Good morning, and welcome to the Toll Brothers First Quarter Fiscal Year 2025 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. To ask a question, you may press star then one on your telephone keypad. And to withdraw your question, please press star then two. The company is planning to end the call at 9:30 when the market opens. During the question and answer session, please limit yourself to one question and one follow-up. And please note this event is being recorded. I would now like to turn the conference over to Mr. Douglas Yearley, CEO. Please go ahead, sir.

Thank you, Chuck. Good morning. Welcome and thank you all for joining us. With me today are Marty Connor, Chief Financial Officer, Rob Parrahaus, President and Chief Operating Officer, Wendy Marlette, Chief Marketing Officer, and Greg Ziegler, Senior VP, Treasurer, and Head of Investor Relations. As usual, I caution you that many statements on this call are forward-looking based on assumptions about the economy, world events, housing and financial markets, interest rates, availability of labor and materials, inflation, and many other factors beyond our control, that could significantly affect future results. Please read our statement on forward-looking information in our earnings release of last night and on our website to better understand the risks associated with our forward-looking statements. Last night, we reported first quarter deliveries of 1,991 homes at an average price of $925,000. For home sales revenues of $1.84 billion. Our adjusted gross margin was 26.9% or 65 basis points better than guidance and our SG&A expense as a percentage of home sales revenue was 13.1% or 40 basis points above guidance. While our net income and earnings per share came in below expectations this was due primarily to impairments, and a delay in the sale of a stabilized apartment property in one of our joint ventures. Our core homebuilding operations met expectations in the quarter. From a demand perspective, we signed 2,307 net contracts for $2.3 billion in the first quarter, up 13% in units and 12% in dollars, compared to last year's very strong first quarter when contracts were up approximately 40% in both units and dollars. On a per community basis, contracts were up 2% compared to last year. We also continue to see a very healthy deposit conversion ratio in the first quarter with 82% of our deposits converted to sales, significantly higher than…

Low net debt, and no significant debt maturities this fiscal year.

As announced last week, we recently extended the maturities of our credit facilities to February 2030 and upsized our revolver to $2.35 billion. We also continue to expect strong cash flow generation from operations this year and reaffirm our $500 million of targeted full-year share repurchases. We expect to continue investing in the growth of our business while simultaneously returning excess capital to our shareholders. With that, I will turn it over to Marty.

Thanks, Doug. First quarter net income was $177.7 million or $1.75 per share diluted. These results were below expectations due to impairments, and lower than projected joint venture land sales and other income. The miss on joint venture and other income was mainly due to a delay in the sale of a stabilized apartment building from one of our joint ventures. We now expect this sale, which is under contract, to close in the second half of fiscal 2025. Positively, our core homebuilding operations met expectations. In the first quarter, we delivered 1,991 homes, at an average price of $925,000 and generated home sales revenue of $1.84 billion. The average price of homes delivered in the quarter

was at the low end of our range due primarily to mix.

As we delivered more homes in our mountain region and had fewer deliveries in the North and Pacific regions, than we had projected. As Doug mentioned, we signed 2,307 net agreements

for $2.3 billion in the quarter. This was up 13% in units and 12% in dollars. Compared to the first quarter of fiscal year 2024. The average price of contracts signed in the quarter was approximately $1 million which was essentially flat compared to both the fourth quarter of fiscal 2024 and the same period last year. Our first quarter adjusted gross margin was 26.9%, 65 basis points better than our guidance of 26.25%. Q1 gross margin exceeded our guidance due primarily to mix. Increased operating efficiency and slightly better margin from sell and sell spec homes. Compared to what we had projected. All regions and all property segment project product segments exceeded our expectations. Based on our first quarter results, the gross margin embedded in our backlog and the mix trends that we are seeing early in the spring selling season, we are maintaining our full-year adjusted gross margin guidance. Of 27.25%. We expect our second quarter adjusted gross margin to also be 27.25%. Write-offs in our home sale gross margin totaled $16.4 million in the quarter, $3.9 million of these impairments were associated with pre-development costs on deals we are no longer pursuing. And the remaining $12.5 million was related to a handful of operating communities in various markets around the country. We also had $1.8 million of land sale impairments, and $4.4 million of pre-development write-offs in other income related to apartment projects, we are no longer pursuing. SG&A as a percentage of revenue, was 13.1% in the first quarter, compared to our guide of 12.7%. Note that our SG&A margin in the first quarter is always higher as it is generally our lowest revenue quarter and includes an accelerated employee stock-based compensation expense that only hits in that first quarter. A 40 basis point SG&A, miss,…

