Toll Brothers Inc Q4 2025 Earnings Call Summary

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

Question: John Lovallo - UBS AG - Analyst : The first one is that, look, you guys have exceeded your quarterly delivery outlook in 11 of the past 12 quarters by like 5% on average versus the midpoint. You beat the gross margin outlook in each of the past 12 consecutive quarters, but I think, about 70 basis points on average. I understand that visibility is limited here. But do you believe you're leaving a little bit of room for cushion in your outlook, particularly if the market is at least slightly better in 2026 as we expect it might be?

Question: John Lovallo - UBS AG - Analyst : Yeah, makes a lot of sense. Okay. The first quarter home sales gross margin guide is 26.25 the full year guidance 26, which would be seasonally sort of atypical given the normal cadence of sales. What's driving the implied moderation in the gross margin through the year in your view?

Question: Trevor Allinson - Wolfe Research LLC - Analyst : First question on fourth quarter orders, typically, they're down mid-single digits sequentially. This quarter, they were up 9%. I think ex-COVID, that was the best sequential performance you had seen a really long time. But you mentioned demand still remains soft. So what drove the outperformance in the quarter? Is that a desire to work down some inventory, or why did that outperform normal seasonality so significantly? And then with that in mind, how are you thinking about orders relative to normal seasonality here in your first quarter? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 09, 2025 / 1:30PM, TOL.N - Q4 2025 Toll Brothers Inc Earnings Call

Question: Trevor Allinson - Wolfe Research LLC - Analyst : Okay. Fair enough. Second question then is around new home inventory in the industry levels. There's been a lot of talk about that being extended, especially in some of the weaker markets such as Texas and Florida. But obviously, you guys operate at very different price points versus a lot of your peers. Can you talk about where you think new home inventory stands and at your price points in some of those more challenged markets, do you think some of the overbuilding that we've seen is more across price points, or you think that from what you guys can see is more concentrated at the entry level, but.

Question: Sam Reid - Wells Fargo Securities LLC - Analyst : Just wanted to dig a little deeper on SG&A. When I run the numbers, it looks like SG&A dollars might be up a little bit

Question: Sam Reid - Wells Fargo Securities LLC - Analyst : All helpful context there. Maybe switching gears and talking lot costs. Would just love to hear some context as to where you exited 2025 on lot cost inflation? And then any sense in terms of what's embedded in guide for 2026 lot cost inflation based on what you plan to deliver?

Question: Michael Rehaut - JPMorgan Chase & Co - Analyst : Wanted to first zero in a little bit and kind of hit the closings guidance. I know Doug, you kind of walked through some of the math and how to get to the midpoint earlier. But on an overall level, given the fact also that you expect the spec mix to be similar in '26 versus '25, you kind of obviously walked through the community count growth. On a kind of looking at it from a different angle, is the guidance for the percent decline in closings largely just driven by Matt from where you're starting out the year with the backlog being down as it is. Or is there some element of a timing of community openings throughout the year or even perhaps a slower sales pace that you're baking in to protect margins, maybe if you were to be a little more aggressive on deliveries, it might be more at the expense of gross margin. So just trying to look at it from a different angle and understand the decline in closings in '26.

Question: Michael Rehaut - JPMorgan Chase & Co - Analyst : Okay. So all those other factors obviously really not coming into play then?

Question: Michael Rehaut - JPMorgan Chase & Co - Analyst : Right. Okay. No, that's fair. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 09, 2025 / 1:30PM, TOL.N - Q4 2025 Toll Brothers Inc Earnings Call

Question: Michael Rehaut - JPMorgan Chase & Co - Analyst : No. Why don't you finish your thought? And then I'll ask my second question.

Question: Michael Rehaut - JPMorgan Chase & Co - Analyst : Right. Okay. Second question kind of on the gross margins. I think you've highlighted the fact that your incentives are roughly flattish, at least most recently. I think you just said you're (technical difficulty) '26 to be flat versus '25. So I just wanted to understand what's driving the sequential decline in gross margins into the first quarter? And then more broadly in the full year? Because I would have assumed if you are assuming incentives being flat I would have thought land cost inflation was be the primary driver of that, but I'd love to understand what let's, what are kind of the impacts, or what are the factors driving 1Q and '26 overall relative to '25?

Question: Alan Ratner - Zelman Associates - Analyst : Tough market. Greg, great job on first call. I won't hold the technical snafu against you. So it's all up from here, though.

Question: Alan Ratner - Zelman Associates - Analyst : (inaudible) himself. So a lot of my questions are on the guidance, but I think we beat that topic there pretty good. Doug, just thinking about the consumer and your buyer today, obviously, there's a lot of cross currents. The stock market remains strong, but we're hearing confidence is challenging. We're seeing on the resale side, a lot of delisting so people that might have been putting their house up for sale, deciding not to move forward with the sale and maybe some of that is seasonal. But I heard your encouraging sales data through the first six weeks of the quarter, but are you sensing any change in your consumer confidence or their dire to sell their house because the data would seem to be a bit more alarming on that front?

Question: Alan Ratner - Zelman Associates - Analyst : Makes sense. No, understood. I appreciate the comments, even if you call them soft, I think it's helpful just to what you're seeing. Greg, I'm going to put the next spot and then hop off. Just on the share buyback guide for $650 million. So pretty flat with the past year. if I look at this past year, I think you did you generated $1.1 billion of cash. You're saying that maybe that's down a little bit, but you also have the sale of the apartment business in there in the first quarter. So it would seem like unless you're looking to, I don't know, build up cash or delever, which you don't have any debt coming due this year that there should be an opportunity to drive that buyback number decently higher from '25. So what's holding you back there?