The St. Joe Company (NYSE: JOE) — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are primarily with FY2020. This is an annual filing, not a standalone fourth-quarter report.
Business context
St. Joe is a real estate development, asset management and operating company focused on Northwest Florida. It reported residential, hospitality and commercial segments and owned approximately 170,000 acres. Management’s strategy is to develop residential, hospitality and commercial properties, grow recurring revenue, and maintain liquidity. The company stated that most 2021 revenue came from activity on about 2% of its land.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $267.0 million | $160.6 million |
| Operating income | $94.5 million | $47.1 million |
| Net income | $73.7 million consolidated; $74.6 million attributable to St. Joe | $45.5 million consolidated; $45.2 million attributable to St. Joe |
| Diluted EPS | $1.27 | $0.77 |
| Net cash from operating activities | $111.8 million | $37.3 million |
| Cash, cash equivalents and restricted cash at year-end | $74.4 million | $110.1 million |
| Cash and cash equivalents plus U.S. Treasury Bill investments | $159.1 million | $154.8 million |
| Debt, net, on balance sheet | $223.0 million | $158.9 million |
| Capital expenditures | $200.8 million | $162.2 million |
Revenue increased 66.3% and operating income approximately doubled. Residential real estate was the largest revenue source, at $158.6 million overall, with residential homesite sales driving much of the increase. Residential real estate gross margin was 61.7%, versus 59.1%; hospitality gross margin was 22.6%, versus 26.4%; and leasing gross margin was 57.2%, versus 68.6%. Hospitality and leasing margins faced start-up, pre-opening and lease-up costs, higher labor and product costs, and prior-year insurance proceeds.
Operating cash flow rose substantially, principally with higher net income and changes in real estate costs sold and JV contribution gains. Investing activities used $196.1 million, including significant capital spending and purchases of Treasury Bills; financing activities provided $48.6 million, including $69.3 million of borrowings. The company paid $0.32 per share in dividends during 2021. Cash and cash equivalents alone were $70.2 million at year-end; the broader $159.1 million liquidity figure includes Treasury Bill investments.
Loans outstanding totaled $227.5 million of principal at year-end, compared with $161.4 million a year earlier; the reported weighted-average rate on variable-rate loans was 2.6%. The balance sheet separately reports $177.6 million of Senior Notes held by a special-purpose entity, supported by related assets held in that structure. Debt agreements contain covenants and certain JV-related guarantees; the company reported covenant compliance at year-end.
Material changes versus FY2020
- Residential real estate revenue rose to $158.6 million from $87.6 million, reflecting 804 homesites sold versus 509 and a higher average revenue per homesite.
- Hospitality revenue rose to $75.3 million from $47.8 million, reflecting stronger lodging and amenity demand and the comparison with COVID-related shutdowns in 2020.
- Leasing revenue increased to $27.1 million from $18.8 million, as new multifamily and senior-living properties began leasing.
- Net income attributable to St. Joe increased to $74.6 million from $45.2 million. FY2020 included $20.0 million in gains on contributions to unconsolidated JVs, compared with $3.6 million in FY2021; FY2021 also included $4.9 million of insurance recovery and $3.6 million of timber-recovery grant income.
- Dividends increased to $0.32 per share from $0.07. There were no share repurchases in 2021; $8.8 million of repurchases occurred in 2020.
Outlook, commentary and risks
- Management said demand across the segments remained strong, citing Northwest Florida growth, regional amenities and increased workplace flexibility. It gave no quantified revenue or earnings guidance and warned that COVID-19, inflation, labor constraints and supply-chain disruptions could cause future declines or delays.
- Management expects 2022 capital expenditures to exceed 2021’s $200.8 million. It reported $217.0 million of construction and development contractual obligations and said cash, financing and operating cash flows should cover anticipated needs for the next 12 months.
- The company anticipated harvesting approximately 260,000 tons of timber in 2022. It reported 2,000 residential homesites under contract, expected to generate about $158.9 million at closing over several years; these closings and proceeds are subject to change.
- Hurricane Michael continued to affect marina operations: the marinas remained under reconstruction, with a portion expected to reopen in spring 2022. Insurance recovery timing and amounts remained uncertain.
- Key risks include concentration of land and operations in Northwest Florida; hurricanes, climate and insurance costs; discretionary development approvals and infrastructure capacity; construction-cost inflation and labor or material shortages; housing and interest-rate cycles; hospitality seasonality; and reliance on homebuilders and JV partners.
- Several loans use LIBOR-based rates; LIBOR was expected to be discontinued after June 2023. The company noted that debt agreements provide alternative rates but the financial effect was uncertain. It estimated that a 100-basis-point increase in applicable rates would raise annual interest expense by about $0.7 million.
- JV guarantees and other commitments warrant attention: maximum exposure to unconsolidated JVs was reported as $69.0 million, including investments, guarantees, a note receivable and derivatives. Surety bonds and other financial guarantees totaled $36.9 million, with standby letters of credit of $12.9 million.
- Subsequent to year-end, the Board declared a $0.10-per-share dividend, payable in March 2022, and authorized additional repurchase capacity, bringing total authority to $100.0 million. These are post-year-end actions, not FY2021 results.
- Fairholme-related clients beneficially owned approximately 42.6% of the common stock as of year-end, giving the large shareholder significant influence over shareholder matters.
Most important facts for investors to verify
- How much reported earnings and cash generation depended on homesite closings, JV contribution gains, insurance recoveries and the timber-recovery grant, rather than recurring leasing and operating income.
- The timing, funding and expected returns of the elevated 2022 capital program, including the $217.0 million of contractual development obligations.
- Actual progress on opening the reconstructed marinas and completing the expanding hotel, multifamily and senior-living pipeline, including lease-up and operating costs.
- Debt maturities, refinancing plans, variable-rate exposure, and the scope and potential cash impact of guarantees for JVs and development projects.
- Whether contracted homesites and JV home contracts close as expected and convert to cash on the stated timetable.
- The company reported unqualified audit opinions on its financial statements and internal controls, and no critical audit matters.