On this page of StockholderLetter.com we present the latest annual shareholder letter from Toll Brothers, Inc. — ticker symbol TOL. Reading current and past TOL letters to shareholders can bring important insights into the investment thesis.

 •  1/30/2025 Letter Continued (Full PDF)
 •  1/25/2023 TOL Stockholder Letter
 •  1/31/2024 TOL Stockholder Letter
 •  More "General Contractors & Builders" Category Stockholder Letters
 •  TOL Benford's Law Stock Score = 99

TOL Shareholder/Stockholder Letter Transcript:

ANNUAL REPORT
2024

Toll Brothers Company Overview
FINANCIAL SUMMARY
INDUSTRY-LEADING COMPANY AND BRAND




Revenues
For Home Sales in FY ($ in millions)
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000


19
20
21
22
23
24
Earnings Per Share
LUXURY HOMES AND COMMUNITIES
In FY ($)
$16
$14
$12
$10
$8
$6
$4
$2

19
20
21




22
23
24


Contracts
In FY ($ in millions)
$12,000
$9,600
$7,200
$4,800
$2,400

19
20
21
22
23
FINANCIAL AND MANAGEMENT STRENGTH

At FYE ($ in millions)
$10,000


$8,000
$6,000


$4,000
$2,000

19
20
21
National presence in over 60 markets in 24 states and Washington, DC
Selling from 408 communities
Delivered over 10,800 homes in FY 2024
Average delivered home price of $976,900
Control 74,700 home sites (55% optioned/45% owned)
High-volume production of highly personalized homes
Build-to-order model: home buyers added an average of approximately
$203,000 in lot premiums and structural and design options to their
homes in FY 2024
40 Design Studio locations nationwide
Diverse Product Lines:
o Luxury move-up homes
o Millennial-focused luxury first-time homes
o Active-adult and second homes
o Master-planned communities; resort-style golf and country club
living
o Toll Brothers City Living: luxury mid- and high-rise urban for-sale
communities
o Toll Brothers Apartment Living and Toll Brothers Campus Living:
luxury for-rent urban, suburban, and student housing communities
24
Backlog

America   s Luxury Home Builder
Founded in 1967
NYSE-listed (TOL) since 1986
Fortune 500 Company
4th largest U.S. home builder by revenues
National Builder of the Year, Builder magazine
Two-time Builder of the Year, Professional Builder magazine
10 years in a row being named to the Fortune World   s Most Admired
Companies    list*
Company   s Chairman and CEO Douglas C. Yearley, Jr. was named one
of 25 Top CEOs by Barron   s magazine
22
23
24
Liquidity of $3.07 billion: $1.30 billion in cash and $1.77 billion available
under our $1.96 billion, 23-bank, 5-year revolving credit facility
$650 million, 12-bank, 4-year term loan
Over $18.8 billion in corporate and joint venture financing transactions
completed in the last 5 years
Debt-to-capital ratio of 27.0%; net debt-to-capital ratio    of 15.2%
Focus on driving return on equity through more capital-efficient land
buying, product optimization, and other strategies
Seasoned executive management team: average 21-year tenure with
Toll Brothers
Information for and as of FYE October 31, 2024, unless otherwise noted.
*From Fortune,   2024 Fortune Media IP Limited. All rights reserved. Used under license.
See    Reconciliation of Non-GAAP Measures    at the end of this report for more information on the calculation of the Company   s net debt-to-capital ratio.

DECEMBER 2024
DEAR SHAREHOLDER
Fiscal 2024 was a milestone year for Toll Brothers. For the first time in our history, we
generated $10.6 billion of home sales revenues, over $2.0 billion of pre-tax income and
over $1.5 billion of net income. We produced record earnings per diluted share of
$15.01, a 21% increase over fiscal 2023, and our return on beginning equity was
23.1%, the third consecutive year above 20%. We delivered 10,813 homes at an
average price of approximately $977,000, and with an adjusted gross margin    of 28.4%.
Our SG&A expense was 9.3% of home sales revenues and our operating margin was
18.8%. In addition, we grew contracts by 27% in both units and dollars and increased
community count by 10% to 408 communities at year-end, positioning us for continued
growth in fiscal 2025 and beyond. During the year, we generated $1.0 billion of cash
flow from operations and returned $720 million to stockholders through share
repurchases and dividends, reducing our outstanding share count by nearly 5% in fiscal
2024.
This outstanding performance     even as mortgage rates remained elevated over the
past year     demonstrates the power of our luxury brand, the financial strength of our
buyers, and the success of our multi-year strategy of increasing spec home production,
widening our geographies, price points and product lines, and focusing on capital
efficiency. More broadly, it underscores the fundamental transformation that we, and
many of the nation   s other large, publicly traded homebuilders, have made to our
business models and operations over the past decade. We have grown revenues and
gained market share, lowered leverage, de-risked balance sheets, improved capital
efficiency and generated strong cash flows, all of which has allowed us to return a
substantial amount of capital to investors.
Our Strategy to Propel Growth
Several years ago, Toll Brothers began executing on a strategy that, at its core, was
focused on improving returns on the capital entrusted to us by our shareholders. This
included a plan for strategic growth and expansion that has allowed us to reach a larger
share of the luxury market while mitigating geographic and product concentration risks.
We now operate in over 60 markets across 24 states and we offer the greatest variety of
homes in the industry     from luxury single family homes to upscale townhomes and
active adult communities. Our home prices range from the $300,000s to over $5 million,
and well over 25% of our homebuyers paid all cash in our fourth quarter. We have been
able to enter new markets and expand our offerings while preserving all the qualities
that set us apart as America   s luxury homebuilder     an impeccable brand, our affluent
    Non-GAAP metrics. See    Reconcilia   on of Non-GAAP Measures    at the end of this report for reconcilia   on to GAAP metrics.

