Sky Harbour (SKYH) Q4 2025 Earnings Transcript

Image source: The Motley Fool. DATE Thursday, March 19, 2026 at 5 p.m. ET CALL PARTICIPANTS - Chief Executive Officer and Chair of the Board — Tal Keinan - Treasurer — Tim Herr - Chief Accounting Officer — Mike Schmitt - Accounting Manager — Tory Petro - Assistant Treasurer — Frank [surname not specified] - President — Francisco Gonzalez Need a quote from a Motley Fool analyst? Email [email protected] Full Conference Call Transcript The team with us this afternoon, you know from our prior webcast: our CEO and Chair of the Board, Tal Keinan; our Treasurer, Tim Herr; our Chief Accounting Officer, Mike Schmitt; our Accounting Manager, Tory Petro; and, at Treasury, Frank, our Assistant Treasurer. We have a few slides we will want to review with you before we open it to questions. These were filed with the SEC about an hour ago in Form 8-Ks, along with our 10-K that will also be available on our website later this evening. We also filed our February construction report one day early today, this afternoon, with the MSRB and the fourth quarter’s Sky Harbour Capital obligated group financials that were filed a couple of weeks ago. As the operator stated, you may submit written questions during the webcast during the Q&A using the Q4 platform, and we will address them shortly after our prepared remarks. Let us now get started. We turn to the first slide. On a consolidated basis, assets under construction and completed construction continue to increase, reaching over $328 million on the back of construction activity at phase two in Miami, the new campus well in construction in Bradley International, and phase two in Addison in the Dallas area. Please note this graph is soon to accelerate its upward trajectory as we broke ground already in Salt Lake City Airport and also soon will be doing that at Houston, New York, and our Lantana Executive Airport, Florida, Trenton, New Jersey, and Dallas International later this year. On the revenue front, we increased year-over-year by 87%, reaching a record $27.5 million for 2025, reflecting the acquisition of Camarillo in December 2024, as well as higher revenues from existing and new campuses that opened last year. Sequentially, revenues have the natural progression of occupancy increasing at the three new campuses. Operating expenses for the year increased to almost $28 million reflecting increasing campuses of operation, the higher number of ground leases; remember, we expense ground leases on an accrual basis, so our larger number of ground leases impacts our operating expenses. These are mostly noncash and something that Mike, our Chief Accounting Officer, will cover shortly. One of our goals in 2026 is to achieve higher efficiencies at the campus level, especially as we open second phases in Miami and Dallas. In Q4, you will notice a slight dip in SG&A. This relates to a reduction in the cash component of compensation for our senior management team. We are working to keep SG&A as stable as possible. As we have discussed in prior public conversations, we look to peak at no more than $20 million SG&A on a cash basis and, obviously, enjoy the operating leverage that will entail. This line item, in terms of operating results, includes a lot of noncash items, again, that Mike will discuss shortly. On our cash flow from operations basis, we are pleased to report that we reached positive territory on a consolidated basis for the first time in our history. But I need to point out that this is mostly driven by the realization of $5.9 million in upfront rent, part of an extension of an existing tenant that closed in December. That tenant went to twelve years and is now our longest tenant lease in our portfolio of developed campuses. We are also pleased to report that, on an adjusted EBITDA basis that Mike will discuss shortly, we also reached breakeven on a run-rate basis in December. Next slide, please. This is a summary of the financials of our wholly-owned subsidiaries, Sky Harbour Capital, that form the obligated group. This basically incorporates the results of Houston, Miami, and Nashville campuses along with the campuses that opened during the year in Phoenix, Dallas, and Denver. Revenues for the year increased 49% year-over-year, and in Q4, 18% sequentially. We expect a moderate increase in 2026 and then a step up in Q2 2027 on the back of the opening of phase two in Miami, and then another step up in Q1 2027 on the back of the completion of our last project that forms the obligated group first vintage in Addison Airport in Texas. Operating expenses increased year-over-year given the higher number of operating campuses in operation. Let us turn now our attention to our Chief Accounting Officer for a breakdown of adjusted EBITDA for the year and for Q4. Thank you, Francisco. As with prior quarters, I would like to take this opportunity to provide some additional context regarding elements of our reported results. Adjusted EBITDA is utilized by our management team to evaluate our operating and financial performance. Mike Schmitt: It is supplemental in nature and a financial measure not calculated in accordance with US GAAP. We define adjusted EBITDA as GAAP net income or loss before the add backs and subtractions that are enumerated on the left of this slide, which consist entirely of noncash or nonoperating elements of both income and expense, including, in the fourth