Hi, everybody. Welcome to the Toll Brothers 2021 Analyst and Investor Day. We're really glad to have you here. My name is Fred Cooper, and for the past nearly 28 years, I've run Toll Brothers finance and investor relations operations. We've got nearly 600 people registered for today, so we're very excited to show you what we've been up to for the past year and a half. It's been over a year since we've met any of you in person or had you tour our communities. Today, our goal is to go deep and go wide and introduce you to a broad range of people at the company and show you what we've been up to. We, as you know, have been putting out strong earnings results, including last week, including record backlog and contracts. Today, we're going to show you what's behind that, not only the people, but the strategies that are leading to these results and also giving us such excitement for the future. A couple of housekeeping items. One, a forward-looking statement. As you might imagine, some of the things that we're going to be talking about today are forward-looking and based on assumptions about global affairs, the housing market, the economy, and other things. This forward-looking statement is not only on our website, but it's in the company overview that we've included in the materials here and in our SEC filings. We urge you to read it and recognize that some of the assumptions that we're making are based on things that may turn out differently. Secondly, people have been submitting questions. If you look on your screen, you'll see at the bottom, there's an ask question button. You can submit questions as the event goes, and we will be trying to address them during the three Q and A sessions. With that, please sit back and enjoy, and let's get started. [Break] Welcome everybody. Doug Yearley here with Marty Connor. We welcome you to our Investor and Analyst Day from our spectacular new headquarters in the suburbs of Philadelphia. We're really looking forward to the next three hours. We think it'll be very impactful and just delighted to be with you, even if it is virtually. We opened this headquarters about six months ago to very few people. We spent a couple of years working hard on it. We realized a few years ago after we had a pretty beat-up old headquarters for 15 years, that as a Fortune 500 luxury brand, we were really deserving of a great headquarters that was worthy of what we do. More and more people are coming in every day. We're about half full right now, which is great. It's a great space. For those of you worried about G&A, as we try to do with everything we buy, we bought it right, or in this case, we leased it right. It was an old abandoned suburban convention center with 22-foot high ceilings, empty. It was a blank canvas for us. Long-term, the rent's pretty cheap, and we're just thrilled to be here. I had a friend come in last week who worked for the company for 15 years, and he walked through the front door into the lobby. He wanted to get a tour, and he said, "Wow." He said, "Doug, somewhere in this building there must be some reference to Main & Main because you always talk about Toll Brothers buys land at Main & Main. We build homes at Main & Main." Sure enough, the intersection of our two main corridors where the fireplace is, where Fred Cooper was, one of our many employee lounges is designated as Main & Main. We tell people, "We'll meet you at the fireplace at Main & Main." It just resonates because that's what we all think and talk about. For the next three hours, we're going to take a deep dive into Toll Brothers. You're going to learn a lot more about our people. You're going to learn about our passion, our brand, what makes us truly unique, what is driving our results today and in the future, and many of the strategic initiatives that we're putting in place to continue to be successful and to see what we believe, and we will explain today, should be outsized growth within this industry. We're going to have Q and A sessions today. There'll be three separate Q and A sessions that will go live with many of the leaders nationwide that you're going to see from today. Please get your questions in. We'll do our best to answer as many as possible, and we're really looking forward to that. Real fast on me, I've been with this company for 31 years. I interviewed with Bob Toll for the first time on my 30th birthday. I was a very unhappy lawyer. My dad taught me to be handy as a kid. I spent all my free time renovating my old house, and I wanted to get out of the practice of law and somehow get myself into construction, home building, renovating something. I came in to meet Bob on my 30th birthday. You know what? I just got lucky because we connected. I went to Cornell. Bob went to Cornell. He loved that. I loved the practice of law. It rewired my brain. I just didn't care for the practice itself. Bob loved law school. He also loved how his brain was rewired in law school. He lasted nine months in the practice. Even more than me going to Cornell, he loved that I appreciated so much the legal education and how it rewired my brain, and he gave me a shot. He gave me a shot to come here, and I just got lucky. My first day of work 31 years ago, my first Monday, Bob threw me in an office and said, "Wait around. I want to meet with you tonight." I waited around with very little to do. At 10:00 P.M., I got the call to go in and see Bob. We spent about an hour together. We didn't have a lot to talk about. It was day one. I walked down the hall out of the building thinking, "This is a little odd." Day one, 11:00 A.M., and I made the mistake of walking down the hallway with Joel Rassman, our pretty much iconic old CFO, officed. Joel sees me. He calls me into his office, and from 11:00 P.M. until 2:00 A.M., he teaches me the history of Toll Brothers and talks to me about my career. I walked out that night thinking that I had surrounded myself and my new job was with a bunch of crazy people. I hung in there, and I started in land acquisition, and then I moved into a construction trailer as a project manager learning the business from the ground up. I got involved in running a number of home building divisions around the country. I got involved in new market expansion, builder M&A. At a young age, Bob tasked me with managing the marketing department, which I will never give up. I think I've seen it all. I know I probably worked on everything that you could work on in this industry. It's been a fascinating ride for me. For the last 25 years, I have calculated that I have spent 900 Monday nights one-on-one with Bob Toll. He is the leader in this industry for many decades, for a generation. Some of the most inspiring, most fun moments I've had are those crazy Monday nights when I stumbled out of his office at midnight. I wouldn't have it any other way. Bob just turned 80, and we celebrate all he has done for Toll Brothers. We are a boots-on-the-ground company. We teach and learn on the job. All of us grew up in the field. Almost everybody you meet today will have worked out of a construction trailer or worked out of a sales center. It's just the way we are. We build the bench in the field, and it's just so important to this culture of the company. Quickly going back to that first week, as crazy as day one was, on day two, Bob says, "Let's jump in the car. I want to show you our Philadelphia communities. Off we went, I watched Bob pull into the entrance of these Toll Brothers communities around Philadelphia, screech on the brakes, get out of his car, go over to the flower bed that was at the entrance feature, and pull a couple weeds. We get to the model home. We walk up the model pathway. He'd straighten out a marketing easel sign. God forbid if there was a light bulb out in the model because he would embarrass the sales manager and anyone else that had come to see him by asking for a step stool and getting up and changing out a dead light bulb. What he taught us and what we know today through him, it's those details that make a good brand into a great brand. That resonates throughout all levels of this company. As I travel today, I find myself at every community pulling weeds, straightening marketing signs, hopefully not changing light bulbs, but I may fluff a pillow or two on a sofa, and I will certainly straighten artwork on the wall. It is these details that nobody is above, and it makes this good brand into a great brand. We have a culture of perfection, That's just how this company's always been run, and it's how I am determined to continue to run it. I'm confident today that you're going to see that. It's going to resonate through with all the people that you meet and all the product that you see. Quickly, I want to look at macroeconomic trends. I'm not going to bog down on this because we talked about it last week, and all of you, I'm sure, are aware of much of it. It's very interesting because in January and February of 2020, before the pandemic, we were pretty pleased with where the market stood. Interest rates were low. The millennial generation was beginning to come out and buy. Even then, we weren't seeing a market that is strong enough for what the fundamentals suggested. The 2011 to 2020 market should have been stronger. Yes, it was recovering from the great housing recession of 2007 to 2011, but it wasn't as strong as it should have been. Lo and behold, who would've thought that a pandemic of all things, an unforeseen pandemic, would have ignited this market to a level that we thought all along the fundamentals have supported. Here we are today, and I'm going to quickly hit on these fundamentals. What's really encouraging is they feel like they're here for a long term, and that is something that really encourages us with our business strategy. First of all, let's look at pent-up demand. We know, we talked about it. Over the last decade, 6 million less houses were built than in the prior four decades going back to the 1970s. Population growth, if you look at this graph, has doubled from the 1970 until today, yet look at housing starts. Are they beginning to recover? They certainly are. Six million less people bought a home in the last decade than each of the prior four decades when there was a lot less population, which means it's going to take a long time for this pent-up demand to be satisfied. We think it's going to take years before we ever get back to anything close to the equilibrium that we had seen in a bunch of the prior decades. Next up is demographics. We talked about it. I talked about it last week. There are 73 million millennials who are now entering their 30s. They're buying homes. This will drive the housing market for an extended period of time. As we're going to talk about today, what's great for Toll is that these millennials, when they buy, when they're forming families, are older. I had my first house at 26. My kids will probably have their first house in their mid-30s. They're wealthier. The more and more affordable luxury that we do from the high threes to the mid sixes will be in the wheelhouse of the millennials. A millennial can buy a Toll Brothers home. That was out of reach before we pivoted, and we're really excited about where that's heading. Next, also we think longer term, the pandemic accelerated migration. U-Haul has it right. They have surge pricing. They price their routes based on the amount of demand. This chart gives you an example. Look how much it costs to take a U-Haul out of California to another market or out of the Northeast down south versus what it costs to return that U-Haul back to where they came from. We are seeing right now out-of-state traffic patterns, migration patterns like we have never seen in this company's history. People are moving to where they want to live, not where the job had tethered them. That may mean that they have remote working opportunities, or it may mean that they're going to go find another job in a market that they want to live in. The pandemic seems to have accelerated what we knew was coming, and it's one of the reasons this company moved aggressively into the western states and the southern states some years ago is because we certainly saw these patterns coming. Then finally, the home. My home is my sanctuary. We say it. We believe it. There is an emotional attachment to the home that is beyond finances. It's beyond record low interest rates. Not everybody. In fact, most people, Marty and I sometimes disagree, he's the finance guy. I've never bought a home because of the financial investment. If that worked out, great. A home is an emotional purchase. Today, after this pandemic, people are putting much more interest in the home. They're emotionally connected. They want to design it. They want to design it the way they live, whatever that means for them, with home offices, with gyms, with indoor-outdoor living. Toll Brothers offers choice. This plays right into our business strategy, and right now it is significantly paying off. How is Toll positioned as we move forward as a company with this backdrop of where the macroeconomic world stands? Here's the map. We have moved from what I saw 31 years ago as a regional builder in the Northeast to a national powerhouse. 24 states, over 50 markets. We moved aggressively, as I said, into the West and the South. We are positioned on both coasts, where there's still a lot of good action, but we're positioned in a lot of these other feeder markets that people are moving into, and it's really, really encouraging. The migration patterns, by the way, are generally from more expensive markets to less expensive markets, which means affordability is not as big of an issue. Next, our land position. We are a long land home builder. We hear about it all the time. Right now, we have 74,000 lots under ownership or control. We've successfully moved it to 50/50, and we've talked about it going to 60% controlled or optioned and 40% that is owned. Most of this land, the vast majority of this land, was acquired pre-COVID, was contracted for. We may not have closed on it, but it's under our control pre-COVID, when land prices were lower. We can be selective today in how we grow because of this great land position we have at very, very favorable prices. Next, this is a major driver of outsized growth. People don't think of this, but we have the widest product diversity in the industry. $350-$5 million, Toll Brothers today brings it to you. Urban, suburban, infill, nationwide. We build all of this on this screen. This gives us the opportunity. With that land position that we have, with our geographic footprint, and with this product diversity and the price point diversity, we have positioned ourselves to have outsized growth. Finally, affordable luxury. This is the move down to grab those millennials. 42% of our communities today are what we term internally affordable luxury. That's not a marketing term in the field. Our clients are buying a Toll Brothers home at no matter what price point. We use that term to help explain it to the investment community, all of you, and internally into how we market and how we operate. Today, 42% of our communities are affordable luxury. That number will continue to grow as we expand and widen what we offer. Most importantly, as we drive this growth, we are focused on one priority. We have one priority, and that is to drive capital efficiency in how we buy land, how we operate the company to continue to improve on our ROE, and it will be permanent. We talked a little bit about where it's headed next year. Next year's primarily headed because of the great sales we've had and the great pricing power. A lot of these land buys Marty's going to talk about in a little bit won't even come until 2023, when we're going to have even more permanent, sustainable, improved ROE. We're really confident in our ability to drive ROE over 20 permanently. Affordable luxury is part of the story, but the biggest part of the story is our land buying and how we're going about it, and Marty's going to certainly get into that. Finally, I just want to hit on the four marketing Toll advantages we call them of the company, and these are all over our website. Number one is location. Main & Main. We buy land, we deliver homes, we build communities at the corner of Main & Main. Could affordable luxury be a block off Main & Main? Yeah, I'll give you that. It's still right there at Main & Main. Number two, architecture. You're going to see it all day today. The exteriors, the interiors, the merchandising of our models, it is a major Toll advantage. There is nobody in this industry that puts the attention and the passion into the architecture as Toll Brothers. Number three, I talked about it before, is choice. Buyers today want choice. We are a production home builder, we have figured out how to offer choice within the umbrella of production home building. You can make structural changes to your home at the sales office, then you go to one of our 35 design studios to pick all of your finishes. Choice today is a major Toll advantage. Finally, we believe we treat the customer to a better customer experience than anyone else in this industry. We have to. We provide a luxury product. We are a high-touch home builder, we are so proud of how we treat our customer and the experience that they have when they sign on with Toll Brothers. I am certain that these four Toll advantages will resonate with you throughout the day. We're going to move into our first segment. It's going to include both Jim Boyd and Rob Parahus. They are our two co-COOs. Rob runs the eastern half of the country. Jim runs the western half of the country. Combined, they have 60 years of experience at Toll Brothers. Just like me, in the early days, they were living in construction trailers. Here we go to Jim and Rob. Hi, I'm Jim Boyd. I share the COO role with Rob Parahus and oversee the Mountain and Pacific regions in the West. These regions include California, Washington, Oregon, Nevada, Idaho, Colorado, Arizona, and Utah. 30 years ago, I started Toll's first community west of the Mississippi in Yorba Linda, California. Since that time, we've come a long way. Today, our sales in the West represent 50% of the company's sales nationwide, and we believe we're perfectly positioned to take advantage of market trends we see occurring in the West. California's coastal markets, with their favorable demographics, job growth, and supply constraints, have been and continue to be a prime economic driver for us. We are operating master planned communities in all the major metropolitan areas throughout California, like here at Porter Ranch, just outside of L.A. These markets all continue to show strong demand and limited supply. Our expertise in entitlements and land development have enabled us to maintain a good pipeline of prime home sites in great locations. I'm Rob Parahus, Co-Chief Operating Officer with Jim, I'd like to tell you about the other half of the country. Today, I'm in Northern New Jersey in one of our newest communities, The Grove at Upper Saddle River. I oversee the Northeast, Midwest, Mid-Atlantic, and South. This includes Pennsylvania up to Massachusetts, plus Michigan and Illinois, Maryland down to Georgia, along with Florida and Texas. I'm proud to say that this year we expect to deliver close to 6,000 homes across these markets. Since my father was a trim carpenter and cabinet maker, I grew up with a passion for working in home building. Straight out of college, I joined Toll Brothers and am grateful to be one of only a handful of current employees that started before the company went public in July of 1986. Over the past few years, Toll Brothers has expanded its footprint in the East and entered several new markets as we follow the growth of the country to the South and the West. In 2019, through the acquisitions of Sharp Residential and Sabal Homes, we first expanded into the suburbs North of Atlanta, Georgia, entered Charleston, Greenville, and Myrtle Beach markets in South Carolina. Through the acquisition of Thrive Residential in February 2020, we expanded even further, entering the urban markets of Atlanta, Georgia, and Nashville, Tennessee. We are now looking to develop our core product in the Nashville suburbs. Overall, these new markets will contribute close to $400 million in revenue to Toll Brothers in fiscal year 2021. While we've had a nice operating footprint throughout Florida since the early 1990s, we have recently increased our presence to include the Tampa/Sarasota market. We are also currently analyzing opportunities in the Panhandle as we continue to see significant growth potential within all the Florida markets, where we build traditional luxury, affordable luxury, and active adult communities. With that, let's head back to Jim so you can hear more about our product diversification efforts that support our growth across the country. During the past 24 months, we've seen a shift in our buyer profile as we've begun attracting more buyers aged 25 to 45. To meet this demand, we pivoted and started offering more affordable homes. Homes which still include many of the luxury features in our move-up product. 