UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2024

or

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission file number 001-09186

Toll Brothers, Inc.

(Exact name of registrant as specified in its charter)

Delaware			23-2416878
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
1140 Virginia Drive	Fort Washington	Pennsylvania	19034
(Address of principal executive offices)			(Zip Code)

(215) 938-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	TOL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

At August 29, 2024, there were approximately 100,972,000 shares of Common Stock, par value $0.01 per share, outstanding.

TOLL BROTHERS, INC.

TABLE OF CONTENTS

	Page No.
Statement on Forward-Looking Information	1
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)	2
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)	3
Condensed Consolidated Statements of Changes in Equity (Unaudited)	4
Condensed Consolidated Statements of Cash Flows (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	45
PART II. Other Information
Item 1. Legal Proceedings	46
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6. Exhibits	47
SIGNATURES	48

STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (“SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). One can identify these statements by the fact that they do not relate to matters of a strictly historical or factual nature and generally discuss or relate to future events. These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” “should,” “likely”, “will” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information related to: market conditions; mortgage rates; inflation rates; demand for our homes; our build-to-order and quick move-in home strategy; sales paces and prices; effects of home buyer cancellations; our strategic priorities; growth and expansion; our land acquisition, land development and capital allocation priorities; anticipated operating results; home deliveries; financial resources and condition; changes in revenues, profitability, margins and returns; changes in accounting treatment; cost of revenues, including expected labor and material costs; availability of labor and materials; selling, general and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability to acquire land and pursue real estate opportunities; our ability to gain approvals and open new communities; our ability to market, construct and sell homes and properties; our ability to deliver homes from backlog; our ability to secure materials and subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; the outcome of legal proceedings, investigations, and claims; and the impact of public health or other emergencies.

From time to time, forward-looking statements also are included in other reports on Forms 10-K, 10-Q, and 8-K; in press releases; in presentations; on our website; and in other materials released to the public. These statements may include guidance regarding our future performance, such as our anticipated annual revenue, home deliveries, and margins, that represents management’s estimates as of the date of publication. Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change.

Any or all of the forward-looking statements included in this report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. Therefore, we caution you not to place undue reliance on our forward-looking statements. The major risks and uncertainties – and assumptions that are made – that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:

•the effect of general economic conditions, including employment rates, housing starts, interest and mortgage rates, home affordability, inflation, consumer sentiment, availability of financing for home mortgages and strength of the U.S. dollar;

•market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;

•the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such land;

•access to adequate capital on acceptable terms;

•geographic concentration of our operations;

•levels of competition;

•the price and availability of lumber, other raw materials, and home components;

•the impact of labor shortages, including on our subcontractors, supply chain and municipalities;

•the effect of U.S. trade policies, including the imposition of tariffs and duties on home building products and retaliatory measures taken by other countries;

•the effects of weather and the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, unavailability of insurance, and shortages and price increases in labor or materials associated with such natural disasters;

•risks arising from acts of war, terrorism or outbreaks of contagious diseases, such as COVID-19;

•federal and state tax policies;

•transportation costs;

•the effect of land use, environmental and other governmental laws and regulations;

•legal proceedings or disputes and the adequacy of reserves;

•risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, indebtedness, financial condition, losses and future prospects;

•the effect of potential loss of key management personnel;

•changes in accounting principles; and

•risks related to unauthorized access to our computer systems, theft of our and our homebuyers’ confidential information or other forms of cyber-attack.

Forward-looking statements. including any guidance, speak only as of the date they are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For a further discussion of factors that we believe could cause our actual results to differ materially from expected and historical results, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the SEC and in this report.

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.

1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

	July 31, 2024		October 31, 2023
	(unaudited)
ASSETS
Cash and cash equivalents	$	893,422	$	1,300,068
Inventory	10,198,060		9,057,578
Property, construction, and office equipment – net	459,234		323,990
Receivables, prepaid expenses, and other assets (1)	577,993		691,256
Mortgage loans held for sale – at fair value	137,627		110,555
Customer deposits held in escrow	109,783		84,530
Investments in unconsolidated entities (1)	983,592		959,041
	$	13,359,711	$	12,527,018
LIABILITIES AND EQUITY
Liabilities
Loans payable	$	1,099,787	$	1,164,224
Senior notes	1,596,873		1,596,185
Mortgage company loan facility	125,417		100,058
Customer deposits	523,982		540,718
Accounts payable	675,471		597,582
Accrued expenses	1,777,553		1,548,781
Income taxes payable	129,582		166,268
Total liabilities	5,928,665		5,713,816
Equity
Stockholders’ equity
Preferred stock, none issued	—		—
Common stock, 112,937 shares issued at July 31, 2024 and October 31, 2023	1,129		1,129
Additional paid-in capital	692,700		698,548
Retained earnings	7,701,274		6,675,719
Treasury stock, at cost — 11,998 and 9,146 shares at July 31, 2024 and October 31, 2023, respectively	(1,016,277)		(619,150)
Accumulated other comprehensive income ("AOCI")	36,038		40,910
Total stockholders’ equity	7,414,864		6,797,156
Noncontrolling interest	16,182		16,046
Total equity	7,431,046		6,813,202
	$	13,359,711	$	12,527,018

(1)    As of July 31, 2024 and October 31, 2023, Receivables, prepaid expenses, and other assets and Investments in unconsolidated entities include $104.6 million and $89.6 million, respectively, of assets related to consolidated variable interest entities (“VIEs”). See Note 3, “Investments in Unconsolidated Entities” for additional information regarding VIEs.

See accompanying notes.

2

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share data)

(Unaudited)

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Revenues:
Home sales	$	2,724,472	$	2,674,602	$	7,303,328	$	6,914,122
Land sales and other	3,472		13,040		209,950		60,668
	2,727,944		2,687,642		7,513,278		6,974,790
Cost of revenues:
Home sales	1,977,162		1,931,949		5,339,671		5,065,750
Land sales and other	8,778		11,578		31,918		74,863
	1,985,940		1,943,527		5,371,589		5,140,613
Selling, general and administrative	244,813		229,004		712,557		668,038
Income from operations	497,191		515,111		1,429,132		1,166,139
Other:
(Loss) income from unconsolidated entities	(10,514)		30,548		(13,799)		20,813
Other income – net	16,950		7,358		49,234		50,453
Income before income taxes	503,627		553,017		1,464,567		1,237,405
Income tax provision	129,016		138,228		368,781		310,870
Net income	$	374,611	$	414,789	$	1,095,786	$	926,535
Other comprehensive (loss) income – net of tax	(3,789)		5,601		(4,872)		1,858
Total comprehensive income	$	370,822	$	420,390	$	1,090,914	$	928,393
Per share:
Basic earnings	$	3.64	$	3.77	$	10.51	$	8.36
Diluted earnings	$	3.60	$	3.73	$	10.40	$	8.28
Weighted-average number of shares:
Basic	102,980		110,003		104,299		110,871
Diluted	104,014		111,123		105,361		111,881

See accompanying notes.

3

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands)

(Unaudited)

For the three months ended July 31, 2024 and 2023:

	Common Stock		Addi- tional Paid-in Capital		Retained Earnings		Treasury Stock		AOCI		Non-controlling Interest		Total Equity
Balance, April 30, 2024	$	1,129	$	689,259	$	7,350,235	$	(772,476)	$	39,827	$	16,220	$	7,324,194
Net income					374,611								374,611
Purchase of treasury stock							(245,852)						(245,852)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances			(371)				2,051						1,680
Stock-based compensation			3,812										3,812
Dividends declared					(23,572)								(23,572)
Other comprehensive loss									(3,789)				(3,789)
Loss attributable to non-controlling interest											(227)		(227)
Capital contributions – net											189		189
Balance, July 31, 2024	$	1,129	$	692,700	$	7,701,274	$	(1,016,277)	$	36,038	$	16,182	$	7,431,046
Balance, April 30, 2023	$	1,279	$	697,583	$	6,632,502	$	(945,019)	$	33,875	$	15,506	$	6,435,726
Net income					414,789								414,789
Purchase of treasury stock							(147,283)						(147,283)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances			(6,091)				24,897						18,806
Stock-based compensation			4,265										4,265
Dividends declared					(23,005)								(23,005)
Other comprehensive income									5,601				5,601
Loss attributable to non-controlling interest											(200)		(200)
Capital contributions – net											1,784		1,784
Balance, July 31, 2023	$	1,279	$	695,757	$	7,024,286	$	(1,067,405)	$	39,476	$	17,090	$	6,710,483

See accompanying notes.

4

For the nine months ended July 31, 2024 and 2023:

	Common Stock		Addi- tional Paid-in Capital		Retained Earnings		Treasury Stock		AOCI		Non-controlling Interest		Total Equity
Balance, October 31, 2023	$	1,129	$	698,548	$	6,675,719	$	(619,150)	$	40,910	$	16,046	$	6,813,202
Net income					1,095,786								1,095,786
Purchase of treasury stock							(427,064)						(427,064)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances			(31,799)				29,937						(1,862)
Stock-based compensation			25,951										25,951
Dividends declared					(70,231)								(70,231)
Other comprehensive loss									(4,872)				(4,872)
Loss attributable to non-controlling interest											(667)		(667)
Capital contributions - net											803		803
Balance, July 31, 2024	$	1,129	$	692,700	$	7,701,274	$	(1,016,277)	$	36,038	$	16,182	$	7,431,046
Balance, October 31, 2022	$	1,279	$	716,786	$	6,166,732	$	(916,327)	$	37,618	$	15,752	$	6,021,840
Net income					926,535								926,535
Purchase of treasury stock							(240,486)						(240,486)
Exercise of stock options, stock based compensation issuances, and employee stock purchase plan issuances			(42,319)				89,408						47,089
Stock-based compensation			21,290										21,290
Dividends declared					(68,981)								(68,981)
Other comprehensive income									1,858				1,858
Loss attributable to non-controlling interest											(446)		(446)
Capital contributions - net											1,784		1,784
Balance, July 31, 2023	$	1,279	$	695,757	$	7,024,286	$	(1,067,405)	$	39,476	$	17,090	$	6,710,483

See accompanying notes.

5

TOLL BROTHERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Nine months ended July 31,
	2024		2023
Cash flow provided by operating activities:
Net income	$	1,095,786	$	926,535
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	55,428		54,249
Stock-based compensation	25,951		21,290
Loss (income) from unconsolidated entities	13,799		(20,813)
Distributions of earnings from unconsolidated entities	31,452		69,107
Deferred tax provision	12,035		5,764
Impairment charges and write-offs	46,465		40,137
Gain on sale of assets	(5,042)		—
Other	(1,572)		3,037
Changes in operating assets and liabilities:
Inventory	(952,043)		(165,152)
Origination of mortgage loans	(1,450,854)		(1,137,893)
Sale of mortgage loans	1,427,645		1,248,621
Receivables, prepaid expenses, and other assets	(12,759)		(34,667)
Current income taxes – net	(47,038)		(133,983)
Customer deposits – net	(41,989)		(26,384)
Accounts payable and accrued expenses	130,392		(174,815)
Net cash provided by operating activities	327,656		675,033
Cash flow used in investing activities:
Purchase of property, construction, and office equipment – net	(55,453)		(54,100)
Investments in unconsolidated entities	(134,480)		(162,576)
Return of investments in unconsolidated entities	74,317		74,006
Proceeds from the sale of assets	556		9,041
Other – net	(974)		—
Net cash used in investing activities	(116,034)		(133,629)
Cash flow used in financing activities:
Proceeds from loans payable	2,768,938		2,413,016
Debt issuance costs	(193)		(5,324)
Principal payments of loans payable	(2,865,849)		(2,603,645)
Redemption of senior notes	—		(400,000)
(Payments) proceeds related to stock-based benefit plans – net	(1,859)		47,091
Purchase of treasury stock	(423,559)		(239,320)
Dividends paid	(70,334)		(69,070)
Receipts related to noncontrolling interest – net	167		—
Net cash used in financing activities	(592,689)		(857,252)
Net decrease in cash, cash equivalents, and restricted cash	(381,067)		(315,848)
Cash, cash equivalents, and restricted cash, beginning of period	1,344,341		1,398,550
Cash, cash equivalents, and restricted cash, end of period	$	963,274	$	1,082,702

See accompanying notes.

6

TOLL BROTHERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation

Our condensed consolidated financial statements include the accounts of Toll Brothers, Inc. (the “Company,” “we,” “us,” or “our”), a Delaware corporation, and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or less owned partnerships and affiliates are accounted for using the equity method unless it is determined that we have effective control of the entity, in which case we would consolidate the entity.

Our unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The October 31, 2023 balance sheet amounts and disclosures have been derived from our October 31, 2023 audited financial statements. Since the condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements, they should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023 (“2023 Form 10-K”). In the opinion of management, the unaudited condensed consolidated financial statements include all recurring adjustments necessary to present fairly our financial position as of July 31, 2024; the results of our operations and changes in equity for the three-month and nine-month periods ended July 31, 2024 and 2023; and our cash flows for the nine-month periods ended July 31, 2024 and 2023. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates and assumptions may prove to be incorrect for a variety of reasons, whether as a result of the risks and uncertainties our business is subject to or for other reasons. In times of economic disruption when uncertainty regarding future economic conditions is heightened, our estimates and assumptions are subject to greater variability. Actual results could differ from the estimates and assumptions we make and such differences may be material.

Revenue Recognition

Home sales revenues: Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states where we build, we are not able to complete certain outdoor features prior to the closing of the home. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the home sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of July 31, 2024, the home sales revenues and related costs we deferred related to these obligations were immaterial. Our contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled $524.0 million and $540.7 million at July 31, 2024 and October 31, 2023, respectively. Of the outstanding customer deposits held as of October 31, 2023, we recognized $120.0 million and $411.2 million in home sales revenues during the three months and nine months ended July 31, 2024, respectively. Of the outstanding customer deposits held as of October 31, 2022, we recognized $150.4 million and $425.5 million in home sales revenues during the three months and nine months ended July 31, 2023, respectively.

