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    TOL
    Earnings call· Apr 2026(Q2 FY26)

    Toll Brothers Q2 FY26 earnings call TOL

    May 20, 2026 Source

    Executive summary

    Toll Brothers Q2 FY26 — Strong Performance, Raised Full-Year Guidance, and Strategic M&A

    Toll Brothers demonstrated resilience in a challenging market, leveraging its luxury positioning and operational discipline to exceed Q2 expectations and raise full-year guidance. Strategic community count growth and the Buffington Homes acquisition underscore a focus on expanding market presence, while a healthy balance sheet supports continued capital returns and investment in future growth.

    Highlights

    5

    • Exceeded guidance for home deliveries and average delivered price, generating $2.5 billion in homebuilding revenue, $110 million above midpoint.

    • Adjusted gross margin of 26.2% was 70 basis points better than guidance, reflecting improved operating efficiencies.

    • Diluted EPS of $2.72, beating guidance by $0.18 per share.

    • Net agreements increased 7% in units and 8% in dollars year-over-year, driven by community count growth.

    • Raised full-year guidance across all key homebuilding metrics, including deliveries (10,400-10,700 homes) and adjusted gross margin (26.1%).

    Concerns

    3

    • Demand environment remained challenging in Q2 and early Q3, with flat per-community sales pace.

    • Weaker markets included Atlanta, San Antonio, Seattle, Portland, and San Francisco.

    • Write-offs in home sales gross margin totaled $32.5 million, including $20 million related to dropped deals.

    Guidance & targets

    19
    CategoryTargetConfidence
    Q3 FY26 Deliveries
    approximately 2,600 to 2,700 homes
    high materiality
    High
    Q3 FY26 Average Delivered Price
    between $965,000 and $985,000
    medium materiality
    High
    Full-Year FY26 Deliveries
    between 10,400 and 10,700 homes
    high materiality
    High
    Full-Year FY26 Average Delivered Price
    between $985,000 and $1 million
    medium materiality
    High
    Full-Year FY26 Adjusted Gross Margin
    26.1%
    high materiality
    High
    Q3 FY26 Adjusted Gross Margin
    25.25%
    medium materiality
    High
    Q4 FY26 Adjusted Gross Margin
    approximately 26.3%
    medium materiality
    High
    Q3 FY26 Interest in Cost of Sales
    approximately 1.1%
    low materiality
    High
    Full-Year FY26 Interest in Cost of Sales
    approximately 1.1%
    low materiality
    High
    Q3 FY26 SG&A as % of Home Sales Revenue
    approximately 10.0%
    medium materiality
    High
    Full-Year FY26 SG&A as % of Home Sales Revenue
    10.1%
    medium materiality
    High
    Q3 FY26 Other Income (JV, land sales, etc.)
    $5 million
    low materiality
    High
    Full-Year FY26 Other Income (JV, land sales, etc.)
    $120 million
    medium materiality
    High
    Full-Year FY26 Community Count
    between 480 and 490
    high materiality
    High
    Q3 FY26 Community Count
    475 communities
    medium materiality
    High
    Full-Year FY26 Weighted Average Share Count
    approximately 95 million
    low materiality
    High
    Full-Year FY26 Share Repurchases
    $650 million
    high materiality
    High
    Q3 FY26 Tax Rate
    approximately 26.0%
    low materiality
    High
    Full-Year FY26 Tax Rate
    approximately 25.5%
    low materiality
    High

    Operational metrics

    36
    Homebuilding Revenue
    $2.5 billion
    Q2 FY26

    Exceeded midpoint of guidance by approximately $110 million.

    Adjusted Gross Margin
    26.2%70 bps better than guidance
    Q2 FY26

    Benefited from favorable mix from Pacific region, Florida, and luxury move-up business, as well as improved operating efficiencies.

    SG&A as % of Homebuilding Revenues
    10.3%40 bps better than guidance
    Q2 FY26

    Due to greater fixed cost leverage from higher home sales revenues and moderately lower selling costs.

    Diluted EPS
    $2.72$0.18 beat relative to midpoint of guidance
    Q2 FY26

    Earnings per diluted share.

    Net Agreements (Units)
    2,834up 7% YoY
    Q2 FY26

    Increase driven by successful execution of growth strategy.

    Net Agreements (Dollars)
    $2.8 billionup 8% YoY
    Q2 FY26

    Increase driven by successful execution of growth strategy.

    Average Price of Contracts Signed
    $990,600up 1% YoY
    Q2 FY26

    Average price of new home contracts signed during the quarter.