10-foot ceilings, 8-foot doors, 42-inch cabinets. During the pandemic, we've seen this trend accelerate. Today we sell almost 30% of our homes to these millennial buyers. Our product has evolved over the past decade to meet today's lifestyles. It began in Southern California. We started by removing a lot of the interior walls to create a more open, casual feeling. Next, we removed the rear walls, replacing them with large sliding glass doors, bringing the outdoors in. Finally, we created transitional rooms, which are both indoor and outdoor, creating a fully integrated experience from the moment you walk through the front door till when you reach the rear yard. We've taken these designs to other Western markets and now to the East. We've included them in all our product offerings, from affordable luxury to move-up product to active adult product. Our design team and architectural team are second to none, and our designs the best in the business. Our locations and our customer service are aspirational and give us an advantage over the competition. It is this Toll advantage that enables our homes to sell at a premium. Good morning. Thanks for being with us. My name is Marty Connor, and I'm privileged to be the Chief Financial Officer here at Toll Brothers. I've been at Toll for 12 and a half years. I've been CFO for 11. I love what I do and especially the people I get to do it with. I'm so proud to be able to show you some of them through the course of the day. Hopefully, you feel how much pride we have at Toll Brothers as being part of a company that delivers the American dream more than 10,000 times this year. I'm not going to talk about our results. We talked about those last week. Suffice it to say, our business is firing on all cylinders. I'm here to talk to you about four different things. I'm going to talk about our land position. I'm going to talk about some of our ROE efforts. I'm going to talk about some of the ways we fundamentally changed our approach to land. One thing we have not changed is that every piece of land is still approved at corporate. Doug, me, Jim, and Rob look at every piece of land as it comes through the email chains every weekend. Long Sunday nights, great Mondays. The last thing I'm going to talk about is our capital allocation strategies and what some of these structural changes to land buying allow us to do. First, land. We had set a 50/50 target a number of years ago, 50% owned, 50% optioned. We're there. We have 74,000 lots, about half are owned and half are optioned. We have a new target now, 60% optioned, 40% owned. This is a far cry from the 80% owned, 20% optioned we were at a number of years ago. I think we can do better than 60/40, but we're going to set the target there for the meantime. In the past, we didn't focus too much on ROE. We focused on gross margin. We focused on earnings per share. We bought the land early. We watched it appreciate. That led to great gross margins. That didn't work as well in the decade of 2010 to 2020. The market was not as traditional as it had been in prior decades. It worked great in the 1970s, 1980s, 1990s, and 2000s. At the same time, the investor community became laser-focused on return on equity. Now so have we. We've taken a number of steps to improve our return on equity. We are controlling costs with a fine-tooth comb in the G&A area. We are reducing the spend for broker commissions and for advertising and marketing. We are increasingly moving to quicker turn land positions, lower upfront cost land positions, as we'll talk about in our affordable luxury. We have rationalized our product. You'll hear more about that today. We've taken some cost out of the building of those homes. The other thing we've done is fundamentally changed the way we look at land. A few years ago, we created a deal scorecard, 12 different metrics, IRR, gross margin, risk profiles, land development. We gave it to our land acquisition teams around the country and said, "The standards have been raised. You now have the scorecard you have to fill out, and we're not going to do a deal unless it meets these standards." Those teams have risen to the challenge. They've been able to find deals that meet those thresholds, and we've been able to grow our land position. We've grown from 63,000 lots at the beginning of this year to 74,000 as of the end of the second quarter. Occasionally, they can't find a deal that fits without a little structuring. We've given them a few different structures to deploy. Our preferred structure is seller financing, and we should have a slide here that shows that. In all of these different structures, you'll see that we are improving the IRR compared to a bulk purchase. We are reducing the peak amount of capital that's out at the top of the roll, as we say, and we're giving up a marginal amount of gross margin. What is seller financing or seller terms? That's where we tell the seller, "We're not going to buy all the land on day one. We'll buy a quarter, a quarter, a quarter, a quarter over four years. We'll pay you for some of the land up front. We'll pay you for more of the land when we get to third-party home closing with our home buyers. Maybe you'll take back a low interest rate mortgage as the land seller, or maybe we'll give you a profit participation on how that community does. That's one method of structuring land deals. Not every seller is going to give you terms. Every once in a while, we need to deploy our land banking strategy. Land bankers are a sophisticated fund. They are in the business of land. As you can see here, we really dramatically change the IRR and we dramatically reduce the peak capital. We'll contract for the land. We'll assign that contract to the land banker. The land banker will close on the land and simultaneously execute an option contract with us. Generally, those option contracts result in a 15% deposit from us, then a 10% or so annual payment for the balance of the land that we haven't bought. An interest payment, if you will, although it goes through the land in our cost of sales. We've seen the terms from these land bankers get stronger and stronger for us. More and more entrants are going into this field. We're excited about the future of what we can do with land banking. Land banking deals work best if we're dealing with an 18 to 48-month duration of the land. The last one I'm going to talk about is joint ventures. In a joint venture situation, the land is too much for us. It's too much dollars, it's too much time. We will share it with another home builder. Hopefully, they'll share a few deals with us. Right now, we have deals with Tri Pointe, Taylor Morrison, Pulte, Lennar, and one more. It escapes me at the moment. Sorry about that. Partner. NVR. There it is. We give up half the size of the deal. Occasionally, we'll get a Wall Street fund to come in as well. We have a deal with GTIS. We'll cut the cost that we put out to nearly a quarter. Generally, I structured it with an upfront land purchase of 25% funded by us, 25% funded by the other builder, and then we get a land loan from a bank for the other 50%. These structures all reduce our capital deployed, they improve our IRR, and they also transfer the risk to the counterparties. That's a great combination, and we're willing to take that combination for a little trade-off on the gross margin. What do we do with this excess capital that we generate? We've been able to do anything we want. We've grown our land position. Land acquisition and builders are our primary focus. We've also been able to increase our dividend. Earlier this quarter, we announced a 55% increase in our dividend from $0.11 to $0.17 a quarter. We have bought back stock. We bought back $180 million of stock in the first quarter, and we expect to be programmatic in the third, fourth, and future quarters with stock buybacks. We've also been able to pay down debt. We paid off $150 million of our term loan in the first quarter. We paid off $250 million of bonds in our second quarter. Those were 5.625% bonds, so we're happy to put those behind us. We're positioned to pay off $410 million of bonds in our first fiscal quarter next year. Mid-November, they're callable at par. Those are at nearly 6%, so we're thrilled to put those behind us. We're targeting a mid-20s% net debt to capital ratio as a result of these actions. That's where we hope to operate long term. Hopefully, the rating agencies are paying attention to that. As Doug mentioned, we set expectations for 20%+ return on equity next year. A lot of that driven by the market, but staying there is going to be driven by all these initiatives I just talked about. Thanks again for listening. I'm going to turn it back to Doug, who's going to lead us into the next section. Great. Thank you, Marty. That was terrific. Thank you to Jim and Rob for your presentations. Both Jim and Rob will be on the first segment of Q and A, which is coming up in a moment. A reminder, bottom left of your screen, there's an ask question icon. Please feed us any questions, and we will do our best to answer them for you. Next up are Karl Mistry and Seth Ring. They are both regional presidents for the company. Karl runs the Mid-Atlantic region, and Seth runs the Pacific region. These two are both on our strategic planning committee, and they are the next generation of leadership here at Toll Brothers. Over the last three or four years, I've introduced many of you to both Seth and Karl as I do bring them to industry conferences, and I'm sure you'll be seeing more and more of them in the future as they get more and more exposed to Wall Street. To steal from "Hamilton" on Broadway, these two are always in the room where it happens. Here we go. Hi, I'm Karl Mistry. This July will mark my 17th anniversary with Toll Brothers. I started with the company in Texas and have had the opportunity to work in both Dallas and Houston. In 2016, Doug gave me a call and asked what I thought about moving to Northern Virginia. Five years later, I serve as our regional president in the Mid-Atlantic, which includes Maryland, Virginia, North Carolina, Georgia, and Tennessee. As Doug mentioned earlier, one of our greatest strengths is our focus on the best locations. Synonymous with Toll Brothers is great schools, access to shopping, employment, and incredible amenities. When your focus is squarely on those locations that Main & Main, you must be disciplined. Disciplined not only in where you're buying land, but how you're buying it, and being sure that you've thought through all of the important facets of a new community that will lead to success. It's a little bit of both art and science. Today, I'm at Union Park in Tysons, Virginia. This community is a great representation of that focus on Main & Main. The central location is the redevelopment of an old apartment community. While opportunities like this one aren't easy, when it all comes together, the end result is amazing. When complete, Union Park will be home to over 200 families. We are walking distance to the center of it all, the McLean Metro station, Capital One's new headquarters, and all that Tysons has to offer. All of this with highly rated schools, just a 15-minute drive to our nation's capital. For years, I've had the privilege to be a part of our Monday land meetings. Our leadership team, including Doug, reviews sales for the week, and then each land opportunity is up for discussion. We spend a couple of hours working to understand the customer, the great attributes, the competition, and the potential pitfalls of every opportunity. We learn from each other and the decades of experience in that room. This collaborative and honest discussion is without a doubt one of the greatest strengths and enables us to push each community to be its best. One of the greatest rewards of working in this industry, and specifically at Toll Brothers, is you get to see tangibly the efforts of your work. In 2016, several of us traveled west to visit our colleagues in California and Seattle. We came back and started to challenge some of our own ideas on architecture. Within two years, we had completely reinvented ourselves. I can say confidently that we have the most innovative, beautiful, and functional offering in the Mid-Atlantic. I'm so proud of the evolution our team has made in designing and building these incredible homes. Hi, my name is Nimita Shah, I'm vice president with the community planning team for the D.C. Metro division. I started working with Toll Brothers in 2005 with the New York City Living team. There, I learned the importance of having a vision and telling a story with each community we create. Throughout my career here, I've been fortunate to apply that idea to multiple product lines in different regions. In D.C. Metro and all over Toll Brothers, each day we work to evolve our home designs to ensure that they serve the story we're scripting. I love that not only do we deliver homes that meet the changing needs of our homeowners, we also work hard to meet the changing demands of the industry. I'll admit, it's not always easy balancing the two, but we're able to get advice from other divisions on design trends, and we work across our teams to review our homes during the pre-development process often. Doing this helps to ensure that our homes support the vision of the community and our internal metrics. What I've learned is that by having a thorough design review process in place, our teams can innovate and improve every day. We've created an alternate plan for our stacked townhomes to meet the needs of our buyers in higher density markets. We've pivoted our product line in an existing master planned community to capture homeowners' desires for new elevation trends, refined choices, and more attainable price points. As a result of the pandemic, we've seen the need to provide more flexibility with our floor plans and design third floor office spaces. One of my favorite examples of this evolution is our new outdoor living space offering. After traveling out to California, our leadership team came back and decided to take a look at how we could create outdoor spaces that our homeowners could enjoy during more of the year. Here at Arden, we designed large stacking doors into our living rooms that could seamlessly connect to our covered outdoor spaces. We designed them with finishes that you might find in the interiors of our homes. These outdoor living rooms have become a huge favorite of our buyers. It's rare to think that less can be more in a home, but in the case of our Parker collection at Lenah Mill, it seemed it was just what our buyers wanted. Lenah Mill is an ongoing master planned community that has been selling for a number of years. As we approach one of our final phases, our leadership team recognized the changing desires of our buyers and designed new, more streamlined plans with new elevations. While we all anticipated a lower price point for these simpler homes, we also knew that we'd be able to sell at a faster pace. What we didn't anticipate was the desire for this product would be so strong that we'd be able to sell at our desired pace and increase revenue steadily throughout the phase. No matter what the future holds, we'll continue to create new stories and new homes so that we're always ready to make it our time. Another exciting part of my day-to-day is being a member of our strategic planning committee. A couple of years ago, Doug asked four of us to put our heads together as we think about the future of the company. He's tasked us with improving our processes and systems, but also taking a step back, looking at new geographies, better ways of working, and upcoming technology. This has been a truly rewarding experience for me, and we've been able to make some great improvements to the way we work, and we are clearly readying ourselves to be the industry leader for years to come. It's not just because of Wanda, for all of these reasons, an amazing team, this unrelenting focus on disciplined land buying in the very best locations, innovative architecture, and a thoughtful approach to our strategy that makes me confident in our future and proud of where I get to come to work every day. Hey, everybody. I'm Seth Ring. I am the regional president for Toll Brothers covering the Pacific region, which is Oregon, Washington, and California, and I've been with the company for 18 years. One of the things I remember about my childhood was seeing those plans rolled out on the kitchen table and how much every little detail mattered to my father as he was designing custom homes. I also saw how close he worked with the customer and how much that relationship mattered. I see a lot of the same things in Toll Brothers. Design matters. The customer matters. When we have those two things collide, you get America's luxury home builder. Every day, thousands of home shoppers make their way to our sales center and model parks, and we get to hear what they like most about our home designs. We can take that feedback and give it over to our nearly 100-person in-house architecture and design firm, and we can apply what they like most to the next great design. Frequently, people ask me, "What's the best feature about a Toll Brothers home?" I think you have to ask my team. The expansive kitchen and prep kitchen. The walk-in pantries. Quality craftsmanship and attention to detail. The magnificent walk-in closets. Luxury outdoor living and entertaining spaces. The grand entrance. The backyard. The multi-gen living features. The volume spaces. Flex spaces that fit your family's needs, whether that's a home theater or a home gym. The beautiful staircases. The home offices and other work spaces. Beautiful en suite baths for my teenage girls to spend hours in. Primary bedrooms and retreats. A new home warranty, plus customer care members to manage your services. My favorite part of a Toll home design? Teamwork, collaboration, camaraderie. I love seeing how it all comes together to do all of this. I have to admit, there's some friendly competition among my colleagues at Toll Brothers to see who can build the best