Good morning, and welcome to the Toll Brothers' fourth quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. The company is planning to end the call at 9:30 A.M. when the market opens. During the Q&A, please limit yourself to one question and one follow-up. Please also note this event is being recorded. I would now like to turn the conference over to Douglas Yearley, CEO. Please go ahead. Thank you, Tom. Good morning. Welcome, and thank you for joining us. With me today are Marty Connor, Chief Financial Officer, Fred Cooper, Senior VP of Finance and Investor Relations, Wendy Marlett, Chief Marketing Officer, and Gregg Ziegler, Senior VP and Treasurer. Before I begin, I ask you to read the statement on forward-looking information in our earnings release of last night and on our website. I caution you that many statements on this call are forward-looking based on assumptions about the economy, world events, housing and financial markets, interest rates, the impact of the pandemic, the availability of labor and materials, inflation, and many other factors beyond our control that could significantly affect future results. I'm incredibly proud of our company's performance this year as we executed on our strategic goals of driving growth, increasing profitability, and improving capital efficiency. In fiscal 2021, we delivered nearly 10,000 homes, the most in our history, and we grew home building revenue by 20% to a record $8.4 billion. We continue to expand our margins. Our full- fiscal- year 2021 adjusted gross margin was 25%, a 150 basis point improvement over fiscal 2020, and we reduced our SG&A expense as a percentage of revenue by 160 basis points year-over-year to 10.9%. We nearly doubled our pre-tax income to $1.1 billion, achieved our highest net income ever of $833.6 million, and we grew earnings per share from $3.40 last year to $6.63 in fiscal 2021. We delivered on our strategy of improving returns with an increase in return on beginning equity of 830 basis points to 17.1% for the full-year. These results reflect the strength of the housing market, the benefits we are realizing from our strategic expansion into new product lines, price points, and geographies, and our focus on driving operating efficiencies and improving the capital efficiency of our land acquisition strategy. At fourth quarter end, option lots represented 55% of our total lots, up from 43% one year ago. While we are pleased with our performance in fiscal 2021, we expect even better results in 2022. At fiscal year-end, our backlog stood at a record $9.5 billion and 10,302 homes. It is supported by substantial nonrefundable deposits, and our cancellation rate as a percentage of beginning quarter backlog was a very low 1.3% in the fourth quarter. Based on this solid backlog, we expect to grow home building revenues by an additional 20% in fiscal year 2022. We also expect to increase our full-year adjusted gross margin by 250 basis points due primarily to the strong pricing in our backlog, which reflects the significant price increases that we've implemented over the past year, plus the operating efficiencies that we continue to gain through optimized floor plans, curated options in our Design Studios, and streamlined operations. We project a return on beginning equity well above 20% in fiscal year 2022, driven by our permanent pivot to a more capital-efficient land strategy and our improved profitability. In the fourth quarter, demand for our homes remained very strong. We signed 2,957 net contracts for approximately $3 billion, up 18% in dollars due to a 26% increase in the average selling price of our homes year over year. As we start fiscal 2022, demand continues to be very healthy. We have averaged over 300 non-binding reservation deposits per week in the first five weeks of our fiscal first quarter, the same pace we have run at for many months now. On a per community basis, this pace is also consistent with the pace that we saw over the comparable five-week period last year. We are very encouraged by this, considering how strong the first quarter of fiscal 2021 was. Demand strength is broad-based across both geographies and product types. We are benefiting from the wide variety of homes and price points that we now offer in more than 60 markets in 24 states. In the fourth quarter, we raised prices in nearly all markets and limited lot releases in about 20% of our communities. This has allowed us to capture price appreciation and also to manage production schedules. As discussed last quarter, in certain markets, more normal seasonal demand patterns have returned. Our ability to continue raising prices illustrates the deep strength of this housing market, as well as the advantages we enjoy as America's luxury home builder. This week, we raised prices again in all of our markets nationwide. The housing market is being driven by solid fundamentals, including favorable demographics, pent-up demand from over a decade of underproduction of new homes, low mortgage rates, and a tight resale market. According to a Redfin report from last week, in the last full- week of November, the number of homes for sale nationwide hit an all-time low, and a third of homes sold in one week or less during the month of November. Additionally, many Americans have fundamentally shifted their lifestyles and reevaluated where and how they wanna work and live. This is driving migration patterns to the Sun Belt and Mountain States, where we have significantly expanded our presence in recent years. Our build-to-order model appeals to an affluent customer base that is placing more importance on their homes and gravitating to the personalization we offer in designing and finishing homes. They are not maxing out their mortgages, and they are