The St. Joe Company

Good day and thank you for standing by. Welcome to the St. Joe Company's third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during the conference. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Mr. George Gonzalez, President, CEO, and Chairman. Please go ahead.

Thank you, and good morning. I'm George Gonzalez, President, CEO, and Chairman of the St. Joe Company. It is my pleasure to welcome you to our quarterly earnings release. I'm joined today by Merrick McCoon, our Chief Financial Officer. Yesterday afternoon, after the market closed, we issued our third quarter 2025 earnings release, which can be found in the investor relations portion of our website at joe.com, J-O-E.com. This morning, we continue 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 can assess the progress of the region and of our company. Before we begin, I would like to remind everyone that today'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 I am only going to mention a few key highlights before we move on to your questions. For the third quarter of 2025, we showed solid performance with 63% growth in revenue and 130% growth in net income when compared to the third quarter of 2024. Residential real estate revenue grew by 94% to $36.8 million from $19 million. The average home site base price increased to $150,000 from $86,000, and the gross margin increased to 53% from 39%. We also continue to grow reoccurring revenue with leasing revenue increasing by 7% to an all-time quarterly record of 16.7 million and hospitality revenue increasing by 9% to an all-time third quarter record of 60.6 million. Our leasing and residential pipelines are also growing. For the first nine months of 2025, we executed 40 new commercial leases and renewed 43 existing leases for a total of 83 compared to 26 new leases and 27 renewals for a total of 53 during the same period in 2024. At the end of the third quarter, we had 1,992 residential units under contract compared to 1,381 for the same period in 2024. We have over 24,000 entitled units in our residential pipeline in various stages of planning, engineering, permitting, or development. This pipeline includes a wide range of locations, products, and pricing, which gives us the flexibility to respond to the ebb and flow of market conditions. Included in commercial real estate revenue for the third quarter is the sale of Watercress Senior Living to one of the nation's largest senior living REITs. This sale is part of our core business and an example of how we create value by developing successful operating properties. The land encompassed approximately 7.7 acres and was originally appraised in 2019 at approximately 2.7 million. After development and leasing of the property beginning in 2020, Watercress was sold in the third quarter for 41 million, resulting in a gross profit of 19.4 million. Senior living is an asset type that is needed for the regional ecosystem, but it is not an asset type we plan to grow as part of our commercial leasing portfolio because these types of assets take longer to lease in multifamily and because they entail considerable operational intensity. The sale of watercress is an example of how our operating properties generate reoccurring revenue, but they are also piggy banks that can be monetized with the right set of circumstances. We anticipate continuing to create asset value by developing operating properties, which we may own for reoccurring revenue or choose to monetize and reinvest strategic capital allocation. We will also continue to evaluate non-strategic timberlands for opportunities to monetize and reinvest for strategic capital allocation. For the third quarter, we continue to execute a measured and multifaceted capital allocation strategy with $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. It is important to remember that the exact capital allocations will vary from quarter to quarter based on the circumstances of that quarter. For example, in the third quarter, project debt reduction includes $19.2 million for the loan payoff associated with the sale of Watercrest. With the $8.7 million in share repurchase for the third quarter, we are at $24.9 million in share repurchases through the first nine months of 2025, compared to zero share repurchases through the first nine months of 2024. which is a significant year-over-year acceleration. The outstanding share balance is now below $58 million for the first time in nearly 30 years. In the third quarter, we announced a 14% increase in the quarterly dividend to $0.16 per share, payable on December 12th to all shareholders of record as of the close of business on November 13th. Since we started this dividend program in 2020, we have increased dividend payments by 129%. Beyond the numbers, we are excited about the new daily nonstop flights between Northwest Florida Beaches International Airport, ECP, and LaGuardia Airport in New York City, which is the largest with a population of approximately 20 million people. The company is poised to leverage this new opportunity by expanding marketing efforts to promote the quality of the Watersound lifestyle to this large population base. With this new flight, ECP now has nonstop flights to seven of the ten largest metropolitan statistical areas in the country. Now, Eric and I are going to answer your questions. As a reminder, in the top right-hand corner of your screen, the words submitted question are visible. Clicking that text will take you to the text entry box where you can type your question and click Submit. Merrick?

Yes, good morning. We have already received a number of questions, so we'll go ahead and start with the first one. At the current buyback rate, the company is repurchasing around 1% of the company on an annual basis. We have $126 million of cash our recurring income continues to increase, our outstanding debt has declined by over $50 million, and the capital intensity of our business continues to decline. Management deserves all of the credit here, but why are we building our cash balance rather than increasing the pace of our buybacks?