Sky Harbour (SKYH) Q4 2025 Earnings Transcript

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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

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TAKEAWAYS

• Total Assets Under Construction and Completed -- Exceeded $328 million, supported by ongoing development at phase two in Miami, Bradley International, and Addison in Dallas, with new ground broken at Salt Lake City and more sites scheduled for 2026.
• Revenue -- Increased by 87% to $27.5 million, attributed to the acquisition of Camarillo and higher revenue from both new and existing campuses.
• Operating Expenses -- Rose to nearly $28 million, primarily due to a higher number of operating campuses and accrual-based expensing of ground leases.
• SG&A Expense -- Showed a small quarter-end dip because of reduced cash compensation for senior management; management targets a cash-based ceiling of $20 million for SG&A.
• Positive Operating Cash Flow -- Achieved for the first time, largely due to "the realization of $5.9 million in upfront rent, part of an extension of an existing tenant that closed in December."
• Adjusted EBITDA -- Hit breakeven on a run-rate basis in December, with fourth-quarter adjusted EBITDA at approximately negative $1 million, an improvement for the third straight quarter.
• Obligated Group Revenues -- Rose 49% year over year and 18% sequentially in the fourth quarter, with a moderate increase anticipated for 2026 and a further uptick upon new project completions in 2027.
• Re-leasing Uplift -- "Twenty-two percent is the average markup from the last year of the previous lease to the first year of the new lease" for mature leases in Miami and Nashville.
• Rent Escalators on Multiyear Leases -- Annual escalators have moved from a "It used to be with a floor of 3%. Today, it is a floor of 4%." on new leases.
• Aggregate Ground Lease Square Footage -- Stands at 4,160,000 square feet across the portfolio, encompassing active, funded, and future projects.
• Construction Program -- Approximately 750,000 square feet under construction entering 2026, with ramp-up planned, and development schedule showing accelerating campus deliveries and scale.
• J.P. Morgan Debt Facility -- Finalized five-year tax-exempt drawdown facility, undrawn at year-end 2025, now available to fund active projects with $200 million committed.
• 2026 Series Subordinate Bonds -- Secured $150 million at a 6% fixed interest rate, three times oversubscribed, with 18 institutional investors and a call option in year four; proceeds to amplify leverage.
• Illustrative Run-Rate Campus Economics -- Management targets $40 per square foot in rent, $5 fuel margin, $9 operating expense, and $36 NOI per square foot as a model for new deals.
• Cash and Treasuries -- Closed 2025 with $48 million in liquidity, now enhanced by $150 million bond proceeds and $200 million available from the J.P. Morgan facility.
• Prototype Build Cost -- Management cited "hard cost below $250 a foot," attributing declines to vertical integration (steel fabrication, general contracting) and scale-driven efficiency.
• Expansion and Waitlists -- Management reported consistent inability to meet demand at airports such as San Jose, citing their strategy to maximize net operating income via premium site acquisition and expansion in familiar markets.

SUMMARY

Sky Harbour Group Corporation (NYSE:SKYH) reported record consolidated revenue, citing 87% growth, and established positive operating cash flow, driven largely by upfront rent receipts from long-term tenant extensions. Management emphasized a deliberate shift in guidance metrics toward net operating income (NOI) capture over simple counts of airports or square footage, foreshadowing a more nuanced approach to capital formation and site development. The company outlined accelerated expansion with a fully funded pipeline facilitated by $150 million in subordinate bond financing and a $200 million J.P. Morgan debt facility, alongside expectations of continued efficiency improvements via vertical integration and development phasing.

• A new leasing approach enables rapid occupancy gains through short-term, below-target leases, followed by renegotiation to above-target, long-term contracts, supporting stable revenue ratchets upon stabilization.
• Campuses entering prelease and initial lease-up phases command meaningfully higher average rents than legacy properties, attributable to management's targeted site selection and pre-commitment strategy.
• Management committed to further cost reductions in future project builds, maintaining that ongoing vertical integration and process repetition will continue to compress build costs below the already achieved $250 per square foot baseline.
• Guidance for 2026 will prioritize NOI as the leading operational metric, with detailed targets forthcoming in the next quarterly disclosure.
• Asset monetization via ultra-long-term prepaid leases (described as hangar "sales") is viewed strictly as a capital management lever, with management stating such deals will occur only at compelling present-value terms.