    Selling Communities
    459vs 421 1 year earlier and 386 2 years ago
    Q2 FY26 end

    Reflects focus on opening new communities across the country.

    Owned or Controlled Lots
    76,800
    Q2 FY26 end

    Existing land position allows for disciplined approach to land acquisition and development.

    Average Incentive for New Contracts
    8%flat for 4th consecutive quarter
    Q2 FY26

    Testament to brand appeal and customer financial strength.

    All-Cash Buyers
    23%consistent with past quarters
    Q2 FY26

    Highlights financial strength of customers.

    Loan-to-Value for Mortgage Buyers
    69%consistent with recent quarters
    Q2 FY26

    Indicates strong equity position of buyers taking a mortgage.

    Spec Homes as % of Deliveries
    51%
    Q2 FY26

    Broadly consistent with targeted range.

    Spec Homes as % of Home Sales Revenues
    41%
    Q2 FY26

    Broadly consistent with targeted range.

    Finished Specs in Inventory Reduction
    28%
    H1 FY26

    Reduction in the number of finished specs in inventory.

    Finished Specs per Community
    2vs 2.8 at FY25 end
    Q2 FY26 end

    Goal is to sell specs earlier in the construction cycle.

    Build-to-Order Cycle Time
    approximately 9 months
    Q2 FY26

    Improved production efficiencies.

    Spec Home Cycle Time
    approximately 1 month shortervs build-to-order homes
    Q2 FY26

    Generally shorter than build-to-order homes.

    Building Costs
    flat
    Q2 FY26

    Even with the cost of lumber rising in the period.

    Write-offs in Home Sales Gross Margin
    $32.5 million
    Q2 FY26

    Includes write-offs on deals that no longer met underwriting standards and associated with operating communities.

    Joint Venture, Land Sales and Other Income
    $9.3 millionvs $29.0 million in Q2 FY25
    Q2 FY26

    Compared to prior year and breakeven guidance.

    Cancellation Rate (% of beginning backlog)
    2.9%vs 2.8% prior year
    Q2 FY26

    Highlights buyer attachment and financial commitment.

    Cancellation Rate (% of signed contracts)
    4.8%vs 6.2% prior year
    Q2 FY26

    Compared to signed contracts in the second quarter.

    Tax Rate
    25.6%40 bps better than guidance
    Q2 FY26

    Effective tax rate for the quarter.

    Liquidity
    $3.3 billion
    Q2 FY26 end

    Includes cash and revolving credit facility availability.

    Cash Balance
    $1.1 billion
    Q2 FY26 end

    Part of total liquidity.

    Revolving Credit Facility Availability
    $2.2 billion
    Q2 FY26 end

    Part of total liquidity.

    Net Debt-to-Capital Ratio
    15.4%vs 19.8% 1 year ago
    Q2 FY26 end

    Reflects healthy balance sheet.

    Share Repurchases (Q2)
    $175 million
    Q2 FY26

    Amount of common stock repurchased in the second quarter.

    Share Repurchases (YTD)
    approximately $226 million
    YTD FY26

    Year-to-date common stock repurchases.

    Design Studio Upgrades, Structural Options, Lot Premiums
    $219,000
    Q2 FY26

    Highly accretive to margins, with design studios running at 40%+ gross margin.

    Land Banked as % of Revenue
    20%
    FY26

    Estimated revenue contribution from land-banked communities for the current fiscal year.

    Land Banked as % of Optioned Lots
    30%
    pipeline

    Likely to move up modestly, balancing margin with returns.

    Move-up Business as % of Home Sales Revenues
    62%up from 59% in Q1
    Q2 FY26

    Highest margin among buyer segments, performing best.

    Luxury First Time as % of Home Sales Revenues
    22%
    Q2 FY26

    Buyer segment contribution to home sales revenues.

    Move Down as % of Home Sales Revenues
    16%
    Q2 FY26

    Buyer segment contribution to home sales revenues.

    Deals & partnerships

    1
    Buffington HomesAcquisition of a leading luxury homebuilder in Northwest Arkansas.

    Entry into Northwest Arkansas (Fayetteville/Bentonville market). Buffington Homes builds from $400k to over $1M. Leveraging local expertise and strong land position to scale their business.

    Risks & headwinds

    5
    Challenging Demand EnvironmentQ2 FY26 and first 3 weeks of Q3 FY26

    Flat per community sales pace.

    Mitigation: Balancing pace, price, and incentives; serving more affluent customer base.

