Stratus(STRS) - 2025 Q2 - Quarterly Results

Company Overview and Highlights Stratus Properties Inc. achieved a Q2 2025 net income turnaround, fueled by real estate sales, asset gains, and an expanded stock repurchase program Highlights and Recent Developments Q2 2025 highlights include net income turnaround, driven by real estate sales, asset gains, project completions, and an expanded stock repurchase program - Q2 and Six Months 2025 Financial Highlights | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Net Income (Loss) Attributable to Common Stockholders | $0.3 million | $(1.7) million | $(2.6) million | $2.8 million | | Diluted Net Income (Loss) Per Share | $0.03 | $(0.21) | $(0.32) | $0.35 | | Total Revenue | $11.6 million | $8.5 million | $16.6 million | $35.0 million | | EBITDA | $(0.2) million | $(1.3) million | $(2.5) million | $3.9 million | - In Q2 2025, the company formed a joint venture with a third-party equity investor to develop the Holden Hills Phase 2 project, receiving a $47.8 million cash distribution[3] - In Q2 2025, the company sold the West Killeen Market retail project, generating approximately $5.0 million in pre-tax gains[3] - As of June 30, 2025, the company held $59.4 million in cash and cash equivalents, with its revolving credit facility undrawn[3] - The board approved increasing the stock repurchase program from $5.0 million to $25.0 million, with $3.0 million in stock repurchased as of August 8, 2025[3] CEO Statement CEO highlighted H1 2025 progress: successful joint ventures, asset sales, and project completions, enhancing cash and flexibility - The company successfully formed the Holden Hills Phase 2 joint venture in the first six months of 2025, receiving a $47.8 million cash distribution[4] - The company sold the West Killeen Market retail project and two Amarra Villas homes, totaling $20.1 million[4] - Construction of The Saint George multi-family project and the final two Amarra Villas homes was completed, with Holden Hills Phase 1 infrastructure substantially finished[4] - An enhanced cash position provides the board flexibility to explore various attractive alternatives to create shareholder value[4] Consolidated Financial Performance Q2 2025 saw revenue and net income growth, but H1 revenue and net income declined year-over-year due to prior large land sales, with negative EBITDA Summary Financial Results Q2 2025 revenue and net income increased, but H1 saw declines due to prior large land sales, with EBITDA turning negative - Summary of Consolidated Financial Performance (USD thousands) | Metric (USD thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Revenue | | | | | | Real Estate Operations | 6,798 | 3,629 | 6,823 | 25,752 | | Leasing Operations | 4,807 | 4,861 | 9,825 | 9,245 | | Total Consolidated Revenue | 11,605 | 8,490 | 16,648 | 34,997 | | Operating Income (Loss) | | | | | | Real Estate Operations | (3,536) | (839) | (5,038) | 5,962 | | Leasing Operations | 6,334 | 1,761 | 8,292 | 3,110 | | General and Administrative Expenses | (3,557) | (3,842) | (7,608) | (8,307) | | Total Consolidated Operating Income (Loss) | (759) | (2,920) | (4,354) | 765 | | Net Income (Loss) | (2,295) | (2,778) | (6,052) | 919 | | Net Income (Loss) Attributable to Common Stockholders | 260 | (1,725) | (2,615) | 2,827 | | Diluted Net Income (Loss) Per Share | 0.03 | (0.21) | (0.32) | 0.35 | | EBITDA | (185) | (1,332) | (2,518) | 3,868 | Detailed Results of Operations Q2 2025 total revenue increased year-over-year, driven by real estate sales; leasing revenue stable, with a pre-tax gain from asset sale - Total revenue for Q2 2025 was $11.6 million, an increase of $3.1 million from $8.5 million in Q2 2024[7] - Real Estate Operations revenue increased by $3.2 million, primarily due to the sale of two Amarra Villas homes ($6.8 million) in Q2 2025, compared to one home ($3.6 million) in Q2 2024[7] - Leasing Operations revenue remained flat in Q2 2025 compared to the same period in 2024[8] - Operating income from Leasing Operations includes approximately $5.0 million in pre-tax gains from the sale of West Killeen Market[8] - The Saint George multi-family residential project was completed and commenced leasing operations in Q2 2025[8] Financial Position and Capital Management As of June 30, 2025, cash and equivalents significantly increased from the Holden Hills Phase 2 JV, with slight debt rise and undrawn credit Debt and Liquidity As of June 30, 2025, cash and equivalents significantly increased from Holden Hills Phase 2 