Sky Harbour Group Q2 FY26 earnings call SKYH

Sky Harbour's assets under construction and completed construction reached over $393 million, marking a $65 million increase year-to-date and the highest 6-month pace in corporate history. The company is on track and on budget with all current developments, including Bradley, Dallas Addison, and Salt Lake City. Management expects to significantly scale up, increasing square footage under construction from over 600,000 sq ft to over 1.2 million sq ft by year-end, driven by vertical integration and general contracting capabilities.

Consolidated revenues grew 50% year-over-year and 13% sequentially, with the obligated group's revenues increasing 79% YoY and 22% QoQ. While leasing in Denver (APA 1) has been slow, the company employs a strategy of offering short-term introductory rates in campuses like Phoenix (DVT 1) and Dallas (ADS 1) to achieve full occupancy quickly, with multi-year tenants in Dallas paying $40s-$50s per square foot. The average re-lease step-up rate was 19% for 100,360 square feet renewed in the last 12 months, reflecting leases often entering their third term.

Operating expenses increased in tandem with new campus openings, particularly due to non-cash accruals for new ground leases. However, the company anticipates gross profit margin expansion from Phase 2 openings in Miami-Opa Locka and Addison, leveraging existing personnel and equipment to serve expanded campuses. The third version of their prototype, launching in Fort Worth, is designed to be more functional and cost less per square foot, with current construction costs around $242 per square foot, down from over $300 previously.

Sky Harbour closed the quarter with significant liquidity, holding over $207 million in cash and US treasuries, and an additional $130 million available from a J.P. Morgan committed construction loan. The company completed a $40 million direct equity placement at $10 per share, bringing cumulative equity investments to over $300 million. Management expects potential additional primary proceeds of $94 million from public warrant exercises by the end of next January, aiming to cover all equity needs for the foreseeable future.

The company's site acquisition strategy is increasingly focused on large-scale expansions at Tier 1 airports and geographies, aiming for 300,000-400,000 square feet per site to maximize revenue and operating margins. Despite capital flight from California, the company maintains high conviction in the market due to strong rents and the frequent return of wealthy residents, alongside the emergence of new billionaires, justifying continued investment in the region.

Sky Harbour rolled out the 'Sky Key' program, a new revenue driver designed to provide network access and consistent service to top residents across multiple campuses. This program aims to enhance the resident experience, which the company emphasizes as a key differentiator. Sky Harbour consistently ranks as the #1 home base solution in business aviation, maintaining waiting lists at stabilized campuses despite charging higher rates.