SKYH

Sky Harbour Group Corp. 10-Q Summary (Q3 2025)

Business Context and Reporting Period

This filing covers the quarterly period ended September 30, 2025. Sky Harbour Group Corp. (SHG) is an aviation infrastructure development company operating under an Up-C structure. It develops, leases, and manages general aviation hangars across the United States. As of the reporting date, SHG owned approximately 44.6% of the operating subsidiary (Sky), with the remaining 55.4% held by non-controlling interests (LLC Interests).

Key Financial Metrics

Note: Net income for YTD 2025 includes a significant non-cash gain of $22.3 million from the change in fair value of warrant liabilities.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 92% year-over-year for the quarter and 93% for the nine-month period. This was driven by the acquisition of the Camarillo (CMA) campus, increased occupancy at existing sites (BNA, OPF, SJC), and the commencement of operations at DVT, ADS, and APA campuses.
• Expense Increases: Operating expenses rose significantly due to new campus operations, higher ground lease expenses (new leases at SWF, HIO, IAD, SLC), and increased depreciation from newly completed assets. Employee compensation increased due to headcount growth and equity-based compensation.
• Warrant Liability Impact: The company recorded an unrealized gain of $3.0 million in Q3 and $22.3 million YTD 2025 related to warrants, compared to losses of $16.0 million and $23.9 million in the same periods in 2024. This non-cash item was the primary driver of the shift from a net loss to net income for the nine-month period.
• Liquidity: Cash and restricted cash decreased from $94.4 million at the start of the year to $36.5 million at period end, primarily due to $58.5 million in construction payments and net cash used in operating activities.

Guidance, Outlook, and Risks

• Capital Resources: In September 2025, the company entered a Credit Agreement with JPMorgan for a term loan facility of up to $200 million (expandable to $300 million) to fund construction. In October 2025, an interest rate swap was executed to fix the SOFR component of loans at approximately 2.65%.
• Construction Pipeline: The company has a robust pipeline of properties in development, including phases at ADS, APA, BDL, DVT, HIO, IAD, OPF, ORL, POU, PWK, SJC, SLC, SWF, and TTN. Total estimated construction costs for the pipeline range from $609.4 million to $667.4 million.
• Risks:
  • Construction Costs: Risks include inflation, labor shortages, and tariffs on steel imports. The company previously incurred $26–$28 million in retrofit costs due to design defects in prototype hangars.
  • Lease Commitments: Ground leases contain covenants requiring minimum capital improvements within specific timelines (e.g., $60 million at SWF, $40 million at SLC). Failure to meet these could result in termination or penalties.
  • Debt Covenants: The company must maintain specific Debt Service Coverage Ratios (DSCR) and Leverage Ratios under its bond and credit agreements.

Investor Verification Checklist

• Warrant Liability Volatility: Verify the sensitivity of net income to changes in the fair value of the $23.9 million warrant liability, as this significantly distorts GAAP profitability.
• Construction Progress vs. Budget: Monitor the "Cost of Construction" line item against the $609–$667 million pipeline estimate to ensure projects remain within budget despite inflation and retrofit history.
• Ground Lease Milestones: Confirm adherence to minimum spend covenants for new leases (SWF, SLC, ORL) to avoid termination risks.
• Occupancy Rates: Review the occupancy rates of newly completed campuses (DVT, ADS, APA) which were at 25%, 54.6%, and 14.3% respectively as of September 30, 2025.
• Liquidity Runway: Assess the sufficiency of the $36.5 million cash balance against the $58.5 million construction outflow and ongoing operating losses.