Toll Brothers Inc Q3 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Stephen Kim - Evercore ISI - Analyst : Congrats to Gregg and Marty. I guess let me just start off with a simple one. Your cash flow from operations, I think you guided to greater than $1 billion. What was it year-to-date because I didn't see that in the release. And then if I could also ask you, you mentioned REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 20, 2025 / 12:30PM, TOL.N - Q3 2025 Toll Brothers Inc Earnings Call construction costs you expect to decline in the near term. I was wondering if you could kind of give us a breakdown on what components you're expecting to get some betterment.

Question: John Lovallo - UBS Securities LLC - Analyst : The first one is -- the only concern we're hearing out there really today is that the ability for you guys to grow next year. And maybe I'll frame the question this way. I mean, in the past, you've talked about achieving a sales pace of two communities -- sorry, two homes per community per month on average through the year. I just want to confirm that there's no change to the thinking there. And do you think that this is something that can be achieved in fiscal year '26 after what appears to be closer to maybe 1.8 in 2025?

Question: John Lovallo - UBS Securities LLC - Analyst : Yes. That's really helpful, Doug. And that's really what I was trying to get at is the backlog maybe being down a bit from where people would have thought it might be perhaps. You guys still feel comfortable with the community count growth in 2026 and the ability to drive orders to drive growth as we move into the next couple of years.

Question: Michael Dahl - RBC Capital Markets Wealth Management - Analyst : Marty heck of a run, congrats. And congrats, Gregg. Just a follow-up. Can you help us walk through how sales pace trended through the quarter and maybe elaborate a little more on your August comments? And the follow-up question would be similarly, if you think about the incentive ending up at 8% versus 7%. I think a lot of your peers talked about sequentially increasing incentives through each month of the summer period. So if you could talk about how that shook out for you and whether we should be thinking the exit rate on incentives was higher than that 8%. Sorry, that's two questions in there, but those are my two.

Question: Stephen Kim - Evercore ISI - Analyst : I'll get even with Drew later. So question, I guess, on the volumes that we saw the orders. I think last year, Doug, you had referred to the order cadence. I think you had sort of talked about how typically 4Q orders are down about 10% from third quarter. And you had said last year that was going to be different and all that. You kind of called that out, if I recall. Can you talk to us about what the order picture you think would look like this year as we move sequentially from 3Q to 4Q? Is there anything that would be helpful for us as we think about your near-term plans on absorptions?

Question: Trevor Allinson - Wolfe Research LLC - Analyst : I'll echo congratulations to both Marty and Gregg as well. The first question, we've heard a few builders talk about seeing some relief on development costs. A couple of questions around that. Are you guys also seeing some softening on development? How widespread is that? And then if you are, what's the timeline for when that starts to flow through your P&L? And how much benefit do you think you could perceive from that from what you're seeing currently?

Question: Trevor Allinson - Wolfe Research LLC - Analyst : Okay. Got you. Makes sense. And then the second question on the 4Q community count guide. It looks like a really nice jump here sequentially going from 420 to 445. How should we think about the timing of those? Do they come on pretty ratably throughout the course of the quarter? Or is there a good portion that's scheduled to open up near the end of the quarter? And then any regional concentration that we should be considering?

Question: Sam Reid - Wells Fargo Securities LLC - Analyst : Congrats to Marty and Gregg. Gregg, looking forward to keeping it going. I wanted to talk cycle times. 35% of your communities can build in eight-months or less. It's a great, very helpful stat. Can you just talk to what cycle times look like across the remaining 65% of your communities? And then when we think about ways to improve that on the spec and build-to-order side, just talk through levers that you can pull to improve cycle times into next year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 20, 2025 / 12:30PM, TOL.N - Q3 2025 Toll Brothers Inc Earnings Call

Question: Sam Reid - Wells Fargo Securities LLC - Analyst : No, that helps, guys. Really appreciate it. Maybe switching to another line item on the P&L. In the prepared remarks, you alluded to better cost controls behind the SG&A beat versus guide. Would just love a little bit of context in terms of what those cost controls were, how sustainable that is perhaps into 2026? And then thinking about Q4 specifically, you've got a step-up in community count quarter-over-quarter. Would just love to know any grand opening expenses that might be embedded in that guidance for SG&A.

Question: Alan Ratner - Zelman & Associates - Analyst : I'll add congrats to Marty and Gregg there. Looking forward to working with Gregg. So on the spec mix, Doug, I think you mentioned it's 50-50 today. Can you just refresh our memory what it was pre-COVID or kind of in more normal times? And what the margin differential currently is on your spec product maybe across the three buckets in terms of completion status versus the build-to-order home?

Question: Alan Ratner - Zelman & Associates - Analyst : Got it. That's really helpful. And I guess my follow-up is a more difficult question, but presuming you don't maybe get back to 90% build-to-order, it sounds like if you can get that share a little bit higher, that would certainly be a positive for your margin and certainly for the visibility in your business. How do this Toll and the industry get back to a more normal build-to-order or spec mix? I mean it seems like everybody has kind of pivoted very hard towards spec. And during the early stages of the pandemic when resale inventory was so tight, that made a lot of sense. But now it almost feels like builders are kind of forced to keep the spec machine running if they want to maintain growth and have the volume ready to go. So I'm just curious how you see this playing out and what

Question: Mike Rehaut - JP Morgan - Analyst : Marty, it's been a pleasure. Best of luck in the future. Gregg, obviously, congrats and looking forward to working with you more.

Question: Mike Rehaut - JP Morgan - Analyst : That's great. That's great. A couple of questions. I guess, first, just on the incentives. It's very helpful, Doug, kind of given the detail that a lot of that increase, 8% versus 7% related to finished spec and maybe that's come down slightly recently. But I think if I'm right, looking back a couple of quarters, your incentives as a percent of sales have increased maybe closer to 200 basis points year-to-date. Obviously, you're expecting a little bit of relief on some build costs, perhaps lot cost inflation would be an ongoing issue on the other side. But it would seem like, again, without pinning it down to '26 guidance, which I know you're not going to give, but is there any reason directionally why we shouldn't expect somewhat of a moderation in '26 versus '25 at this point?

Question: Mike Rehaut - JP Morgan - Analyst : Right. No, that's definitely fair. And maybe just secondly, Doug, I think you alluded to earlier a little bit lower rates over the last -- maybe by, I want to say, 20 bps, 30 bps, maybe on a broader market level. You talked about June and July being a little better from a sales pace perspective versus March versus May and obviously, the last few weeks. I'm wondering if you're trying to maybe parse out the increase in incentives maybe throughout the quarter to -- and maybe that was again to move the finished spec. You also have obviously some seasonality. But I'm wondering between seasonality and maybe a little bit of a higher incentive, how do you think about that, let's say, 20 bps, 30 bps decline in rates impact on demand relative to some of the other factors that perhaps are driving sales pace currently and into the fall?