less susceptible to affordability issues. They have enjoyed years of price appreciation in their current homes and in the stock market. Since most of our move-up and active adult customers have a home to sell, the tight resale market gives them confidence that they can sell their home quickly and at an appreciated value that can be reinvested in their new home. We continue to realize the benefits of our strategic expansion into the affordable luxury segment. In the fourth quarter, approximately 42% of our new contracts were in this segment. Over the past two years, nearly half of the lots we placed under contract were for our affordable luxury communities. We believe all of these factors will continue to contribute to strong and sustained demand for our homes in the years to come. While the environment for home builders remains healthy, this market is not without its challenges. Consistent with other builders and nearly every other company in the broader economy, we continue to face supply chain disruptions and labor constraints. These issues extend beyond just construction cycle times and impact land development and municipal approvals and inspections as well. While we have been able to more than offset cost pressures with price increases, these production constraints continue to extend cycle times and put pressure on deliveries. In our fourth quarter, we saw average cycle times increase by about two weeks compared to the third quarter. On average, it is now taking us about six to eight weeks longer to deliver a home than it took one year ago. We do not anticipate these labor and supply chain conditions will improve in the near term. Our delivery projections for full fiscal 2022 are based on production schedules that reflect current labor and supply chain conditions. They are not based on any assumption that labor or supply chain conditions improve. Similarly, our projected 250 basis point increase in adjusted gross margin does not assume any improvement in labor or material markets. Given the high degree of uncertainty regarding when supply chain and the labor markets will normalize, we believe these assumptions are prudent. Our land strategy continues to serve us well in this market. We are poised for significant growth in 2022 and beyond, with a pipeline of owned and controlled land that will feed our projected 10% community count growth by the end of fiscal 2022. This projection is based solely on land we own or control today. We also have land under control today for meaningful further community count growth in fiscal year 2023. We continue to generate strong cash flow and have a healthy balance sheet with ample liquidity. This gives us the flexibility to continue to invest in the growth of our business while returning capital to our shareholders and reducing debt. In fiscal 2021, we returned approximately $455 million to shareholders through dividends and buybacks and reduced debt by approximately $400 million. We intend to continue to prioritize growth with a balanced approach to capital return and leverage. We are targeting buybacks of approximately $100 million per quarter in fiscal year 2022. With that, let me turn it over to Marty. Thanks, Doug. In fiscal year 2021's fourth quarter, we delivered 3,341 homes and generated revenues of $2.95 billion, which were up 13.6% in homes and 18% in dollars from one year ago. The average price of homes delivered was $883,000, benefiting from more City Living in Pacific deliveries than had been anticipated. Fourth quarter net income was $374.3 million or $3.02 per share diluted, compared to $199.3 million and $1.55 per share diluted one year ago. Our fourth quarter adjusted gross margin was 25.9% compared to 24% in the fourth quarter of 2020. This 190 basis point increase in our adjusted gross margin was due primarily to our ability to raise prices as well as favorable mix coming a quarter earlier than expected from the Pacific region and City Living noted above. SG&A as a percentage of revenues was 8.8% in the quarter compared to 9.9% in the same quarter one year ago. This year-over-year reduction in SG&A is due to both the leverage from increased revenues and tighter cost controls on items such as headcount, advertising, model home expenses, and broker commissions. Joint venture, land sales, and other income was $63.5 million during the fourth quarter compared to $11.2 million in the fourth quarter of fiscal year 2020, and approximately $20 million better than projected. The outperformance was primarily due to an asset sale in our Apartment Living business that occurred sooner and at a better cap rate than expected, as well as better than expected performance in our mortgage and title operations. Our Apartment Living business had an active and productive year in fiscal year 2021. In addition to starting about a dozen new projects across the country, we sold five projects during the year with a total of 1,420 units that generated cash to Toll Brothers of approximately $106 million and resulted in $75 million of income from unconsolidated entities. We expect a steady flow of projects reaching stabilization and being sold each year going forward. Last quarter, we announced a strategic partnership between our Apartment Living unit and EQR. Under this arrangement, we expect to be able to improve the capital efficiency of our Apartment Living business. We continue to explore similar programmatic relationships for markets that are not covered by our joint venture with EQR. Impairments and write-offs totaled $10.5 million in the quarter, concentrated in our North segment. We continue to generate strong cash flow with $1.3 billion of cash flows from operations this year. We ended the fiscal year with approximately $3.45 billion of liquidity, including $1.64 billion of cash and $1.81 billion available under our revolving bank credit facility. During the year, we invested $1.9 billion in land acquisition and development, returned $455 million to shareholders through share repurchases and dividends, and reduced debt by approximately $400 million, lowering our net debt to capital ratio to 25.1% at fiscal year-end. Last month, we repaid all $410 million of 5 7/8 notes that were due in February 2022 at par. At fiscal year-end, we also extended the maturity of both our $1.9 billion revolving credit facility and our $650 million term loan. Each of these facilities is now scheduled to mature on November 1st, 2026, five years out. Our next significant public debt maturity is not until April 2023, when $400 million of senior notes becomes due. After that, another $350 million of notes are due in November 2025. Looking forward, we are projecting fiscal year 2022 first quarter deliveries of approximately 2,000 homes with an average price of between $865,000 and $885,000. Consistent with normal seasonal patterns, first quarter deliveries are expected to be the low point of the year, with deliveries for the full fiscal year weighted to the second half, also consistent with seasonal patterns. For full fiscal year 2022, we are projecting new home deliveries of between 11,250 and 12,000 homes, with an average price between $875,000 and $895,000. In light of the challenges caused by labor shortages, supply chain disruptions, and related issues with municipalities, it is important to note that our delivery projections for the first quarter and full-year are based on lower backlog conversion ratios than historical trends would suggest. We hope the construction environment improves in fiscal year 2022, but we are not factoring improvement into our guidance. We expect adjusted home sales gross margin in fiscal year 2022 to be approximately 27.5% for the full- fiscal- year. This is 250 basis points higher than 2021. We steadily increased prices over the course of fiscal 2021. We expect those price increases to flow through our gross margin over the course of fiscal year 2022. In addition, we expect peak lumber prices from last year to be reflected in our first half deliveries. Therefore, we expect adjusted gross margin in the first quarter to be the low point of the year at approximately 25.5%, with a modest increase in Q2, followed by significant growth in margin in the second half of the year. We expect interest in cost of sales to be approximately 2.2% in the first quarter and 2.1% for the full-year. The lower expected interest expense in our cost of sales is due in large part to the debt reduction actions that we have taken over the past 12 months. We project first quarter SG&A as a percentage of home sales revenues to be approximately 14.1% versus 14.9% one year ago. Included in first quarter SG&A is about $11 million or 63 basis points of our normal annual accelerated stock compensation expense that will not recur in the remainder of the year. For the full-year, we project SG&A as a percentage of home sales revenues to be approximately 10.5%. Doug mentioned that we project community count growth of 10% by fiscal year-end 2022. Based on the high number of community closeouts that we project for the first quarter and the typical seasonality of fewer community openings in November and December, we expect community count to dip to 325 at the end of the first quarter before steadily rising over the remaining course of the year to 375. Again, this projection is based on land we already own or control. Other income from unconsolidated entities and land sales gross profit is expected to be approximately $30 million in the first quarter and $100 million for the full-year. We project a first quarter and full-year tax rate of approximately 26%. Our weighted average share count is expected to be approximately 123 million shares for the first quarter and 121.5 million for the full-year. Put this all together using our midpoints, and we are guiding to fiscal year 2022 earnings per share of approximately $10. This represents a 50% increase in earnings per share over 2021. Now let me turn it back to Doug. Thank you, Marty. Before I open it up to questions, I'd like to thank the Toll Brothers team for their determination, creativity, and commitment to make this a record year. These are very exciting times for Toll Brothers. Tom, let's open it up. Great. We will now begin the question- and- answer session. As a reminder, the company is planning to end the call at 9:30 A.M. when the market opens. During the Q&A, please limit yourself to one question and one follow-up. If you would like to ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. The first question comes from Deepa Raghavan with Wells Fargo. Please go ahead. Hi, good morning, everyone. Thanks for taking my question. Great quarter. Looks like Q1 is turning out pretty nice as well. But just looking at the guide for 2022 and looking at the gross margins, especially in the second half, you're talking about roughly 29%-30% ex cap gross margins exiting the year. Just curious, does it bake in the recent lift in lumber? Do you think that hits you by then? Curious, you know, how sustainable is that if, let's just say, commodities don't move from here? Is that what we should be expecting in 2023? I mean, it's a hypothetical question, but is that what we should be expecting 2023, if things were to stay here at this, you know, commodities don't move from here? Deepa, yes, we believe we have properly budgeted and built in contingencies for not just the relatively modest, compared to a year ago, increase in lumber prices recently. We have increased our contingencies on our building costs that are within our