St. Joe Company (The)

Good day and thank you for standing by. Welcome to the St. Joe Company's second quarter 2026 earnings 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 this call is being recorded. I'd now like to hand the conference over to your speaker today, Jorge Gonzalez, President, CEO, and Chairman of the St. Joe Company. 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 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. 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 percent and net income increasing by 37 percent compared to the second quarter of 2025. The total revenue of $158.9 million was the highest in the 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 is 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 Watercress Senior Living Community 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 Lair Detail Specific Area Plans, or DSAPs, and the other that will serve the Pigeon Creek and West Bay Creek DSAPs. These types of offsite utility extensions are capital-intensive but necessary seeding to harvest many thousands of future residential homesites in these DSAPs. It is important to remember that because of the one to two-year seeding and harvesting cycles and the mixture of homesite 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 The company had repurchased $41 billion 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 is uniquely positioned like few other companies. Now Marek 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.

Thank you, Jorge. First question. Estimated residuals grew this quarter. Origins looks to have added to residuals. Did home sites in Bay County add to the estimated residual balance this quarter?

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

And 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 piggy banks open along with the operating improvements funding this capital allocation.

Thank you for the comment. We appreciate it. That is part of our measure, the multifaceted capital allocation strategy, which we are planning to continue.

How is the new hospital on Highway 79 progressing?

The new hospital, which again is an academic health center model with teaching, research, and clinical delivery, or a teaching hospital, is progressing well. Construction is ongoing. There are many other components of operations that are in the works. The anticipated completion of that hospital is still in 2028.

While record quarterly income is notable, I believe the across the board increase in margins and the 50% growth in net income on a trailing 12-month basis on lower amount of invested capital is far more indicative of the suburb job done by management when it comes to maximizing long-term value of this great company and assets. In regards to capital allocation, When the company looks at buybacks as a capital allocation tool, are you doing via a long-term model, i.e., are you thinking about reduce the share count by a certain percentage over a 5 or 10-year period, and how will be able to impact future earnings on a per share basis?

Thank you for the question. That's a great question. Our capital allocation strategy and specifically our share buyback strategy is based on a longer term model.

As the region continues to grow, are you attracting new interest from investment institutions in St. Joe, the company, who have not visited the region before?

Obviously, we can't answer the question of individuals or institutions that haven't called us, but we on a regular basis do host entities that have not been here before that are looking at the company and the region.

Given another great quarter, what is management doing to attract more sell-side coverage? This is an amazing story to tell.

It's not something that is a primary focus of ours, but obviously if there's an interest in that, we would speak to whoever has an interest in providing that service.

In the release you said that capital allocation decisions may vary quarter to quarter based on the dynamic nature of our cash flows and for stock repurchases based on market conditions and the timing of open and closed periods, Thank you for joining us. I would think, given the above, we should be capable of repurchasing 100 million or more of our shares annually.

Another great question. That information we provided in our earnings release was not intended to mean that our share buybacks are exclusively based on the short-term cash flows. That was not the intent of that statement. It was an attempt at describing our capital allocation strategy in broad terms. In cash flows is a factor in our broad capital allocation strategy, but it was not meant to be specific to share buybacks. Like I answered in a previous question, our capital allocation strategy as a whole and our share buyback strategy specifically is based on a long-term model.

Can you confirm that the 4.87 acre commercial parcel on a corner of 30A and Watersound Parkway is under contract?

We cannot disclose factual matters in an earnings call, but we appreciate the question.

We read daily about various costs being driven higher by AI-related data center build-out demand. Are you seeing larger than previous increases in either trade personnel costs or other expenses?

Not anything significant or acute.

Is there a chance The recently increased lead time for power development and grid connection will constrain Joe's ability to execute on the growth plan.

If the question is specific to power generation and distribution, we don't anticipate that being a constraint at this moment in time.

While items like utility pipe improvement and new community launches are capital intensive, Do we not have significant capital already within a lot development business which can then be recycled into these community investments as prior lots are sold? Meaning it is not as if we need to add significant additional capital into the business to fund these items.

