Toll Brothers(TOL) - 2025 Q3 - Quarterly Results

Q3 FY2025 Earnings Overview Q3 FY2025 Financial Highlights The company achieved record Q3 revenues of $2.9 billion, though net income slightly declined and backlog value fell 10% Q3 FY2025 vs Q3 FY2024 Key Metrics | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $369.6 million | $374.6 million | -1.3% | | Diluted EPS | $3.73 | $3.60 | +3.6% | | Home Sales Revenues | $2.88 billion | $2.72 billion (approx.) | +6% | | Homes Delivered | 2,959 units | 2,814 units | +5% | | Net Signed Contract Value | $2.41 billion | $2.41 billion | Flat | | Contracted Homes | 2,388 units | 2,490 units | -4% | | Quarter-End Backlog Value | $6.38 billion | $7.07 billion | -10% | | Adjusted Gross Margin | 27.5% | 28.8% | -130 bps | | SG&A as % of Revenue | 8.8% | 9.0% | -20 bps | - The company repurchased approximately 1.8 million shares for a total of $201.4 million during the quarter[7] Management Commentary Management highlighted record Q3 revenues and strong margins, citing the resilience of its luxury business - Delivered 2,959 homes at an average price of $974,000, resulting in record Q3 home sales revenues of $2.9 billion, a 6% increase YoY[4] - Adjusted gross margin of 27.5% and SG&A margin of 8.8% both beat company guidance[4] - The average sales price of new contracts rose 4.5% YoY to $1.0 million, offsetting a 4% decline in contract units and keeping contract dollar value flat[5] - The company maintains a solid financial position with significant cash flow and liquidity, and controls sufficient land for community count growth over the next several years, allowing for selective land acquisition[6] Financial Guidance for Q4 and Full Year FY2025 The company projects delivering 11,200 homes for the full year with an adjusted gross margin of 27.25% Q4 and Full Year FY2025 Guidance | Metric | Fourth Quarter Guidance | Full Fiscal Year Guidance | | :--- | :--- | :--- | | Deliveries | 3,350 units | 11,200 units | | Avg. Delivered Price | $970,000 - $980,000 | $950,000 - $960,000 | | Adj. Gross Margin | 27.00% | 27.25% | | SG&A % of Revenue | 8.3% | 9.4% - 9.5% | | Period-End Community Count | 440 - 450 | 440 - 450 | | Tax Rate | 25.5% | 25.1% | Detailed Financial Results Q3 & YTD FY2025 Financial Performance Q3 home sales revenue grew 6%, while nine-month pre-tax income declined due to lower land sales income Financial Highlights for the three months ended July 31 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income | $369.6M | $374.6M | | Home Sales Revenues | $2.88B | $2.72B | | Net Signed Contracts | $2.41B (2,388 units) | $2.41B (2,490 units) | | Quarter-End Backlog | $6.38B (5,492 units) | $7.07B (6,769 units) | | Adjusted Gross Margin | 27.5% | 28.8% | | Cancellations as % of Beginning Backlog | 3.2% | 2.4% | Financial Highlights for the nine months ended July 31 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income | $899.8M | $1.10B | | Home Sales Revenues | $7.43B | $7.30B | | Net Signed Contracts | $7.32B | $7.41B | | Adjusted Gross Margin | 27.4% | 28.6% | | Income from Operations | $1.16B | $1.43B | Financial Position and Liquidity The company maintained strong liquidity, managed its capital structure, and increased book value per share to $83.85 - Ended Q3 with $852.3 million in cash and cash equivalents and $2.19 billion available under its revolving credit facility[13] - Issued $500.0 million of 5.600% senior notes due 2035 and redeemed $350.0 million of 4.875% senior notes due 2025[13] - Book value per share increased to $83.85 at quarter-end, up from $76.87 at FYE 2024[13] - The net debt-to-capital ratio was 19.3% at the end of Q3 FY2025, compared to 19.8% at the end of Q2 FY2025 and 15.2% at FYE 2024[13] Consolidated Financial Statements Financial statements show increased assets from inventory and a decline in net income for Q3 and the nine-month period Condensed Consolidated Balance Sheets Total assets grew to $14.40 billion, driven by a significant increase in inventory Balance Sheet Highlights (in millions) | Account | July 31, 2025 | October 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $852.3 | $1,303.0 | | Inventory | $11,071.5 | $9,712.9 | | Total Assets | $14,396.8 | $13,367.9 | | Total Liabilities | $6,285.6 | $5,681.2 | | Total Stockholders' Equity | $8,095.6 | $7,670.9 | Condensed Consolidated Statements of Operations Q3 revenue rose 6% while net income slightly fell; nine-month net income saw a more significant decline