Land sales and other revenues: Our revenues from land sales and other generally consist of: (1) land sales to joint ventures in which we retain an interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk lot sales to third parties of land we have decided no longer meets our development criteria; (4) sales of land parcels to third parties (typically because there is a superior economic use of the property); and (5) sales of commercial and retail properties generally located at our high-rise urban luxury condominium projects. In general, our performance obligation for each of these land sales is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty. For land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in such joint venture.

In February 2024, we sold a parcel of land to a commercial developer for net cash proceeds of $180.7 million, which resulted in a pre-tax gain of $175.2 million during the nine months ended July 31, 2024.

7

Forfeited Customer Deposits: Forfeited customer deposits are recognized in “Home sales revenues” in our Condensed Consolidated Statements of Operations and Comprehensive Income in the period in which we determine that the customer will not complete the purchase of the home and we have the right to retain the deposit.

Sales Incentives: In order to promote sales of our homes, we may offer our home buyers sales incentives. These incentives vary by type of incentive and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a reduction in home sales revenues. Incentives are recognized at the time the home is delivered to the home buyer and we receive the sales proceeds.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. ASU 2023-07 will be effective for our fiscal year ending October 31, 2025 and for interim periods starting in our first quarter of fiscal 2026. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. We are currently reviewing the impact that the adoption of ASU 2023-07 may have on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which requires expanded disclosure of our income tax rate reconciliation and income taxes paid. ASU 2023-09 will be effective for our fiscal year ending October 31, 2026 and may be applied either retrospectively or prospectively. We are currently evaluating ASU 2023-09 and do not expect it to have a material effect on our consolidated financial statements and disclosures.

In March 2024, the SEC issued final rules on the enhancement and standardization of climate-related disclosures. The rules require disclosure of material climate-related risks; activities to mitigate or adapt to such risks; governance and management of such risks; and material greenhouse gas (GHG) emissions from operations owned or controlled (Scope 1) and/or indirect emissions from purchased energy consumed in operations (Scope 2). Additionally, the rules require disclosures in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. On March 15, 2024, a federal appellate court imposed a temporary stay pending judicial review of these new rules and on April 4, 2024, the SEC voluntarily stayed implementation pending completion of the judicial review. We are currently evaluating the impact of this final rule on our disclosures.

Reclassification

Certain prior period amounts have been reclassified to conform to the fiscal 2024 presentation.

8

2. Inventory

Major components of inventory at July 31, 2024 and October 31, 2023 were (amounts in thousands):

	July 31, 2024		October 31, 2023
Land deposits and costs of future communities	$	571,400	$	549,035
Land and land development costs	2,855,478		2,631,147
Land and land development costs associated with homes under construction	3,488,892		2,916,334
Total land and land development costs	6,915,770		6,096,516
Homes under construction	2,784,577		2,515,484
Model homes (1)	497,713		445,578
	$	10,198,060	$	9,057,578

(1)    Includes the allocated land and land development costs associated with each of our model homes in operation.

The following table provides a summary of the composition of our inventory based on community status at July 31, 2024 and October 31, 2023 (amounts in thousands):

	July 31, 2024		October 31, 2023
Land controlled for future communities	$	204,529	$	173,175
Land owned for future communities	614,473		663,413
Operating communities	9,379,058		8,220,990
	$	10,198,060	$	9,057,578

Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.

Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).

The amounts we have provided for inventory impairment charges and the expensing of costs that we believe not to be recoverable, and which are included in home sales cost of revenues, are shown in the table below (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Land controlled for future communities	$	1,759	$	895	$	4,518	$	9,343
Land owned for future communities	—		369		—		694
Operating communities	3,700		2,100		30,840		12,400
	$	5,459	$	3,364	$	35,358	$	22,437

In addition, we recognized $3.8 million and $4.4 million of impairment charges on land held for sale included in land sales and other cost of revenues during the three-month and nine-month periods ended July 31, 2024, respectively. We recognized $17.7 million of similar impairment charges during the nine-month period ended July 31, 2023. No impairment charges were recognized in land sales and other cost of revenues during the three-month period ended July 31, 2023.

See Note 13, “Commitments and Contingencies,” for information regarding land purchase commitments.

At July 31, 2024, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were variable interest entities (“VIEs”) and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At July 31, 2024, we determined that 260 land purchase contracts, with an aggregate purchase price of $4.79 billion, on which we had made aggregate deposits totaling $468.0 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2023, we determined that 251 land

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purchase contracts, with an aggregate purchase price of $3.79 billion, on which we had made aggregate deposits totaling $421.4 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts. However, at July 31, 2024 and October 31, 2023, certain contracts were accrued as we concluded we were economically compelled to purchase the land. See Note 6, “Accrued Expenses,” for information regarding liabilities related to consolidated inventory not owned.

Interest incurred, capitalized, and expensed, for the periods indicated, were as follows (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Interest capitalized, beginning of period	$	193,478	$	211,760	$	190,550	$	209,468
Interest incurred	33,579		32,624		100,018		107,341
Interest expensed to home sales cost of revenues	(32,803)		(37,004)		(91,121)		(99,642)
Interest expensed to land sales and other cost of revenues	(802)		(1,258)		(1,821)		(6,086)
Interest capitalized on investments in unconsolidated entities	(2,027)		(2,271)		(6,734)		(7,432)
Previously capitalized interest transferred to investments in unconsolidated entities	—		—		—		(244)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory	296		296		829		742
Interest capitalized, end of period	$	191,721	$	204,147	$	191,721	$	204,147

3. Investments in Unconsolidated Entities

We have investments in various unconsolidated entities and our ownership interest in these investments ranges from 5.0% to 50%. These entities are structured as joint ventures and either: (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments and single family homes, commercial space, and a hotel (“Rental Property Joint Ventures”); or (iv) provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).

The table below provides information as of July 31, 2024, regarding active joint ventures that we were invested in, by joint venture category ($ amounts in thousands):

	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total
Number of unconsolidated entities	15		2		42		2		61
Investment in unconsolidated entities (1)	$	373,025	$	59,259	$	539,587	$	11,721	$	983,592
Number of unconsolidated entities with funding commitments by the Company	6		—		24		1		31
Company’s remaining funding commitment to unconsolidated entities (2)	$	157,809	$	—	$	85,678	$	4,132	$	247,619

(1)    Our total investment includes $147.9 million related to nine unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $366.7 million as of July 31, 2024, inclusive of our investment in these joint ventures. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 25% to 50%.

(2)    Our remaining funding commitment includes approximately $116.5 million related to our unconsolidated joint venture-related variable interests in VIEs.

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The table below provides information as of October 31, 2023, regarding active joint ventures that we were invested in, by joint venture category ($ amounts in thousands):

	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total
Number of unconsolidated entities	16		2		43		3		64
Investment in unconsolidated entities (1)	$	351,154	$	65,285	$	531,823	$	10,779	$	959,041
Number of unconsolidated entities with funding commitments by the Company	9		—		19		1		29
Company’s remaining funding commitment to unconsolidated entities (2)	$	204,438	$	—	$	184,266	$	12,066	$	400,770

(1)    Our total investment includes $121.6 million related to 11 unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $329.3 million as of October 31, 2023, inclusive of our investment in joint ventures. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 25% to 50%.

(2)    Our remaining funding commitment includes approximately $105.4 million related to our unconsolidated joint venture-related variable interests in VIEs.

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at July 31, 2024, regarding the debt financing obtained by category ($ amounts in thousands):

	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	9		1		39		49
Aggregate loan commitments	$	539,589	$	98,150	$	3,603,148	$	4,240,887
Amounts borrowed under loan commitments	$	384,172	$	77,141	$	2,655,333	$	3,116,646

The table below provides information at October 31, 2023, regarding the debt financing obtained by category ($ amounts in thousands):

	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	12		2		42		56
Aggregate loan commitments	$	610,758	$	219,650	$	3,731,847	$	4,562,255
Amounts borrowed under loan commitments	$	445,506	$	135,723	$	2,152,872	$	2,734,101

More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below.

New Joint Ventures

There were no new joint ventures entered into during the nine-months ended July 31, 2024. The table below provides information on joint ventures entered into during the nine-months ended July 31, 2023 ($ amounts in thousands):

	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period	1		$	—	3
Investment balance at July 31, 2023	$	12,808	$	—	$	7,096
Number of consolidated joint ventures entered into during the period	—		1		1
Carrying value of consolidated joint ventures’ assets at July 31, 2023	$	—	$	5,000	$	10,604
Noncontrolling interests in consolidated joint ventures at July 31, 2023	$	—	$	835	$	2,651

Results of Operations and Intra-entity Transactions

From time to time, certain of our land development and rental property joint ventures sell assets to unrelated parties or to our joint venture partners. In the nine-month period ended July 31, 2024, one of our Rental Property Joint Ventures sold its assets and we recognized $21.0 million in “Income (loss) from unconsolidated entities” on our Condensed Consolidated Statements of Operations and Comprehensive Income. No similar transactions occurred in the three-month period ended July 31, 2024. In the

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three-month and nine-month periods ended July 31, 2023, one of our joint ventures sold its assets and we recognized $35.0 million in “Income (loss) from unconsolidated entities” on our Condensed Consolidated Statements of Operations and Comprehensive Income

In the three-month periods ended July 31, 2024 and 2023, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $29.8 million and $25.7 million, respectively. In the nine-month periods ended July 31, 2024 and 2023, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $91.7 million and $94.8 million, respectively. Our share of income from the lots we acquired was insignificant in each period.

In the nine-month periods ended July 31, 2023, we sold land to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, for $8.2 million. This amount is included in “Land sales and other revenue” on our Condensed Consolidated Statements of Operations and Comprehensive Income and are generally sold at or near our land basis. No similar land sales to unconsolidated entities occurred in the three-month or nine-month periods ended July 31, 2024 or the three-month period ended July 31, 2023.

Guarantees

The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we have guaranteed portions of the debt of unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity or its partners.

In some instances, we and our joint venture partner have provided joint and several guarantees in connection with loans to unconsolidated entities. In these situations, we generally seek to implement a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed upon share of the guarantee; however, we are not always successful. In addition, if the joint venture partner does not have adequate financial resources to meet its obligations under such a reimbursement agreement, we may be liable for more than our proportionate share.

We believe that, as of July 31, 2024, in the event we become legally obligated to perform under a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture.

Information with respect to certain of the Company’s unconsolidated entities’ outstanding debt obligations, loan commitments and our guarantees thereon are as follows ($ amounts in thousands):

	July 31, 2024		October 31, 2023
Loan commitments in the aggregate	$	3,099,500	$	3,341,700
Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed (1)	$	665,500	$	688,000
Debt obligations borrowed in the aggregate	$	2,118,100	$	1,643,600
Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed	$	569,500	$	544,100
Estimated fair value of guarantees provided by us related to debt and other obligations	$	18,000	$	19,500
Terms of guarantees	1 month - 3.3 years		1 month - 4.0 years

(1)    At July 31, 2024 and October 31, 2023, our maximum estimated exposure under repayment and carry cost guarantees includes approximately $102.3 million related to our unconsolidated joint venture VIEs.

The maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any reimbursement from our partners, nor do they include any potential exposures related to project completion guarantees or the indemnities noted above, which are not estimable. We have not made payments under any of the outstanding guarantees, nor have we been called upon to do so.

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Variable Interest Entities

We have both unconsolidated and consolidated joint venture-related variable interests in VIEs. Information regarding our involvement in unconsolidated joint-venture related variable interests in VIEs has been disclosed throughout information presented above.

The table below provides information as of July 31, 2024 and October 31, 2023, regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):

	Balance Sheet Classification	July 31, 2024		October 31, 2023
Number of Joint Venture VIEs that the Company is the primary beneficiary and consolidates		5		5
Carrying value of consolidated VIEs assets	Receivables, prepaid expenses and other assets and Investments in unconsolidated entities	$	104,600	$	89,600
Our partners’ interests in consolidated VIEs	Noncontrolling interest	$	10,200	$	10,200

Our ownership interest in the above consolidated Joint Venture VIEs ranges from 75% to 98%.

As shown above, we are the primary beneficiary of certain VIEs due to our controlling financial interest in such ventures as we have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan. For other VIEs, we are not the primary beneficiary because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIE’s other partners or such activities were controlled by our partner. For VIEs where the power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be unanimously approved by all partners. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and other partners.

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Joint Venture Condensed Combined Financial Information

The Condensed Combined Balance Sheets, as of the dates indicated, and the Condensed Combined Statements of Operations, for the periods indicated, for the unconsolidated entities in which we have an investment are included below (in thousands):

Condensed Combined Balance Sheets:

	July 31, 2024		October 31, 2023
Cash and cash equivalents	$	217,515	$	161,274
Inventory	1,266,323		1,425,145
Loans receivable – net	26,355		17,024
Rental properties	2,827,765		1,907,604
Rental properties under development	1,565,392		1,804,664
Other assets	473,781		385,197
Total assets	$	6,377,131	$	5,700,908
Debt – net of deferred financing costs	$	3,120,781	$	2,711,986
Other liabilities	480,102		498,866
Partners’ equity	2,776,248		2,490,056
Total liabilities and equity	$	6,377,131	$	5,700,908
Company’s net investment in unconsolidated entities (1)	$	983,592	$	959,041

(1)    Our underlying equity in the net assets of the unconsolidated entities was less than our net investment in unconsolidated entities by $9.7 million and $40.9 million as of July 31, 2024 and October 31, 2023, respectively, and these differences are primarily a result of interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; distributions from entities in excess of the carrying amount of our net investment; unrealized gains on our retained joint venture interests; other than temporary impairments we have recognized; and gains recognized from the sale of our ownership interests.

