Toll Brothers, Inc. (TOL)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)

This discussion and analysis is based on, should be read together with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements, notes thereto, and the related MD&A contained in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025 (“2025 Form 10-K”). It also should be read in conjunction with the disclosure under “Statement on Forward-Looking Information” and “Risk Factors” in this report and in our 2025 Form 10-K.

Unless otherwise stated in this report, net contracts signed represents a number or value equal to the gross number or value of contracts signed during the relevant period, less the number or value of contracts canceled during the relevant period (irrespective of whether the contract was signed during the relevant period or in a prior period). Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”). Backlog conversion represents the percentage of homes delivered in the period from backlog at the beginning of the period (“backlog conversion”).

OVERVIEW

Our Business Environment and Current Outlook

In the three months ended April 30, 2026, we signed 2,834 net contracts for an aggregate value of $2.81 billion, a 6.9% increase in units and 7.8% increase in dollars compared to the prior year period, which was attributable in part to a 9% year-over-year increase in community count. On a per-community basis, net signed contracts saw a modest year-over-year decline of 2.0%. In the second quarter of fiscal 2026, demand for our homes remained generally consistent with the demand we experienced in the second quarter of fiscal 2025. Factors that negatively impacted demand in the quarter included an overall housing environment that remained challenged due to ongoing affordability pressures and weak consumer confidence, which were exacerbated by an increase in geopolitical volatility starting in March. However, because we serve an affluent customer base with higher incomes and greater accumulated wealth, the affordability pressures that have impacted the lower end of the market have had less of an impact on our business. We anticipate that in the near term, softer overall demand for new homes may persist, which would likely result in a continuation of the elevated incentive levels and slower sales paces that characterized most of fiscal 2025 and the first half of fiscal 2026. In this environment, we continue to strategically manage our pricing, including by adjusting incentive levels where appropriate, to effectively balance sales price and margin with pace, and to align our inventory levels with local sales environments. While the near-term trajectory of new home demand remains uncertain and subject to a variety of unpredictable factors, over the longer term we continue to believe the outlook for the new home market remains positive, as it is supported by strong fundamentals including favorable demographics, a structural undersupply of homes, the aging stock of existing homes, and an increase in upper income households over the past several decades.

While historically most of our homes have been sold on a build-to-order basis, where we do not begin construction of the home until we have a signed contract with a customer, in recent years we have increased the number of homes we start without a buyer (“spec homes”). In general, we are able to build our spec homes faster and more efficiently than build-to-order homes, and spec homes allow us to attract buyers who are looking for a quicker move-in schedule, although the gross margin on spec homes is generally lower than build-to-order homes. We determine how many spec homes to start within each community based on local market conditions, our current and planned sales pace, and our backlog and construction cadence for the community. We continue to monitor demand and other factors on a community-by-community basis and make appropriate adjustments to our spec starts as market conditions evolve over time.

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Financial and Operational Highlights

In the three-month period ended April 30, 2026, we recognized $2.53 billion of revenues, consisting of $2.51 billion of home sales revenues and $18.8 million of land sales and other revenues, and net income of $260.6 million, as compared to $2.74 billion of revenues, consisting of $2.71 billion of home sales revenues and $32.6 million of land sales and other revenues, and net income of $352.4 million in the three-month period ended April 30, 2025.

In the three-month periods ended April 30, 2026 and 2025, the value of net contracts signed was $2.81 billion (2,834 homes) and $2.60 billion (2,650 homes), respectively.

In the six-month period ended April 30, 2026, we recognized $4.68 billion of revenues, consisting of $4.37 billion of home sales revenues and $309.4 million of land sales and other revenues, and net income of $471.5 million, as compared to $4.60 billion of revenues, consisting of $4.55 billion of home sales revenues and $51.0 million of land sales and other revenues, and net income of $530.2 million in the six-month period ended April 30, 2025.

In the six-month periods ended April 30, 2026 and 2025, the value of net contracts signed was $5.19 billion (5,137 homes) and $4.91 billion (4,957 homes), respectively.

The value of our backlog at April 30, 2026 was $6.32 billion (5,394 homes), as compared to our backlog at April 30, 2025 of $6.84 billion (6,063 homes). Our backlog at October 31, 2025 was $5.49 billion (4,647 homes), as compared to backlog of $6.47 billion (5,996 homes) at October 31, 2024.

At April 30, 2026, we had $1.11 billion of cash and cash equivalents and we had approximately $2.24 billion of borrowing capacity of the $2.38 billion available under our revolving credit facility (the “Revolving Credit Facility”) on such date. At April 30, 2026, we had no borrowings and we had approximately $136.5 million of outstanding letters of credit under the Revolving Credit Facility.

At April 30, 2026, we owned or controlled through options approximately 76,800 home sites, as compared to approximately 76,100 at October 31, 2025; and approximately 74,700 at October 31, 2024. Of the approximately 76,800 home sites that we owned or controlled through options at April 30, 2026, we owned approximately 32,000 and controlled approximately 44,800 through options. Of the 32,000 home sites owned, approximately 18,400 were substantially improved. In addition, as of April 30, 2026, we expect to purchase approximately 8,900 additional home sites over several years from certain of the joint ventures in which we have interests, at prices to be determined.

At April 30, 2026, we were selling from 459 communities, compared to 446 at October 31, 2025 and 421 at April 30, 2025.

At April 30, 2026, our total stockholders’ equity and our debt to total capitalization ratio were $8.48 billion and 0.25 to 1.00, respectively.

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RESULTS OF OPERATIONS – OVERVIEW

The following table compares certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income and other supplemental information for the three months and six months ended April 30, 2026 and 2025 ($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.

NM: Not meaningful.

Note: Due to rounding, amounts may not add. Net contracts signed information presented above is net of all cancellations that occurred in the period. “Net contracts signed - value” includes the value of each binding agreement of sale that was signed in the period, plus the value of all options that were selected during the period, regardless of when the initial agreement of sale related to such options was signed.

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Home Sales Revenues and Home Sales Cost of Revenues

Three months ended April 30, 2026 compared to the three months ended April 30, 2025

The decrease in home sale revenues for the three months ended April 30, 2026, as compared to the three months ended April 30, 2025, was primarily attributable to a 14% decrease in the number of homes delivered, offset in part, by an 8% increase in the average price of homes delivered. The decrease in the number of homes delivered was primarily due to a decrease in the number of homes in backlog at October 31, 2025, as compared to the number of homes in backlog at October 31, 2024 and fewer spec home deliveries offset, in part, by faster construction cycle times. The increase in the average delivered home price was m

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)

This discussion and analysis is based on, should be read together with, and is qualified in its entirety by, the Consolidated Financial Statements and Notes thereto in Item 15(a)1 of this Form 10-K, beginning at page F-1. It also should be read in conjunction with the disclosure under “Forward-Looking Statements” in Part I of this Form 10-K.

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Toll Brothers, Inc. and its subsidiaries, unless the context otherwise requires. References herein to fiscal year refer to our fiscal years ended or ending October 31.

Unless otherwise stated in this report, net contracts signed represents a number or value equal to the gross number or value of contracts signed during the relevant period, less the number or value of contracts cancelled during the relevant period, which includes contracts that were signed during the relevant period and in prior periods. Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”). Backlog conversion represents the percentage of homes delivered in the period from backlog at the beginning of the period (“backlog conversion”).

OVERVIEW

Our Business

We design, build, market, sell, and arrange financing for an array of luxury residential single-family detached, attached, master-planned, resort-style golf, and urban low-, mid-, and high-rise communities, principally on land we develop and improve. In recent years, we have pursued a strategy of broadening our product lines, price points and geographic footprint, as well as increasing the number of spec homes that we sell relative to our traditional build-to-order homes. We cater to luxury first-time, move-up, empty-nester (move-down), active-adult, and second-home buyers in the United States. From time to time, we also design, build, market, and sell high-density, high-rise urban luxury condominiums, which we endeavor to do with third-party joint venture partners. At October 31, 2025, we were operating in 24 states and in the District of Columbia.

In the five years ended October 31, 2025, we delivered 52,203 homes from 1,061 communities, including 11,292 homes from 556 communities in fiscal 2025. At October 31, 2025, we had 1,137 communities in various stages of planning, development or operations containing approximately 76,100 home sites that we owned or controlled through options. At fiscal year-end, we were selling from 446 of these communities.

We operate our own architectural, engineering, mortgage, title, land development, insurance, smart home technology and landscaping subsidiaries. We also develop master-planned and golf course communities as well as operate, in certain regions, our own lumber distribution, house component assembly and component manufacturing operations.

In addition to our residential for-sale business, we have also developed and, in some cases operated, for-rent apartments generally through joint ventures. In September 2025, we announced plans to exit this business over time. See the section entitled “Apartment Living” below.

We have investments in various unconsolidated entities, including our Land Development Joint Ventures, Home Building Joint Ventures and Rental Property Joint Ventures.

Financial Highlights

In fiscal 2025, we recognized $10.97 billion of revenues, consisting of $10.84 billion of home sales revenues and $124.5 million of land sales and other revenues, and net income of $1.35 billion, as compared to $10.85 billion of revenues, consisting of $10.56 billion of home sales revenues and $283.4 million of land sales and other revenues, and net income of $1.57 billion in fiscal 2024. Land sales and other revenue, pre-tax income and net income in fiscal 2024 included $185.0 million, $175.2 million and $124.1 million, respectively, related to the sale of a single parcel of land in northern Virginia to a commercial developer.

In fiscal 2025 and 2024, the value of net contracts signed was $9.85 billion (9,943 homes) and $10.07 billion (10,231 homes), respectively. The value of our backlog at October 31, 2025 was $5.49 billion (4,647 homes), as compared to our backlog at October 31, 2024 of $6.47 billion (5,996 homes).

At October 31, 2025, we had $1.26 billion of cash and cash equivalents and approximately $2.19 billion available for borrowing under our $2.35 billion revolving credit facility (the “Revolving Credit Facility”). At October 31, 2025, we had no outstanding borrowings under the Revolving Credit Facility and had outstanding letters of credit of approximately $155.9 million.

At October 31, 2025, our total equity and our debt to total capitalization ratio were $8.29 billion and 0.25 to 1.00, respectively.

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Our Business Environment and Current Outlook

In the three months ended October 31, 2025, we signed 2,598 net contracts for an aggregate value of $2.53 billion, a decrease of 2% in units and 5% in dollars compared to the prior year period. For the full year, net signed contracts of approximately 9,943 units and $9.85 billion decreased 3% in units and 2% in dollars, respectively. On a per-community basis, contracts were also down in both the quarter and for the full year. Throughout the year, we experienced weakness in demand, which has continued into the first quarter of our fiscal 2026, and which we attribute to ongoing affordability pressures, especially at the lower end of the market, and volatile economic conditions that have negatively impacted consumer confidence. We have responded to these conditions by strategically managing our pricing, including by increasing incentives where necessary, to appropriately balance sales price and margin with pace, and to align our inventory levels with local sales environments. While the trajectory of near-term demand remains uncertain, we continue to believe the outlook for the new home market remains positive over the long term, as it is supported by strong fundamentals including favorable demographics, the structural undersupply of homes in the U.S. caused by over a decade of underproduction, the aging stock of existing homes, and wealth built up from years of stock market and home price appreciation.

Historically, most of our homes have been sold on a build-to-order basis, where we do not begin construction of the home until we have a signed contract with a customer. In recent years, we have strategically increased the number of homes that we start without a buyer (a spec home), which we generally build faster than build-to-order homes and which allow us to attract buyers who are looking for quicker move-in homes. We determine how many such homes to start within each community based on local market conditions, our current and planned sales pace, and our backlog and construction cadence for the community. We continue to monitor demand and other factors on a community-by-community basis and will make appropriate adjustments to our spec starts as market conditions evolve.

Competitive Landscape

The home building business is highly competitive and fragmented. We compete with numerous home builders of varying sizes, ranging from local to national in scope, some of which have greater sales and financial resources than we do. Sales of existing homes also provide competition. We compete primarily based on price, location, design, quality, service, and reputation. We believe our size and financial stability, relative to many others in our industry, provides us with a competitive advantage.

Land Acquisition and Development

Our business is subject to many risks because of the extended length of time that it takes to obtain the necessary approvals on a property, complete the land improvements and community amenities, and build and deliver a home. We attempt to reduce some of these risks and improve our capital efficiency by utilizing one or more of the following methods: controlling land for future development through options, which enables us to obtain necessary governmental approvals before acquiring title to the land; commencing construction of a build-to-order home only after executing an agreement of sale and receiving a required down payment from the buyer; and using subcontractors to perform home and amenity construction and land development work on a fixed-price basis.

During fiscal 2025 and 2024, we acquired control of approximately 12,700 and 14,900 home sites, respectively, net of options terminated and land sales. In fiscal 2025 and 2024 we forfeited control of approximately 5,900 and 4,000 optioned lots, respectively, primarily because the planned community no longer met our development criteria. At October 31, 2025, we controlled approximately 76,100 home sites, as compared to approximately 74,700 home sites at October 31, 2024, and approximately 70,700 home sites at October 31, 2023. In addition, at October 31, 2025, we expected to purchase approximately 8,800 additional home sites from several Land Development Joint Ventures in which we have an interest, at prices to be determined.

Of the approximately 76,100 total home sites that we owned or controlled through options at October 31, 2025, we owned approximately 33,000 and controlled approximately 43,100 through options. Of the 76,100 home sites, approximately 18,300 were substantially improved.

In addition, at October 31, 2025, our Land Development Joint Ventures owned approximately 28,900 home sites (including 832 home sites included in the 43,100 controlled through options).

At October 31, 2025, we were selling from 446 communities, compared to 408 communities at October 31, 2024, and 370 communities at October 31, 2023.

Customer Mortgage Financing

We maintain relationships with a diverse group of mortgage financial institutions, many of which are among the largest in the industry. We believe that national, regional and community banks continue to recognize the long-term value in creating relationships with our home buyers, and these banks continue to provide these customers with financing.

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We believe that our home buyers generally are, and will continue to be, well-positioned to secure mortgages due to their typically lower loan-to-value ratios and attractive credit profiles, as compared to the average home buyer.

Apartment Living

In addition to our residential for-sale business, we have also developed and in some cases operated for-rent apartments and student housing projects generally through joint ventures. In fiscal 2025, three of our Rental Property Joint Ventures sold their assets to unrelated parties, resulting in aggregate gains of $146.1 million recognized by the joint ventures. From our investments in these joint ventures we received cash and recognized our share of the gains of $45.1 million in fiscal 2025. In fiscal 2024, three of our Rental Property Joint Ventures sold their assets, or we sold a portion of our ownership interest to unrelated parties, resulting in aggregate gains of $176.1 million recognized by the joint ventures. From our investments in these joint ventures we received cash and recognized our share of the gains of $24.1 million in fiscal 2024. In fiscal 2023, two of our Rental Property Joint Ventures sold their assets to unrelated parties, resulting in aggregate gains of $106.2 million recognized by the joint ventures. From our investments in these joint ventures, we received cash and recognized gains of $50.9 million in fiscal 2023. In addition, in fiscal 2023, we sold our ownership interest in one of our Rental Property Joint Ventures and recognized a gain of $16.0 million. The gains recognized from these sales are included in “Income (loss) from unconsolidated entities” in our Consolidated Statements of Operations and Comprehensive Income included in Item 15(a)1 of this Form 10-K.

At October 31, 2025, we, or joint ventures in which we have an interest, controlled 73 land parc

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