Sky Harbour Group Corp Q1 FY2025 earnings call

• Construction: Assets under construction and completed construction accelerated to over $275M as of quarter end, with activity in Phoenix, Dallas, and Denver. Vertical integration in construction is being expanded, including bringing pre-engineered metal building manufacturing and construction services in-house to manage costs, improve speed, build quality, and manage scale. • Acquisitions: The Camarillo campus was acquired in December 2024, contributing to revenue growth. • Ground Leases: Growing pipeline of ground leases, with new leases in the Pacific Northwest (Seattle and Portland). The chart on rentable square footage under ground lease times Sky Harbour equivalent rent shows current revenue available and expected increases. • Liquidity: Strong liquidity with ~$97.5M in U.S. treasuries, with cash management focused on short-term investments for future construction. • Q1 Highlights: Development activities ongoing with Phoenix, Dallas, and Denver nearing completion; two more campuses scheduled for delivery by early 2026; 16 additional campuses in development. Leasing underway with new campuses in round one lease up and releasing of existing leases at higher premiums. Operations team ramping up new campuses and establishing presence at Boeing Field.

On a consolidated basis, assets under construction and completed construction reached over $275 million as of quarter end due to activity in Phoenix, Dallas, and Denver. Revenues increased 133% y-o-y and 20% sequentially, driven by the acquisition of the Camarillo campus in December 2024. Sky Harbour Capital's revenues were flat in recent quarters but expected to have a step function increase in Q2, Q3, and Q4 as new campuses in Phoenix, Addison, and Denver start generating rent and fuel revenues. Revenue contribution from the Camarillo campus acquisition was a key factor in the sequential revenue growth.

• Consolidated cash flow expected to reach breakeven at year end as new campuses in Phoenix, Addison, and Denver are leased over summer and fall. • Revenues from Sky Harbour Capital's new campuses (Phoenix, Addison, Denver) expected to have a step function increase in Q2, Q3, and Q4 as they commence rent and fuel revenues. • Vertical integration in construction expected to improve unit economics by lowering construction costs, increasing addressable market, and enhancing product differentiation. • Expectation that future debt service coverage ratios for bonds will exceed those forecasted at issuance.

• Competition: Concern about potential new competition replicating the model, but belief in sustainable lead due to site acquisition expertise and integrated silos (site acquisition, construction, leasing, operations). • Macro Uncertainty: Potential impact on construction timelines, but vertical integration in construction mitigates some supply chain risks. • Lease Term Negotiations: Uncertainty in lease term negotiations, though currently not seeing significant impacts.

Q: Can you provide more color on your plans to raise debt this year?

A: We are gearing up for a financing for new projects, dual tracking bond issuance and bank term facility, tracking ~$150M to $175M, monitoring market conditions and interest rates.

Q: Could you speak to the prospect for increased competition over time from operators that would seek to replicate your model versus FBOs? And does this concern you? And what would Harbour's competitive advantage in the face of new competition?

A: Concerned about new competition, but believe site acquisition expertise is a key differentiator, and integrated silos (site acquisition, construction, leasing, operations) make it hard to replicate. Lead is becoming more sustainable over time.

Q: If Sky Harbour was segmented only for New York and Connecticut locations, what would the unlevered and levered returns be?

A: Projects in New York/Connecticut have higher lease revenues and potential, with unit economics penciling out nicely despite potentially higher costs in the area.

Q: You've stated that you typically achieve income per square foot double that of the FBO's charge. What are the FBO's charging at your four New York metropolitan airports? And do you believe any of the airports you have ground leases at could generate income per square foot exceeding $100?

A: No New York area airports open today, but leases outside New York generate $70-$90/sq ft, with potential for higher income in some areas.

Q: Your initial projections saw the entire obligated group being completed in 2024 versus more than half slipping into 2025 and 2026 now. Considering these delays, why is the correct strategy to accelerate the pace of the lease acquisition instead of focusing on those already signed out yet to start construction?

A: Site acquisition is key, with limited available land at airports, and focus on acquiring ground leases for 50-year terms, with development of those leases being about execution after acquisition.

Q: Have construction timelines been affected by macro uncertainty this year? If so, how are you managing around the delays, any delays?

A: No significant impact, as vertical integration in construction mitigates supply chain risks, and business aviation demand is unaffected.

Q: Are you seeing any impacts to lease term negotiations, given the uncertainty in the markets?

A: No significant impacts currently.

Q: Could you please provide some color on Nashville occupancy?

A: Nashville occupancy is 92%, but effectively above 100% due to semi-private hangars and overlapping aircraft space.

Q: What is the expected interest rate and timing on the expected term financing and or bond insurance in 2025?

A: Bond deal likely long-term, bank facility likely 5-year term; interest rates market-dependent, with bond yield ~5.5% and bank facilities at SOFR plus 200 area.

Q: Using the low end of your total projected cost for the obligated group, you seem to have 61 million of remaining spend compared to the 47 million of cash. Will you have to make another contribution to Sky Harbour Capital?

A: Will monitor obligated group, consider interest income and potential partnerships, will support as needed for bondholders.

Q: How conservative is the share slide of close to 20 million by the end year or by the year end? What kind of premium could we see for the upside of the multiples of CPI for Sky Harbour's business model continues?

A: The 200M is a statement of intent, aiming for premium as Sky Harbour is a unique offering with courtside seat value in business aviation, expecting multiples of CPI-based premiums as the model continues to succeed.

Q: How meaningful to your revenue could add on services be over time and how much do you anticipate this may add to your income per square foot?

A: Add-on services like boarding, maintenance, and partnerships with third parties are provided without extra charge currently, aiming to enhance value and capture in rent, but focus is on core operations for now.

Q: For all the leases signed outside of the obligated group, what do you estimate the total construction costs to be cost being? When do you expect to start and finish the construction on these leases?

A: Construction costs and timelines are detailed in the 10-Q, with acceleration in construction efforts to start and finish leases, leading to higher revenues in coming quarters