Toll Brothers, Inc. (NYSE:TOL) Q2 2023 Earnings Conference Call May 24, 2023 8:30 AM ET

Company Participants

Douglas C. Yearley, Jr. - Chairman and CEO

Martin P. Connor - CFO

Conference Call Participants

Spencer Kaufman - UBS

Michael Rehaut - J.P. Morgan

Stephen Kim - Evercore ISI

Rafe Jadrosich - Bank of America Securities

Alex Barron - Housing Research Center

Alan Ratner - Zelman Associates

Michael Dahl - RBC Capital Markets

Operator

Good morning everyone and welcome to the Toll Brothers Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. The company is planning to end the call at 9.30 when the market opens. During the Q&A we do ask that you please limit yourselves to one question and one follow-up. Please note, this event is being recorded. At this time, I would like to turn the floor over to Douglas Yearley, CEO. Please go ahead.

Douglas C. Yearley, Jr.

Thank you, Jamie. Good morning. Welcome and thank you all for joining us. Before I begin, I ask you to read our statement on forward-looking information in our earnings release of last night and on our website. I caution you that many statements on this call are forward-looking based on assumptions about the economy, world events, housing and financial markets, interest rates, the availability of labor and materials, inflation and many other factors beyond our control that could significantly affect future results.

With me today are Marty Connor, Chief Financial Officer; Rob Parahus, President and Chief Operating Officer; Fred Cooper, Senior VP of Finance and Investor Relations; Wendy Marlett, Chief Marketing Officer; and Gregg Ziegler, Senior VP and Treasurer.

We are very pleased with our second quarter results. As mortgage rates have stabilized and buyer confidence has improved, the increase in demand that began in January has continued through our second quarter and into the start of our third quarter. This improvement in demand combined with our strategy of increasing our supply at spec homes into the spring selling season and our focus on operational efficiency has resulted in second quarter performance that well exceeded our guidance. As a result, we are raising our full year guidance across most metrics.

We delivered 2492 homes in the second quarter at an average price $1 million generating home sales revenues of approximately $2.5 billion each a second quarter record. Deliveries exceeded the mid-point of our guidance by nearly 400 units primarily due to cycle time improvements and an increase in the number of spec homes we settled in the quarter. Adjusted gross margin of 28.3% in the second quarter improved to 220 basis points compared to last year’s second quarter and was 130 basis points better than guidance. Our home building gross margin benefited from cost controls and greater leverage on fixed costs from higher home building revenues.