On Thursday, Sky Harbour Group (AMEX:SKYH) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Access the full call at https://events.q4inc.com/attendee/103067347
Summary
Sky Harbour Group reported a significant increase in assets under construction, reaching $352 million, with a $75 million increase from the previous year.
Revenues increased by 56% year over year and 8% sequentially, driven by new campus openings and higher occupancy rates.
Operating expenses rose due to new campus openings and non-cash expenses from new ground leases.
The company expects gross profit margin expansion from upcoming campus phases in Miami and Addison, with a focus on operational efficiency.
Sky Harbour Group announced a guidance for 2026 with an expected revenue run rate of $42-$46 million and an adjusted EBITDA run rate of $4-$6 million by year-end.
The company is focusing on expanding in Tier 1 and Tier 2 markets, emphasizing profitable growth over simply increasing the number of locations.
Sky Harbour Group highlighted a successful pre-leasing strategy, achieving 68% occupancy at Miami Phase 2 upon opening.
Management emphasized the potential for operating leverage due to high upfront capex with growing revenue potential.
The company reported strong liquidity with $368 million in available resources, including cash and unused credit facilities.
Sky Harbour Group is actively pursuing investor relations initiatives, increasing conference participation to engage with investors.
Full Transcript
OPERATOR
Thank you for standing by. My name is Kate and I’ll be your conference operator today. At this time I would like to welcome everyone to The Sky Harbour 2026 first quarter earnings call and webinar. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. In order to ask a question, you can send via webcast in the Q and A box. Thank you. I would now like to turn the call over to Francisco Gonzalez, CFO please
Francisco Gonzalez (Chief Financial Officer)
ahead thank you Kate and hello and welcome to the 2026 First Quarter Investor Conference Call and webcast for the Sky Harbor Group Corporation. We have also invited our bondholder investors and lenders in our borrowing subsidiaries Sky Harbor Capital, Sky Harbor Capital 2 and Sky Harbor Capital 3 to join and participate on this call. Before we begin, I’ve been asked by Council to note that on today’s call the company will address certain factors that may impact this and next year’s earnings. Some of the information that will be discussed today contains forward looking statements. These statements are based on management assumptions which may or may not come true and you should refer to the language on slides one and two of this presentation as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward looking statements. All forward looking statements are made as of today and we assume no obligation to update any such statements. So now let’s get started. The team with us this afternoon you know from our prior webcast our CEO and Chair of the Board Tom Kanan, our Treasurer Tim Herr, our Chief Accounting Officer Mike Schmidt, our Accounting Manager Tory Petro and our Assistant Treasurer Andreas Frank. We have a few slides we will want to review with you before we open it to questions. These were filed with the SEC an hour ago in Form 8K along with our 10Q and will also be available on our website later this evening. We also filed our first quarter Sky Harbour Capital obligated group Financials with MSRB’s EMA an hour ago. As Kate mentioned, you may have submitted written questions during the webcast during the Q4 platform using the Q4 platform and we will address them shortly after our prepared remarks. Let’s get started. At the end of the first quarter on a consolidated basis, assets under construction and completed construction reached over 352 million. That is a 75 million increase from a year ago. Let me highlight that the pace of investment and new construction at Sky Harbour is accelerating and this column will continue to grow at a higher rate revenues experienced an increase of 56% year over year and 8% sequentially given the new campus openings during past year and increases in occupancy and rental rates. Operating expenses in Q1 continue to increase in tandem with new campus openings, impacted in particular by increases in campus headcount and the cash and non cash expense accruals of new ground leases entering into the past year which are not yet in construction or in operations. More than half of the increase in OPEX in quarter over quarter or quarter sequentially is related to the signing of these new ground leases at the end of the year and within that expense. More than half of that is noncash accruals payments that will be made in the future. We look forward to benefiting from the operating leverage of our Phases II both in Miami Opaloka we just opened and in early 2027 with the opening of Addison 2 Phase II. We expect gross profit margin expansion with these 2 phase phases. 