Sky Harbour Group Corporation 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and good afternoon, everybody, and welcome to the 2026 second quarter investor conference call and webcast for the Sky Harbour Group Corporation.

We have also invited our bondholder investors and lenders in our borrowing sub-series, Sky Harbour Capital, Sky Harbour Capital II, and Sky Harbour Capital III, to join and participate on this call as well. Before we begin, I have been asked by counsel 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 contain 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 1 and 2 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. Now let's get started. The team with us this afternoon you know from our prior webcasts, our CEO and Chair of the Board, Tal Keinan, our Treasurer, Tim Herr, our Chief Accounting Officer, Mike Schmitt, Accounting Manager, Tori Petro, and our Assistant Treasurer, Andreas Frank. We have a few slides we want to review with you before we open it to questions.

We're starting on this webcast today will be limited to those from the research analyst community that have us under coverage. We decided that, as you may have remembered in the past, we have run out of time usually, and not all of the questions get addressed. We decided to change to this structure. Obviously, we welcome any and all investor questions afterwards through our investor email at investors@skyharborgroup. I will make an effort to respond promptly. We just filed a few minutes ago our 10-Q with the SEC and our second quarter financials for Sky Harbour Capital related to the Series 2021 bonds, and for the Sky Harbour Capital III, related to the Series 2026 bonds with MSRB EMMA. We also just filed a prospectus supplement to our existing shop registration program. Let's get started then. If we could go to the slide with our recent results.

At the end of the second quarter, on a consolidated basis, assets under construction and completed construction reached over $393 million. That is a $65 million increase year-to-date and the highest in six months in our corporate history. What this means is that the pace of investment and new construction at Sky Harbour continues to accelerate, and these columns will continue to grow at an ever higher incremental rate. Q2 revenues experienced an increase of 50% over a year ago and 13% sequentially, given the new campus openings in the past year and increases in occupancy and rental rates. Operating expenses in Q2 continued to increase in tandem with new campus openings, impacted in particular by increases in campus headcount and in non-cash expense accruals of new ground leases entering in the past year, which are not yet constructed or in operations.

As in the prior quarter, a significant amount of the increase in OPEX is related to the signing of new ground leases at the end of last year. With that expense, more than half is non-cash accruals of new ground leases payments into the future. We look forward to benefiting from the operating leverage for our Phases II with Miami-Opa Locka, which has now been open for four months, and later this year with the opening of Addison Phase II. We expect gross profit margin expansion with these two Phases II with the same people and field trucks serving basically a doubling of those respective hangar campuses. We strive to keep SG&A in check as we grow, keeping frugality front and center in our expense and cost management initiatives.

Cash flow provided by operating activities reached positive territory of roughly half a million dollars, reaching a significant milestone in the company's history. Going forward, equity proceeds will only go to new project CapEx and not to fund current operating expenses like in the past. Next slide, please. This is a summary of the financial results of our wholly owned subsidiary, Sky Harbour Capital, and its operating sub-series that form the obligated group. Assets under construction are still growing as we completed Opa-locka Phase II in Q2 and will soon stabilize with the completion of Addison Phase II at year-end, which, as many of you know, is the last project of the obligated group first vintage of campuses that were financed by the Series 2021 bonds. Revenues of the obligated group increased 79% year-over-year and 22% sequentially.

We expect continued step function increases in revenues in Q3 and Q4 with the continued new leasing of Phase II in Opa-locka and then Q1 and Q2 of 2027 after the opening of Addison Phase II. As I mentioned before, we expect a marked increase in gross profit and EBITDA margin expansion with those added revenues and limited increase in operating expenses, given the ability to use the same personnel and equipment with expanded campuses that double in size. Cash flow from operations reached almost $3 million in the quarter and increased from $2.2 million a year ago. This constitutes 10 consecutive quarters of positive cash flow from operations, providing ample and growing debt service coverage for our bondholders and bank facility lenders. Let me pass it on to Mike Schmitt for a discussion of our adjusted EBITDA calculation.

Something we did a few quarters ago, but it is important to refresh given the importance of this adjustment to our EBITDA.

Mike? Thank you, Francisco. As with the prior quarter, I would like to take this opportunity to provide additional context regarding elements of our reported results.

We have provided a reconciliation from our GAAP net income results for the quarter ended June 30, 2026. We believe this measure is important due to the impact of non-cash items within our reported results. Particularly, the non-cash operating expenses at our campuses that are not yet operational, stock compensation expense, and gains and losses arising from marking our liability classified warrants to market. As seen in the diagram, adjusted EBITDA improved to approximately negative $0.9 million in Q2 2026. This is driven by continued improvement of results at our operating campuses where revenues continue to increase as operating expenses remained relatively flat. Adjusted EBITDA is supplemental in nature and is not calculated in accordance with GAAP.

Our definition of EBITDA and other non-GAAP measures can be found in the Management Discussion and Analysis section of our Form 10-Q. With that, I would like to pass to Tom.

Thanks, Mike. All right. Leasing update. I am not going to go through all of the cells on this chart. Let me just highlight a couple things. First, take a look at APA1. That is Denver Centennial phase one. One of the things that should jump out at you on this chart is our relatively low economic occupancy. Leasing has been slow in Denver. That is just the state of affairs. Not all of these lease up at the same time. Some take longer than others. I will point to examples like Miami and Nashville. Miami took almost a year and a half to lease up phase one, and Nashville took even longer than that. Both of those are very robust cash flowing campuses today. We are not concerned about it. We wish we could move faster on this, but that is the state of affairs.