Q1 2017 Real-Time Call Brief

Highlights

First quarter net income was $70.4 million or $0.42 per share diluted compared to $73.2 million or $0.40 per share diluted in fiscal year 2016's first quarter.

Fiscal year 2017's first quarter pretax income of $109.8 million compared to $116.8 million in fiscal year 2016's first quarter.

Revenues of $920.7 million and homebuilding deliveries of 1190 units were flat in dollars and up 12% in units compared to fiscal year 2016's first quarter totals.

The average price of homes delivered was $774,000, compared to $874,000 in 2016's first quarter.

Net signed contracts of $1.24 billion and 1,522 units, rose 14% in dollars and 22% in units compared to fiscal year 2016's first quarter.

The average price of net signed contacts was $817,000 compared to $870,000 in last year's first quarter.

In total net contract units and dollars with double-digit increases in each of the last three quarters and for the first three weeks of fiscal year 2017 second quarter non-binding reservation deposits were up 16% in units compared to the same period in fiscal year 2016.

Deliveries are projected to increase from 6100 in fiscal year 2016 to between 6700 and 7500 in fiscal year 2017.

The other income and income from joint ventures, unconsolidated entities, is projected to increase from $100 million in fiscal year 2016 to be between $160 million and $200 million in fiscal year 2017.

This should produce significantly higher earnings per share in fiscal year 2017 versus 2016 and improve our ROE to 12% of beginning equity.

We signed 66 agreements in the first quarter, double last year's first quarter total and we have taken 30 additional deposits in the last three weeks, all at average price of over $1.2 million.

In total, our portfolio includes in excess of 10,000 units built, in construction, or planned across the nation.

Last night we announced that we will begin paying quarterly dividend equal to $0.08 per share or approximately 1% annualized of our current share price.

We were able to exceed our delivery expectation this quarter. This fact along with our first quarter-end backlog being up 19% in dollars and 21% in units as well as the increase the midpoint of our guidance range by 100 units for full fiscal year 2017, we now project revenues and deliveries at a range of $5.2 billion to $6.2 billion and 6,700 to 7,500 units.

For fiscal year 2017's second quarter, we project deliveries of between 1,350 and 1,650 units at an average delivered sales price of between $810,000 and $835,000.

Adjusted gross margin is expected to be between 23.8% and 24.2% of revenues, while SG&A is projected to be about 11.4% of revenues in our second quarter.

Other income and income from unconsolidated entities is projected to be between $40 million and $60 million.

Our Q2 tax rate should be around 37.5% and our share count should average approximately 170.8 million shares in our second quarter.

We remain focus on our return on equity and expect to see 12% ROE for the full 2017 year and make further strides in 2018 through various strategic initiatives as well as our core operations.

As an example of one such initiative, in December we formed a joint venture at a large New York City project and essentially reduced Toll's equity commitment from about $350 million if we had build the project alone our balance sheet, to $30 million as a joint venture project with outside equity and construction financing.