See which workplaces made this year's list.

Employees say:"For a national public company and high up in the homebuilder industry, the overall culture both nationally and divisionally does not feel very corporate. &nbsp;Working here feels more like family, and surrounded by a big bunch of relatives all over - near and far. &nbsp;Everyone is approachable. &nbsp;It is a positive corporate culture that is fostered by its leadership who are effective, supportive, empathetic, and approachable. &nbsp;Thank you for making every effort to provide clear communication, opportunities for growth, collaboration, reward systems, and a strong sense of purpose. &nbsp;It is great place to work and be a part of!"

Best Large Workplaces in Construction

This ranking evaluates how Fortune 500 companies are deploying AI, and how technology leaders value those investments relative to industry peers.

Fortune AIQ 75

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

AI is a major force shaping this year’s list—but it’s far from the only story.

World's Most Admired Companies

The companies on this annual list make a conscious effort to be supportive, inclusive workplaces.

Employees say:"Toll Brothers is the best place of work I have ever had. I have developed the confidence and trust within myself to perform my duties well. Toll offers so many resources to be good at your job (training, senior employees with loads of knowledge and online tools). I don't even like using the term 'job'. I see this as a long-term career and with long-term success. It has challenged me in ways that I didn't know I had to grow in. I have learned so much. I interact with most all departments on a daily basis and I consider them all my work-family. When things get tough or something is missed, we communicate well to get it all resolved quickly and efficiently."

100 Best Large Workplaces for Women

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

Industries included in the sector are construction and engineering services and homebuilders.

Fortune Sector Leaders: Engineering and Construction

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

Employees say: 
 
"The overall camaraderie is unlike anywhere else I've worked. People who work here care about the work they do and the people they work with. I also love, as does my family, the additional time off we're given around holidays and the personal health days."

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

Great Places to Work in Construction Large-2022-Toll Brothers, Inc._1000277-2

Employees say: 
 
“The culture of the company is inclusive and unique. Positions are considered valuable no matter what the department, the pay, or the responsibility. Everyone has a part in making it work and is appreciated for their particular role.”

This year’s Fortune 500 marks the 68th running of the list.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

This year’s Fortune 500 marks the 67th running of the list.

New Residential Properties Ahead Of Housing Starts Figures

The company designs, builds, markets, sells, and arranges financing for luxury residential properties in 24 states.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-426-Toll-Brothers

Revenues at the luxury homebuilder were essentially flat last year, and earnings sank 21%. The main culprit: slowing demand in a key market, California. Its stock was down sharply in the first few months of 2020 on fears of a coronavirus-driven slump in home sales.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

The inaugural list of the 100 Best Workplaces for Millennials from our partners at Great Place to Work includes surprising newcomer Power Home Remodeling, making an impressive debut at No. 1. Other standouts include Chili’s Grill and Bar (no. 11), Elevation Church (No. 34), and Yelp (No. 41).

BESTCOMPANIES2015TOLL BROTHERS

Luxury home builder Toll Brothers has built a high-quality home for its workforce. The company hosts free dinners on Monday and holds occasional fireside chats with CEO Douglas Yearley. Employees are allowed to rent—and vacation at —properties the company owns across the country for discounted prices. Plus, the company bagged the no. 628 spot on this year’s Fortune 1000 list. “You are given ample responsibilities and your success is pretty much in your hands,” says one worker. <a style="color:#ff0000;" href="http://us.greatrated.com/toll-brothers" target="_blank">Read the Great Place to Work review.</a>

100 Best Large Workplaces for Millennials

This year's Fastest-Growing Companies marks the 19th running of the list. In our annual list of public companies with the most stellar three-year profit, revenue, and stock growth, Facebook makes its first appearance.

100 Fastest-Growing Companies

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Shale rules! That’s the lesson of the latest edition of our annual list of public companies with the most stellar three-year profit, revenue, and stock growth. 