home design for our customer. Every time I see a beautiful home out of places like Arizona or Texas or the Southeast or the Mid-Atlantic or the Northeast or the Pacific Northwest, it inspires our team to raise the bar. At Toll Brothers, we're not only raising the bar on home design, but we're finding ways to optimize that design and bring it to the market. What is optimization? Like any fine brand, we're streamlining our home design process so that only the best plans make it to the market. Our home buyers are seeking out floor plans that trade formal spaces for a more informal and comfortable design. This means our latest plans highlight features like beautiful volume ceilings, straight stairs with modernized railings, and expansive open floor plans with a greater connectivity to the outdoors. These design trends have also proven to be more cost-effective than legacy designs. This means we can design plans more desirable to our homeowners while also saving construction costs and reducing cycle time. Our optimized approach to design also enhances Toll Brothers' option program, which allows homeowners to more easily personalize their homes. For example, a standard downstairs bedroom and office can officially convert to a generous first-floor suite or multigenerational living space. Through thousands of homeowner interactions and Toll's careful monitoring of design trends across the country, Toll homes feature the most innovative designs mixed with construction efficiency to deliver our new homes at a lower cost. California is the laboratory for energy-efficient homes. Toll Brothers is leading the charge. Almost every new Toll Brothers home in California comes with a distinct list of energy-efficient features, including radiant barrier roof sheathing, continuous insulation with one coat stucco, 2-by-6 mandatory exterior walls, window glazing to deflect heat, improved efficiencies in heating and cooling equipment, reduced water flow rates, insulated plumbing pipes to reduce temperature loss, and perhaps most importantly, solar. Solar is great. Solar allows the Toll homeowners to have a cost-effective energy source for their new homes. It cuts their power bill into a third or even up to half, depending on usage. It also provides a clean alternative for energy for our new Toll Brothers homes. The latest features in solar are that we can actually store some of the energy produced from the panels into a battery that we place in the garage. This allows the buyer to use stored energy during peak operating hours, and also in the case of a blackout, they can power their homes. In California, when we're about ready to open a new community, we map the entire community for solar. We look at the most efficient places on the roof to put a solar system. We determine the right size for the home designs, and then we provide solar to every single homeowner in the community. It saves the buyer money. It creates a cleaner source of energy. It's good for the environment, and it's cost-effective. Working for Toll Brothers is awesome. Not only can you be proud of the product you build or the homes you design, it's the people. It's the collaboration that comes together to produce these amazing communities. It's the homeowner who walks into the model and says, "Wow," three or four times. It's all of that stuff. It just makes you feel great. You know what they say, "If you love what you do, you never have to work a day in your life." Wow. Thanks, Karl and Seth. They focused on two of the pillars of the Toll Advantage that we talked about, which, of course, is prestigious locations and distinctive architecture. Now we're going to move on to the other two pillars, which is unrivaled choice and the customer experience. We have Lisa McClelland. She runs our $700 million design studio business, 35 design studios around this country that are run by Lisa, and you're going to love her story because we brought a retailer in and got it out of the hands of the local management team as we realized what an important business this is. Then you're going to meet Group President Mark Bailey, who runs both our Colorado division and our Boise, Idaho operation. I'm Lisa McClelland, Vice President of Design Studios. I've been with Toll Brothers for four years and spent most of my career previously as a retail leader with The Home Depot and Nordstrom. I'm here joining you today from our newest studio in Austin, Texas, which we just opened a few weeks ago. We operate 35 Design Studios across the country, and this is the exciting and fun part where customers come to personalize their new home after signing an agreement. Our Toll Brothers Design Studios are really a business within the business, and they play an important role within the company. The focus of the design studios is multifaceted. Most importantly, the role of the design studio is to provide an exceptional customer experience. We offer unrivaled choice and thousands of selections to choose from top brands. It also serves as a powerful marketing tool for our sales teams. We are the design store within the division, providing a high-touch experience and a point of difference from other builders. Our design studios help streamline operations with an efficient selection process that helps support our production timelines. Buyers typically spend about 10 hours finalizing their decisions over three appointments, and they can do that either virtually or in person at the design studio. Very importantly, one of the roles of the design studio is to drive meaningful profit and revenue for our company. We find that over 90% of our buyers choose to invest in upgrades for their finishes within their interior portion of their home. Cabinetry and flooring are amongst the top categories with which we find buyers investing the most. Our design studio gross margin productivity is strong and above the company average. We've had the highest revenue per home and total revenue in our company's history this past year. We spent time insourcing seven of our 13 outsourced studios. We have found that the outcome of that has been an eight-point improvement in our margin. We're focused on the productivity of our assortments and what we offer to our buyers. We've spent some time really going through what sells and where buyer preferences are. The result of that has been a 30% reduction on things that just aren't chosen. This has given us better visibility into what really is selling. By focusing our assortments on really what is selling, it allows us to address trends and new requests. We're focused on our design studios as a retail core business rather than historically what had been known as a sideline home building operation run by divisional leadership differently across the country. We've learned a lot in how to adapt to how we interact with our buyers, including offering virtual experiences and appointments, which our buyers find really convenient based on either their schedule or their physical location. It's genuinely a pleasure to be able to offer a highly differentiated experience for buyers to personalize their selections for their home. Hi, my name is Mark Bailey. I'm the Group President of Colorado and Idaho Regions, now including Colorado Springs with the recent acquisition of Keller Homes. Having a presence in Colorado Springs market is not only exciting for me, but for the entire Toll Brothers team. Expansion and growth is what drives Toll Brothers, we look forward to expanding our presence in Colorado Springs with Keller Homes. I have a lot of great stories about our people, business, and the 10,000 home sites we control in the group. I'm going to talk about something that is important to all divisions and all Toll Brothers employees, and that's customer satisfaction. I started with Toll Brothers 20 years ago, the importance of customer satisfaction stemmed from our founders, Bob and Bruce Toll. Our history and our core values help guide employees to achieve customer satisfaction. We're not perfect and we make mistakes, but we care about our customers. We will always make it right. There's one other secret to our success, and that is happy employees build happy homes. More on that in a bit. The typical customer journey begins here in one of our beautiful models. Who doesn't want to live in a home like this? Getting from here to the finished home that the customer envisioned and they dreamed of, that's where Toll Brothers is special. At Toll Brothers, we offer customers the ability to personalize their home, whether it's an affordable luxury home or an ultra-luxury home. That's why many customers choose Toll Brothers over other builders. Our professional sales consultants guide our customers through configuring their home to fit the customer's needs and the way they live. Starting with their home site, we identify what is important to the customer. It might be an oversized home site, a multi-gen suite, or dual home offices. Each customer meets with a design consultant at our studio where they get to fine-tune the details of their new home. Our designers help them select the perfect flooring, countertops, cabinets, and even add electrical or low-vol options. Whether they are retirees in an active adult community, a young family, or a multi-gen family, they can personalize the home to fit their needs and the way they live. Once the home is designed, it's time to build. That starts with the kickoff meeting where we review every detail with the customer. This ensures that we have incorporated all their selections. It is also where we begin to earn the customer's trust. Customers see how much detail, coordination, and care goes into the construction of their home. Our team wants to make sure we are building the dream home they envisioned. During construction, our construction managers monitor every detail of the house to make sure it's being built to Toll Brothers standards. Every week, we call every customer with an update to let them know what is happening in their home. When the home gets framed, the team walks the customer through the home so they can see what is behind the walls, ask questions, and understand how the home is built. Occasionally, we even measure furniture for them. The more communication, the better. When the home is complete, we have two orientation meetings with the customer to teach them about the operation, care, and maintenance of their new Toll Brothers home. Even after closing, we're still engaged with our customers. We have one and 11-month follow-ups. We have a 10-year warranty. At every step of the process, our team is going above and beyond to care for the customer and their new home. The process we go through is only half of what's so special about building a home with Toll Brothers. The other half, probably most important part, are the people. It's the Toll Brothers team. Do you remember when I said happy employees build happy homes? We hike mountains, we bowl, we ski, we barbecue. We do things together to make it fun. When employees love what they do and the team they do it with, they take pride in the communities and the homes they build. There's a lot of companies that build houses, but at Toll Brothers, we build homes for our customers. Thanks, Lisa and Mark. Our final segment before we go to our first Q and A session comes from Wendy Marlett, our Senior VP and Chief Marketing Officer. Wendy has over 25 years of experience in the home building business, and she's going to talk to us about the Toll Brothers brand. Hello, I'm Wendy Marlett, Chief Marketing Officer. It takes a lot of hard work and a lot of passion to create a great brand and then continue to grow it. You have to know what you stand for and deliver on it over and over again. When you stop and consider how Toll Brothers began more than 50 years ago, and you look at where we are today, you can see how the seed of one really incredible idea grew into something truly remarkable. The idea to build exceptional homes on the corner of Main & Main, as Bob Toll puts it, set Toll Brothers apart from other builders at its start and continues to do so today. Over the years, we've received lots of awards for our homes, for our communities, and even for our people. What we care most about is what our customers say about us. Reputation is everything. At the heart of managing the brand is the marketing and sales teams, along with all of our other customer-facing departments. To ensure consistency and quality, we have detailed internal playbooks for everything from brand standards, the merchandising of our models and sales centers, design studio protocols, and our efforts in public relations to drive traffic and provide thought leadership. This makes it efficient to scale our business while still creating distinct sub-branding for each of our communities to showcase what's really special about each one of them. The combination of great talent and detailed processes allows us to be very agile, to meet the market's changing dynamics and not miss a beat, and continue to always move forward. We believe what makes the brand successful is precise attention to detail. It's in those details at any touchpoint, marketing messages, model homes and product, even interactions with a construction manager. It all matters. We generate constantly evolving digital-centric approaches to connecting with consumers. This is all in response to the changing world around us. Our marketing is deliberate, and our positioning is elevated. We work to generate creative that drives quality and consistency. It can be signage at our sales centers and model homes or brochures and campaigns, even producing broadcast-quality spots on a national level like this spot about our customers' obsession with their new homes. Take a minute? Yeah, give me a minute. You're obsessed. I love you. I love you, too. We look beyond home building to other luxury brands as our contemporaries. They are in other industries where our customers shop. It could be fashion, automotive, or high-end hospitality. All of this results in aspirational marketing that resonates. One of the most compelling parts of the Toll Brothers luxury brand experience is the imagery. This photography sparks the imagination of our buyers to what's possible to create in their new Toll Brothers home. Whether we are adopting new technology, introducing new products, new price points, or expanding into new geographies, we take great care to do it thoughtfully for our customers and for the brand. The same care and attention to detail carries through into the home purchase experience. This high-touch experience starts with our online sales consultants. They're available by text, chat, and by phone daily. These experts live local in their markets to best assist customers when selecting a community and answering detailed questions all about the aspects of living in that area. They are the link to scheduling appointments for our on-site and virtual visits. Some speak multiple languages to assist customers with a wide variety of backgrounds. Our on-site sales team is made up of 650 sales professionals. They build strong relationships with their home buyers. We support our sales teams with internal networking opportunities to share best practices across the company. We also have a robust internal sales resource center that includes ongoing training and development opportunities. Of course, at the center of all of what we do is our customer. That's why we make it a point to share a customer story at the beginning or end of every meeting. This keeps us grounded in what matters most as we preserve our legacy and remain the leading luxury home builder nationwide. Thank you there, Wendy. That was terrific. Quick comment as we head into Q and A. You heard from Mark Bailey. He was the one that got to dress in blue jeans hanging out in the Colorado mountains and runs a fabulous Denver division. We came up with a division report card a couple of years ago, which has a number of criteria on it as we judge and compare the performance of divisions. It includes return on assets, gross margin, SG&A, growth, customer satisfaction. Mark and his Denver division have been, for the last two years, number one on that division report card. Not only are they number one overall, but they are number one in both customer satisfaction and employee engagement. He made the comment that happy employees build happy houses. Well, not only do they build happy houses, but they tend to drive more growth, and they tend to drive more profitability. Everyone's shooting for Mark. He's got a special culture, as you could see, and we're just so honored and thankful for what he is teaching all of us about how to be better all the time. With that, we are going to move into the first session of Q and A. You can see now we have on the screen. Marty and I will stay on all of these, but it's really an opportunity for you to ask the questions of those you just heard from. We have Wendy Marlett, Jim Boyd, of course, Rob Parahus, Karl Mistry, Seth Ring, and there's Mark. We're getting a lot of questions, I've just been advised. If we can't get to everything today, our IR group is going to be very busy over the next couple of days because we will get your questions answered. We've also tried, some questions are very similar, so we try to consolidate them maybe. You may not hear your exact words, but we're trying to consolidate some questions down to what several people are asking. Heather, if you have the latest for us, we will thank you very much. Thanks, Heather. Let's jump in. All right. Before we get to that, it's amazing what that report card on the divisions did to the competitive spirit of our various division presidents. They're coming after you, Mark. Be on the lookout. Our first question, as we anticipated it might be, is about cost increases for building materials and labor. What impact is that having on us? How about the availability of materials and labor? Are you able to start homes and deliver them on time? Why don't we give this one to Rob Parahus up in the upper right corner of your screen? Thanks, Marty. Let me start by just letting everybody know that we adjust our budgets constantly to reflect today's lumber pricing, building material costs, and we build in a contingency to hedge against any future increases as well. Most importantly, our national purchasing team has done a terrific job aligning us with manufacturers that are willing to lock in pricing for one, two, three, even as much as four years. In doing that, we protected the cost of the homes we build. More importantly, if there is a commodity price change and a manufacturer does need to come in, they're required to give us anywhere from 60 to 120 days notice. During that timeframe, we can place orders for the materials that we need to build the homes that we've sold. In effect, that locks in the pricing for those homes and the cost increase is applied to the next home we sell. Our national purchasing teams work in lockstep with our division teams as well to ensure that this happens. That same philosophy is applied across our trade partners when they come in at the local level and a plumber wants to increase his pricing, we do our best to lock it in for the homes we have in backlog and to pass that increase along to the next home that we sell. I will say that from the labor side, we have not seen a lot of cost pressure there. I know I've seen it in Austin, I believe Jim has seen it in Phoenix and in Boise. Most of the markets we really haven't seen those labor cost pressures. You heard Seth mention optimization. Certainly, that's another way that we've controlled our building costs