Toll Brothers FY 2Q17 Earnings Call Notes

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Douglas Yearley – CEO

Best spring selling season in 10 years

“Solid and improving demand and the financial strength of our affluent buyer base are driving our growth. This was the best spring selling season we have had in over 10 years. The number of contracts in fiscal year 2017 second quarter was the highest since 2005’s third quarter and the number of contracts per community was the highest since 2006’s second quarter.”

West is great in all regards

“Bob, the West is great in all regards. We had significant order growth in Arizona, Colorado, Idaho of course is new to us and doing very well. Las Vegas, Reno, the only place that was down in the West and it’s strictly mix because we love the market was Seattle and we have more opening coming, so we’ll make up for that, but the West was absolutely fabulous in all regard. We’ve course now report California independently, which is as west as we get and I have the same comments for all of California as I just made for our Western region. It’s just fabulous.”

Raising price faster than cost but not by a huge amount

“Mike, this Doug. It’s certainly better in some reasons and it’s worse in others. California and Seattle have had — we’ve had the ability to raise prices the most. For the quarter, we on average nationwide we raised prices a little more than $5,000 per home. We had cost go up about $2,500 per home. So, we continue on a national level on average to outpace cost increases, but not by a whole lot, by $2500. But when I focus on those areas that have been strongest on you look to where we sold the most homes this quarter and that’s Southern Cal, Northern Cal, Seattle, Northern Virginia, New Jersey, Las Vegas, Reno and Michigan.”

We don’t see an overheated market in CA

“We don’t see overheated market. We don’t see investors. We certainly all know mortgage money is not easy. The percentage of foreign buyers has stayed stable and they have been quite easily been able to finance their homes or get cash into us to purchase their homes with truly no issues. I’ve checked with our mortgage company. I’ve checked with our California teams and it has been business as usual for some time now with that foreign buyer. ”

Bob Toll – Executive Chairman

Housing starts still half of previous peak

“Thanks Marty. We believe our strong results are being supported by the release of pent-up. Single family housing starts rose to 835,000 in April. However, that is still just half the previous peak of 1.72 million in 2005. Many factors are bringing buyers off the fence right now. These include low interest rates, urgency created by the limited supply of resale and new homes and improving personal balance sheets and credit profiles. Our luxury buyers are further benefiting from a solid employment picture, strong consumer confidence, a robust stock market and increasing equity in their existing homes.”