Sky Harbour Group (NYSE:SKYH) reported higher second-quarter revenue and reached positive consolidated operating cash flow, as the private aviation hangar developer and operator continued to expand construction activity, add capacity at existing campuses and pursue larger opportunities at tier-one airports.
Chief Financial Officer Francisco Gonzalez said consolidated assets under construction and completed construction exceeded $393 million at the end of the second quarter, up $65 million year to date. He described the increase as the company’s largest six-month investment and construction expansion to date.
Cash Flow Turns Positive
On a consolidated basis, Sky Harbour generated roughly $500,000 of cash flow from operating activities during the quarter, its first positive result in that measure, according to Gonzalez. He said the company expects future equity proceeds to be directed toward capital expenditures for new projects rather than funding current operating expenses.
For Sky Harbour Capital and its operating subsidiaries, which comprise the obligated group supporting the company’s bond financing, revenue increased 79% year over year and 22% from the prior quarter. Cash flow from operations was nearly $3 million, compared with $2.2 million a year earlier, marking 10 consecutive quarters of positive operating cash flow for that group.
Chief Accounting Officer Mike Schmitt said adjusted EBITDA improved to approximately negative $0.9 million in the second quarter. He attributed the improvement to rising revenue at operating campuses while operating expenses remained relatively flat. Schmitt noted that adjusted EBITDA is a non-GAAP measure and excludes certain non-cash expenses, including costs associated with non-operating campuses, stock compensation and changes in the fair value of liability-classified warrants.
Sky Harbour reaffirmed its year-end guidance for an annualized revenue run rate of $42 million to $46 million, compared with a $39.4 million run rate in the second quarter. The company also maintained its outlook for an annualized adjusted EBITDA run rate of $4 million to $6 million by year-end.
Gonzalez said the projected improvement is expected to be supported by leasing at the second phase of the company’s Miami-Opa Locka campus and by occupancy gains at Denver Centennial and Phoenix Deer Valley. He said the operational leverage from the Opa-locka expansion should aid profitability because the second phase uses much of the same staffing and equipment as the initial campus.
Leasing, Pricing and New Campus Openings
Chairman and Chief Executive Officer Tal Keinan said leasing in Denver has progressed more slowly than the company would prefer, though he said lease-up timing can vary materially by market. He pointed to Miami and Nashville as examples of campuses that took longer to lease initially but later became “very robust cash flowing campuses.”
Keinan also discussed the company’s use of short-term introductory-rate leases at certain locations, including Dallas Addison, Phoenix Deer Valley and Denver Centennial, to accelerate occupancy. He said Sky Harbour intends to replace those agreements with longer-term leases at higher rates when they expire. In Dallas, he said multi-year tenants are paying rents in the $40 to $50 per-square-foot range.
The company said it recorded a 19% average rent increase on 100,360 square feet of leases that expired and were renewed during the preceding 12 months. Keinan said the figure was lower than the prior quarter’s 23% because some agreements were entering a third lease term, when pricing is closer to prevailing market rates.
Sky Harbour plans to use pre-leasing as a standard practice for new campuses. Keinan said the company has targeted having roughly one-half to two-thirds of a new location leased by opening. He said pre-leasing has been especially effective at markets where Sky Harbour already operates a first phase, citing demand for San Jose’s second phase and Miami-Opa Locka’s expansion.
Development Scale and Construction Costs
Management said all projects currently in the development plan are on schedule and on budget. The company expects Bradley International Airport in Connecticut to be its nearest-term opening, followed by Dallas Addison’s second phase and Salt Lake City early next year.
Keinan said Sky Harbour expects to increase space under construction from slightly more than 600,000 square feet to more than 1.2 million square feet by year-end. The company has completed a third version of its hangar prototype, which is scheduled to debut at a Fort Worth project expected to break ground in the fourth quarter.
The company said its current construction cost is about $242 per square foot, below its previously stated $250 target. Keinan said Sky Harbour sees further potential savings through prototype changes, national procurement and its vertically integrated construction capabilities, while acknowledging potential construction-inflation pressure.
Liquidity and Equity Placement
Gonzalez said Sky Harbour ended the quarter with more than $207 million of cash and U.S. Treasuries, plus approximately $130 million available under a committed JPMorgan construction loan. Those liquidity figures exclude $40 million in proceeds from a registered direct common-stock placement that closed on the day of the call.
The company issued the shares at $10 each, a 4.6% discount to the prior 30-day volume-weighted average price of $10.49 through the Monday before the purchase agreement was executed, Gonzalez said. The company said it has now received more than $300 million in cumulative shareholder equity investment.
Management said the $40 million raise, along with a potential $94 million from the exercise of public warrants next January, could cover Sky Harbour’s equity requirements for the foreseeable future. The company also said it plans to provide 2027 guidance during its next quarterly webcast.
About Sky Harbour Group (NYSE:SKYH)
Sky Harbour Group Inc is a U.S.-based real estate development and operating company focused on private aviation infrastructure. The company specializes in the acquisition, design and management of fixed-base operations (FBOs), aircraft hangarage and private terminals that serve business and general aviation operators. By providing expedited ground handling, concierge services and state-of-the-art facilities, Sky Harbour seeks to streamline the operations of private jet owners, fractional-ownership programs and charter operators while reducing congestion at major airports.
Through strategic leases and joint-venture partnerships, Sky Harbour has established a growing presence at key regional and metropolitan airports across the United States.
