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Item 7. Management’s Discussion and Analysis

2025-12-19 compared with 2024-12-20 · 131 added, 137 removed, 514 unchanged (34% of the section changed)

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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, as well as urban and suburban renters.

We also design, build, market, and sell high-density, high-rise urban luxury condominiums with third-party joint venture partners.

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.

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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 also develop and, in some cases operate, for-rent apartments generally through joint ventures.

See the section entitled “Toll Brothers Apartment Living/Toll Brothers Campus Living” below.

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.

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Our Business Environment and Current Outlook

Through fiscal 2024, demand for our homes remained solid despite geopolitical turmoil, continued inflationary pressures and mortgage rates that remained elevated compared to the prior decade.

Despite these conditions, the market for new homes, and in particular higher-end new homes, has continued to perform well.

We believe this is due to a variety of factors, including the very low levels of resale inventory on the market, favorable demographic trends that include first time millennial buyers who are acquiring homes later in life, and a continuation of a structural supply-demand imbalance that has resulted from underproduction of homes relative to population growth for well over a decade.

While home price appreciation and higher mortgage rates have made homes unaffordable for many entry-level buyers, our more affluent customer base has been less impacted by these trends.

We believe the favorable trends described above will continue to support demand for our homes for the foreseeable future.

However, historically the home building industry has been highly cyclical and there can be no guarantee that our business will not be disrupted by macroeconomic factors, such as negative impacts from inflation or mortgage rates that may trend higher.

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

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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, whether by a homeowner or by a financial institution that may have acquired a home through a foreclosure or otherwise, also provide competition.

Sales of existing homes also provide competition.

We compete primarily based on price, location, design, quality, service, and reputation.

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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 each of fiscal 2024 and 2023 we forfeited control of approximately optioned 4,000 lots primarily because the planned community no longer met our development criteria.

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.

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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.

Toll Brothers Apartment Living/Toll Brothers Campus Living

In addition to our residential for-sale business, we also develop and in some cases operate for-rent apartments generally through joint ventures.

At October 31, 2024, we or joint ventures in which we have an interest, owned or controlled 67 land parcels that are planned, or being developed or operated, as for-rent apartment projects containing approximately 21,300 units.

projects, which are located in multiple metropolitan areas throughout the country, are being operated, are being developed, or will be developed with partners under the brand names Toll Brothers Apartment Living and Toll Brothers Campus Living.

Of these 21,300 units, 13,300 were owned by joint ventures in which we have an interest;

approximately 2,400 were owned by us;

and the land parcels underlying 5,600 units were under contract to be purchased by us.

At October 31, 2024, we had approximately 4,500 units in for-rent apartment projects that were occupied or ready for occupancy, 5,700 units in the lease-up stage, 6,500 units in the design phase or under development, and 4,700 units in the planning stage.

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.

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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 from unconsolidated entities” in our Consolidated Statements of Operations and Comprehensive Income included in Item 15(a)1 of this Form 10-K.

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 parcels that are planned or operating as for-rent apartment projects containing approximately 22,300 units.

On September 18, 2025, we announced our intention to exit the multi-family development business, beginning with the sale of our interests in approximately half of our portfolio, as well as our operating platform, to Kennedy Wilson for a purchase price of approximately $380 million, as adjusted to reflect investments in certain assets since the September announcement.

This sale includes 44 land parcels that are in various stages of development containing approximately 13,400 units.

In December 2025, we completed a significant portion of the sale to Kennedy Wilson, including our operating platform, with the remaining portion expected to occur in the first half of our fiscal 2026.

In connection with the transaction, Kennedy Wilson has agreed to assume our management responsibilities for our retained interests in for-rent properties.

We expect to sell our interests in these retained assets over time.

Contracts and Backlog

The aggregate value of net sales contracts signed increased 27% in fiscal 2024, as compared to fiscal 2023.

The value of net sales contracts signed was $10.07 billion (10,231 homes) in fiscal 2024 and $7.91 billion (8,077 homes) in fiscal 2023.

The increase in the aggregate value of net contracts signed in fiscal 2024, as compared to fiscal 2023, was due to a 27% increase in the number of net contracts signed.

The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, reflects both solid demand and an increase in the average number of communities that we were selling from in 2024.

The average value attributed to each contract signed in fiscal 2024 was generally flat compared to those signed in fiscal 2023.

The average value attributed to each contract signed includes the value of each binding agreement of sale that was signed in the period, as well as the value of all options selected during the period, regardless of when the initial agreement of sale related to such options was signed.

The aggregate value of net signed sales contracts decreased 2% in fiscal 2025 compared to fiscal 2024, from $10.07 billion (10,231 homes) to $9.85 billion (9,943 homes).

This decrease was the result of a 3% decrease in the number of net contracts signed (despite a 9% increase in operating communities in fiscal 2025) and was offset by a 1% increase in the average value attributed to each contract signed.

The decline in net signed contracts, in both units and dollars, was reflective of the overall weakness in demand that we experienced in fiscal 2025, 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.