INDUSTRY GLOSSARY

• Obligated Group: The ring-fenced set of campuses whose operating and financial results are consolidated for credit and bond covenant purposes within Sky Harbour Capital.
• NOI (Net Operating Income): The income from campus operations after operating expenses, before debt service and other non-operating costs.
• Ground Lease: A long-term lease of land on which Sky Harbour constructs and operates hangar facilities.
• Floor (as in CPI escalator): The minimum guaranteed annual rent increase, set here at 3%-4% regardless of actual inflation changes.
• Triple Net Lease: Lease agreement where the tenant is responsible for property taxes, insurance, and maintenance in addition to rent.

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. 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 that 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. Internally, we do, 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 after.

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 rentable square feet that is actually built and ready for occupancy. And, again, you can see how that grows.

I think through 2026 is probably pretty accurate. 2027, we might start to see a little bit of a bump up on that 2.35 million square foot number. 2028, we expect something significantly higher than 3.17 million that you see here. Shifting to the bottom, I am not going to take you through the eye chart on the right. But on the left, you will see our schedule of deliveries of campuses. We expect to deliver Miami phase two toward the end of next month, then in September Bradley, Connecticut, our first New York area campus. At the end of this year, Addison two, our second phase in Dallas.

And you can see, as we go down the list leading all the way to Dallas International at the bottom of the list, the pace of deliveries is obviously starting to ramp up. So I think we have gotten our development program to a place that we feel very comfortable right now in our ability to deliver on our 2026 and early 2027 schedule. There is still more ramp-up of our development resources required for the surge that is coming in 2027. With that, let me hand it back to Francisco. Tim?

Francisco Gonzalez: Thanks, Tal. As we announced last quarter, we finalized a five-year tax-exempt drawdown facility with J.P. Morgan that will provide debt funding for our next projects in the development pipeline.

Tim Herr: We expect to draw on the facility over the next two years as our airfields become ready for construction. To cover Sky Harbour Group Corporation’s required corporate contribution to the facility, we closed last month on $150 million of tax-exempt subordinate loans. The pricing was three times oversubscribed, with 18 distinct institutional investors coming into the credit. These bonds have a five-year maturity with a 6% fixed interest rate and a call option starting in year four, as we plan for an eventual takeout of both the bank facility and the subordinate bonds with long-term tax-exempt bonds once the projects are completed and cash flowing. Next slide. Quickly, these charts highlight the recent trading in our credit.

Our long bond from the original 2021 issuance has been trading higher as we approach the completion of our first obligated group project later this year. Our newly issued 2026 series bonds have also been trading higher following issuance last month. Now let me turn it over to Francisco for a discussion on future capital—

Francisco Gonzalez: Thank you, Tim. The 2026 series that Tim mentioned, of subordinate bonds, represents a fundamental rethinking of how we think of our economics and capital formation. We always knew we were going to issue subordinate bonds, but not this early in the life of our portfolio and not while still unrated on our senior obligated group credit. In this slide, we illustrate what the unit economics of a new campus looks like on average. We aim to target campuses across the US where we believe we will earn $40 per square foot in rent and $5 in fuel margin.

After $9 per square foot of operating expenses, we are left with, again, as an illustration, $36 per square foot of NOI. Before the issuance of these subordinate bonds, we had been assuming 70% leverage on the program or on the projects, resulting in a return on equity at the unit economics level close to 30%. With the increased use of our debt, specifically subordinated bonds replacing the use of equity, the same campus can now be expected to generate returns on equity higher than 60%. Of course, we are going to be deliberate and cautious in our level of leverage. I look forward to refinancing, as Tim mentioned, the subordinated bonds and the J.P.

Morgan facility well in advance of their five-year maturities. On a pro forma basis, we expect the coverage of such refinancing to still support investment-grade ratings for those bonds given the predicted coverage of all the existing and future projects under construction. Next slide. We closed the year with $48 million in cash and U.S. Treasuries, which now are enhanced with $150 million in gross proceeds from the 2026 series bonds, which closed last month, and $200 million of the committed J.P. Morgan facility late last year, which was undrawn at year-end but which we now start to use here in the current quarter to fund capital expenditures at the Bradley campus.

