Toll Brothers, Inc. (NYSE:TOL) Q1 2023 Results Conference Call February 22, 2023 8:30 AM ET

Company Participants

Fred Cooper - SVP, Finance & IR

Douglas Yearley - CEO

Martin Connor - CFO

Conference Call Participants

Stephen Kim - Evercore ISI

Michael Rehaut - JP Morgan

Rafe Jadrosich - Bank of America

John Lovallo - UBS

Susan Maklari - Goldman Sachs

Truman Patterson - Wolfe Research

Mike Dahl - RBC Capital Markets

Operator

Good morning, and welcome to the Toll Brothers First Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I'd now like to turn the conference over to Douglas Yearley, CEO. Please go ahead.

Douglas Yearley

Thank you, Keith. 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.

I'm very pleased with the strong first quarter results. We exceeded the midpoint of our guidance on all key metrics, and we have seen a meaningful uptick in demand that started in January and has continued through this past weekend. In our first quarter, we delivered 1,826 homes and generated homebuilding revenue of $1.75 billion, up 3.7% in dollars compared to the first quarter of fiscal 2022. Our adjusted gross margin was 27.5% or 50 basis points better than guidance and 190 basis points better than last year's first quarter. SG&A expense at 12.1% of homebuilding revenues was significantly better than both last year's first quarter and our guidance as we are benefiting from cost savings initiatives that we've implemented over the past year.

Moving forward, we will continue to execute on additional cost-saving plans to further reduce SG&A expense. Pretax income was $253.8 million, and earnings per share was $1.70 diluted, up 26% and 37%, respectively, compared to last year's first quarter. At first quarter end, our backlog stood at $8.6 billion and 7,733 homes. Although we've seen orders decline 50% to 60% on a unit basis over the past 3 quarters. Backlog is down only 21% in dollars compared to 1 year ago. As a result, we continue to expect solid results this year, and we are reaffirming our full fiscal year 2023 guidance of an adjusted gross margin of 27% and and $8 to $9 of diluted earnings per share.