The value of our backlog at October 31, 2025, 2024, and 2023 was $5.49 billion (4,647 homes), $6.47 billion (5,996 homes), and $6.95 billion (6,578 homes), respectively.

Approximately 98% of the homes in backlog at October 31, 2025 are expected to be delivered by October 31, 2026.

The 7% decrease in the value of homes in backlog at October 31, 2024, as compared to October 31, 2023, was due to the delivery of more homes out of backlog than were added during fiscal 2024, and a decrease in the average value of each contract signed.

The 15% decrease in the value of homes in backlog at October 31, 2025, as compared to October 31, 2024, was due to the delivery of more homes out of backlog than were added during fiscal 2025, and a relatively flat average value of each contract signed.

For more information regarding revenues, net contracts signed, and backlog by geographic segment, see “Segments” in this MD&A.

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For a discussion of all our significant accounting policies, including our critical accounting policies, refer to Note 1,“Significant Accounting Policies” of the Consolidated Financial Statements.

We believe that the accounting estimates and assumptions described below involve significant subjectivity and judgment, and changes to such estimates or assumptions could have a material impact on our financial condition or operating results.

We believe that the accounting estimates and assumptions described below involve significant subjectivity and judgment, and changes to such estimates or assumptions could have a

material impact on our financial condition or operating results.

Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results.

We believe the following critical accounting estimates reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Inventory is stated at cost unless an impairment exists, in which case it is written down to fair value in accordance with GAAP.

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$ 65,914 $ 59,441 $ 30,706

We have also recognized $26.9 million, $4.4 million, and $30.6 million of impairment charges on land that we no longer plan to develop which are included in land sales and other cost of revenues during the fiscal years ended October 31, 2025, 2024, and 2023, respectively.

Cost of Revenue Recognition

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Adjustments to our warranty liabilities related to homes delivered in prior years are recorded in the period in which a change in our estimate occurs.

Over the past decade, we have had a significant number of warranty claims related to water intrusion issues primarily impacting homes built in Pennsylvania and Delaware.

Our review process for these claims includes an analysis of many factors to determine the estimated costs to resolve such claims, including:

the closing dates of the homes;

the number of claims received;

our inspection of homes;

an estimate of the number of homes we expect to repair;

the type and cost of repairs that have been performed in each community;

the estimated costs to remediate pending and future claims;

and the previously recorded amounts related to these claims.

We also monitor legal developments relating to these types of claims and review the volume, relative merits and adjudication of claims in litigation or arbitration.

We have not made any material changes in our methodology or significant assumptions used to establish our warranty reserves during the past three fiscal years.

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These insurance policies protect us against a portion of our risk of loss from claims related to our home building activities, subject to certain self-insured retentions, deductibles and other coverage limits (“self-insured liability”).

We also provide general liability insurance for our subcontractors in Arizona, California, Colorado, Nevada, Washington, and certain areas of Texas, where eligible subcontractors are enrolled as insureds under our general liability insurance policies in each community in which they perform work.

We also provide general liability insurance for our

subcontractors in Arizona, California, Colorado, Nevada, Washington, and certain areas of Texas, where eligible subcontractors are enrolled as insureds under our general liability insurance policies in each community in which they perform work.

For those enrolled subcontractors, we absorb their general liability associated with the work performed on our homes within the applicable community as part of our overall general liability insurance and our self-insurance through our captive insurance subsidiary.

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Income from operations 1,720.6 2,040.2 (16) %

(Loss) income from unconsolidated entities (23.8) 50.1 (148) %

Income (loss) from unconsolidated entities 19.1 (23.8) 180 %

Other income - net 51.7 69.3 (25) %

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The increase in the number of homes delivered in fiscal 2025, as compared to fiscal 2024, was principally due to higher backlog conversion and an increase in the number of spec homes delivered in fiscal 2025, offset, in part, by a decrease in the number of homes in backlog at October 31, 2024, as compared to the number of homes in backlog at October 31, 2023.

The decrease in the average delivered home price was mainly due to increase in homes delivered in less expensive product types/geographic regions.

The decrease in the average delivered home price was mainly due to an increase in homes delivered in less expensive product types/geographic regions and an increase in the number of spec homes closed.

Home sales cost of revenues, as a percentage of homes sales revenues, in fiscal 2025 was 74.4%, as compared to 73.4% in fiscal 2024.

The increase in fiscal 2024 was principally due to a shift in the mix of revenues to lower margin products/areas and increased inventory impairment charges, offset, in part, by lower interest expense as a percentage of home sales revenues.

The increase in fiscal 2025 was principally due to an increase in incentives as a result of soft market conditions, as well as shifts in the mix of revenues to lower margin products/areas, offset, in part, by lower interest expense as a percentage of home sales revenues.

We recognized inventory impairments and write-offs of $65.9 million, or 0.6% of home sales revenues, and $59.4 million, or 0.6% of home sales revenues, in fiscal 2025 and fiscal 2024, respectively.