JV distribution, with slight debt rise and undrawn credit - Debt and Liquidity Overview (USD thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Consolidated Debt | 199,400 | 194,900 | | Consolidated Cash and Cash Equivalents | 59,400 | 20,200 | - Cash and cash equivalents significantly increased, primarily due to a $47.8 million distribution received from the Holden Hills Phase 2 joint venture in Q2 2025[9] - As of June 30, 2025, the company had $17.7 million available under its revolving credit facility, with no amounts drawn[10] Capital Expenditures and Real Estate Development H1 2025 saw reduced real estate development and capital expenditures, focusing on Holden Hills Phase 1 and The Saint George projects - Capital Expenditures and Real Estate Development (USD thousands) | Metric | H1 2025 | H1 2024 | | :------------------------------------------------- | :------------ | :------------ | | Purchases and Development of Real Estate Properties and Capital Expenditures (Total) | 21,600 | 32,500 | - Investments primarily focused on the development of Holden Hills Phase 1 and The Saint George[11] Share Repurchase Program Board significantly increased share repurchase authorization to $25.0 million, reflecting enhanced financial flexibility post-asset sales and JV - The stock repurchase program authorization increased from $5.0 million to $25.0 million[12] - As of August 8, 2025, the company repurchased 135,620 shares of common stock at a total cost of $3.0 million, averaging $22.13 per share[12] - An additional $22.0 million remains available under the repurchase program[12] Business Strategy and Company Profile Board is evaluating cash use from Holden Hills Phase 2 JV and asset sales, considering repurchases, deleveraging, reinvestment, or shareholder returns Strategy Board explores cash use opportunities: stock repurchases, deleveraging, project reinvestment, and/or other shareholder returns - The board is exploring opportunities for cash utilization, including stock repurchases, deleveraging, reinvestment in the project pipeline, and/or other cash returns to shareholders[14] About Stratus Stratus Properties Inc. develops, manages, leases, and sells multi-family, single-family, and commercial real estate in Austin, Texas and other markets - The company's primary business involves the ownership, development, management, leasing, and sale of multi-family, single-family, and commercial real estate in the Austin, Texas area and other specific markets[15] - The company owns a portfolio of approximately 1,500 acres of commercial and residential projects under development or held for development[15] - Revenue and cash flow are primarily generated from the sale of developed and undeveloped properties, leasing of retail, mixed-use, and multi-family properties, and development and asset management fees[15] Forward-Looking Statements and Non-GAAP Measures This release contains forward-looking statements on future performance, influenced by inflation, interest rates, supply chain, debt, real estate markets, and regulatory risks Cautionary Statement Forward-looking statements are subject to risks like inflation, interest rates, supply chain, debt, real estate markets, and regulatory changes; actual results may differ - Forward-looking statements cover expectations regarding inflation, interest rates, supply chain constraints, debt repayment, bank credit, future cash flows, Austin and Texas real estate markets, development projects (including costs and completion times), asset sale plans, MUD reimbursements, regulatory matters (such as the ETJ bill), leasing activities, tax rates, capital expenditures, joint ventures, and future cash returns to shareholders[17] - Under the Comerica Bank debt agreement, the company cannot repurchase more than $1.0 million of common stock or pay dividends without written consent, but has obtained consent for the current $25.0 million stock repurchase program[18] - Actual results may differ materially from forward-looking statements due to various important factors, including ability to implement business strategies, increased operating and construction costs, rising inflation and interest rates, debt repayment capacity, decreased market values, changes in real estate demand, economic and geopolitical conditions, financing availability, loss of key personnel, joint venture risks, public health crises, MUD reimbursement eligibility, industry risks, changes in the regulatory environment, and environmental and litigation risks[19] Non-GAAP