Condensed Combined Statements of Operations:

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Revenues	$	286,981	$	186,669	$	571,512	$	429,647
Cost of revenues	199,012		124,414		365,813		266,593
Other expenses	71,271		67,195		210,670		187,336
Total expenses	270,283		191,609		576,483		453,929
Income (loss) from operations	16,698		(4,940)		(4,971)		(24,282)
Other income (2)	45,543		79,857		155,452		76,251
Income before income taxes	62,241		74,917		150,481		51,969
Income tax expense	4,468		1,195		2,119		1,030
Net income	57,773		73,722		148,362		50,939
Company’s (loss) income from unconsolidated entities (3)	$	(10,514)	$	30,548	$	(13,799)	$	20,813

(2)    The nine months ended July 31, 2024 includes $112.7 million related to the gain on the sale of assets by one of our Rental Property Joint Ventures. The three and nine months ended July 31, 2023 includes gains of $78.8 million related to the sale of assets by one of our Rental Property Joint Ventures.

(3)    Differences between our loss from unconsolidated entities and our percentage interest in the underlying net income (loss) of the entities are generally a result of distributions from entities in excess of the carrying amount of our investment; promote earned on the gains recognized by joint ventures and those promoted cash flows being distributed; other than temporary impairments we have recognized; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired; and amortization of other basis differences.

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4. Receivables, Prepaid Expenses, and Other Assets

Receivables, prepaid expenses, and other assets at July 31, 2024 and October 31, 2023, consisted of the following (amounts in thousands):

	July 31, 2024		October 31, 2023
Expected recoveries from insurance carriers and others	$	85,692	$	94,987
Improvement cost receivable	41,281		40,992
Escrow cash held by our wholly owned captive title company	68,210		44,273
Properties held for rental apartment and commercial development	116,146		225,261
Prepaid expenses	36,672		43,763
Right-of-use asset	107,005		102,787
Derivative assets	20,431		41,612
Other	102,556		97,581
	$	577,993	$	691,256

5. Loans Payable, Senior Notes, and Mortgage Company Loan Facility

Loans Payable

At July 31, 2024 and October 31, 2023, loans payable consisted of the following (amounts in thousands):

	July 31, 2024		October 31, 2023
Senior unsecured term loan	$	650,000	$	650,000
Loans payable – other	452,201		517,378
Deferred issuance costs	(2,414)		(3,154)
	$	1,099,787	$	1,164,224

Senior Unsecured Term Loan

We are party to a $650.0 million senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks 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. There are no payments required before these stated maturity dates. At July 31, 2024, the interest rate on the Term Loan Facility was 6.24% per annum. Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries are guarantors under the Term Loan Facility. The Term Loan Facility contains substantially the same financial covenants as the Revolving Credit Facility described below.

In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the Term Loan Facility. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility through October 2025. The spread at July 31, 2024 was 0.90%. These interest rate swaps were designated as cash flow hedges.

Revolving Credit Facility

At July 31, 2024, we had a $1.955 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks that is scheduled to mature on February 14, 2028. The Revolving Credit Facility provides us with a committed borrowing capacity of $1.955 billion, which we have the ability to increase up to $3.00 billion with the consent of lenders. Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries are guarantors of the borrower’s obligations under the Revolving Credit Facility.

Both our Revolving Credit Facility and Term Loan Facility require us to maintain certain financial covenants, which include not exceeding a defined maximum leverage ratio and maintaining a minimum tangible net worth. In addition, our ability to repurchase our common stock and pay cash dividends is limited by these agreements. However, during the three and nine months ended July 31, 2024, these limitations did not meaningfully restrict the amount of cash dividends paid or stock repurchased. We were in compliance with all covenants and requirements as of July 31, 2024.

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At July 31, 2024, we had no outstanding borrowings under the Revolving Credit Facility and had approximately $180.9 million of outstanding letters of credit that were issued under the Revolving Credit Facility. At July 31, 2024, the interest rate on outstanding borrowings under the Revolving Credit Facility would have been 6.54% per annum.

Loans Payable – Other

“Loans payable – other” primarily represents purchase money mortgages on properties we acquired that the seller had financed, project-level financing, and various revenue bonds that were issued by government entities on our behalf to finance community infrastructure and our manufacturing facilities. At July 31, 2024, the weighted-average interest rate on “Loans payable – other” was 5.61% per annum.

Senior Notes

At July 31, 2024, we had four issues of senior notes outstanding with an aggregate principal amount of $1.60 billion.

In our second quarter of fiscal 2023, we redeemed all $400.0 million principal amount of 4.375% Senior Notes due April 15, 2023, at par, plus accrued interest.

Mortgage Company Loan Facilities

Toll Brothers Mortgage Company (“TBMC”), our wholly owned mortgage subsidiary, had a mortgage warehousing agreement (the “Warehousing Agreement”) with a bank to finance the origination of mortgage loans by TBMC. The Warehousing Agreement was accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” The Warehousing Agreement provided for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the Warehousing Agreement provided for an accordion feature under which TBMC could request that the aggregate commitments under the Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time. Borrowings under the Warehousing Agreement bore interest at BSBY plus 1.75% per annum (with a BSBY floor of 0.50%). The Warehousing Agreement was terminated in January 2024.

On December 5, 2023, TBMC executed a new Warehousing Agreement (“New Warehousing Agreement”) with a bank that provides for loan purchases up to $75.0 million, subject to certain sublimits. In addition, the New Warehousing Agreement, provides for an accordion feature under which TBMC may request that the aggregate commitments under the New Warehousing Agreement be increased to an amount up to $150.0 million for a short period of time. The New Warehousing Agreement is accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” TMBC is also subject to an under usage fee based on outstanding balances, as defined in the New Warehousing Agreement. The New Warehousing Agreement is set to expire on December 3, 2024 and bears interest at SOFR plus 1.75% per annum (with a SOFR floor of 2.50%). At July 31, 2024, the interest rate on the New Warehousing Agreement was 7.09% per annum.

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6. Accrued Expenses

Accrued expenses at July 31, 2024 and October 31, 2023 consisted of the following (amounts in thousands):

	July 31, 2024		October 31, 2023
Land, land development, and construction	$	341,866	$	286,516
Liabilities related to consolidated inventory not owned	440,276		268,630
Compensation and employee benefits	193,924		212,684
Escrow liability associated with our wholly owned captive title company	66,199		42,451
Self-insurance	222,567		230,688
Warranty	210,980		206,171
Lease liabilities	127,423		123,866
Deferred income	52,650		52,907
Interest	30,368		30,044
Commitments to unconsolidated entities	38,069		29,212
Other	53,231		65,612
	$	1,777,553	$	1,548,781

The table below provides, for the periods indicated, a reconciliation of the changes in our warranty accrual (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Balance, beginning of period	$	206,717	$	149,395	$	206,171	$	164,409
Additions – homes closed during the period	9,748		12,395		24,714		29,666
Change in accruals for homes closed in prior years – net	6,132		3,995		18,277		6,018
Charges incurred	(11,617)		(20,334)		(38,182)		(54,642)
Balance, end of period	$	210,980	$	145,451	$	210,980	$	145,451

Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in communities located in Pennsylvania and Delaware (which are in our North region). Our recorded estimated repair costs to resolve these claims were approximately $39.6 million at July 31, 2024 and $41.1 million at October 31, 2023. We continue to perform review procedures to assess, among other things, the number of affected homes, whether repairs are likely to be required, and the extent of such repairs.

Our review process, conducted quarterly, includes an analysis of many factors to determine whether a claim is likely to be received and the estimated costs to resolve any such claim, 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; the expected recovery from our insurance carriers and suppliers; 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. Our review process includes a number of estimates that are based on assumptions with uncertain outcomes. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that our actual costs and recoveries could differ from those recorded. However, based on the facts and circumstances currently known, we do not believe that any such differences would be material.

7. Income Taxes

We recorded income tax provisions of $129.0 million and $138.2 million for the three months ended July 31, 2024 and 2023, respectively. The effective tax rate was 25.6% for the three months ended July 31, 2024, compared to 25.0% for the three months ended July 31, 2023. We recorded income tax provisions of $368.8 million and $310.9 million for the nine months ended July 31, 2024 and 2023, respectively. The effective tax rate was 25.2% for the nine months ended July 31, 2024, compared to 25.1% for the nine months ended July 31, 2023. The income tax provisions for all periods included the provision for state income taxes, interest accrued on anticipated tax assessments, excess tax benefits related to stock-based compensation, federal energy efficient home credits and other permanent differences.

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We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction, and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of income or loss among the various taxing jurisdictions and changes in tax regulations and their impact on our tax strategies, we estimate that our state income tax rate for the full fiscal year 2024 will be approximately 6.1%. Our state income tax rate for the full fiscal year 2023 was 6.2%.

At July 31, 2024, we had $10.5 million of gross unrecognized tax benefits, including interest and penalties. If these unrecognized tax benefits were to reverse in the future, they would have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is reasonably possible that our unrecognized tax benefits will change, but we are not able to provide a range of such change. The possible changes would be principally due to the expiration of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and the accrual of estimated interest and penalties.

8. Stock-Based Benefit Plans

We grant various types of restricted stock units to our employees and our non-employee directors. We also granted stock options to certain of our employees and non-employee directors through fiscal year 2023. Additionally, we have an employee stock purchase plan that allows employees to purchase our stock at a discount. Information regarding the amount of total stock-based compensation expense and tax benefit recognized by us, for the periods indicated, is as follows (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Total stock-based compensation expense recognized	$	3,812	$	4,265	$	25,951	$	21,290
Income tax benefit recognized	$	986	$	1,076	$	6,662	$	5,380

At July 31, 2024 and October 31, 2023, the aggregate unamortized value of unvested stock-based compensation awards was approximately $25.4 million and $23.2 million, respectively.

9. Stockholders’ Equity

Stock Repurchase Program

From time to time since fiscal 2017, our Board of Directors has renewed its authorization to repurchase up to 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or other financial arrangements or transactions. Most recently, on December 13, 2023, our Board of Directors renewed its authorization to repurchase 20 million shares of our common stock. Shares may be repurchased for general corporate purposes, including to obtain shares for the Company’s equity awards and other employee benefit plans. This authorization terminated, effective December 13, 2023, the existing authorization that had been in effect since May 17, 2022. The Board of Directors did not fix any expiration date for this repurchase program.

The table below provides, for the periods indicated, information about our share repurchase programs:

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Number of shares purchased (in thousands)	2,073		1,931		3,576		3,561
Average price per share (1)	$	118.57	$	76.26	$	119.42	$	67.53
Remaining authorization at July 31 (in thousands)	16,424		11,016		16,424		11,016

(1)    Average price per share includes costs associated with the purchases, including the excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022, as applicable.

Cash Dividends

On March 12, 2024, our Board of Directors approved an increase in our quarterly cash dividend from $0.21 per share to $0.23 per share. During the three month periods ended July 31, 2024 and 2023, we declared and paid cash dividends of $0.23 and $0.21 per share, respectively, to our shareholders. During the nine months ended July 31, 2024 and 2023, we declared and paid cash dividends of $0.67 and $0.62 per share, respectively, to our shareholders.

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Accumulated Other Comprehensive Income

The changes in each component of accumulated other comprehensive income (“AOCI”), for the periods indicated, were as follows (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Employee Retirement Plans
Beginning balance	$	2,911	$	2,510	$	3,080	$	2,475
(Gains) losses reclassified from AOCI to net income (1)	(115)		23		(342)		70
Less: Tax expense (benefit) (2)	29		(6)		87		(18)
Net (gains) losses reclassified from AOCI to net income	(86)		17		(255)		52
Other comprehensive (loss) income – net of tax	(86)		17		(255)		52
Ending balance	$	2,825	$	2,527	$	2,825	$	2,527
Derivative Instruments
Beginning balance	$	36,916	$	31,365	$	37,830	$	35,143
(Losses) gains on derivative instruments	(2,151)		8,900		659		5,191
Less: Tax benefit (expense)	553		(2,250)		(506)		(1,302)
Net (losses) gains on derivative instruments	(1,598)		6,650		153		3,889
Gains reclassified from AOCI to net income (3)	(2,832)		(1,427)		(6,871)		(2,789)
Less: Tax expense (2)	727		361		2,101		706
Net gains reclassified from AOCI to net income	(2,105)		(1,066)		(4,770)		(2,083)
Other comprehensive (loss) income – net of tax	(3,703)		5,584		(4,617)		1,806
Ending balance	$	33,213	$	36,949	$	33,213	$	36,949
Total AOCI ending balance	$	36,038	$	39,476	$	36,038	$	39,476

(1) Reclassified to “Other income – net”

(2) Reclassified to “Income tax provision”

(3) Reclassified to “Cost of revenues – home sales”

10. Earnings per Share Information

The table below provides, for the periods indicated, information pertaining to the calculation of earnings per share, common stock equivalents, weighted-average number of antidilutive options and restricted stock units, and shares issued (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Numerator:
Net income as reported	$	374,611	$	414,789	$	1,095,786	$	926,535
Denominator:
Basic weighted-average shares	102,980		110,003		104,299		110,871
Common stock equivalents (1)	1,034		1,120		1,062		1,010
Diluted weighted-average shares	104,014		111,123		105,361		111,881
Other information:
Weighted-average number of antidilutive options and restricted stock units (2)	9		121		51		395
Shares issued under stock incentive and employee stock purchase plans	50		548		725		1,984

(1)    Common stock equivalents represent the dilutive effect of outstanding in-the-money stock options using the treasury stock method and shares expected to be issued upon the conversion of restricted stock units under our equity award programs.

(2)    Weighted-average number of antidilutive options and restricted stock units are based upon the average closing price of our common stock on the New York Stock Exchange for the period.

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11. Fair Value Disclosures

Financial Instruments

The table below provides, as of the dates indicated, a summary of assets/(liabilities) related to our financial instruments, measured at fair value on a recurring basis (amounts in thousands):

		Fair value
Financial Instrument	Fair value hierarchy	July 31, 2024		October 31, 2023
Mortgage Loans Held for Sale	Level 2	$	137,627	$	110,555
Forward Loan Commitments — Mortgage Loans Held for Sale	Level 2	$	(57)	$	2,234
Interest Rate Lock Commitments (“IRLCs”)	Level 2	$	5	$	(4,135)
Forward Loan Commitments — IRLCs	Level 2	$	(5)	$	4,135
Interest Rate Swap Contracts	Level 2	$	20,426	$	35,243

At July 31, 2024 and October 31, 2023, the carrying value of cash and cash equivalents, escrow cash held by our wholly owned captive title company, and customer deposits held in escrow approximated fair value.

