Toll Brothers, Inc. · NYSE:TOL
Toll Brothers — Q4 2023 Earnings Presentation
60 slides from Toll Brothers's earnings presentation, December 2023
Slide 1: Company Overview October 31, 2023
Slide 2: Forward-looking statements
Information presented herein for the fourth quarter ended October 31, 2023 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
Slide 3: Executive Summary / Table of Contents
EXECUTIVE SUMMARY 1 RwWN Company Overview Forward-looking Statement Table of Contents America’s Luxury Home Builder Toll Brothers Differentiators Quarter and FY Results Key Financial Metrics Quarterly Results Factors Driving Demand . National Footprint . Geographically Diversified Portfolio . Total
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: The Dominant Player With Few Competitors In The Luxury Home Market
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 both high-growth & high barrier-t
Slide 6: Key financial metrics Q4 and FY 2023
3 Months Ended October 31, Fiscal Year Ended Oc 2023 2022 % Change 2023 2022 % Change Contracts Units 2,038 1,186 72% 8,077 8,255 (2%) Dollars $2,015 $1,320 53% $7,908 $9,067 (13%) Backlog Units 6,578 8,098 (19%) 6,578 8,098 (19%) Dollars $6,945 $8,874 (22%) $6,945 $8,874 (22%) Deliveries Units 2,75
Slide 7: Historical financial data FY2016-FY2023
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/2022-historicaFfinancia-1634400.pdf FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Reve
Slide 8: Q4 & FY 2023 Results
Q4 & FY 2023 RESULTS * Q4 2023 Contracts up 53% in dollars, & up 72% in units * Q4 2023 Backlog down 22% in dollars, & down 19% in units ¢ FY 2023 earnings per share up 13% vs FY 2022 ¢ FY 2023 settlements up 2% in dollars, & down 9% in units * Expect 10% community count growth in FY 2024 ¢ Expect t
Slide 9: Factors driving demand
Constrained supply of new & resale homes on the market Home price appreciation in existing homes for our buyers Exogenous factors such as global political turmoil Toll buyers have benefited from a decade of solid stock market / low unemployment Surge of Millennials purchasing first home Boomers maki
Slide 10: National Footprint Positions Toll Brothers for Growth
NATIONAL FOOTPRINT POSITIONS 24 STATES TOLL BROTHERS FOR GROWTH 60+ MARKETS it O nm n " i rin Raleigh Los Angeles '@) Q n Di © Myrtle Beach oe fe Charlestor Dc n Hilton Head fe, Jacksonville Total: 370 Note: Data as of October 31, 2023
Slide 11: Geographically Diversified Portfolio: lots controlled and revenue
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 (TAM)
TOTAL ADDRESSABLE MARKET (TAM) Annual TOL Homes 26MM With Income > $150K 20% growth c Addressable Market 26,000,000 TOL Annually 9 Reaches 04% of TAM It would take us about 20+ years to sell to just 1% of the total addressable market
Slide 13: Land Acquisition and Development
LAND ACQUISITION * Control 70,664 home sites * Reduced land owned vs optioned; From 62/38% at FYE 2019 to 51/49% at Q4 FY 2023 + 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 14: Growing Percentage of Lots Optioned vs. Owned
GROWING PERCENTAGE OF LOTS OPTIONED VS. OWNED (AT FYE) 80,867 76,049 70,664 59,230 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Mm Owned mmm Optioned Avg. Owned
Slide 15: Strong Buyer Profile
Toll Brothers STRONG BUYER PROFILE _,Toll Brothers | IN Q4 2023, 52% 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. 95% % of Total Settlements _Incl.Cash
Slide 16: Builder Acquisitions
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, Tennessee & Atlanta, Georgia 2020 Sabal H
Slide 17: 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 18: Leadership in the Luxury Market
LEADERSHIP IN THE LUXURY MARKET 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 51g «$539: $542 gas «$440 $4460 $454 $479 $501 . ; i i i i i ; ; : : $624 $1,028 .
