Admired Companies™ list. Toll Brothers has also been named Builder of the Year by Builder magazine and is the first two-time recipient of Builder of the Year from Professional Builder magazine. For more information visit TollBrothers.com.

Toll Brothers discloses information about its business and financial performance and other matters, and provides links to its securities filings, notices of investor events, and earnings and other news releases, on the Investor Relations section of its website (investors.TollBrothers.com).

From Fortune, ©2024 Fortune Media IP Limited. All rights reserved. Used under license.

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 meaning of the Private Securities Litigation Reform Act of 1995. One can identify these statements by the fact that they do not relate to matters of a strictly historical or factual nature and generally discuss or relate to future events. These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” “should,” “likely,” “will,” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information and statements regarding: expectations regarding inflation and interest rates; the markets in which we operate or may operate; our strategic priorities; our land acquisition, land development and capital allocation priorities; market conditions; demand for our homes; our build-to-order and spec home strategy; anticipated operating results and guidance; home deliveries; financial resources and condition; changes in revenues; changes in profitability; changes in margins; changes in accounting treatment; cost of revenues, including expected labor and material costs; selling, general, and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; sales paces and prices; effects of home buyer cancellations; growth and expansion; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability to acquire or dispose of land and pursue real estate opportunities; our ability to gain approvals and open new communities; our ability to market, construct and sell homes and properties; our ability to deliver homes from backlog; our ability to secure materials and subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; and the outcome of legal proceedings, investigations, and claims.

Any or all of the forward-looking statements included in this release are not guarantees of future performance and may turn out to be inaccurate. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. The major risks and uncertainties – and assumptions that are made – that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:

  • the effect of general economic conditions, including employment rates, housing starts, inflation rates, interest and mortgage rates, availability of financing for home mortgages and strength of the U.S. dollar;
  • market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;
  • the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such land;
  • access to adequate capital on acceptable terms;
  • geographic concentration of our operations;
  • levels of competition;
  • the price and availability of lumber, other raw materials, home components and labor;
  • the effect of U.S. trade policies, including the imposition of tariffs and duties on home building products and retaliatory measures taken by other countries;
  • the effects of weather and the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, unavailability of insurance, and shortages and price increases in labor or materials associated with such natural disasters;
  • risks arising from acts of war, terrorism or outbreaks of contagious diseases, such as Covid-19;
  • federal and state tax policies;
  • transportation costs;
  • the effect of land use, environment and other governmental laws and regulations;
  • legal proceedings or disputes and the adequacy of reserves;
  • risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, indebtedness, financial condition, losses and future prospects;
  • the effect of potential loss of key management personnel;
  • changes in accounting principles;
  • risks related to unauthorized access to our computer systems, theft of our and our homebuyers’ confidential information or other forms of cyber-attack; and
  • other factors described in “Risk Factors” included in our Annual Report on Form 10-K for the year ended October 31, 2023 and in subsequent filings we make with the Securities and Exchange Commission (“SEC”).

Many of the factors mentioned above or in other reports or public statements made by us will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.

Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For a further discussion of factors that we believe could cause actual results to differ materially from expected and historical results, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the SEC and in subsequent reports filed with the SEC. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.

 
TOLL BROTHERS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands)
 
 April 30,2024 October 31,2023
 (Unaudited)  
ASSETS   
Cash and cash equivalents$1,030,530  $1,300,068 
Inventory 9,926,939   9,057,578 
Property, construction and office equipment - net 321,166   323,990 
Receivables, prepaid expenses and other assets 724,399   691,256 
Mortgage loans held for sale 136,346   110,555 
Customer deposits held in escrow 108,521   84,530 
Investments in unconsolidated entities 1,002,458   959,041 
 $13,250,359  $12,527,018 
    
LIABILITIES AND EQUITY   
Liabilities:   
Loans payable$1,113,126  $1,164,224 
Senior notes 1,596,644   1,596,185 
Mortgage company loan facility 127,541   100,058 
Customer deposits 542,877   540,718 
Accounts payable 694,422   597,582 
Accrued expenses 1,636,722   1,548,781 
Income taxes payable 214,833   166,268 
Total liabilities 5,926,165   5,713,816 
    
Equity:   
Stockholders’ Equity   
Common stock, 112,937 shares issued at April 30, 2024 and October 31, 2023 1,129   1,129 
Additional paid-in capital 689,259   698,548 
Retained earnings 7,350,235   6,675,719 
Treasury stock, at cost — 9,974 and 9,146 shares at April 30, 2024 and October 31, 2023, respectively (772,476)  (619,150)
Accumulated other comprehensive income 39,827   40,910 
Total stockholders’ equity 7,307,974   6,797,156 
Noncontrolling interest 16,220   16,046 
Total equity 7,324,194   6,813,202 
 $13,250,359  $12,527,018 

