Toll Brothers (TOL) Q1 2025 earnings summary

Executive summary

• Delivered 1,991 homes in Q1 FY25 at an average price of $925,000, generating $1.84 billion in home sales revenue; home deliveries rose 3% year-over-year, but average price declined 8% due to a shift to more affordable products and geographies.

• Net income was $177.7 million ($1.75 per diluted share), down 26% year-over-year, below expectations due to impairments and delayed joint venture sales.

• Net contracts signed rose 13% in units and 12% in value year-over-year to $2.31 billion, with backlog at $6.94 billion (6,312 homes), down 2% in value and 6% in units year-over-year.

• Spec homes represented 55% of sales and net signed contracts, supporting faster delivery and competitiveness with existing homes.

• Demand was strongest in North, Mid-Atlantic, Houston, Dallas, Boise, Denver, Las Vegas, and California, but mixed overall in the spring selling season.

Financial highlights

• Q1 2025 revenues were $1.86 billion (down 5% year-over-year), with home sales revenues at $1.84 billion and net income of $177.7 million.

• Adjusted gross margin was 26.9%, 65 bps above guidance but below last year's 28.9%; SG&A was 13.1% of revenue, up from 11.9% year-over-year.

• Write-offs in home sale gross margin totaled $16.4 million; $3.9 million in pre-development costs, $12.5 million in operating communities; total impairments reached $22.6 million.

• Q1 tax rate was 19.7%, down from 23.0% year-over-year, aided by stock compensation deductions.

• Ended Q1 with $574.8 million cash and $1.77 billion available under the revolver.

Outlook and guidance

• Full-year guidance reaffirmed: 11,200–11,600 deliveries, average price $945,000–$965,000, adjusted gross margin 27.25%.

• Q2 guidance: 2,500–2,700 deliveries, average price $940,000–$960,000, adjusted gross margin 27.25%.

• SG&A expected at 9.4–9.5% of revenue for the year; community count targeted to grow 8–10% to 440–450 by year-end.

• $500 million share repurchase targeted for FY25, mostly in the second half; quarterly dividend of $0.23 per share paid.

• Management expects to reduce the pace of spec home starts in the near term due to mixed demand trends.