Thank you, Marty. Before I open it up for questions, I'd like to thank our Toll Brothers employees for their hard work, dedication and commitment to our customers. Their talent and constant focus on our business, is the driver of our long-term success. Okay. Chuck, let's open it up to questions.

We will now begin the question and answer session. As a reminder, the company is planning to end the call at 9:30 when the market opens. During the question and answer session, please limit yourself to one question and one follow-up.

To ask a question, you may press star then one on your touch tone phone.

If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. And our first question will come from Stephen Kim with Evercore ISI. Please go ahead.

Thanks very much, guys. Appreciate all the, all the color. I guess, I wanted to start off by just talking about your inventory. You talked about the fact that your spec levels were you were comfortable with them as well as the stage of construction. You know, and we can see that your specs actually came in a little lighter than we were expecting. So, you know, that all seems, you know, positive. That being said, your inventory did rise a lot, particularly the construction in progress. Number rose pretty significantly. And I was curious if you could talk about what drove that. Was there something about the land or the land on which you're building these homes, which have a greater value? Where are you just naturally are you at a later stage of construction, but you're just comfortable with it? Just if you could help us understand sort of what what's going into the much higher inventory number that we saw this quarter.

Yeah, Steven. I think you hit it at it. I think we have more specs under construction, and they're at a little bit further stage of completion stage of spend. Than they had been in prior years or more recently. And that's with an eye towards having the inventory hit our 11,400 delivery guidance for this year.

And I thought you were gonna continue there because that you also had talked about the fact that you were looking to maybe slow down a little bit on your specs. As you headed later this year in later in the year. Is this something that we should just is this just that's the kind of the natural cadence that we should expect to see from you from this point forward as we go into the spring, you know, just carry more specs and that sort of thing and then sort of bringing that down as we go later in the year.

Yeah. Yeah. Steve, we definitely focus on seasonality, when most buyers are in the market, when most buyers wanna move in, which is generally the summer months, and we try to time the start and the construction and, of course, then the completion of our spec inventory so it lines up with seasonality. And I think that's what you're seeing right now. We have 3,200 spec homes that are at the beginning of framing or forward. So framing and beyond, and then we have about 1,000 specs that are sitting at foundation. Some of those are on hold at foundation. Where we haven't yet released them for framing. And then we have about 1,600 specs that are sitting at permit that have not been released yet for foundations to go in. And this is all strategic. It's all based on the timing of the year. We're very comfortable with where the levels stand. We did this on purpose to set up for the spring and for the summer delivery. Over time, short over short term timing, we do expect to cut back a bit on the new spec starts. So when I tell you that there are 1,600 at permit, but they've been held and are not authorized to go to foundation, you know, we're keeping an eye on that closely. When I tell you there's 1,000 at foundation that haven't yet been released for framing, you know, that's all strategic and intentional. It is all decided by market. There are some markets that are performing very well. Where we are actually increasing our spec activity and those other markets as we've talked about, that have had more mixed results lately. Where we are being more tempered. And so this is the analysis we do. But at the moment, we are leaning more towards less spec starts than you've seen in the past.

I just add to that, Doug, that it's even more specific than by market. It's by community. Although the mentality often applies by market.