customer base, prestigious locations, distinctive architecture, unrivaled choice, and an
extraordinary customer experience.
Toll Brothers build-to-order homes have always been the hallmark of luxury in the
industry. Our Design Studios, the retail-like spaces where home buyers choose their
finishing selections, hit $1 billion in revenues in fiscal 2024. Over the past few years,
however, we have also woven into our growth strategy an increased emphasis on the
production and sale of spec homes, which we define as any home that has a foundation
poured without a buyer in place. We sell our spec homes at various stages of
construction, allowing us to capitalize on demand for quick move-in homes while still
affording many of our buyers the opportunity to personalize. We have steadily increased
sales of our spec homes from around 10% to roughly half of our sales. In the current
market, characterized by healthy demand for upscale homes and a shortage of these
homes on the resale market, we believe this is the right balance and the right strategy.
All of these strategies have proven their worth, as they have enabled us to increase our
home sales revenue by a compound annual growth rate of 10.4% over the past decade.
Mitigating Risk & Maximizing Returns
Our strategy was also crafted to squarely address the capital intensity that has
historically been associated with the homebuilding industry, primarily by adjusting the
way we own and control land. Ten years ago, at the end of fiscal 2014, we owned or
controlled 47,167 home sites. Of these, nearly 80% were owned and the remainder
were controlled through option arrangements, where we place a relatively small deposit
in exchange for the right to acquire land closer in time to when we build a home. To
support the acquisition of this land, we carried total debt of $3.4 billion and our net debtto-capital ratio    was 41.4% at our 2014 fiscal year-end. Fast forward to the end of fiscal
2024 and our total lot position stood at approximately 74,700 lots, but we had more than
doubled the percentage of lots optioned versus owned. Total debt was $2.8 billion and
our net debt-to-capital ratio    was 15.2%. Over this same period, we grew annual home
sales revenue from $3.9 billion in fiscal 2014 to $10.6 billion last year. So today, we now
own essentially the same number of home sites compared to a decade ago, but we
have grown our total lot count by over 50%, grown community count by 55% and we
nearly tripled the size of our business based on revenues     all with less debt. Looking
forward, we continue to target approximately 60% controlled and 40% owned land,
which includes land dedicated to homes in our backlog. This would give us one to two
years of owned land     sufficient to meet near-term deliveries while providing ample
opportunity for growth.
This increased capital efficiency has helped us generate significant operating cash flows
and has allowed us to return excess capital to our shareholders. Over the past five
years, we have generated an average of $1.1 billion of cash flow from operations each

year, and we have reduced our outstanding share count by nearly 30% through share
repurchases. Since 2016, we have bought back half of the company. It is clear that our
shift to a lighter owned land portfolio has helped free up cash, reduce debt and improve
shareholder returns     without sacrificing growth potential.
Making the Company Better Every Single Day
We have also taken great strides to become more efficient in our operations. In our
homebuilding operations, we have simplified designs, optimized floorplans, and reduced
SKU counts in our Design Studios. We recently launched our new Designer Appointed
Collections     a curation of finishes selected by nationally acclaimed interior designers    
to make it easier for our buyers to customize their homes while also reducing our costs.
Other initiatives have included a redesign of our divisional organization structure to
allow us to scale more efficiently and the implementation of new IT systems to increase
productivity.
These and other initiatives have helped us improve our margins. Since fiscal 2020, our
adjusted gross margin    has steadily improved from around 23.5% to above 28.0%. Over
the long term (and assuming normal economic conditions), we believe an adjusted
gross margin    at or above 27% is sustainable.
Likewise, several years ago, we set an internal goal to reduce our SG&A expense, as a
percentage of home sales revenue, to below 10%. Our teams responded with actions
aimed at improving productivity and eliminating redundancy, and over each of the past
two years we have achieved our goal. We have become an organization that is
committed to doing more with less and we will continue to look for opportunities to
leverage fixed costs, reduce overhead and gain efficiencies as we grow the business.
Leaning into Favorable Housing Trends
With these strategies firmly in place, and with the housing market continuing to benefit
from long-term trends that are driving buyers to new homes, I remain optimistic about
Toll Brothers    future. These trends include the structural shortage of homes in the U.S.
(estimated at between 3 and 6 million homes) resulting from well over a decade of
underproduction, and favorable demographics driven by millennials, many of whom are
buying their first home later in life when they have higher incomes and accumulated
wealth, and baby boomers who are moving in retirement. Due primarily to the wellknown affordability issues in this country, the average age and wealth of a homebuyer
has increased. According to data published by the National Association of Realtors in
November, the median age of a first-time homebuyer is at an all-time high of 38 years
old and the median age of all buyers is now 56 years old. In addition, first-time buyers
comprised just 24% of the market in 2024, the lowest level in over 40 years. This means
the vast majority of buyers in the market are move-up or move-down. These trends play



 1/30/2025 Letter Continued (Full PDF)