quarter and for the year ending 12/31/2025, the significant unrealized gain on our outstanding positions. We have provided a reconciliation from our GAAP net income results for the year and quarter ended 12/31/2025. The primary item worth highlighting here is the general trend of adjusted EBITDA as we conclude fiscal 2025. While slightly down on a year-over-year basis, adjusted EBITDA improved for the third consecutive quarter to a negative EBITDA of approximately $1 million in Q4. This was driven by increased occupancy and rental rates at each of our campuses, particularly during the latter half of the fourth quarter as our run rates improved and turned positive. With that, I would like to take the opportunity to pass the call. Tal Keinan: Thanks, Mike. Good to be with everyone again. I am not going to run through this entire leasing update, but I will point your attention to a few items. First, on the stabilized campuses, we have been talking for a while about greater than 100% potential occupancy, and we are, on a number of campuses, starting to break into that greater-than-100% territory. There is still a long way to go on those, but we are there on a number of campuses already. On campuses in initial lease-up, the blue, you will see Phoenix and Dallas going quite nicely. They are moving a little bit faster than we expected, and Denver is moving a bit slower than we expected. And, you know, again, we are not going to nail the timing on all of these. But Denver is now coming along nicely. We also, I think, encountered some seasonal effects in Denver opening up in the winter season. That plays in your favor in Phoenix and Dallas, less so in Denver. In addition, have a look at the last three lines of that main chart: the high, average, and low rent. And a couple things that you will see in there. First of all, in the blue campuses, campuses that are in initial lease-up, you will see a significantly larger discrepancy between the highest and the lowest rent. The reason for that is, as some of you will probably remember, our leasing strategy on these campuses is to achieve 100% occupancy or greater as soon as possible, which means we do very short-term leases, including some six-month leases, at very low rents with the idea of beginning to negotiate in earnest on the basis of 100% occupancy. That is a strategy that we have seen work in the previous vintages, so we are doing it now in a much more deliberate way. So what you will see, for example, if you take the Denver column, APA 1, you will see that the highest rent is $41. That is somebody who is actually on a long-term lease. We are only doing long-term leases, meaning a year or more, at or above our target rents. And that $14.36 as the lowest is a short term. That is somebody who will either be cycled out or will agree to come up to the target rates once we are in, call it, full or long-term lease-up. And then, lastly, on the main chart, I will call your attention to the preleasing activities, which, again, after we finish Denver, Phoenix, and Dallas, we move to that preleasing strategy. Again, it is already in place. It has to be. In order to do that, you will see significantly higher average rents. Remember, just to make everything apples to apples, that $44.85, that is rent alone. That does not include fuel revenue on those campuses, whereas the numbers for the green and blue sections include rent and fuel. In the case of blue, it is contracted fuel. We could get more fuel flow-ish than that. But the preleasing numbers do not include fuel at all. And what that is beginning to point to, we think, is what we have been maintaining for a while now. Our first campuses were chosen on a somewhat arbitrary basis. We are now targeting the best airports in the country, and we expect to see that trend continue of rents coming up as we go. The last thing I want you to be able to look at on this page is the bottom left, the re-lease update. We promised to give the numbers on this, and I think we have alluded to the fact that it has been quite robust. But what we are talking about is, in 2025, leases that came to term—remember, these were all mature leases. This is not that initial lease-up exercise that I just referred to where we try to get to 100% occupancy. No. These are mature leases in Miami and Nashville, where the lease comes to term. Twenty-two percent is the average markup from the last year of the previous lease to the first year of the new lease. So what we think that is pointing to is, again, our thesis on airports being essentially Manhattan or beachfront property. There is a fundamental supply-demand mismatch, and supply cannot grow because of the limited number of airports at the rate that demand is growing. I do not want to say that we are going to see 22% escalations for the next fifty years of these ground leases, but we do expect a very robust re-lease rate. Reminding everybody on the call, the multiyear tenant leases feature annual escalators of CPI. It used to be with a floor of 3%. Today, it is a floor of 4%. So, on top of those CPI-with-a-floor-of-4% escalators, we are seeing an average 22% jump when one lease comes to term and the new one is signed. Next slide, please. This is a summary of the financials of our wholly-owned subsidiaries, Sky Harbour Capital, that form the obligated group. This basically incorporates the results of Houston, Miami, and Nashville campuses along