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Land sales to joint ventures in which we retain an interest are generally sold at our land basis and therefore little to no gross margin is earned on these sales.

The increase in land sales and other cost of revenues as a percentage of land sales and other revenues in fiscal 2024 compared to fiscal 2023 was primarily due to the sale of a single land parcel to a commercial developer in our second quarter for net cash proceeds of $180.7 million, which resulted in a pre-tax gain of $175.2 million.

In addition, we incurred lower impairment charges in fiscal 2024.

We recognized $4.4 million of impairment charges in fiscal 2024 in connection with planned land sales.

This compares to $30.6 million of land sales and other impairment charges recognized in fiscal 2023.

The increase in land sales and other cost of revenues as a percentage of land sales and other revenues in fiscal 2025 compared to fiscal 2024 was primarily due to the sale of a single land parcel to a commercial developer for net cash proceeds of $180.7 million, which resulted in a pre-tax gain of $175.2 million in fiscal 2024.

In addition, we had higher impairment charges in fiscal 2025.

We recognized $26.9 million of land sales and other impairment charges in fiscal 2025 in connection with planned land sales compared to $4.4 million of land sales and other impairment charges recognized in fiscal 2024.

Selling, General and Administrative Expenses (“SG&A”)

SG&A spending increased by $72.8 million in fiscal 2024, as compared to fiscal 2023.

SG&A spending increased by $51.3 million in fiscal 2025 compared to fiscal 2024.

As a percentage of home sales revenues, SG&A was 9.5% and 9.3% in fiscal 2025 and 2024, respectively.

The dollar increase in SG&A was primarily due to an increase in variable spending such as selling expenses associated with increased home sales revenues.

The increase in SG&A as a percentage of home sales revenues was primarily due to general cost inflation.

The dollar increase in SG&A was primarily due to an increase in payroll, marketing and insurance costs.

These increases were offset, in part, by modestly lower selling commissions.

Income from Unconsolidated Entities

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For our Rental Property Joint Ventures specifically, these entities typically generate operating losses until the related property reaches stabilization.

For the fiscal years 2024 and 2023, our earnings related to the Rental Property Joint Ventures include approximately $50.3 million and $32.9 million, respectively, of our share of net operating losses incurred by these joint ventures, of which approximately $29.8 million and $26.1 million, respectively, was our share of the depreciation expense recognized by these joint ventures.

We recognized a loss from unconsolidated entities of $23.8 million in fiscal 2024, as compared to income of $50.1 million in fiscal 2023.

This decrease was mainly due to $50.9 million of gains recognized in fiscal 2023 related to property sales compared to $24.1 million of such gains in fiscal 2024.

We also recognized a $16.0 million gain as the result of the sale of our ownership interest in a Rental Property Joint Venture in fiscal 2023.

No similar sales occurred in fiscal 2024.

Fiscal 2024 was

also impacted by higher losses incurred by various Rental Property Joint Ventures, reduced income at one Home Building Joint Venture due to its underlying assets being sold out, lower earnings from a Land Development Joint Venture due to reduced sales volume, and an increase in other-than-temporary impairment charges recognized.

We recognized other-than-temporary impairment charges in fiscal 2024 of $6.6 million related to two investments in Rental Property Joint Ventures.

No similar impairment charges were recognized in fiscal 2023.

For fiscal years 2025 and 2024, our earnings related to the Rental Property Joint Ventures include approximately $68.0 million and $50.3 million, respectively, representing our share of net operating losses incurred by these joint ventures, of which approximately $38.3 million and $29.8 million, respectively, was our share of the depreciation expense recognized by these joint ventures.

We recognized a gain from unconsolidated entities of $19.1 million in fiscal 2025, as compared to a loss of $23.8 million in fiscal 2024.

This increase was mainly due to $45.1 million of gains recognized in fiscal 2025 related to property sales by our joint ventures compared to $24.1 million of such gains in fiscal 2024, increased earnings by certain Home Building Joint Ventures and lower other-than-temporary impairment charges.

We recognized other-than-temporary impairment charges in

fiscal 2025 of $2.1 million related to one investment in a Rental Property Joint Venture compared to $6.6 million related to two investments in Rental Property Joint Ventures in fiscal 2024.

These increases were offset, in part, by higher losses from certain Rental Property Joint Ventures.

Other Income - Net

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Management fee income earned by home building operations

Gain on litigation settlements – net — 27,683

Other 2,482 6,968

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$ 51,703 $ 69,296

The increase in income from ancillary businesses in fiscal 2024, as compared to fiscal 2023, was principally due to higher earnings from our mortgage and title operations due to increased closing volume and a $4.4 million gain from a bulk sale of security monitoring accounts by our smart home technology business, offset, in part, by higher operating losses incurred in our apartment living operations.

The decrease in interest income in fiscal 2025, as compared to fiscal 2024, was principally due to lower average cash balances in fiscal 2025.