The fair values of the interest rate swap contracts are included in “Receivables, prepaid expenses and other assets” in our Condensed Consolidated Balance Sheets and are determined using widely accepted valuation techniques including discounted cash flow analysis based on the expected cash flows of each swap contract. Although the Company has determined that the significant inputs, such as interest yield curve and discount rate, used to value its interest rate swap contracts fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of July 31, 2024, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate swap contract positions and have determined that the credit valuation adjustments were not significant to the overall valuation of our interest rate swap contracts. As a result, we have determined that our interest rate swap contracts valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Mortgage Loans Held for Sale

At the end of the reporting period, we determine the fair value of our mortgage loans held for sale and the forward loan commitments we have entered into as a hedge against the interest rate risk of our mortgage loans and commitments using the market approach to determine fair value.

The table below provides, as of the dates indicated, the aggregate unpaid principal and fair value of mortgage loans held for sale (amounts in thousands):

	Aggregate unpaid principal balance		Fair value		Fair value greater (less) than principal balance
At July 31, 2024	$	138,044	$	137,627	$	(417)
At October 31, 2023	$	114,835	$	110,555	$	(4,280)

Inventory

We recognize inventory impairment charges and land impairment charges based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. The fair value of the aforementioned inventory was determined using Level 3 criteria. Estimated fair value is primarily determined by discounting the estimated future cash flow of each community. In determining the fair value related to land impairments, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors. We record land impairments related to land parcels we plan to sell to third parties within land sales and other cost of revenues. See Note 1, “Significant Accounting Policies – Inventory,” in our 2023 Form 10-K for additional information regarding our methodology for determining fair value. Impairments of inventory were insignificant during the three-month and nine-month periods ended July 31, 2024 and 2023 and, accordingly, we did not disclose the ranges of certain quantitative unobservable inputs utilized in determining the fair value of these impaired operating communities.

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Debt

The table below provides, as of the dates indicated, the book value, excluding any bond discounts, premiums, and deferred issuance costs, and estimated fair value of our debt (amounts in thousands):

		July 31, 2024				October 31, 2023
	Fair value hierarchy	Book value		Estimated fair value		Book value		Estimated fair value
Loans payable (1)	Level 2	$	1,102,201	$	1,082,633	$	1,167,378	$	1,150,704
Senior notes (2)	Level 1	1,600,000		1,566,910		1,600,000		1,481,220
Mortgage company loan facility (3)	Level 2	125,417		125,417		100,058		100,058
		$	2,827,618	$	2,774,960	$	2,867,436	$	2,731,982

(1)    The estimated fair value of loans payable was based upon contractual cash flows discounted at interest rates that we believed were available to us for loans with similar terms and remaining maturities as of the applicable valuation date.

(2)    The estimated fair value of our senior notes is based upon their market prices as of the applicable valuation date.

(3)    We believe that the carrying value of our mortgage company loan borrowings approximates their fair value.

12. Other Income – Net

The table below provides the significant components of other income – net (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Interest income	$	9,033	$	8,109	$	28,508	$	22,187
Income (loss) from ancillary businesses	5,405		(1,451)		11,152		(1,543)
Management fee income earned by home building operations	985		839		3,291		2,901
Gain on litigation settlements – net	—		—		—		27,683
Other	1,527		(139)		6,283		(775)
Total other income – net	$	16,950	$	7,358	$	49,234	$	50,453

Income (loss) from ancillary businesses is generated by our mortgage, title, landscaping, smart home technology, Gibraltar, apartment living, city living, and golf course and country club operations. The table below provides, for the periods indicated, revenues and expenses for our ancillary businesses (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Revenues	$	43,850	$	36,057	$	115,309	$	97,238
Expenses	$	38,445	$	37,508	$	104,157	$	98,781

In the nine-month period ended July 31, 2024, our smart home technology business recognized a $4.4 million gain from a bulk sale of security monitoring accounts, which is included in income from ancillary businesses above. No similar amounts were recognized in the nine-month period ended July 31, 2023.

In the three-month and nine-month periods ending July 31, 2024, we recognized $1.8 million and $6.7 million of write-offs related to previously incurred costs that we believed not to be recoverable in our apartment rental development business operations, respectively. In the three-month and nine-month periods ending July 31, 2023, we recognized $3.3 million and $3.8 million of write-offs related to previously incurred costs that we believed not to be recoverable in our apartment rental development business operations, respectively.

In the three-month periods ended July 31, 2024 and 2023, income from ancillary businesses included management fees earned on our apartment rental development, high-rise urban luxury condominium, and Gibraltar unconsolidated entities and operations totaling $11.0 million and $8.9 million, respectively. In the nine-month periods ended July 31, 2024 and 2023, income from ancillary businesses included management fees earned on our apartment rental development, high-rise urban luxury condominium, and Gibraltar unconsolidated entities and operations totaling $28.1 million and $25.7 million, respectively.

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13. Commitments and Contingencies

Legal Proceedings

We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.

Land Purchase Contracts

Generally, our agreements to acquire land parcels do not require us to purchase those land parcels, although we, in some cases, forfeit any deposit balance outstanding if and when we terminate an agreement. Information regarding our land purchase contracts, as of the dates indicated, is provided in the table below (amounts in thousands):

	July 31, 2024		October 31, 2023
Aggregate purchase price:
Unrelated parties	$	5,239,397	$	4,191,160
Unconsolidated entities that the Company has investments in	35,731		31,477
Total	$	5,275,128	$	4,222,637
Deposits against aggregate purchase price	$	506,304	$	449,925
Additional cash required to acquire land	4,768,824		3,772,712
Total	$	5,275,128	$	4,222,637
Amount of additional cash required to acquire land included in accrued expenses	$	433,755	$	254,030

In addition, we expect to purchase approximately 8,100 additional home sites over a number of years from several joint ventures in which we have interests; the purchase prices of these home sites will be determined at a future date.

At July 31, 2024, we also had purchase contracts to acquire land for apartment developments of approximately $215.4 million, of which we had outstanding deposits in the amount of $11.2 million. We intend to acquire and develop these projects in joint ventures with unrelated parties in the future.

We have additional land parcels under option that have been excluded from the aggregate purchase price since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.

Investments in Unconsolidated Entities

At July 31, 2024, we had investments in a number of unconsolidated entities, were committed to invest or advance additional funds, and had guaranteed a portion of the indebtedness and/or loan commitments of these entities. See Note 3, “Investments in Unconsolidated Entities,” for more information regarding our commitments to these entities.

Surety Bonds and Letters of Credit

At July 31, 2024, we had outstanding surety bonds amounting to $909.2 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We have an additional $319.1 million of surety bonds outstanding that guarantee other obligations. Although significant construction and development activities have been completed related to these improvements, the bonds are generally not released until all construction and development activities are completed and acceptance by the counterparty is received. The aggregate amount of surety bonds outstanding is in excess of the estimated cost of the remaining work to be performed. We do not believe that it is probable that any outstanding bonds will be drawn upon.

At July 31, 2024, we had outstanding letters of credit of $180.9 million under our Revolving Credit Facility. These letters of credit were issued to secure various financial obligations, including insurance policy deductibles and other claims, land deposits, and security to complete improvements in communities in which we are operating. We do not believe that it is probable that any outstanding letters of credit will be drawn upon.

At July 31, 2024, we had provided financial guarantees of $28.6 million related to fronted letters of credit to secure obligations related to certain of our insurance policy deductibles and other claims.

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Backlog

At July 31, 2024, we had agreements of sale outstanding to deliver 6,769 homes with an aggregate sales value of $7.07 billion.

Mortgage Commitments

Our mortgage subsidiary provides mortgage financing for a portion of our home closings. For those home buyers to whom our mortgage subsidiary provides mortgages, we determine whether the home buyer qualifies for the mortgage based upon information provided by the home buyer and other sources. For those home buyers who qualify, our mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan based upon then-current market conditions. Prior to the actual closing of the home and funding of the mortgage, the home buyer will lock in an interest rate based upon the terms of the commitment. At the time of rate lock, our mortgage subsidiary agrees to sell the proposed mortgage loan to one of several outside recognized mortgage financing institutions (“investors”) that is willing to honor the terms and conditions, including interest rate, committed to the home buyer. We believe that these investors have adequate financial resources to honor their commitments to our mortgage subsidiary.

Mortgage loans are sold to investors with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements. These representations and warranties primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate underwriting of the loan and in some cases, a required minimum number of payments to be made by the borrower. The Company generally does not retain any other continuing interest related to mortgage loans sold in the secondary market.

Information regarding our mortgage commitments, as of the dates indicated, is provided in the table below (amounts in thousands):

	July 31, 2024		October 31, 2023
Aggregate mortgage loan commitments:
IRLCs	$	296,717	$	354,716
Non-IRLCs	1,765,688		1,818,486
Total	$	2,062,405	$	2,173,202
Investor commitments to purchase:
IRLCs	$	296,717	$	354,716
Mortgage loans held for sale	127,889		104,703
Total	$	424,606	$	459,419

14. Information on Segments

We operate in the following five geographic segments, with current operations generally located in the states listed below:

•The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and Pennsylvania;

•The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;

•The South region: Florida, South Carolina and Texas;

•The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah;

•The Pacific region: California, Oregon and Washington.

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

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Revenues and income (loss) before income taxes for each of our segments, for the periods indicated, were as follows (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Revenues:
North	$	375,119	$	377,744	$	982,991	$	1,081,854
Mid-Atlantic	335,721		288,480		975,985		787,184
South	776,262		632,572		1,967,522		1,544,804
Mountain	670,027		726,004		1,726,976		1,880,450
Pacific	566,336		648,447		1,650,015		1,619,085
Total home building	2,723,465		2,673,247		7,303,489		6,913,377
Corporate and other	1,007		1,355		(161)		745
	2,724,472		2,674,602		7,303,328		6,914,122
Land sales and other revenues (1)	3,472		13,040		209,950		60,668
Total consolidated	$	2,727,944	$	2,687,642	$	7,513,278	$	6,974,790
Income (loss) before income taxes:
North	$	64,615	$	49,087	$	149,058	$	136,643
Mid-Atlantic	73,470		71,132		377,513		158,482
South	161,177		126,861		386,072		268,028
Mountain	113,785		146,757		275,899		368,003
Pacific	145,911		183,371		420,445		419,872
Total home building	558,958		577,208		1,608,987		1,351,028
Corporate and other	(55,331)		(24,191)		(144,420)		(113,623)
Total consolidated	$	503,627	$	553,017	$	1,464,567	$	1,237,405

(1)    Included in the nine months ended July 31, 2024 is a $185.0 million land sale related to our Mid-Atlantic segment, as further discussed in Note 1, “Significant Accounting Policies”.

“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups; interest income; income from certain of our ancillary businesses, including our apartment rental development business and our high-rise urban luxury condominium operations, and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.

Total assets for each of our segments, as of the dates indicated, are shown in the table below (amounts in thousands):

	July 31, 2024		October 31, 2023
North	$	1,533,394	$	1,281,479
Mid-Atlantic	1,505,684		1,323,381
South	2,627,920		2,399,055
Mountain	3,038,021		2,666,874
Pacific	2,345,041		2,175,776
Total home building	11,050,060		9,846,565
Corporate and other	2,309,651		2,680,453
Total consolidated	$	13,359,711	$	12,527,018

“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, investments in our Rental Property Joint Ventures, expected recoveries from insurance carriers and suppliers, our Gibraltar investments and operations, manufacturing facilities, our apartment rental development and high-rise urban luxury condominium operations, and our mortgage and title subsidiaries.

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The amounts we have provided for inventory impairment charges and the expensing of costs that we believe not to be recoverable, for the periods indicated, which are included in home sales cost of revenues, were as follows (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
North	$	390	$	158	$	923	$	590
Mid-Atlantic	2,690		2,225		5,585		8,545
South	2,289		921		3,016		1,402
Mountain	32		42		25,706		5,659
Pacific	58		18		128		6,241
Total consolidated	$	5,459	$	3,364	$	35,358	$	22,437

We have also recognized $3.8 million of land impairment charges included in land sales and other cost of revenues during the three-month period ended July 31, 2024, which was in our Corporate and other segment. No land impairment charges were recognized in land sales and other costs of revenues in the three-month period ended July 31, 2023. In the nine-month period ended July 31, 2024, we recognized land impairment charges of $4.4 million of which $3.8 million and $0.6 million were in our Corporate and other and Mid-Atlantic segments, respectively. In the nine-month period ended July 31, 2023, we recognized $17.7 million of similar charges of which $2.7 million, $10.3 million, $2.2 million, and $2.5 million were in our North, Mid-Atlantic, Pacific and Corporate and other segments, respectively.

15. Supplemental Disclosure to Condensed Consolidated Statements of Cash Flows

The following are supplemental disclosures to the Condensed Consolidated Statements of Cash Flows, for the periods indicated (amounts in thousands):

	Nine months ended July 31,
	2024		2023
Cash flow information:
Income tax paid – net	$	397,666	$	427,153
Noncash activity:
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses - net	$	228,660	$	342,073
Changes in investments in unconsolidated entities due to net increase in accrued liabilities	$	5,626	$	1,987
Transfer of other assets to property, construction and office equipment - net	$	133,020	$	13,738
Unrealized loss on derivatives	$	(14,816)	$	(7,767)
	At July 31,
	2024		2023
Cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	893,422	$	1,033,369
Restricted cash included in receivables, prepaid expenses, and other assets	69,852		49,333
Total cash, cash equivalents, and restricted cash shown on the Condensed Consolidated Statements of Cash Flows	$	963,274	$	1,082,702

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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, 2023 (“2023 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 2023 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 for the sale of homes 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

Through the first nine months of fiscal 2024, demand for our homes remained solid despite an uncertain economic outlook and mortgage rates that have remained elevated compared to the years preceding the Federal Reserve’s latest rate-hiking cycle, which began in March 2022. In the nine months ended July 31, 2024, we signed 7,573 net contracts for an aggregate value of $7.41 billion, an increase of approximately 25% in both units and dollars compared to the prior-year period. We attribute the resiliency in demand for new homes to, among other factors, strong demographic trends and the persistent underproduction of homes relative to household formations for well over the past decade. This structural undersupply of homes has been exacerbated in recent years by low levels of resale inventory on the market, caused in part by homeowners who are reluctant to sell because of the higher mortgage rate environment. In our most recent quarter, demand declined compared to the first half of the fiscal year, with net signed contracts up approximately 11% in both units and dollars primarily due to the year-over-year increase in the number of communities from which we were selling during the quarter. At the end of the third quarter of fiscal 2024, we were selling from 404 communities, a 17% increase compared to the 345 communities in operation at the end of the third quarter of fiscal 2023. In recent months, the Federal Reserve has indicated that it is likely to lower short-term interest rates, which we believe will put downward pressure on mortgage rates and should, in turn, increase sales of both new and existing homes. However, it is difficult to predict the near-term direction of home demand due to the many and varied factors that impact it, including changes in economic conditions, long-term interest rates, inflation expectations and consumer sentiment. Over the longer term we continue to believe that the market for new homes will benefit from the strong drivers of demand for new homes described above.