Yeah. And that's very helpful. And it kinda leads into the next question that I have, which is about spring selling season. So you made the comment about it being mixed, and I think that that is something that we've been hearing from a number of folk. I guess what I really wanted to understand is what is the company's posture relative to your production pipeline and your anticipated land spend, over the next year or two in if the spring selling season continues to be mixed, is this an environment which will cause you to have to pivot in some way? And if so, what kind of pivot or nudging the dial one way or the other? Should we be expecting, if the spring selling season remains mixed.

If the spring selling season remains mixed, the overall land spend will come down. We will become more conservative in certain markets. In the underwriting of new land. As you know and as we brag about all the time, we have a terrific pipeline of owned and optioned land. We are in great shape in all of our markets. We have the opportunity to be very selective. While we haven't guided the 26 community count growth, I can tell you that the land we control today provides the opportunity to continue growing communities as we have the last few years, without running out and finding any more land. So it's a very local business. We will still be active in the land buying business, but overall, the land spend would come down.

The next question will come from John Lovallo with UBS. Please go ahead.

Good morning, guys. Thanks for taking my questions as well. Maybe just starting off on the gross margin. The second quarter gross margin outlook would seem to imply sort of steady fiscal year 2Q to 4Q gross margins to achieve that full-year target. Of 27.25. So I guess the question is, how are you thinking about incentives in that forecast? Are you assuming, you know, pretty fairly stable levels with what we saw in the first quarter?

Sure. So the second quarter gross margin with our guide jumping up to 27.25, is because we expect to have more Pacific which is higher margin, we expect to have more luxury which is higher margin. And a bit less affordable luxury and empty nester. Or age-targeted. So the mix aligns with that increased guide. When you look to the second half of the year, obviously, it needs to be modestly above 27.25. Modestly. It is common that it's pretty steady as a pretty good. Because the first quarter only had 2,000 deliveries, so the 26.9 is off of a smaller part of you know, it's not a quarter of the year. It's less than that. So we continue to see in the second half of the year pretty much what I just described, which is more Pacific, more North. And North has been very high margin as the northern region, as we talked about, has been very strong. And we have more luxury than we have affordable and age-targeted. With respect to your question about you know, our confidence level and how we have budgeted, because we do recognize there are a number of sales that haven't occurred yet. We do have 6,300 homes in backlog. We have delivered 2,000 homes in the first quarter. So that is 8,300 of the 11,400. I'm not saying every home in backlog delivers, but most of that delivers. But we do recognize that there are some homes that still have to be sold. Many of those are spec. All I'll tell you is we have a great level of confidence in the conservatism we have brought to the pricing, the incentivizing that needs to occur community by community, market by market, to complete the year with the balance of those sales, and still hit the guided margin.

Yeah. I could just add to that, John, that the specs we have with roughly 1,000 of them complete, and so the cost there is known. There's no variability in that cost. And the specs we have under construction, which is another 2,300 or 2,400 behind that, are contracted for it, so the costs are pretty well locked down there. Gives us further confidence in terms of what we will sell and settle from this point forward through the balance of the year. And we base our estimates based on what we're seeing in the market most recently. For the balance of the year with some conservatism.

Okay. So you're not assuming any relief from rates or any pullback in incentives is what I was trying to get at. Okay. No. That's helpful. And then, you know, on the lower some of the lower price inventory negatively impacting sales, I'm curious, you know, what price points specifically that you were seeing some of that competition, you know, what market you're referring to? I mean, we've heard from some of the, you know, more entry-level focus folks that the inventory at the very low level is still fairly limited. So I'm just curious where you guys were seeing that real competition intensifying.