The decrease in income from ancillary businesses in fiscal 2025, as compared to fiscal 2024, was principally due to a $4.4 million gain from a bulk sale of security monitoring accounts by our smart home technology business in fiscal 2024 and higher operating losses incurred in our Apartment Living operations, offset, in part, by higher earnings from our mortgage and title operations due to increased closing volume and a higher capture rate by our mortgage operations.

In fiscal 2025 and fiscal 2024, we also recognized $7.3 million and $8.9 million, respectively, of write-offs related to previously incurred costs that we believed not to be recoverable in our Apartment Living operations.

In fiscal 2025 and 2024, income from ancillary businesses included management fees earned on our apartment rental development, high-rise urban luxury condominium, and other unconsolidated entities and operations totaling $20.4 million and $35.7 million, respectively.

In fiscal 2023, the gain on litigation settlements - net primarily related to the settlement of an insurance claim.

The increase in “other” in fiscal 2024 was principally due to a $5.0 million gain related to an investment we held in a privately held company that sold substantially all of its assets to a third party during the year.

The decrease in “other” was principally due to a $5.0 million gain in fiscal 2024 related to an investment we held in a privately held company that sold substantially all of its assets to a third party.

Income Before Income Taxes

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Based upon the federal statutory rate of 21.0% for fiscal 2025, our federal tax provision would have been $376.2 million.

The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes of $103.9 million, $2.7 million of other permanent differences, and a $2.6 million increase in unrecognized tax benefits, offset, in part, by a benefit of $17.5 million from excess tax benefits related to stock-based compensation, $2.1 million of reversal of accruals for uncertain tax positions and $13.0 million of miscellaneous and other deferred tax adjustments.

The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes of $85.6 million and a $2.6 million increase in unrecognized tax benefits, offset, in part, by a benefit of $15.2 million from excess tax benefits related to stock-based compensation, $2.7 million of miscellaneous and other deferred tax adjustments, and $1.7 million of reversals of accruals for uncertain tax positions.

We recognized a $514.4 million income tax provision in fiscal 2024.

Based upon the federal statutory rate of 21.0% for fiscal 2024, our federal tax provision would have been $438.0 million.

The difference between the tax provision recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes of $90.7 million and a $2.2 million increase in unrecognized tax benefits, offset, in part, by a benefit of $7.3 million from excess tax benefits related to stock-based compensation, $2.8 million of other permanent differences, and a $2.3 million benefit of federal energy efficient home credits.

CAPITAL RESOURCES AND LIQUIDITY

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Our cash flows from operations generally provide us with a significant source of liquidity.

Our cash flows provided by operating activities, supplemented with our short-term borrowings and long-term debt, have been sufficient to fund our

operations while allowing us to invest in activities that support the long-term growth of our Company.

Our primary uses of cash include inventory additions in the form of land acquisitions and deposits to obtain control of land, land development, working capital to fund day-to-day operations, and investments in existing and future unconsolidated joint ventures.

Our cash flows provided by operating activities, supplemented with our short-term borrowings and long-term debt, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our Company.

Our primary uses of cash

include inventory additions in the form of land acquisitions and deposits to obtain control of land, land development, working capital to fund day-to-day operations, and investments in existing and future unconsolidated joint ventures.

We may also use cash to fund capital expenditures such as investments in our information technology systems.

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and substantially all of its 100%-owned home building subsidiaries are guarantors of the borrower’s obligations under the Revolving Credit Facility.

We are also a party to a $650.0 million unsecured Term Loan Facility, of which $487.5 million matures February 14, 2028, $101.6 million matures on November 1, 2025 and the remaining $60.9 million matures on November 1, 2026.

Our $650.0 million unsecured Term Loan Facility is also scheduled to mature on February 7, 2030 and is also guaranteed by Toll Brothers, Inc.

and substantially all of its 100%-owned home building subsidiaries.

Short-term Liquidity and Capital Resources

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We expect to meet our short-term liquidity requirements primarily through our cash and cash equivalents on hand and net cash flows provided by operations.

Additional sources of funds include distributions from our unconsolidated joint ventures, borrowing capacity under our Revolving Credit Facility and borrowings from banks and other lenders.

Additional sources of funds include distributions from our unconsolidated joint ventures, proceeds from the sale of a portion of our Apartment Living portfolio to Kennedy Wilson, borrowing capacity under our Revolving Credit Facility and borrowings from banks and other lenders.

We believe we will have sufficient liquidity available to fund our business needs, commitments and contractual obligations in a timely manner for the next twelve months.

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Long-term Liquidity and Capital Resources

Beyond fiscal 2025, our principal demands for funds will be for the payments of the principal amount of our long-term debt as it becomes due or matures, land purchases and inventory additions needed to grow our business, long-term capital investments and investments in unconsolidated joint ventures, common stock repurchases, and dividend payments.

Beyond fiscal 2026, our principal demands for funds will be for the payments of the principal amount of our long-term debt as it becomes due or matures, land purchases and inventory additions needed to maintain and grow our business, long-term capital investments and investments in unconsolidated joint ventures, common stock repurchases, and dividend payments.

Over the longer term, to the extent the sources of capital described above are insufficient to meet our needs, we may also conduct additional public offerings of our securities, refinance debt or dispose of certain assets to fund our operating activities and debt service.

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At October 31, 2025, we had investments in these entities of $1.03 billion, and were committed to invest or advance up to an additional $331.2 million to these entities if they require additional funding.

At October 31, 2024, we had agreed to terms for the acquisition of 316 home sites from four joint ventures for an estimated aggregate purchase price of $26.8

At October 31, 2025, we had agreed to terms for the acquisition of 832 home sites from five joint ventures for an estimated aggregate purchase price of

$111.3 million.

In addition, we expect to purchase approximately 8,800 additional home sites over a number of years from several joint ventures in which we have interests.

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(1) $1.35 billion of net income plus the following non-cash activities:

$81.2 million of depreciation and amortization, a net deferred tax benefit of $80.3 million, $72.8 million of impairments and write-offs, $29.6 million of stock-based compensation, $23.8 million of losses from unconsolidated entities;

and (2) $39.3 million of distributions received from unconsolidated entities and $31.9 million in current income taxes, net.

$82.1 million of depreciation and amortization, a net deferred tax expense of $86.7 million, $100.0 million of impairments and write-offs, $30.8 million of stock-based compensation, offset by $19.1 million of income from unconsolidated entities;

and (2) $61.4 million of distributions received from unconsolidated entities and an increase of $64.6 million in accounts payable and accrued expenses.

This activity was offset, in part, by an increase of $521.2 million in inventory, a decrease of $66.7 million in net customer deposits;

$78.5 million in mortgage loan originations, net of sales, and a decrease of $21.8 million in accounts payable and accrued expenses.

a $24.8 million increase in receivables, prepaid expenses and other assets, $21.1 million in current income taxes, net, and $7.6 million in mortgage loan originations, net of sales.

Cash provided by operating activities during fiscal 2024 was $1.01 billion.

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(1) $1.57 billion of net income plus the following non-cash activities:

$76.5 million of depreciation and amortization, $69.5 million of impairments and write-offs, $24.8 million of stock-based compensation, $50.1 million of income earned from unconsolidated entities;

and a net deferred tax expense of $36.2 million and (2) $88.4 million of distributions received from unconsolidated entities and $78.9 million in mortgage loan sales, net of originations.

This activity was offset, in part, by a decrease of $162.6 million in current income taxes, net;

an increase of $135.9 million in receivables, prepaid assets, and other assets;

a decrease of $88.3 million in net customer deposits;

a decrease of $23.7 million in accounts payable and accrued expenses;

and an increase of $22.2 million in inventory.

and (2) $39.3 million of distributions received from unconsolidated entities and $31.9 million in current income taxes, net.

This activity was offset, in part, by an increase of $575.7 million in inventory, a decrease of $77.2 million in net customer deposits;

$78.5 million in mortgage loan originations, net of sales, and a decrease of $21.8 million in accounts payable and accrued expenses.

Investing Activities

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Cash used in investing activities during fiscal 2024 was $167.6 million, primarily related to $193.2 million used to fund our investments in unconsolidated entities and $73.6 million for the purchase of property and equipment.

This activity was offset, in part, by $112.7 million of cash received as returns from our investments in unconsolidated entities and $26.0 million of cash proceeds from the sale of assets, including ownership interests in unconsolidated entities.

This activity was offset, in part, by $101.4 million of cash received as returns from our investments in unconsolidated entities.

Financing Activities

We used $833.9 million of cash from financing activities in fiscal 2025, primarily for the repurchase of $651.0 million of our common stock;

$350.0 million for the redemption of senior notes;

payments of $162.2 million of loans payable, net of new borrowings;

and the payment of dividends on our common stock of $93.4 million.

This activity was offset by $4.1 million of proceeds from stock-based benefit plans.

We used $1.17 billion of cash from financing activities in fiscal 2023, primarily for the repurchase of $561.6 million of our common stock;

the redemption of $400.0 million of senior notes;

the payment of dividends on our common stock of $97.1 million;

$39.4 million of payments related to repurchases from land bank programs, net of proceeds;

$19.9 million of payments related to stock-based benefit plans - net

and $13.0 million of debt issuance costs.

This activity was offset, in part, by $498.2 million of proceeds from the issuance of senior notes.

We used $816.5 million of cash from financing activities in fiscal 2024, primarily for the repurchase of $627.1 million of our common stock;

payments of $100.1 million of loans payable, net of new borrowings;

the payment of dividends on our common stock of $91.1 million and $5.4 million of payments for debt issuance costs.

and the payment of dividends on our common stock of $93.4 million.

This activity was offset by $4.1 million of proceeds from stock-based benefit plans.

11 unchanged sentences

At October 31, 2025, our 100%-owned subsidiary, Toll Brothers Finance Corp.

(the “Subsidiary Issuer”), had issued and outstanding $1.60 billion aggregate principal amount of senior notes maturing on various dates between November 15, 2025 and November 1, 2029 (the “Senior Notes”).

(the “Subsidiary Issuer”), had issued and outstanding $1.75 billion aggregate principal amount of senior notes maturing on various dates between March 15, 2027 and June 15, 2035 (the “Senior Notes”).

For further information regarding the Senior Notes, see Note 5 to our Consolidated Financial Statements under the caption “Senior Notes.”

36 unchanged sentences

• The North region:

Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and Pennsylvania;

Connecticut, Delaware, Massachusetts, Michigan, New Jersey, New York and Pennsylvania;

• The Mid-Atlantic region:

6 unchanged sentences

California, Oregon and Washington.

In fiscal 2024, we discontinued the sale of homes in Illinois.

Our operations in Illinois were immaterial to the North geographic segment.

Our geographic reporting segments are consistent with how our chief operating decision makers are assessing operating performance and allocating capital.

The following tables summarize information related to revenues, net contracts signed, and

income (loss) before income taxes by segment for fiscal years 2024 and 2023.

The following tables summarize information related to revenues, net contracts signed, and income (loss) before income taxes by segment for fiscal years 2025 and 2024.

Information related to backlog and assets by segment at October 31, 2025 and 2024 has also been provided.

10 unchanged sentences

Total home building 10,842.2 10,563.2 3 % 11,292 10,813 4 % 960.2 976.9 (2) %

Other 0.1 1.7

Total home sales revenue 10,842.2 10,563.3 3 % 11,292 10,813 4 % 960.2 976.9 (2) %

71 unchanged sentences

Number of selling communities at October 31, 55 43 28 %

The decrease in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to a decrease in the number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022, offset, in part by a higher backlog conversion in fiscal 2024 and an increase in the number of spec homes delivered.

The increase in the average delivered price in fiscal 2024 was primarily due to a shift in the number of homes delivered to more expensive areas and/or products, as well as sales price increases.

The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase in the number of selling communities in fiscal 2024.

The increase in the average value of each contract signed in the fiscal 2024 period was primarily due to a shift in the number of contracts signed to more expensive areas and/or products and a decrease in average sales incentives in fiscal 2024.

The increase in income before income taxes in fiscal 2024 was principally attributable to lower home sales cost of revenues, as a percentage of home sales revenues, and decreased SG&A spend, partially offset by lower income from unconsolidated entities.

The decrease in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2024 was primarily due to a shift in product mix/areas to higher-margin areas and lower interest expense as a percentage of home sales revenue.

The decrease in income from unconsolidated entities was principally due to one joint venture delivering its final home in fiscal 2023.

In addition, we recognized $15.6 million of land impairment charges in fiscal 2023 in connection with planned land sales.

No similar charges were recognized in fiscal 2024.

The increase in the number of homes delivered in fiscal 2025, as compared to fiscal 2024, was mainly due to an increase in the number of spec homes delivered, offset, in part, by a decrease in the number of homes in backlog at October 31, 2024, as compared to the number of homes in backlog at October 31, 2023.

The increase in the average delivered price in fiscal 2025 was primarily due to a shift in the number of homes delivered to more expensive areas and/or products, offset, in part by an increase in incentives as a result of soft market conditions.

The increase in the number of net contracts signed in fiscal 2025, as compared to fiscal 2024, was due to a continuation of favorable demand conditions, as well as an increase in the number of selling communities in the fourth quarter of fiscal 2025.

The increase in the average value of each contract signed in the fiscal 2025 period was primarily due to favorable demand conditions, as well as a shift in the number of contracts signed to more expensive areas and/or products, partially offset by a modest increase in sales incentives.

The increase in income before income taxes in fiscal 2025 was principally attributable to higher earnings from increased revenue and lower home sales cost of revenues, as a percentage of home sales revenues.

The decrease in home sales costs of revenues, as a percentage of home sale revenues, was primarily due to a shift in the mix of homes delivered in higher-margin areas/products and lower interest expense as a percentage of home sales revenue.

Fiscal 2025 also benefitted from higher income from unconsolidated entities, primarily from one Home Building Joint Venture.

These increases were offset by higher SG&A costs in fiscal 2025.

Year ended October 31,

13 unchanged sentences

Number of selling communities at October 31,

The increase in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to an increase in the number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022, higher backlog conversion, and an increase in the number of spec homes delivered in fiscal 2024.

The decrease in the average price of homes delivered in fiscal 2024 was primarily due to a shift in the number of homes delivered to less expensive areas and/or products, as well as an increase in the number of spec homes delivered.

The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase in the number of selling communities, partially offset by a modestly lower community sales pace.

The decrease in the average value of each contract signed in fiscal 2024 was mainly due to shifts in the number of contracts signed to less expensive areas and/or products and an increase in average sales incentives.

The increase in income before income taxes in fiscal 2024, as compared to fiscal 2023, was mainly due the sale of a land parcel to a commercial developer that resulted in a pre-tax gain of $175.2 million and higher earnings from increased revenues, offset, in part, with higher home sales costs of revenues, as a percentage of home sale revenues, and increased SG&A spend.