Fastest-growing Companies

Headquarters

Industry

Sector

Fortune 500 Rank

Fortune 500 Profile

Current Streak

Years on List

Website

Revenue, Net Income

Revenue past four quarters ($M)

Net Income past four quarters ($M)

Growth Rates

EPS 3 Yr Annual Growth Rate

Revenue 3 Yr Annual Growth Rate

Total Return 3 Yr Annual Rate

Beat S&P 500 3 Yr Return

Rank

EPS 3 Yr Growth Rank

Revenue 3 Yr Growth Rank

Total Return 3 Yr Rank

Company Info

City

Founded

Type of org

Revenue ($)

Web Address

Global employee headcount

Millennials as % of total workforce

Best Workplaces For Women

Industry Vertical

# Work Sites

Current All-Star Rank

Previous All-Star Rank

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Best Workplaces In Construction

Sites

Toll Brothers was founded in 1967 by brothers Robert and Bruce Toll in Pennsylvania as a builder of luxury homes. The company went public in 1986 and expanded nationwide, eventually moving into urban high-rises, active adult communities, and resort properties. Over the decades, Toll Brothers has grown into a leading U.S. builder of luxury homes, operating in 24 states and the District of Columbia. Today it designs, builds, and sells high-end homes, condominiums, and rental communities, and offers related services such as mortgage, insurance, and smart-home technology.

Q3 2026

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Toll Brothers (TOL): Company Profile, Stock Price, News, Rankings

legacy

Toll Brothers

toll brothers

Good morning, everyone, and welcome to the Toll Brothers Second Quarter Fiscal Year twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. The company is planning to end the call at 09:30 when the market opens. During the Q and A, please limit yourselves to one question and one follow-up.

Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Douglas Dearly, CEO. Please go ahead.

Thank you, Jamie. Good morning. Welcome and thank you all for joining us. With me today are Marty Connor, Chief Financial Officer Rob Perahouse, President and Chief Operating Officer Wendy Marlett, Chief Marketing Officer and Greg Ziegler, Senior VP, Treasurer and Head of Investor Relations. As usual, I caution you that many statements on this call are forward looking based on assumptions about the economy, world events, housing and financial markets, interest rates, the availability of labor and materials, inflation and many other factors beyond our control that could significantly affect future results.

Please read our statement on forward looking information in our earnings release of last night and on our website to better understand the risks associated with our forward looking statements. I am pleased with our performance in the second quarter. In what proved to be a challenging environment, we met or exceeded our guidance across all metrics. We delivered 2,899 homes at an average price of approximately $934,000 generating record second quarter home sales revenue of $2,710,000,000 or $236,000,000 better than the midpoint of our guidance. We posted an adjusted gross margin of 27.5 and an SG and A margin of 9.5%, a twenty five and eighty basis points better than guidance respectively.

And we earned $352,400,000 or $3.5 per diluted share. Adjusting for the $175,000,000 pre tax land sale gain we recorded last year, our second quarter earnings per share were a record. We believe these results highlight the strength of our broadly diversified luxury product offerings, our balanced portfolio of build to order and spec homes and our strategy of prioritizing sales pace and margin in the current environment as we seek to maximize returns. They also reflect the financial strength of our customers. Our results and the strength of our backlog also provide us the confidence to reaffirm all of our guidance for fiscal twenty twenty five, including home sales revenue of $10,900,000,000 at the midpoint, an adjusted gross margin of 27.25% and earnings of approximately $14 per diluted share.

Turning to market conditions. In the second quarter, we signed 2,650 net agreements for $2,600,000,000 down approximately 13% in units and 11% in dollars compared to last year's strong second quarter. We experienced softer demand in the second quarter due to a decline in consumer confidence driven by increased economic uncertainty. These conditions have continued into our third quarter. In this environment, we believe prioritizing price and margin over pace makes the most strategic sense.

We are confident that our balanced approach will allow us to continue successfully navigating this market. Our average sales price in the quarter was approximately $983,000 compared to $1,000,000 in our first quarter and $967,000 in the second quarter of fiscal twenty twenty four. Given the softer demand environment, we modestly increased incentives in the quarter. Overall, incentives were approximately 7% of the average sales price, up from our recent average of 5% to 6%. As we discussed last quarter, we have been reducing our spec starts to match local market conditions.

