The St. Joe Company — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. St. Joe is a real estate development, asset management and operating company focused primarily on Northwest Florida, with residential, hospitality and commercial segments. Approximately 90% of its land holdings are within 15 miles of the Gulf of Mexico.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Total revenue | $41.3 million | $18.6 million |
| Operating income (loss) | $5.5 million | $(1.3) million |
| Net income (loss) attributable to St. Joe | $3.2 million; $0.05 per share | $(1.5) million; $(0.03) per share |
| Net cash from operating activities | $9.8 million | $3.1 million |
| Cash, cash equivalents and restricted cash at quarter-end | $55.9 million | $110.2 million at March 31, 2020 |
| Debt, net, on balance sheet | $169.7 million | $158.9 million at December 31, 2020 |
| Total assets / total equity | $1.053 billion / $568.1 million | $1.037 billion / $568.2 million at December 31, 2020 |
Revenue growth was led by real estate sales ($21.1 million versus $5.8 million) and hospitality ($13.1 million versus $6.6 million). Leasing revenue rose to $5.6 million from $4.3 million; timber revenue declined to $1.6 million from $1.9 million. The filing reports segment gross margins of 50.0% for real estate, 12.2% for hospitality, 51.8% for leasing and 93.8% for timber. Leasing margin was lower year over year, while hospitality moved from a gross deficit to a profit.
Investing activities used $68.6 million, mainly reflecting $85.0 million of purchases of debt securities and property investment. Financing activities provided $4.5 million, including $11.3 million of borrowings, partly offset by $4.7 million of dividends. Cash declined from $110.1 million at the start of the quarter to $55.9 million, in part as short-term Treasury bills were reclassified from cash equivalents to investments. At March 31, the company also held $94.0 million of Treasury-bill debt securities and $1.6 million of preferred stock investments. Management said cash, financing arrangements and operating cash flows were expected to meet anticipated needs for the next 12 months.
Material changes and operating trends
- Residential revenue increased substantially: the company sold 203 homesites and two homes, versus 19 homesites and no homes in Q1 2020. Residential gross margin declined to 50.2% from 62.1%, reflecting sales mix and development costs.
- Hospitality revenue nearly doubled, with management citing increased lodging and resort demand, regional popularity and the impact of COVID-related closures in the prior-year period. Watersound Club membership rose to 1,722 from 1,284 a year earlier.
- Commercial revenue declined to $7.2 million from $8.9 million, primarily because Q1 2020 included commercial land sales and a $3.9 million gain on contribution of land to a joint venture. Q1 2021 commercial real estate sales were less than $0.1 million.
- Debt, net, increased $10.8 million from year-end. The company reported $172.3 million of debt principal; scheduled maturities include $50.3 million in 2024 and $50.7 million in 2025. It was in compliance with financial debt covenants.
Outlook, risks and unusual items
- No specific earnings or revenue guidance was provided. Management plans to develop residential, hospitality and commercial projects to increase recurring revenue and long-term value, while noting that projects may be delayed and investments may not produce immediate benefits.
- The company reported $167.4 million of construction and development contractual obligations at quarter-end; management said a significant portion would be funded through committed or new financing arrangements. Q1 capital expenditures were reported as $37.2 million in the liquidity discussion.
- COVID-19 may continue to disrupt hospitality and other operations; management warned that results could decline in one or more periods compared with historical norms. Hospitality is seasonal, and residential and commercial sales can vary materially by quarter.
- Hurricane Michael continues to affect Bay Point and Port St. Joe marinas, which remained closed during reconstruction; a portion was expected to reopen by year-end 2021. Insurance recoveries remain uncertain. Q1 included a $0.9 million insurance-recovery gain, and the company does not expect marina revenue until rebuilding is complete.
- Debt guarantees, including guarantees for joint-venture and construction loans, surety bonds of $24.2 million, and standby letters of credit of $4.6 million create contingent exposures. Litigation and environmental matters are also disclosed; accrued liabilities for relevant claims were $0.7 million, while potential environmental costs beyond accruals could not be reasonably estimated.
- Interest-rate exposure includes variable-rate borrowing tied to LIBOR. The company estimated a 100-basis-point increase could raise annual interest expense by $0.5 million. It noted LIBOR’s planned discontinuation and uncertainty over replacement rates.
- The company paid a $0.08-per-share dividend during the quarter and declared another $0.08-per-share dividend for payment in June 2021. It made no share repurchases in Q1; $77.4 million remained authorized under its repurchase program.
Key facts for investors to verify
- Whether the strong increase in residential closings and hospitality demand continues beyond the quarter, and how sales mix affects margins.
- Progress, remaining costs and financing for the $167.4 million development commitment and hotel, apartment and marina projects.
- Actual occupancy, lease-up and profitability of recently opened apartments and the senior living community.
- Insurance recoveries and reopening timing for hurricane-damaged marinas, alongside any continuing costs.
- Debt maturities, guarantees and contingent liabilities, including how LIBOR transition terms affect borrowing costs.
- Whether available cash, Treasury securities and operating cash flow remain sufficient to fund planned investment, dividends and debt service.