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Toll Brothers, Inc. (TOL)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 home sales revenue of $2.71B and diluted EPS of $3.50, beating Wall Street on both revenue ($2.49B est.) and EPS ($2.86 est.) as Toll delivered 2,899 homes and leveraged stronger-than-expected same-quarter sell-and-settle spec activity and cost control; adjusted home sales gross margin was 27.5% and SG&A 9.5% . Q2 2025 consensus: revenue $2.49B*, EPS $2.86*.
  • Despite softer demand (net signed contracts down 13% units YoY), management reaffirmed full-year guidance, citing backlog strength ($6.84B; 6,063 homes) and a strategy prioritizing price/margin over pace; Q3 guide implies stable margins (27.25% adjusted) and 2,800–3,000 deliveries .
  • Mix tailwinds (more luxury, Mid-Atlantic/Pacific), strict cost control, and higher-than-modeled spec sell-and-settle drove the beat; incentives averaged ~7% of ASP in Q2 as Toll calibrated pricing to conditions without sacrificing margin guidance .
  • Capital returns stepped up: buyback target increased to $600M for FY25 (from $500M), and dividend was raised 9% to $0.25; liquidity stood at ~$2.8B and net debt-to-capital at 19.8% at quarter-end .

What Went Well and What Went Wrong

  • What Went Well

    • “We generated record second quarter home sales revenues of $2.71 billion, well above our guidance of $2.47 billion, and beat both our adjusted gross margin and SG&A guidance,” demonstrating execution in a softer demand backdrop .
    • Adjusted home sales gross margin of 27.5% (+25 bps vs. guide) benefited from positive mix, cost control, and leverage; SG&A of 9.5% also beat, aided by higher revenue .
    • Capital allocation: increased FY25 buyback plan to $600M and maintained strong balance sheet (cash $686M, net debt/cap 19.8%), reinforcing confidence and support for EPS .

  • What Went Wrong

    • Demand softness: net signed contracts fell 13% units and 11% dollars YoY; management cited lower consumer confidence and macro volatility; trend persisted into early Q3 .
    • ASP mix: delivered ASP (~$934K) was below guide low end due to more deliveries in Mountain and Mid-Atlantic; adjusted gross margin still held, but adj. home sales gross margin declined YoY (27.5% vs. 28.2%) as incentives ticked up .
    • SG&A deleverage vs. prior year (9.5% vs. 9.0%) and lower “other income” vs. last year's land-sale-driven Q2 tough comp ($29M vs. $203.7M) pressured YoY operating metrics .

Financial Results

Q2 results vs prior year and prior quarter

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Billions)$2.84 $1.86 $2.74
Home Sales Revenues ($USD Billions)$2.65 $1.84 $2.71
Diluted EPS (GAAP)$4.55 $1.75 $3.50
Adjusted Diluted EPS$3.38 $5.24 YTD context $3.50
Home Sales Gross Margin %25.8% 25.0% 26.0%
Adjusted Home Sales Gross Margin %28.2% 26.9% 27.5%
SG&A % of Home Sales Revenues9.0% 13.1% 9.5%
Deliveries (units)2,641 1,991 2,899

Q2 actual vs Wall Street consensus (S&P Global)

MetricConsensusActual
Revenue ($USD)$2,491,821,400*$2,739,077,000
Diluted EPS ($)$2.86041*$3.50
EPS # of Estimates13*—
Revenue # of Estimates11*—
  • Values marked with * retrieved from S&P Global.