In the three months ended July 31, 2024, home sales revenue increased 2% as compared to the three months ended July 31, 2023. In the quarter, we delivered 2,814 homes with an average delivered price of $968,200, as compared to 2,524 delivered homes at an average price of $1,059,700 in the third quarter of fiscal 2023. The year-over-year increase in the number of homes delivered was primarily the result of the year-over-year increase in the number of communities we were operating from during the third quarter of fiscal 2024, and a higher backlog conversion ratio. The year-over-year decline in average delivered price was primarily due to our strategic expansion of our product lines and price points to include more affordable homes, and our increased production of quick move-in (or “spec”) homes. While most of our homes have historically 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, over the past two years, we have increased the number of spec homes in our inventory, which are homes started without a signed agreement with a customer. In the third quarter of fiscal 2024, 54% of net signed contracts were spec homes and the remainder were build-to-order. Spec homes allow us to compete more effectively with existing homes available in the market, especially for homebuyers that wish to take delivery within a short time frame. We sell our spec homes at various stages of construction and determine how many such homes to offer within each community based on local market factors, our current and planned sales pace and construction cadence for the community.

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Financial and Operational Highlights

In the three-month period ended July 31, 2024, we recognized $2.73 billion of revenues, consisting of $2.72 billion of home sales revenue and $3.5 million of land sales and other revenue, and net income of $374.6 million, as compared to $2.69 billion of revenues, consisting of $2.67 billion of home sales revenue and $13.0 million of land sales and other revenue, and net income of $414.8 million in the three-month period ended July 31, 2023.

In the three-month periods ended July 31, 2024 and 2023, the value of net contracts signed was $2.41 billion (2,490 homes) and $2.16 billion (2,245 homes), respectively.

In the nine-month period ended July 31, 2024, we recognized $7.51 billion of revenues, consisting of $7.30 billion of home sales revenues and $210.0 million of land sales and other revenues, and net income of $1.10 billion, as compared to $6.97 billion of revenues, consisting of $6.91 billion of home sales revenues and $60.7 million of land sales and other revenues, and net income of $926.5 million in the nine-month period ended July 31, 2023. Land sales and other revenue and net income in the nine months ended July 31, 2024 period included $185.0 million and $124.1 million, respectively, related to the sale of a single parcel of land in northern Virginia to a commercial developer.

In the nine-month periods ended July 31, 2024 and 2023, the value of net contracts signed was $7.41 billion (7,573 homes) and $5.89 billion (6,039 homes), respectively.

The value of our backlog at July 31, 2024 was $7.07 billion (6,769 homes), as compared to our backlog at July 31, 2023 of $7.87 billion (7,295 homes). Our backlog at October 31, 2023 was $6.95 billion (6,578 homes), as compared to backlog of $8.87 billion (8,098 homes) at October 31, 2022.

At July 31, 2024, we had $893.4 million of cash and cash equivalents and approximately $1.77 billion available under our $1.955 billion revolving credit facility (the “Revolving Credit Facility”). At July 31, 2024, we had no borrowings and we had approximately $180.9 million of outstanding letters of credit under the Revolving Credit Facility.

At July 31, 2024, we owned or controlled through options approximately 72,700 home sites, as compared to approximately 70,700 at October 31, 2023; and approximately 76,000 at October 31, 2022. Of the approximately 72,700 total home sites that we owned or controlled through options at July 31, 2024, we owned approximately 36,300 and controlled approximately 36,400 through options. Of the 36,300 home sites owned, approximately 19,300 were substantially improved. In addition, as of July 31, 2024, we expect to purchase approximately 8,100 additional home sites over several years from certain of the joint ventures in which we have interests, at prices to be determined.

At July 31, 2024, we were selling from 404 communities, compared to 370 at October 31, 2023; and 345 at July 31, 2023.

At July 31, 2024, our total stockholders’ equity and our debt to total capitalization ratio were $7.41 billion and 0.28 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 nine months ended July 31, 2024 and 2023 ($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.

	Three months ended July 31,								Nine months ended July 31,
	2024			2023			% Change		2024			2023			% Change
Revenues:
Home sales	$	2,724.5		$	2,674.6		2	%	$	7,303.3		$	6,914.1		6	%
Land sales and other	3.5			13.0			(73)	%	210.0			60.7			246	%
	2,727.9			2,687.6			1	%	7,513.3			6,974.8			8	%
Cost of revenues:
Home sales	1,977.2			1,931.9			2	%	5,339.7			5,065.8			5	%
Land sales and other	8.8			11.6			(24)	%	31.9			74.9			(57)	%
	1,985.9			1,943.5			2	%	5,371.6			5,140.6			4	%
Selling, general and administrative	244.8			229.0			7	%	712.6			668.0			7	%
Income from operations	497.2			515.1			(3)	%	1,429.1			1,166.1			23	%
Other
(Loss) income from unconsolidated entities	(10.5)			30.5			(134)	%	(13.8)			20.8			(166)	%
Other income – net	17.0			7.4			130	%	49.2			50.5			(2)	%
Income before income taxes	503.6			553.0			(9)	%	1,464.6			1,237.4			18	%
Income tax provision	129.0			138.2			(7)	%	368.8			310.9			19	%
Net income	$	374.6		$	414.8		(10)	%	$	1,095.8		$	926.5		18	%
Supplemental information:
Home sales cost of revenues as a percentage of home sales revenues	72.6		%	72.2		%			73.1		%	73.3		%
Land sales and other cost of revenues as a percentage of land sales and other revenues	252.8		%	88.8		%			15.2		%	123.4		%
SG&A as a percentage of home sale revenues	9.0		%	8.6		%			9.8		%	9.7		%
Effective tax rate	25.6		%	25.0		%			25.2		%	25.1		%
Deliveries – units	2,814			2,524			11	%	7,382			6,842			8	%
Deliveries – average delivered price (in ‘000s)	$	968.2		$	1,059.7		(9)	%	$	989.3		$	1,010.5		(2)	%
Net contracts signed – value	$	2,407.5		$	2,163.5		11	%	$	7,413.3		$	5,893.1		26	%
Net contracts signed – units	2,490			2,245			11	%	7,573			6,039			25	%
Net contracts signed – average contracted price (in ‘000s)	$	966.9		$	963.7		—	%	$	978.9		$	975.8		—	%
	At July 31,								At October 31,
	2024			2023			% Change		2023			2022			% Change
Backlog – value	$	7,066.6		$	7,874.8		(10)	%	6,945.3			8,874.1			(22)	%
Backlog – units	6,769			7,295			(7)	%	6,578			8,098			(19)	%
Backlog – average contracted price (in ‘000s)	$	1,044.0		$	1,079.5		(3)	%	$	1,055.8		$	1,095.8		(4)	%

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 July 31, 2024 compared to the three months ended July 31, 2023

The increase in home sale revenues for the three months ended July 31, 2024, as compared to the three months ended July 31, 2023, was primarily attributable to an 11% increase in the number of homes delivered offset by a 9% decrease in the average price of homes delivered. The increase in the number of homes delivered in the three months ended July 31, 2024 was primarily due to an increase in operating communities, more deliveries of spec homes, and a higher backlog conversion in the three months ended July 31, 2024 compared to the three months ended July 31, 2023, primarily as a result of improvement in build times. These factors were offset, in part, 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, most significantly in the Mountain and Pacific 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, most notably in the Mid-Atlantic and Pacific regions.

The increase in home sales cost of revenues, as a percentage of home sales revenues, in the three months ended July 31, 2024, as compared to the three months ended July 31, 2023, was principally due to a shift in the mix of revenues to lower margin products/areas, most notably in the Mid-Atlantic, Mountain and Pacific regions, and higher inventory impairment charges in the fiscal 2024 period.

Nine months ended July 31, 2024 compared to the nine months ended July 31, 2023

The increase in home sale revenues for the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023, was primarily attributable to an 8% increase in the number of homes delivered offset by a 2% decrease in the average price of homes delivered. The increase in the number of homes delivered in the nine months ended July 31, 2024 was primarily due to an increase in operating communities, more deliveries of spec homes, and a higher backlog conversion in the nine months ended July 31, 2024 compared to the nine months ended July 31, 2023, primarily as a result of improvement in build times. These factors were offset, in part, 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, most significantly in the Mountain and Pacific 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, most notably in the Mid-Atlantic region.

The decrease in home sales cost of revenues, as a percentage of home sales revenues, for the nine months ended July 31, 2024, as compared to the nine months ended July 31, 2023, was principally due to a shift in the mix of revenues to higher margin products/areas and lower interest expense as a percentage of home sales revenues, offset, in part, by higher inventory impairment charges in the fiscal 2024 period. In the nine months ended July 31, 2024 and 2023, interest expense, as a percentage of home sales revenues, was 1.2% and 1.4%, respectively.

Land Sales and Other Revenues and Land Sales and Other Cost of Revenues

Our revenues from land sales and other generally consist of the following: (1) land sales to joint ventures in which we retain an interest; (2) lot sales to third-party builders within our master-planned communities; (3) bulk sales to third parties of land we have decided no longer meets our development criteria; (4) sales of land parcels to third parties (typically because there is a superior economic use of the property); and (5) sales of commercial and retail properties generally located at our

urban luxury condominium communities. 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 the three months ended July 31, 2024 compared to the three months ended July 31, 2023 was primarily due to higher impairment charges in the 2024 period and additional costs incurred in the period related to a prior land sale. We recognized a $3.8 million impairment charge in the three-month period ended July 31, 2024 in connection with a planned land sale. There were no land sales and other impairment charges recognized in the three months ended July 31, 2023.

The decrease in land sales and other cost of revenues as a percentage of land sales and other revenues in the nine months ended July 31, 2024 compared to the nine months ended July 31, 2023 was primarily due to the sale of a 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 addition, we incurred lower impairment charges in the 2024 period. We recognized $4.4 million of impairment charges in the nine-month period ended July 31, 2024 in connection with planned land sales. This compares to $17.7 million of land sales and other impairment charges recognized in the nine months ended July 31, 2023.

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

SG&A expenditures increased by $15.8 million in the three-month period ended July 31, 2024, as compared to the three-month period ended July 31, 2023. As a percentage of home sales revenues, SG&A expense was 9.0% in the three months ended July 31, 2024, as compared to 8.6% in the three months ended July 31, 2023. The dollar increase in SG&A expenditures was due primarily to higher commissions and marketing spend from greater sales volume and increased community count. The increase in SG&A expense as a percentage of revenues was primarily due to the volume of new community openings in the fiscal 2024 period.

SG&A expenditures increased by $44.5 million in the fiscal 2024 nine-month period, as compared to the fiscal 2023 nine-month period. As a percentage of home sales revenues, SG&A expense was 9.8% in the fiscal 2024 period, as compared to 9.7% in the fiscal 2023 period. The dollar increase in SG&A expenditures was primarily due to higher commissions and marketing spend from greater sales volume and increased community count. The increase in SG&A expense as a percentage of revenues was due to revenues increasing 6% year-over-year in the fiscal 2024 period, while SG&A expenditures increased 7%.

Income from Unconsolidated Entities

In the three-month period ended July 31, 2024, we recognized a loss from unconsolidated entities of $10.5 million as compared to income of $30.5 million in the prior year period. The decrease was primarily due to a $35.0 million gain in the fiscal 2023 period related to a property sale by one of our Rental Property Joint Ventures, which did not recur in the 2024 period, higher losses by various Rental Property Joint Ventures, reduced income at one Home Building Joint Venture due to its underlying assets being sold out, and higher losses at one Home Building Joint Venture that recently commenced closing its units.

In the nine-month period ended July 31, 2024, we recognized a loss from unconsolidated entities of $13.8 million, as compared to income of $20.8 million in the prior year period. The decrease was primarily due to a $35.0 million gain in the fiscal 2023 period related to a property sale by one of our Rental Property Joint Ventures compared to $21.0 million of such gains in the fiscal 2024 period. In addition, there were higher losses by various Rental Property Joint Ventures, higher losses incurred by one Home Building Joint Venture, reduced income at one Home Building Joint Venture due to its underlying assets being sold out, and lower earnings from a Land Development Joint Venture due to reduced sales volume.

Other Income – Net

The table below provides, for the periods indicated, the components of “Other income – net” (amounts in thousands):

	Three months ended July 31,				Nine months ended July 31,
	2024		2023		2024		2023
Interest income	$	9,033	$	8,109	$	28,508	$	22,187
Income (loss) from ancillary businesses	5,405		(1,451)		11,152		(1,543)
Management fee income earned by home building operations	985		839		3,291		2,901
Gain on litigation settlements – net	—		—		—		27,683
Other	1,527		(139)		6,283		(775)
Total other income – net	$	16,950	$	7,358	$	49,234	$	50,453

The increase in interest income in the three-month and nine-month periods ended July 31, 2024 was primarily due to higher interest rates on invested cash balances.

