The St. Joe Company (JOE) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A suggest a mixed outlook. While there are positive developments like new memberships, increased revenues from higher fees, and strategic growth plans, challenges such as interest rate impacts, unclear timelines for major projects, and management's reluctance to provide specific guidance temper the optimism. The market cap suggests moderate sensitivity, leading to a neutral prediction.

Key Financial Performance

Revenue 16% growth year-over-year. This growth is attributed to solid organic growth and a strategic transformation of the company.

Net Income 20% growth year-over-year. This increase is driven by strong performance in real estate revenue and recurring revenue streams.

Real Estate Revenue 27% growth year-over-year. This growth is a result of the company's focus on developing scalable master-planned residential communities and businesses.

Leasing Revenue 11% increase year-over-year, reaching a quarterly record. This growth is due to the company's diversified real estate operations and recurring revenue strategy.

Hospitality Revenue 10% increase year-over-year, reaching a quarterly record. This growth is attributed to the company's strategic investments in hospitality businesses.

Recurring Revenue 63% of total revenue for the first 6 months of 2025, showing a significant transformation of the company towards recurring revenue streams.

Capital Expenditures $36.5 million spent for growth in the second quarter. This reflects the company's measured and multifaceted capital allocation strategy.

Share Repurchase $10.1 million spent in the second quarter, with $16.2 million spent in the first half of 2025. This has reduced the outstanding share balance below $58 million for the first time in 29 years.

Cash Dividends $8.1 million paid in the second quarter. This is part of the company's capital allocation strategy.

Project Debt Reduction $7.7 million reduced in the second quarter. This is part of the company's financial management strategy.

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Operating Highlights

WaterSound Real Estate launch: A boutique real estate brokerage located in the WaterColor Town Center was launched, with plans for several other future locations.

Topgolf opening: Topgolf opened its doors in Panama City Beach as the main anchor for Pier Park City Center, an entertainment district.

New flight route: Delta announced year-round daily nonstop flights between New York City's LaGuardia Airport and Northwest Florida Beaches Airport, ECP, expanding market access.

Recurring revenue growth: Recurring revenue now constitutes 63% of total revenue, driven by 11% growth in leasing revenue and 10% growth in hospitality revenue, both reaching quarterly records.

Capital allocation: $36.5 million was allocated for growth, $10.1 million for share repurchase, $8.1 million for cash dividends, and $7.7 million for project debt reduction.

Pigeon Creek DSAP approval: Bay County Commission approved entitlements for over 3,000 residential units and 400,000 square feet of commercial space, with discussions underway with a homebuilder.

FSU Health Teaching Research Hospital: Approval of $414 million in bonds for the construction of a new hospital in Bay County on the company's medical campus.

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Risk or Challenges

Market Conditions: Potential risks associated with market conditions were not explicitly discussed, but the company's reliance on real estate and hospitality sectors could expose it to economic downturns or changes in consumer behavior.

Regulatory Hurdles: The company mentioned the approval of the Pigeon Creek DSAP and the issuance of bonds for the FSU Health Teaching Research Hospital. While these are positive developments, they highlight the dependency on regulatory approvals, which could pose risks if future projects face delays or denials.

Strategic Execution Risks: The company is undergoing a strategic transformation from a land sales company to a diversified real estate operating company. This shift involves significant capital allocation and operational changes, which could pose execution risks if not managed effectively.

Supply Chain Disruptions: No explicit mention of supply chain disruptions, but the company's reliance on construction and development projects could make it vulnerable to material or labor shortages.

Economic Uncertainties: The company's growth is tied to the economic health of Northwest Florida. Any regional economic downturns or changes in tourism patterns could adversely impact its recurring revenue streams.

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Guidance & Outlook

Future residential and commercial development: The Bay County Commission approved the Pigeon Creek Detail's specific Area Plan (DSAP) with entitlements for over 3,000 residential units and over 400,000 square feet of commercial space. Discussions are ongoing with a homebuilder interested in the entire DSAP.

Expansion of real estate brokerage: The company launched WaterSound Real Estate, a boutique real estate brokerage, with plans for several future locations.

Market access expansion: Delta announced year-round daily nonstop flights between New York City's LaGuardia Airport and Northwest Florida Beaches Airport, ECP, providing access to a new, heavily populated market.

Healthcare infrastructure development: The Florida Governor and Cabinet approved $414 million in bonds for constructing a new FSU Health Teaching Research Hospital in Bay County on the company's medical campus.

Entertainment and commercial growth: Topgolf opened in Panama City Beach as the main anchor for Pier Park City Center, an entertainment district.

Infrastructure support for growth: The Florida state budget for fiscal year 2025-26 includes a $5 million appropriation to Bay County for planning a new sanitary sewer plant in the northern part of the State Road 79 corridor to support future growth.

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Shareholder Return Plan

Cash Dividends: $8.1 million allocated for cash dividends in Q2 2025.

Share Repurchase: $10.1 million allocated for share repurchase in Q2 2025, with $16.2 million repurchased in the first half of 2025, reducing the outstanding share balance below 58 million for the first time since 1996.

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Key Q&A

Q:Would the Board consider reviewing the current access policies to ensure that hotel guest usage in the WaterSound Club does not dilute the premium experience and investment for members?

A:There are currently 3 hotels on 30A that allow access to club amenities out of a total of 12 hotels. At this moment, there is no plan to change the current policy.