Geographic segment performance (home sales)

RegionQ2 2024 UnitsQ2 2024 Rev ($MM)Q2 2025 UnitsQ2 2025 Rev ($MM)ASP Q2 2024 ($)ASP Q2 2025 ($)
North349 335.2 389 378.5 960,500 973,000
Mid-Atlantic378 376.1 379 321.8 995,000 849,000
South804 658.4 928 758.6 818,900 817,500
Mountain686 603.6 856 755.9 879,800 883,000
Pacific424 674.7 347 492.2 1,591,200 1,418,400
Total Home Sales2,641 2,647.0 2,899 2,706.5 1,002,300 933,600

KPIs and order metrics

KPIQ2 2024Q1 2025Q2 2025
Net Signed Contracts ($B / units)$2.94 / 3,041 $2.31 / 2,307 $2.60 / 2,650
Backlog ($B / units)$7.38 / 7,093 $6.94 / 6,312 $6.84 / 6,063
Avg Price in Backlog ($)$1,040,200 $1,099,200 $1,128,100
Cancellations % of Beg. Backlog2.8% 2.4% 2.8%
Cancellations % of Signed in Qtr5.7% 5.8% 6.2%
Period-End Community Count386 406 421
Delivered ASP ($)1,002,300 924,600 933,600

Guidance Changes

MetricPeriodPrevious Guidance (as of Q1)Current Guidance (as of Q2)Change
Deliveries (units)Q3 2025—2,800 – 3,000 New
Avg Delivered Price ($)Q3 2025—$965,000 – $985,000 New
Adjusted Home Sales Gross Margin %Q3 2025—27.25% New
SG&A %Q3 2025—9.2% New
Period-End Community CountQ3 2025—430 New
Other income/land JV profit ($MM)Q3 2025—$0 New
Tax RateQ3 2025—26.0% New
Deliveries (units)FY 202511,200 – 11,600 11,200 – 11,600 Maintained
Avg Delivered Price ($)FY 2025$945,000 – $965,000 $945,000 – $965,000 Maintained
Adjusted Home Sales Gross Margin %FY 202527.25% 27.25% Maintained
SG&A %FY 20259.4% – 9.5% 9.4% – 9.5% Maintained
Period-End Community CountFY 2025440 – 450 440 – 450 Maintained
Other income/land JV profit ($MM)FY 2025110 110 Maintained
Tax RateFY 202525.5% 25.5% Maintained
Share Repurchases ($MM)FY 2025500 (target) 600 (target) Raised
Quarterly Dividend ($/sh)FY 2025$0.23 (paid Jan) $0.25 (9% increase; paid Apr 25, 2025) Raised

Earnings Call Themes & Trends

TopicQ4 FY24 (Dec call)Q1 FY25 (Feb call)Q2 FY25 (May call)Trend
Demand cadenceStrong finish; incentives elevated modestly in Q4 to move specs; optimism into spring Mixed spring; targeting ~3,000 Q2 orders; 2.0 per comm/mo pace February weakest; March/April consistent; May trending similar; softness vs expectations persists Softer but stable after Feb; cautious tone
Pricing/incentivesIncentives ~6.7% of ASP in Q4; planned reductions and price increases into spring Incentives trending down early Q2; spec margin ~200–250 bps below avg, BTO ~+200 bps Incentives ~7% in Q2; prioritizing price/margin over pace; margin guide intact Balanced; holding margin framework
Spec vs build-to-order~50/50 mix supports ROE, scale, and leverage ~55% spec sales; reducing new spec starts near-term; large WIP pipeline ~1,028 completed specs; ~2,400 in progress; sell-and-settle spec beat aided Q2 Tightening spec starts; monetizing finished specs
MarginsFY25 adj GM implied ~27.5% for balance of year Q2 adj GM 27.25% guide; FY25 27.5% maintained Q2 adj GM 27.5% actual; Q3 guide 27.25%; FY maintained Stable at ~27.25–27.5%
Regional trendsNE/Mid-Atlantic strong; TX mixed (Austin soft); FL caution; Pacific/CA strong Similar dispersion; D.C. and SoCal strong Strength: NJ/PA/NY, DC, Charlotte, Atlanta, CA, Las Vegas, Denver, Boise; softer: Pacific NW, most of FL, parts of TX, Phoenix Northeast/Pacific strength; FL/TX/Phoenix softness
Tariffs/supply chainMonitoring potential tariffs; impact seen as de minimis; cycle time improving No immediate tariff/immigration labor impacts; cycle times modestly improving No significant tariff impact expected in FY25 Minimal impact expected; continued ops efficiency
Capital returnsFY25 buybacks budgeted $500M; ~$1B CFO expected Reaffirm buyback target; liquidity expanded; revolver upsized Buybacks raised to $600M; dividend +9% to $0.25 Increasing capital return pace

