The St. Joe Company

Good day and thank you for standing by. Welcome to the St. Joe Company Fourth Quarter 2025 Earnings Conference. 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 your speaker today, George Gonzalez, Chairman and CEO of the St. Joe Company. 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 call. I'm joined today by Merrick McCoon, our Chief Financial Officer. On Wednesday after the market closed, we issued our fourth quarter and full year 2025 earnings press release, which can be found in the investor section of our corporate website at joe.com. If you want 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 word submitted 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 for later in the call. 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. 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 the region and of our assets. 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 both the fourth quarter and full year before we move on to your questions. For the fourth quarter, we continued the year-over-year growth of the previous three quarters with a 24% increase in revenue and a 58% increase in net income. Capital allocation in the fourth quarter was $18.5 million in capital expenditures, primarily for growth, $15.1 million for stock repurchase, $9.2 million for dividends, and $8 million for debt reduction. The $15.1 million in stock repurchase was the highest of any quarter in 2025. For the full year, revenue increased by 27% to $513.2 million from $402.7 million and net income increased by 56% to $115.6 million from $74.2 million. Earnings per share increased to $2 from $1.27. Not including the one-time large timberland sale in 2014, we surpassed $500 million in revenue for the first time in 20 years and reached $2 per share for the first time in 23 years. However, we are now a different company than we were 20 years ago. Back then, the company's financial performance was achieved primarily as a bulk seller of assets with only 15% recurring revenue. Today, the company is a diversified real estate operating company with 56% recurring revenue. The company now has a more sustainable and diverse business model with a demonstrated ability to grow multiple revenue streams all while simultaneously increasing the value of the underlying land assets in what we call the virtuous circle of value creation, where an investment in one segment creates value for the other segments. In addition to the growth we had for the full year, we continue to refine our operations and improve profitability. Homesite gross margins increased to 51% from 47%, Leasing gross margins increased to 57% from 54%. Hospitality gross margins had a slight decrease to 31% from 32%, which was primarily due to opening expenses associated with the new golf course, the third, and the renovation of the Shark's Tooth Clubhouse. It is important to note that the hospitality gross margin of 32% in 2024 was a significant increase from 20% in 2023. For the full year, we continued a measured and multifaceted capital allocation strategy with 47% for capital expenditures, primarily for growth, 33% for dividend payments and stock repurchases, and 20% for project debt reduction. We accelerated stock repurchases with a repurchase of 798,602 shares as compared with a repurchase of 70,000 985 shares in 2024. The average price of shares repurchased in 2025 was $50.10, which considering the share price as of the close of the market yesterday, it was a good value for our shareholders. Since 2015, the company has used $653.6 million to repurchase 34.9 million shares of the company stock. representing 37.8% of the original shares, bringing the outstanding share balance below $58 million for the first time in nearly 30 years. Outside of the financial numbers, we continue to fill the pipeline for potential future growth. We have local and state government approval for 10 detail-specific area plans, or DSAPs, each with at least 1,000 acres of fully entitled mixed-use projects. We have only started to develop three of the 10 approved DSAPs, so we have a long runway for future growth. An encouraging sign is that we continue to receive inquiries from new potential homebuilders from outside of this market who want to join our homebuilder program. So we plan on breaking ground on two more DSAPs in 2026 to accommodate our growing home builder demand. At the end of the year, our residential home site pipeline had approximately 23,900 home sites in various stages of planning, engineering, permitting, or development, which is an increase of 2,200 home sites as compared to the end of 2024. At the end of the year, our commercial segment had 94,500 square feet under construction, the watersound town center and west bay center of which approximately 76 percent is pre-leased we continue to receive inquiries from national and regional tenants who are noticing the growth of this market and are interested in leasing space from us in order to continue to meet this growing demand in 2026 we plan on breaking ground on new commercial buildings in the watersound town center and west bay center totaling approximately 54,000 square feet. We are also planning on breaking ground in a new apartment complex and executing several new commercial ground leases. In our hospitality segment, we continue to increase our club membership program and we continue to be focused on increasing occupancy and margins in our hotels while continuing to assess and plan for opportunities for new hotels, marinas, and club amenities. Now, 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 question and click submit. We're going to do this in the same way that we've done the last several calls. Merrick is going to read the questions, and then we're going to answer them. Merrick?

Thank you, George. We have a few questions. The first one, are there any new multifamily units on the horizon for 2026 or 2027? Any new hotel operations or acquisitions planned?