Sky Harbour Group Corporation Q3 FY2025 earnings call

• Site acquisition: On track to deliver 23 airports by the end of 2025, with 19 airports on the chart, including the latest Long Beach, California. Begun pursuing same-field expansion opportunities.
• Financial results: Sky Harbour Capital's revenues increased 25% YOY and 8% QOQ, with operating expenses decreasing moderately. Adjusted EBITDA discussed, with non-cash components like ground lease expense and share-based compensation.
• Construction program: Modified construction program by removing Centennial Airport Phase 2 and adding Addison Airport Phase 2, with earlier completion and lower cost. Finalized $200 million tax-exempt drawdown facility with JPMorgan.
• Capital formation: Closed the quarter with $48 million in cash and US Treasuries, exploring private and public capital alternatives, entered binding LOI with ultra-high-net-worth family office for hangar acquisition.
• Business pillars: Site acquisition on track, development with manufacturing and construction in full gear, leasing with growth in leasing team and focus on stabilizing campuses and migrating to pre-leasing, operations with active resident feedback loop and innovative training programs.

Consolidated revenues in the third quarter experienced an increase of 78% year over year and 11% sequentially, reaching $7.3 million. Sky Harbour Capital's revenues in Q3 increased 25% year over year and 8% sequentially. Consolidated assets under construction and completed construction reached over $300 million. Sky Harbour Capital's operating subsidiaries' revenues are expected to continue increasing in Q4 and the first quarter of next year.

• On track to deliver 23 airports by the end of 2025. 2026 focus on max revenue capture (tier-one airports) and same-field expansion. 2027 expected to have another step up in development volume.
• Sky Harbour Capital expects continued revenue increase in Q4 and first quarter of next year. Aim to reach breakeven on cash flow for operation basis next month.
• Plan to reinvest positive operating cash flow next year into additional hangar campuses.

• Potential overruns in construction costs, though mitigated by guaranteed maximum price contracts and systematization. Risk of underestimating market potential. Concerns regarding debt service coverage covenant test, but confident in meeting compliance through portfolio adjustments and updated feasibility reports.

Q: Regarding the Miami JV, how was the $30,750,000 valuation for a 75% stake determined? Is this a repeatable financing model you plan to use at other campuses?

A: Tal Keinan said it's repeatable with demand across the country.

Q: Congratulations on the quarter. What are your thoughts about more hangars similar to the 75% in Miami in an SPV? Also, are these more likely to happen if the equity price for Sky Harbour is below that is attractive to raise equity capital, or is that not a major factor?

A: Tal Keinan said it's about cost of capital and independence from primary equity issuance, considering equity price as a factor.

Q: What are your thoughts on new locations for 2026?

A: Tal Keinan said primary focus is on tier-one airports but specifics are proprietary.

Q: Your projected DSCR is three basis points above your covenant level in 2026. How do you weigh the probability of a cure in the case of a delay or slow leasing?

A: Francisco Gonzalez said rents are higher than forecasted, debt service coverage will be met through portfolio adjustments and updated feasibility reports.

Q: Can you elaborate on the statement that 2026 will be focused on MAX revenue capture?

A: Tal Keinan said focus on airports where you can get much more than double-digit yield on cost, shifting to best airports before robust competition arrives.

Q: Do you see a greater percentage increase between first and second leases of square feet that is private and compared to square feet that is semi-private?

A: Tal Keinan said migration to more semi-private model due to higher occupancy rates, with flight departments valuing privacy leading to semi-private weighted model.

Q: Do you expect to begin pre-leasing OPF two in the coming quarters?

A: Tal Keinan said pre-leasing already in progress with Opa-locka Phase 2, with backfilling of hangars at higher rent.