between optimizing and simplifying our homes, taking the complexity out while still providing our buyers with tons of choice. We've been able to control our costs that way as well. As it relates to material and labor availability, again, our national purchasing teams have done a great job. We get priority for the products that we've contracted for. They're our partners in every sense of the word. If we run up against a specific model number that we can't get of an appliance or a hot water heater, these partners either upgrade that appliance at no extra cost to us, or they'll provide us with a temporary appliance that we can install, knowing that when the upgraded dishwasher, I'll call it, they're going to come in and switch it out for our customers and make it right. We're in a great place with those partners. We've also streamlined some of our product offerings. As an example, if we had eight to 10 colors of roof shingles that we offered a couple of years ago, and the manufacturers today are really producing four or five colors more so than others, we've narrowed the selections for our home buyers during this peak time where they're struggling with production. As far as lead time goes, have we seen increased lead time requirements? Absolutely. That's been communicated very well through our national team and our division teams, and we've taken advantage of that. They've been able to deliver the products that we need when we need them for the most part. That has enabled us over the last two quarters to continue to reduce our cycle time across most of the divisions. Some of that's related to, as Doug mentioned, the affordable luxury and that being a higher percentage of the homes that we're building today, which ultimately has a reduced cycle time built in. Mix may play a little bit into those cycle time savings, but for the most part, our partners have done a great job providing us with what we need to produce the homes we're building on time. Great. Thanks, Rob. Jim Boyd, here's a good one. With so much anticipated growth, how do you plan to scale your business? Doug, thanks. That's a great question. We're in a terrific market right now, but if you don't have the team in place and if you don't have the organizational structure, you really can't take advantage of it. To address the growth, we've pivoted. We've transitioned our management structure from our traditional project management structure to a more functional structure. For those of you who have been with us for many years, you'll know that Toll Brothers was built on the project management system, and it's been successful. Rob, Doug, and I are all products of it. So are our younger leaders, Karl, Seth, Mark. Under that system, basically each community is run by a generalist, you could call him kind of a COO for that community, that handled everything from site work to models to sales, construction, and profit and loss. Today, we're a much bigger company. Today, we have over 300 communities, and we plan to close over 10,000 homes. What we learned over the years was that scaling that project management system, finding those 300 generalists, was becoming more difficult to grow. Our new structure relies on specialists and functional leaders operating more consistently nationwide, enabled to plan for growth on a regional basis. In each division, we'll have a leader of sales, a leader of purchasing, a leader of construction, and we also have national leaders like Lisa, who you just heard from, running our design studios. By directing resources, both trade partners and materials, throughout the division, rather than focusing on each of those on a community-by-community basis, we have successfully scaled our business to become, today, the largest residential builder in Reno. After only five years, we've become the second-largest builder in Boise, and we're poised to deliver over 1,000 homes in the Phoenix metro market next year. Back to you, Doug. Thank you, Jim. Seth, now this one came in earlier. Full disclosure here. We knew it was appropriate for Seth because it had to do with optimization, which we talked about last week at length. Seth, I think, was able to maybe pull a slide or two together to help as examples of what we're talking about. The specific question is, how do you cut costs on designing your floor plans without compromising quality and the risk of blending in with all the other builders as you continue to optimize and rationalize all your plans? Yeah, we think about that every day, and as much as we want to control costs, and we know that the battle on cost management is won and lost at the design stage, we can't forget about our ultimate commitment to the buyer, and that's to deliver a luxury home. It's a balancing act. We have a term that we use internally called optimization. You've seen it in the slides. What it really means is to capitalize on current buyer trends for more open floor plans, for comfortable and formal spaces, maybe a large volume entry ceiling, and a better connectivity to indoor/outdoor spaces. I think Nimita touched on that earlier. We have a number of different things we're doing, which actually deliver on a promise for a better superior plan, but also a lower cost to build. I wanted to bring in Karl Mistry to walk us through an example on the East Coast, and I'll show you one on the West Coast, because I think it's best just to show you in an illustration what it looks like. Karl? Yeah, thanks, Seth. I guess I'll start by saying thanks for allowing so many of us to come out and visit. I think we came in December to get out of some cold weather and visit you in SoCal, but we went up to Seattle as well. It was a great trip. I think it was collaborative, sort of speaks to this ongoing innovation that we talk about a lot internally. This slide, I think, is how it manifested itself here in the East. We came back from that trip impressed by the floor plans, but also the process that Seth and his team went through. The floor plan at the top is a legacy floor plan that's here for context, the Columbia II, which was a great seller for a very long time. As we continued to offer it, we had to continue to offer more options to modify that floor plan. After a while, it just simply became cumbersome. Coming back from that trip sort of invigorated, we hired a local architect here in the D.C. area and developed the Rosslyn along with a few other plans that are certainly optimized. What we were able to do is actually reduce the option offering considerably and put a lot of the options that customers were buying in the home standard. We were nervous what that would do to our option revenue, but we're actually surprised in the end. Customers are actually spending more at design studios and in our structural options. Additionally, what you can see here is we're able to save money on a price per square foot basis. The net savings on this home, as a contrast, is right around $20,000. You have the benefit of a better sales experience, easier for our sales teams to sell these homes, and a cost savings. I know, Seth, you had an example out west you shared with, I think, an even larger home. I'll pass it back to you. I think we share a lot of the same characteristics in terms of our change to optimizing. The cleaner, sleeker home designs, fewer exterior corners, fewer arches, bump-outs, things that cost us a lot of money that we didn't always get the return on. We're delivering a better design, and like Karl said, it costs less. This is a big opportunity for Toll. As good as we've been in home design for the many years we've been out there selling homes, there's opportunity to improve and get even better, and it's a boost to the bottom line. In this case, in Southern California, two beautiful homes. The one on the top was built around 2015. Its predecessor on the bottom was built here recently and was about $17 a foot less, which is about $70,000 a home. We're not talking about insignificant savings. Doug, we're out here. You see it. There's hundreds of plans hitting the market that are just like this. As you know, senior management is hot on this. There isn't a new community that opens that doesn't have optimized product. I think there's big opportunity in the future to improve the design and continue to cut costs, and I think everybody will see examples of this in the coming months and years. Great, guys. Thank you very much. Our next question, let's direct it to Karl. It's about land buying discipline. Karl can answer this because all of our regional presidents sit through all of our Monday meetings. The East Coast sits with the other two regional presidents. The West Coast sits with their counterparts. With the company so large and every market so different, how do you maintain discipline in your land buying? Got it. Thanks, Marty. I think you and Doug both touched on it. I've had the perspective of working in a lot of different markets for the company, certainly land acquisition has its local nuance. Real estate is a local business. The tools that we use, the way that we evaluate, and as you mentioned, even the people that evaluate these opportunities are consistent. No division is exempt from that process or these return thresholds that we've mentioned. I think a simple way to state it when you talk about capital efficiency in the context of land acquisition is what we're trying to do is buy land no sooner than when we need it, right? That's a real simple way to think about it. The deal structure, as you mentioned, Marty, at the top of the call for how we do that, your corporate finance team, a big shout-out to them. They help pair the opportunity with the right deal structure, and that's a large part of it. The other thing is, along with Seth and some others, we were able to develop this land deal scorecard. The way to think about that is it gives our operators an objective way and a qualitative way to think about the next opportunity. Outside of the financial returns, is there a supply-demand imbalance? Is there approval risk? Does the land development have a complexity that we should look into? All of this is in an effort to sort of make those returns more predictable, more stable. Then it all comes together on Monday, right? We're no longer up at 2:00 A.M., like Doug mentioned, but Monday is still a very important part of our day. Every opportunity is discussed, and there's spirited conversation. We don't approve every opportunity. Some have to go back and get reworked. Look, at a time like now, where we have a lot of inventory we have, so much of it which we controlled pre-pandemic, it gives us a chance to grow in the near term, and it allows us to be selective and discerning. Even from my chair, it gives us a chance to really filter those deals for the very best ones. We do that no matter what division is, every single Monday. Great. I think we're going to take one more because our time slot is wrapping up here. Wendy Marlett, there's a question about advertising spend. Can you quantify, please, the reduction in advertising spend that is contributing to the lowering of SG&A today and going forward? Sure, Doug. Let me give some color to that. When you think about it, the demand has been huge. We've wanted to take advantage of that and really look at our advertising spend and be smart about it. Right now, we have this huge opportunity to dial back media spend, and for the most part, that's in anything related to digital. It could be paid search, display ads, and really dial it back, but at the same time, carefully watching traffic, both online traffic and foot traffic, and making sure that customers are finding us easily, they can get to our communities. Being thoughtful about our cost-cutting. At the same time, we're looking at opportunities on the ground. Our models, which are arguably our best marketing asset, they're also very expensive. We put a lot into them to make them so beautiful and so compelling and exciting for our customers. We're looking at sort of everything that maybe the customer wouldn't even notice. Let me give you an example of a cost-cutting measure. Our beautiful sales centers have this glass front, a really luxury retail experience. Well, just by designing that a little bit differently, we can cut a few thousand dollars here and there, and we multiply it times all the communities that we're opening, it can make a really big difference. We're looking at everything. I think at the end of the day, a lot of these measures will go forward. It's not just about today, but we'll bake them into our practices for the future as well to really support driving down SG&A. Great. Thanks, everyone. Really appreciate it. If you have any questions, by the way, of this panel, again, after today, just feed them through Fred and the IR group, and we'll make sure to get you on the phone with anybody you meet today. We really want you to get to know our team, not just this afternoon, but permanently. Looking forward to that. Our next segment will showcase two of our business units that do differentiate us from most of the other builders, and that is our City Living and our Apartment Living businesses. We have David Von Spreckelsen, who is our Division President of City Living, followed by Charles Elliott, who is our President of Toll Brothers Apartment Living. Hello, I'm David Von Spreckelsen, Group President of Toll Brothers City Living, our urban condominium division. I've been with City Living since its New York City inception in 2004. Since then, we've completed 35 condominium buildings totaling 5,400 residences and one hotel. Coincidentally, it's called 1 Hotel Brooklyn Bridge. We developed the hotel with Starwood Capital Group and a half-million sq ft mixed-use development, which includes 106 condominium residences called Pierhouse. We were attracted to the site because of its location in Brooklyn's premier neighborhood, Brooklyn Heights, and the tremendous views that it affords. We designed Pierhouse with a single loaded corridor so that every residence would have a view of the world-class Brooklyn Bridge Park, the East River, and the Manhattan skyline. This is just one of a number of very successful waterfront communities we've created over the years. City Living got its start a decade before Pierhouse on the Hoboken waterfront that was once a Maxwell House coffee plant and a Lipton tea facility. We redeveloped these sites into 10 condominium buildings totaling 1,946 residences and over million square feet of commercial and parking space, transforming this once dormant area into a vibrant waterfront neighborhood. With our success in coffee and tea, we turned next to matzo balls, converting the former Manischewitz matzo factory in Jersey City into a new community called Provost Square. The first tower there is a rental building developed with Toll Brothers Apartment Living, from whom you will hear much more about shortly. The second tower is a condominium building with 242 residences, which recently sold out, and I'm happy to say that we are about to break ground on the third tower, which will include 259 condominium residences and a theater for the performing arts. Many of our most recent buildings have been in Manhattan. We have had the good fortune to be able to develop in some of Manhattan's finest residential neighborhoods, including the Upper East Side, Sutton Place, Chelsea, Flatiron, Gramercy, Upper West Side, and Tribeca. We have worked with world-famous architects, including the Pritzker Architecture Prize winners, Christian de Portzamparc and Rem Koolhaas. To all of these buildings, we bring our keen focus on outstanding architecture, fine interior finishes, and thoughtful amenity offerings. What sets us apart from other condominium developers is our vertical integration. We generally build our communities with in-house teams and always sell our residences with our own sales teams. In addition, we have strong development and financial partnerships which can leverage our operational capabilities. This gives us tremendous flexibility in rapidly changing environments and provides us with complete control of our brand and our message. Our latest building, 77 Charlton, is in the burgeoning Hudson Square neighborhood of Manhattan. I'm pleased to say condominium sales in New York City are back. We're currently selling at a pace we haven't seen in years, and that certainly makes Florence and Samantha happy. Hi, I'm Florence Clutch, and I'm the senior sales consultant for 77 Charlton. I've been with City Living since 2007, and to date, I have sold more than 500 homes at nine buildings in Brooklyn, Queens, and Manhattan, totaling more than $600 million. David is right, Samantha and I are ecstatic about the way sales are going right now, and we're thrilled that our first homebuyers are moving into the building. We eagerly anticipate working on future City Living communities. That's right, Florence. Hi, my name is Samantha Solomon, and I've been with the City Living division since 2010, where I started as a sales greeter at our Northside Piers development in Williamsburg, Brooklyn. 