We now feel that we have created a fortress of liquidity at the company and are fully funded to double the size of our campuses and reach over 2 million rentable square feet, as I mentioned earlier. In terms of future capital formation, we will continue to be deliberate and prudent on our debt management, opportunistic in monetization of assets. As previously noted or disclosed, we received $5.9 million in an upfront rent payment last December as part of the extension of one of our hangars in our portfolio.

We also continue to negotiate and have now actually broadened the number of potential partners for the previously announced joint venture of one of our hangars in Miami, likely to include more hangars throughout the portfolio. We also have received interest from tenants who would also like to acquire hangars and then lease them. This type of asset monetization, either in the form of hangar sales or hangar lease prepayments, is a prudent way to generate equity capital in front of our future growth if, but only if, the valuation is supported and the alternatives are less attractive from dilution and cost-of-capital perspectives.

Let me now turn it back to Tal for end-of-year highlights and forthcoming initiatives in the four pillars of our business.

Tal Keinan: Thanks, Francisco. Okay. So on-site acquisition—2025 guidance of 23 airports under ground lease has been met. Like I said before, from our perspective, it is exceeded substantially through the two new ground leases on existing airports. And, like I said as well, we are refining our guidance metrics. Again, internally, we already use a metric that is much closer to targeting total available NOI rather than number of airports or square footage. But, again, we will get back in the next earnings call with guidance and with some clearly understandable metrics. On development, 2025 was the year of great investment in our development program. What I can say right now is, in the short term, things are looking good.

We are on time, on budget, on all projects. Our scale-up for the next big surge in development activity is underway, and, you know, hopefully, in our Q2 call, we will be able to say we are ready to go with the program that will carry us through 2027. And as we continue to grow, it is not just economies of scale; it is our vertical integration. First, it is steel manufacturing. Now into general contracting. Our prototype improvements, the constant value engineering of that prototype, has gotten our cost per square foot down lower and lower.

And I think a lot of people on the call appreciate that not only impacts our unit economics, it impacts our total market, because the number of airfields on which you can get a double-digit yield on cost goes up dramatically as your cost of construction goes down. I could say the same thing for cost of capital as well. On leasing, we continue to increase our revenue run-rate every quarter. And that is, again, something to be expected. Every time a new campus comes online, that is a ratchet up in our revenue run-rate. Again, once these things are stabilized, they are long-term leases.

Again, just to avoid any confusion, we do have a period where we have a mix of long-term and short-term leases in order to achieve 100% occupancy. But then we re-lease for the long term. Once that happens and stabilizes, that is a ratchet up in your revenue run-rate. It is stable. These are multiyear leases, again with escalators. And when they do come to maturity, the trend has been a very significant jump in revenue each time. So I think we can expect to see that continue. We talked about re-leasing, and we talked about the preleasing program, which is in place.

I think the first airport we will see dramatic wins on preleasing, really months before we actually open our doors, is going to be Bradley, Connecticut. On operations, our first phase two campus is ready to go operationally. We open our doors late next month; that is Miami phase two. One of the things to look at here is, we talk about the power of phasing. And so far, I think we have already seen the leasing dynamics. If you are opening up 160,000 square feet of hangar at once in Miami, it is a challenge on its own. If we had opened up 350,000 square feet at once, that would have been that much bigger a challenge.

So I think we are already seeing the benefits of phasing in that respect. But it is also an OpEx question, in that we will be able to operate the combined campus in Miami with the same headcount, or almost the same headcount, that we are already operating just phase one in Miami. So, you know, very significant efficiency gains as we do that. The next place we will see that is going to be Dallas phase two. The second, we will come up with a metric that is kind of objective for measuring the quality of our service offering.

The best we have been able to do so far is get some testimonials from some of the top flight departments in the country that base at Sky Harbour Group Corporation. There is a metric that we are going to put out hopefully by the next earnings call because it is increasingly important to us. It is a big differentiator. The time to wheels-up, the efficiency, the access of the aircraft, the security, the privacy, the customizable space, all of these things are a very big deal in aviation. We know it. We see it. We live it every day. We want to find a kind of objective way to communicate that to our investors.

