On December 5, 2023, Toll Brothers Inc (TOL, Financial) released its 8-K filing, detailing its financial performance for the fourth quarter and full fiscal year ended October 31, 2023. The luxury homebuilder reported a mixed set of results, reflecting both the resilience of its business model and the broader challenges faced in the housing market.
Fiscal Summary and Performance Overview
For the fourth quarter of FY 2023, Toll Brothers Inc (TOL, Financial) reported a net income of $445.5 million, or $4.11 per share diluted, a decrease from the net income of $640.5 million, or $5.63 per share diluted, in the same quarter of the previous fiscal year. This decline was partly due to the absence of a one-time net after-tax benefit related to a litigation settlement that boosted the prior year's results. Pre-tax income for the quarter also fell to $605.0 million from $841.1 million year-over-year.
Home sales revenues for the quarter were $2.95 billion, marking an 18% decrease compared to the same period last year, with delivered homes down by 27%. However, the net signed contract value saw a significant increase of 53% to $2.01 billion, and contracted homes rose by 72%. The backlog value at the end of the quarter was $6.95 billion, down 22% year-over-year.
Despite the drop in revenues, Toll Brothers Inc (TOL, Financial) improved its home sales gross margin to 27.5% for the quarter, up from 26.9% in the previous year. The adjusted home sales gross margin, which excludes interest and inventory write-downs, also saw a slight increase to 29.1% from 29.0%.
Annual Financial Achievements
For the full fiscal year 2023, Toll Brothers Inc (TOL, Financial) achieved a net income of $1.37 billion, with earnings per share rising to $12.36 diluted, compared to $1.29 billion and $10.90 per share diluted in FY 2022. Home sales revenues increased by 2% to $9.87 billion, despite a 9% decrease in delivered homes. The adjusted home sales gross margin for the year improved to 28.7%, up from 27.5% in the previous year.
The company also continued its share repurchase program, buying back approximately 7.9 million shares at an average price of $72.00 per share for a total purchase price of approximately $565.9 million.
Management Commentary
"Fiscal 2023 was exceptional for Toll Brothers, as we delivered another year of record results," stated Douglas C. Yearley, Jr., chairman and chief executive officer. He highlighted the increase in earnings per share and improvements in gross margin and SG&A expense. Yearley also noted the solid demand seen in the fourth quarter and the strategic shift in mix reflected in the contract numbers. Looking forward, he expressed optimism about the upcoming spring selling season and the company's positioning to capitalize on market trends.
Balance Sheet and Cash Flow Highlights
Toll Brothers Inc (TOL, Financial) ended the fourth quarter with approximately $1.30 billion in cash and cash equivalents. The company's debt-to-capital ratio was 29.6%, showing a slight improvement from 35.7% at the end of FY 2022. The book value per share at the end of the fourth quarter was $65.49, up from $54.79 at the end of the previous fiscal year.
The company's strategy includes broadening its home offerings to include lower price points and increasing its supply of spec homes. Toll Brothers Inc (TOL, Financial) plans to increase its community count by approximately 10% in fiscal 2024, with the end of fiscal 2023 seeing the company operating from 370 communities.
Outlook and Guidance
For the first quarter and full fiscal year 2024, Toll Brothers Inc (TOL, Financial) provided guidance on deliveries, average delivered price per home, adjusted home sales gross margin, SG&A as a percentage of home sales revenues, and other financial metrics. The company anticipates delivering between 9,850 to 10,350 units for the full year, with an adjusted home sales gross margin of approximately 27.9%.
Value investors and potential GuruFocus.com members may find Toll Brothers Inc (TOL, Financial)'s ability to navigate market headwinds and its strategic positioning for future growth particularly noteworthy. The company's focus on maintaining a strong balance sheet and returning cash to shareholders through share repurchases and dividends could also be of interest to those seeking stable investments in the real estate sector.
For a more detailed analysis of Toll Brothers Inc (TOL, Financial)'s financial results and future outlook, readers are encouraged to visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from Toll Brothers Inc for further details.
