The St. Joe Company (NYSE: JOE) — Q1 2022 10-Q
Business context and period. Unaudited results for the three months ended March 31, 2022, compared with Q1 2021. St. Joe develops, manages and operates real estate in Northwest Florida, principally across residential, hospitality and commercial businesses. About 90% of its land holdings are within 15 miles of the Gulf of Mexico.
Key financial results
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Total revenue | $64.9 million | $41.3 million |
| Operating income | $20.2 million | $5.5 million |
| Net income attributable to St. Joe | $13.4 million; $0.23 per diluted share | $3.2 million; $0.05 per diluted share |
| Net cash provided by operating activities | $19.8 million | $9.8 million |
| Cash and cash equivalents | $33.1 million | $70.2 million at Dec. 31, 2021 |
| U.S. Treasury bills | $118.2 million | $89.0 million at Dec. 31, 2021 |
| Debt, net, on balance sheet | $256.8 million | $223.0 million at Dec. 31, 2021 |
| Total assets / total equity | $1,256.3 million / $637.0 million | $1,208.2 million / $626.1 million at Dec. 31, 2021 |
The company reported $151.3 million of cash and Treasury bills at quarter-end and said liquidity, financing and operating cash flows should cover anticipated needs for the next 12 months. It also reported $177.6 million of Senior Notes held by a consolidated special purpose entity, separately from the debt line above.
Investing cash outflow was $81.3 million and financing cash inflow was $28.9 million. Capital expenditures were $79.0 million, compared with $25.1 million in Q1 2021. Cash, cash equivalents and restricted cash decreased $32.6 million to $41.8 million.
Changes versus Q1 2021
- Revenue rose 57.1%. Real estate revenue increased to $36.8 million from $21.1 million, hospitality revenue to $16.3 million from $13.1 million, leasing revenue to $8.8 million from $5.6 million, and timber revenue to $3.0 million from $1.6 million.
- Residential real estate gross margin improved to 58.4% from 50.0%, helped by sales mix and higher average revenue per homesite. St. Joe sold 181 homesites versus 203; average revenue per homesite, excluding residuals, was approximately $150,000 versus $73,000.
- Hospitality revenue increased, but hospitality gross margin declined to 8.6% from 12.2%. Pre-opening and staffing costs, higher labor and product costs, and WaterColor Inn construction weighed on results.
- Leasing revenue grew with new apartment and senior-living leases; leasing gross margin improved to 58.0% from 51.8%. Timber sales volume rose to 107,000 tons from 76,000 tons.
- Net income attributable to the company increased to $13.4 million from $3.2 million. Corporate and other operating expenses fell $1.5 million, partly because Q1 2021 included a $1.2 million pension-plan surplus allocation expense.
Outlook, risks and unusual items
- Management said demand remained strong across segments, citing Northwest Florida’s growth and appeal. It provided no specific full-year financial guidance and cautioned that quarterly results are not necessarily indicative of full-year results.
- Management highlighted uncertainty from COVID-19, inflation, supply-chain disruptions, rising interest rates and geopolitical conflicts. Hospitality is seasonal; the company also cited dependence on homebuilders, regional migration and tourism, and exposure to severe weather and insurance recovery.
- Residential pipeline at quarter-end included 2,294 homesites under contract, expected to generate approximately $175.6 million at closing over several years. The unconsolidated Latitude Margaritaville Watersound JV had 527 homes under contract. These are expected values, not recognized revenue or guaranteed proceeds.
- Construction and development contractual obligations totaled $220.1 million. Surety bonds and other financial guarantees were $37.3 million; standby letters of credit were $16.8 million. The company reported compliance with financial debt covenants.
- Variable-rate project debt is exposed to rate changes: a hypothetical 100-basis-point increase was estimated to raise annual interest expense by $1.4 million. The company also discussed the transition away from LIBOR.
- Unusual Q1 items included $1.1 million of abandoned design costs and a $0.6 million homeowners’ association special assessment, within miscellaneous expense. A $0.7 million Hurricane Michael insurance recovery partly offset ongoing hurricane-related impacts; marina operations had not resumed.
- Reported litigation and environmental matters included $0.4 million of accrued liabilities. Management did not expect pending matters to materially affect financial position or liquidity, but noted adverse outcomes could affect results or cash flows in a period.
- The company paid a $0.10-per-share dividend in Q1, up from $0.08 a year earlier; the board declared another $0.10-per-share dividend for payment in June 2022.
Investor facts to verify
- Whether homesite contract activity converts to closings and cash on the expected timetable, and how much reported real estate revenue depends on sales mix and estimates such as homesite residuals.
- Project budgets, opening dates, occupancy and lease-up progress for hotels, apartments and other developments, alongside the $220.1 million of contractual commitments.
- Debt maturities and refinancing plans, variable-rate exposure, and the scope and conditions of company guarantees for joint ventures and projects.
- Cash available for general use versus restricted cash, investments held in special purpose entities, and the funding demands of continuing capital expenditures.
- Potential effects of concentrated ownership: FCM clients, including Chairman Bruce Berkowitz, beneficially owned approximately 41.8% of common stock as of March 31, 2022.