budgets to cover lumber, to cover some labor pressure, to cover some of the supply chain issues we've talked about. Yes, we are comfortable. I think we made it clear in our prepared comments that we believe we are very comfortable, and we are being prudent in our guidance to assume that this market, the labor and supply market does not improve. In fact, we have proper contingencies in to protect ourselves should lumber continue to go up or should there be any other pressure. With respect to 2023, we're just not gonna get out that far. All I'll say is, as I mentioned a moment ago, you know, we're continuing to raise prices. This is a very strong market nationwide. We had another price increase this week. To date, you know, through this recent cycle, we have been able to more than offset price increases, cost increases, you know, with our home price increases. Thanks. I'm sticking on that pricing for my second question. You know, your order pricing is up 26%. Your backlog pricing is higher, it's in the teens. But you're calling for a closings ASP of up 5%. What sort of conservatism is baked in that? Is it primarily some production issues? Is there some slippage? I mean, you just talked about, you know, deposits being almost, you know, non-refundable deposits. Just curious, how do I... And you had another price increase this week, you just pointed out. Just curious, how do I reconcile the strong pricing trends we're witnessing? Sure. It's a great question, and it's a pretty simple answer. Historically, we do not normally deliver the price per home in the backlog because the more expensive houses take longer to build. As you saw the fourth quarter's sales price break through $1 million, you know, those more expensive homes are bigger, they're more complicated, they have more upgrades and options, and they just take a bit longer to build. There's a lag on the upper end of the sales price, and I think that is the answer. You know, the faster turn comes from the affordable luxury and the less expensive homes. While we're really proud of the price increases that are coming in the future, revenue, that's the reason why it doesn't perfectly match what you see in our more recent sales and in our year-end backlog. Okay. Sorry. If I can, you know, just one more part on the pricing. Closing ASP is strong considering that you're mixing more towards affordable luxury. So within that price performance, are you able to provide color on how much is price versus mix? Well, we had a very strong quarter in our luxury segment this year, and that has influenced the average price of sales in the fourth quarter. We expect moving forward, more Affordable Luxury as a percentage of total based on our community count and our land purchases. Great. Thanks so much. I'll pass it on. Great quarter. Thank you very much. The next question comes from Truman Patterson with Wolfe Research. Please go ahead. Hey, good morning, everyone. Thanks for taking my questions. Thanks, Truman. Marty, hey, Marty, very strong 2021 operating cash flow of $1.3 billion. I'm hoping you can help us think through 2022 operating cash flow. You should see a nice jump in net income. You're transitioning more towards option land, improving multi-family capital efficiency, but you're likely going to continue to build backlog as well as cash usage. Hoping you can help us think through 2022 and then also a little bit of clarity on what you plan to do with the cash. I know Doug mentioned about $100 million in share repo per quarter, but any debt reduction, et cetera. Well, let me start with the second half of the question first, and then I'll move back to cash flow from operations. We paid off $410 million of debt already in the first quarter, back in mid-November. We've guided to $100 million of buybacks per quarter moving forward. We have a dividend commitment of the $60 million-$70 million range. So that's, let's call that $850 million of cash usage. That's approximately, you know, what we might generate this year. It all depends on the land spend, which is variable based on the deals we are going to put into land banking arrangements and the deals that we have in the pipeline that may or may not close. It will be another strong year of cash flow from operations. As we currently project, it may not be quite as strong as the previous year. Okay. No, fair enough. Doug, I'm hoping on the material supply chain, you know, it still remains tight. You said your cycle times were up two weeks sequentially in fiscal Q4. Post-quarter, November, December, have you seen any improvement in the availability of any of key materials categories? Or, as of now, have you seen construction cycle times stabilize? Truman, the answer is no. We're not seeing an improvement. It's tough. Here's a story out of Boise. For months, we couldn't get trusses. They were done. We get them. They were delayed and it really hurt construction. We've recently solved the truss problem in Boise only to find out our HVAC contractor, again, can't get flexible duct to do the roughs on the houses. You know, you solve one problem and another one pops up, and every market has a different story. I have spoken with the CEOs of some of our largest partners, some companies bigger than Toll Brothers, and they have been somewhat encouraged by what they believe you know, is some hope for them on solving their problems and speeding up some deliveries and having more consistency in what can be delivered. Overall, you know, the short answer is no, it is not improving. We don't see cycle time growing dramatically. You know, I talked about six-eight weeks longer now than it was a year ago. But as we said, we think we're being very prudent in not assuming that that gets better for the full-year. I'm hopeful. You