The increase in income from ancillary businesses in the nine-month period ended July 31, 2024, was mainly due to a $4.4 million gain from a bulk sale of security monitoring accounts by our smart home technology business. In addition, the fiscal 2024 periods benefited from higher income from our mortgage and title operations due to increased volume and increased management fees related to our high-rise urban luxury condominium business operations as a result of unit closings. These increases were offset, in part, by higher operating losses incurred in our apartment living operations. Our apartment living operations were also impacted by $1.8 million and $6.7 million of write-offs related to previously incurred costs that we believed not to be recoverable in both the three-month and nine-month periods ended July 31, 2024, respectively, compared to $2.9 million and $3.3 million in the three-month and nine-month periods ended July 31,2023, respectively.

The increases in management fee income earned by our home building operations in the three-month and nine-month periods ended July 31, 2024 were primarily related to an increase in fees from certain of our Rental Property Joint Ventures.

The gain on litigation settlements - net in nine months ended July 31, 2023 primarily relates to the settlement of an insurance claim. No similar gains occurred in the fiscal 2024 period.

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The increase in “other” in the nine-month period ended July 31, 2024 was primarily due to a $5.0 million gain related to an investment we held in a privately held company which sold substantially all of its assets to a third party during the period.

Income Before Income Taxes

For the three-month period ended July 31, 2024, we reported income before income taxes of $503.6 million, as compared to $553.0 million in the three-month period ended July 31, 2023.

For the nine-month period ended July 31, 2024, we reported income before income taxes of $1.46 billion, as compared to $1.24 billion in the nine-month period ended July 31, 2023.

Income Tax Provision

In the three-month periods ended July 31, 2024 and 2023, we recognized income tax provisions of $129.0 million and $138.2 million, respectively. Based upon the federal statutory rate of 21.0% for the fiscal 2024 and 2023 periods, our federal tax provisions would have been $105.8 million and $116.1 million, in the three-month periods ended July 31, 2024 and 2023, respectively. The difference between the tax provisions recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes.

We recognized income tax provisions of $368.8 million and $310.9 million in the nine-month periods ended July 31, 2024 and 2023, respectively. Based upon the federal statutory rate of 21.0% for the fiscal 2024 and 2023 periods, our federal tax provisions would have been $307.6 million and $259.9 million, in the nine-month periods ended July 31, 2024 and 2023, respectively. The difference between the tax provisions recognized and the tax provision based on the federal statutory rate was mainly due to the provision for state income taxes and permanent differences, offset, in part, by excess tax benefits related to stock-based compensation.

Contracts

In the three-month periods ended July 31, 2024 and 2023, the value of net contracts signed was $2.41 billion (2,490 homes) and $2.16 billion (2,245 homes), respectively. The aggregate value of net contracts signed increased $244.0 million, or 11.3%, in the three-month period ended July 31, 2024, as compared to the three-month period ended July 31, 2023. The increase in the aggregate value of net contracts signed was due to a 10.9% increase in the number of net contracts signed and a 0.3% increase in the average value attributed to each signed contract. The increase in the number of net contracts signed was primarily due to the year-over-year increase in the number of communities from which we were operating during the period. The average value of each signed contract in the three-months ended July 31, 2024 was essentially flat compared to the prior year period.

In the nine-month periods ended July 31, 2024 and 2023, the value of net contracts signed was $7.41 billion (7,573 homes) and $5.89 billion (6,039 homes), respectively. The aggregate value of net contracts signed increased $1.52 billion, or 25.8%, in the nine-month period ended July 31, 2024, as compared to the nine-month period ended July 31, 2023. The increase in the aggregate value of net contracts signed was due to a 25.4% increase in the number of net contracts signed and a 0.3% increase in the average value attributed to each signed contract. The increase in the number of net contracts signed reflects both an improved demand environment and the year-over-year increase in the number of communities from which we were operating during the period. The average value of each signed contract in the nine months ended July 31, 2024 was essentially flat compared to the prior year period.

Backlog

The value of our backlog at July 31, 2024 decreased 10% to $7.07 billion (6,769 homes), as compared to $7.87 billion (7,295 homes) at July 31, 2023. Our backlog at October 31, 2023 and 2022 was $6.95 billion (6,578 homes) and $8.87 billion (8,098 homes), respectively. The decrease in the value of our backlog at July 31, 2024 as compared to July 31, 2023, is due to a 7% decrease in the number of homes in backlog and a 3% decrease in the average contracted price per home. These decreases are primarily attributable to spec homes representing a larger portion of our net signed contracts and homes delivered.

For more information regarding results of operations by segment, see “Segments” in this MD&A.

CAPITAL RESOURCES AND LIQUIDITY

Funding for our business has been, and continues to be, provided principally by cash flow from operating activities before inventory additions, credit arrangements with third parties, and the public capital markets.

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

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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. We also use cash to pay dividends on our common stock, to repay debt and make share repurchases with cash flows from operations and other sources. We believe our sources of cash and liquidity will continue to be adequate to fund operations, finance our strategic operating initiatives, repay debt, fund our share repurchases and pay dividends for the foreseeable future.

At July 31, 2024, we had $893.4 million of cash and cash equivalents on hand and approximately $1.77 billion available for borrowing under our Revolving Credit Facility. The Revolving Credit Facility provides us with a committed borrowing capacity of $1.955 billion, which we have the ability to increase up to $3.00 billion with the consent of lenders, and is scheduled to mature on February 14, 2028. Toll Brothers, Inc. 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 on February 14, 2028, $101.6 million matures on November 1, 2025, and the remaining $60.9 million matures on November 1, 2026.

Short-term Liquidity and Capital Resources

For the next twelve months, we expect our principal demand for funds will be for inventory additions (in the form of land acquisition, land development, home construction costs, and deposits to control land, which could occur directly or indirectly through builder acquisitions), operating expenses, including our selling, general and administrative expenses, investments and funding of capital improvements, investments in existing and future unconsolidated joint ventures, repayment of community-level borrowings, common stock repurchases, and dividend payments. Demand for funds include interest and principal payments on current and future debt financing. 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 other 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. We may, however, seek additional financing to fund future growth or refinance our existing indebtedness through the debt capital markets, but there is no assurance that such financing will be available on favorable terms, or at all.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, our principal demands for funds will be for the payments of the principal amount of our long-term debt as it becomes due or otherwise matures, land purchases and inventory additions needed to grow our business (which could occur directly or indirectly through builder acquisitions), 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. We expect these resources will be adequate to fund our ongoing operating activities as well as provide capital for investment in future land purchases and related development activities and future joint ventures.

Material Cash Requirements

We are a party to many agreements that include contractual obligations and commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Condensed Consolidated Balance Sheet as of July 31, 2024, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, payments due on our mortgage company loan facility, purchase obligations related to expected acquisition of land under purchase agreements and land development agreements (many of which are secured by letters of credit or surety bonds), operating leases, obligations under our deferred compensation plan, and obligations under our supplemental executive retirement plans. We also enter into certain short-term lease commitments, commitments to fund our existing or future unconsolidated joint ventures, letters of credit and other purchase obligations in the normal course of business. For more information regarding our primary obligations, refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility,” and Note 13, “Commitments and Contingencies,” in the Notes to the Condensed Consolidated Financial Statements for amounts outstanding as of July 31, 2024, related to debt and commitments and contingencies, respectively.

We also operate through a number of joint ventures and have undertaken various commitments as a result of those arrangements. At July 31, 2024, we had investments in these entities of $983.6 million and were committed to invest or advance up to an additional $247.6 million to these entities if they require additional funding. At July 31, 2024, we had agreed to terms for the acquisition of 472 home sites from four joint ventures for an estimated aggregate purchase price of $35.7 million. We

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also expect to purchase approximately 8,100 additional home sites over a number of years from several joint ventures in which we have interests. The purchase price of these home sites will be determined at a future date.

The unconsolidated joint ventures in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our joint venture partner have guaranteed debt of unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.

In situations where we have joint and several guarantees with our joint venture partner, we generally seek to implement a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed-upon share of the guarantee; however, we are not always successful. In addition, if the joint venture partner does not have adequate financial resources to meet its obligations under such a reimbursement agreement, we may be liable for more than our proportionate share. We believe that, as of July 31, 2024, in the event we become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay all or a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the entity. At July 31, 2024, we had guaranteed the debt of certain unconsolidated entities that have loan commitments aggregating $3.10 billion, of which, if the full amount of the debt obligations were borrowed, we estimate $665.5 million to be our maximum exposure related to repayment and carry cost guarantees. At July 31, 2024, the unconsolidated entities had borrowed an aggregate of $2.12 billion, of which we estimate $569.5 million to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from 1 month to 3.3 years. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners, nor do they include any potential exposures related to project completion guarantees or the other (non-carry cost/repayment) indemnities noted above, which are not estimable.

For more information regarding these joint ventures, see Note 3, “Investments in Unconsolidated Entities” in the Notes to the Condensed Consolidated Financial Statements.

Debt Service Requirements

Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced profile of debt maturities, and to manage our exposure to floating interest rate volatility.

Outside of the normal course of operations, one of our principal liquidity needs is the payment of principal and interest on outstanding indebtedness. We are required by the terms of certain loan documents to meet certain covenants, such as financial ratios and reporting requirements. As of July 31, 2024, we were in compliance with all such covenants and requirements on our term loan, revolving credit facility and other loans payable. Refer to Note 5, “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in the Notes to the Condensed Consolidated Financial Statements.

Operating Activities

At July 31, 2024 and October 31, 2023, we had $963.3 million and $1.34 billion, respectively, of cash, cash equivalents, and restricted cash. Cash provided by operating activities during the nine-month period ended July 31, 2024 was $327.7 million. Cash provided by operating activities during the fiscal 2024 period was primarily related to net income (adjusted for depreciation and amortization, impairments, stock-based compensation, losses and distributions of earnings from unconsolidated entities, deferred taxes, and gain on sale of assets); and increases in accounts payable and accrued expenses. This activity was offset, in part, by an increase in inventory; mortgage loans originated, net of mortgage loans sold, a decrease in customer deposits – net; an increase in prepaid expenses, receivables and other assets; and a decrease in current income taxes – net.

At July 31, 2023 and October 31, 2022, we had $1.08 billion and $1.40 billion, respectively, of cash, cash equivalents, and restricted cash. Cash provided by operating activities during the nine-month period ended July 31, 2023 was $675.0 million. Cash provided by operating activities during the fiscal 2023 period was primarily related to net income (adjusted for stock-based compensation, impairments, depreciation and amortization, income and distributions of earnings from unconsolidated entities and deferred taxes); and mortgage loans sold, net of mortgage loans originated. This activity was offset, in part, by an increase in inventory; decreases in accounts payable and accrued expenses, current income taxes – net, and customer deposits – net; and an increase in receivables, prepaid expenses, and other assets.

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Investing Activities

In the nine-month period ended July 31, 2024, cash used in investing activities was $116.0 million, which was primarily related to $134.5 million used to fund our investments in unconsolidated entities and $55.5 million used for the purchase of property and equipment. This activity was offset, in part, by $74.3 million of cash received as returns from our investments in unconsolidated entities.

In the nine-month period ended July 31, 2023, cash used in investing activities was $133.6 million, which was primarily related to $162.6 million used to fund our investments in unconsolidated entities and $54.1 million used for the purchase of property and equipment. This activity was offset, in part, by $74.0 million of cash received as returns from our investments in unconsolidated entities and $9.0 million of cash proceeds from the sale of assets.

Financing Activities

We used $592.7 million of cash in financing activities in the nine-month period ended July 31, 2024, primarily for the repurchase of $423.6 million of our common stock, the payments of $96.9 million of loans payable, net of borrowings, the payment of dividends on our common stock of $70.3 million, and $1.9 million of payments related to stock-based benefit plans - net.

We used $857.3 million of cash in financing activities in the nine-month period ended July 31, 2023, primarily for the redemption of $400.0 million of senior notes, payments of $190.6 million of loans payable, net of borrowings, the payment of dividends on our common stock of $69.1 million, the repurchase of $239.3 million of our common stock and payments of $5.3 million of debt issuance costs. This activity was offset, in part, by $47.1 million of proceeds related to stock-based benefit plans - net.

CRITICAL ACCOUNTING ESTIMATES

As disclosed in our 2023 Form 10-K, our most critical accounting estimates relate to inventory, cost of revenue recognition, warranty and self-insurance, and investments in unconsolidated entities. Since October 31, 2023, there have been no material changes to those critical accounting estimates.

SUPPLEMENTAL GUARANTOR INFORMATION

At July 31, 2024, 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”). For further information regarding the Senior Notes, see Note 5, “Loans Payable, Senior Notes and Mortgage Company Loan Facility” in the Notes to the Consolidated Condensed Financial Statements under the caption “Senior Notes.”

The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a senior basis by Toll Brothers, Inc. and substantially all of its 100%-owned home building subsidiaries (the “Guarantor Subsidiaries” and, together with us, the “Guarantors”). The guarantees are full and unconditional, and the Subsidiary Issuer and each of the Guarantor Subsidiaries are consolidated subsidiaries of Toll Brothers, Inc. Our non-home building subsidiaries and several of our home building subsidiaries (together, the “Non-Guarantor Subsidiaries”) do not guarantee the Senior Notes. The Subsidiary Issuer generates no operating revenues and does not have any independent operations other than the financing of our other subsidiaries by lending the proceeds of its public debt offerings, including the Senior Notes. Our home building operations are conducted almost entirely through the Guarantor Subsidiaries. Accordingly, the Subsidiary Issuer’s cash flow and ability to service the Senior Notes is dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Subsidiary Issuer, whether by dividends, loans or otherwise. Holders of the Senior Notes have a direct claim only against the Subsidiary Issuer and the Guarantors. The obligations of the Guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference or similar laws affecting the rights of creditors generally) under applicable law.

