The St. Joe Company (NYSE: JOE) — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter earnings report. St. Joe is a Northwest Florida real estate development, asset management and operating company, with residential, hospitality and commercial segments and approximately 169,000 acres of land.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $252.3 million | $267.0 million | Down 5.5% |
| Operating income | $61.5 million | $94.5 million | Down 35.0% |
| Operating margin | 24.4% | 35.4% | Down 11.0 percentage points |
| Net income attributable to St. Joe | $70.9 million | $74.6 million | Down 4.9% |
| Diluted earnings per share | $1.21 | $1.27 | Down 4.7% |
| Operating cash flow | $48.2 million | $111.8 million | Down 56.9% |
Revenue mix shifted as real estate revenue fell to $109.2 million from $158.6 million, while hospitality revenue rose to $97.3 million from $75.3 million and leasing revenue grew to $39.2 million from $27.1 million. Residential real estate gross margin declined to 52.5% from 60.7%; hospitality gross margin was 20.3% versus 22.6%; and leasing gross margin was 55.1% versus 57.2%.
- Residential: Homesite sales revenue declined 38.6% to $92.8 million. The company sold 752 homesites versus 804 in 2021; average revenue per homesite, excluding residuals, fell to approximately $98,000 from $157,000, primarily reflecting community and product mix.
- Hospitality: Revenue rose 29.1%, driven by club membership growth and new or expanded hotel, restaurant, retail and marina operations. Watersound Club had 2,604 members at year-end, up from 2,255. Higher pre-opening costs, labor and product costs weighed on margins.
- Commercial: Segment revenue increased to $59.4 million from $45.5 million. Leasing revenue and occupied space expanded; approximately 987,000 of 1,034,000 rentable square feet were under lease at year-end.
Net income included significant non-recurring or event-related contributions: $21.7 million of St. Joe’s share of the Sea Sound joint venture’s asset-sale gain and $9.8 million of insurance recovery income, principally related to Hurricane Michael. These items helped offset lower operating income. The company closed the Hurricane Michael insurance claim in November 2022 and expects no further proceeds.
Cash, debt and liquidity
- At December 31, 2022, cash and cash equivalents were $37.7 million and Treasury-bill investments were $40.6 million, or $78.3 million combined. Cash, cash equivalents and restricted cash reported in the cash-flow statement totaled $45.3 million; restricted cash is not generally available for operations.
- Operating cash flow was $48.2 million, while investing activities used $189.8 million and financing activities provided $112.5 million. The company reported $356.7 million of segment capital expenditures for the year and $118.1 million of construction and development contractual obligations at year-end.
- Loans outstanding totaled $391.4 million before $5.6 million of unamortized discounts and issuance costs; reported debt, net was $385.9 million. Separately, $177.9 million of Senior Notes issued by a consolidated special-purpose entity were reported as a liability, alongside related investments held by special-purpose entities. Consider this structure when assessing leverage.
- Loan balances increased substantially year over year. Weighted-average effective interest on outstanding debt was 5.1%; 60.4% was fixed-rate or swapped, and remaining average debt life was 13.8 years. Management estimated that a 100-basis-point increase in applicable variable rates would add $2.0 million to annual interest expense.
- Management said cash, financing arrangements and operating cash generation should be sufficient for anticipated working capital, capital spending, debt service, JV contributions, repurchases and dividends over the next 12 months. This is management’s assessment, not a guarantee.
Outlook, commentary and key risks
Management reported strong demand across segments despite inflation, higher interest rates, supply-chain disruption and other macroeconomic pressures. It said residential delivery delays primarily affected the timing of revenue recognition and had not generally caused a material increase in cancellations; worsening conditions could increase cancellations. The company expects to continue investing in development and operating assets to build recurring revenue, but does not anticipate immediate returns from investments. No specific earnings or revenue guidance is provided in the filing.
The company paid dividends of $0.40 per share in 2022, compared with $0.32 in 2021, and said it currently expects to continue quarterly dividends; future declarations remain at the Board’s discretion. It repurchased 576,963 shares for $20.0 million during 2022 and had $80.0 million of repurchase authorization remaining at year-end.
- Highly concentrated exposure to Northwest Florida real estate, tourism and regional growth; demand and asset values may be affected by interest rates, economic conditions and insurance costs.
- Development and construction risks include permitting and entitlement delays, infrastructure constraints, labor shortages, cost inflation, supply-chain issues and weather events, particularly hurricanes.
- Joint ventures involve shared control, partner and financing risks. St. Joe disclosed $87.8 million of maximum exposure to loss from unconsolidated JVs, including investments, guarantees, notes, receivables and contribution requirements.
- The company reported $38.1 million of surety bonds and other financial guarantees and $17.3 million of standby letters of credit that could create liabilities if obligations are not met. Certain JV debt guarantees may expose the company to additional obligations.
- Debt maturities include approximately $70.0 million in 2024 and $65.9 million in 2025. Certain loans have variable rates, balloon payments, refinancing needs or prepayment penalties.
- Environmental, land-use, litigation and regulatory matters remain risks. Accrued liabilities for litigation and other matters were $0.4 million; management could not quantify potential future environmental rehabilitation costs beyond existing accruals.
Most important facts for investors to verify
- How much 2022 earnings and cash generation depended on the $21.7 million Sea Sound JV gain and the $9.8 million insurance recovery, and how results look excluding these items.
- Whether contracted residential sales convert to closings: 2,197 homesites were under contract, with expected revenue of approximately $176.3 million; the unconsolidated Latitude Margaritaville Watersound JV had 677 homes under contract.
- Funding, completion schedules, lease-up and returns for the company’s large development program, including its $118.1 million of construction and development obligations.
- Debt refinancing and interest-rate exposure, especially 2024–2025 maturities, variable-rate loans and guarantees on JV borrowings.
- Liquidity after capital expenditures, JV commitments, dividends and repurchases; confirm the distinction between unrestricted cash, restricted cash and special-purpose-entity investments.
- Management’s valuation assumptions for real estate and impairment exposure. The filing reported no impairment charges in 2022, while identifying substantial real estate and other assets subject to impairment risk.
The auditor issued an unqualified opinion on the financial statements and reported effective internal control over financial reporting. The auditor reported no critical audit matters.