Sure. So, you know, when we go down in price, it's not nearly as low as many of the other builders and what many define as a starter market. You know, our 25% to 30% of our business that is first-time buyer is still the affluent luxury end of the first-time buyer. They're a bit older, late thirties. They may have a combined family income of $200,000, and they can afford a $600,000, $700,000, $800,000 home you know, even in today's rate market. So we rarely go down into the territory where I think there's been the most pain and there's the most affordability pressure. Some you know, I mentioned in my prepared comments our stronger markets. The softer markets in the first quarter included Jacksonville, Tampa, San Antonio, Phoenix, Reno, Salt Lake City, and Portland, which are very small for us. But I will say based on the last week or so of activity, and it's very early. You know, this is a very fluid market. We are a bit encouraged by what's happened in the last week or so. In several of these markets that were soft in Q1. So I would if it was one week you asked me about, I'd probably take Jacksonville, Tampa, and even Phoenix off the list. But, again, I'm not gonna be all that bold because it's one week. But those would be the places where we're feeling the most pressure, particularly as you come down a bit in price.

The next question will come from Trevor Allinson with Wolfe Research. Please go ahead.

Good morning and thank you for taking my questions. First, following up on the geographical question thinking about Southern California and Washington DC, demand in those markets, Southern California with the wildfires and then DC with the Doge impact on potential employment there. Have you started to see any impacts to either of those markets either from the wildfires or just from overall employment uncertainty in DC?

No. Washington DC which for us is Maryland, Northern Virginia, strong. Southern Cal, strong.

Okay. Great. It's good to hear. And then second, last fall, we consistently heard of buyers postponing home purchases expecting rates to come down in 2025. And for your buyer who generally is not battling qualification issues, you know, the rates not moving lower here. Are you starting to see a shift where some of those buyers that were maybe waiting before for rates to come down are starting to get back into the market and transact here, and then if not, can you talk about maybe what's holding them back? Is that still an expectation for rates to move lower or anything else to call out?

I think in some markets, we are seeing what you described. You know, our buyers are affluent. Nobody loves the six and seven eight three, but they can afford it. And they've been waiting a long time. And I think, if anything, they recognize now that rates are probably not going to move significantly lower. This year. I think that's where, you know, the indications are and it's time to move on with their lives. The kids have hit middle school. It's time to get a bigger house in a more prestigious town with a better school district. And they're going to move forward. Now that's not everywhere. If it was, then it wouldn't be the mixed market that I have described. So in those areas where buyers are a bit more hesitant, I think it's number one, those areas have had more significant price appreciation through the COVID years than other areas. So instead of a 40% to 50% price increase over the last five years, maybe they're in a market where there's been 60%, 70%, 80%, 100% price increase. And that includes Florida, primarily for Austin, Texas as an example. You know, where we've seen prices up dramatically. And I think, you know, that can call some concern to people that, boy, they just missed it. The prices up so much. That goes to affordability. There's markets where inventory levels are growing a bit. And so the resale market is not feeling as strong as it had in the past, and there are some fears about the ability to sell my home. And do they want a contract for a new move-up home when they're not as confident in selling their existing home as quickly or at the price that they thought they could sell it at. A lot of this growing inventory in existing markets is not with used homes coming on the market. It's with more new spec inventory hitting the market from the builders. And so those markets where you have more national builders, there may be more inventory that those national builders have put on the market. One of the reasons Boston down to Atlanta and particularly Boston down to the Carolinas. Has been so strong for us is because the resale market does not have a lot of the new home specs sitting on it because the big builders don't build there. And so the resale market tends to be the older traditional resales and there aren't a lot of those on the market, and it's tight. And the opportunity is to go new. And so that's one of the reasons the northeast mid-Atlantic is so strong. So it's a really mixed story. Part of it is what you described where there is our people are ready to move, but in other areas, there's a bit of a hesitancy. And we're just we're managing through all of it.

Trevor, the one thing I'd add to Doug's comments since you mentioned rates, is that 26% of our buyers pay all cash. So the rate equation is of less relevance. To them, and that is a really strong number for us.

And the LTV at 68% means people have the ability because of their financial strength, to take a bit less mortgage at a higher rate and still make the move. And since we're selling here, let's not forget mom and dad.

Right.

