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

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

Overview

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.

Key Financial Performance

Revenue 63% growth year-over-year for the third quarter of 2025 compared to the third quarter of 2024. This growth is attributed to strong performance across various business segments.

Net Income 130% growth year-over-year for the third quarter of 2025 compared to the third quarter of 2024. This increase is due to improved operational efficiencies and higher revenue.

Residential Real Estate Revenue 94% growth to $36.8 million from $19 million year-over-year. The increase is driven by higher average homesite base prices and improved gross margins.

Average Homesite Base Price Increased to $150,000 from $86,000 year-over-year. This rise reflects strong demand and favorable market conditions.

Gross Margin Increased to 53% from 39% year-over-year. This improvement is due to higher pricing and operational efficiencies.

Leasing Revenue 7% growth to $16.7 million, achieving an all-time quarterly record. This growth is attributed to an increase in leasing activity.

Hospitality Revenue 9% growth to $60.6 million, achieving an all-time third quarter record. This increase is due to higher occupancy rates and improved pricing.

Residential Units Under Contract Increased to 1,992 units from 1,381 units year-over-year. This growth is due to a strong residential pipeline and market demand.

Commercial Real Estate Revenue (Watercrest Sale) Sale of Watercrest senior living property for $41 million, resulting in a gross profit of $19.4 million. The property was originally appraised at $2.7 million in 2019, and the sale reflects value creation through development and leasing.

Capital Expenditures $20.4 million for the third quarter of 2025. This reflects ongoing investments in strategic projects.

Share Repurchase $8.7 million for the third quarter of 2025, totaling $24.9 million for the first 9 months of 2025 compared to $0 in the same period of 2024. This indicates a significant year-over-year acceleration.

Cash Dividends $8.1 million for the third quarter of 2025. This includes a 14% increase in the quarterly dividend to $0.16 per share.

Project Debt Reduction $28.4 million for the third quarter of 2025, including $19.2 million for the loan payoff associated with the sale of Watercrest.

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Operating Highlights

Residential real estate revenue: Grew by 94% to $36.8 million from $19 million. Average homesite base price increased to $150,000 from $86,000, and gross margin increased to 53% from 39%.

Recurring revenue: Leasing revenue increased by 7% to $16.7 million, and hospitality revenue increased by 9% to $60.6 million, both achieving record levels.

New flight route: Daily nonstop flights between Northwest Florida Beaches International Airport (ECP) and LaGuardia Airport in New York City were introduced, connecting to the largest Metropolitan Statistical Area in the U.S. with a population of 20 million.

Leasing and residential pipeline: Executed 40 new commercial leases and renewed 43 existing leases in the first 9 months of 2025, compared to 26 new leases and 27 renewals in the same period in 2024. Residential units under contract increased to 1,992 from 1,381 year-over-year.

Capital allocation: Allocated $20.4 million for capital expenditures, $8.7 million for share repurchase, $8.1 million for cash dividends, and $28.4 million for project debt reduction in Q3 2025.

Sale of Watercrest senior living: Sold for $41 million, generating a gross profit of $19.4 million. The asset was originally appraised at $2.7 million in 2019. This sale aligns with the strategy to monetize non-core assets and reinvest strategically.

Dividend increase: Quarterly dividend increased by 14% to $0.16 per share, marking a 129% increase since the program's inception in 2020.

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Risk or Challenges

Senior Living Asset Strategy: The company has decided not to grow senior living assets as part of its commercial leasing portfolio due to their longer leasing periods and considerable operational intensity. This could limit diversification and potential revenue streams in this asset type.

Market Conditions and Flexibility: The company acknowledges the need to respond to the ebb and flow of market conditions, which implies potential risks from market volatility affecting residential and commercial real estate demand.

Capital Allocation Variability: The company’s capital allocation strategy varies quarter-to-quarter, which could lead to challenges in maintaining consistent financial planning and execution.

Debt Reduction and Financial Leverage: The company allocated $28.4 million for project debt reduction in the third quarter, including $19.2 million for a loan payoff. High levels of debt or inconsistent debt reduction could pose financial risks.

Dependence on Regional Ecosystem: The company’s focus on regional assets and ecosystem, such as the Watersound lifestyle, may expose it to risks if the region faces economic or demographic challenges.

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Guidance & Outlook

Future Residential Pipeline: The company has over 24,000 entitled residential units in various stages of planning, engineering, permitting, or development. This pipeline includes a wide range of locations, products, and pricing, providing flexibility to respond to market conditions.

Capital Allocation Strategy: The company plans to continue a measured and multifaceted capital allocation strategy, including capital expenditures, share repurchases, cash dividends, and project debt reduction. The exact allocations will vary based on quarterly circumstances.

Asset Monetization and Strategic Reinvestment: The company anticipates continuing to create asset value by developing operating properties, which may be owned for recurring revenue or monetized for strategic capital allocation. Non-strategic timberlands will also be evaluated for monetization opportunities.

Market Expansion via Transportation: The company aims to leverage new daily nonstop flights between Northwest Florida Beaches International Airport and LaGuardia Airport in New York City to expand marketing efforts and promote the Watersound lifestyle to a large population base.

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Shareholder Return Plan

Cash Dividends: $8.1 million allocated for cash dividends in the third quarter of 2025.