2s with the same people and fuel trucks basically serving a doubling of hangar campuses in terms of SG and A. We strive to keep this in check as we grow, keeping frugality front and center in our expense and cost management initiatives. Cash flow used in operations moved higher than last quarter of 2025 which usually happens in each of our first quarters given the seasonality of our cash performance, Boardman bonuses bonuses paid to our employees in February, the annual increases in base salaries that occur as of January 1st and also some minor items related to 401k corporate matches, Social Security, employer contributions and the like that they all tend to be concentrated in Q1. If you look historically, that pattern has been the case in terms of Q1 prior Q1 quarters. In prior years. Also, the figure in Q4 had the non recurrent benefit of the 5.9 million upfront payment we received by one tenant in terms of at least renegotiation in Miami on a normalized basis. As we have disclosed previously, we have reached cash out breakeven at the operating level. More on this when we talk about our guidance for 2026 shortly. Next slide please. This slide is a summary of the financial results of our wholly owned subsidiary Sky Harbor Capital and submarine projects that form the Obligated Group. Assets under construction are still growing as we complete Opaloka Phase 2 and will only stabilize once we complete Addison Phase 2 at the end of the year. These will constitute the last projects of the Obligated Group’s first Vintage Oak campuses that were financed primarily by the 2021 series bonds. Revenues at the Obligated Group in Q1 increased 76% year over year and 15% sequentially. We expect another step function increase in revenues in Q2 and Q3 of this year following the opening of Phase 2 in the Opaloka and then in Q1 and Q2 of 2027 after the opening of Phase 2 in Addison. As I mentioned earlier, we expect a significant increase in the obligated group’s gross profit and EBITDA margins given the additional revenues of these two phases with limited increases in operating costs given the ability to use the same personnel and equipment. With an expanded campus doubling in size both in Dallas and in Miami, cash flow from operations at the Obligated group reached 2.9 million, almost tripling of the same amount, I’m sorry, of a million dollars a year ago and a 14% increase from the prior quarter after adjusting for that non recurrent 5.9 million influx in the prior quarter with the prepaid rent that we discussed also earlier. So at this point let me pass it on to Tal to provide a leasing and development update.
Tal
Tal thanks Francisco. So the slide is self explanatory and it’s the same format we’ve been using in the last few earnings calls. So I think I’m just going to highlight a few specific rubrics here for people’s attention starting with the campuses that are in initial lease up. We’ll speak specifically about Opaloka Miami Phase 2 in a later slide. I think our what I just call attention to is Denver APA Phase 1 where we’re only 44% leased at this point. Sometimes they go a little bit slower than others. This one has definitely lagged a bit, but again that’s, you know, I think Nashville looked quite similar six months after it opened. So we don’t really, we don’t really attach that much significance to it and obviously we wish everything moved a bit little, little bit faster. And then on the left side you can see the economic occupancy which now on all but one campus is at 100% or above. What’s the upper limit of that? I’m going to go down limb and say San Jose is probably somewhere near the upper limit of that. We might find a few more creative ways to increase occupancy beyond 130%, but it’s probably not going to go much beyond that. However, what I really want to point out is the lower left hand corner of the slide that release update. So in the last 12 months we have released about 119,000 square feet of hangar, meaning leases that have come to term and either been renewed by the existing resident or taken over by a new resident. The average escalation between one lease and the next is 23%. By the way, that’s up from 22% in the last quarter. All of this is on top of the annual escalators, the contractual escalators that feature in all of our leases which escalate at CPI with a floor of 4%. Anyone who is running a model for Sky Harbour knows that your inflation, your inflation assumption is one of the most sensitive inputs in the entire model. I don’t want to make a claim here that we’ll always be getting 23% escalations, but for the time being at least, I think what we’re seeing is more or less what we, what we forecast a couple of years ago on these calls, which is that hangar inflation has nothing to do with cpi. We are on the island of Manhattan. From a, from a real estate perspective, you just cannot build new airports. And we think that this, this scarcity is what is one of the key