Q:Could you provide color on the decision-making of how much capital or cash is kept at Latitude Margaritaville WaterSound versus being distributed to the joint venture partners?

A:There is no specific formula for distribution. Decisions are made based on business performance, sales, closings, infrastructure needs, and capital requirements, in collaboration with the joint venture partner.

Q:What is the number of acres contributed to the Margaritaville joint venture with Minto?

A:Approximately 2,600 acres.

Q:What can you tell us about population growth in the area over the past year?

A:Bay and Walton County are among the fastest-growing counties in Florida. The level of in-migration remains consistent, and the growth trend is expected to continue.

Q:Do you think the housing market in the area could perform above the national trend?

A:Time will tell, but the region is currently performing better than many other metro markets in the country.

Q:Do you believe you have reached a point where you can return close to $100 million annually to shareholders as you did this past quarter?

A:Capital allocation is reviewed daily based on ground-level, macro, and micro-level factors. While returning capital is a priority, there is no definitive answer to reaching $100 million annually.

Q:What is going on with memberships?

A:Memberships saw a slight decrease due to recalibration of membership types and increased entry fees and monthly dues. However, 113 new full members joined, and the market is expected to absorb the fee increases over time.

Q:Were there any major communities that drove the 482 newly contracted homesites this quarter?

A:No, the number was spread across all active communities.

Q:What is currently the main bottleneck to selling more than the 1,000 homesites averaged in the last year?

A:A decrease in mortgage interest rates would help accelerate sales. Traffic in sales centers and in-migration remain strong, but interest rates are a key factor.

Q:How do you think about the vehicle traffic you're creating over time when traffic already seems difficult at times?

A:The company plans infrastructure 3-10 years ahead in collaboration with state, regional, and local partners to ensure growth is supported.

Q:What caused the growth in sea club revenues despite lower memberships?

A:Higher dues, a new golf course, and strong hotel occupancy and rates contributed to increased revenue.

Q:What is driving the decline in homesites under contract despite having more active selling communities and builders?

A:A large number of lots were closed in the first half of the year. Lot delivery timelines are not linear and depend on engineering, permitting, and infrastructure development, which can take up to two years.

Q:Does the Board believe Florida Senate Bill 1622 will negatively affect St. Joe's real estate holdings?

A:No, the Board does not anticipate any negative effects.

Q:How do you plan to address the discrepancy between market cap and NAV?

A:The focus is on growing the company profitably and creating shareholder value.

Q:Can you provide details on CapEx and lot development relative to lots under development?

A:CapEx includes both soft (planning, engineering, permitting) and hard (infrastructure) costs. Lot development timelines vary and should not be overanalyzed at any single point in time.

Q:When will Phase 2 Margaritaville break ground, and what is its size? Will pricing and market positioning be similar to Phase 1?

A:Phase 2 is approved for over 4,000 units. Pricing and market positioning are expected to be similar to Phase 1. Groundbreaking is likely a couple of years away, based on current run rates.

Q:What is the earnings potential of the Pier Park JVs and WaterSound Fountains Independent Living JV as they ramp up?

A:These properties are in the start-up lease-up phase. Long-term potential is positive, and similar projects have become profitable over time.

Q:What needs to occur for the West Bay Bridge to be built, and what is the timeline?

A:The alignment has been chosen, and engineering and permitting are the next steps. The timeline depends on consumer demand and progress in planning with the Florida Department of Transportation.

Q:Do you get offers to buy land from third parties, and how do you decide whether to sell or hold?

A:Offers are received occasionally. Non-strategic lands are more likely to be sold at the right price, while strategic lands are held unless a strategic opportunity arises.

Q:When do you expect the new marina to start construction on the ICW?

A:Construction has started with grading, but final permits are awaited before full development can proceed.

Q:How should we look at the earnings potential of the new St. Joe brokerage boutique?

A:The brokerage has ambitious goals and plans to expand locations. It may also handle new home sales in communities.

Q:What is the goal for growth rate of recurring revenues in the next 3 to 5 years?

A:There is no exact goal, but the focus is on growing revenues, profitability, and recurring revenue.

Q:What is the timing of the medical center breaking ground, and what is its impact on the region?

A:The medical center will have a transformational impact. Bonds are issued, and the project will move forward quickly once an operator agreement is finalized.

Q:Would you consider selling the Pigeon Creek parcel to a single builder for upfront cash?

A:Discussions are ongoing with a large-scale builder interested in the entire Pigeon Creek DSAP. Progress has been made, and the builder is seen as suitable for accelerating residential growth.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer or lacked clarity on the following questions: 1) Whether they can return $100 million annually to shareholders, citing daily capital allocation reviews without a definitive answer. 2) The exact timing for Phase 2 Margaritaville groundbreaking, stating it is likely a couple of years away without a specific date. 3) The timeline for the West Bay Bridge construction, mentioning planning progress but no exact timeframe. 4) The goal for recurring revenue growth, stating a focus on growth without providing specific targets.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

JOE Transcript

The St. Joe Company (JOE) Q3 2025 Earnings Call Transcript

Positive10-30

The earnings call reflects positive developments: strong financial performance, strategic real estate expansions, and increased share repurchases. The Q&A session showed management's confidence in ongoing projects, despite some vagueness in financial specifics. The market's reaction is likely positive, driven by strategic growth plans and robust asset management, outweighing concerns over vague capital spending details.

The St. Joe Company (JOE) Q2 2025 Earnings Call Transcript

Unknown7-24

JOE Report

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