know, I think by the second half of the year, you know, there's some reason to hope that we're gonna see some improvement, but we are not building it into how we're running this company or how we're guiding the street. Absolutely. Thanks, guys, for taking my questions, and good luck on the upcoming quarter. Thanks, Truman. The next question comes from Stephen Kim with Evercore ISI. Please go ahead. Great. Thanks, guys. Yeah, great job. Obviously, encouraging comments. Particularly, I guess, Doug, you used the word contingency that you've baked in. That sounds a lot to me like conservatism, but we'll take it. I think that's really encouraging. My first question relates to the supply chain issues. You know, in answer to Truman's question, you said you're not seeing them grow dramatically, but are you actually seeing them grow, continuing from end of October? We've been hearing, for instance, that subcontractors have been willing to sort of warehouse parts when they become available so that if in the future they become unavailable, they're still able to service their largest customers, such as you guys. Wondering if you're seeing that kind of stuff and whether in fact cycle times are stabilizing, and maybe that's the way to think about what's happening in Q4 currently. Cycle times were up two weeks, as I said, from the fourth quarter over third quarter. You are right. There's a lot of meetings going on and a lot of creative ways that builders and major contractors and suppliers are trying to figure this out. Stockpiling is one very good example. You know, we're getting tired of having to go to The Home Depot to try to find something that, you know, has to fill a gap for a week. Everybody is on it, and I think I'm not gonna go so far, Stephen, as to use the word stabilize, but I also don't believe, you know, we're gonna see a continued jump, as I mentioned, of, you know, another two weeks in Q1 versus Q4 of 2021. I think by adding two months, six-eight weeks to our delivery cycle in a year, obviously that's a lot, and it is the most acute and the biggest issue that every builder is focusing on. Yes, I think we are all finding ways to try to, if not solve these problems, then I'll use your words, stabilize them. Yeah, I'm fairly confident that it's not going to get significantly worse, but I'm less encouraged that it's gonna get better for some time. Sorry for being vague. Yeah. That's as straight as I can give you. Now, this is a very fluid situation, and every market is different. Yeah. There's certain markets where the teams aren't as concerned, and there's other markets where it's acute. I appreciate it. I know it's a crazy time out there. We're still relating to supply chain and your reaction to it. Got a couple, you know, a few questions kinda all around that. I was curious if you could give us a sense for how many homes you started in the quarter, and how that compares with what you expect to do in the first quarter and what you did maybe in the third quarter. Same thing with how many unsold units under construction do you have at year-end, and do you think that's going to increase net in Q1 2022? Then lastly, do you think your backlog can continue to rise from its current level over the next few quarters? Sure. About 12% of our homes are spec, which means they're starting without a buyer. That was higher. A few quarters ago, we talked about it approaching 20%. We've sold through those specs. We have huge backlogs of homes that, you know, have been contracted with a buyer that, you know, obviously has to take some priority, because we have a contract on that lot. We are absolutely committed to increase our spec inventory, to increase our starts of spec homes over the next couple of quarters. As we begin to solve or at least stabilize some of the backlog turns, some of the construction issues, you will see us increase the number of starts. We will, in most cases, hold off on the sale of those spec starts until the houses are much further along and closer to completion. That is absolutely a strategy that is in place, and I am pushing to get that 12% spec number up, closer to the 20%, you know, that we were at a few months ago. Steven, I'm sorry. Did you have a second half of that, or are we good? The last one was just simply about your backlog. Your backlog's very high. In many ways, that’s a good thing. Oh, yeah. You know, right now we're selling at a pace of 40 per community, and we're building at about a pace of 36. Historically, we've been able to build higher than 36, approaching 40. You know, with the supply and labor issues out there, that's tougher right now. Are we able to grow backlog? Yes. Absolutely. What does that do to cycle times and delivery dates that we quote? You know, that's dependent upon what's going on in the field and how quickly we can get houses built. We're open for business. You know, as I mentioned, 20% of our communities are on allocation, 80% are open, and we are seeing terrific demand and sales activity in all of our markets nationwide, in all of our product segments, Affordable Luxury, and Active Adult. We are, you know, we're raising prices. We're on allocation where we need to be, because, you know, the quoted delivery date has pushed out. But we sit today in a very strong housing market. Yeah. Good times. Thanks very much, guys. Thank you. Take care. The next question comes from Mike Dahl with RBC Capital Markets. Please go ahead. Morning. Thanks, Doug and Marty, for taking the questions. I wanted to follow up on pricing. I think last call you mentioned some of the normalization and how maybe the national increase had turned into as much a marketing tool as something to cover costs or expand margin. I'm wondering, you know, as you've seen some