Sky Harbour Group Corp. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. Financial statements are audited; the auditor did not express an opinion on internal control over financial reporting.
Business context
Sky Harbour develops, leases and manages private hangar campuses for business aircraft, primarily on long-term airport ground leases. At year-end, three campuses were operating: Sugar Land, Nashville and Miami-Opa Locka Phase I, with 29 hangars and 375,241 rentable square feet. Weighted occupancy was 79.3%. The company reported 53 hangars and about 1.17 million square feet in its development pipeline.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $7.6 million | $1.8 million |
| Operating loss | $17.0 million | $18.9 million |
| Net loss | $25.4 million | $13.7 million |
| Net loss attributable to Sky Harbour Group shareholders | $16.2 million | $3.2 million |
| Basic and diluted loss per share | $0.98 | $0.23 |
| Cash used in operating activities | $7.7 million | $27.5 million |
- Revenue rose 311%, primarily as leases commenced at Miami-Opa Locka and Nashville and additional leases took effect at operating campuses. The filing does not present a gross margin.
- Operating expenses were $7.2 million; depreciation was $2.3 million; general and administrative expense was $15.1 million. Operating loss narrowed, but net loss increased mainly because the warrant remeasurement changed from a $5.1 million gain in 2022 to an $8.6 million loss in 2023.
- Cash, restricted cash, investments and restricted investments totaled $172.3 million at year-end. Of this, $100.2 million was restricted; cash and unrestricted investments were approximately $72.1 million. Cash and restricted cash alone were $72.3 million.
- Cash used in investing activities was $16.3 million and cash provided by financing activities was $54.9 million. The company raised approximately $57.8 million gross in a November private placement of shares and warrants.
- Series 2021 Bonds had $166.3 million principal outstanding and a $162.4 million carrying amount, with stated rates of 4.00%–4.25% and maturities in 2036, 2041 and 2054. Other loans and finance lease liabilities totaled $9.3 million, including a variable-rate loan due December 2025. Total liabilities also included $69.4 million of operating lease liabilities.
- Bond debt-service coverage testing begins with the quarter ending December 31, 2024; the required ratio is 1.25, subject to the indenture’s cure provisions. The company reported compliance with debt covenants at December 31, 2023.
Material changes, outlook and risks
- In December 2023, independent engineering reviews found a significant design defect in prototype hangars for the Centennial Phase I and Deer Valley Phase I projects. The company expects retrofits also at Addison Phase I, with estimated aggregate additional costs of $26–$28 million and delays of three to five months for each affected project. Management expects to fund increased project costs with corporate cash contributed to the bond-funded project group; cost and schedule estimates remain uncertain.
- A tenant renting two Miami-Opa Locka hangars exited after a negotiated lease settlement. The settlement included about 8.5 months of additional rent. The two largest tenants together represented 30% of 2023 revenue, down from 78% in 2022; their leases expire in November 2025 and December 2026, assuming no extensions.
- The company estimates its cumulative 20-campus plan at approximately $1.2 billion, with 65%–75% expected from private activity bonds or other debt and the balance from equity or equity-linked financing. Future projects are discretionary and depend on ground leases, permits, construction execution, leasing and access to capital. No specific near-term earnings or revenue guidance is provided.
- Management cites inflation, construction-material and labor costs, elevated borrowing rates, limited operating history, tenant concentration, competition, airport lease obligations and dependence on external financing as significant risks. Secured debt exposes project assets to foreclosure if obligations are not met.
- The company’s 2023 results include an $8.6 million non-cash unrealized warrant loss. A previously reported material weakness in cash-flow classification controls was remediated as of year-end, according to management; management also concluded disclosure controls and internal control over financial reporting were effective.
- The company reported no material legal proceedings. It does not intend to pay cash dividends in the foreseeable future. Subsequent to year-end, it signed ground leases at San Jose and Orlando Executive airports.
Important facts for investors to verify
- Whether the retrofit cost and schedule estimates prove adequate, and whether the affected projects can be completed and leased on revised timelines.
- How much of reported liquidity is available for corporate needs versus restricted to bond-financed projects, and whether additional financing can be secured on acceptable terms.
- Tenant retention, lease expirations and occupancy progress, especially given the prior concentration in two tenants and the Miami-Opa Locka tenant departure.
- Compliance with debt-service coverage requirements beginning in late 2024, and the ability to service debt alongside long-term ground lease commitments.
- Potential dilution from outstanding warrants, redeemable Sky units and future equity financing; the filing reports 16.1 million warrants outstanding at year-end, generally exercisable at $11.50 per share.
- Execution and funding of the stated campus expansion plan, including whether projected demand, construction costs and lease economics support the approximately $1.2 billion program.