 
TOLL BROTHERS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except per share data and percentages)(Unaudited)
 
 Three Months Ended April 30, Six Months Ended April 30,
  2024   2023   2024   2023 
 $% $% $% $%
Revenues:           
Home sales$2,647,020   $2,490,098   $4,578,856   $4,239,520  
Land sales and other 190,466    16,881    206,478    47,628  
  2,837,486    2,506,979    4,785,334    4,287,148  
            
Cost of revenues:           
Home sales 1,963,283 74.2%  1,832,878 73.6%  3,362,509 73.4%  3,133,801 73.9%
Land sales and other 12,979 6.8%  20,850 123.5%  23,140 11.2%  63,285 132.9%
  1,976,262    1,853,728    3,385,649    3,197,086  
            
Gross margin - home sales 683,737 25.8%  657,220 26.4%  1,216,347 26.6%  1,105,719 26.1%
Gross margin - land sales and other 177,487 93.2%  (3,969)(23.5)%  183,338 88.8%  (15,657)(32.9)%
            
Selling, general and administrative expenses 237,698 9.0%  227,537 9.1%  467,744 10.2%  439,034 10.4%
Income from operations 623,526    425,714    931,941    651,028  
            
Other:           
Income (loss) from unconsolidated entities 5,887    (5,302)   (3,285)   (9,735) 
Other income - net 20,366    10,180    32,284    43,095  
Income before income taxes 649,779    430,592    960,940    684,388  
Income tax provision 168,162    110,376    239,765    172,642  
Net income$481,617   $320,216   $721,175   $511,746  
Per share:           
Basic earnings$4.60   $2.88   $6.87   $4.60  
Diluted earnings$4.55   $2.85   $6.80   $4.56  
Cash dividend declared$0.23   $0.21   $0.44   $0.41  
Weighted-average number of shares:           
Basic 104,794    111,214    104,958    111,306  
Diluted 105,803    112,184    106,034    112,260  
            
Effective tax rate 25.9%   25.6%   25.0%   25.2% 

 
TOLL BROTHERS, INC. AND SUBSIDIARIESSUPPLEMENTAL DATA(Amounts in thousands)(unaudited)
 
 Three Months Ended April 30, Six Months Ended April 30,
 2024 2023 2024 2023
Inventory impairments and write-offs included in home sales cost of revenues:       
Pre-development costs and option write offs$1,288 $5,844 $2,759 $8,448
Land owned for future communities   325    325
Land owned for operating communities 27,140  4,900  27,140  10,300
 $28,428 $11,069 $29,899 $19,073
        
Land and other impairments included in land sales and other cost of revenues$600 $4,700 $600 $17,700
        
Depreciation and amortization$19,590 $18,611 $35,283 $34,093
Interest incurred$27,405 $33,581 $56,164 $66,628
Interest expense:       
Charged to home sales cost of revenues$34,740 $37,558 $58,318 $62,638
Charged to land sales and other cost of revenues 726  1,350  1,020  4,827
 $35,466 $38,908 $59,338 $67,465
        
Home sites controlled:    April 30,2024 April 30,2023
Owned     36,985  36,348
Optioned     34,779  34,947
      71,764  71,295
          

Inventory at April 30, 2024 and October 31, 2023 consisted of the following (amounts in thousands):

 April 30,2024 October 31,2023
Land deposits and costs of future communities$509,981 $549,035
Land and land development costs 2,952,101  2,631,147
Land and land development costs associated with homes under construction 3,203,677  2,916,334
Total land and land development costs 6,665,759  6,096,516
    
Homes under construction 2,782,555  2,515,484
Model homes (1) 478,625  445,578
 $9,926,939 $9,057,578

(1)   Includes the allocated land and land development costs associated with each of our model homes in operation.

Toll Brothers operates in the following five geographic segments, with current operations generally located in the states listed below:

  • North: Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and Pennsylvania
  • Mid-Atlantic: Georgia, Maryland, North Carolina, Tennessee and Virginia
  • South: Florida, South Carolina and Texas
  • Mountain: Arizona, Colorado, Idaho, Nevada and Utah
  • Pacific: California, Oregon and Washington
  
 Three Months Ended April 30,
 Units $ (Millions) Average Price Per Unit $
 2024 2023  2024   2023   2024  2023
REVENUES           
North349 408 $335.2  $381.3  $960,500 $934,600
Mid-Atlantic378 274  376.1   309.6  $995,000 $1,129,900
South804 659  658.4   519.4  $818,900 $788,100
Mountain686 767  603.6   674.2  $879,800 $879,100
Pacific424 384  674.7   605.9  $1,591,200 $1,577,800
Home Building2,641 2,492  2,648.0   2,490.4  $1,002,600 $999,300
Corporate and other     (1.0)  (0.3)    
Total home sales2,641 2,492  2,647.0   2,490.1  $1,002,300 $999,200
Land sales and other     190.5   16.9     
Total Consolidated    $2,837.5  $2,507.0     
            