Our spec strategy is calibrated to effectively balance the need to have quick moving homes available to meet buyer demand while protecting margins. Over the past decade, we have worked hard to build a nationwide platform with operations in over 60 markets in 24 states. We now serve all buyer groups with the broadest home offerings in the industry and prices that range from the $300,000 to over $5,000,000 We have entered new markets and expanded our offerings while enhancing all that sets us apart as America's luxury homebuilder, an exceptional brand, our affluent customer base, prestigious locations, distinctive architecture, unrivaled choice and an extraordinary customer experience. We've executed this growth strategy while derisking our balance sheet, improving capital efficiency and returning capital to stockholders. Our performance in the second quarter and over the past many years has demonstrated the competitive advantages of our business and brand in driving high returns as well as our ability to navigate through challenging markets.

And while the near term outlook for the housing market remains cloudy due to the well known affordability pressures and the volatile macro environment, we continue to believe the long term outlook for the new home market remains positive, particularly for our luxury niche. With many entry level buyers struggling with affordability challenges, we are pleased to be serving an affluent consumer. Over 70% of our business serves the move up and empty nester segments. These buyers are wealthier, have greater financial flexibility and most have equity in their existing homes. The remaining 25% to 30% of our business serves the more affluent, older first time buyer.

The financial strength of our customer base is highlighted by our industry low cancellation rate, high percentage of all cash buyers and low LTVs for those who take a mortgage. Consistent with the past several quarters, approximately 24% of our buyers paid all cash in the second quarter, up from our long term average of approximately 20%. The LTVs of buyers who took a mortgage in the quarter was approximately 70% and our contract cancellation rate was 2.8% of beginning backlog. In addition, the average spend on design studio selections, structural options and lot premiums was approximately $200,000 per home in Q2, consistent with our first quarter. These upgrades benefit our margins as they tend to be highly accretive.

We continue to expect community count growth to help drive results in fiscal twenty twenty five and beyond. We remain on target to reach our year end guidance of approximately four forty to four fifty communities, which would represent an eight to 10% increase versus fiscal year end '20 '20 '4. We project similar community count growth in fiscal twenty twenty six. We also continue to see modest improvements in our construction cycle times as we focus on increasing production efficiency. We have not yet seen any impact from potential tariffs on building costs or product availability.

While it is difficult to predict where tariffs will land and the precise impact to our business, we do not believe we will see any significant impact in fiscal twenty twenty five. Turning to land. At our second quarter end, we controlled approximately 78,600 lots, 58% of which were optioned. Over the past year, we have increased our percentage of option lots from 48% to 58% of our total lock count, consistent with our focus on structuring land deals in more capital efficient ways in order to enhance returns. Our land position allows us to continue to be highly selective and disciplined as we approach new opportunities.

In today's environment, we have tightened our underwriting standards and are reducing land spend on new deals, which we expect to primarily impact fiscal twenty twenty six land spend. At quarter end, we held approximately $686,000,000 of cash and cash equivalents and our net debt to capital ratio was 19.8%. We continue to generate strong operating cash flows. This provides us plenty of opportunity to both grow our business and return capital to stockholders. During the quarter, we repurchased $177,000,000 of our common stock.

Given our strong financial position, healthy projected cash flow and our focus on returning capital to stockholders, we are increasing our projected share repurchases in fiscal twenty twenty five from $500,000,000 to $600,000,000 With that, I will turn it over to Marty.

Thanks, Doug, and congrats on today being the thirty fifth anniversary of your first day at Toll and your sixtieth conference call.

We had a strong second quarter, beating our guidance for deliveries, homebuilding revenue, adjusted gross margin, SG and A and earnings. In the quarter, we delivered 2,899 homes and generated home sales revenues of $2,710,000,000 up nearly 10% units and 2.3% dollars compared to last year. Both were second quarter records.