Measure: EBITDA Explanation EBITDA, a non-GAAP measure, helps assess recurring operating performance by excluding financing impacts, but should not supersede GAAP measures and may not be comparable - EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a non-GAAP financial measure used to assess the company's recurring operating performance, particularly its profitability after excluding the impact of financing and similar decisions[21] - Management believes EBITDA helps investors evaluate the company's business, but it should not be considered more significant than GAAP measures and may not be comparable[21] Consolidated Financial Statements (Unaudited) Q2 2025 saw a net income turnaround to $0.3 million, from a $1.7 million loss, though H1 2025 recorded a $2.6 million net loss, down from prior year's $2.8 million net income Consolidated Statements of Comprehensive Income (Loss) Q2 2025 saw a net income turnaround to $0.3 million, from a $1.7 million loss, though H1 2025 recorded a $2.6 million net loss, down from prior year's $2.8 million net income - Summary of Consolidated Statements of Comprehensive Income (Loss) (USD thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Total Revenue | 11,605 | 8,490 | 16,648 | 34,997 | | Cost of Sales | 13,807 | 7,568 | 18,594 | 25,925 | | Gain on Sale of Assets | (5,000) | — | (5,200) | — | | Operating Income (Loss) | (759) | (2,920) | (4,354) | 765 | | Net Income (Loss) and Total Comprehensive Income (Loss) | (2,295) | (2,778) | (6,052) | 919 | | Net Income (Loss) and Total Comprehensive Income (Loss) Attributable to Common Stockholders | 260 | (1,725) | (2,615) | 2,827 | | Diluted Net Income (Loss) Per Share | 0.03 | (0.21) | (0.32) | 0.35 | Consolidated Balance Sheets As of June 30, 2025, total assets increased from year-end 2024, driven by higher cash and investment properties, with slight liability growth and increased equity - Summary of Consolidated Balance Sheets (USD thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Assets | | | | Cash and Cash Equivalents | 59,386 | 20,178 | | Real Estate Held for Sale | 11,618 | 11,211 | | Real Estate Under Development | 175,916 | 274,105 | | Land Held for Development | 76,620 | 65,009 | | Investment Properties, Net | 228,112 | 136,252 | | Total Assets | 574,821 | 532,606 | | Liabilities | | | | Debt | 199,434 | 194,853 | | Total Liabilities | 236,497 | 235,039 | | Equity | | | | Total Stockholders' Equity | 191,908 | 194,705 | | Noncontrolling Interests in Subsidiaries | 146,416 | 102,862 | | Total Equity | 338,324 | 297,567 | - Cash and cash equivalents increased from $20.2 million at year-end 2024 to $59.4 million as of June 30, 2025[27] - Investment properties, net, increased from $136.3 million at year-end 2024 to $228.1 million as of June 30, 2025[27] Consolidated Statements of Cash Flows H1 2025 saw increased operating cash outflow, a shift to investing cash inflow, and significant financing cash flow from noncontrolling interests, boosting period-end cash - Summary of Consolidated Statements of Cash Flows (USD thousands) | Metric | H1 2025 | H1 2024 | | :--------------------------------------------------------- | :------------ | :------------ | | Net Cash Used in Operating Activities | (15,179) | (1,716) | | Net Cash Provided by (Used in) Investing Activities | 5,811 | (16,542) | | Net Cash Provided by (Used in) Financing Activities | 48,597 | (213) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 39,229 | (18,471) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | 60,383 | 13,961 | - Cash flow from financing activities significantly increased, primarily including $59.9 million in project loan borrowings and $47.8 million in noncontrolling interest contributions[29] - Cash flow from investing activities shifted from a net outflow of $16.5 million in the first six months of 2024 to a net inflow of $5.8 million in the first six months of 2025, primarily due to $13.0 million in proceeds from asset sales[29] Business Segments Financial Information Stratus Properties Inc. operates two segments: Real Estate (ownership, development, sales) and Leasing (investment properties), with CEO assessing performance by segment profit Business Segments Overview Stratus Properties Inc. has two segments: Real Estate (ownership, development, sales) and Leasing (investment properties), with CEO evaluating performance by segment profit - The company has two reportable operating segments: Real Estate Operations and Leasing Operations[31] - Real Estate