CONTRACTS           
North412 396 $422.1  $366.1  $1,024,600 $924,400
Mid-Atlantic376 316  348.9   325.4  $928,000 $1,029,700
South892 749  746.8   590.9  $837,200 $789,000
Mountain944 529  814.6   449.4  $862,900 $849,500
Pacific417 343  608.6   543.5  $1,459,400 $1,584,600
Total Consolidated3,041 2,333 $2,941.0  $2,275.3  $967,100 $975,300
            
BACKLOG           
North1,055 1,081 $1,108.0  $1,097.6  $1,050,300 $1,015,300
Mid-Atlantic912 969  900.8   1,052.3  $987,700 $1,085,900
South2,344 2,539  2,120.2   2,362.4  $904,500 $930,400
Mountain1,891 2,037  1,836.2   2,161.1  $971,000 $1,060,900
Pacific891 948  1,412.8   1,702.9  $1,585,600 $1,796,300
Total Consolidated7,093 7,574 $7,378.0  $8,376.3  $1,040,200 $1,105,900

 Six Months Ended April 30,
 Units $ (Millions) Average Price Per Unit $
 2024 2023  2024   2023   2024  2023
REVENUES           
North638 765 $607.9  $704.1  $952,800 $920,400
Mid-Atlantic655 440  640.3   498.7  $977,600 $1,133,400
South1,435 1,148  1,191.3   912.3  $830,200 $794,700
Mountain1,171 1,315  1,056.9   1,154.4  $902,600 $877,900
Pacific669 650  1,083.7   970.6  $1,619,900 $1,493,200
Home Building4,568 4,318  4,580.1   4,240.1  $1,002,600 $982,000
Corporate and other     (1.2)  (0.6)    
Total home sales4,568 4,318  4,578.9   4,239.5  $1,002,400 $981,800
Land sales and other     206.5   47.6     
Total Consolidated    $4,785.3  $4,287.1     
            
CONTRACTS           
North737 724 $751.0  $681.3  $1,019,000 $941,000
Mid-Atlantic622 567  587.6   589.5  $944,700 $1,039,700
South1,467 1,164  1,216.7   919.4  $829,400 $789,900
Mountain1,485 828  1,313.4   713.3  $884,400 $861,500
Pacific772 511  1,137.1   826.0  $1,472,900 $1,616,400
Total Consolidated5,083 3,794 $5,005.8  $3,729.5  $984,800 $983,000

Note: Due to rounding, amounts may not add.

Unconsolidated entities:

Information related to revenues and contracts of entities in which we have an interest for the three-month and six-month periods ended April 30, 2024 and 2023, and for backlog at April 30, 2024 and 2023 is as follows:

 Units $ (Millions) Average Price Per Unit $
 2024 2023  2024   2023   2024  2023
Three months ended April 30,           
Revenues40 3 $40.9  $8.6  $1,021,400 $2,864,500
Contracts33 29 $43.9  $37.3  $1,328,900 $1,286,000
            
Six months ended April 30,           
Revenues40 6 $40.9  $23.4  $1,021,400 $3,906,700
Contracts55 52 $65.4  $70.2  $1,189,700 $1,350,300
            
Backlog at April 30,164 127 $184.5  $143.4  $1,125,200 $1,128,800
                  

RECONCILIATION OF NON-GAAP MEASURES

This press release contains, and Company management’s discussion of the results presented in this press release may include, information about the Company’s adjusted home sales gross margin, adjusted net income, adjusted diluted earnings per share and the Company’s net debt-to-capital ratio.

These four measures are non-GAAP financial measures which are not calculated in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP financial measures should not be considered a substitute for, or superior to, the comparable GAAP financial measures, and may be different from non-GAAP measures used by other companies in the home building business.

The Company’s management considers these non-GAAP financial measures as we make operating and strategic decisions and evaluate our performance, including against other home builders that may use similar non-GAAP financial measures. The Company’s management believes these non-GAAP financial measures are useful to investors in understanding our operations and leverage and may be helpful in comparing the Company to other home builders to the extent they provide similar information.

Adjusted Home Sales Gross Margin The following table reconciles the Company’s home sales gross margin as a percentage of home sales revenues (calculated in accordance with GAAP) to the Company’s adjusted home sales gross margin (a non-GAAP financial measure). Adjusted home sales gross margin is calculated as (i) home sales gross margin plus interest recognized in home sales cost of revenues plus inventory write-downs recognized in home sales cost of revenues divided by (ii) home sales revenues.