So, hopefully, we will have that by the next earnings call. And then our big thrust in 2026—if the construction program was the big thrust in 2025—getting our OpEx efficient is the big thrust in 2026. What I can say today is that we are effective. And that is by design. We said, listen, we are going to overinvest. If we have an equipment shortage, there is no equipment shortage. We might have an equipment surplus. We are going to have a headcount surplus. We are going to do everything a little bit over to make sure that we have the absolutely bulletproof service offering, and really the best service in business aviation.

We are paying more than we need to pay to have that, though. So we are now in the process of very carefully and very deliberately finding the efficiency that we can find. I alluded to one of those, which is when you open phase two, for example, or if you have multiple airports in a single metro center—which you can see in our map we are having now—you can find all sorts of very, very exciting efficiencies. So I think part of that is kind of free money. There are those things that we can do, and that we are doing, that will, without any risk or any significant effort, increase the efficiency.

Then there are certain things that we have to be, again, very deliberate, and it will be a bit of an effort to get it down. But that is our big strategic focus for 2026. Looking forward, last slide. So site acquisition—again, our focus is on maximizing our NOI capture. I am going to preempt questions. We are feeling the rumblings of competition in our industry. I think we have talked about it on pretty much every earnings call. We are seeing it. It is still kind of anecdotal. We do not see a player like Sky Harbour Group Corporation coming and doing exactly what we do, but we think that is on the way.

And, again, the deepest moat we can dig around this business is capturing the last available land at the best airports in the country. So the focus this year is on max NOI capture—the best geographies in the country. Secondarily is same metro center expansion. And one of the things that we have learned is, knowing a market that we know intimately is a massive advantage. The fact that those markets know us intimately is a massive advantage. You cannot get space at Sky Harbour San Jose. You cannot get space. And we love that. That is great.

It would be great if we could expand in that market, because we know the specific people—because we are talking to them—who would like to be based at Sky Harbour and cannot because we have run out of space. So look to that trend happening as well in 2026. On the development side, the prototype program continues. Again, we have a biannual refinement of the prototype, so it gets better each time we go: higher quality, lower life-cycle cost, lower development cost of the flagship SH37 hangar. And, like we said, we are preparing for the big surge in development that will happen with the big surge this year and the bigger surge beginning in early 2027.

On the leasing side, the big challenge: square footage is coming online very fast. As you can see, we are stretched a little bit thin on the leasing side. We are looking to grow that team early this year. So short term, our objective is to meet that surge. The order of operations is: get those new campuses up to 100%, then go back and get those new campuses to market rent, and then third is take the legacy campuses—we are talking about that 22% jump in rents between lease terms—get those enhanced in Miami and in Nashville and in all of the legacy markets. And then long term, like I said, we are growing the leasing team.

It has always been a little bit too small, and I think it is one of the areas that we have been a little bit behind the eight ball. But we are growing it now. And then, lastly, operations—the defense—I never want to forget it. I do not know if our investors are particularly interested in this. We definitely are. A boring quarter in operations is a victory: zero safety incidents, zero service lapses. That is a very big deal. I do not think any other provider in business aviation can make that claim, and we continue to be able to make it. We do not take it for granted.

There is a lot of work that goes on to deliver that. What I consider offense is continuing to add services. We are working in conjunction with our residents to define the areas where we can really ratchet up our level of service, not looking at our competition. We do not really—does not bother us what our competition does. Looking at our residents and understanding their needs. And then, lastly, our 2026 OpEx efficiency program, and we will hope to have good numbers to report by the end of this year on OpEx. With that, thanks everyone.

Francisco Gonzalez: This concludes our prepared remarks, and we now look forward to your questions. Operator, please go ahead and lead the queue.

Operator: At this time, I would like to remind everyone, in order to ask a question, please submit it online using the webcast URL. We will pause for just a moment to compile the Q&A roster.

Ryan Myers: Should we be expecting the signing of any new ground in 2026?

Tal Keinan: Alright, Ryan. This is Tal. First, thanks for the coverage. Yes. The answer is yes. Again, we will be putting out guidance on the next earnings call for 2026. It is not going to come in the form of number of airports, like I said. It is going to come in the form of NOI capture, and we will have some clear metrics.

Ryan Myers: Nice work on reaching operating cash flow/adjusted EBITDA run-rate breakeven by year-end. How should we be thinking about that in 2026? Will you be breakeven going forward from here?

