The St. Joe Company (NYSE: JOE) — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report. St. Joe is a real estate development, asset management and operating company focused on Northwest Florida, with residential, hospitality and commercial segments. It owned approximately 168,000 acres at year-end.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $389.3 million | $252.3 million |
| Operating income | $90.7 million | $61.5 million |
| Net income | $74.1 million | $70.2 million |
| Net income attributable to St. Joe | $77.7 million; $1.33 per diluted share | $70.9 million; $1.21 per diluted share |
| Net cash from operating activities | $103.8 million | $48.2 million |
| Capital expenditures | $217.8 million | $356.7 million |
| Cash and cash equivalents at year-end | $86.1 million | $37.7 million |
| Loans outstanding, principal | $459.2 million | $391.4 million |
- Operating margin was approximately 23.3%, compared with 24.4% in 2022. Interest expense rose to $30.6 million from $18.4 million. The weighted-average effective rate on outstanding debt was 5.3%; 66.2% of debt had fixed or swapped rates. Variable-rate loans, excluding the swapped portion, averaged 7.6%.
- Segment gross margins declined year over year: residential 50.0% (52.5% in 2022), hospitality 19.8% (20.5% on the segment table) and commercial leasing 52.5% (57.4%). Hospitality margins were pressured by new-property opening costs; leasing margins by higher operating costs and lease-up expenses.
- Operating, investing and financing cash flows were $103.8 million, $(99.1) million and $40.8 million, respectively. Year-end cash, cash equivalents and restricted cash totaled $90.8 million, including $4.7 million of restricted cash.
- Balance-sheet debt, net was $453.6 million, with a further $178.2 million of Senior Notes held by a consolidated special-purpose entity. Those notes are associated with investments held by that entity; review the related financing structure and cash flows when assessing leverage.
Changes versus FY2022
- Revenue grew 54.3%, led by real estate revenue rising to $186.0 million from $115.9 million, hospitality revenue to $152.4 million from $97.2 million, and leasing revenue to $50.8 million from $39.2 million.
- Residential sales increased to 1,063 homesites from 752; average base revenue per homesite was approximately $107,000 versus $98,000. Residential gross margin nevertheless eased, reflecting community mix and development costs.
- Hospitality revenue benefited from added hotel rooms, new openings and growth in Watersound Club membership, which reached 3,317 from 2,604. Operating results were affected by opening costs and higher depreciation and interest.
- Equity income from unconsolidated joint ventures was $22.7 million versus $26.0 million. FY2022 included a $21.7 million share of the Sea Sound JV asset-sale gain; FY2023 instead included $23.6 million from the Latitude Margaritaville Watersound JV.
- FY2022 also included $9.8 million of insurance-recovery gain. These prior-year items help explain why attributable net income grew 9.6%, less than operating income.
- Operating cash flow improved, while capital expenditures declined from the prior-year level, which included substantial hospitality and commercial investment. The company did not repurchase shares in 2023; it paid $0.44 per share in dividends, versus $0.40 in 2022.
Outlook, commentary and risks
- Management said demand across segments remained strong despite inflation, elevated interest rates, insurance costs, supply-chain disruption and labor constraints. It cited regional population growth, limited housing supply and cash buyers as offsets. It did not provide quantified earnings or revenue guidance.
- Management believes cash, financing arrangements and operating cash generation will be sufficient for anticipated working capital, capital spending, debt service, JV contributions, share repurchases and dividends over the next 12 months. Planned future capital commitments are to be funded through operations, financing, cash on hand and other sources.
- Projects include the Watersound Town Center, Watersound West Bay Center and FSU/TMH medical campus; the company also continued construction of hospitality and residential assets. As of year-end, it reported $48.6 million of construction- and development-related contractual obligations.
- Near-term debt maturities include $36.3 million in 2024 and $66.0 million in 2025. The North Bay Landing loan, with $26.8 million outstanding, matures in September 2024, subject to an extension option; the company reported pursuing refinancing. Other notable maturities include the $41.5 million Pier Park North JV loan in November 2025 and the $13.0 million Airport Hotel loan in March 2025.
- The Latitude Margaritaville Watersound JV generated over 20% of pretax income through St. Joe’s equity-method accounting. The JV had 609 homes under contract, with expected sales value of approximately $318.5 million at closing; these JV revenues are not consolidated as St. Joe revenue.
- Key risks include concentration of land and operations in Northwest Florida; hurricanes, climate and insurance exposure; discretionary consumer demand and mortgage rates; entitlement, environmental and infrastructure approvals; construction cost and labor pressures; seasonal hospitality operations; and partner, debt-guarantee and refinancing risks. The company reported $40.0 million of surety bonds and other financial guarantees, $0.2 million of standby letters of credit, and a $122.4 million maximum exposure to loss from unconsolidated JVs.
- Litigation and environmental matters arise in the ordinary course. Accrued aggregate liabilities were $0.4 million at year-end; management said pending matters were not expected to materially affect consolidated financial position or liquidity, while noting an adverse outcome could affect results or cash flows in a period. No long-lived-asset or JV impairment charges were recorded in 2023.
- The board declared a $0.12-per-share dividend in February 2024, payable March 27, 2024. Future dividends and repurchases remain at board discretion. The company reported effective disclosure controls and internal control over financial reporting, and the auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Reconcile reported earnings with JV contributions and prior-year unusual gains, especially the Latitude Margaritaville JV earnings and FY2022 Sea Sound and insurance-recovery gains.
- Review debt maturities, refinancing progress, variable-rate exposure, guarantees and the distinction between company debt and consolidated special-purpose-entity Senior Notes.
- Assess whether new hospitality assets can improve margins after opening costs, depreciation and financing expenses, and monitor occupancy and lease-up performance.
- Track residential homesite closings, contract pipeline and the timing and collectability of estimated homesite residuals and fees; the under-contract homesite count fell to 1,486 from 2,197.
- Evaluate the sustainability of operating cash flow against planned development spending, JV funding needs, obligations and dividend payments, and the sensitivity of asset values to Northwest Florida market conditions.