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Slide 22: ‘Toll Brothers
‘Toll Brothers SERENO CANYON | SCOTTSDALE, (AZ ie AMP RICA'S ERR B gO MRE 22 he
Slide 23: Increasing Focus on Affordable Luxury
INCREASING FOCUS ON AFFORDABLE LUXURY TOLL BROTHERS COMMUNITY COUNT BY BUYER SEGMENT 47% 42% 42% 40% 40% 39% say 36% 20% 19% 20% ; ; 7 Affordable Luxury Luxury Age Targeted / Empty Nester FY 2020 mFY 2021 mFY 2022 mFY 2023
Slide 24: Affordable Luxury
CARRIAGE HILL WEST | NAMPA, ID
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Slide 28: 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 -15,000 (6,700 owned / 8,300 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 Octo
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Slide 32: Suburban High-Density
SUBURBAN HIGH-DENSITY METRO CROSSING |-FR aS
Slide 33: Successful Urban Track Record
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 * Joint venturing with in
Slide 34: Toll Brothers City Living
- s ~~ “TOLEBROTHER Cre others
Slide 35: Toll Brothers City Living
se : LS BK LL, BROT HERS CITY LIVING:
Slide 36: 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 M
Slide 37: Toll Brothers Apartment Living
TT Ti Ti ita / (0 ia it ean a Te Be tea i ie 4 us a le oe ; Wil T a - 5) go! Allg 1 thers”. —_—
Slide 38: Apartment Living Pipeline
TOLL BROTHERS APARTMENT LIV PIPELINE 27,965 TOTAL UNITS IN 83 Denver PROPERTIES ‘Southern California Cameo, 262 Units The Lindley, 362 Units Rafferty, 218 Units Eveswell, 306 Units Oceanside NCTD, 547 Units Warner Center, 276 Units @ STUDENT HOUSING UMD - Terrapin Row, 418 Units ASU- Canvas, 263 Uni
Slide 39: The Toll Brothers Advantage
SUMMIT AT WESTCLIFF LOS ANGELES, cA 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 * Extraordinary architectural elements & thoughtful desi
Slide 40: Build-to-Order model provides unrivaled choice
ii Ni | il Build-to-Order model provides unrivaled choice for our home buyers Goal: 60% of homes pre-sold build-to-order, 40% spec We operate 34 Toll Brothers Design Studios, a retail-like space where buyers choose both structural & finishing options Our buyers increasingly want the ability to perso
Slide 41: What Buyers Want Today
Slide 42: John Burns Submarket Desirability Index
JOHN BURNS’ HIGHEST RANKING SELLING COMMUNITIES IN ‘SUBMARKET DESIRABILITY INDEX 2.15 21 2.05 1.90 1.75 DFH GRBK TMHC~ TPH DHI MDC ccs LGIH NVR mame Wid. Avg. Wtd. Avg, All Builders The weighted average Submarket Desirability Index™ is the proprietary measurement John Burns uses to determine which a
Slide 43: Operational Efficiencies Through Innovation
OPERATIONAL EFFICIENCIE 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
Slide 44: Environmental, Social and Governance
* — Inaugural report released April 19, 2021 * Metrics updated in FY 2023 for FY 2022 * — Utilizes industry-specific standards from the Sustainability Accounting Standards Board (SASB) * Benchmarks efforts on a range of environmental, social & governance matters * — Visit the report at TollBrothers.