components of driving the value on a macro level in this company going forward. Next slide, a little bit of kind of forecast versus actual. So again, things that I’ll point out, you’ve got two rows here of third party forecasts for revenue per square foot on different campuses. What we’re showing right now is whatever is gray is going to be within the range of those forecasts. Whatever is green is going to be above both forecasts. Whatever is red is going to be below both forecasts. So what you see at first, lush might look like a mixed bag to us. It does not. Because that high range, if you look, we’ve got high average and low, the high range in the campuses that are in lease up. Okay? So look at DVT, APA and Addison. The high range are the long term leases. Okay? And I think as people might remember, our strategy on initial lease up, this is before we move to the pre leasing strategy, which we’ll get to soon, has been to get these campuses to 100% as quickly as possible. So if somebody wants to come in on a six month lease at some very low introductory rate, we’re fine with that. We want to start actually negotiating in earnest with our long term tenants on the basis of 100% occupancy or higher. So rather than let these hangars ride empty for the month that it takes to get to 100% and surpass it, we rent them out like this, which skews your averages. So all of those higher the Green numbers on those lease up campuses are long term leases. That’s what that looks like. And then another thing I’ll call everyone’s attention to is if you look at the legacy campuses we call the stabilized campuses. So Nashville, that’s Nashville, Miami Phase 1, that’s Miami Phase 1, even Camarillo, TMA at the end, what you’ll see is the lows are the first leases that we signed. In fact, if you take bna, that might actually be the very first lease we signed at bna. And the highs tend to be the last leases that we sign, which again, I think corroborates the trend that we’re talking about, that 23% release rate. As time goes by, these leases go up, which is why we’re getting a lot of demand from new residents, especially long term residents, to maximize the term of their leases. Because there’s an increasing appreciation that this inflation trend is here to stay in business aviation. Okay, next slide. A little bit about pre leasing. So Miami Phase 2 is the first campus that we’ve. The first campus on which we’ve applied this pre leasing strategy where we’re going out and offering people certain incentives to sign leases before we even open the doors, which has resulted in what we consider pretty significant success. We’re 68% leased in Miami phase two, the day we open the doors. That means we’re leaving some money on the table. No question. We think, all things considered, this is probably the right way for us to continue a few things that we learned from Opelaka. Phase two, I’m starting at the top of the slide. Number one, this is the first, at least partial trial of the Ascend Integrated Construction Program that we have in place. We’re using the prototype hanger. It’s a derivative of the SH37 hangar, it’s the SH34 hangar hanger. We’re using Stratus Construction. That steel that you see in the picture is our Stratus steel. We’re using Ascend Construction Management. What we don’t have yet here is number one, our Guaranteed Maximum Price was priced before we implemented the program, before Ascend came in. So that budget construction cost is what it is. And number two, we’re using a third party general contractor in Miami. But other than that, this is the Ascend Integrated Construction Program. We’re very happy to demonstrate an on time, on budget delivery. The next thing I think it’s worth understanding is you’ll see this in some of the upcoming slides. Same campus expansion can be a lot more valuable than putting a new dot on the map in that we know the market. We’ll take Miami in this case as sort of the first example of this. We know the market and even more importantly, the market knows us. Okay. It’s not like we’re getting more speculative when we increase the size. And you’ll see when we talk about Stuart and Dulles, that’s exactly what we’re doing. It’s just that we know the battle space a lot better. And again, our counterparties know us better. There’s a lot of pent up demand in Miami. There’s about to be a lot of pent up demand in Dallas. Once people experience the Sky Harbour model, the churn is extremely low. People tend not to leave us. Most, Most of those 23% markups are to existing residents who just understand that there is a market. This is what people are paying now. If I want to stay, that’s what I have to pay. So the churn has been extremely low. So look out for a lot more of that going forward and we’ll show as we people have already seen our press release, but the guidance that we’re putting forward is based a lot more on that, meaning more dots on …
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