    Weaker Market PerformanceQ2 FY26

    Atlanta, San Antonio, Seattle, Portland, and San Francisco cited as weaker markets.

    Mitigation: Focus on strong performing markets like Florida, Boston, Boise, Las Vegas, Austin.

    Write-offs in Home Sales Gross MarginQ2 FY26

    $32.5 million in write-offs, including $20 million related to dropped deals.

    Mitigation: Rigorous underwriting standards for land acquisition.

    Mortgage Rate VolatilityRecent period

    Discussed, not quantified.

    Mitigation: Luxury customers less sensitive to rates; ability to sell specs early in construction cycle.

    Rising Lumber CostsQ2 FY26

    Discussed, not quantified.

    Mitigation: Overall building costs remained flat due to improved production efficiencies and offsetting other costs.

    What to watch in Q3 FY26

    5

    Full-year delivery guidance

    FY26 end
    Current10,400 to 10,700 homes
    TargetAchievement of the raised full-year delivery target

    Why it matters

    Indicates the company's ability to convert backlog and new sales into deliveries amidst market challenges🌐, crucial for revenue and earnings.

    For the full fiscal year, we are increasing the low end of our guidance range by 100 homes, and we are increasing the projected average delivered price by $12,500 at the midpoint. We now project deliveries of between 10,400 and 10,700 homes with an average price between $985,000 and $1 million.

    Q&A highlights

    7

    Seeking more color on current demand trends, buyer sentiment, and how spec sales are performing given recent market dynamics.

    Demand was consistent throughout Q2 and early May, with April being the strongest month. Traffic and web activity are up year-over-year but flat per community. Customers are still taking longer to decide, but the company is pleased with flat per-community sales given the backdrop.

    “Customers are still waiting to make a decision conversions are taking a little bit longer. I think we've shared in the past, it's tied a bit to consumer confidence at our price point. But overall, I think given the backdrop in the current environment, we're really happy to be flat, frankly, and again, consistent throughout the quarter and early in May.”

    asked by Michael Dahl · answered by Karl Mistry

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Expansion and Leadership Transition

    Doug Yearley highlighted the company's strategic initiatives, including expanding geographies, product lines, and price points. The call also announced Rob Parahus's retirement and Seth Ring's succession as President and COO, emphasizing a focus on mentoring the next generation of leadership and building on the company's foundation. Seth Ring, with over 20 years of experience, is seen as the perfect successor to lead the company forward.

    02

    Resilient Luxury Market Performance

    The company's unique position as a luxury homebuilder continues to drive strong results, with orders up 7% gross and flat per community in Q2, a trend continuing into Q3. The affluent customer base is less sensitive to affordability pressures, benefiting from income growth, stock market gains, and home equity appreciation, allowing Toll Brothers to balance pace, price, and incentives effectively. This segment accounts for 62% of home sales revenues.

    03

    Operational Efficiencies and Cost Management

    Toll Brothers achieved an adjusted gross margin of 26.2% and SG&A as a percentage of revenue of 10.3%, both better than guidance. Production efficiencies improved, with build-to-order cycle times at approximately 9 months, and overall building costs remained flat despite rising lumber prices, demonstrating effective cost management and the team's ability to offset cost increases.

    04

    Land Strategy and Competitive Advantage

    At quarter-end, Toll Brothers owned or controlled 76,800 lots, with 58% optioned, supporting future community count growth. The company's luxury focus allows it to acquire land in prime locations with less competition from larger builders, often utilizing favorable financing structures like seller financing and joint ventures to improve capital efficiency. Approximately 20% of this year's revenue will come from land-banked communities.

    05

    Buffington Homes Acquisition and Market Entry

    The acquisition of Buffington Homes, a leading luxury builder in Northwest Arkansas, marks Toll Brothers' entry into the vibrant Fayetteville/Bentonville market. This strategic bolt-on acquisition adds approximately 1,500 lots to the pipeline and is expected to scale well into the future, leveraging local expertise and strong land position. This is part of a long history of strategic, non-transformational acquisitions.

    06

    Capital Allocation and Financial Health

    The company repurchased $175 million of common stock in Q2, bringing the year-to-date total to $226 million, and raised its quarterly dividend. With $3.3 billion in liquidity, a net debt-to-capital ratio of 15.4%, and an investment-grade credit rating, Toll Brothers maintains a healthy balance sheet to support growth and shareholder returns, reaffirming its $650 million share repurchase target for the full year.

    AI-generated summary of the company’s earnings call. Not investment advice.