Sky Harbour Group Corporation Q4 FY2025 earnings call

• Site acquisition: 2025 guidance of 23 airports under ground lease met, with additional ground leases on existing airports. Refining guidance metrics to focus on total available NOI. - Development: 2025 was a year of reconfiguring development to a significant program. Rentable square feet under construction and built and ready for occupancy are ramping up. Scheduled deliveries of campuses including Miami phase two, Bradley campus, etc. - Leasing: Stabilized campuses starting to break into greater-than-100% potential occupancy. Initial lease-up campuses like Phoenix and Dallas moving well, Denver facing seasonal effects. Preleasing activities in place with higher average rents expected. Re-leasing of mature leases with average 22% markup. - Operations: First phase two campus ready to operate. Focus on OpEx efficiency in 2026, including phasing benefits and finding objective service metrics.

On a consolidated basis, revenues increased year-over-year by 87%, reaching a record $27.5 million for 2025. Operating expenses for the year increased to almost $28 million. Cash flow from operations reached positive territory for the first time. Adjusted EBITDA reached breakeven on a run-rate basis in December. For wholly-owned subsidiaries Sky Harbour Capital, revenues for the year increased 49% year-over-year, and in Q4, 18% sequentially. Revenues are expected to have a moderate increase in 2026 and then step up in Q2 2027 and Q1 2027 on the back of new project openings.

Management will release guidance for 2026 at the next earnings call, not in terms of number of airports but related to NOI capture. Cash flows and earnings expected to move north from breakeven with campus openings and lease rate increases.

• Industry competition rumblings. - Flexibility in changing projected construction start and completed dates for some facilities to optimize phase implementation.

Q: Should we be expecting the signing of any new ground in 2026?

A: Yes, will put out guidance on next earnings call in terms of NOI capture.

Q: Nice work on reaching operating cash flow/adjusted EBITDA run-rate breakeven by year-end. How should we be thinking about that in 2026? Will you be breakeven going forward from here?

A: Yes, cash flows follow revenues from campus openings and leasing, expected to move north from breakeven with campus openings like Miami phase two and Bradley opening.

Q: We noticed construction spend came in a little lighter in Q4 than prior quarters, likely due to timing of deliveries and development starts. Now, with the proper team and financing in place, how can we think about construction spend ramping as we move throughout 2026 and beyond?

A: Construction expenditures are ramping up with ground breaking in various projects and liquidity strong, also with in-house construction management team added.

Q: It looks like you made some great leasing progress this quarter, especially at Deer Valley. What are your expectations for when those rents start to roll into earnings, and what are your expectations for stabilization across the three assets that were delivered in 2025?

A: Takes 6 to 9 months to reach stabilization, with progression expected for the three assets in coming quarters, and preleasing on upcoming campuses boding well.

Q: How many additional ground leases do you expect in 2026?

A: Will put out formal guidance at next earnings call in terms of NOI capture metric.

Q: Why is the average rent at preleasing campuses higher than stabilized and in initial lease-up campuses?

A: Targeting better airports now, with more precise airport targeting leading to higher rents on preleasing campuses.

Q: Quarter over quarter, multiple facilities had their projected construction start and completed dates changed to TBD: APA phase two, DVT phase two, HIO phase two, IAD phase two, ORL phase two, and POU phase two. Can you walk us through what led to those changes shown in the 10-K?

A: Flexibility in deciding when to implement phase two based on phase one performance, leasing, and market sense, with funding facility providing flexibility.

Q: Can you explain the unit economics slide more? The most recent feasibility study has NOI around $20 per square foot for both obligated groups. Why do you think it would be $36? Only two properties have rent above $45 per square foot.

A: Illustration, entering leases with rents higher than $40 in some areas, expecting new airports to have higher rents than first vintage.

Q: At this point, how much of a new campus do you ideally want preleased before construction begins, and how do you balance early visibility against the opportunity to push rents higher closer to delivery?

A: Ideally around 50% preleased before construction, with 50% left to potentially get higher rents on opening, while being cash flowing at 50%.

Q: With the first obligated group nearing completion, what is the actual IRR or yield on cost you think you achieved?

A: Will backtest projects, considering initial challenges like COVID and design issues, but rents higher than forecasted, expecting yield on cost to be affected but rents and renewals improving IRR.

Q: Can you please provide details on your interest in selling hangars? Should we expect any sales this year?

A: Deliberate about entertaining hangar sales, with ultra-long-term prepaid leases as a tool, but will be deliberate on price and suitability.

Q: A recent sell-side report from BTIG indicates that you are now seeing build costs closer to $250 per square foot on your active sites. Could you unpack the primary drivers of this reduction in build costs? Specifically, how much of this efficiency is being driven by the vertical integration of Stratus and Ascend versus the natural economies of scale as you shift into phase two expansion? Finally, is $250 per square foot the right baseline to use, or do you see room for even further cost compression as you scale?

A: Vertical integration and general contracting are drivers, will continue compressing costs, with room for further compression.

Q: What percent of your airports that are operating currently have waitlists?

A: Have lists of interested parties, not exact waitlists, with dynamic lists and staggered space availability.

Q: First, is the gestation period shorter for the expansion of existing airports as compared to acquiring brand new ground leases? Are there any differences in the acquisition process between the two? Second, does management anticipate a need for hangars with a door threshold higher than 28 feet? Is the prototype able to be adjusted for airplanes as they become larger?

A: Shorter gestation for expanding existing airports with advantages in market knowledge, ground rent, and OpEx. Prototype adjusted to go up to 34 feet to accommodate larger planes.

Q: Might a NetJets or a Flexjet decide to rent out an entire hangar for their clients to use where they are not able to build their own hangar? They seem to be moving away from always leaving jets on the ramps of airfields.

A: Yes.

Q: With regards to the step up of 22% following re-leasing, how sustainable is this kind of step up, and are there any geographies that are running ahead of or behind this? With the OpEx program underway, can you talk more about any specific levers being pulled here or maybe where you are seeing easy wins?

A: 22% step up not expected to be ongoing, easy wins include enforcing triple nets on leases, with OpEx program focusing on optimizing various aspects.