77 Charlton is the sixth building I've done with City Living, and now I'm a sales consultant here. As with our previous buildings, our exquisite architecture, great interior finishes, and great amenities really resonate with our buyers. Like Florence, I look forward to the next one. Given this encouraging news, in addition to commencing with the third tower at Provost Square, we have a number of other exciting projects in the pipeline that we're preparing for development, and we continue to monitor land prices and look at acquisition opportunities. Thank you for allowing me to show you all the great things we are doing at Toll Brothers City Living. I'm Charles Elliott. This is Apartment Living. The company and its founders have a long history of multifamily and commercial development. We initially focused the apartment business in the Northeast in Toll's core markets from Washington, D.C. to Boston. Since then, we've developed over a dozen properties in those markets. It made sense to start our growth in the Northeast. It enabled us to leverage Toll Brothers' brand and benefit from the synergies between the homebuilding business and the apartment business. Through our focus on our people and our shared values of delivering on our promise of being thoughtfully designed and uniquely elevated, we enhance the living experience of our residents. We have a very disciplined approach to growth. When we grow into any new market or to any new project, we do extensive due diligence and very conservative underwriting before we move forward. Today, we're a national platform diversified across 14 states. Our focus is on developing in high barrier to entry markets with limited land, as well as in high growth markets with strong job growth and diverse employment. Currently, we control land for over 18,000 apartment homes, primarily in suburban infill locations. The market for rental housing continues to be large and growing. We see tremendous opportunities for growth in the Sun Belt, Southwest, and mountain markets. We combine the premier locations of where renters want to live and a luxury product. Our vision for growth is based on exceeding our customers' expectations and expanding to where our residents want to live. The demographic of an Apartment Living resident is someone in their early to mid-30s with a household income of $160,000. A few years go by, that resident gets married, has kids, and they become the target market of homebuilding. Our residents become accustomed to our quality, our brand, our service. They become Toll Brothers customers for life. Our primary strategy is centered on developing institutional quality product and selling at stabilization for outsized returns. As a result of these strategies, we deliver consistent income for our investors through the sale and recapitalizations of the projects we develop. Apartment Living projects are capitalized through joint ventures where Toll Brothers is typically the minority investor. These joint venture structures benefit our shareholders by increasing capital efficiency through fees and promotes. We have a strong track record of creating value for our investors. Our depth of investors speaks to this with 18 equity partners and 24 debt partners. We partner with blue-chip institutional investors, including public companies, pension funds, and private equity. We've also established strategic partnerships that have enabled us to maximize returns while minimizing economic risk and reducing the use of shareholder equity. Thanks, David. Thanks, Charles. We love these businesses, but we do recognize at times they can be capital inefficient. We are studying in great detail. We're pretty far along in studying some strategies that will permanently reduce the investment in these businesses as we're able to continue to grow them and also drive permanent improvement in the ROI and the ROE. We'll probably have something to report on that over the next coming months, but it's something that we're working hard on with both City Living and with the Apartment Living business. Moving on, we're going to now highlight four leaders from some of our dynamic regions around the country. First up will be Bob Flaherty. Bob Flaherty is the Group President overseeing both Arizona and Utah, followed by Greg Netro, the Group President for Florida, Rob Paul, Group President for Texas, and Kelley Moldstad, who's the Group President for the Pacific Northwest. The way we operate, we have, of course, two Co-COOs, then we have five regional presidents that handle the entire country. Then under the regional presidents, we have a handful of group presidents that have multiple markets within an area. Then, of course, we have the VPs. Right now you're going to hear from four of the group presidents. I always knew I wanted to be a home builder, but wasn't sure what that meant. After college, I went to school in L.A., graduated from UCLA with a degree in economics, and I moved to Arizona, and I picked up a hammer, and I worked as a carpenter for a year and a half. Then I found my way after a couple of years as a superintendent to Toll Brothers. It also gave me an appreciation for who builds our homes, the physical workers that are out there building homes every day for us. I think it helped me a lot in my career with Toll Brothers. Certainly while I enjoyed it was incredibly beneficial for what I do today. Arizona is a fantastic place to live and raise a family and retire. We've got an incredible food scene, great weather. We're a very mature, cosmopolitan area, and it's very easy living. With all the growth occurring in metropolitan Phoenix, it only makes sense for our division in Arizona, for Toll Brothers division to grow. We traditionally serve the luxury move-up second home market. Several years ago, our senior management team asked us to look into expanding our market share. That will come from three places, the active adult, age-restricted, age-targeted lifestyle community, our traditional move-up high-end luxury market, and then our affordable luxury, which is a lower price point. That affordable luxury can be built throughout all of metropolitan Phoenix. We can go into cities like Goodyear and Surprise and Buckeye and Queen Creek, where we previously couldn't go because it didn't support the price point. These three markets now allow us to move from doing just 250 to 350 homes a year, but instead doing from 1,000 to 1,500 or more. Sterling Grove is our lifestyle active adult community. It feels like a place that you want to go to spend a vacation. You want to relax with your family or friends. Everyone knows what it's like to go on vacation, you're just this sense of relaxation and the desire to own there. How many people go on vacation and end up buying a second home? There's no reason to leave the gate, actually. Once you come in, everything you want is here. There are restaurants, golf course. It's a Jack Nicklaus golf course. There's the spa, three resort pools, fitness, pickleball, tennis, bocce ball, a putting course. You can even have your groceries delivered here, you really don't need to leave. You name it, we've got it here. In all of our models today, specifically the model we're in, Boulder Ranch, which is award-winning, you'll see indoor-outdoor connectivity throughout the entire home. There are many private courtyard spaces, meditative gardens, large gathering areas, pools, spas. We're building private resorts for our customer because we know who our customer is. We salvage and save most of the vegetation when we come onto a parcel of land and develop it. We keep that vegetation so that we can put it back into the community, into some of the homes that we build. It's very important to us. It really helps with the maturity of the neighborhood, the feel of the neighborhood, and preserves that meditative quality that the desert brings so many people, which is really important. It's why we have so much indoor/outdoor living here. We build more than homes, we build lifestyle. We've done that for 25+ years. It's also what's allowed us to open other buyer segments, go to affordable luxury, and age-restricted lifestyle communities because of the reputation that we've got and the luxury that we build into all of our communities, all of our neighborhoods. The affordable luxury product line will account for about 50% of our sales this year and 50% of our settlements next year. It has a projected growth rate of 20% year-over-year. This is a big market segment for us at Toll Brothers, and specifically here in Arizona. When you tour an affordable luxury community, you only think of it as luxury. High ceilings, indoor/outdoor living, multi-slide pocketing doors, beautiful elevations that are on trend. It also allowed us to open up additional geographic areas in metropolitan Phoenix, places we really couldn't offer our high-end luxury product. Today, we're selling homes to first-time homeowners, millennials, first move-up buyers, because we're in a price point that is affordable for that segment. As a result of that, we are creating lifelong Toll Brothers customers. Whereas in the past, the first Toll Brothers home, someone may be an empty nester, retiree, or buying a second home. Today, they can buy their first home. We expect to sell our customer quite a few homes over their home buying lifetime, and that's a real benefit and a real advantage to the growth of Toll Brothers. We may move people from an affordable luxury into a luxury and into a lifestyle age-targeted community. Wouldn't that be great? Hi, I'm Greg Netro, Group President for the state of Florida, and I'm here to talk about the expansive growth and success that we're seeing all across the state. I've been with Toll for over 20 years, what's going on here right now in Florida is absolutely incredible. I say that because three years ago, we were only building a little over 400 homes a year. Today, we're at 1,200, and in another two years it'll be over 2,400 homes. That's a significant amount of growth in a short period of time. In addition to building our tried-and-true luxury estate homes in a select few markets, we're developing new products across a wider range of price points, which allowed us to reach into new market segments across the entire state of Florida. Let's hear how this strategic move to diversify has helped Andrew out. Hi, I'm Andrew Colavito. I've been with Toll Brothers for 13 years. I first started selling luxury estate homes, and I really enjoyed making dreams come true. This was great for us, but what we were able to offer our homebuyers was a very limited segment of the market. Now, in addition to luxury estate homes, we offer low-maintenance lifestyle villas and townhomes, and age-targeted and active adult living opportunities with price points from $300,000 to over $3 million. The possibilities are endless, and we take pride in knowing that we can help every homebuyer that chooses us to build their home. You know another thing that's helped us grow over the last few years? The world has decided to move to Florida. In the last year alone, the population has grown by over 300,000 people. There's over 1,000 people a day moving to Florida right now. These are people who want to live in a luxury home and luxury community full of the Florida lifestyle everyone is seeking. One of those individuals that has decided to move here is our very own Kristen Hill, who comes to us from South Florida. I've been with Toll Brothers for 15 years, and I recently relocated to Southeast Florida, not only to take advantage of my growth with the company, but also for the affordability and the opportunity to live in the Sunshine State. Here at Azura, we created a vision we call the Azura Experience. This vision included a unique luxury branding approach to make the overall community appealing to our lifestyle homebuyers. Azura is located in the highly sought-after area of Naples, which features our luxury gated master-planned community with an award-winning clubhouse with state-of-the-art fitness center. Azura is just one of our many communities that provides a place for an active lifestyle, a variety of entertainment, relaxation, and most importantly, a vacation lifestyle all year long. We need to continue to execute on our proven strategy of diversification, just like we did in 2019 when we expanded into the Tampa market. Tampa will provide us with an additional 500 sales a year while adding double-digit community count to our business plan. Over the next few years, we'll continue to do the same thing across Florida, entering even more markets such as the Gold Coast, the Space Coast, and Emerald Coast, as well as expanding more in our existing markets with further diversification of product and price point. There is still so much opportunity for us to grow all around the state of Florida and increase market share for years to come. Hello, my name is Rob Paul, the Group President for the great state of Texas. On June 18th of this year, I will be celebrating my 20th anniversary with Toll Brothers. When I began my career in the Dallas division, we had four selling communities, and we were working really hard to sell 100 homes. Today, I oversee our three markets of Houston, Austin, and Dallas, where combined, we should sell almost 900 homes in our beautiful master-planned communities and other locations across this great state. One of our greatest strengths is our focus on unrivaled choice. This choice is not just about the type of home you dream of owning, but in Texas, this choice is extended to where you'd like to live, whether that be the master-planned community of Treviso in the Texas Hill Country in Austin, the urban vibe of Somerset Green in Houston, or a large home site at Town Lake in Flower Mound in the Dallas area in which to raise your family. This unrivaled choice also now spans diverse price points and product types. We currently offer affordable luxury communities with prices starting in the $300s to estate homes priced over $2 million. Texas is welcoming almost 1,600 new residents each and every day. This population growth and in-migration, teamed with a pro-business attitude, tax-friendly policy, warm weather, quality education, and affordable housing, are bringing relocation buyers from across the country. As companies keep announcing their movement to the great state of Texas, that demand will continue to fuel our success for the foreseeable future. Let's start our tour with Austin, Texas. Who does not love Austin? This seems to be the first stop for most people contemplating a move to the Lone Star State. We entered Austin in 2014 and have organically grown to over 250 sales per year. Austin offers a world-class music and food scene, great recreational lakes, and Hill Country views that you just can't find in the other major markets. Our crown jewel in Austin is our Treviso master planned community, where over 3,200 homes will eventually be built by us and our JV partner. Community count is expected to increase by 35% through 2022, and our footprint will expand from Dripping Springs all the way to Georgetown. I'm especially excited to announce the 1,079 home site active adult community of Regency at Santa Rita Ranch, coming later this year. Santa Rita Ranch is a top 25 national master plan and will be home to our first age-qualified community in the state of Texas. Moving to the land of the master plan, Houston, Texas. After entering the Houston market in 2009, we purchased three master planned communities, Sienna, Woodson's Reserve, and NorthGrove. Not only building homes, but selling lots to many other builders. This master planned team based in Houston is headed by Jimmie Jenkins and now helps our operations in Florida, South Carolina, and beyond. Houston was also the birthplace of Texas affordable luxury product. The pioneering spirit and attention to detail by our Vice President, Brian Murray, paved the way for this growth category to spread across the state. With fast build times, great design, attainable price points, and a fantastic gross margin, this division proved that Toll Brothers can be much more than the typical large family home. Our last stop is the Dallas division. Dallas is our largest division in Texas and began in 1995 as our first entry into the state. Since that time, we've completed almost 5,000 homes. Our large home suburban move-up model has transformed to now include affordable luxury, smaller lots, and locations spanning from West Fort Worth to the northeast suburbs of Dallas. As a matter of fact, we now refer to our group as the Dallas-Fort Worth division since expanding our market area. DFW continues to be the destination of choice for corporate relocations, and we're growing our land position to take advantage of that relocation market, in addition to the high demand from local residents choosing to move up or downsize. I'd like to conclude with the exciting announcement that we are entering the San Antonio market. We have recently secured a 535 home site, age-restricted community in Boerne, Texas. It's located within the beautiful master plan of Esperanza and will serve as the base for our future San Antonio operation. I hope this gives you a greater appreciation for Toll Brothers' Texas operation. There's so many benefits to living in the Pacific Northwest and a lot of reasons why people want to come here to retire. We have the very mild climate year-round here, beautiful summers, and then we also have such beautiful scenery. I mean, the mountains, the water, and access to all kinds of outdoors recreation. Toll Brothers came to the region in 2011 through an acquisition of a small builder. One of the keys to our division is that we start from raw land, we entitle the land, we develop the land, and then we sell the homes. Some of the biggest changes we've seen in our market really surrounds the job growth and the economy. With the home of quite a few world headquarters and secondary headquarters, the likes of Microsoft, Amazon, Google, Facebook, Expedia, T-Mobile, and on and on, it really has driven the economy here. Some of the communities that I'm very proud of, and are really the flagship of our East Side and Kirkland area, is one called Belvedere. It was 81 homes up on the top of Lakemont, and that was really our first flagship Toll community that we built in the Seattle area. At McGraw Square, we really wanted to blend in with the neighborhood, and that means architecture that blends in. Architecture on each street a little bit different. The street down on the lower side of McGraw is more of a contemporary, that matches the rest of the street up and down the corridor there. On the top, we have more traditional brick townhomes that actually match the houses across the street. It really blends in nice with the whole community. When Toll first entered into this market, we were really focused in the greater Seattle area, in Bellevue, Redmond, Sammamish. Since then, we've been able to expand our footprint outside of that core to areas to the north, moving to the east, to areas like we're at here, where we're at the base of the Cascade Mountains, and south towards Tacoma. By expanding to these areas, we've been able to increase our pipeline. We currently sit at 1,350 lots in the pipeline, which is a great improvement, and we're bullish on the future where that can go in expanding that pipeline further. Working in Seattle for a number of years, we recognized the great opportunity in the Pacific Northwest. We've been in Seattle for seven or eight years and thought, "It's time to go to Portland as well and look at other opportunities." We're excited that this year we're going to close almost 300 homes and sell well in excess of that number in Seattle. In Portland, we're going to close just over 100 homes. Although often Toll Brothers likes to enter new markets through acquisition, we actually entered the Portland market through organic growth. In 2018 is when we made our first purchase and acquired two communities, which shortly opened in 2019. The growth of the division has been extremely rapid. We closed three homes our first year, 56 our second year, now we're going to close over 100 homes this year. That trajectory keeps going. For the next couple of years, we anticipate being over 200 homes probably in the next two years. It's been received really well by our buyers and the real estate community. As we look forward, the opportunities we're working on now are communities that we're doing site development, bringing it from the ground up. We're really excited this fall, we have coming online Toll Brothers Hosford Farms, which will be our largest community to date. It's going to be our first flagship Toll Brothers community that I think will really plant the flag for the division here in Portland. The Ridge at Big Rock is a master-planned community of over 300 homes. What makes The Ridge at Big Rock such a unique and special community is the community clubhouse. In the Pacific Northwest, it isn't common for builders to be able to build a clubhouse in the community as well as all of the parks. Our clubhouse has an outdoor event lawn, climbing wall for the kids, along with a splash park, and a hammock forest. The clubhouse also has multiple indoor and outdoor entertaining areas and a fitness center down below. We believe that our clubhouse is an excellent feature for our residents. The exciting thing about Toll Brothers homes in the Pacific Northwest region is that we offer such an array of choice that really appeals to different consumer segment groups. We have such a great diversity of price across the region that that's very attractive for the first-time home buyers. We see the international luxury buyer. We get a lot of people buying that are professionals in the technology industry, and also relocation buyers that are coming into the area. The product that we build in the Pacific Northwest really starts with our single-family detached homes to estate-style homes, and then we transfer into some townhomes, which is the attached living. We are building some stacked flat condominiums. We are thrilled to bring the 55 plus active adult Regency brand to the Pacific Northwest for the first time. Regency