SKYH

Business Context and Reporting Period

Company: Sky Harbour Group Corp (SKYH)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2024
Business Overview: Sky Harbour is an aviation infrastructure development company building a nationwide network of "home basing" hangar campuses for business aircraft. The company operates under a dual-class structure and an Up-C (umbrella partnership-C corporation) structure, with operating assets held by Sky Harbour LLC. As of December 31, 2024, the company operated five hangar campuses and had multiple projects in development across major U.S. metropolitan areas.

Key Financial Metrics

Note: Net Loss includes a non-cash unrealized loss on warrants of $34.5 million in 2024 compared to $8.6 million in 2023.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 95% year-over-year, driven by a 78% increase in rental revenue ($12.7M vs $7.1M) and a 371% increase in fuel revenue ($2.1M vs $0.4M). Growth was fueled by the commencement of operations at San Jose (SJC) and increased occupancy at Nashville (BNA) and Miami-Opa Locka (OPF).
• Expense Increases: Total expenses rose 43% to $35.2 million. Ground lease expenses more than doubled to $8.6 million due to new leases and the Camarillo acquisition. Employee compensation increased 35% to $13.9 million due to headcount growth and equity compensation.
• Acquisitions: In December 2024, the company completed the acquisition of CloudNine and Sky 805 at Camarillo Airport (CMA) for approximately $32 million in cash, expanding its footprint in the Los Angeles market.
• Capital Raises: The company raised approximately $75.2 million in equity through a two-closing PIPE transaction in late 2024 and an additional $1.1 million via its At-The-Market (ATM) facility.

Guidance, Outlook, Risks, and Unusual Items

Outlook and Guidance

The company does not provide specific numerical guidance for future periods. Management expects to continue investing in construction and development, with a long-term plan to develop up to 20 airport campuses. The company anticipates continued operating losses in the near term as it scales its portfolio.

Unusual Items

• Warrant Liability Volatility: The significant increase in net loss was primarily driven by a $34.5 million non-cash unrealized loss on the fair value adjustment of outstanding warrants, compared to $8.6 million in the prior year.
• Construction Defects: In late 2023, the company identified a design defect in its prototype hangar buildings requiring retrofitting at three projects (DVT, APA, ADS). This resulted in an estimated $26–$28 million in additional costs and construction delays of 3–5 months per project.

Risk Factors

• Construction Costs & Tariffs: Rising inflation and new U.S. tariffs on steel imports (effective March 2025) pose risks to construction budgets and timelines.
• Debt Covenants: The company is subject to a Debt Service Coverage Ratio (DSCR) covenant of 1.25 under its $166.3 million Series 2021 Bonds, with testing commencing in Q4 2024. Failure to meet this could trigger default.
• Ground Lease Dependency: The company operates under long-term ground leases with airport authorities. Termination or non-renewal of these leases would materially impact operations.
• Concentration Risk: While no single tenant accounted for 10% of revenue in 2024, the company previously relied heavily on two tenants (30% of revenue in 2023).

Investor Verification Checklist

• Debt Covenant Compliance: Verify the company's ability to maintain the 1.25 Debt Service Coverage Ratio required by the Series 2021 Bonds, given the current operating loss position.
• Construction Cost Overruns: Monitor the impact of the identified design defects and new steel tariffs on the budgeted costs for the 14+ projects currently in development.
• Warrant Liability Impact: Assess the sensitivity of the company's reported net loss to fluctuations in the stock price, which drives the fair value of the $46.1 million warrant liability.
• Liquidity Runway: Confirm that the $94.4 million in cash and restricted cash is sufficient to fund ongoing construction and debt service obligations without immediate need for further dilutive equity raises.
• Occupancy Rates: Track occupancy rates at newly completed campuses (e.g., SJC, OPF Phase I) to ensure they meet the revenue assumptions required to service debt.