At the midpoint, we delivered nearly 300 more homes in our guidance or $236,000,000 of home sales revenue. The average price of homes delivered in the quarter was approximately $934,000 a bit below the low end of our guidance as we delivered more homes in our Mountain And Mid Atlantic regions than anticipated. We signed 2,650 net agreements for $2,600,000,000 in the quarter, down 13% in units and 11% in dollars compared to the second quarter of fiscal year twenty twenty four. The average price of contracts signed in the quarter was approximately $983,000 up 1.6% compared to last year. At second quarter end, our backlog stood at $6,840,000,000 and 6,063 homes, down 7% in dollars and 15% in units compared to a year ago.

The average price of the homes in our backlog was $1,130,000 a company record. Our second quarter adjusted gross margin was 27.5%, which was 25 basis points better than guidance. Our Q2 gross margin exceeded guidance, primarily due to positive mix, strong cost control and increased leverage from higher than projected revenues. Write offs in our home sales gross margin totaled $9,800,000 in the quarter as compared to $28,400,000 in the second quarter of twenty twenty four. SG and A as a percentage of home sales revenue was 9.5% in the second quarter and 80 basis points better than guidance, again reflecting our focus on cost controls and leverage from higher than expected home sales revenue.

Second quarter JV land sales and other income was $29,000,000 versus our breakeven guidance. Approximately $15,000,000 of this gain was attributable to the sale of a stabilized asset in one of our apartment living joint ventures, with the remainder primarily attributable to interest income and income from our mortgage, title, and city living operations. Our tax rate in the second quarter was approximately 26.2%. Our balance sheet is very healthy. At second quarter end, we had $2,800,000,000 of liquidity, including approximately $686,000,000 of cash and our net debt to capital ratio was 19.8%.

In addition, we are generating strong cash flows with approximately $1,000,000,000 of cash flows from operations projected for fiscal twenty twenty five. As previously reported, during the quarter we extended the maturities of our credit facilities to February 2030 and upsized our revolver to $2,350,000,000 and we increased our quarterly dividend by 9% to $0.25 per share. We repurchased $177,000,000 of our common stock, bringing full year repurchases to approximately $200,000,000 and we bought 2,073 lots for $362,000,000 As Doug mentioned, as a result of our strong financial position and healthy cash flows, we are increasing our projected share repurchases in fiscal twenty twenty five from $500,000,000 to $600,000,000 Turning to guidance. Our outlook is subject to the usual caveats regarding forward looking information and the assumptions, risks and uncertainties inherent to projections. Based on our backlog, recent sales activity and the number of homes currently under construction or completed, we expect to deliver between 805,000 homes in the third quarter, and we continue to expect to deliver between 222,600 homes for the full year.

Our projected second half delivery cadence is consistent with what it has been over the past several years. On average, we deliver approximately 58% of full year deliveries in the second half with 26% of the total delivered in the third quarter and 32% in the fourth quarter. We are projecting essentially the same percentages this year. The average price of deliveries in the third quarter is expected to be between $965,000 and $985,000 We are maintaining our full year projection of $945,000 to $965,000 for our average price of deliveries. As Doug mentioned, in today's softer demand environment, we believe it makes the most strategic sense to prioritize price and margin over pace.

This strategy, combined with the gross margin embedded in our backlog, gives us confidence in maintaining our full year projected adjusted gross margin of 27.25%. For the third quarter, we also expect adjusted gross margin to be 27.25%. We expect interest in cost of sales to be approximately 1.2% of home sales revenues in the third quarter and also for the full year. Third quarter SG and A as a percentage of home sales revenue is expected to be approximately 9.2%. For the full year, we continue to expect it to be between 9.49.5%.