Operations include properties at various stages of development, involving ownership, development, and sales[31] - Leasing Operations include real estate assets held for investment and lease, such as The Saint George, The Saint June, and the retail portion of Lantana Place[33] - The CEO measures segment performance based on segment profit, excluding general and administrative expenses[34] Segment Financial Information - Three Months Ended June 30, 2025 Q2 2025: Real Estate Ops had $6.8M revenue but $3.5M loss; Leasing Ops had $4.8M revenue and $6.3M profit, boosted by a $5.0M asset sale gain - Segment Financial Information - Three Months Ended June 30, 2025 (USD thousands) | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 6,798 | 4,807 | 11,605 | | Cost of Sales | (6,244) | — | (6,244) | | Gain on Sale of Assets | — | 5,000 | 5,000 | | Segment Income (Loss) | (3,536) | 6,334 | 2,798 | | Capital Expenditures and Real Estate Development Purchases | 7,185 | 2,634 | 9,819 | - Real Estate Operations recorded a $1.0 million accounts receivable write-off expense in Q2 2025[37] Segment Financial Information - Three Months Ended June 30, 2024 Q2 2024: Real Estate Ops generated $3.6M revenue with an $0.8M loss; Leasing Ops reported $4.9M revenue and a $1.8M profit - Segment Financial Information - Three Months Ended June 30, 2024 (USD thousands) | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 3,629 | 4,861 | 8,490 | | Cost of Sales | (3,173) | — | (3,173) | | Segment Income (Loss) | (839) | 1,761 | 922 | | Capital Expenditures and Real Estate Development Purchases | 7,360 | 8,001 | 15,361 | Segment Financial Information - Six Months Ended June 30, 2025 H1 2025: Real Estate Ops had $6.8M revenue but $5.0M loss due to costs; Leasing Ops had $9.8M revenue and $8.3M profit, benefiting from asset sales - Segment Financial Information - Six Months Ended June 30, 2025 (USD thousands) | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 6,823 | 9,825 | 16,648 | | Cost of Sales | (6,244) | — | (6,244) | | Gain on Sale of Assets | — | 5,200 | 5,200 | | Segment Income (Loss) | (5,038) | 8,292 | 3,254 | | Capital Expenditures and Real Estate Development Purchases | 14,397 | 7,161 | 21,558 | - Real Estate Operations recorded a $1.0 million accounts receivable write-off expense in the first six months of 2025[42] - Leasing Operations' gain on asset sales includes a $5.0 million pre-tax gain from West Killeen Market and a $0.2 million deferred gain from The Oaks at Lakeway[43] Segment Financial Information - Six Months Ended June 30, 2024 H1 2024: Real Estate Ops generated $25.8M revenue and $6.0M profit from land sales; Leasing Ops reported $9.2M revenue and $3.1M profit - Segment Financial Information - Six Months Ended June 30, 2024 (USD thousands) | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 25,752 | 9,245 | 34,997 | | Cost of Sales | (17,122) | — | (17,122) | | Segment Income (Loss) | 5,962 | 3,110 | 9,072 | | Capital Expenditures and Real Estate Development Purchases | 16,317 | 16,142 | 32,459 | Total Assets by Segment As of June 30, 2025, Leasing Operations' total assets significantly increased, while Real Estate Operations' assets decreased, reflecting asset allocation shifts - Total Assets by Segment (USD thousands) | Segment | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Real Estate Operations | 271,985 | 342,089 | | Leasing Operations | 246,214 | 159,314 | | Corporate and Other | 56,622 | 12,613 | | Total Assets | 574,821 | 514,016 | - Leasing Operations assets increased from $159.3 million as of June 30, 2024, to $246.2 million as of June 30, 2025[46] - Real Estate Operations assets decreased from $342.1 million as of June 30, 2024, to $272.0 million as of June 30, 2025[46] Reconciliation of Non-GAAP Measure The company reconciles net income (loss) to EBITDA, showing negative EBITDA for Q2 and H1 2025, reflecting operating performance before interest, taxes, depreciation, and amortization EBITDA Reconciliation The company reconciles net income (loss) to EBITDA, showing negative EBITDA for Q2 and H1 2025, reflecting operating performance before interest, taxes, depreciation, and amortization - EBITDA Reconciliation (USD thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Net Income (Loss) | (2,295) | (2,778) | (6,052) | 919 | | Depreciation and Amortization | 1,376 | 1,402 | 2,770 | 2,803 | | Net Interest Expense | 277 | — | 277 | — | | Provision for Income Taxes | 457 | 44 | 487 | 146 | | EBITDA | (185) | (1,332) | (2,518) | 3,868 |