The St. Joe Company (JOE) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to The St. Joe Company's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Jorge Gonzalez, President, CEO and Chairman of The St. Joe Company. Please go ahead.

Thank you, and good morning. I'm George Gonzalez, President, CEO and Chairman of The St. Joe Company. It is my pleasure to welcome you to our quarterly earnings call. I'm joined today by Marek Bakun, our Chief Financial Officer; and Rhea Goff, our Chief Administrative Officer. On Wednesday after the market closed, we issued our third quarter of 2026 earnings press release, which can be found in the Investor Relations section of our corporate website at joe.com. This morning, we are continuing our commitment to quarterly earnings calls to provide our shareholders and the investor community with an opportunity to ask questions about our business and performance. We have always been an open and transparent company that welcomes all feedback and opinions. Because of the types of assets that we own, we encourage shareholders to visit us in person so they may assess firsthand the progress of our region and of our assets. If you would like to send us questions for later in the call, you may do so by visiting the right-hand corner of your screen where the word submitted question are visible on that text box where you can type in your question and then click submit. Before we begin discussing our results and answering your questions, I would like to remind everyone that Wednesday's press release and the statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that can cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. A reconciliation of these measures can be found in our earnings release. Let's go ahead and get started. We assume everyone has already carefully reviewed our earnings release and 10-Q, which provide comprehensive details about our performance. So we are only going to mention a few key highlights of the third quarter before we move on to your questions. Although the sale of Watercrest boosted the prior year results, we had a solid third quarter with organic growth. Quarterly total revenue decreased by 3%, net income decreased by 5% and operating income increased by 16%. On October 28, the Board of Directors declared a cash dividend of $0.18 per share, which is a 13% increase from the third quarter dividend and a 157% increase from when the current dividend program was initiated in 2020. For the first 9 months of 2026, total revenue increased by 8%, net income increased by 7% and operating income increased by 26% when compared to the first 9 months of 2025. Except for the large onetime timberland sale in 2014, the full year 2025 had the best performance in 20 years. So it is encouraging that through the first 9 months of 2026, the company is performing ahead of 2025. In the third quarter, we wrapped up another strong peak season in our hospitality segment. Total hospitality revenue increased by 9% to a company third quarter record of $66 million when compared to $61 million in the third quarter of 2025. Our hotel revenue increased by 7% and our club revenue increased by 14%. We also continue to expand the geography from where our hotel guests travel with the highest growth coming from the states of New York, South Carolina, Illinois and Michigan. Through the end of September, we had guests stay in our hotels from all 50 states. Latitude Margaritaville Water Sound has 2,426 existing homes of the planned 3,700 homes. And in the third quarter, we announced plans to move forward with a second phase that will add approximately 3,500 planned homes, which will bring the community to approximately 7,200 planned homes. Sales were strong for the first 9 months with an increase of 24%. The growth of Latitude, together with the previously announced new planned community for PulteGroup in the Pittson Creek DSA will create continued demand for the Watersound West Bay Center, the company's emerging commercial lifestyle town center, which is planned for a minimum of 500,000 square feet with 33,182 square feet existing and 69,134 square feet under construction. including a new Publix grocery store. The emerging Watersound West Bay Center will make the Latitude and Pigeon Creek communities more appealing to potential buyers by offering convenient shopping service and entertainment opportunities, which is another example of our virtuous circle of value creation. The community in Pigeon Creek is expected to break ground in the first part of 2027 and is planned for approximately 3,000 homes. In the third quarter, we continued to implement a measured and multifaceted capital allocation strategy. We repurchased $27.2 million of the company's common stock, funded $22.8 million in capital expenditures primarily for future growth, paid $9.1 million in cash dividends and repaid $8.8 million of debt. The allocation broke down is 40% for stock repurchases, 34% for capital expenditures for growth 13% for cash dividends and 13% for debt reduction. More than half or 53% of the capital allocation in the third quarter was to shareholders through stock repurchases and cash dividends. For the first 9 months of 2026, the company repurchased $64.9 million of common stock when compared to $24.9 million for the same period in 2025, an increase of 161%. As of September 30, the company had 56,578,851 outstanding shares, which is the lowest number of outstanding shares in nearly 30 years. Now Marek and I are going to answer your questions. As a reminder, in the top right-hand corner of the screen, the submit question are visible. text entry box you can type your questions and click submit. Ray, do you mind reading the questions?

Could you talk about the impact of the hurricane on the company's properties along the Gulf and the further inland assets?

We appreciate the question. We issued a press release shortly after the storm or the hurricane came through. We were fortunate the impact to our properties was not as severe as it was on the west side of the storm. We did have an impact to our golf courses with trees down. We had an impact to the Boardwalk in our Beach Club, which has been under reconstruction. And we had some minor roof damage in the Pearl in Waterstound -- excuse me, in Camp Creek. Relatively speaking, they are minor damage. We were open for business in our hotels within 24 to 48 hours.

Will the coastal dooms along the company's properties be rebuilt or just naturally reestablished over time?

The main coastal dooms that we have on our properties are the dooms in the Watertown Beach Club. Those dooms were not materially impacted. So there's really not going to be a need to rebuild those dooms. The rebuilding is primarily the Boardwalk that provides access from the Beach Club to the beach. And like I mentioned a few minutes ago, that Boardwalk is currently under reconstruction.

Appreciate the measured and multifaceted capital allocation, including the increased pace of buyback. Is there any updated time line on the ICW Marina? It appears little change from when it was a part of the 2025 Annual Meeting. And in September, it looks like an updated application was approved for a bigger project, but still surprising to see no ground has broken.

We have commented on the ICW Mina a couple of times. First of all, we're really excited about the potential of this marina. We did break ground. We did do some mass grading a while back. The project from our end is a project that we're ready to move forward with full steam ahead. As I mentioned before, we have obtained most of the permits that are needed from the federal, state and local authorities, but we're still waiting for one final permit from the federal authorities before we can go full steam ahead. We believe that permit is going to be issued hopefully in the near term. And as soon as we get that final permit, the development and construction activity on the Marina is going to move forward pretty quickly.

Strong growth in the backlog and sales contract pace at Latitude Margaritaville Waterstown. Could you talk about the pace of completions at Latitude? Was it an active decision to lower the pace of completion there? Or is it just sort of the natural ebb and flow of building costs?

Yes. Natural ebbs and flows is the right answer. Just as a reminder, the joint venture transacts homes. So it takes time from the time you sell a home to the time you complete the construction of the home. So just a reminder, coming into 2026, the backlog number of homes under contract was at 149. Now as of September 30, it's 222. So it's the time lag between selling a home and building the home to the deliveries that caused the timing of the closings. And one of the reasons for the increase in the backlog is sales have increased, as I mentioned earlier. Sales so far for this year are up 24%.

Correct. Do you see growth capital spend accelerating from the $80 million to $100 million range of past 2 years to support leasing division potentially doubling of square feet?

We do see capital expenditure for growth growing over the next year or 2. As we continue to see demand from tenants, particularly national tenants for our commercial leasing space, we certainly want to fulfill that demand, and we are seeing that both in the Waterstown Town Center and also in the emerging West Center. So the -- yes, we believe we're going to be increasing the pace and accelerating the pace over the next couple of years.

Explain the decline in residential sales. Is it more of a timing issue?

It is. Residential sales, unlike the revenue that comes in from leasing and hospitality comes in spurts based on the closings that are scheduled at that particular time in that particular quarter. In the second quarter, we had an uptick in closings. This quarter, it was down, but it was not for any specific reason other than the timing of when closings are scheduled.

What is per acre amount realized on $50 million land sales to Latitude this quarter?