Management Commentary

  • “We generated record second quarter home sales revenues of $2.71 billion, well above our guidance of $2.47 billion, and beat both our adjusted gross margin and SG&A guidance.” — CEO Douglas C. Yearley, Jr. .
  • “In this environment, we believe prioritizing price and margin over pace makes the most strategic sense.” — CEO, on demand strategy .
  • “Our second quarter adjusted gross margin was 27.5%, which was 25 basis points better than guidance... SG&A as a percentage of home sales revenue was 9.5%,... reflecting our focus on cost controls and leverage from higher-than-expected home sales revenue.” — CFO Martin Connor .
  • “Given our strong financial position... we are increasing our projected share repurchases in fiscal ’25 from $500 million to $600 million.” — CEO .

Q&A Highlights

  • Spec inventory and coverage: ~1,028 completed specs; ~2,400 in progress; permits for additional 1,000–2,000; ~1,900 homes needed from unsold specs to hit FY deliveries, with cost risk limited as builds are contracted; pricing risk budgeted conservatively .
  • Margin cadence: Q3 ~27.25% adj GM; Q4 similar; mix tailwinds (more luxury, Pacific/Mid-Atlantic) offset higher spec incentives; strategy is price/margin over pace .
  • Demand cadence: February weakest; March/April stable; May tracking similar; management not assuming a market improvement in guidance .
  • SG&A leverage: Q4 leverage driven by higher revenue; variable sales costs modestly lower aided Q2 .
  • Regional color: Strength in Northeast corridor, California, Las Vegas, Denver, Boise; softness in Pacific NW, most Florida, parts of Texas, Phoenix .
  • Land spend and pipeline: ~$723M land spend in Q2 to purchase ~4,380 lots; tightening underwriting and expecting lower land spend for FY26 unless market improves; increased use of options/land banking .

Estimates Context

  • Q2 2025 beat: Revenue $2.74B vs $2.49B consensus*; EPS $3.50 vs $2.86 consensus* .
  • Street may refine near-term models for: (a) stronger sell-and-settle spec conversion in Q3, (b) mix shift to higher-margin luxury/Mid-Atlantic/Pacific, and (c) SG&A leverage into H2 given higher revenue cadence; management reaffirmed FY targets equating to roughly ~$14 EPS with book value per share ~$90 YE outlook .
  • Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with reaffirmed FY guide: execution and operating leverage are offsetting softer orders; margin framework (~27.25–27.5% adj) looks durable in current conditions .
  • Near-term catalysts: increased buyback to $600M and stable Q3 margin/delivery guide provide support; dividend increase adds yield underpinning .
  • Spec monetization is a feature, not a bug: ample completed/in-progress specs underpin 2H delivery cadence while BTO margins remain several hundred bps above average .
  • Demand softer but resilient in affluent cohorts: cancellation rates remain low; backlog ASP at a record $1.13M; regional strength (NE/Pacific) and luxury mix help protect margins .
  • Balance sheet/liquidity strong: $2.8B liquidity, net debt-to-cap 19.8%, revolver extended/upsized to 2030; supports continued investment and returns .
  • Watch list: Florida/Texas/Phoenix demand elasticity and incentive levels; Q3 sell-and-settle conversion vs assumptions; JV/other income timing (4Q weighted) .
  • Medium-term: community count growth (8–10% in FY25 and similar in FY26) plus mix normalization supports steady margins and ROE focus, with upside if demand improves .

Citations

  • Q2 2025 press release and financials:
  • 8-K Item 2.02 and exhibit:
  • Q2 2025 earnings call transcript:
  • Q1 2025 press release and call: ;
  • Q4 2024 call for trend context:
  • Dividend increase press release: