Toll Brothers(US:TOL)2025-12-09 14:32Financial Data and Key Metrics Changes - The company delivered 11,292 homes at an average price of $960,000, generating a record $10.8 billion in home sales revenue, with an adjusted gross margin of 27.3% and earnings of $13.49 per diluted share [4][5][18] - For the fourth quarter, the company generated $3.4 billion in home sales revenue with an adjusted gross margin of 27.1% and earnings of $4.58 per diluted share, slightly below guidance due to a delayed sale [5][19] - The company reported a net income of $1.35 billion for the full year, down from $1.57 billion the previous year, primarily due to a one-time gain in the prior year [18][19] Business Line Data and Key Metrics Changes - The company grew its community count by 9% and maintained strong operating cash flows of $1.1 billion, returning approximately $750 million to stockholders through share repurchases and dividends [5][21] - Spec homes accounted for approximately 54% of deliveries in fiscal 2025, allowing the company to appeal to buyers looking for quicker move-ins [7][8] - The average spend on design studio selections and upgrades was approximately $206,000 per home, benefiting margins [13] Market Data and Key Metrics Changes - The company noted relative strength in the East and coastal California markets, with little meaningful variation in demand among buyer segments [11] - The average sales price in the quarter was approximately $972,000, down from $1 million in the same quarter last year due to a mix of sales [10][19] - The company observed a structural undersupply of homes in the U.S., with favorable demographics supporting long-term housing demand [10][11] Company Strategy and Development Direction - The company plans to exit the multifamily business, expecting to complete the sale of its apartment living assets and use the proceeds to grow its core home building business and return capital to stockholders [6][16][50] - The company aims to grow community count by 8%-10% in fiscal 2026, targeting 480-490 communities [24] - The strategy includes a balanced portfolio of build-to-order and spec homes to improve efficiencies and reduce construction cycle times [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the housing market, noting that mortgage rates have stabilized and demographic trends remain favorable [9][10] - The company is not assuming any market improvement in its guidance for fiscal 2026, projecting first-quarter deliveries of 1,800-1,900 homes [21][22] - Management highlighted the importance of consumer confidence and affordability pressures as key factors influencing the housing market [87] Other Important Information - The company ended the fiscal year with over $3.5 billion in liquidity and a net debt-to-capital ratio of 15.3% [21] - The company repurchased $652 million of its common stock during fiscal 2025, representing 5% of outstanding shares [15][21] Q&A Session Summary Question: Can you provide insights on the active adult buyer segment and trends affecting land purchasing decisions? - Management noted that the active adult segment is performing well, representing about 17% of revenue, and emphasized a disciplined approach to land purchasing amid changing trends [31][32][34] Question: What factors are influencing the guidance for closings in 2026? - Management indicated that the lower backlog at the beginning of 2026 is the primary driver for the guidance, with no assumptions of improved sales pace [72][74] Question: What is driving the sequential decline in gross margins into the first quarter and the full year? - The increase in incentives per house from $68,000 to $80,000 is a significant factor affecting gross margins [81] Question: How does the company view consumer confidence and the desire to sell homes? - Management expressed that consumer confidence remains a critical driver, with some headwinds due to affordability and mortgage rates, but noted potential long-term tailwinds as the market stabilizes [87][88]