The increase in home sales costs of revenues, as a percentage of home sale revenues, in fiscal 2024 was primarily due to a shift in product mix/areas to lower-margin areas.

The number of homes delivered in fiscal 2025 increased as compared to fiscal 2024.

This was primarily due to an increase in the number of spec homes delivered in the region, as the number of homes in backlog at October 31, 2024 was lower than the number of homes in backlog at October 31, 2023.

The decrease in the average price of homes delivered in fiscal 2025 was primarily due to a shift in the number of homes delivered to less expensive areas and/or products, as well as the increase in spec home deliveries with higher sales incentives in fiscal 2025.

The increase in the number of net contracts signed in fiscal 2025, as compared to fiscal 2024, was principally due to an increase in the number of selling communities, offset, in part, by moderately softer demand.

The average value of each contract signed in fiscal 2025 decreased primarily due to shifts in the number of contracts signed to less expensive areas and/or products and increased sales incentives.

The decrease in income before income taxes in fiscal 2025, as compared to fiscal 2024, was mainly due to the fiscal 2024 sale of a land parcel to a commercial developer that resulted in a pre-tax gain of $175.2 million, which did not recur in fiscal 2025.

In addition, fiscal 2025 was impacted by higher home sales costs of revenues, as a percentage of home sale revenues, higher land impairment charges, and increased SG&A spend.

The increase in home sales costs of revenues, as a percentage of home sale revenues, was primarily due to a shift in the number of homes delivered to less expensive areas and/or products.

Inventory impairment charges were $16.8 million and $15.2 million in fiscal 2025 and 2024, respectively.

In addition, in fiscal 2024 and 2023 we recognized $0.6 million and $10.3 million, respectively, in land impairment charges included in land sales and other cost of revenues in connection with planned land sales.

In addition, in fiscal 2025 and 2024 we recognized $12.1 million and $0.6 million, respectively, in land impairment charges included in land sales and other cost of revenues in connection with planned land sales on future communities which we no longer intend to develop.

Year ended October 31,

14 unchanged sentences

Number of selling communities at October 31,

The increase in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to a higher backlog conversion and an increase in the number of spec homes delivered in fiscal 2024, partially offset by a decrease in the number of homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022.

The slight decrease in the average price of homes delivered in fiscal 2024 was primarily due to a shift in the number of homes delivered to less expensive areas and/or products.

The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase in the number of selling communities.

The increase in the average value of each contract signed in fiscal 2024 was mainly due to a shift in the number of contracts signed to more expensive areas, partially offset by an increase in average sales incentives.

The increase in income before income taxes in fiscal 2024, as compared to fiscal 2023, was principally due to higher earnings from increased home sales revenues and lower home sales costs of revenues, as a percentage of home sales revenues, offset, in part, by higher SG&A costs resulting from increased sales volume.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, was mainly due to a shift in product mix/areas to higher-margin areas and lower interest expense as a percentage of home sales revenue, offset by higher inventory impairment changes in fiscal 2024.

The number of homes delivered in fiscal 2025, as compared to fiscal 2024, was relatively flat.

The decrease in the average price of homes delivered in fiscal 2025 was primarily due to an increase in incentives as a result of soft market conditions coupled with a shift in the number of homes delivered to less expensive areas and/or products.

The decrease in the number of net contracts signed in fiscal 2025, as compared to fiscal 2024, was principally due to soft demand, offset, in part by an increase in the number of selling communities.

The decrease in the average value of each contract signed in fiscal 2025 was mainly due to a shift in the number of contracts signed to less expensive areas or product types and increased sales incentives.

The decrease in income before income taxes in fiscal 2025, as compared to fiscal 2024, was principally due to higher home sales costs of revenues, as a percentage of home sales revenues, and lower earnings from decreased home sales revenues.

The increase in home sales cost of revenues, as a percentage of home sales revenues, was mainly due to a shift in product mix/areas to lower-margin areas and higher inventory impairment charges.

Inventory impairment charges were $16.9 million and $3.4 million in fiscal 2025 and 2024, respectively.

In addition, we recognized $2.6 million of land impairment charges in fiscal 2025 in connection with planned land sales.

No similar charges were recognized in fiscal 2024.

Year ended October 31,

15 unchanged sentences

115 117 (2) %

The increase in the number of homes delivered in fiscal 2024, as compared to fiscal 2023, was mainly due to higher backlog conversion and an increase in the number of spec homes delivered in fiscal 2024, partially offset by a decrease in the number of

homes in backlog at October 31, 2023, as compared to the number of homes in backlog at October 31, 2022.

The decrease in the average price of homes delivered in fiscal 2024 was primarily due to a shift in the number of homes delivered to less expensive areas or product types.

The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to improved demand in fiscal 2024, offset, in part, by a decrease in the number of selling communities.

The increase in the average value of each contract signed in fiscal 2024 was mainly due to shifts in the number of contracts signed to more expensive areas and/or products, partially offset by an increase in average sales incentives.