Francisco Gonzalez: Thank you, Ryan, for the question, and, again, also for your research coverage. Yes. So, obviously, our cash flows follow revenues. Revenues follow campus openings and leasing and lease rate increases. So Q1, Q2, if we are on time and on schedule for the opening of the second phase at Miami of Boca, we should be moving north from breakeven, and then, similarly, Q3 and Q4. Then, as I mentioned earlier, with Bradley opening up later on in the fall, and then phase two, we should then be a deep in deep black towards the end of this year. Thanks, Ryan.

Michael Tompkins: We noticed construction spend came in a little lighter in Q4 than prior quarters, likely due to timing of deliveries and development starts. Now, with the proper team and financing in place, how can we think about construction spend ramping as we move throughout 2026 and beyond?

Francisco Gonzalez: Thank you, Michael, for the question. Yes. As I mentioned earlier, construction expenditures are ramping up. We are breaking ground now in a variety of projects, and we have raised the capital to be able to raise the accelerator on a lot of these projects that we have been preparing for. Also, we need to note that we completed the onboarding of Ascend, our new subsidiary, doing in-house construction management, also general contracting of some, not all, but some of the campuses. With that and our liquidity being strong, you are going to see the acceleration of the construction spend in the coming quarters. Next question.

Michael Tompkins: It looks like you made some great leasing progress this quarter, especially at Deer Valley. What are your expectations for when those rents start to roll into earnings, and what are your expectations for stabilization across the three assets that were delivered in 2025?

Tal Keinan: Francisco, do you want to start, and I will finish?

Francisco Gonzalez: Yes. So you are correct. We have recently received the increase in occupancy at Deer Valley, and then, you know, we have noticed that, again, market by market, very specific to the situation, but we are seeing that it takes us from six to nine months to reach stabilization. And then we are doing more preleasing, as Tal mentioned earlier, on some of our upcoming campuses. It is great to see, from the finance perspective, some hard leases signed for products that we have not even broken ground on, even getting on a permit, like in Dallas. So that bodes well for future stabilization and the speed at which we reach that after opening.

But we expect some progression for the three assets that opened, basically, in the coming two quarters.

Tal Keinan: Yep. Fair, and, Michael, I appreciate that you asked specifically about those three assets delivered in 2025, because, like Francisco just said, we are transitioning to a different lease-up strategy where we start a lot earlier. Just to remind everybody, even though you see, for example, Phoenix and Dallas at roughly 80% leased now, remember that when we hit 100%, we do not call that stabilization. A, because some of those are short-term leases that need to be recycled into long-term leases at our true market rates; and B, because we do not really stop at 100%. We can get beyond 100%, as we are showing in the legacy accounts.

Gaurav Mehta: How many additional ground leases do you expect in 2026?

Tal Keinan: It is Tal. Gaurav, thank you for the question. Thanks for the coverage. We are going to put out formal guidance at the next earnings call. Again, expected to come not in the form of number of ground leases, but some metric that is much more specific to how much NOI we are generating. That fundamentally is the metric we should be pursuing.

Gaurav Mehta: Why is the average rent at preleasing campuses higher than stabilized and in initial lease-up campuses?

Tal Keinan: Yep. Thanks for that as well. It is Tal again. It is what I alluded to in my earlier remarks, which is, when we—not to disparage Houston—but we showed up at our first airports, it was very much, “Hey, stay away from New York City,” because we know that is the best metro center in the country for us, and we know we are going to make mistakes at the beginning. Other than that, we were not that particular about which metro centers we targeted at the beginning. Some are better than others, as you can see. Our targeting is much more precise today. The airports are getting better and better.

We know what we are looking for at those airports. So when we lease a hangar literally eighteen months out—we are talking about hard cash deposits in the bank, binding contracts on those leases—they are coming in at higher numbers than our existing campuses. That is the reason.

Timothy D’Agostino: Quarter over quarter, multiple facilities had their projected construction start and completed dates changed to TBD: APA phase two, DVT phase two, HIO phase two, IAD phase two, ORL phase two, and POU phase two. Can you walk us through what led to those changes shown in the 10-K?

