St. Joe Company 2026 Q3 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, 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 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 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 nine months of 2026, total revenue increased by 8%, net income increased by 7%, and operating income increased by 26% when compared to the first nine months of 2025. Except for the large one-time timberland sale in 2014, the full year 2025 had the best performance in 20 years. It is encouraging that through the first nine months of 2026, the company's 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 Watersound has 2,426 existing homes of the planned 3,700 homes. 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 nine months with an increase of 24%.

The growth of Latitude, together with the previously announced new planned community for PulteGroup in the Pigeon Creek DSAP, 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 sq ft with 33,182 sq ft existing and 69,134 sq ft 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 it's 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 as 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 nine 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. Merrick and I are going to answer your questions.

As a reminder, in the top right-hand corner of the 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. 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 Watersound Beach Club, which has been under reconstruction. And we had some minor roof damage in The Pearl 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 dunes along the company's properties be rebuilt or just naturally reestablished over time?

The main coastal dunes that we have on our properties are the dunes in the Watersound Beach Club. Those dunes were not materially impacted, so there is really not going to be a need to rebuild those dunes. The rebuilding is primarily the boardwalk that provides access from the beach club to the beach. Like I mentioned a few minutes ago, that boardwalk is currently under reconstruction.