SkyHarbour(SKYH) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an increase in revenues for Q2 2024, driven by new tenant leases and renewals at higher rental rates [4][5] - Operating expenses rose due to ground lease payments and non-cash employee stock-based compensation, totaling approximately $1.1 million each [6][10] - The company achieved positive cash flow from operations and expects this trend to continue as new campuses open [4][10] Business Line Data and Key Metrics Changes - The San Jose International Airport campus was approximately 58% leased during Q2, with expectations for further revenue increases as occupancy rises [5] - The company anticipates significant revenue growth from lease renewals, with an average markup of over 20% on renewed leases [17][29] Market Data and Key Metrics Changes - The company is focusing on high-demand markets, particularly in New York, where there is a significant deficit of hangar space [47] - The company plans to increase its ground leases from four to eight by the end of 2025, expanding its market presence [21] Company Strategy and Development Direction - The company is pursuing an accelerated growth plan with 33 projects planned between 2025 and 2026 [9] - The focus is on maximizing economies of scale and standardizing construction processes to enhance efficiency [21][39] - The company aims to achieve investment-grade ratings by increasing cash flow generation from new campuses [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the profitability of the San Jose lease and highlighted the potential for revenue growth through lease renewals [29] - The company is aware of the competitive landscape with FBOs and emphasizes its unique offering of homebasing solutions [30][32] - Management is optimistic about the future, citing strong demand and the potential for additional revenue streams from services [25][48] Other Important Information - The company has$ 150 million in cash and treasury bills, allowing for strong liquidity and cash management strategies [10] - The company is exploring additional revenue streams, including partnerships for aircraft detailing services [49][50] Q&A Session Summary Question: Thoughts on broadening the float to mitigate potential selling from Boston Omaha and Altai - The company plans to address the low float through organized equity offerings over time, aiming to increase trading float [26][27] Question: Is the SJC lease profitable today? - The San Jose lease is profitable, with significant upside potential and a strategy to stagger lease terms for revenue growth [29] Question: How does Sky Harbour plan to compete with FBOs offering fuel discounts? - Sky Harbour provides fuel and focuses on base tenants, differentiating itself from transient-focused FBOs [30][32] Question: How will raising an additional $150 million be possible? - The company intends to protect existing bondholders by issuing new debt outside the current obligated group [33][34] Question: Should we expect less equity capital needs going forward? - The company maintains a target of 70/30 debt-to-equity split, with potential for higher leverage in the future [35] Question: Do ground leases have deadlines for improvements? - Typically, there are no strict deadlines for ground leases, allowing flexibility in development timelines [41] Question: How does the company view the trade-off between short leases and revenue visibility? - The company staggers lease terms to balance revenue visibility and the potential for higher renewals [43][45] Question: Rationale for New York and Connecticut area airports? - The company targets high-revenue locations, particularly in New York, where there is a significant demand for hangar space [46][47] Question: Potential for ancillary revenue from airport services? - The company is exploring various ancillary revenue opportunities, including partnerships for services like aircraft detailing [48][50]