Francisco Gonzalez: Thank you, Tim, for the question. It is clear that you are reading the detail, and thank you for your coverage. I am glad of this question because we obviously have, at the margin, to decide where do we go and do a phase two, and where we do a phase one, of the ground leases that we have secured. And, you know, ground leases will continue to be generated every year. So we set to put TBD on phases two to give us the flexibility in terms of when we actually are going to go ahead and implement that.

It is going to depend on, of course, how phase one went, how the leasing went, how we feel in terms of making sense of adding that capacity to that particular market. Let me also note that having our funding of construction now through a drawdown facility in the bank gives us even more flexibility to do that type of optimization in terms of when we do a phase two versus a phase one on our campus, which is not something you get if you are doing it with fixed financing from the get-go where you almost have to determine exactly what you are doing from the get-go.

Tal Keinan: Next question.

Pranav Mehta: Can you explain the unit economics slide more? The most recent feasibility study has NOI around $20 per square foot for both obligated groups. Why do you think it would be $36? Only two properties have rent above $45 per square foot.

Francisco Gonzalez: Thank you for the question. And, again, let me remind that this was an illustration, but something that we believe we are going to meet or likely surpass. Right now, we are entering into leases, and we have leases higher than $40 of rent in Miami, in San Jose, in Bradley, and in Dallas. The ones that we have preleased. We feel very comfortable that, as Tal mentioned, the airports that we are constructing now and are still forthcoming, on average, are better airports than our first vintage obligated group, so we are likely to see rents and overall revenues per square foot trending higher on our new accounts.

Pat McCann: At this point, how much of a new campus do you ideally want preleased before construction begins, and how do you balance early visibility against the opportunity to push rents higher closer to delivery?

Tal Keinan: Just reading the question again. At this point, how much of a new campus do you ideally want preleased before construction begins, and how do you—okay. Great question, Pat. And, again, thank you as well for the coverage. First of all, it is not really before construction begins per se. Yes, we are preleasing now before construction begins in a lot of these campuses. That is not really the threshold moment. The right time is about nine months before we intend to open those campuses. How much do you tend to—your question is very elegant. The first part ties to the last part very well.

You are leaving some money on the table, of course, when you do that, when you prelease so far in advance. I think a good number—and we will experiment with this as we go and optimize it—but a good number is 50%. And when you open up, you are going to leave the second 50%. And you are right, our expectation is you will see somewhat higher rents on the second 50%. But the fact that we go in cash flowing—remember, at 50%, we are meeting our debt obligations handily already—I think is probably the right way to do it. And remember, we are not doing, you know, the average lease term is significantly less than five years.

Whatever money you are leaving on the table, you are not leaving it on for a very long time. But I think your relapse will come over time as we optimize that.

Don Kedick: With the first obligated group nearing completion, what is the actual IRR or yield on cost you think you achieved?

Francisco Gonzalez: Thank you, Don, for the question. At Sky Harbour Group Corporation, we are very data driven, and we have all the data, and we are going to be looking back with backtesting at all our projects by phase and crunch all the numbers in terms of looking back and keeping track of profitability by campus and by vintages and so on. Of course, if you look back, we faced in our first portfolio the COVID construction inflation that we certainly underestimated, and then we had the design issue that we addressed a year and a half ago. That obviously resulted in us having to put more equity into the obligated group than we really expected.

So the yield on cost at the outset is not going to be what we would hope for our campus. Having said that, though, rents have been coming in higher than we originally forecasted. So, yes, we are going to be lowering yield on cost at the first point of stabilization, but then, as Tal mentioned, we are experiencing higher rents and we are experiencing higher bumps on those first renewals. So there is another calculation that happens, I would say, two years after the first stabilization or the second stabilization when you have hit market rates of those leases in that particular campus or that particular vintage.

And then, lastly, in terms of IRRs, IRRs incorporate that increasing rent that we experienced with inflation. Remember, we have CPI with a floor of 3% or 4%—only new leases have 4%—and then those bumps. The IRRs should offset some of those increased costs that we experienced. So stay tuned for those vintage portfolio calculations when we complete the obligated group at the end of this year. Next question.

Gaurav Mehta: Can you please provide details on your interest in selling hangars? Should we expect any sales this year?