 
Adjusted Home Sales Gross Margin Reconciliation(Amounts in thousands, except percentages)
 
  Three Months Ended April 30, Six Months Ended April 30,
   2024   2023   2024   2023 
Revenues - home sales$2,647,020  $2,490,098  $4,578,856  $4,239,520 
Cost of revenues - home sales 1,963,283   1,832,878   3,362,509   3,133,801 
Home sales gross margin 683,737   657,220   1,216,347   1,105,719 
Add:Interest recognized in cost of revenues - home sales 34,740   37,558   58,318   62,638 
 Inventory impairments and write-offs in cost of revenues - home sales 28,428   11,069   29,899   19,073 
Adjusted home sales gross margin$746,905  $705,847  $1,304,564  $1,187,430 
         
Home sales gross margin as a percentage of home sale revenues 25.8%  26.4%  26.6%  26.1%
         
Adjusted home sales gross margin as a percentage of home sale revenues 28.2%  28.3%  28.5%  28.0%
  

The Company’s management believes adjusted home sales gross margin is a useful financial measure to investors because it allows them to evaluate the performance of our home building operations without the often varying effects of capitalized interest costs and inventory impairments. The use of adjusted home sales gross margin also assists the Company’s management in assessing the profitability of our home building operations and making strategic decisions regarding community location and product mix.

Forward-looking Adjusted Home Sales Gross MarginThe Company has not provided projected third quarter and full FY 2024 home sales gross margin or a GAAP reconciliation for forward-looking adjusted home sales gross margin because such measure cannot be provided without unreasonable efforts on a forward-looking basis, since inventory write-downs are based on future activity and observation and therefore cannot be projected for the third quarter and full FY 2024. The variability of these charges may have a potentially unpredictable, and potentially significant, impact on our third quarter and full FY 2024 home sales gross margin.

Adjusted Net Income and Diluted Earnings Per Share ReconciliationThe following table reconciles the Company’s net income and earnings per share (calculated in accordance with GAAP) to the Company’s adjusted net income and diluted earnings per share (a non-GAAP financial measure).

 
Adjusted Net Income and Diluted Per Share Reconciliation(Amounts in thousands, except per share data)
 
  Three Months Ended April 30, Six Months Ended April 30,
   2024   2023  2024   2023
Net income$481,617  $320,216 $721,175  $511,746
Subtract:Net income resulting from the sale of a parcel of land to a commercial developer (124,119)    (124,119)  
Adjusted net income$357,498  $320,216 $597,056  $511,746
         
Diluted earnings per share$4.55  $2.85 $6.80  $4.56
Subtract:Diluted earnings per share resulting from the sale of a parcel of land to a commercial developer (1.17)    (1.17)  
Adjusted diluted earnings per share$3.38  $2.85 $5.63  $4.56
              

Net Debt-to-Capital RatioThe following table reconciles the Company’s ratio of debt to capital (calculated in accordance with GAAP) to the Company’s net debt-to-capital ratio (a non-GAAP financial measure). The net debt-to-capital ratio is calculated as (i) total debt minus mortgage warehouse loans minus cash and cash equivalents divided by (ii) total debt minus mortgage warehouse loans minus cash and cash equivalents plus stockholders’ equity.

 
 Net Debt-to-Capital Ratio Reconciliation(Amounts in thousands, except percentages)
 
  April 30, 2024 January 31, 2024 October 31, 2023
Loans payable$1,113,126  $1,064,149  $1,164,224 
Senior notes 1,596,644   1,596,414   1,596,185 
Mortgage company loan facility 127,541   63,194   100,058 
Total debt 2,837,311   2,723,757   2,860,467 
Total stockholders’ equity 7,307,974   7,019,271   6,797,156 
Total capital$10,145,285  $9,743,028  $9,657,623 
Ratio of debt-to-capital 28.0%  28.0%  29.6%
       
Total debt$2,837,311  $2,723,757  $2,860,467 
Less:Mortgage company loan facility (127,541)  (63,194)  (100,058)
 Cash and cash equivalents (1,030,530)  (754,793)  (1,300,068)
Total net debt 1,679,240   1,905,770   1,460,341 
Total stockholders’ equity 7,307,974   7,019,271   6,797,156 
Total net capital$8,987,214  $8,925,041  $8,257,497 
Net debt-to-capital ratio 18.7%  21.4%  17.7%
            

The Company’s management uses the net debt-to-capital ratio as an indicator of its overall leverage and believes it is a useful financial measure to investors in understanding the leverage employed in the Company’s operations.

CONTACT: Frederick N. Cooper (215) 938-8312fcooper@tollbrothers.com

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/8896d5f0-0a75-4129-9749-02c7fc35e5c7

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Bella Vista at Porter Ranch

Northridge, CA
Source: Toll Brothers, Inc.

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