Toll Brothers Inc. (NYSE:TOL) Q1 2020 Earnings Conference Call - Final Transcript
Feb 26, 2020 • 11:00 am ET
Good day, and welcome to the Toll Brothers First Quarter Conference Call. [Operator Instructions]
I would now like to turn the conference over to Douglas Yearley, Chairman and CEO. Please go ahead.
Douglas C. Yearley
Thank you, Elisa. Welcome, and thank you for joining us. With me today are Bob Toll, Chairman Emeritus; Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance and Investor Relations; Wendy Marlett, Chief Marketing Officer; and Gregg Ziegler, Senior VP and Treasurer. Before I begin, I ask you to read the statement on forward-looking information in our earnings release and on our website. I caution you that many statements on this call are forward-looking based on assumptions about the economy, world events, housing and financial markets and many other factors beyond our control that could significantly affect future results. Those listening on the web can e-mail questions to email@example.com. Last night, we reported first quarter 2020 home sales revenue of $1.3 billion with a 20.9% adjusted gross margin and net income of $56.9 million or $0.41 per share diluted. Our first quarter backlog of 6,461 units and $5.45 billion was up 9% in units and 2% in dollars versus last year. First quarter deliveries, revenue and earnings per share were lower than we had anticipated due to delayed closings in a few markets, principally in Northern California where we missed 60 closings valued at $67 million.
Most of these homes should deliver in our second quarter. With strong buyer demand, our first quarter contracts were up 31% in units and 28% in dollars. And our contracts per community were up 28% compared to one year ago. California, which is now part of our Pacific region, was up 32% in contracts and 10% in dollars in the first quarter. This was the first quarterly year-over-year growth in contracts in California since fiscal 2018's second quarter, almost two years ago. Demand has remained strong through the start of our second quarter, and we are experiencing pricing power in many of our markets. We continue to look for opportunities to expand our luxury brand to new product lines and price points. While we intend to maintain our leadership in the luxury segment, we are also strategically adding more affordable luxury communities to capitalize on demographic trends and to expand our footprint and customer base. Nearly 40% of our current communities offer a home with a base price of $500,000 or less. These communities should turn inventory quicker and be more capital efficient. We continue to expand our presence in new markets. We have completed three acquisitions in the past nine months in the Southeastern United States. These acquisitions brought us into five dynamic new markets, Atlanta, Nashville, Charleston, Greensboro and Myrtle Beach. We've added three more markets with expansion into Portland, Oregon, Tampa and Salt Lake City within the past 18 months. Single-family permits rose in January to the highest seasonally adjusted annual pace since June 2007.
Even so, housing supply remains tight. Interest rates remain historically low, consumer confidence