St. Joe Company 2026 Q2 Earnings Call

Please go ahead. Thank you and good morning.

I'm Jorge 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. On Wednesday, after the market closed, we issued our second 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 in 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 the region and of our assets.

If you'd like to send us questions for later in the call, you may do so by visiting the top right-hand corner of your screen, where the words "Submit a question" are visible. Clicking on that text will take you to the text entry 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 could 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, which provides comprehensive details about our performance, so we are only going to mention a few key highlights of the second quarter before we move on to your questions. We had a strong second quarter, with total revenue increasing by 23% and net income increasing by 37% compared to the second quarter of 2025. The total revenue of $158.9 million was the highest in a second quarter in 20 years, and the net income of $40.5 million was the highest in the second quarter in the company's history, not including the one-off gain on the sale of discontinued operations in 1996.

In addition to this growth, the company's also becoming more profitable, with an increase in the gross margins of every segment. The gross margins in the residential segment increased to 48% from 45%. The hospitality segment increased to 42% from 39%, and the commercial segment increased to 65% from 57%. This growth in gross margin demonstrates our emphasis on profitability while we continue to scale up and grow. The increase in profitability is in part due to our continued focus on refining and improving operations. In addition, we systematically evaluate our operating assets to identify non-strategic, lower-margin assets for their potential disposition. In the short term, these decisions may cause a slight reduction in revenue inside of a segment, but an increase in income and profitability, as evidenced by last year's sale of the Watercrest Santa Rosa Beach property in the commercial segment.

This strategy is being executed with a deliberate and thoughtful process that seeks to maximize the value of these assets based on timing and market conditions. Residential real estate revenue grew by 39% in the second quarter when compared to the prior year. This growth is in part due to the diverse portfolio of our residential communities, which contain a mixture of price points and product types to accommodate a wide cross-section of consumers moving to our region. The new home prices in our communities range from the high $200,000 to over $5 million. This diversity is deliberate to help insulate the residential segment from volatility in the market conditions of any one price point.

Later this year, the company plans on commencing the development of two utility corridors, one that will serve the future residential communities in the Lake Powell and West Laird Detailed Specific Area Plans, or DSAP, and the other that will serve the Pigeon Creek and West Bay Creek DSAP. These types of off-site utility extensions are capital intensive but necessary seeding to harvest many thousands of future residential home sites in these DSAP. It is important to remember that because of the one to two-year seeding and harvesting cycles and the mixture of home site pricing, the results of the residential segment are not linear and may vary from quarter to quarter. In the second quarter, we continued to implement a measured and multifaceted capital allocation strategy.

We repurchased $32.7 million of the company's common stock, funded $24 million for capital expenditures, primarily for future growth, repaid $10.9 million of debt, and paid $9.1 million in cash dividends. The allocation broke down as 43% for stock repurchases, 31% for capital expenditures, 14% for debt reduction, and 12% for cash dividends. More than half, or 55%, of the capital allocation in the second quarter was to shareholders through stock repurchases and cash dividends. As of July 27th, the company had repurchased $41 million of common stock in 2026, when compared to $40 million in all of 2025. As of the same date, the company now has 56,930,451 outstanding shares, which is the lowest number of outstanding shares in nearly 30 years.

With 165,000 acres of mostly entitled land in one of the fastest-growing areas of Florida and a diverse operations platform with a proven track record of growing revenue, increasing profitability, distributing profits to shareholders, reducing the number of outstanding shares, and planning for the future, the company's uniquely positioned like few other companies. Merrick and I are going to answer your questions. As a reminder, in the top right-hand corner of your screen, the words "Submit a Question" are visible. Clicking that text will take you to the text entry box where you can type your questions and click submit.

Merrick? Thank you, George. First question.

Estimated residuals grew this quarter. Origins looks to have added to residuals. Did homesites in Bay County add to the estimated residual balance this quarter?

Yes. The answer to the question is, homesites in Bay County did add to the estimated residual balance to this quarter.

Yep. Just to add a little bit, the increase was driven by higher price point communities. For the first half of 2026, we booked a total of $14.6 million of new true-ups, but we've also collected $5.3 million worth of existing true-ups. The buyback pace this quarter was appreciated. Given your tireless work increasing the value of land holdings, it was also nice to see some of the piggie banks open, along with the operating improvements funding this capital allocation.