The St. Joe Company Q3 2026 Earnings Conference Call - ST JOE CO

Financial Performance:

• Total revenue for Q3 2026 decreased 3% year-over-year (YoY), while net income fell 5%; however, operating income rose 16%.
• First nine months of 2026 showed organic growth with total revenue up 8%, net income up 7%, and operating income up 26% compared to the same period in 2025.
• Hospitality revenue hit a Q3 record of $66 million (up 9% YoY), driven by a 7% increase in hotel revenue and a 14% increase in club revenue.
• The Board declared a quarterly cash dividend of $0.18 per share (a 13% increase from Q3 2025 and 157% since the 2020 program initiation).
• Capital allocation in Q3 totaled $68.9 million, allocated as 40% for stock repurchases ($27.2M), 34% for capital expenditures ($22.8M), 13% for dividends ($9.1M), and 13% for debt repayment ($8.8M).
• Share repurchases for the first nine months of 2026 reached $64.9 million (a 161% increase from the prior period), reducing outstanding shares to 56.6 million, the lowest in nearly 30 years.
• As of September 30, 2026, the company reported $120.6 million in contractual obligations, primarily related to construction and development.

Guidance and Future Outlook:

• The company expects capital expenditures to accelerate over the next 1-2 years to meet growing commercial leasing demand, moving beyond the historical $80-100 million range.
• A second phase at Latitude Margaritaville-Watersound is planned to add ~3,500 homes, bringing the total planned community size to ~7,200 homes.
• Groundbreaking for the new Pigeon Creek planned community (approx. 3,000 homes) is scheduled for early 2027.
• The emerging Watersound West Bay Center commercial town center is under construction with 69,134 sq ft currently in progress, including a new Publix.
• The ICW marina project remains pending a final federal permit; once received, development and construction are expected to proceed "full steam ahead."
• Management projects continued demand for the Watersound lifestyle, supported by the virtuous cycle of new residential growth and commercial amenities.

Business Segments and Product Lines:

• Hospitality: Record Q3 performance with guest origins expanding to all 50 states, with significant growth from New York, South Carolina, Illinois, and Michigan.
• Residential (Latitude Margaritaville-Watersound): Strong sales pace for the first nine months (up 24%); backlog increased from 149 to 222 homes due to sales growth and construction lags in the joint venture.
• Commercial Leasing: Demand is increasing, particularly from national tenants, driving planned expansion in the Watersound Town Center and West Bay Center.
• Land Sales: Sold approximately 50 million units of land to Latitude at an average realization of one unit per acre.
• Events: "Discover Watersound" weekend remains well-attended, generating new buyer and club member leads and strengthening agent relationships.

Market and Competitive Landscape:

• Market trends indicate robust travel demand from diverse geographic regions (all 50 states) and strong interest in the Watersound lifestyle community.
• The company leverages its "virtuous circle of value creation," where residential growth drives demand for commercial amenities, which in turn attracts more homebuyers.
• Competitive positioning is strengthened by natural coastal resilience features (elevated dunes, natural buffers) that differentiate assets in the Florida panhandle.
• Club initiation fee increases have been received positively, resulting in increased member interest and traffic despite incremental price hikes.

Risks and Challenges:

• Hurricane Impact: A recent hurricane caused minor damage, including downed trees on golf courses, boardwalk damage at Beach Club (under reconstruction), and minor roof damage at Pearl in Camp Creek; operations resumed within 24-48 hours.
• Regulatory Delays: The ICW marina project is paused solely on awaiting one final federal permit.
• Timing Variability: Residential sales and revenue fluctuate based on the timing of closings and the natural ebb and flow of home construction in joint ventures.
• Future Capital Requirements: Significant capital is required for future growth, including off-site utility corridors for new communities and commercial expansion.

Management Commentary and Tone:

• Management tone is confident and optimistic, describing Q3 as "solid" and highlighting that first-nine-months performance is ahead of 2025, the company's best full-year performance in 20 years (excluding 2014 timber sales).
• CEO George Gonzalez emphasized the company's commitment to transparency, encouraging shareholders to visit assets in person to assess progress.
• CFO Merrick McCoon and CAO Ray Goff provided detailed, data-driven answers regarding capital allocation, backlog, and specific project statuses.
• Management highlighted a "measured and multifaceted" capital allocation strategy, with over half (53%) of Q3 allocation returning value to shareholders via buybacks and dividends.

Analyst Questions and Answers:

• Hurricane Damage: Clarified that coastal dunes were not materially impacted; the primary repair is the Beach Club boardwalk, with no major reconstruction needed for dunes.
• ICW Marina Timeline: Confirmed mass grading is complete and permits are mostly secured; construction will accelerate immediately upon receipt of the final federal permit.
• Latitudes Backlog: Explained the backlog increase to 222 units is due to a combination of higher sales volume and the time lag between contract and completion in joint ventures.
• Residential Sales Decline: Attributed the Q3 dip to the timing of scheduled closings rather than a lack of demand.
• Capital Expenditures: Confirmed plans to increase capex to support commercial leasing growth and off-site utility corridor development.
• Club Fees: Noted that gradual fee increases have been well-received, driving new member acquisition.
• Coastal Resilience: Stated that the company's long-standing strategy of preserving natural buffers (dunes, vegetation) mitigates the need for artificial armoring or major renourishment projects.

Other Key Points:

• The company has successfully executed a strategy of debt reduction ($8.8M repaid in Q3) while simultaneously expanding growth capex.
• The "Discover Watersound" event is cited as a key driver for generating high-quality leads for both real estate sales and club memberships.
• The Watersound West Bay Center is positioned as a critical asset to support the 7,200-home future community scale of Latitude and Pigeon Creek.