Sky Harbour Group Corporation

Good evening, my name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the Sky Harbor 2025 Year End Earnings Call and Webinar Conference. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, Simply submit a question online using the webcast URL posted on our website. Thank you. Francisco Gonzalez, Chief Financial Officer, you may begin your conference.

Thank you, Tiffany. I'm Francisco Gonzalez, CFO of Sky Harbor. Hello and welcome to the 2025 Full Year Results Investor Conference Call and Webcast for the Sky Harbor Group Corporation. We have also invited our bondholder investors in our powering subsidiary, Sky Harbor Capital, and now also our lenders in Sky Harbor Capital II and the 2026 series bondholders of Sky Harbor Capital III to join and participate on this call. Before we begin, I have been asked by council 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 we'll discuss today contains forward-looking statements. These statements are based on management assumptions, which may or may not come true. And you should refer to the language of 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 social statements. So now, let's get started. The team with us this afternoon, you know from our prior webcast, 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 Andreas Frank, our Assistant Treasurer. We have a few slides we will want to review with you before we open into questions. These were filed with the ACC about an hour ago in Form 8K, along with our 10K, and will also be available on our website later this evening. We also filed our February construction report one day early today, this afternoon, with the MSRP EMA. and the fourth quarter's capital obligated financials that were filed a couple weeks ago. As the operator stated, you may submit written questions during the webcast using the Q4 platform, and we'll address them shortly after our prepared remarks. Let's now get started. We turn to the first slide. On a consolidated basis, assets under construction and completed construction continue to increase, reaching over $328 million on the back of construction activity at phase two in Miami, the new campus well in construction in Bradley International, and phase two in Addison in the Dallas area. Please note this graph is soon to accelerate its upward trajectory as we broke ground already in Salt Lake City Airport, and also soon we'll be doing that at New York and Orlando Executive Airport in Florida, Trenton, New Jersey, and Dulles International later this year. On the revenue front, we increased year-over-year at 87%, reaching record $27.5 million for 2025, reflecting the acquisition of Camarillo in December of 2024, as well as higher revenues from existing and new campuses that opened last year. Sequentially, revenues have a natural progression of occupancy, increasing at the three new campuses. Operating expenses for the year increased to 27, almost $28 million, reflecting increasing campuses operation. The higher number of ground leases, remember we expense ground leases open accrual, so our large number of ground leases impact our operating expenses. mostly non-cash, and something that Mike, our chief accounting officer, will cover shortly. One of our goals in 2026 is to achieve higher efficiencies at the campus level, especially as we open second phases in Miami and Dallas. In Q4, you will notice a slight dip in SG&A. This relates to reduction in the cash component of compensation for our senior management team. We're working to keep SG&A as stable as possible. As we have discussed in prior public conversations, we look to peak at no more than 20 million SG&A on a cash basis and obviously enjoy the operating leverage that that will entail. This line item, in terms of operating results, includes a lot of non-cash items, again, that Mike will discuss shortly. On a cash flow from operations basis, we're pleased to report that we reached positive territory on a consolidated basis for the first time in our history. But I need to point out that this is mostly driven by the realization of $5.9 million from rent as part of an extension of an existing tenant that closed in December of last year. That tenant went to 12 years and is now our longest tenant lease in our portfolio of developed campuses. We're also pleased to report that on an adjusted EBITDA basis that Mike will discuss shortly, we also reached breakeven on a run rate basis in December. Next slide, please. This is a summary of our financial results of our wholly-owned subsidiary, Skyward Capital, that formed the obligated group. This basically incorporates the results of Houston, Miami, Nashville campuses, along with the campuses that opened during the year in Phoenix, Dallas, and Denver. Revenues for the year increased 49% year-over-year, and in Q4, 18% sequentially. We expect a moderate increase in Q1 of 2025, and then A step up in Q2 and Q3 of 2027 on the back of the opening of phase two in Miami. And then the last step up in Q1 and Q2 of 2027 on the back of the completion of our last project that forms the obligated group First Vintage in Addison Airport in Texas. Operating expenses increase year over year given the higher number of operating campuses in operation. Let's turn now our attention to our chief accounting officer for a breakdown of adjusted EBITDA for the year Q4.

Thank you, Francisco. As with prior quarters, I'd like to take this opportunity to provide some additional context regarding elements of our reported results. Adjusted EBITDA is utilized by our management team to evaluate our operating and financial performance. It is supplemental in nature and a financial measure not calculated in accordance with U.S. GAAP. We define adjusted EBITDA as gap net income or loss before the add-backs and subtractions that are enumerated on the left of this slide, which consists entirely of non-cash or non-operating elements of both income and expense, including in the fourth quarter and for the year ending December 31st, 2025, the significant unrealized gain on our outstanding war. We have provided a reconciliation from our gap net income results for the year and quarter ended December 31st, 2025. The primary item worth highlighting here is the general trend of adjusted EBITDA as we conclude in fiscal 25. While slightly down on a year-over-year basis, adjusted EBITDA improved for the third consecutive quarter to a negative EBITDA of approximately $1 million in Q4. This was driven by increased occupancy and rental rates at each of our campuses, particularly during the latter half of the fourth quarter as our run rates improved and turned positive. With that, I'd like to take the opportunity to pass the towel.