with the campuses that opened during the year in Phoenix, Dallas, and Denver. Revenues for the year increased 49% year-over-year, and in Q4, 18% sequentially. We expect a moderate increase in 2026 and then a step up in Q2 2027 on the back of the opening of phase two in Miami, and then another step up in Q1 2027 on the back of the completion of our last project that forms the obligated group first vintage in Addison Airport in Texas. Operating expenses increased year-over-year given the higher number of operating campuses in operation. Let us turn now our attention to our Chief Accounting Officer for a breakdown of adjusted EBITDA for the year and for Q4. Thank you, Francisco. As with prior quarters, I would like to take this opportunity to provide some additional context regarding elements of our reported results. Adjusted EBITDA is utilized by our management team to evaluate our operating and financial performance. Mike Schmitt: It is supplemental in nature and a financial measure not calculated in accordance with US GAAP. We define adjusted EBITDA as GAAP net income or loss before the add backs and subtractions that are enumerated on the left of this slide, which consist entirely of noncash or nonoperating elements of both income and expense, including, in the fourth quarter and for the year ending 12/31/2025, the significant unrealized gain on our outstanding positions. We have provided a reconciliation from our GAAP net income results for the year and quarter ended 12/31/2025. The primary item worth highlighting here is the general trend of adjusted EBITDA as we conclude fiscal 2025. While slightly down on a year-over-year basis, adjusted EBITDA improved for the third consecutive quarter to a negative EBITDA of approximately $1 million in Q4. This was driven by increased occupancy and rental rates at each of our campuses, particularly during the latter half of the fourth quarter as our run rates improved and turned positive. With that, I would like to take the opportunity to pass the call. Tal Keinan: Thanks, Mike. Good to be with everyone again. I am not going to run through this entire leasing update, but I will point your attention to a few items. First, on the stabilized campuses, we have been talking for a while about greater than 100% potential occupancy, and we are, on a number of campuses, starting to break into that greater-than-100% territory. There is still a long way to go on those, but we are there on a number of campuses already. On campuses in initial lease-up, the blue, you will see Phoenix and Dallas going quite nicely. They are moving a little bit faster than we expected, and Denver is moving a bit slower than we expected. And, you know, again, we are not going to nail the timing on all of these. But Denver is now coming along nicely. We also, I think, encountered some seasonal effects in Denver opening up in the winter season. That plays in your favor in Phoenix and Dallas, less so in Denver. In addition, have a look at the last three lines of that main chart: the high, average, and low rent. And a couple things that you will see in there. First of all, in the blue campuses, campuses that are in initial lease-up, you will see a significantly larger discrepancy between the highest and the lowest rent. The reason for that is, as some of you will probably remember, our leasing strategy on these campuses is to achieve 100% occupancy or greater as soon as possible, which means we do very short-term leases, including some six-month leases, at very low rents with the idea of beginning to negotiate in earnest on the basis of 100% occupancy. That is a strategy that we have seen work in the previous vintages, so we are doing it now in a much more deliberate way. So what you will see, for example, if you take the Denver column, APA 1, you will see that the highest rent is $41. That is somebody who is actually on a long-term lease. We are only doing long-term leases, meaning a year or more, at or above our target rents. And that $14.36 as the lowest is a short term. That is somebody who will either be cycled out or will agree to come up to the target rates once we are in, call it, full or long-term lease-up. And then, lastly, on the main chart, I will call your attention to the preleasing activities, which, again, after we finish Denver, Phoenix, and Dallas, we move to that preleasing strategy. Again, it is already in place. It has to be. In order to do that, you will see significantly higher average rents. Remember, just to make everything apples to apples, that $44.85, that is rent alone. That does not include fuel revenue on those campuses, whereas the numbers for the green and blue sections include rent and fuel. In the case of blue, it is contracted fuel. We could get more fuel flow-ish than that. But the preleasing numbers do not include fuel at all. And what that is beginning to point to, we think, is what we have been maintaining for a while now. Our first campuses were chosen on a somewhat arbitrary basis. We are now targeting the best airports in the country, and we expect to see that trend continue of rents coming up as we go. The last thing I want you to be able to look at on this page is the bottom left, the re-lease update. We promised to give the numbers on this, and I think we have alluded to the fact that it has been quite robust. But what we are talking about is, in 2025, leases that came to term—remember, these were