That's a great question, and it's really a description of our broader capital allocation strategy in our cash flows. That's a factor. What's mentioned in the question or the statement, it is a factor in how we execute that strategy.

Where is the new Park Place development going to be located?

We're not too clever in naming projects, so Park Place East is east of Park Place.

Could you talk about cadence of capital spend for utility expansions? Is it more lump sum or more steady periodic investment over time?

It's probably somewhere in between. Offsite utility extensions are capital intensive, but at the same time, they are things that we plan well ahead of time, and we incorporate into our overall business plan budget and capital allocation strategy.

How has demand for homes evolved in Northwest Florida over the last few years?

We continue to see an increase in demand, and it's really led by a continuation of in-migration into our region. Not only in-migration in terms of the actual numbers of people that are moving to our region, But we continue to also see a broader range of geography where those individuals are moving from, which is very encouraging. We're not seeing migration from a static historical set of states and locations. It's dynamic, and we continue to see more people move into our region from a broader range of locations.

Okay, we have one more question. Given the negative impact fair home selling has had on the stock the last several years, have you guys given thought to a solution as far as it relates to the things in your control? As a shareholder, it becomes increasingly frustrating seeing any market enthusiasm down in a wave of Form 4. Even as it relates to attracting new investors, this dynamic is viewed very negatively. which is a shame given the outstanding assets, people, and executions that are occurring at St. Joe.

We appreciate the question, but we don't comment on individual shareholders.

Waterfront property across the country appears to be at record demand and at record pricing. Are these assets around the bay or the intracoastal water frontage that the company has The company can unlock over the next several years for residential and commercial development.

Yes, the short answer to the question is absolutely yes in all the locations mentioned in the question. It's part of our planning process and part of the, I guess the best way to describe it is we don't look at those locations in isolation. We look at those locations to see how we can drive value away from the water also. So it's not just let's look at a property that's on the intercoastal or the bay and maximize the value, but how can us moving forward with a concept in those locations add value to all of our land holdings adjacent to it?

Could you talk a bit about the growth of aviation-related companies and the recent release on the Space Florida program in Bay County?

Aviation and aerospace has always been a focus of the regional and local economic development authorities for a number of reasons. That has been one of the target industries to attract, and we do continue to see interest from the industry in our region. There's also a concept that's in the process of being executed, led by Florida State University in an aerospace research and development center. That is in the planning stage in Bay County that we believe may be a catalyst for the aerospace aviation industry.

It appears Build-A-Lot inventory at Origins is dwindling, especially the bunch delivered in mid 2023. Does this not provide a huge window for growth in deliveries at Origins Walton County over the next few years? More specifically, It is intentional that you're giving builders bigger communities such as the Huff Archon versus the previous piecemeal strategy. If so, would this open opportunities for builders like Toll, Fisher, or even Coulter who's finishing up Nature Walk to take their own communities in the future?

I guess the short answer to that question is we are considering Every and all those options. We don't feel that our pipeline is dwindling. Again, it's a matter of when you look at the pipeline quarter to quarter because of that seeding and harvesting cycle that we have a very long runway, very long pipeline of potential residential home sites, both west of origins and east of origins.

There are no additional questions at this time.

Great questions as always. Let's give it a couple more minutes in case there's any other questions.

There's one more that just came in.

How do you guys view your land holdings around Southport? It seems to be a unique area where there's huge and growing opportunity. Even the price points far inland around Lake Muriel indicate these good values there.

So we look at our geography very broadly. Again, going back to what I mentioned at the beginning of the call, that we want to continue to have a residential segment that has diversity in price point and product type. In the Southport area, we do own property in that area. For example, the Tee Chee DSAP, which we have talked about a number of times where we're planning on breaking ground on the first phase early next year, is an example of us, again, continuing to look at broader geographies continue to maintain diversity in our residential segment.

Thank you for taking my questions. Great job as always. That's an easy answer. Thank you.

Okay. Well, we don't see any more questions.

So again, thank you for joining us today. We greatly appreciate you joining us and asking great questions. And we look forward to speaking with you again next quarter. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.