Toll Brothers' home-sales revenues in the first quarter of Fiscal Year 2020 were down 2% at $65.9 million.

HORSHAM, PA—National luxury homebuilder Toll Brothers, Inc. has reported lower first quarter earnings, but believes strong home purchase contract volume will improve the company's balance sheet going forward.

Some of the key financial data released by Toll Brothers included net income and earnings per share in its first quarter FY 2020 at $56.9 million and $0.41 per share diluted, compared to net income of $112.1 million and $0.76 per share diluted in FY 2019's first quarter. Pre-tax income in the first quarter FY 2020 was $65.9 million, compared to $151.4 million in FY 2019's first quarter.

Home sales revenues were $1.30 billion, down 2%, while home building deliveries were 1,611, up 5% during the same period.

Other positive metrics for the firm were net signed contract units were 1,806, up 31%; the contract value was $1.49 billion, up 28% and backlog units at the end of the first-quarter 2020 were 6,461, up 9%. The backlog value was $5.45 billion, up 2% from the previous year.

Douglas C. Yearley, Jr., Toll Brothers' chairman and CEO, states, "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. We saw improvement in California with contracts up 32% in units and 10% in dollars. Demand has remained strong through the start of our second quarter and we are experiencing pricing power in many of our markets."

Yearley continues that the firm's guidance for deliveries for FY 2020 is between 8,600 and 9,100 homes, at an average price of between $800,000 and $820,000 per home.

"The adjusted gross margin in the first half of FY 2020 will continue to reflect the challenging sales environment we experienced through the third quarter of FY 2019," he says. "We expect our adjusted gross margin in FY 2020's second half to improve by approximately 100 basis points over the first half, reflecting the improved selling environment that began in late FY 2019."

The more recent growth in contracts and absorptions, increase in pricing power, and the firm's projected 10% community count expansion should contribute to margin and earnings improvement in FY 2021, according to Yearley.