all mature leases. This is not that initial lease-up exercise that I just referred to where we try to get to 100% occupancy. No. These are mature leases in Miami and Nashville, where the lease comes to term. Twenty-two percent is the average markup from the last year of the previous lease to the first year of the new lease. So what we think that is pointing to is, again, our thesis on airports being essentially Manhattan or beachfront property. There is a fundamental supply-demand mismatch, and supply cannot grow because of the limited number of airports at the rate that demand is growing. I do not want to say that we are going to see 22% escalations for the next fifty years of these ground leases, but we do expect a very robust re-lease rate. Reminding everybody on the call, the multiyear tenant leases feature annual escalators of CPI. It used to be with a floor of 3%. Today, it is a floor of 4%. So, on top of those CPI-with-a-floor-of-4% escalators, we are seeing an average 22% jump when one lease comes to term and the new one is signed. Next slide, please. Thank you. Okay. So—site acquisition, a couple things to call everyone’s attention to. I am looking at the chart on the right first. The green bar, that 1,096,000 square feet, that is airports that are in operation, starting in Houston and running all the way to Denver. The orange, the 1,149,000 square feet, that is airports we have under ground lease that are fully funded. And we will go through the funding a little bit further. But those are airports where we are now developing, and you will see a list of which airports are coming online in what order. So the green is in operation. The red is secured and fully funded. The yellow is secured and not yet funded. Again, we are not really in a rush to fund these yet because we are in a permitting process on all those airports. It will take some time. And there is phasing. There are airports where we are going to do phase one and wait a bit before we do phase two. In some cases, there is also a phase three on those airports. If you sum up all of the square footage of hangar buildable on airports on which we have ground leases, that is 4,160,000 square feet. Calling your attention to the left side of the slide, the map speaks for itself. The bottom of the slide is something that we want to try to get people used to a little bit. We have been defining our site acquisition goals in terms of number of airports. That is a proxy, a not-so-close proxy of what we are really going for, and it has the virtue that it is simple and easy to communicate a number of airports. But, as you saw, we met our guidance for 23 airports last year. We also secured new lands at two existing airports last year. And I can say that in the case, for example, of Stewart International in New York, securing that extra, whatever it was, 240,000 to 250,000 square feet of hangar-constructible land, that is worth a lot more to us than almost any new airport in the entire portfolio. So those expansions mean something, but they are obviously not captured if all you are doing is counting the number of airports. A closer proxy of what we are really going for is square footage of revenue-producing hangar. An even closer proxy is the total revenue available, because a square foot of hangar in the New York area is going to be worth more than a square foot of hangar in most other parts of the country. And then, finally—and we are going to find a way to communicate this simply. We do not have it yet. We do internally, but we do not have something simple enough, I think, to put out on these earnings calls. We will. It is: what is the total NOI available? Because there are airports where our OpEx per square foot is higher and airports where it is lower. Fundamentally, that is really what we are going for. We are trying to capture as much NOI as we can, assuming we are above a certain yield-on-cost threshold. So, again, we will find good and simple ways to communicate these things better. We are not releasing guidance yet. We will do that in the next earnings call for guidance for 2026. But expect that guidance to come in these terms, not really a number of airports, because, again, we just do not think that is a close enough proxy to what we are actually trying to achieve. Next slide is development. We spent a lot of 2025 really reconfiguring our development effort to go from something that is a little bit more sporadic and on fewer airports to a really significant program that is operating at scale. So we are seeing that happen right now. Just to make sure everyone understands what these numbers mean, starting at the top of the slide: rentable square feet under construction. You can see the timeline, what is going up as we enter 2026. It is about 750,000 square feet that is actually under construction, and that will continue to ramp up. Important to say, we are only talking about construction on existing ground leases, which is why you will see the 2027 square footage under construction, that 819,000 square feet, is likely to be low—meaning airports that we secure now, that we enter construction in 2027, are not captured here. And 2028 is very low; in fact, it is going down on this chart. And, again, that is because most of the construction that is going to be conducted in 2028 is on airfields that we have not secured yet. And then, based on our construction timeline, the next line is renta