Francisco Gonzalez: Thank you for the question. As I said in the prepared remarks, we are going to be very deliberate about entertaining this. There are some big concerns out there that really just increasingly do not like to rent. They maybe made their money in real estate and just do not want to lease. So, of course, we will be deliberate in terms of—and for us, the sale is an ultra-long forty- or fifty-year tenant lease where the tenant pays upfront for the right to basically have that hangar. It is just, conceptually, a sale. So we put up, obviously, numbers, and we are in the leasing business.

We truly believe that, on a present value basis, we have maximized the value to our shareholders by keeping these assets and leasing them over time. But at the right price, and if that tenant will only participate in a particular campus if by “acquiring,” we will state that if it makes sense.

Tal Keinan: I would add to that, Gaurav, that those ultra-long-term prepaid leases, aka sales, should be looked at as a tool in the growing arsenal of cost-of-capital reduction mechanisms that Francisco and team have at their disposal. It is another one of these: what is it worth to us today, from an NPV perspective? You never want to do these deals—and, to be clear, the conversation that we have with our residents who want these deals are very explicit. They are coming to us saying, we agree with you on your inflation expectations. We want to protect ourselves. I think, in one case, “I am going to be flying for the next fifteen years or so.

I am probably going to phase out. I want to lock in whatever I have. I am willing to prepay. I am willing to prepay at a premium to get that done because I do not want to be subject to escalations and to reset.” So, by definition, there is a zero-sumness to this whole exercise. So it is definitely not an exercise in trying to beat our NPVs on the leases. It is about cost of capital.

Alex Bossert: A recent sell-side report from BTIG indicates that you are now seeing build costs closer to $250 per square foot on your active sites. Could you unpack the primary drivers of this reduction in build costs? Specifically, how much of this efficiency is being driven by the vertical integration of Stratus and Ascend versus the natural economies of scale as you shift into phase two expansion? Finally, is $250 per square foot the right baseline to use, or do you see room for even further cost compression as you scale?

Tal Keinan: Thanks for that question, Alex. Starting at the end, no, we are going to continue fighting. This is definitely not, you know, when we hit our goals, we reset our goals. Again, this is very, very material. To get your hard cost below $250 a foot not only improves your unit economics, it grows your total addressable market. If you can get that to $240, even more so; if you get that to $230, even more so. So we will continue fighting to get it down. How are we doing it? Yes, vertical integration is definitely a big part of it.

The fact that we are subject, for example, to volatility in steel prices, but we can manage that volatility because we have virtually limitless space for inventory of steel at our plant in Texas, means we are not subject to the much higher volatility in pre-engineered metal building component prices, because that is our output. So the vertical integration is a key piece of it. The vertical integration into construction management and general contracting is another big piece, as a guess. I think I have said on this—say, if you are going to assemble a set of eight dining room chairs from IKEA, you are probably going to get something wrong in that first chair.

You follow the instructions, but you are going to mix up left and right, and you are going to have to take it apart and put it back together again. Second chair, you are going to get it right. Third chair, you are not going to be looking at the instructions. Four through eight, you are going to be doing faster than you did the first chair. Same thing in our business. The erection of these hangars comes at a very, very specific sequence. There is a lot of nuance in it. Getting it right and getting it fast matters a lot.

Here is the fact that we are now doing it over and over again across the country, not working with the general contractor who is seeing it for the first time as we have done up until now, is a big deal. There is more to it, but put all of those together; that is where we are seeing the economies.

Christian Solberg: What percent of your airports that are operating currently have waitlists?

Tal Keinan: Yep. Christian, thanks. We—so, not exactly waitlists that we operate. Meaning, it is not first come, first serve. If you are first on the list, you get a hangar first. If you are second, you get the hangar second. We keep lists of interested parties, and they are dynamic lists. Somebody could come and say, “I really need a solution right now.” If we do not have room, they might find a solution elsewhere and might become not relevant for a while. So we have lists of interested parties. When we come up with space—and this is particularly on the semi-private model; that happens a lot more frequently—we reach out to all of those guys.

What is important, I think, to understand in that is, it is a flipping of the dynamic. When we open Miami phase one, you have got 160,000 square feet of vacancies. Everybody is shrewd. Everybody is sophisticated in this business. They understand that they have the leverage in that negotiation. Once the campus is stabilized, it is really the mirror image of that: you have multiple parties interested in one space. And if you stagger appropriately, which we do—you want to have two or three hangars coming to term at the same time—if staggered appropriately, you can keep that dynamic. So it is not exactly a waiting list. It is really an interested-parties list.