Dividend Increase: Announced a 14% increase in the quarterly dividend to $0.16 per share, payable on December 12 to shareholders of record as of November 13.

Dividend Growth: Since the dividend program started in 2020, dividend payments have increased by 129%.

Share Repurchase Allocation: $8.7 million allocated for share repurchase in the third quarter of 2025.

Year-to-Date Share Repurchase: $24.9 million in share repurchases through the first 9 months of 2025, compared to 0 share repurchases in the same period of 2024.

Outstanding Share Reduction: Outstanding share balance is now below $58 million for the first time in nearly 30 years.

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Key Q&A

Q:Why is the company building its cash balance rather than increasing the pace of its buyback?

A:The company is generating significant cash through its operations and views share repurchase as a priority. They have already invested $25 million in share repurchase in the first 9 months of 2025 compared to $0 in the same period of 2024. The largest liquidity event, the sale of Watercrest, occurred at the end of Q3, which also impacts their cash strategy.

Q:Why not sell more assets at high valuations to reduce share count while retaining future developable land?

A:The company evaluates its operating properties and timberlands to determine the best opportunities for monetization. They will not sell assets at a discount and aim to ensure shareholders receive the deserved value when monetizing assets.

Q:Where does the company see cash levels 12 to 18 months from now, and what are the regulatory hurdles for share buybacks?

A:Cash levels depend on macroeconomic and microeconomic conditions, as well as the company's capital allocation strategy. Regulatory hurdles for share buybacks include navigating open and closed periods and other requirements. The company prioritizes liquidity while executing its capital allocation strategy.

Q:What is the progress update on talks with a large-scale builder interested in Pigeon Creek DSAP?

A:Talks are ongoing, and while there is no specific update, the company is encouraged by the progress made.

Q:Are there plans for the beachfront lots near Twin Beachfront Vacation Homes in Panama City Beach?

A:The project, called Wavecrest, is being evaluated for its highest and best use. The property has significant frontage on the Gulf of Mexico, and the company is considering synergies with inland land holdings before executing a strategy.

Q:Has management identified opportunities to monetize assets within the hospitality or leasing segments?

A:The company is constantly evaluating its assets to determine the best strategy, whether to hold for recurring revenue or monetize, as seen with the Watercrest property.

Q:Would the company consider increasing the pace of share repurchases?

A:The company evaluates its assets and cash flow to adjust its capital allocation strategy. Share repurchases have increased this year compared to prior years.

Q:Are the unleased townhomes at Watersound Origins Crossings up for sale?

A:Yes, the company is transitioning the townhomes from commercial leasing assets to residential real estate sales, selling them one at a time to maximize value.

Q:What is driving the uptick in lot sales at WindMark Beach, and is there potential for expansion?

A:The company shifted its strategy to a builder program focusing on spec homes, which has been successful. There are about 800 developed lots, with more under development, and potential for expansion exists, including repurposing areas like the original golf course plan.

Q:What caused the significant jump in average home site prices this quarter, and are these margins sustainable?

A:The increase is driven by the mix of communities and timing of closings. Margins have historically been around 50%, and the company advises looking at trends over 12-24 months rather than quarter-to-quarter.

Q:What is the estimated cumulative capital spending over the next 3 to 5 years?

A:The company continues to generate cash and views capital allocation as a multifaceted strategy, with share repurchase being a priority.

Q:What is the current value of the company's land inventory and recurring revenue at the end of Q3 2025?

A:Recurring revenue includes $169 million in hospitality and $49.4 million in leasing for the first 9 months of 2025. Land valuation is being assessed, with a third-party evaluation in progress.

Q:Who will be the builder for Longleaf Park 3?

A:The company plans to continue its strategy of using multiple semi-custom and custom builders to create a unique product in the region.

Q:How should we interpret the increase in average home site sale price from $86,000 to $150,000?

A:The increase is primarily due to the mix of communities and timing of closings, consistent with previous disclosures.

Q:What is the outlook for growth in hospitality and leasing segments?

A:The company plans to continue expanding hospitality and leasing segments with deliberate strategies, focusing on town centers like WaterSound and West Bay. Growth may not match the exponential pace of previous years but will continue with the right projects and locations.

Q:Is the company discounting home site pricing?

A:No, the company does not discount home site pricing. Pricing is negotiated with builders to achieve desired margins and avoid cannibalization within communities.

Q:What is needed for the area to transition from a secondary/tertiary market to a primary market?

A:The area needs assets like the academic health center with FSU Health and more direct flights to larger metropolitan areas. Growth trends and increased interest from businesses indicate progress toward this transition.

Q:When will the company provide more midterm and long-term financial frameworks and KPIs?

A:The company is considering options to present more consistent and recurring information for shareholders, with a focus on cash flow and recurring revenue trends.

Q:Is there progress in accelerating home site pricing as older builder contracts conclude?

A:Yes, the company aims to increase home site pricing with each new phase of residential communities, based on market conditions.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the estimated cumulative capital spending over the next 3 to 5 years, the exact cash levels expected in 12-18 months, and the current value of the company's land inventory. Responses to these questions were vague and lacked numerical specifics.

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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

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

Unknown7-24

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.

JOE Report

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