Slide 45: 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 still below
Slide 46: Key Market Trends
KEY MARKET TREND MARKET TRENDS Millennials are now buying their first homes, some with parental assistance Baby Boomers consider their next move: the home they want to retire in, asecond home, or a multi-generational living option Economy & population growth in the Southeast, Texas, Mountain States,
Slide 47: Median Age Of Owner-Occupied Housing
2005 2007 2009 2011 2013 2015 2017 2019 2021
Slide 48: 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 49: Buyer Credit
BUYER CREDIT 2000s vs TODAY LAST CYCLE (Before GFc) * 26% of loans originated had a credit score of <660 * 24% were to borrowers with a credit score 760+ higher returns TODAY (As of @3 2023) * 8% of loans originated had a credit score of <660 * 62% were to borrowers with a credit score 760+ Mortgage
Slide 50: 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 Controlling more land with fewer dollars leads to higher returns OPERATIONS
Slide 51: Debt Maturity Profile
AS OF OCTOBER 31, 2023 Cash & Equivalents $1.30BN Moody's Baa3 (Stable) Standard & Poor's BBB- (Stable) Revolver Availability $1.79 BN . Fitch Inc. BBB (Stable) TOTAL LIQUIDITY $3.08 BN $400M fixed at 1,5% through 10/25; $250M floating [ | (currently 6.5%) ae $61 $102 sO SO Fae SO FYE 2024 2025 2026
Slide 52: Strong Bank and Capital Market Relationships
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Slide 53: Book Value Per Share
$15.61 $18.51 $19.68 $22.02 $24.15 $26.14 $28.82 $32.57 $35.99 $38.53 $44.08 $54.79 $65.49
Slide 54: Net Debt-To-Capital 2000-2023
Net Debt-To-Capital 2000-2023 (FYE) 9/ 45.8% 48.0% 46.0% 40.7% 41% 39 50, 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 2002 2003 2004 2005 2006
Slide 55: Stock Repurchase Summary
FY Shares Cost Average Price otal $/Quarterly pw genes 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 15,951,855 $634MM $39.75 $57MM/$0.11 2019 6,619,345 $234MM $35.28 $64MM/$0.11 2018 12,108,158 $503MM $41.56 $62MM/$
Slide 56: Adjusted Gross Margin & EBITDA
ADJUSTED GROSS MARGIN & EBITDA 201 2016 2017 2018 2019 2020 2021 2022 2023 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 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 7,207,279 Gross
Slide 57: Net Debt-To-Capital
NET DEBT-TO-CAPITAL Loans payable 472,854 94,491__ 106,556 99,817 107,222 652,619 1,000,439 __ 871,079 __637,416 __686,801_1,111.449 1,147,955 1,011,534 __1185,275 1,164,224 Senior notes 1578,212 1,536,005 1,484,204 2,065,334 2,305,765 2,638,241 __2,689.801__ 2,694,372 2,462,463 2.861375 2,659,898 2
Slide 58: Share of Owner-Occupied Housing by Year Structure Built
SHARE OF OWNER-OCCUPIED HOUSING BY YEAR STRUCTURE BUILT Built 1969 or earlier Built 1970 to 1979 ; Built 1980 to 1989 Ye Built 1990 to 1999 Built 2000 to 2009 Built 2010 or later REGENCY AT A PALM BEACH GARDENS, FE Source: U.S. Census Bureau
Slide 59: Book Value and Earnings Per Share Growth
TOLL BROTHERS BOOK VALUE PER SHARE GROWTH / FYE STOCK PRICE S&P 500 BOOK VALUE CAGR: 4% $65.49 33.01 $32.88 717.44 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year TOLL BROTHERS EARNINGS PER SHARE GROWTH / FYE STOCK PRICE S&P 500 AVERAGE EARNINGS PER SHARE GROWTH CAGR: 8%
Slide 60: Return on Beginning Equity and Dividend Growth
TOLL BROTHERS TOLL BROTHERS RETURN ON BEGINNING EQUITY GROWTH DIVIDEND GROWTH S&P 500 ROE S&P 500 DIVIDEND CAGR: 4% GROWTH CAGR: 9% 24.3% $0.83 22.8% : 17.1% : . . $0.41 $0.44 $0.44 my 24% 9.0% 8.8% $0.24 5.5% 2013 2014 2015-2016 «2017-2018 «2019-2020 «2021 «2022 = 2023 2017 2018 2019 2020 2021 2022