Sky Harbour Group Corporation Q2 FY2025 earnings call

• Consolidated results: Revenues up, operating expenses moderately increased. Cash flow from operating activities improved. - Sky Harbour Capital: Revenues up sequentially, cash flow from operations positive $2.2 million, expected to increase with new campuses leased. - Leasing: First 5 airports show Q2 results, contracted airports have lease terms. Pre-leasing pilot at Dulles and Bradley. - Manufacturing and Construction: Vertical integration with Ascend Aviation Services and Stratus Building Systems for better quality, speed, and cost control. - Debt financing: $200 million warehouse bank debt facility expected to close Aug 28, providing $300 million funding for next 5-6 capital developments. - Site acquisition: Targeting Tier 1 airports, all-veteran team growing. - Operations: Service is a key differentiator, with residents valuing service highly.

On a consolidated basis, assets under construction and completed construction reached close to $300 million. Consolidated revenues increased 82% year-over-year and 18% sequentially, reaching $6.6 million for the quarter. This was due to the acquisition of Camarillo last December and higher revenues from existing campuses. Notably, Q2 had roughly $200,000 of revenues from 3 new campuses that just opened. Sky Harbour Capital's revenues increased 20% sequentially. Cash flow used in operating activities improved to less than $1 million in Q2 from $5 million in Q1. The potential revenues for the 3 new campuses total a projected $14 million annualized.

• Reaffirm expectation to reach cash flow breakeven on consolidated basis at the end of this year as 3 new campuses ramp up. - Sky Harbour Capital's cash flow expected to continue increasing with higher cash flows from new campuses leased. - Anticipate a step function increase in revenues in Q3, Q4 and into the new year as 3 new campuses are leased up.

• Construction risk due to potential supply chain interruptions. - Market changes that could affect leasing and revenue projections. - Operational challenges associated with opening and ramping up new campuses.

Q: Can you provide details on actual revenues as compared to forecasted revenues? Are there any airports where you are seeing higher variance?

A: We track to exceed CBRE projections for Obligated Group #1 campuses. Miami has proven to be a strong market with rents higher than originally forecasted.

Q: If we think about the 9 campuses in operation and the operating expenses associated with them, do you feel like you're seeing the scale gains in line with expectations?

A: SG&A remains fairly constant, and operating leverage will be seen as revenues from new campuses come in.

Q: Are you seeing any changes to the electric aviation industry since the Trump administration has been elected? Does this have any impact on the electric optionality on current Sky Harbour campuses?

A: Trump admin removed some regulatory hurdles, we prewire campuses for electric aviation and are prepared for its future.

Q: What aspects of your product offerings, service and training differentiate Sky Harbour from what a tenant would receive at an FBO?

A: No transients, lower time to wheels up, and a training rig for line crew are differentiators.

Q: How will future pre-leasing influence future debt offerings such as the timeframe for investment grade rating in the future?

A: Pre-leasing supports a better credit profile for debt offerings, which will support an investment grade rating in the future.