They are affluent. And they are wanting to help their kids. Move up in life and support down payments, or whatever else they can do through gifting, to lower the mortgage amount.

The next question will come from Mike Dahl with RBC Capital Markets. Please go ahead.

Morning. Thanks for taking my questions. At the risk of asking you to extrapolate where none of us really want to extrapolate a day, a week, a few weeks. Given your comments on kinda both the mixed, but then the more recent week, can you just help level set kind of what like, quantify some level of trends quarter to date because, typically, you would be up very significantly sequentially in terms of order pace. So how are you stacking up compared to that? What are you thinking in terms of a 2Q kind of pace, how you're tracking?

Yeah. We as you know, Mike, we're hesitant to give sales guidance, but I'll tell you that we believe that we will hit, we can hit, the market is there to hit, you know, with the margin we talked about and with, you know, we balanced pace and price. We are not margin proud. You know, we wanna drive returns. But we're also you know, we have a good mix and it's working really well and we're gonna continue to execute upon this strategy to stay in the middle lane between price and pace. And we think we will hit 3,000 contracts in Q2, which is 2.4 agreements per month. And you have it. Right, Marty?

Yeah. I think that's an achievable number. Without much move in the pricing of the homes? Correct. Okay. So status quo 3,000. Got it. In terms of then the spec dynamics, Marty, I think you mentioned kind of modest upside to spec margins as a driver for 1Q. Can you give us an update? And I know you've got kind of mix-adjusted numbers, like, for, like, there's a lot of things that go into the spec spread when you consider which specific lots you're building on. Can you give us an update on kinda where that where those margin spreads are on the specs versus built to order right now?

Mike, I'll take this one. Spec margin is still running as we talked in the past about 200 to 250 basis points below average. We're comfortable with that. We did a little better in the first quarter, which is why the margin was up and when we look at our spec that is now in our backlog that will be delivering, you know, at some point here, you know, one of the reasons we're comfortable with our guide going forward is because it's doing a bit better than that. On a related subject, which also includes spec, let's talk about incentives a little bit. The average incentive in Q4 of 2024 was $68,000. The average incentive in Q1 of 2025 was $62,000, so it came in by $6,000. We ended Q1 2025 or started Q2 2025. With an incentive at $55,000. So it had come down another $7,000 from the average in Q1. And with the mixed market we have described in some markets, were raising prices and cutting incentives. But in other markets, we know we will be giving back some of that improvement to take it back to what might have been the average in Q1. And we have all of that built in. Plus some additional cushion when we talk about, you know, the returns we expect over the balance of the year. So that's where things stand right now.

The next question will come from Michael Rehaut JPMorgan. Please go ahead.

Great. Thanks for taking my questions. Morning, everyone. Mike. I just wanted to circle back to, you know, your comment of mixed results. And I think there was a question about if those mixed results were to continue, how would that affect the rest of the year? And the answer that you gave was interesting in that it didn't you know, it appeared that, you know, your reiteration of full-year guidance is in some ways, I guess, kind of incorporating the current state of mixed results. In other words, kind of reflecting where we are today. So I wanted to know if that kind of my take on that is kind of accurate. And, you know, in other words, with maybe the present state where you just described your maybe raising prices in some communities, raising incentives in others, if that current state again, you know, in some of the mix of pricing actions here, anticipating in response to that mixed results type of dynamic if that's all kind of incorporated in your current guide.

Yes. We are anticipate with the guidance we have given, for the second quarter and the full year, we have assumed a continuation of this mixed market.

Right. Okay. That's helpful. And I think important just to obviously state explicitly.

Mike, I think it's also important to remember our backlog is two-thirds of what we have left to go. Right? So we're really talking about the other 3,000, 3,300 homes that we haven't sold and settled yet that have the I'll say, variability and potential to impact positively or negatively our margin guidance.