Statement of Operations Highlights (Q3, in millions) | Account | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Home Sales Revenue | $2,881.0 | $2,724.5 | | Gross Margin - Home Sales | $738.2 (25.6%) | $747.3 (27.4%) | | Income from Operations | $487.7 | $497.2 | | Net Income | $369.6 | $374.6 | | Diluted EPS | $3.73 | $3.60 | Statement of Operations Highlights (Nine Months, in millions) | Account | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Home Sales Revenue | $7,428.2 | $7,303.3 | | Gross Margin - Home Sales | $1,901.7 (25.6%) | $1,963.7 (26.9%) | | Income from Operations | $1,156.5 | $1,429.1 | | Net Income | $899.8 | $1,095.8 | | Diluted EPS | $8.95 | $10.40 | Supplemental and Segment Data This section details inventory, impairments, and geographic segment performance, with the Pacific region showing the highest prices Supplemental Financial Data Inventory grew to $11.07 billion, and inventory impairments increased significantly to $23.3 million in Q3 Home Sites Controlled | Type | July 31, 2025 | July 31, 2024 | | :--- | :--- | :--- | | Owned | 32,761 | 36,345 | | Optioned | 43,990 | 36,384 | | Total | 76,751 | 72,729 | - Inventory impairments and write-offs charged to home sales cost of revenues increased to $23.3 million in Q3 2025, compared to $5.5 million in Q3 2024[30] Geographic Segment Performance The South segment led in revenue and deliveries, while the Pacific segment had the highest average contract price Q3 2025 Performance by Geographic Segment | Segment | Revenues ($M) | Contracts ($M) | Backlog ($M) | | :--- | :--- | :--- | :--- | | North | $438.7 | $431.3 | $1,021.2 | | Mid-Atlantic | $400.7 | $369.0 | $956.2 | | South | $757.9 | $524.2 | $1,543.3 | | Mountain | $730.2 | $575.6 | $1,410.8 | | Pacific | $553.1 | $511.9 | $1,444.7 | - The average price per unit in backlog at quarter-end was $1,161,000, a significant increase from $1,044,000 in the prior year, driven largely by a substantial price increase in the Pacific segment's backlog[31] Reconciliation of Non-GAAP Measures This section reconciles non-GAAP measures like adjusted gross margin and net debt-to-capital ratio to their GAAP equivalents Adjusted Home Sales Gross Margin The adjusted home sales gross margin of 27.5% excludes interest and inventory write-downs from the GAAP margin Adjusted Home Sales Gross Margin Reconciliation (Q3) | Metric | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Home Sales Gross Margin (GAAP) | 25.6% | 27.4% | | Add: Interest | 1.1% (approx.) | 1.2% (approx.) | | Add: Inventory Impairments | 0.8% (approx.) | 0.2% (approx.) | | Adjusted Home Sales Gross Margin (Non-GAAP) | 27.5% | 28.8% | - Management believes this non-GAAP measure allows investors to evaluate the performance of home building operations without the often varying effects of capitalized interest costs and inventory impairments[41] Net Debt-to-Capital Ratio The net debt-to-capital ratio, an indicator of leverage, stood at 19.3% at the end of Q3 Net Debt-to-Capital Ratio Reconciliation | Metric | July 31, 2025 | April 30, 2025 | Oct 31, 2024 | | :--- | :--- | :--- | :--- | | Debt-to-Capital Ratio (GAAP) | 26.7% | 26.1% | 27.0% | | Net Debt-to-Capital Ratio (Non-GAAP) | 19.3% | 19.8% | 15.2% | - Management uses the net debt-to-capital ratio as an indicator of its overall leverage and believes it is a useful financial measure for investors to understand the leverage employed in the Company's operations[48] Company Information and Disclosures About Toll Brothers Toll Brothers is a leading U.S. luxury home builder operating in over 60 markets across 24 states - Toll Brothers is the nation's leading builder of luxury homes, serving various buyer segments including first-time, move-up, active-adult, and second-home buyers[16] - The company operates in over 60 markets in 24 states and the District of Columbia and has been recognized as one of Fortune magazine's World's Most Admired Companies for over 10 consecutive years[16][17] Forward-Looking Statements This section outlines risks and uncertainties that could cause future results to differ from forward-looking statements - The release contains forward-looking statements regarding future events and performance, which are not guarantees and are subject to risks and uncertainties[20][21] - Major risks that could affect future results include general economic conditions, interest rates, market demand, land availability, competition, and the price of raw materials and labor[21]