at Ten Trails is set within the Ten Trails master plan community. It's quite close to the urban centers of Seattle and Bellevue still, but it has a bit of a rural feel in Black Diamond. The community is just over 400 homes, and that is going to be the largest community to date for our Pacific Northwest region. Awesome. Thanks, team. That was great. We're going to move to Q and A session number two. Heather just brought us a new batch of questions. The first one, I'm putting my teammate here, Marty Connor, on the hot seat. I thought you said at the outset we were going to try and direct these questions. Well, there's one for you. The rest of the folks. Okay. Which is important. Here it goes. I picked you. Okay. So the- Watch your back. They didn't pick you. I'm picking you. Okay. How do you prioritize the structuring of your land purchases between seller financing, land banking, and joint ventures? Okay. Those are the three different structuring methods I mentioned at the earlier section of today. Our preferred method is seller financing, seller terms. Our land teams have gotten well-versed in these various structures. Our finance team has given them a bit of a reprogramming, a bit of an education from the days when they would buy in bulk, and they've really risen to the challenge. If we can get the seller to defer receipt of cash, even if it's a little bit more cash, and that meets our deal scorecard metrics, that's the way we want to go. On occasion, the deal. We'll not be able to fit into those metrics. We need to go and get terms from a land banker instead. The land banker will buy the land. Then we will get terms from that land banker. As I mentioned, those terms are generally a 15% deposit, buy the land as you need it, pay a 10% option fee for that privilege. The deals that fit into that bucket generally are 18-48 months in terms of duration, the time period over which we are confident we will use that land. The land bankers don't have a longer horizon for that. If it's shorter than that, the IRR benefit is not worth the pursuit. Then for really big deals where we're not comfortable spending that much money in one place, or where the duration of the land is so long that we can't use it up in a reasonable period of time, that's where we bring in a joint venture partner. As I mentioned, hopefully, they think the same way and bring us into a few every once in a while, too. That's the way we look at it. The teams are doing a great job finding land deals and getting the terms from sellers. On occasion, we do turn to the other two structures. Right. When it goes to the land bank structure, Marty has built a great team in the finance group that really takes over from the field. We don't have our land acquisition teams, our division presidents trying to find land bankers, negotiate with land bankers. It gets fed back into corporate. We have a handful of land bankers we work with. We're now seeing rates that are breaking south of 10% with those land bankers, and the finance group can really take over and assist the teams in the field. That's been more and more helpful. If there are any land bankers on the call today, we'd love to hear from you. Well, the new rate is 8%. I think that's a great starting point. Thanks, Marty. Lisa McClelland, running Design Studios. When you choose products to include in the design studio, what are the key considerations? Is it profit, sustainability, buyer preference? What do you look at, and how do you set up those studios today? Well, thank you for the good question. There are a number of things that we look at, and the things that you just mentioned are certainly important factors. We're really fortunate that every day we are able to meet directly one-on-one with our buyers. Through that, it affords us a great opportunity to get real-time feedback about style preferences and trends and things that they'd like to see. We're lucky to also work with our national merchandising team very closely, and the external design firms who help us with our model homes. They're amongst some of the best in the industry, and with their collaboration, we're able to make sure that we balance our assortments across trends and style. Additionally, we look at our assortments on an annual basis, and that's important because we always want to make sure that we're rotating and keeping current with new looks. In the last three years, we've reduced our assortment about 30%. You've heard us talk a lot about optimization, and we too have done that in the design studios. I think a good example of that is if you think about the carpet category. If you were to walk into one of our studios five-plus years ago, you typically would have seen a pretty large footprint of carpeting. Trends have changed, and with the great innovation and new materials and looks that are coming out into the marketplace, things like wood plank tiles, large format tiles, beautiful engineered woods in lots of different stains and colors, that has really overtaken the sales that we saw in carpets. As a result of that, we've been able to change space allocations and do some different things with our assortments to meet the demand and needs of our customers today. Our average option sales overall, those are sales for home through the studio, have been strong, and they've been growing year over year. I think there's a couple of things that I think about that contribute to that. The first is we've really sort of elevated the environment. We've looked at all of our 35 studios across the country, and we've either renovated them or built new ones. Secondly, I think this curation of product within the design studio has really helped buyers be able to make decisions more quickly and confidently. Then coming out of the pandemic, I think buyer sentiment has been important as well. Choice and selection is now more important than ever. Lastly, the result of a lot of that work by lots of great people and teams that we get to work with has been some good margin productivity within the studio. Our studio operations contribute in the mid to high 30% margin contribution, which is great. It's just been fun to see the momentum of this business. We treat it like a retail store. We're the store within the division, and it's just been a lot of fun. Great. Great. Thanks, Lisa. Thanks, Lisa. We're always happy in the finance and accounting world to hear about margin contribution in the mid to high 30s. Our next question is going to go to Bob Flaherty. I think it comes from the Chamber of Commerce in Phoenix. The first thing they want to know is if you could moonlight for them based on your video. The second question is, you're selling $300,000 houses in that market and $3 million houses in that market. That seems like a lot of different businesses. How do you balance that without diluting the Toll Brothers brand? Yeah, it's a good question. By the way, thanks for pointing out what a homer I am for Phoenix. I do love it here. I encourage everyone to come. We were worried about that. I'll be perfectly honest. We have an incredible brand that we've built over 50 years, and here in Phoenix, 25 years. We didn't want to dilute it. When I sat down with the team and we talked about the tenets of what our affordable luxury would be, believe it or not, they were the pillars that Doug mentioned earlier. The only difference was location and price point, but design-driven customer service, luxury. We just brought elements of what we were doing at high price point to low price point. Today, if you walk our affordable luxury product, it's just luxury. It's been great. There is no concern over diluting it. Really it's the business of building homes. Whether you're building a $3 million home or a $300,000 home, it's the same thing. I will tell you, we've learned a little bit in efficiencies that we're now putting into our luxury products. That's been a kind of a side effect we didn't expect, but hopefully that answers the question. Thanks, Bob. Thank you, Bob. Let's go to Greg Netro, Florida. You talked about doubling the number of homes in Florida over the next two years. It's a pretty bold projection. Can you expand more on how you're going to do that and what new markets within Florida you're taking a look at? Yeah, absolutely. It's a big challenge that we have risen to the occasion of, and if you look back three years ago, we were really only selling in four markets in Florida. That was Jacksonville, Orlando, Naples, and Boca. The team has done a phenomenal job expanding new markets by our price points and segments. In three years, forward if you look, we're going to be selling in upwards of 20 markets across Florida. You asked for specifics. We talked about Tampa as one of the big markets that we recently entered, but there are more. If you go to the east coast of Florida, there is a 210-mile stretch of beautiful coastline from Port St. Lucie to St. Augustine that there are several viable markets that we haven't entered into. The greater Central Florida area is expanding north of Orlando, west of Orlando, down the I-4 corridor, and there's viable opportunities for us in the Panhandle. We're extremely excited about these, and it creates a great potential for us here in Florida for years to come. Great. Thank you. Let's move on to Rob Paul. Rob, you mentioned going back into San Antonio, where we used to be. Somebody asked a fair question, which is, what about timing? Is it smart to be entering a new market like San Antonio, with how hot things are right now, how expensive land must be, and how are we doing on timing? Maybe you can talk about the deal you're going to do there in San Antonio. Sure. Absolutely. The reason we chose now really comes down to the affordable luxury program that we have in the state of Texas. When it was created down in Houston, it's now spread across and accounts for 45% of the communities across the state. When we were in San Antonio before, we built large homes, large lots, and the market there was pretty thin. It's appropriate for us to go back with this affordable luxury segment that we now have practiced and is tried and true in the state. The deal itself, you touched on it, Marty touched on it in our disciplined land buying. We had a fantastic deal structure presented to us for an active adult community in Boerne, Texas, where we're doing as Karl described earlier, which is really buying the lots just in time. We're excited about bringing this to San Antonio, and it absolutely is the right time to go back. Cool. Thanks. I think the last one for this group will be Kelly Moldstad up in the Pacific Northwest. Kelly, what are your growth projections for the Pacific Northwest? It's real tough to find land up there. How are you going to grow in what we all know is a very environmentally sensitive and highly regulated part of the country? Sure. Thanks, Doug. Our main focus is to be innovative. What that means is look at other geographical areas, other sub-market neighborhoods within our four-county region, and that's in the Washington area. We really want to grow in our density, which is townhomes, stacked flats, and some of the other densifying product. We are also entering the affordable luxury areas in some of our outlying markets, which are south and north of Seattle. Really, we are doing the same thing in Portland. Portland is very similar to Seattle with the growth management. Land is hard to find. We have to do the same thing, be innovative, just go for different product, different areas, those sort of things. We are also looking at some of the other sides of the state, which is Eastern Washington, Spokane, Coeur d'Alene, and some of those areas as well. Great. Thanks very much. Okay. That wraps up this session of Q and A. We're now going to move on and talk about some of the really high growth markets that we've had. I talked earlier about how we really believe we're set up for outsized growth in the industry. You're going to hear from division presidents from some of the fastest growing markets for us right now. Susan Stanley is our division president in Boise, Idaho. Eric White is our division president in Atlanta. Gary Mayo is our group president for the state of Nevada, which for us is Las Vegas and Reno. With Gary will be Donna O'Connell, who is our division president within Gary's area in Reno. What they're going to look at, not only spotlighting their areas, but they're going to explain a bit more about the affordable luxury, the luxury, and the move-down or the empty nester niches that we're in. Susan, Eric, and Gary were all acquired talent. We were lucky to inherit all three of them through builder acquisitions. We acquired Coleman Homes in Boise in 2016, Sharp Residential in Atlanta in 2019, and another division of Coleman Homes in Las Vegas back in 1998. Those three acquisitions have been incredibly successful, and as I've mentioned, that we now have three division presidents that came out of each of those companies. We're also really happy with more recent acquisitions we've done in both Colorado Springs and three markets in South Carolina, Greenville, Charleston, and Myrtle Beach. We've acquired 13 builders over the last 25 years, but lately, it's accelerated. We've been acquiring one to two builders per year, and we're not done. Benjy Godnick is our managing director of M&A. That's all he does. He is a direct report to me. He is constantly out hunting for new opportunities. He also helps us get into new markets de novo, and there are right now five new markets that we're in the very advanced stages of investigating, and I'm very confident that three of those five markets will become new markets for Toll Brothers pretty soon. It's fun. This growth is just really exciting for the company. The footprint is solid, but there's more to be done. Let's jump into presentations on Boise, Atlanta, and Nevada. When you think about Boise, Idaho, most people think about the state capital, a blue football field, and potatoes. Now, Boise is one of the hottest real estate markets in the country and one of the most desirable places to live. Since May of 2020, we've seen a mass migration to our state from the West Coast, mostly from California, the interest and demand doesn't seem to be letting up. Hi, I'm Susan Stanley, I'm the Idaho Division President of Toll Brothers. I'm a 6th-generation Idahoan, I'm extremely proud today to welcome you to our state and to let you know a little more about Toll Brothers in Idaho. Boise is a vibrant, up-and-coming metro area known for great quality of life, growth, and opportunity. Zillow ranked Boise number one among U.S. midsize markets in 2020, and Realtor.com ranked Boise number four out of the nation's top 10 housing markets for 2021. In 2016, Toll Brothers acquired a local private builder that I had been working for for seven years. After becoming a part of the Toll Brothers family in 2016, the progress has been substantial. Since the acquisition, our sales have increased by 93%. Our closings have increased by 107%, and the average delivered price has increased by 58%. Since becoming part of the Toll Brothers luxury brand, we've seen a transformation in our product as well. Now I'd like to introduce our Senior Vice President of Forward Planning, Ryan Hammons. He leads our land acquisition team and will talk about our growth and land position. Thanks, Susan. The demand for housing in Boise continues to be extremely strong. To meet that demand, we've been aggressively acquiring land. In 2016, our division owned approximately 1,600 entitled home sites. That number is now over 2,500. We're on track to develop over 1,000 finished home sites this year, and a conservative estimate has us delivering another 1,500 in 2022. This would triple the number of home sites we developed in 2016. We've been able to expand our footprint in the Boise Metro area, adding 10 new communities this year. This growth wouldn't have been possible without the resources we now have with being part of Toll Brothers. It's not just financial. The Toll Brothers' reputation for quality homes and developments plays just as big a role. We work with a lot of families that have owned land for generations and want it turned into something they can be proud of. After seeing what we've built here in Idaho, they're excited that their land can be part of a Toll Brothers community. Being a part of Toll Brothers has really opened doors for us. Back to you, Susan. Single-family home inventory levels in the Boise Metro area are at an all-time low, 80% lower than they were last year. Toll Brothers is the only public builder with the foresight to establish strong Idaho roots back in 2016. Now that this market is booming, we are well-positioned to make the most of it. As an Idaho native, I'm thrilled to be part of such an exciting time with America's luxury home builder. Welcome to Atlanta. I'm Eric White, Division President for Toll Brothers here in Atlanta. Almost two years ago, Toll Brothers entered the Atlanta suburban market with the acquisition of Sharp Residential, a privately-owned builder who was in business for almost 30 years. Sharp Residential focused on building in close-in locations using classical architecture, creating impressive streetscapes in well-manicured communities. Its experienced leadership used a disciplined approach to production building, focused on cycle time efficiency and holding on to strong margins, allowing it to be very profitable. The transition to Toll Brothers was made easier by the level of luxury and quality that was already built into Sharp Residential's existing communities by adding fresh new home designs and elevations and building to a higher level of quality by leveraging national vendor contracts, including plumbing, lighting, appliances, and more, without adding costs normally associated with such upgrades. The Toll Brothers brand has also improved our customer visibility in the market. At the time of our acquisition, we had 10 open communities, and since then, we've opened six additional communities and expect to open four more this year. Sharp Residential has had a great reputation in the market for many years. However, the reaction to the Toll Brothers brand brought immediate excitement and can be attributed to much of our recent success. While other builders are selling homes in the fours and fives, we're able to do the same in the sixes and sevens and even higher with a luxury product, largely in part because of the brand reputation, home design, as well as our planned customer and sales experience. We're going to take you over to Cumming to show you another example of our Toll branding. Let's go. Welcome to Cumming, Georgia. We are in Brookmeade, our newest community in Forsyth County. This is our Rylan floor plan. It was just professionally merchandised with our Toll Brothers branding. I hope you like it. Atlanta is the capital of the state of Georgia. However, it is also considered the capital of the South. The housing market in Atlanta is the largest in the Southeast. In the past, our primary focus has been on single-family homes. Recent land acquisition efforts will now allow a more diverse product offering catering to an expanded buyer segment. We have at least six new town home communities either in development or at planning phase, offering two, three, and even four-story designs with a wide range of price points. This is very exciting for a division that has only sold one town home community over the past five years. More town home offerings will also allow the division to continue to build in a higher demand area while maintaining more affordable price points. We also have our first dedicated age-targeted phase of development expected for release next year with several more in the planning phases. In addition to diversifying product offerings, as part of our strategy to continue expanding our geographic footprint, in 2020, we acquired Thrive Residential. The Thrive acquisition expanded our operations to the urban infill markets in Atlanta and Nashville, Tennessee. Thrive was best known for its diverse design-driven multifamily product offerings and superior locations within Atlanta's most desirable in-town neighborhoods. At the time of the acquisition, we were open and selling Emerson on Krog, located in Inman Park, one of Atlanta's burgeoning BeltLine neighborhoods. Despite challenges presented by the pandemic, we have been able to successfully open three additional communities, one in town Atlanta and one a new community in Nashville. In addition, we are scheduled to open three new communities in Atlanta by October of this year. At the grand openings held in our Oxnard and Anderson Park communities, we unveiled our first three fully merchandised model homes and are slated to open three additional models this summer. Over the past year, we have made significant investments in our urban divisions in Atlanta and Nashville, growing both our team and market presence. We have a robust pipeline of future communities in both markets and are well-positioned to capitalize on the sustained demand for affordable luxury urban infill multifamily products. I hope you enjoyed your visit to Atlanta, Georgia. Welcome to Nevada. I'm Gary Mayo, Group President of Toll Brothers. I joined the company in 1997 when Toll Brothers entered the market through the acquisition of Coleman Homes of Las Vegas. Since the Las Vegas acquisition, we've become one of the 10 largest builders in Las Vegas, and we are now the largest builder in Reno. Nevada is a dynamic market that has been largely driven by the hospitality industry. However, as the population has continued to grow, new companies have moved into the state, attracting more employers, and the region continuously is diversifying its economy. Nevada has also become a prime destination for active adults seeking a lower cost of living, a more favorable tax environment, and an agreeable climate with year-round recreational activities. In 2015, we opened our first Regency active adult community in Reno, Nevada, and shortly thereafter at Regency in Summerlin, where we are today. Regency at Summerlin consists of over 450 single-story homes in the Summerlin master-planned community, which is located on the west edge of the Las Vegas Valley. In the heart of Regency is its 22,000 sq ft amenity center where residents gather to enjoy indoor and outdoor pools, a fitness center, bocce ball, pickleball, and tennis courts, social lounges, and an outdoor stage. In addition to our active adult offering, we have 17 communities in the Las Vegas Valley. These stunning one and two-story homes offer open concept designs and living spaces that appeal to today's buyer. Homeowners can personalize their homes for the way they live, including indoor and outdoor living, backyard pools, the perfect home office space, and multigenerational living options to accommodate modern families. In addition to the luxury home and active adult communities that built our brand in this market, we've expanded our offerings into luxury condos and a line of affordable luxury homes that enable us to continue to grow throughout the state. The Northern Nevada market, with its close proximity to California and a climate different than Las Vegas, provided a natural expansion opportunity for Toll Brothers in 2003. For more about our Reno market, here's Donna O'Connell, Reno's Division President. Welcome to Reno. It really is a pretty cool place. Surrounded by the stunning Sierra Nevada mountains, 25 minutes to Lake Tahoe, and a short drive to the Silicon Valley, our city is an ideal location for Toll Brothers and our customers. Toll Brothers has been part of this Northern Nevada region since 2003. Today, we operate 16 new home communities, including our second age-restricted community in the market, Regency at Caramella Ranch. Our active adult business accounts for about 20% of our total volume locally. Reno is a thriving community and a perfect option for the active adult customer, especially those neighbors to our west. We are delighted to highlight some of the great work Toll Brothers is doing in the active adult segment. The tail end of the baby boomer generation is now over 55. This is the next generation of the active adult buyer. Members of Generation X are also future consumers for active adult communities. Welcome to Regency at Caramella Ranch. The heart of this community is the amazing 18,000 sq ft facility we call The Hub. Inside amenities include our weight and cardio room featuring state-of-the-art exercise equipment, a movement studio, indoor lap pool, coffee bar, and casual gathering spaces. The outdoors come alive with pickleball courts, bocce, outdoor amphitheater, a multi-tiered outdoor resort-style pool, and a game pavilion. Let's not forget the upstairs lounge with sweeping views of the surrounding mountains and downtown city lights. Of course, there's a lot more going on in Reno than active adults and retirees. Hosting a national Tier 1 university, a convenient airport, and an emerging tech mecca, Reno is just getting started. In 2020, Toll Brothers accounted for 26% of the total building permits issued, making us the number one builder by volume in the market. Across our 16 actively selling communities, our diversified product offering appeals to a variety of consumer segments. Families and empty nesters alike have discovered the benefits of living in the Silver State. With over 50% of our buyers coming from out of state and strong in-migration from California, Toll Brothers is poised for continued growth in Northern Nevada. Between the Northern Nevada and Las Vegas markets, Toll Brothers controls over 3,000 lots and counting. Our growth plans are ambitious, and we have an incredible team in place to accomplish great things. Nevada is growing, Nevada is innovating, Nevada is thriving, and Toll Brothers is proud to be a part of it all. Okay. I'm moving. Are you moving? Maybe not. Not yet. I don't know where to go. Not yet. Everything sounds so great. Next segment, we're going to dive into the backbone of the company. We're going to talk about land development, our in-house mortgage company, and our home building component manufacturing facilities that we call Toll Integrated Systems. You're going to be hearing from Bob McCarron, who's our President of Land Development, and he oversees over $1 billion, with a B, of land development activity nationwide per year. He moves a lot of dirt for us to build these communities that we have. Steve Audet is our Robert McCarron. He's going to talk about the unique nature of our buyer profile and what the mortgage markets look like for us today, particularly as a primarily build-to-order home builder. We're going to wrap it up with John Mangano, Senior VP of building technologies. He oversees Toll Integrated Systems. He oversees Toll Architecture, and he's also charged with understanding all construction-related technologies that may be hitting the industry. Here we go. We're getting towards the end here. Hi, I'm Bob McCarron. I run the Toll Brothers land development department. I'm a civil engineer. I started with Toll Brothers about 28 years ago, back in 1993 as its third land development employee. In 1993, we built in four states on the East Coast and did about $340 million worth of business that year. This year, we're going to develop over 13,000 home sites. In order to do so, we're going to move millions of cubic yards of dirt, blast millions of tons of rock, install miles of water, sewer, and storm drain pipe, build bridges and parks and new rec centers. We're going to install stormwater infiltration systems that'll store tens of millions of gallons of water, which basically allow the stormwater to infiltrate back into the ground rather than run off directly to a creek to reduce erosion, flooding, and increase water quality. We'll spend about $1 billion this year over 24 states and 50 markets in very difficult jurisdictions and site conditions. At this project, we are decommissioning over 150 oil wells spread out over 200 acres, removing thousands of cubic yards of impacted oil dirt to provide 1,200 home sites for much-needed housing in the L.A. area. This community will provide a five-acre public park, 15,000 sq ft rec center, miles of walking trails, as well as many acres of conservation land. We're also creating 85 acres of new habitat for the California gnatcatcher. Of course, I don't do this alone. We're a group of 160-plus engineers, entitlement specialists, and construction managers. We're a national group of hands-on, boots on the ground managers in every market. Each division has a land development team in the market to oversee the work. This enables us to get involved with sites earlier than most of our other builders, which gives us a competitive advantage. Why is Toll Land Development different? While we are a big land development group, we are here to support the effort of home building. We're not a profit center, so we are doing what's right for the community and right for the company. We're very focused on fast-tracking models in our first home production areas to get new communities open and new homes built and settled as quickly as possible. We have our own in-house estimating group that provide budgets for all communities during due diligence using our extensive database of cost information. These estimates are done together with the local land development teams to incorporate local nuances, entitlement requirements, and site-specific conditions. Because we don't work directly for the divisions, we provide checks and balances to make sure that the right budgets and schedules are included in the underwriting. We're also very focused on value engineering. I haven't seen a plan yet that we couldn't find some cost savings. Every dollar that we save in value engineering is one additional dollar to the bottom line. Because we have national oversight, we recognize trends quicker. The markets move differently, but are eventually connected by large issues like inflation, shortages of manpower and materials, spikes in oil, concrete, and steel, slowing or accelerating sales, and constantly changing environmental regulations. For example, as we saw sales moving up quickly in the markets like Boise and Reno, we put the word out to the other land development teams to be ready in case the sales momentum spread, and it did. We were able to get a jump on it by starting replacement lots early because we had the land and recognized the trend. This meant starting engineering on future phases sooner, making deals with contractors that were already on site to stay and build the next phase. We also work closely with the engineers and land planners to make sure that the communities are thoughtfully designed. We build walkable communities with sidewalks, parks, open space, streetlights, basically where people want to live. We share experiences and expertise between the groups to take advantage of our successes and to avoid repeating our failures. I travel regularly to the markets to see the communities and the land development teams, and to share stories with them from other divisions. We have assembled a tremendous team and a variety of expertise and a large amount of experience. The one thing I can tell you about land development is experience does matter. Hello, everyone. My name is Steve Audet. I am the president of TBI Mortgage. I'd like to take this opportunity to share with you some data about TBI Mortgage, our role in serving Toll Brothers homebuyers, and how we support the sales process. I have been with Toll Brothers since 2016 and in the mortgage industry for over 30 years. The last 15 have been in various leadership roles with build-around mortgage companies, including D.R. Horton and Lennar immediately preceding TBI. TBI Mortgage employs about 250 employees across the country. Our sole purpose is to provide Toll Brothers homes and our customers with unparalleled service, as we do not seek third-party non-Toll Brothers business. We want the home buying process to be as seamless as possible so our buyers can close on schedule with great rates. Over the last couple of years, TBI Mortgage has become financially and operationally accretive, driven by increases in our capture rate, increases in conforming loan limits which help us capture more loans, expansion into new Toll markets, and improved efficiencies realized with the deployment of a new loan origination system. We expect our financial performance to improve further this year as we continue to benefit from these initiatives. TBI Mortgage provides multiple services for Toll Brothers Homes, which allows each home building division the peace of mind knowing our customers will be able to close on their beautiful new home on time upon the home's completion. Lending on newly constructed homes has unique challenges. For example, getting full appraised value for the highly upgraded features added to our homes, seasonal issues such as postponing landscaping installation for homes closing in the winter, and assorted other issues. TBI Mortgage expertly navigates these issues successfully that might otherwise delay closings by mortgage companies not familiar with or unwilling to make accommodations for regarding new home construction. Among the additional services TBI provides is a pre-application analysis of a buyer's credit and income worthiness. In today's ever-changing mortgage environment, it is critical for a TBI Mortgage professional to understand our customer's ability to close on their Toll home prior to entering into a sales agreement. Once a customer enters into an agreement of sale, TBI also provides a fully underwritten loan commitment to each homebuyer seeking financing. TBI offers a vast array of products from conforming and jumbo loans to FHA and VA loans with little to no down payment. We also offer long-term rate locks of up to 345 days to provide our customers the assurance they can lock in current interest rates to avoid the potential of rates increasing during the construction phase of their home buying journey. Toll Brothers and TBI are blessed to not only build and finance magnificent homes, but our buyer profiles are among the strongest, if not the strongest in the industry. Our average credit score is 764 among all TBI customers, and the average loan to value of the homes we finance is 68%. Approximately 20% of our customers pay cash for their new home as well. Our investors create programs and opportunities solely designed for Toll Brothers and TBI due to the superior quality of our customers and the homes we build. TBI Mortgage's loans continue to be highly valued by our investor banks, correspondent lenders, and credit unions as our loan quality has been and still is best in class, as our mortgage delinquencies and defaults are near zero, even during the global financial crisis. This has allowed TBI to continue to provide highly competitive mortgage products and superior rates to our customers, which only enhances their luxury buying experience. Interest rates still remain near historic lows. As of April 30th, 30-year agency conforming and jumbo rates were still in the low threes. In recent weeks, jumbo rates actually dipped below the agency conforming rates as the banks and credit unions increased desire for jumbo loans continues to be very strong, which bodes well for Toll Brothers home sales. Recently, TBI performed an analysis of our backlog to determine the percent of at-risk buyers if fixed rates were to increase to 5%. In our review, we concluded that 5% of our backlog may be affected, where TBI would then have to look at rate buy-downs or adjustable rate loans for qualifying purposes. TBI and Toll Brothers are well-positioned from a lending standpoint to continue to offer our customers superior mortgage programs and exceptional rates to not only enhance their buying experience, but also to provide Toll Brothers with continued backlog management and additional revenue to the bottom line. Hello, I'm John Mangano, Senior Vice President for Architecture and Building Technologies here at Toll Brothers. Like many of our senior management, I started with the company in the field as a construction manager, and that was 34 years ago. Over the years, I've grown with the company and I've worn many hats, including regional president for nearly 10 years. Now, I'm responsible for architecture and building technology. This is a great role where I get to combine years of operations experience with my passion for design and engineering to help Toll Brothers build the most innovative homes in the industry. We're always looking for advances in building technology to take our homes to the next level. We accomplish this not just by investing in innovative companies, but through our trade partners, like what we're doing in Atlanta with our first steel panelized community. We also develop our own building advancements, like the prefabricated floor systems that we'll be installing in one of our Pennsylvania communities later this year. Today, I'd like to share with you our off-site manufacturing operations, known as Toll Integrated Systems, TIS for short. TIS supplies our Mid-Atlantic and our north regions, which is about a third of the company, with lumber, panels, trusses, windows, doors, and millwork out of five facilities that are strategically located from Massachusetts down through Virginia. TIS's central purchasing team buys all the materials for our five facilities, including over $100 million in lumber annually. Our facilities are located on rail lines, so we can purchase lumber by the rail car direct from mills in Canada and the Pacific Northwest. Our long-term relationships with all the major mills and distributors, plus our ability to buy and store materials in bulk, gives us tremendous buying power and priority, and this keeps our communities building economically without missing a beat, even in today's challenging environment. Before we can make the components for a home, they need to be designed for fabrication. Toll Brothers provides our homebuyers with choices, including architectural elements and personalization options to build their dream home. Our state-of-the-art 3D modeling software allows us to design and fabricate components for any home we sell. Our design process ensures every home is value engineered with the same high design standards. Completed design files are linked to the equipment on the manufacturing floor, where we will build that dream home to exact specifications and the highest quality standards. We're fabricating house components using world-class equipment in a controlled environment in a fraction of time it would take to build on-site. This translates to shorter cycle times, which means our customers get to enjoy their homes that much sooner. This Morrisville, P.A. facility is one of the most productive panel lines in the United States, producing over a mile of wall panels every day, and we'll ship about 1,500 homes a year from here. This very advanced piece of equipment lays out the most efficient cuts on each board to minimize waste. After precisely cutting, it labels each part for assembly. Computer terminals located throughout the facility provide our builders with all the information they need to assemble the components. We