Right. No. That's fair as well. And I guess, you know, you'd was very helpful, Doug, in terms of walking through, you know, the dollar percent the dollars of incentives you know, 4Q, 1Q and where you stand today, which is pretty impressive, all the you know, I guess just to level set that, what was the average incentive in fiscal 2024? And, you know, I guess with any kind of forward-looking view, on land cost inflation, how are you thinking about land cost inflation this year and perhaps next year?

Q1 of 2024 Greg Ziegler tells me our incentive was $55,000. And I'm sorry, Mike, that I was focused on that number trying to get it for you. What was the other part? Land cost inflation. What do we think? Thank you. Apologies. Very happy with deal flow. Continue to find good action with our strict underwriting of a combination score of gross margin and IRR. It's modest. I would say low to mid-single digit. If I had, you know, that's where I think it is. Mike, I'm very pleased. We've had very unique opportunities lately in the land game. A lot of suburban office that is half occupied and is better suited to be torn down and rebuilt as residential with towns embracing that. Because they don't wanna look at a blighted half-empty office building anymore with the weeds growing. And they'd rather have some vibrancy and some people. And we have we're seeing a lot of cool deal flow around that, which is more infill. And the entitlements are a bit easier and more predictable. And the margins have been great. So just one example. But there's a lot of that going on. And, you know, we're really well suited for those kind of unique deals. With the way we go about it and as attractive as Toll Brothers is to many municipalities. So I'm very pleased in the land side, and the inflation is low.

And, Mike, since we've focused a lot about our projections for this year, that low inflation cost is not relevant to our projections for this year. The land we have in the projections for this year is already known. It's not gonna be impacted by any inflationary pressures.

And next year, for the most part. Yeah. It's hard to turn raw land into houses in, you know, less than eighteen months.

The next question will come from Jesse Letterman with Zelman and Associates. Please go ahead.

Actually, it's Ivy. Good morning. So, you know, I think what Michael Rehaut and others might be trying to get to just to circle back to guidance, is that going into the year, at the end of your fourth quarter and giving guidance for 1Q, you didn't know the market was gonna be mixed. And now the market is mixed, but yet your outlook for earnings did not change. I guess the question is, what were you incorporating as you gave that forecast for the original guidance? I think that's the disconnect. But I think, Marty, maybe you explained it because this year is only gonna have one quarter that could be at risk. So is that the framework that we should be thinking about just to circle back there and then I have a follow-up?

Sure. Great to hear your voice, Ivy. If you guys remember back in the fall, we were hinting towards the 27.50 gross margin in 2025. And then when we gave more definitive guidance in December, we cut that back modestly by 25 points to the 27.25. So there was a little bit of conservatism in December when we were thinking about, you know, where the market was. We felt better in December. But we had a bad September and October. As rates had jumped up and as we were heading into the election. So I wouldn't say we were euphoric in December. We were still cautious. And we were hopeful, and, you know, now that we sit here and mid-February, the results have been a bit more mixed than we thought, but we were still doing okay. And we're outperforming, frankly. Our spec pricing has been a bit better. There's more luxury coming. In the second half of the year as we've talked about. There's more North and Pacific coming. So you know, we're just feeling good about where we are. That's all I can tell you. And part of that might have been a little bit of a little bit of a conservatism that we built into what we said in December, which I'm glad we did.

Got it. No. That's helpful. And I think going back to the last question on land, just well, don't know if you can quantify for us how much land still remains that would have been purchased pre-COVID. And if in fact there is, you know, a decent amount still that you will be able to go vertical on, at low cost on a low-cost basis.

I think we like the term contracted for rather than purchased. I mean, just to be clear because some of it might have been purchased more recently, but based on a price that we set pre-COVID, we used December of 2020 as our pre and post-COVID. And we think it's approximately 30% of our land bank right now is still priced pre-COVID. 50% of what we owned and 40% of what we settled.

The next question will come from Rafe Jadrosich with Bank of America. Please go ahead.