The indentures under which the Senior Notes were issued provide that any of our subsidiaries that provide a guarantee of our obligations under the Revolving Credit Facility will guarantee the Senior Notes. The indentures further provide that any Guarantor Subsidiary may be released from its guarantee so long as (i) no default or event of default exists or would result from release of such guarantee; (ii) the Guarantor Subsidiary being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of our most recent fiscal quarter; (iii) the Guarantor Subsidiaries released from their guarantees in any fiscal year comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of our consolidated net worth as of the end of our most recent fiscal quarter; (iv) such release would not have a material adverse effect on ours and our subsidiaries’ home building business; and (v) the Guarantor Subsidiary is released

34

from its guaranty under the Revolving Credit Facility. If there are no guarantors under the Revolving Credit Facility, all Guarantor Subsidiaries under the indentures will be released from their guarantees.

The following summarized financial information is presented for Toll Brothers, Inc., the Subsidiary Issuer, and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among Toll Brothers, Inc., the Subsidiary Issuer and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.

Summarized Balance Sheet Data (amounts in millions):

	July 31, 2024
Assets
Cash	$	757.8
Inventory	$	10,061.0
Amount due from Non-Guarantor Subsidiaries	$	698.1
Total assets	$	12,294.6
Liabilities & Stockholders' Equity
Loans payable	$	996.8
Senior notes	$	1,596.9
Total liabilities	$	5,256.0
Stockholders' equity	$	7,038.7

Summarized Statement of Operations Data (amounts in millions):

	For the nine months ended July 31, 2024
Revenues	$	7,389.5
Cost of revenues	$	5,282.0
Selling, general and administrative	$	707.4
Income before income taxes	$	1,434.2
Net income	$	1,073.0

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SEGMENTS

We operate in the following five geographic segments, with current operations generally located in the states listed below:

•The North region: Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New York and Pennsylvania;

•The Mid-Atlantic region: Georgia, Maryland, North Carolina, Tennessee and Virginia;

•The South region: Florida, South Carolina and Texas;

•The Mountain region: Arizona, Colorado, Idaho, Nevada and Utah; and

•The Pacific region: California, Oregon and Washington.

The tables below summarize information related to units delivered and revenues, net contracts signed, and income (loss) before income taxes, by segment, for the periods indicated, and information related to backlog, by segment, as of the dates indicated.

Units Delivered and Revenues:

	Three months ended July 31,
	Revenues ($ in millions)						Units Delivered				Average Delivered Price ($ in thousands)
	2024		2023		% Change		2024	2023	% Change		2024		2023		% Change
North	$	375.1	$	377.7	(1)	%	386	390	(1)	%	$	971.8	$	968.6	—	%
Mid-Atlantic	335.7		288.5		16	%	362	247	47	%	$	927.4	$	1,167.9	(21)	%
South	776.3		632.6		23	%	934	732	28	%	$	831.1	$	864.2	(4)	%
Mountain	670.0		726.0		(8)	%	774	775	—	%	$	865.7	$	936.8	(8)	%
Pacific	566.4		648.4		(13)	%	358	380	(6)	%	$	1,581.9	$	1,706.4	(7)	%
Total home building	2,723.5		2,673.2		2	%	2,814	2,524	11	%	$	967.8	$	1,059.1	(9)	%
Other	1.0		1.4
Total home sales revenue	2,724.5		2,674.6		2	%	2,814	2,524	11	%	$	968.2	$	1,059.7	(9)	%
Land sales and other revenue	3.5		13.0
Total revenue	$	2,727.9	$	2,687.6

	Nine months ended July 31,
	Revenues ($ in millions)						Units Delivered				Average Delivered Price ($ in thousands)
	2024		2023		% Change		2024	2023	% Change		2024		2023		% Change
North	$	983.0	$	1,081.9	(9)	%	1,024	1,155	(11)	%	$	960.0	$	936.7	2	%
Mid-Atlantic	976.0		787.2		24	%	1,017	687	48	%	$	959.7	$	1,145.9	(16)	%
South	1,967.5		1,544.8		27	%	2,369	1,880	26	%	$	830.5	$	821.7	1	%
Mountain	1,727.0		1,880.4		(8)	%	1,945	2,090	(7)	%	$	887.9	$	899.7	(1)	%
Pacific	1,650.0		1,619.1		2	%	1,027	1,030	—	%	$	1,606.6	$	1,571.9	2	%
Total home building	7,303.5		6,913.4		6	%	7,382	6,842	8	%	$	989.4	$	1,010.4	(2)	%
Other	(0.2)		0.7
Total home sales revenue	7,303.3		6,914.1		6	%	7,382	6,842	8	%	$	989.3	$	1,010.5	(2)	%
Land sales and other revenue	210.0		60.7
Total revenue	$	7,513.3	$	6,974.8

Note: Due to rounding, amounts may not add.

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Net Contracts Signed:

	Three months ended July 31,
	Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)
	2024		2023		% Change		2024	2023	% Change		2024		2023		% Change
North	$	334.7	$	330.7	1	%	329	344	(4)	%	$	1,017.3	$	961.3	6	%
Mid-Atlantic	340.4		296.4		15	%	354	317	12	%	$	961.6	$	935.3	3	%
South	626.9		513.8		22	%	763	632	21	%	$	821.6	$	812.9	1	%
Mountain	658.1		481.1		37	%	721	605	19	%	$	912.7	$	795.2	15	%
Pacific	447.4		541.5		(17)	%	323	347	(7)	%	$	1,385.1	$	1,560.5	(11)	%
Total consolidated	$	2,407.5	$	2,163.5	11	%	2,490	2,245	11	%	$	966.9	$	963.7	—	%

	Nine months ended July 31,
	Net Contract Value ($ in millions)						Net Contracted Units				Average Contracted Price ($ in thousands)
	2024		2023		% Change		2024	2023	% Change		2024		2023		% Change
North	$	1,085.7	$	1,012.0	7	%	1,066	1,068	—	%	$	1,018.5	$	947.6	7	%
Mid-Atlantic	928.0		886.0		5	%	976	884	10	%	$	950.8	$	1,002.3	(5)	%
South	1,843.6		1,433.2		29	%	2,230	1,796	24	%	$	826.7	$	798.0	4	%
Mountain	1,971.5		1,194.4		65	%	2,206	1,433	54	%	$	893.7	$	833.5	7	%
Pacific	1,584.5		1,367.5		16	%	1,095	858	28	%	$	1,447.0	$	1,593.8	(9)	%
Total consolidated	$	7,413.3	$	5,893.1	26	%	7,573	6,039	25	%	$	978.9	$	975.8	—	%

Backlog:

	At July 31,
	Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
	2024		2023		% Change		2024	2023	% Change		2024		2023		% Change
North	$	1,067.7	$	1,051.1	2	%	998	1,035	(4)	%	$	1,069.8	$	1,015.6	5	%
Mid-Atlantic	906.3		1,060.8		(15)	%	904	1,039	(13)	%	$	1,002.6	$	1,021.0	(2)	%
South	1,972.2		2,245.8		(12)	%	2,173	2,439	(11)	%	$	907.6	$	920.8	(1)	%
Mountain	1,824.8		1,917.9		(5)	%	1,838	1,867	(2)	%	$	992.8	$	1,027.3	(3)	%
Pacific	1,295.6		1,599.2		(19)	%	856	915	(6)	%	$	1,513.6	$	1,747.7	(13)	%
Total consolidated	$	7,066.6	$	7,874.8	(10)	%	6,769	7,295	(7)	%	$	1,044.0	$	1,079.5	(3)	%

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	At October 31,
	Backlog Value ($ in millions)						Backlog Units				Average Backlog Price ($ in thousands)
	2023		2022		% Change		2023	2022	% Change		2023		2022		% Change
North	$	964.1	$	1,119.5	(14)	%	956	1,122	(15)	%	$	1,008.5	$	997.8	1	%
Mid-Atlantic	953.0		960.5		(1)	%	945	842	12	%	$	1,008.4	$	1,140.7	(12)	%
South	2,093.4		2,352.5		(11)	%	2,312	2,523	(8)	%	$	905.5	$	932.4	(3)	%
Mountain	1,577.7		2,597.3		(39)	%	1,577	2,524	(38)	%	$	1,000.5	$	1,029.0	(3)	%
Pacific	1,357.1		1,844.3		(26)	%	788	1,087	(28)	%	$	1,722.2	$	1,696.7	2	%
Total consolidated	$	6,945.3	$	8,874.1	(22)	%	6,578	8,098	(19)	%	$	1,055.8	$	1,095.8	(4)	%

Income (Loss) Before Income Taxes ($ amounts in millions):

	Three months ended July 31,						Nine months ended July 31,
	2024		2023		% Change		2024		2023		% Change
North	$	64.6	$	49.1	32	%	$	149.1	$	136.6	9	%
Mid-Atlantic	73.4		71.1		3	%	377.5		158.5		138	%
South	161.2		126.9		27	%	386.1		268.0		44	%
Mountain	113.8		146.8		(22)	%	275.9		368.0		(25)	%
Pacific	145.9		183.4		(20)	%	420.4		419.9		—	%
Total home building	558.9		577.3		(3)	%	1,609.0		1,351.0		19	%
Corporate and other	(55.3)		(24.2)		(129)	%	(144.4)		(113.6)		(27)	%
Total consolidated	$	503.6	$	553.1	(9)	%	$	1,464.6	$	1,237.4	18	%

“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups; interest income; income from certain of our ancillary businesses, including our apartment rental development business and our high-rise urban luxury condominium operations; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.

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FISCAL 2024 COMPARED TO FISCAL 2023

North

	Three months ended July 31,								Nine months ended July 31,
	2024			2023			Change		2024			2023			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	375.1		$	377.7		(1)	%	$	983.0		$	1,081.9		(9)	%
Units delivered	386			390			(1)	%	1,024			1,155			(11)	%
Average delivered price ($ in thousands)	$	971.8		$	968.6		—	%	$	960.0		$	936.7		2	%
Net Contracts Signed:
Net contract value ($ in millions)	$	334.7		$	330.7		1	%	$	1,085.7		$	1,012.0		7	%
Net contracted units	329			344			(4)	%	1,066			1,068			—	%
Average contracted price ($ in thousands)	$	1,017.3		$	961.3		6	%	$	1,018.5		$	947.6		7	%
Home sales cost of revenues as a percentage of home sale revenues	77.0		%	81.0		%			77.6		%	79.9		%
Income before income taxes ($ in millions)	$	64.6		$	49.1		32	%	$	149.1		$	136.6		9	%
Number of selling communities at July 31,	40			41			(2)	%

The decreases in the number of homes delivered in the fiscal 2024 periods were 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 an increase in spec homes delivered. The increase in the average prices of homes delivered in the nine-month period ended July 31, 2024 was primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas and/or products.

The decreases in the number of net contracts signed in the three-month period ended July 31, 2024, compared to the prior year period, was due to a decrease in the average number of selling communities offset by improved demand. The increases in the average value of each contract signed in the fiscal 2024 periods were mainly due to a shift in the number of contracts signed to more expensive areas and/or products.

The increases in income before income taxes in the three-month and nine-month fiscal 2024 periods were attributable to lower home sales cost of revenues, as a percentage of home sale revenues, and lower SG&A costs, offset, in part, by lower earnings from decreased revenue and income from unconsolidated entities. The decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2024 periods were primarily due to a shift in product mix/areas to higher-margin areas and by lower interest expense as a percentage of home sales revenues. In addition, the nine-month fiscal 2023 period was impacted by $2.7 million of land impairment charges recognized in connection with a planned land sale. No similar charge was recognized in the nine-month fiscal 2024 period.

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Mid-Atlantic

	Three months ended July 31,								Nine months ended July 31,
	2024			2023			Change		2024			2023			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	335.7		$	288.5		16	%	$	976.0		$	787.2		24	%
Units delivered	362			247			47	%	1,017			687			48	%
Average delivered price ($ in thousands)	$	927.4		$	1,167.9		(21)	%	$	959.7		$	1,145.9		(16)	%
Net Contracts Signed:
Net contract value ($ in millions)	$	340.4		$	296.4		15	%	$	928.0		$	886.0		5	%
Net contracted units	354			317			12	%	976			884			10	%
Average contracted price ($ in thousands)	$	961.6		$	935.3		3	%	$	950.8		$	1,002.3		(5)	%
Home sales cost of revenues as a percentage of home sale revenues	70.8		%	69.2		%			72.0		%	71.5		%
Income before income taxes ($ in millions)	$	73.4		$	71.1		3	%	$	377.5		$	158.5		138	%
Number of selling communities at July 31,	50			34			47	%

The increases in the number of homes delivered in the fiscal 2024 periods were 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, an increase in community count and an increase in spec homes delivered. The decreases in the average price of homes delivered in the fiscal 2024 periods were 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 increases in the number of net contracts signed in the fiscal 2024 periods were mainly due to the increase in the average number of selling communities, offset, in part, by lower demand. The increase in the average value of each contract signed in the three-month fiscal 2024 period was mainly due to a shift in the number of contracts signed to more expensive areas and/or products.The decrease in the average value of each contract signed in the nine-month fiscal 2024 period was mainly due to a shift in the number of contracts signed to less expensive areas and/or products and sales price increases.

The increases in income before income taxes in the fiscal 2024 periods were mainly due to higher earnings from increased revenue, offset, in part, by higher home sales cost of revenues, as a percentage of home sales revenues and by higher SG&A costs. The increases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2024 periods were primarily due to a shift in product mix/areas to lower-margin areas. The nine-month fiscal 2024 period was also impacted by the sale of a land parcel to a commercial developer that resulted in a pre-tax gain of $175.2 million during the nine months ended July 31, 2024. Furthermore, the nine-month fiscal 2023 period was impacted by a $10.3 million land impairment charge, included in land sales and other cost of revenues, which was recognized in connection with a planned land sale, compared to $0.6 million in the nine-month fiscal 2024 period.