stability or strength come back to the market this fall, how would you characterize the price increase that you're putting out there this week in terms of magnitude or signaling effect? Please understand that communities are free to raise prices whenever they want, subject to, I usually put my eyes on it. We don't wait for what I described this week, and there are many communities that are regularly raising prices. However, two, three, four times a year, we do have a national price increase, which helps with sales, right? You sell into it. We also, 3x a year, have a national sales event, which is a couple-week-long sales event, and we can also sell into that. This week, prices went up 1%-5% in our communities in all of our markets nationwide. Okay. Great. Understood. Thanks, Doug. My second question, just on the cadence of margins, I mean, makes sense given the moving pieces. Just in terms of what that implies for the second half, I think it's I guess it depends on your definition of modest and significant when you're talking 2Q versus 3Q, 4Q. You know, maybe something in the neighborhood of 29% in the second half of the year. I guess, Marty, any further color on how we should be thinking about kind of the exit rate for gross margin in your guidance for 2022? Yeah. I think, directionally you're on track there, Mike. I think, 25.5% for the first quarter, a modest increase for the second quarter, and then we get up into those upper 20's for the last two quarters, more so in the fourth quarter. Would you say that your fourth quarter guidance, I guess, given the deliveries, or the constraints that you've outlined, I know you don't want to get into 2023, but the pricing that you've already put into effect that's in your backlog, that is not yet fully coming through by the end of 2022. Is that fair? That is fair. That, that's fair to say, yeah. Yeah. There's certainly some homes we're selling today that will not be delivering until 2023. There's some homes in the year-end backlog. That's right. Yeah. Okay. Great. Thank you. The next question comes from Alan Ratner with Zelman & Associates. Please go ahead. Hey, guys. Good morning. Nice results. Good morning. Congrats. Thank you. First question, you know, on the lot count and land acquisition environment. I know this is not necessarily representative of what you're seeing or doing today, but the sequential increase in your lot count was a lot more modest than we've seen in the last several quarters. I'm just curious if you could kind of talk about what your appetite is for land right now, what the environment looks like in terms of price appreciation on the lot side. Obviously, you guys are, you know, you have a lot of land, which is a great position to be in in this market. Are you maybe starting to, you know, pull back a little bit on the gas pedal, or is this, should I not read into that as much? Yeah, I wouldn't read into it. We're very opportunistic. As I think everyone now understands, we're obsessively focused on how we're buying the land and driving our return on investment, return on equity. You know, I'm very proud that we're now at 55% optioned. You know, we'd set a goal of 45% optioned. We blew through that. We set a goal of 50% optioned. We blew through that. We're gonna set a goal of 60% optioned. I suspect we'll blow through that. It's, you know, Q4 was one of the biggest land spends that we had in some time, and that was just sort of coincidental with when certain land that we tied up in prior times closed and would require to check. I wouldn't read much into what you're seeing there. We're gonna continue to be opportunistic. Our footprint is bigger. We're now, you know, we were in 50 markets, we're now in 60 markets from the way we have expanded and some of these smaller bolt-on, you know, builder acquisitions we've done of late. There's more opportunity. As we expand affordable luxury, there's more opportunity. We mentioned that almost half our land buys in the last couple of years go to the affordable luxury segment. We're not shutting it down. We're not changing the underwriting. It's still very disciplined, and I wouldn't read much into that one quarter. I think you're gonna see us continue to increase the optioned land, drive the higher return on equity, but grow. Yeah, I want to take this opportunity to kind of point out that of our 36,000 or so owned lots, 10,000 of them are sold and are in backlog. Compared to kind of other builders with the size of our backlog, our years of land supply needs to be evaluated with that sort of mentality. Right, because we're not a spec builder. Right. We're selling. Sure. Appreciate that, guys. Thank you. Second question, might be a two-parter here, but, you know, first one, you know, just thinking about Boise as an example. You guys obviously were very early to take advantage of the strength of that market, and it seems like in the last six or so months, a number of other publics have entered that market. In general, it kind of feels like, you know, builders are back in expansion mode. You know, they hadn't necessarily been entering new markets as much as they have been over the last six or nine months. You know, just thinking about your observations in a market like Boise, for example, does that create any type of competitiveness or incentives or any, you know, change in market dynamics when you have a number of builders entering what seems like a fairly, you know, hot market over a short period of time? Well, Boise is a good example. I mean, we couldn't keep it a secret any longer. In fact, I didn't do a good job of ever keeping it a secret, because we were doing so well. I'm so proud of it. There's no question, you prefer when the other big publics aren't in the market and you have a dominant position. We have a huge head start there, and we have many thousands of high-quality, inexpensive lots. So there, Alan, is an example where we can be a bit more conservative in our land buying because of the land position we have built. Yes, as some of these markets become a bit more competitive with larger players in the market, you have to find your niche, and I think we're really good at that. You know, we're gonna come in at a little bit higher price. Even our Affordable Luxury is a little bit higher price. We're not gonna be all spec. We're gonna offer people choice. People today, even at a lower price, they want some level of choice. The home is so important that they want some opportunity to design it to their lifestyle. We work hard, even in really competitive markets, of finding that niche. I think that's distinct to Toll Brothers, and we're gonna continue to take advantage of it. You're right. As markets get loaded up with bigger builders, they become more competitive, and you have to be more careful, and you have to find the right opportunities that fit your business plan. Makes sense, Doug. Your response to that kind of segues into that third question I wanted to ask, was just that, you know, with the cycle times becoming so elongated for you guys and, you know, the fact that even though you're trying to put a few more specs on the ground, you're never gonna be as spec-focused as a number of other builders. Have you seen any sign of consumer pushback in the sense that, you know, especially at that affordable luxury price point where maybe you're getting more renters coming to those homes that need to move fairly quickly, that extended cycle time is now a turn-off to them and they're not willing to move forward and they're looking for something that they can be in a little bit quicker, or is it not at that pain point yet? Well, you know, rents are up dramatically. Interest rates are still very low, so I'm not hearing that people come in and say, "Boy, I'm really disappointed it's now 12 months to get that house that last year I could have gotten from you in 9.5, and I'm gonna go rent." Maybe they'll rent while they wait for the 12 months. There you go, it's a 12-month lease. They'll wait until our house is completed. I don't think we're feeling it, particularly at our price point, even in affordable luxury, of the rent decision versus the own. But I, you know, there is a. I think it's a small part of the market that as delivery dates get pushed out, you know, they become a bit concerned as to whether they want to wait that long, and they may go look for other opportunities. Now, the resale market is so incredibly tight that I'm not sure they're going to find it there, and all the other builders in the market are pretty busy, so I'm not sure they're gonna find it there. Could there be some spec inventory, new home spec inventory? Possibly. But again, the question is, do I want the spec that is not exactly what I want, or do I want to wait a bit and get exactly what I want because I can, you know, I can modify it a bit with Toll? There is some modest pressure, but we're not feeling it to any extent that's affecting demand or affecting pricing power or affecting our sales pace. Got it. Okay, great. Thanks a lot. I appreciate the responses. Oh, you're very welcome, Alan. Take care. The next question comes from Michael Rehaut with J.P. Morgan Securities. Please go ahead. Hi. Thanks very much for taking my question. Good morning, and congrats on all the progress and the great results. Thanks, Mike. First question, I just wanted to circle back, and I don't wanna beat a dead horse, and it's not easy to talk about 2023, 2024, but you know, you've had a couple of questions about the exit rate on the gross margins. You know, I think you know, one of the big concerns for the sector overall, not just Toll, is you know, the sustainability of those margins as they're approaching prior peaks, and you know, what potential trajectory you might see in the out years, in the next couple of years. You know, given the still very strong pricing power that you have in the market, that's continued as you've noted, you know, how are you thinking about the potential tailwinds and headwinds as you think about 2023, 2024, and, you know, relative to the sustainability of that exit rate that you're looking at in 2022? Mike, all I can say to that, because, you know, we're not gonna get out that far, is that all of our geographies and all of our different product segments are seeing gross margin expansion today. That is with the contingencies we put in place to cover, you know, a certain level of cost increases or uncertainties that are out in the market. I'm not gonna predict as far out as you talked about, you know, how that gross margin compares to industry historic highs. I can't even predict how it compares to today, except what I just said. All geographies, all product types are seeing gross margin expansion on the next home sold at this moment in time. Okay. Appreciate that. I guess secondly, you mentioned, you know, your I believe it was non-binding deposits for the first five weeks, you know, kind of continuing the pace over the last few months and similar to what you saw last year. You know, your absorption rate on average for fiscal 2021 was in the low threes per month, like 3.2, 3.3. You know, is that a good way to think about the business during the upcoming year, assuming, you know, current demand trends persist? And would you expect to see, you know, within the year, you know, the higher rate hit almost four per month in the second quarter? Obviously, that's the strong seasonal quarter. You know, given the fact that, you know, now only 20% of your communities are on allocation, which means that you know, you're kind of selling at a you know, perhaps closer to market, let's say, I would think. You know, is that type of a sales pace, you know, kind of how we should think about the business, you know, over the next 12 months? Well, as I said, we were delighted that our five weeks of deposits equaled the same five weeks at the end of calendar 2020, first month of, you know, Q1 fiscal 2021. Remember, Q1 of 2021, sales were up 59% over Q1 2019. We were hot. 2020. 20. Sorry, my apologies, 20. It's only five weeks, but for us to achieve deposits that match a year ago. When that quarter a year ago was up 59% over the prior year, you know, we're very encouraged. The cadence for the year, as you described, you know our cadence. You know, generally, you know, December and January are not the strongest months for sales. February, the spring season kicks in, and then, off we go with the spring selling season. You know, I've mentioned that there's some signs of seasonality in some of our markets, and many other markets there aren't signs of seasonality. Last year there was no seasonality. Didn't matter what week of the year it was, we just kept selling. All I can say to that, Mike, is, you know, because we're not gonna predict our sales going forward, we have the land, we have community count growth coming, we have an incredibly wide net now with geographies and price point, and we've had a terrific start to Q1. Great. Thanks so much. Good luck. Thank you, Mike. Take care. Our last question comes from Rafe Jadrosich with Bank of America. Please go ahead. Hi, good morning. It's Rafe. Thanks for taking my question. First, you mentioned lifestyle changes and migration shifts in your pre-prepared remarks. I just wanna ask, what are you seeing that gives you confidence that this is a sustainable trend and it's not just temporary? Within that, can you just talk about the demand you're seeing for second homes? Yeah. I'm sorry, I misunderstood the first half. Consistency of migration patterns we're seeing. Thank you. Why is it long- term? Sure. You know, we look at the U-Haul pricing charts. They obviously have surge pricing. If you wanna move a load from New York City to Palm Beach, you're gonna pay $4,000. You wanna get that U-Haul back to New York for another load, they may pay you to drive it north. Those trends exist from California to Austin, and California to Reno, and Vegas, and Phoenix, and the north to Charleston and Florida. I think those trends are real. I mean, before COVID, people were leaving the Northeast, chasing the sunshine, chasing the jobs, chasing the lifestyle, chasing affordability. The same thing from the West, you know, the expensive state of California. We're doing really well in California. There's 40 million people, and if a half a million decide to leave, we still got ourselves 39.5 million that wanna stay there and pay the price to enjoy that Pacific Ocean. Those migration trends existed before COVID, and they have accelerated, and I think are firmed up longer- term. When COVID is long gone, the mentality of people to live where they wanna live, to take a job that allows them to have flexibility in where they can work at least part of the time, to design the home to their lifestyle. You know, early on, we were marketing, you know, my home is the most important thing in the world. My home is my sanctuary. This is real. People care more about their home. They're spending more time there, and they're concentrating on how they can design it, and they're moving to where they are allowed to move to enjoy their life versus where the job had tethered them. I feel strongly these migration patterns, Sun Belt, mountain states, existed before COVID and will long outlive this moment that we are in. I mean, I just look at, you know, we have states like Idaho, Florida, Texas, North Carolina, Nevada, Arizona, Colorado. 40%, in some cases, of our buyers coming in are coming from a different state. That's gonna continue. Thank you. Then just to follow up on this, as you spoke a little bit about how your affluent customer is less concerned about affordability. I know mortgage rates have stayed stable and low, but if they do move up, how do you think about the willingness of your kind of core affluent buyer to trade up? Yeah, it's a great question. You know, we ran the math. If rates go up by 150 basis points, call it 3.25 to 4.75, 5% of our backlog would have to figure out either mortgage less or go to an adjustable product. Only 5%. That's because, you know, 20% are all cash, and those that get a mortgage have an average LTV of 69%. They have a lot of equity coming out of their existing home. They've done well in the stock market. So that's the backlog. Your bigger question about, you know, how would the buyers react to it? You know, I can't sit here and tell you that Toll Brothers is immune to affordability and immune to higher interest rates, but we are in a much better position because of the nature of our buyer for all the reasons that we have given. The other thing, you know, as the loan limits have gone up on conforming loans, they've gone up by $100,000. That's moved about 6% of our backlog from a jumbo down into a conforming. You know, that's also very encouraging. $100,000 average move in the loan limit of conforming. You know, I think that's a nice tailwind for our business. Great. Thanks for all the color. You're very welcome. This concludes our question- and- answer session. I'll turn the conference back over to management for any closing remarks. Thank you, Tom, and thanks everyone for your continued interest and support. We wish everybody a wonderful holiday season and a healthy and happy 2022. Thanks. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.