Hi. Hi. Good morning. It's Rafe. Thanks for taking my question. Just kind of following up on the comment about the kind of current absorption piece and the demand trends have been a little bit more mixed. If we see sort of the absorption pace kinda stay like this over the intermediate term or over the next few quarters. Do you still think that you'll be able to hold the 27% gross margin range, or if the absorption sort of stays at this level. You mentioned you're not margin proud. Would you kinda push lean a little bit more into incentives?

Well, we're not gonna guide beyond 2025. We're very confident in what we've given all of you for the second quarter and the balance of the year. You say if this market sticks, I think if this market sticks since we already said we've we're assuming it sticks with the guide we've given, then we are confident in this range of margin. However, if to take it to the next level, if the market gets better, you're gonna see better margins out of us because we love raising prices. Nothing no better way to create urgency than price increase coming next Monday. And if the market was to soften, we're not gonna stand proud and not sell homes. And try to hang on to a margin that's not attainable, we're going to manage our business, which means there will be an intelligent, thoughtful local, decision being made between pace and price. And that's how we go about it. We are encouraged you know, I talked about how the incentive had come down as we started Q2. And how we're able to keep that incentive down in submarkets but we might have to give some of it back in others. We've already begun doing a little bit of that, and we are in elasticity of demand, meaning as we throw a few more bucks at it, buyers are responding. And that is certainly a good sign. There's nothing worse than the inelasticity it doesn't matter what you do, you know, the buyers are on the sidelines. So we are encouraged by what we're seeing in those markets that have required a little bit more of an incentive.

Thank you. That's helpful. And then just on the SG&A, you called out that it was higher in the first quarter, so maybe just has to do with lower deliveries. But also higher selling expenses. Then you still deleveraged in the second quarter as well, but then leverage in the second half of the year. Can you just talk about what's driving it higher in the first half? Because sort of where does the leverage come permit that second half and how we think about just SG&A dollar inflation going forward?

Sure. The biggest driver, you know, we had a little bit of a creep in sales and marketing expenses, but the biggest driver is just the leverage off of revenue. In the second half of 2025, we expect $6.6 billion of revenue. In the second half of 2024 we had $6 billion of revenue. So we have $600 million more revenue in the second half of 2025 than 2024. And the SG&A was 8.6%. In the second half of 2024. And so we believe it's gonna be in the low 8's for the second half of 2025, based off of leverage, with that additional revenue I just described, and that is what brings home the full-year guide.

The next question will come from Sam Reid with Wells Fargo. Please go ahead.

Sam, we can't hear you. Mister and missus Reid, your line is muted.

Our next question will come from Alex Barron with Housing Research Center. Please go ahead.

Yes. Thank you. Good morning, guys.

Hey, Al. Good morning, Al.

Wanted to ask about your specs. Are they mainly concentrated in your lower price points, or are they across you know, all price points?

They're across all price points. But they lean a little bit towards the affordable luxury side because we I think we're more comfortable at specking $800,000 houses and, you know, than we are two or three million dollar houses. But we have it's across the board, but it leans a little bit to the more affordable what?

Got it. And in terms of you guys, you know, stepping on the brakes, I guess, on new permitting or new specs, I think that makes a lot of sense. Is it your sense that other builders are starting to do that as well? And can you quantify, you know, are you guys just talking about delaying what you've already sort of specced and started or you're you know, how can we get our arms around what stepping on the brakes would mean for you?

Yeah. We may be pumping the brakes a little bit. I don't think we're stepping on the brakes, but we are it's a fair comment. And I don't think we have enough intelligence in the field yet to be able to give you a definitive answer on whether the other builders are similarly pumping the brakes. I am encouraged by some builders' comments on earnings calls or elsewhere, that they too are being a bit more cautious in their spec starts.

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.

Chuck, thank you very much. Thanks everyone for your interest and support. As you all know, we are always here to answer any questions you may have individually. And stay warm. I think we're 24 degrees in Philadelphia today. Or I hope you're somewhere where it is warm.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.