The decrease in income before income taxes in fiscal 2024, as compared to fiscal 2023, was mainly due lower earnings from decreased revenues, higher home sales cost of revenues, as a percentage of home sales revenues, and increased SG&A spend, partially offset by higher earnings from land sales and other revenues.

The increase in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in product mix/areas to lower-margin areas and lower interest expense as a percentage of home sales revenues, and higher inventory impairment charges.

The increase in the number of homes delivered in fiscal 2025, as compared to fiscal 2024, was mainly due to higher backlog conversion and an increase in the number of spec homes delivered.

The average price of homes delivered in fiscal 2025

increased compared with fiscal 2024 primarily due to a shift in the number of homes delivered in more expensive areas, offset, in part by an increase in incentives as a result of soft market conditions.

The decrease in the number of net contracts signed in fiscal 2025, as compared to fiscal 2024, was principally due to soft demand and a decrease in the number of selling communities.

The average value of each contract signed in fiscal 2025 was relatively flat as compared to fiscal 2024.

The increase in income before income taxes in fiscal 2025, as compared to fiscal 2024, was mainly due to higher earnings from increased revenues, lower home sales cost of revenues, as a percentage of home sales revenues, partially offset by higher SG&A costs.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to lower inventory impairment charges.

Inventory impairment charges were $15.6 million and $26.0 million in fiscal 2025 and 2024, respectively.

15 unchanged sentences

Number of selling communities at October 31,

The decrease in the average price of homes delivered in fiscal 2024 was primarily due to higher sales incentives and a shift in the number of homes delivered to less expensive areas and/or product types.

The increase in the number of net contracts signed in fiscal 2024, as compared to fiscal 2023, was principally due to an increase in demand in fiscal 2024, partially offset by an decrease in the number of selling communities.

The decrease in the average value of each contract signed in fiscal 2024 was mainly due to a shift in the number of contracts signed in less expensive areas or product types, offset, in part, by a decrease in average sale incentives.

The decrease in income before income taxes in fiscal 2024, as compared to fiscal 2023, was primarily due to lower earnings from decreased revenues and higher home sales cost of revenues, as a percentage of home sales revenues.

The increase in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in product mix/areas to lower-margin areas and an increase in inventory impairment charges, partially offset by lower interest expense as a percentage of home sales revenues.

The number of homes delivered in fiscal 2025 was relatively flat as compared to fiscal 2024.

The decrease in the average price of homes delivered in fiscal 2025 was primarily due to a shift in the number of homes delivered to less expensive areas and/or product types.

The decrease in the number of net contracts signed in fiscal 2025, as compared to fiscal 2024, was primarily due to soft demand, offset, in part, by an increase in the number of selling communities.

The increase in the average value of each contract signed in fiscal 2025 was mainly due to a shift in the number of contracts signed to more expensive areas or product types.

The decrease in income before income taxes in fiscal 2025, as compared to fiscal 2024, was primarily due to higher home sales cost of revenues, as a percentage of home sales revenues, and lower earnings from decreased revenues.

The increase in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in product mix/areas to lower-margin areas and an increase in impairment charges.

Inventory impairment charges were $15.2 million and $13.7 million in fiscal 2025 and 2024, respectively.

In addition, we recognized a $2.2 million impairment charge in land sales and other cost of revenues in fiscal 2023 in connection with a planned land sale.

In addition, we recognized $8.8 million of land impairment charges in fiscal 2025 in connection with planned land sales.

No similar charges were recognized in fiscal 2024.

1 unchanged sentence

In fiscal 2025 and 2024, loss before income taxes was $225.3 million and $204.6 million respectively.

The increase in the loss before income taxes in fiscal 2024 was principally due to $27.7 million of gains from litigation settlements - net, recognized in fiscal 2023, which did not recur in fiscal 2024.

In addition, fiscal 2023 was positively impacted by $50.9 million of gains

recognized from property sales by two of our Rental Property Joint Ventures and a $16.0 million gain from the sale of our ownership interest in one of our Rental Property Joint Ventures.

The fiscal 2024 period was positively impacted by a $5.0 million gain related to our investment in a privately held company that sold substantially all of its assets to a third party;

a $4.4 million gain from a bulk sale of security monitoring accounts by our smart home technology business;

higher earnings from our mortgage and title company operations primarily due to increased volume;

offset by higher losses by various Rental Property Joint Ventures.

The increase in the loss before income taxes in fiscal 2025 was principally due to higher SG&A costs and a decrease in other income - net, partially offset by lower losses from unconsolidated entities and lower gross margin from land sales.

The decrease in other income - net was primarily due to lower interest income as well as gains recognized in fiscal 2024 that did not recur in fiscal 2025.

Specifically, in the fiscal 2024 period, we recognized a $5.0 million gain related to an investment in a privately held company that sold substantially all of its assets to a third party and a $4.4 million gain from a bulk sale of security monitoring accounts by our smart home technology business.

The decrease in gross margin related to land sales in fiscal 2025 was primarily due to a lower volume of transactions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis