Sky Harbour Group Corporation

using the webcast URL posted on our website. Thank you. I would now like to turn the call to CFO Francisco Gonzalez. You may begin your conference.

Thank you, Sara. Welcome, everybody. I'm Francisco Gonzalez, CFO of Sky Harbor. Welcome to the 2025 Second Quarter Investor Conference Call and Webcast for the Sky Harbor Group Corporation. We have also invited our bondholder investors in our borrowing subsidiary, Scarborough Capital, to join and participate on this call. Before we begin, I have been asked by counsel to note that on today's call, the company will address certain factors that may impact this and next year's earnings. Some of the information that will be discussed today contains forward-looking statements. These statements are based on management assumptions, which may or may not become true, and you should refer to the language in slides one and two of this presentation, as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statements. So now, let's get started. The team with us this afternoon, you know from our prior webcasts, our CEO and Chair of the Board, Tal Kanan, our Treasurer, Tim Herr, our Chief Accounting Officer, Mike Schmidt, our Accounting Manager, Tori Petro, and our Assistant Treasurer, Andres Franco. We have a few slides we want to review with you before we open it to questions. These were filed with the SEC an hour ago in Form 8K, along with our thank you, and will also be available on our website later this evening. We also filed our second quarter Sky Harbor Capital obligated group financials with MSRP EMA an hour ago. Stated by the operator, you may submit written questions during the webcast, during the Q4 platform, and we'll address them shortly after our prepared remarks. So let's get started. In the second quarter, on a consolidated basis, assets under construction and completed construction continue to increase, reaching close to $300 million on the back of construction activity at the new campuses in Phoenix, Dallas, and Denver. Consolidated revenues experienced an increase of 82%, year-over-year and 18% sequentially, reaching $6.6 million for the quarter, reflecting the acquisition of Camarillo last December and also higher revenues from our existing campuses. It is important to note that Q2 had roughly only $200,000 of revenues from our three new campuses that just opened. Operating expenses in Q2 increased moderately, reflecting the purchase of fuel at Camarillo and the naked expenses of bearing the payroll and others of these three new campuses without associated revenues, as we have been preparing in the past six months to open and commence operations there. In terms of SG&A, we strive to keep our expenses in check as we grow, keeping costs as low as possible. Cash flow used in operating activities on the lower right-hand quadrant improved and stood at less than $1 million for the quarter. a significant improvement from the $5 million used in Q1. This is a key metric we pay attention to. We reaffirm our guidance that we expect Sky Harbor to reach cash flow break-even on a consolidated basis at the end of this year as we ramp up the leasing and cash flowing of these three new campuses over the fall. I need to note that the potential revenues for the three new campuses total a projected $14 million annualized. which is why mathematically we feel confident of our profitability expectations in the near term, given the operating leverage of our business. Next slide, please. This is a summary of the financial results of our wholly-owned subsidiary, Sky Harbor Capital, that form the obligated group. This basically incorporates the results of our Houston, Miami, and Nashville campuses, along with the CAPEX and operating cost and SLUB revenues that came in the quarter for three projects in Denver, Phoenix, and Addison, Texas. Revenues increased 20% sequentially from the first quarter. As just discussed, we expect a step function increase in revenues in Q3 and Q4 and into the new year as these three campuses are leased up and rent and fuel revenues commence to flow. Operating expenses increases we just discussed given the onboarding of all the line personnel and hardware masters in Q1 and Q2 in anticipation of the campus opening in Q2 and Q3. Cash flow from operations generate a positive $2.2 million in the quarter, and we expect this number to continue to increase with the higher cash flows from operations as new campuses are leased. Let me now turn it to CEO Tal Kanan for an update on site acquisitions, leasing, and construction. Tal?

Thanks, Francisco. So I think everybody has become pretty familiar with the chart on the right, which is self-explanatory. Sorry, the chart on the left. The chart on the right, which we've been showing for the last few quarters, we've given a little bit more color here because we're getting, you know, questions on how this chart is derived. What you're seeing in the bar chart itself is the rentable square footage of site plans on Sky Harbor Gorge. existing ground leases times the Sky Harbor equivalent rent, which is the number we use for available revenue per square foot on each campus. And what you'll see is today the revenue capture potential is at about $140 million. If we meet our guidance by the end of the year, we expect it to be approaching $200 million of revenue. I want to call everybody's attention again in response to questions from the last quarter as to the methodology to the chart, the embedded chart right above the bar chart. The 2022 CBRE projected revenues are pretty close proxy for share for Sky Harbor equivalent rent, meaning that is what we underwrote going into these airports. The average expected revenue on these airports is the revenue that we have contracted under leases plus additional fuel margin that we collect. And the highest expected revenue is the weighted average of the highest paying residents on each existing campus, which gives, we put that in there to give people a sense of the step up in second leases, right? When you initially lease up a campus or at least Up until now, as we originally lease up a campus, we achieve one level of rent. When a campus is fully leased and leases begin coming to terms, we have a significant step up in rents, and that's what's captured here. All of this to demonstrate why we feel that methodology of using share as the multiplier against rentable square footage is a conservative methodology. Next slide, please. So this is an update on leasing. We've broken this slide into two components. One is the first five airports where all we're showing is actual results from Q2. And then the second is contracted. These are airports that are under lease out. uh where we don't have actual results yet the the contracted is what's in the lease what are you paying in rent in some cases we have a minimum uh minimum uplift guarantee of for fuel that's also captured and contracted in some cases we don't in which case fuel margin is not captured here and any any fuel margin in excess of the minimum uplift guarantee is also not captured here. So that's for the remainder of those airports. And then I'll call everybody's attention, and you'll see it in our filings and our press release, to this pilot project that we initiated this quarter to actually pre-lease hangars at campuses that have not begun construction yet. And we're doing that now because we feel that within the business aviation community, Sky Harbor has established a strong enough reputation that people, if you can picture it, for an aircraft owner to make a commitment a year or year and a half in advance and put down a hard deposit for that commitment, they've got to really be confident that we're going to deliver exactly the product that we said we were going to deliver and that we're going to deliver it on time. And that's a service offering because remember these are long-term leases. If the service is not there, um, there's the value of the lease is not there that the service offering is, is really bulletproof. And so we went to market, uh, on two pilot airports, Dulles international and Bradley international in Connecticut, uh, and have entered our first pre leases at both of those airports and, uh, more to come. And I think this is a good initial result from a pilot project might become part of the leasing strategy going forward where you could significantly pre-lease a lot of these future campuses. And what we're seeing is that, at least for the time being, we don't feel like we're paying a significant penalty in revenue per rentable square foot. So when you see that $47, average for those two airports, that's signed leases contracted, meaning that's without the excess of fuel margin that is in line with our targets for those airports. Next slide. Manufacturing construction. In the last quarter, we started unveiling our plan to really scale up Sky Harbor's construction efforts. We've gone from being a little bit of an upstart in airport land to a really not minor construction company. In fact, probably the largest developer of hangers anywhere. And what we've done in order to, number one, increase quality, number two, accelerate the pace of our construction, and number three, lower our per square foot cost is this process of vertical integration. So starting from the left side of the page, I'm looking at the bottom of the slide. The wholly owned development subsidiary of Sky Harbor is called Ascend Aviation Services. It's run by Phil Emmes, who was actually the first general contractor that Sky Harbor ever worked with. Built our Sugar Land campus on time and under budget. Phil's been doing just metal buildings for 40 years. A few people have more experience in the space, a lot of airport experience as well. And we've brought in a lot of players with specific airport experience here. The subsidiary is 100% dedicated to Sky Harbor, does one thing, it builds the Sky Harbor 37 hangar across the country. We have our own in-house general contracting capability now, which we'll use selectively. and construction management where we're not acting as general contractor. And that model or kind of the breakdown of which projects we're doing, you know, we're kind of performing as general contractors and which ones are construction manager will, I think, evolve over time. But the fact that we have that capability brings a lot of advantages. And then manufacturing Stratus building systems. I already saw a question come in on that, uh, that, that the old rapid built is now Stratus building systems, uh, restaffed retooled, uh, you know, new leadership that's been in place for close to a year now. Um, that has, you know, not only the experience, but the tooling, and it's again, dedicated only to manufacturing sky Harbor 37 hangers across the country. Put that all together and integrate it, you have, or the intention at least, is to have process coordination. We're far less exposed to the vicissitudes of supply chain interruptions, which we've experienced in the past. We have our own design, which is constantly refined and value engineered in coordination with the field. So we think that's a big advantage. And maintaining Sky Harbor quality standards, not being subject to other manufacturers or other builders' standards. So that's, I think, the heaviest lift that we've undertaken in the company in the last, call it three quarters, and we're really ready to roll with that now. With that, let me hand it back to Francisco.