Alan Jackson: First, is the gestation period shorter for the expansion of existing airports as compared to acquiring brand new ground leases? Are there any differences in the acquisition process between the two? Second, does management anticipate a need for hangars with a door threshold higher than 28 feet? Is the prototype able to be adjusted for airplanes as they become larger?

Tal Keinan: Yes. Two good questions, Alan. Thanks. So, yes, there are a lot of advantages to expanding an existing field. Like I said earlier, you know the market and the market knows you at those airports. So that is a very big deal. We can also typically achieve greater efficiencies on ground rent. If you have a larger plot, you have more options for layout plans that could be more efficient. Again, revenue density is obviously critical to us, so the bigger plots lend themselves to that. And then, lastly, your OpEx—your OpEx per rentable square foot goes lower.

There is a certain number of people that you need, come what may, on a campus, so scale is your friend as you grow. With regard to door threshold height, I do not know if you are watching it, but the NFPA 409 Group 3 standard 2026 edition allows you to go up to 34 feet of threshold height. So we have adjusted the prototype to go up to 34 feet. Remember that NFPA 409 is not mandatory, so the adoption rate is different in different geographies.

We have come up with a kind of temporary solution where you have a valance which takes you down to 28 feet, keeps you compliant with 2021 standards for NFPA 409, and then, once the jurisdiction adopts those standards, you can remove the valance, and now you are at 34 feet. Because you are absolutely right: Falcon 10X, likely to be certified this year, is a 29-foot-and-change tall airplane. It does not fit in 28-foot door threshold hangars. So, good question.

Francisco Gonzalez: Operator, I think we have time for two more questions. We started a little late. Let us take two more questions, and we will close it there.

Alan Rodlow: Might a NetJets or a Flexjet decide to rent out an entire hangar for their clients to use where they are not able to build their own hangar? They seem to be moving away from always leaving jets on the ramps of airfields.

Tal Keinan: The short answer is yes.

Dave Storms: With regards to the step up of 22% following re-leasing, how sustainable is this kind of step up, and are there any geographies that are running ahead of or behind this? With the OpEx program underway, can you talk more about any specific levers being pulled here or maybe where you are seeing easy wins?

Tal Keinan: With the second one. The easy ones are things like just enforcing our triple nets on our leases. We did not have good enough standardization on our tenant leases early on, and most of those are the leases that are in effect. Slightly different rules on each lease, which leads to lack of enforcement of triple net. So, you know, your insurance rates go up on an airport; we are covering a lot of what we do not really need to be covering today. That is an example of an easy one. It is just being compliant with our agreement. With regard to the sustainability of that 22% step up, it is a good question.

We do not want to make huge claims going forward. To be clear, I do not think it is going to be 22% ongoing for the duration of these leases. If it were half that, if it were a quarter of that, I think you have a very exciting story. Just throw that into the model. Your inflation rate is probably the most sensitive item in the entire financial model of the whole business. So it is a very big deal. We are excited about—what I can say is, if you own a car in New Jersey, a $50,000 car, and you have a house in New Jersey, you park it for free in the driveway of your house.

When you move into Manhattan, they are going to charge you a thousand bucks a month to garage your car. That is going to bother you for a little while. But at some point, you just accept it as part of the cost of owning a car in Manhattan. Fundamentally, hangar rents have been a footnote in the annual OpEx of a large jet owner, a footnote. I do not think that should be the case. If anything is a commodity in this business, it is fuel. It is not real estate. Real estate is actually the most precious asset in this entire industry. It should occupy a much higher level on your ranking of aircraft ownership OpEx.

We think it is going there, and there is a lot more to go on that.

Francisco Gonzalez: Thank you, operator.

Operator: There are no further questions at this time. Mr. Francisco Gonzalez, I would like to turn the call back over to you.

Francisco Gonzalez: Thank you, operator, and any leftover questions, because we are out of time, we will answer directly. Also, let me remind everybody again that you can find further information on our website, www.skyharbour.group. You can always reach out directly with financial questions through our email, investors@skyharbour.group. Thank you again for your participation. With this, we have concluded our webcast. Thank you all.

Operator: This concludes today’s conference call. You may now disconnect.

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