SKYH

Sky Harbour Group Corp. 10-Q Summary: Q1 2026

Business Context and Reporting Period

Company: Sky Harbour Group Corp. (SKYH)
Reporting Period: Quarter ended March 31, 2026
Business Model: Aviation infrastructure developer operating a network of "Home Base Operator" (HBO) campuses for business aircraft hangars across the U.S. The company operates under an Up-C structure, with Sky Harbour LLC holding operating assets.
Portfolio Status: As of March 31, 2026, the company operated 57 hangars with 84.6% physical occupancy and 86.9% economic occupancy. Significant construction activity is ongoing at multiple sites including SLC, BDL, and OPF Phase II.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 56% to $8.7 million, driven by a 46% increase in rental revenue (new campuses at DVT, APA, ADS) and a 97% increase in fuel revenue.
• Expense Increases: Total expenses rose 26% to $15.7 million. Ground lease expenses increased 36% due to new leases at SWF, HIO, LGB, and FTW. Depreciation and amortization increased 79% as new assets came online.
• Debt Expansion: Total debt more than doubled from $183.4 million to $359.3 million. This includes the issuance of $150 million in Series 2026 Bonds in February 2026 and draws on the Term Loan Facility and Yorkville Promissory Notes.
• Investing Outflows: Net cash used in investing activities surged to $126.9 million (from $4.5 million prior year) due to $30.5 million in construction costs and significant purchases of restricted investments ($114.9 million) funded by bond proceeds.
• Warrant Liability: Unrealized loss on warrants decreased to $0.8 million from $2.5 million in the prior year, contributing to a lower net loss despite higher interest expenses.

Guidance, Outlook, and Risks

• Capital Deployment: Proceeds from the Series 2026 Bonds and Term Loan Facility are designated to fund the "2026 Projects," including construction at seven airport locations. The company expects to continue investing heavily in construction, resulting in operating losses in the near term.
• Refinancing Risk: The Series 2026 Bonds are subject to a mandatory tender on January 1, 2031. The company must refinance or remarket these bonds by that date.
• Construction Risks: Management highlights risks related to inflation, supply chain disruptions, and potential tariff impacts on steel and concrete costs. While GMP contracts are used, cost overruns remain a possibility.
• Interest Rate Environment: While the company has hedged a portion of its variable-rate debt via an interest rate swap (fixing SOFR at ~2.65%), elevated interest rates remain a risk for future borrowing costs.
• Liquidity: Management believes liquidity is sufficient for operations for more than one year, supported by $180.6 million of availability under the Term Loan Facility and the ATM equity facility.

Investor Verification Checklist

• Debt Service Coverage: Verify compliance with the 1.25x debt service coverage ratio covenant required by the Series 2021 Bonds and Term Loan Facility.
• Construction Milestones: Monitor progress on the "2026 Projects" to ensure capital expenditures align with the $150 million bond proceeds and that projects are completed within the ground lease spend commitments.
• Occupancy Rates: Track the ramp-up of occupancy at recently opened campuses (DVT, APA, ADS) to ensure they meet revenue projections.
• Refinancing Timeline: Assess the company's strategy and market conditions for the mandatory tender of Series 2026 Bonds in 2031.
• Warrant Liability Volatility: Monitor the fair value of the $11.1 million warrant liability, as fluctuations directly impact net income.