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South

	Three months ended July 31,								Nine months ended July 31,
	2024			2023			Change		2024			2023			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	776.3		$	632.6		23	%	$	1,967.5		$	1,544.8		27	%
Units delivered	934			732			28	%	2,369			1,880			26	%
Average delivered price ($ in thousands)	$	831.1		$	864.2		(4)	%	$	830.5		$	821.7		1	%
Net Contracts Signed:
Net contract value ($ in millions)	$	626.9		$	513.8		22	%	$	1,843.6		$	1,433.2		29	%
Net contracted units	763			632			21	%	2,230			1,796			24	%
Average contracted price ($ in thousands)	$	821.6		$	812.9		1	%	$	826.7		$	798.0		4	%
Home sales cost of revenues as a percentage of home sale revenues	71.3		%	72.8		%			72.1		%	74.7		%
Income before income taxes ($ in millions)	$	161.2		$	126.9		27	%	$	386.1		$	268.0		44	%
Number of selling communities at July 31,	146			108			35	%

The increases in the number of homes delivered in the fiscal 2024 periods were mainly due to an increase in community count, an increase in spec homes delivered and higher backlog conversion, offset, in part, 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 the three-month fiscal 2024 period was primarily due to a shift in the number of homes delivered to less expensive areas. The increase in the average price of homes delivered in the nine-month fiscal 2024 period was primarily due to sales price increases and a shift in the number of homes delivered to more expensive areas.

The increases in the number of net contracts signed in the fiscal 2024 periods were due principally to an increase in the average number of selling communities, offset, in part, by lower demand. The increases in the average value of each contract signed in the fiscal 2024 periods were primarily due to a shift in the number of contracts signed to more expensive areas or product types.

The increases in income before income taxes in the fiscal 2024 periods were principally due to higher earnings from increased revenues and lower home sales cost of revenues, as a percentage of home sale revenues, offset, in part, by higher SG&A costs. The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2024 periods were primarily due to a shift in product mix/areas to higher-margin areas and lower interest expense as a percentage of home sales revenues.

Mountain

	Three months ended July 31,								Nine months ended July 31,
	2024			2023			Change		2024			2023			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	670.0		$	726.0		(8)	%	$	1,727.0		$	1,880.4		(8)	%
Units delivered	774			775			—	%	1,945			2,090			(7)	%
Average delivered price ($ in thousands)	$	865.7		$	936.8		(8)	%	$	887.9		$	899.7		(1)	%
Net Contracts Signed:
Net contract value ($ in millions)	$	658.1		$	481.1		37	%	$	1,971.5		$	1,194.4		65	%
Net contracted units	721			605			19	%	2,206			1,433			54	%
Average contracted price ($ in thousands)	$	912.7		$	795.2		15	%	$	893.7		$	833.5		7	%
Home sales cost of revenues as a percentage of home sale revenues	76.2		%	73.6		%			76.9		%	73.6		%
Income before income taxes ($ in millions)	$	113.8		$	146.8		(22)	%	$	275.9		$	368.0		(25)	%
Number of selling communities at July 31,	122			111			10	%

The decrease in the number of homes delivered in the nine-month period ended July 31, 2024 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,

41

partially offset by higher backlog conversion and an increase in spec homes delivered in the fiscal 2024 periods. The decreases in the average price of homes delivered in the fiscal 2024 periods were primarily due to a shift in the number of contracts delivered to less expensive areas or product types.

The increases in the number of net contracts signed in the fiscal 2024 periods were primarily due to an increase in the number of selling communities and improved demand. The increases in the average value of each contract signed in the fiscal 2024 periods were mainly due to a shift in the number of contracts signed to more expensive areas or product types.

The decreases in income before income taxes in the fiscal 2024 periods were due mainly to lower earnings from decreased revenues in the fiscal 2024 periods and higher home sales cost of revenues, as a percentage of home sale revenues. The increases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal 2024 periods were primarily due to a shift in product mix/areas to lower-margin areas. The fiscal 2024 nine-month period was also impacted by higher inventory impairment charges, principally due to a $24.9 million impairment charge associated with one master-planned community.

Pacific

	Three months ended July 31,								Nine months ended July 31,
	2024			2023			Change		2024			2023			Change
Units Delivered and Revenues:
Home sales revenues ($ in millions)	$	566.4		$	648.4		(13)	%	$	1,650.0		$	1,619.1		2	%
Units delivered	358			380			(6)	%	1,027			1,030			—	%
Average delivered price ($ in thousands)	$	1,581.9		$	1,706.4		(7)	%	$	1,606.6		$	1,571.9		2	%
Net Contracts Signed:
Net contract value ($ in millions)	$	447.4		$	541.5		(17)	%	$	1,584.5		$	1,367.5		16	%
Net contracted units	323			347			(7)	%	1,095			858			28	%
Average contracted price ($ in thousands)	$	1,385.1		$	1,560.5		(11)	%	$	1,447.0		$	1,593.8		(9)	%
Home sales cost of revenues as a percentage of home sale revenues	68.3		%	66.2		%			68.2		%	67.8		%
Income before income taxes ($ in millions)	$	145.9		$	183.4		(20)	%	$	420.4		$	419.9		—	%
Number of selling communities at July 31,	46			51			(10)	%

The decrease in the number of homes delivered in the three-month period ended July 31, 2024 was mainly due to the lower 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 higher backlog conversion and an increase in spec homes delivered. The average price of homes delivered decreased in the three-month fiscal 2024 period compared to the prior-year period primarily due to a shift in the number of contracts delivered to less expensive areas or product types. The increase in the average price of homes delivered in the nine-month fiscal 2024 period was primarily due to a shift in the number of homes delivered to more expensive areas and/or products and sales price increases.

The decrease in the number of net contracts signed in the three-month fiscal 2024 period was primarily due to a decrease in the number of selling communities in the fiscal 2024 period. The increase in the number of net contracts signed in the nine-month fiscal 2024 period was primarily due to improved demand, offset, in part, by a decrease in the number of selling communities in the fiscal 2024 period. The decreases in the average value of each contract signed in the fiscal 2024 periods were primarily due to a shift in the number of contracts signed to less expensive areas or product types, offset, in part, by decreased sales incentives.

The decrease in income before income taxes in the three-month fiscal 2024 period was mainly due to lower earnings from decreased revenues in the fiscal 2024 period, 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, offset, in part, by lower interest expense as a percentage of home sales revenues. The three-month fiscal 2023 period was also impacted by higher land impairment charges. We recognized a $2.2 million land impairment charge, included in land sales and other cost of revenues, during the three-month fiscal 2023 period in connection with a planned land sale. No similar charge was recognized in the fiscal 2024 period.

Income before income taxes was essentially flat in the nine-month fiscal 2024 period compared to the nine-month fiscal 2023 period.

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Corporate and Other

In the three months ended July 31, 2024 and 2023, loss before income taxes was $55.3 million and $24.2 million, respectively. The increase in the loss before income taxes was principally due to a $35.0 million gain recognized from a property sale by one of our Rental Property Joint Ventures in the fiscal 2023 period, offset by higher earnings from our mortgage company operations primarily due to increased volume and increased management fees related to our high-rise urban luxury condominium business operations as a result of unit closings. In addition, the fiscal 2024 period was impacted by higher losses by various Rental Property Joint Ventures, increased losses at one of our Home Building Joint Ventures, and reduced income at one Home Building Joint Venture due to the underlying asset being sold out.

In the nine months ended July 31, 2024 and 2023, loss before income taxes was $144.4 million and $113.6 million, respectively. The increase in the loss before income taxes in the fiscal 2024 period was principally due to $27.7 million of gains from litigation settlements - net, recognized in the fiscal 2023 period, which did not recur in the fiscal 2024 period. In addition, the fiscal 2023 period benefited from higher income related to our share of gains on property sales by Rental Property Joint Ventures and a $4.4 million gain from a bulk sale of security monitoring accounts by our smart home technology business. The fiscal 2024 period was also impacted by: a $5.0 million gain recognized from an investment we held in a privately held company that sold substantially all of its assets to a third party; an increase in interest income; increased management fees related to our high-rise urban luxury condominium business operations as a result of unit closings; higher earnings from our mortgage company operations primarily due to increased volume; and higher losses by various Rental Property Joint Ventures.

AVAILABLE INFORMATION

Our principal Internet address is www.tollbrothers.com, and our Investor Relations website is located at investors.tollbrothers.com. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available through our Investor Relations website, free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We provide information about our business and financial performance, including our company overview, on our Investor Relations website. Additionally, we webcast our earnings calls and certain events we participate in with members of the investment community on our Investor Relations website. Corporate governance information, including our codes of ethics, corporate governance guidelines, and board committee charters, is also available on our Investor Relations website. The content of our websites is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk primarily due to fluctuations in interest rates. We utilize both fixed-rate and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flow. Conversely, for variable-rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but do affect our earnings and cash flow. We generally do not have the obligation to prepay fixed-rate debt before maturity, and, as a result, interest rate risk and changes in fair value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance it.

The table below sets forth, at July 31, 2024, our debt obligations by scheduled maturity, weighted-average interest rates, and estimated fair value (amounts in thousands):

	Fixed-rate debt			Variable-rate debt (a),(b)
Fiscal year of maturity	Amount		Weighted- average interest rate	Amount		Weighted- average interest rate
2024	$	39,885	5.49%	$	—
2025	154,672		5.26%	160,478		7.28%
2026	412,380		4.92%	169,647		6.53%
2027	484,216		4.84%	60,938		5.34%
2028	409,695		4.31%	—
Thereafter	456,503		3.75%	487,500		5.34%
Discounts, premiums and deferred issuance costs - net	(11,423)			(2,414)
Total	$	1,945,928	4.57%	$	876,149	5.94%
Fair value at July 31, 2024	$	1,896,398		$	878,562

(a)    Based upon the amount of variable-rate debt outstanding at July 31, 2024, and holding the variable-rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $8.8 million per year, without consideration of the Company’s interest rate swap transactions.

(b)    In November 2020, we entered into five interest rate swap transactions to hedge $400.0 million of the $650.0 million Term Loan Facility, which is included in the variable-rate debt column in the table above. The interest rate swaps effectively fix the interest cost on the $400.0 million at 0.369% plus the spread set forth in the pricing schedule in the Term Loan Facility through October 2025. The spread was 0.90% as of July 31, 2024. These interest rate swaps were designated as cash flow hedges.

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ITEM 4. CONTROLS AND PROCEDURES

Any controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected; however, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the “Evaluation Date”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has not been any change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our quarter ended July 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors as previously disclosed in Part I, Item 1A., “Risk Factors” in our 2023 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

During the three-month period ended July 31, 2024, we repurchased the following shares of our common stock:

Period	Total number of shares purchased (a)	Average price paid per share (b)		Total number of shares purchased as part of publicly announced plans or programs (c)	Maximum number of shares that may yet be purchased under the plans or programs (c)
					(in thousands)
May 1, 2024 to May 31, 2024	479	$	120.46	479	18,018
June 1, 2024 to June 30, 2024	1,068	$	117.81	1,068	16,950
July 1, 2024 to July 31, 2024	526	$	113.90	526	16,424
Total	2,073			2,073

(a)    Our stock incentive plans permit us to withhold from the total number of shares that otherwise would be issued to a performance based restricted stock unit recipient or a restricted stock unit recipient upon distribution that number of shares having a fair value at the time of distribution equal to the applicable income tax withholdings due and remit the remaining shares to the recipient. During the three months ended July 31, 2024, we withheld 1,886 of the shares subject to performance based restricted stock units and/or restricted stock units to cover approximately $245,000 of income tax withholdings and we issued the remaining 4,559 shares to the recipients. The shares withheld are not included in the total number of shares purchased in the table above.

Our stock incentive plans also permit participants to exercise non-qualified stock options using a “net exercise” method. In a net exercise, we generally withhold from the total number of shares that otherwise would be issued to the participant upon exercise of the stock option that number of shares having a fair market value at the time of exercise equal to the option exercise price and applicable income tax withholdings, and remit the remaining shares to the participant. During the three-month period ended July 31, 2024, the net exercise method was not employed to exercise options.

(b) Average price paid per share includes costs associated with the purchases, but excludes any excise tax that we accrue on our share repurchases as a result of the Inflation Reduction Act of 2022.

(c)    On December 13, 2023, our Board of Directors authorized the repurchase of 20 million shares of our common stock in open market transactions, privately negotiated transactions (including accelerated share repurchases), issuer tender offers or other financial arrangements or transactions for general corporate purposes, including to obtain shares for the Company’s equity award and other employee benefit plans. This authorization terminated, effective December 13, 2023, the existing authorization that had been in effect since May 17, 2022. Our Board of Directors did not fix any expiration date for the current share repurchase program.

Except as set forth above, we have not repurchased any of our equity securities during the three-month period ended

July 31, 2024.

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Dividends

During the nine months ended July 31, 2024, we paid cash dividends of $0.67 per share to our shareholders. The payment of dividends is within the discretion of our Board of Directors and any decision to pay dividends in the future will depend upon an evaluation of a number of factors, including our results of operations, our capital requirements, our operating and financial condition, and any contractual limitations then in effect. Our revolving credit agreement and term loan agreement each require us to maintain a minimum tangible net worth (as defined in the applicable agreement), which restricts the amount of dividends we may pay. During the nine months ended July 31, 2024, these limitations did not meaningfully restrict the amount of cash dividends paid. At July 31, 2024, under these agreements we could have paid up to approximately $3.34 billion of cash dividends.

ITEM 5. OTHER INFORMATION

Securities Trading Plans of Directors and Executive Officers

During the period covered by this Quarterly Report on Form 10-Q, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS

4.1*	Thirty-Third Supplemental Indenture dated as of July 31, 2024 to the Indenture dated as of February 7, 2012 by and among the party listed on Schedule A hereto and The Bank of New York Mellon, as successor trustee
31.1*	Certification of Douglas C. Yearley, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Martin P. Connor pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Douglas C. Yearley, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Martin P. Connor pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial statements from Toll Brothers, Inc. Quarterly Report on Form 10-Q for the quarter ended July 31, 2024, filed on September 3, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

* Filed electronically herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TOLL BROTHERS, INC.
		(Registrant)
Date:	September 3, 2024	By:	/s/ Martin P. Connor
			Martin P. Connor Senior Vice President and Chief Financial Officer (Principal Financial Officer)
Date:	September 3, 2024	By:	/s/ Michael J. Grubb
			Michael J. Grubb Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

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