Other income, income from unconsolidated entities and land sales gross profit in the third quarter is expected to breakeven. We continue to project $110,000,000 for the full year, much of which is projected to come from fourth quarter sales of our interest in certain stabilized apartment communities, developed by Toll Brothers Apartment Living in joint venture with various partners. We project the third quarter tax rate to be approximately 26% and the full year rate to be approximately 25.5%. Our community count at quarter end was four twenty one compared to our guide of four fifteen. We expect four thirty at the end of the third quarter and reaffirm four forty to four fifty communities by the end of the fiscal year.

Our weighted average share count is expected to be approximately 99,000,000 for the third quarter and 100,000,000 for the full year. This assumes we repurchase $400,000,000 of common stock in the second half on top of the $200,000,000 we bought back so far this year, which would be consistent with the greater operating cash flow we typically generate in the second half. All of our guidance for fiscal twenty twenty five translates to approximately $14 per diluted share. This would result in a full year return on beginning equity of approximately 18% and would put our year end book value per share at approximately $90 We believe these results will once again reinforce the strength and resiliency of our business model, as well as our ability to successfully navigate changing market conditions while still delivering attractive returns to stockholders. Now let me turn it back to Doug.

Before I open it up for questions, I'd like to thank our Toll Brothers employees for their hard work in the first half of twenty twenty five. I am proud of your commitment to our customers and dedication to our business, which are key drivers to our long term success. Now let's open it up to your questions. Jamie, we're ready to go.

Ladies and gentlemen, at this time, we'll begin the question and answer session. As a reminder, the company is planning to end the call at 09:30 when the market opens. During the Q and A, we do ask that you please limit yourselves to one question and one follow-up. And our first question comes from Stephen Kim from Evercore ISI. Please go ahead with your question.

Yes, thanks very much guys. Appreciate all the color as usual. My first question actually has a bit of a housekeeping element to it. We didn't see your spec data and your homes are completed and under construction information. So I was wondering if you could kind of give us an update on where your specs stand, both completed as well as under construction.

And my overarching question with respect to that is, you've talked about 11,005 closings, give or take. I'm kind of wondering like how many units do you want to have under construction or completed at any point in time, given a run rate of about 11,000 closings and where do we stand relative to that?

So I'll let Marty hey Steve, I'll let Marty give you the details on the spec count and then I'll be happy to jump in and answer your question.

Sure. So Steve, we have just over 1,000 fully completed spec units right now and we have a number

Can we get a specific number, do you mind Marty?

Ten twenty eight. We have approximately 20 I

just got a text in the field. We sold one, Marty.

That is the number as of fourthirty. '2 thousand '4 hundred or so in progress and we have permits available for another 1,000 or two behind those that we have not commenced construction on.

So the 2,400 in progress means that we've issued a go to the field. And so in progress could mean the survey crew is staking out the lot to anticipate a foundation going in. So it goes all the way back to the company's decision to go. But it could you may not visibly see anything on the site yet, but the permits in hand and we're ready to go. So it's a very broad definition.

With respect, does that give you what you need?

Yeah, we'll follow. We'll clean up later on, but sure that gets us close.

I think the other aspect that may be along the lines of what you're looking for, is about the highest concentration of work in progress and completed specs that we will have at any particular point in time during the year.

So you asked about our comfort level. We are comfortable with where we are in the spec business. We had gotten it up to 55% a few quarters ago. As you heard us say today, we are slowing the start of new specs. So many of those permits we talked about are sitting at permit without a go issued.

And I think that is the smart way to run this business in the current environment. We are very pleased with how well we did in the second quarter in terms of the sale of specs without larger incentives. And one of the reasons we had a revenue beat in Q2 is because we call it same quarter sell and settle, right? So it's not a spec we sold in a prior quarter to settle now, but how many sell and settles do we have intra quarter? And we were very pleased in Q2 with that activity and at incentive levels that were manageable.

And so as we move forward, we continue to be very comfortable with Q3 and Q4 number of specs that we believe will sell and settle. And we believe based on current market conditions, we have conservatively budgeted incentives. Those incentives are consistent with what we achieved with our spec sales in Q2. And that's why we have comfort in the guide understanding that we have 1,000 completed spec homes that we intended to sell and settle. And then beyond that, of course, some of these homes in progress, many of these homes in progress would be ready to deliver by the October, the end of our fiscal year.

We have projected that some of those will in fact sell over the next five point five months and settle, But there'll be another bunch of those that while they could settle by the end of Q4, we are not budgeting for that. We are conservatively assuming that they roll into 2026, and set up that year. But in terms of the incentive front, which I know is a question out there, we've read it overnight, we're very comfortable with how we budgeted. Yes, there's more incentive needed to move spec right now in this market than build to order. We are very pleased with build to order margin.

It actually is coming in higher than we have budgeted, particularly for the more luxury homes, the more expensive homes. Those margins are coming in even higher. So while the spec margin is a little bit lower, it all blends out to 27.25%, twenty seven point five % as we did in this past quarter. And we are assuming no improvement in the market over the next five point five months to deliver the returns and the guidance that we have presented.

Our next question comes from John Lovallo from UBS. Please go ahead with your question.

Good morning, guys. Thank you for taking my questions. First one is, I mean, obviously, you did a really nice job managing the business and as you talked about prioritizing price and margin over pace in the quarter. The third quarter gross margin outlook of '27 the quarter implies pretty flat quarter over quarter margin in the fourth quarter. Just curious kind of what are the moving pieces impacting the second half gross margin?

And any thoughts on sort of the sustainability of this into next year?

Sure. So it's a great question. Yes, you are right in your math that the fourth quarter margin, we expect to be about the same as the third quarter at 27.25 While there will be some downward pressure because of the spec sell and settles as I discussed, we have some tailwind gross margin from mix. There's going to be more luxury delivering in the second half of the year, which is higher margin, and there's going to be more out of the Pacific and out of the Mid Atlantic region, which both support higher gross margin. So when you blend more spec that will have a bit we believe a bit higher incentive with what I just described in the mix coming out of the Pacific and the Mid Atlantic and more luxury nationwide, it all works out to the guidance we've given.

Understood. And then you guys beat the top end of the delivery guide by about 200 homes. What drove the beat? Was this product mix, maybe a little bit more spec? Was it regional mix?

And does it imply that you're incrementally less optimistic on the full year given the maintained outlook?

I don't think it necessarily changes our optimism for the whole year. What we did in the second quarter is simply we outperformed by selling and settling more spec homes than we had projected and we still had a gross margin beat. And I think that provides some evidence to the conservatism that we have in our guidance.

Our next question comes from Mike Dahl from RBC Capital Markets. Please go ahead with your question.

Good morning. Thanks for all the comments and taking my questions. Good just keep attacking the back half a little bit. Think when we look at it, historically, I see your point about the cadence being consistent. The flip side is this is the first year that we can see looking back where your current backlog is given actually fully covering second half deliveries, meaning you need more deliveries in the second half than your current backlog.

So I know, like Doug, Marty, you talked about you expect to sell and settle some of the completed, some of the under progress. Can you just give us a little more granularity on that opportunity like of the number of homes in progress or complete? What is obviously complete can close. What percentage of that 2,400 do you think could actually settle by year end? And then just given the lack of visibility margins for homes that you haven't yet sold, a little more detail on how that spec margin progressed through the quarter would help, I think.

All right, Mike. So have roughly 6,400 units left to deliver this year to hit the 11,400 midpoint. Roughly 4,500 of them should deliver from our backlog. Remember, our backlog is 6,050 or so homes. So those homes are sold, we know the revenue, their build costs are contracted, so we have limited risk on their costs growing or shrinking, and we think we have adequate builder reserves in those cost estimates.

So let's take those 4,500 off the table. We have roughly 1,900 homes that will need to come from our spec inventory that haven't been sold yet. We told you actually ten twenty eight of them are completed, so there's no build cost risk there. The others are all under construction, in fact more than the 900 we would need to sell and settle are under construction. So there's not much cost risk there because they're under contract for construction.

So it's really the selling price of those $1,900 where there is some potential risk. And we believe we've accounted for that in this market based on recent comparable sales, a lot of which I just mentioned in the second quarter still allowed us to outperform our guidance for the second quarter. We sold and settled two fifty to 300 more specs in the second quarter than we thought when we entered the quarter and we beat gross margin still. So I hope that helps give some comfort and understanding of what we foresee in next six months.

And those 900, we have the 1,000 completed and then we need 900 more that are under construction. We have significantly more than the 900 that could deliver by October 31. So we are not being aggressive in assuming that, oh boy, we need to sell and settle everything we're building to hit that number. There will be plenty that will be setting up twenty twenty six that do not sell and settle by the end of this fiscal year.

It's also safe to assume that as we manage our spec production, where we have a green light for specs is probably where we're doing best.

Okay, that's perfect. Yes, very helpful. Thank you. My follow-up question, just along similar lines, talked about the stronger margins on built to order luxury, presumably a lot of that is in your backlog. So you talked about your backlog gross margin.

Can you give us a sense of where your current backlog gross margin stands?

I think it's inherent in the guidance we've given you.

I mean, the build to order business runs several hundred basis points above the midpoint and the spec business runs several hundred below. Lately that range has widened a little bit on both ends, but it still comes out in the middle. And that's why we like the business. I think we're doing a really good job of balancing our spec business with our build to order business. And remember, we don't hold spec off until the end where the client has no choice.

We sell a lot of our spec earlier where the buyer can still go to our design studios, pick all the finishes that allow them to have a home that really fits their lifestyle. And that design studio is highly accretive in margin to the company's margin. So when we're able to sell a spec a bit earlier, even if it's incentivized a little more, there can be some residual margin left after they get to that design studio.

Our next question comes from Trevor Allinson from Wolfe Research. Please go ahead with your question.

Good morning. Thank you for taking my questions. You talked about demand slowing throughout the quarter. I think that's not very surprising given what we've heard from other builders in the stock market volatility in April. The question would be then, as we got into May here, the stock market obviously got a lot better.

You had a pause on tariffs. Did you see demand get better as we went into May? If so, could you put any numbers around that perhaps, either relative to April or relative to 2Q, however you want to frame it?

It's very interesting. February was our first worst month. We sold 1.7 homes in the month of February. March and April were pretty consistent at two point four and two point three sales in those months. And May is trending more like March and April.

Now May seasonally has lower sales historically than March and April, but June and July, the next two months of this third quarter have better sales historically than May. So we seem to be trending right now into May, consistent with what we saw in March and April, which were better than February. I think we and all the other builders have explained it well. And we all know it. The market is softer than we had all anticipated back in January.

There's a lot of good and understandable reasons for that. With consumer confidence being down, with macroeconomic volatility, with the stock market moving around quite a bit. There are buyers on the sidelines. One of the reasons we are favoring pace over price is because we believe this market is fairly inelastic and to throw more incentive at home sales is going to hurt your margin a lot more than it's going to increase sales because the buyer is not responding over $5.10000 dollars 15 thousand 20 thousand dollars of more incentive. Many of them just happen to be on the sidelines.

But I am very pleased with the company's performance through the second quarter and into the beginning of the third quarter considering the macro environment out there. And I think it has to do with what we said earlier that over 70% of our business is move up and empty nester. Our buyer is more affluent. We have a quarter of our buyers paying all cash. Those who get a mortgage are at 70 LTV.

They're moving up or they're moving down. They're moving on with their lives. They have equity in their homes. And so I think we're in a really good niche in the market, notwithstanding the fact that the market is a bit softer. But that's a long answer to your cadence of the quarter.

But we were surprised that February was worse and we are May is where we thought it would be, which is consistent with what we've seen in March and April. June should be a bit better, July should be a bit better. We are not anticipating an improvement in this market in any of the guidance we are giving. And as I said, I think we have adequately and conservatively budgeted the incentives necessary for the sell and settle spec inventory we have.

Toll Brothers (TOL) Q2 2025 Earnings Call Transcript

Company Participants