are paperless here. In our truss operation, overhead lasers assist the layout of the truss. These are just a couple examples of where we're using the most advanced technology to build components with a high degree of accuracy and quality. We build a very high quality standard into our process, starting with the lumber. Our buying power gives us access to the best materials available, and we use only the highest grade lumber in our components because we're building for ourselves and we know it will translate to cost savings and customer satisfaction. Every stick of lumber is put through a strict quality check before it enters the panel line. Those that don't meet the grade will be cut into smaller pieces and used somewhere else, so there's very little waste here. We incorporate quality checkpoints along the panel line, and our quality control manager performs routine inspections of the finished product to ensure it meets our exact standards. Toll Brothers is our only customer, and our objective is to ensure that the house package is there when our construction teams need it. This starts with raw material procurement and culminates with the delivery of the house ordered to the site. Our trucks are outfitted with software to help us operate at peak efficiency, and our in-house drivers are experienced in navigating challenging site conditions so that they can get the material where it is needed on time. TIS also provides turnkey services to half the communities we serve. We're not just building and delivering the components, but we're also hiring and managing the labor to install them. By doing this, we can better coordinate material delivery and monitor how our lumber and components are being used. This direct relationship with the framing contractor reduces build time and material waste while helping us perfect our manufacturing operations. There you have it. From raw material procurement to the construction of the home on site, our TIS operations creates value, helping Toll Brothers be the best. Great, John. Thank you, Steve. Thank you, Bob. Appreciative of what you do for us. Okay, this is the final stretch. We have two final presentations, one last Q and A, and I think we pulled it off and we're going to wrap this up right at the three-hour mark. Today, we know how important diversity and inclusion and environmental, social, and governance issues are to the investment community. We know how important it is to our employees, to our homeowners, to the communities we build in, and to our society at large. You're going to be hearing from Corey Tendler. She is our Chief Diversity and Inclusion Officer, and she's going to talk to you about all the new initiatives here at Toll Brothers, and then we're going to wrap it up with the one and only Fred Cooper, who you all know so well as he's going to talk about the launch of our first ESG report. Here we go. Hi, I'm Corey Tendler, Chief Diversity and Engagement Officer. We have a truly incredible culture here at Toll Brothers, as I'm sure you're getting a sense of by hearing from so many of our wonderful employees today. Part of that is because we have such strong values, and we work to apply them every day. This includes making sure that Toll Brothers is a place where everyone feels welcome and supported, no matter their race, gender, sexual orientation, religious beliefs, or background. It's not enough to say the words and believe in the mission. We are taking meaningful steps to ensure that employees and leaders across the company are committed to creating a culture of mutual respect, equality, and understanding. Our diversity and inclusion strategy includes five key focus areas: build the foundation, create an inclusive culture, hire diverse talents, advance diverse talents, and impact the community. We share these focus areas with our employees because we know that to make real and sustainable change, we need everyone involved. The focus areas were created by getting feedback from our board of directors, our employee resource groups, and our diversity and inclusion council. Our diversity and inclusion council includes employees from across the company who provide strategic guidance on our plans and help us prioritize our efforts. All employees are encouraged to join one of our Employee Resource Groups, which help us celebrate diversity and amplify employee voices. Our ERG program is strong and growing every day. Here are just a few of the activities that they've hosted and which are truly making an impact. The Toll Women's Network celebrated International Women's Day by telling us what they do to support women. I choose to celebrate all the women who work at Toll Brothers because empowered women empower other women. Members of our Pride Network promoted National Coming Out Day by sharing personal stories and experiences. Thank you for allowing me to share this with you today because our collective stories are the Toll story. Our BELIEVE group, our Black employee resource group, hosted a moving commemorative walk to honor the 1964 march from Selma to Montgomery, Alabama. Thank you all for joining us. Thank you to the BELIEVE ERG for being able to provide us this platform to be able to reach out nationally. Mosaic, which is our multicultural ERG, hosts monthly meetings where they work to expand awareness and understanding of different cultures and backgrounds. Thank you for giving this platform to present ways to move forward and help promote solidarity against hate crimes against all cultures. Our Veterans at Toll group profiles employees who have served our country. All I can say, too, I did a deployment. I left Toll Brothers for a year and a half and went to Iraq and came back, and it does make a big impact. It makes you feel like what you've done isn't just leaving your family for a year. Yeah, it's important. Across the company, we're hosting company-wide events such as conversations with our board members, employee panels, and small group listening sessions. These are meant to help build awareness and understanding and help employees feel safe talking about diversity and inclusion at work. Well, I am excited to be part of this panel, and I just want to thank everybody for actively taking a role and I thank all my panelists here for joining me so that we can have this open dialogue. Our leaders are evaluating the diversity makeup of their organization, thinking through ways to increase the hiring of diverse talent, and talking to employees about the importance of this work. This is just a highlight of some of the things that we're doing. To learn more, you can review our ESG report on tollbrothers.com. Hi, everyone. My name is Fred Cooper. I joined Toll Brothers nearly 28 years ago to set up what is now our finance and investor relations department. In addition to running investor relations, we're essentially Toll Brothers' investment bank. We focus on raising capital at the corporate level through the public markets and through over $2 billion of bank credit facilities. We also raise debt and equity at the project level for our Apartment Living platform, our City Living platform, and some of our larger land joint ventures. We work on builder acquisitions and financial structuring initiatives such as land banking, as well as financial analysis and strategy as we plan for the future. We led the preparation of our first ESG report, which we released in April of 2021. ESG, of course, meaning environmental, social, and governance. ESG issues have always been integral to how we run our business. Our decision to publish a formal ESG report this year was a recognition of its growing importance in the eyes of the investment community. As we began preparing the report, we recognized the investment community was just one of a number of stakeholders important to us. Our stakeholders also included our employees, our board of directors, our trade partners, our customers, both buyers and renters, and the communities in which we build and society at large. Our industry has a tremendous amount to contribute. The U.S. is suffering from an enormous shortage of housing, recently estimated by Freddie Mac at about 4 million homes. Home builders, particularly the large public ones that can produce homes in high volumes, are a big part of the answer to solving the nationwide shortage of housing. We're also tremendous job creators. We create jobs for landscapers, plumbers and painters, electricians, architects, and engineers. In this regard, we are playing a major role in helping the economy recover from the pandemic. The National Association of Home Builders estimates that 2.9 indirect jobs are created for every home built. Not only is there production of building materials and the labor used in construction, but buyers purchase furniture and many other things that go into the home. For our first ESG report, we used industry specific standards from the Sustainability Accounting Standards Board or SASB. The Toll Brothers ESG report outlines the company's commitment to an ongoing program to measure data, set priorities, and implement practices that address a variety of environmental, social, and governance issues. Some key highlights. Environmental. Sustainability and preservation of the natural environment are essential to building exceptional homes and communities. As one of the nation's most significant land developers, as you've heard today, we are very conscious about employing sophisticated land planning techniques, sustainable land stewardship, and home design practices. Our goals include decreasing the company's impact on climate change, more efficient water use, energy consumption, and reduction of waste production. In 2020, for example, we preserved 923 acres of open space, planted over 40,000 trees, built 110 miles of walking trails, and 61 parks. Social. We are committed to expanding diversity at all levels of the organization, as well as to the health and safety of our employees and our trade partners. We strive to provide an environment where all employees are treated with fairness, dignity, and respect and have an opportunity to grow and thrive. Just last year, our board approved a new human rights policy, which is consistent with the United Nations Guiding Principles on Business and Human Rights. Governance. We believe sound corporate governance enables us to operate with integrity while promoting long-term value creation for our stakeholders. This commitment is rooted in the oversight of a majority independent board of directors with a strong lead independent director. It is further strengthened by ongoing dialogue with stockholders and guided by policies that enable the success of our strategy and business objectives. In closing, I urge you to dive into our ESG report on our website. Thank you. Thank you, Fred. Thank you, Corey. Let's head into our last Q and A session. With us, Gary Mayo from Nevada, Susan Stanley from Boise, Steve Audet, of course, TBI Mortgage. Corey, thank you for that great presentation. Fred and John Mangano. First question I have is for Gary Mayo. As you may remember from earlier in the day, Jim Boyd talked about how we are transitioning. We're deep into the transition from the old project manager system to a new system that we internally have coined the vision of the future, which will allow us to, we think, grow much faster, much more efficiently by having stack leaders on top of sales and on top of construction and purchasing and other things. The question for Gary, since you came from another home builder, and you've seen both sides, and you now are heading towards the vision of the future in both of your Nevada markets, what do you see as the advantages of operating under the, what I call the functional management or the vision of the future system as opposed to the legacy project management structure that Toll Brothers had years ago? Thanks, Doug. As you know, I've been able to work in both structures. I was with Coleman Homes in Las Vegas for 17 years prior to the Toll acquisition. At that point, we were in more of the functional structure. After the acquisition, of course, I had to morph into the project management system for the past 21, 22 years. We recently have changed the management structure in both Reno and Las Vegas to the more functional structure again. A couple of advantages that come to mind quickly. I think it gives us a greater efficiency in the division-wide purchasing structure and a greater effect on supply chain, regional supply chain. I think it also allows for us to scale the business up quickly to meet the record growth that Toll Brothers is experiencing now. All right. I have a question for John Mangano next. I think somebody saw some of the steel framing in one of our earlier segments. Do you have plans to expand the products and services that TIS provides to include steel framing? There's a second part. Do you have plans to expand turnkey framing across your business more broadly? John Marty. Thank you. Let me go with the first one about steel in our future. With what's been happening with the price of wood products this past year, which I don't have to remind anyone on this call about, yeah, steel is definitely an alternative that we're currently exploring, and especially in multi-family communities where the product is a little bit more repeatable. We do know from collaborating with our trade partner in Atlanta that steel framing labor is the driver or key driver for steel component success since most of the residential workforce isn't quite set up to tackle light gauge steel, at least the ones that are doing most of the residential home building. Our turnkey operation is growing and very successful, and that puts us in a really good place to solve for that steel deficit. Yeah, we're pretty excited about the potential for incorporating steel components into our offerings in the future. The other one about turnkey operations, the short answer to that one is, yes, we definitely are going to continue to grow that operation. We started only a few years ago in Virginia with just a couple of homes. Now we're doing most of Virginia, moved into Maryland, New Jersey, and Pennsylvania. Our hope is to expand the turnkey operation to nearly all of the TIS service area. As for expanding the TIS service area for panels and trusses, the supply chain disruptions that our industry has endured this past year has really given us a renewed appreciation for the value of our TIS facilities to the company. Yeah, we continue to research the feasibility of expanding our footprint of TIS into the South and possibly the West. Even though we're not in those areas yet, we do leverage the talent and the expertise that we have in our TIS team by providing support and guidance to all areas of the country. Thank you, John. Corey, how do your diversity numbers compare to the other builders? What specific things are you doing to improve diversity and inclusion in your recruiting process at Toll Brothers? Well, based on the research that we've done, we're pretty much on par with other home builders. That certainly does not mean that we don't have work to do. We are making systematic adjustments to the way that we recruit and source so that we can increase diversity at all levels of the organization. We're taking a number of steps to present hiring managers with more diverse candidates and to really build out our diversity pipeline, starting by recruiting at HBCUs and other universities with large diverse populations. We're also partnering with a number of organizations at a national and local level. Nationally, we're partnering with The Posse Foundation, with YouthBuild, and with Building Talent Foundation, and locally, we're partnering with organizations such as The ROC in Charlotte, which is helping to introduce students to the construction field and help them gain real-world experience. Internally, we are also making sure that all employees and managers now take diversity and inclusion training, which is addressing unconscious bias and making sure that we are giving employees practical guidance on how to create a fair and equitable hiring process. Thanks, Corey. Great to have you in charge of this initiative. I'm going to go to Fred for the next question, which may be our last question. Can you elaborate on the ESG initiatives that are most important to Toll Brothers and to our customers? Fred? Sure. Thanks, Marty, thanks for everybody that's joined us today. I think you saw three good examples during the day of three of the key initiatives. One, Bob McCarron talked about how we control water management at our communities. I think water preservation, efficiency, efficient use of water, this is a different issue in Arizona than it is in Florida where they have very different water issues. You heard Bob Flaherty talk about how we are repositioning and reusing cactuses and creating habitat for the gnatcatcher in Arizona. Again, being a responsible land steward, given the scale of our land development activities, I think is another important initiative. Then Seth Ring talked about solar and energy conservation, and I think that's becoming a very bigger part of what we're doing. Frankly, ESG is evolving in the investment community, so we're also taking our cues from what investors think is important and what our customers also think is important. Okay. Thank you, Fred. I think that's it for this Q and A session, we're about ready to wrap up, we did it. A huge thank you to all of you for taking time out of your busy day to spend with us. We hope it was helpful. We hope you learned a lot about this company. You can feel, I know, the passion for this brand. I hope you could sense how much we love working together and how unique we believe this culture is, how we drive each other. This is a hardworking company. This is an intense company. There's a lot of really smart people here, we all treat each other with great respect. We're all really nice. We work hard, we go home, we hug our families, we hug our friends, we get back at it the next day. I am just so proud to be the leader. It's been an amazing run for me. Our future looks so bright. I hope you learned a little bit more about our strategies, why we think we're so well-positioned for outsized growth. I know you understand our obsession and our structural change to drive ROE. I know we've said that plenty, and I'm sure you sensed the Toll advantages we talk about with our great locations, our great architecture, the offering of tremendous choice to the client, and of course, making sure the customer experience is better than any other builder in the industry. We missed a lot of questions. They were flying in. The IR team's going to be very busy for the next few days because we will get to you. We will answer your specific question, and we're here for you at all times. We look forward to welcoming you into this office as we all come back to work. There's a big thank you to all of you for your interest in Toll Brothers. I just hope you learned a little bit more about how we operate and getting to meet this other layer or two layers of management that you just don't get to see helps you understand a bit more about this great company. A final big thank you to so many people here at Toll. You can tell how hard they worked to put this together. The passion that so many people brought to today's event is the passion that I see every day that they bring to our business. I am so indebted and so thankful for all that so many have done. Have a wonderful summer. I'm happy the world feels like it's getting back to normal, and we really, really appreciate your interest in our company. Thank you.