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SkyHarbour(SKYH) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis for Sky Harbour Group Corporation Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Sky Harbour Group Corporation and its subsidiaries for the period ended June 30, 2025, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies and specific financial line items Consolidated Balance Sheets Presents the company's financial position, highlighting assets, liabilities, and equity at specific dates Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------------------- | | Total Assets | $568,139 | $556,556 | +$11,583 | | Cash | $8,610 | $42,442 | -$33,832 | | Constructed Assets, net | $211,393 | $110,302 | +$101,091 | | Cost of Construction | $84,102 | $144,900 | -$60,798 | | Total Liabilities | $401,094 | $396,738 | +$4,356 | | Warrants Liability | $26,856 | $46,130 | -$19,274 | | Total Equity | $167,045 | $159,818 | +$7,227 | Consolidated Statements of Operations Details the company's revenues, expenses, and net income or loss over specific reporting periods Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric (in thousands, except per share data) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Total Revenue | $6,588 | $3,618 | +82% | $12,180 | $6,022 | +102% | | Operating Loss | $(7,528) | $(4,958) | -52% | $(14,352) | $(10,182) | -41% | | Net Income (Loss) attributable to SHG shareholders | $17,453 | $5,761 | +203% | $11,077 | $(13,178) | N/A | | Basic EPS | $0.52 | $0.23 | +126% | $0.33 | $(0.54) | N/A | | Diluted EPS | $0.18 | $0.06 | +200% | $0.07 | $(0.54) | N/A | Consolidated Statements of Comprehensive Income (Loss) Reports net income and other comprehensive income items, reflecting changes in equity from non-owner sources Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net income (loss) | $14,356 | $4,163 | +245% | $5,230 | $(17,036) | N/A | | Unrealized gains on available-for-sale securities | $70 | $67 | +4% | $70 | $462 | -85% | | Realized gains on available-for-sale securities reclassified | $0 | $(690) | N/A | $(53) | $(707) | -92% | | Total comprehensive income (loss) | $14,426 | $3,540 | +307% | $5,247 | $(17,281) | N/A | Consolidated Statements of Stockholders' Equity Outlines changes in equity accounts, including common stock, additional paid-in capital, and accumulated deficit Consolidated Stockholders' Equity Highlights (in thousands, except share data) | Metric (in thousands, except share data) | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------------- | :------------ | :---------------- | :----- | | Class A Common Stock Shares Outstanding | 33,835,373 | 33,456,227 | +379,146 | | Class B Common Stock Shares Outstanding | 42,046,356 | 42,046,356 | 0 | | Additional Paid-in Capital | $170,614 | $168,634 | +$1,980 | | Accumulated Deficit | $(53,515) | $(64,592) | +$11,077 | | Total Equity | $167,045 | $159,818 | +$7,227 | Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities over a period Consolidated Statements of Cash Flows Highlights (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------- | | Net cash used in operating activities | $(5,994) | $(5,472) | -$522 | | Net cash (used in) provided by investing activities | $(54,803) | $54,535 | -$109,338 | | Net cash (used in) provided by financing activities | $(1,457) | $975 | -$2,432 | | Cash and restricted cash, end of period | $32,105 | $122,304 | -$90,199 | Notes to Unaudited Consolidated Financial Statements Provides detailed explanations of accounting policies, estimates, and specific line items within the financial statements Note 1. Organization and Business Operations Sky Harbour Group Corporation (SHG) operates as a holding company, with its primary business being aviation infrastructure development, leasing, and management of general aviation hangars across the U.S. The company uses an "Up-C" structure, where SHG owns 44.6% of Sky Common Units and prior holders control 55.4% through Class B Common Stock - SHG is an aviation infrastructure development company that develops, leases, and manages general aviation hangars for business aircraft across the United States22 - The Company operates under an "Up-C" structure, with SHG owning approximately 44.6% of Sky Common Units22 - Prior holders of Sky Common Units own approximately 55.4% and control the Company through their ownership of Class B Common Stock22 Note 2. Basis of Presentation and Summary of Significant Accounting Policies This note outlines the basis of presentation for the unaudited consolidated financial statements, prepared in conformity with SEC requirements for Form 10-Q and GAAP. It details significant accounting policies, including the use of estimates, risks and uncertainties, liquidity and capital resources, basis of consolidation, cost of construction, leases, warrants liability, revenue recognition, and income taxes, along with recently issued accounting pronouncements - Financial statements are prepared in conformity with SEC requirements for Form 10-Q and GAAP, excluding certain disclosures normally in audited statements23 - The Company has reclassified certain historical amounts for current year presentation, including separate disclosure of rental and fuel revenue, and detailed operating expenses24 - Key estimates include impairment analyses, useful lives of assets, fair value of financial instruments (warrants), ROU assets, operating lease liabilities, and fair value of acquired assets/liabilities25 - The Company has incurred recurring losses and negative cash flows from operating activities since inception due to ongoing construction and business development, expecting this to continue in the near future28 - The Company believes its liquidity is sufficient for continued operations for more than one year, funded by bond and equity offerings and an "at the market" offering program29 - Recently issued accounting pronouncements include ASU No. 2023-09 (Income Taxes) and ASU No. 2024-03 (Expense Disaggregation Disclosures), with the Company evaluating their impact4546 Note 3. Investments and Restricted Investments The Company's investments primarily consist of U.S. Treasury securities, classified as available-for-sale or held-to-maturity (restricted). Investments are carried at fair value (Level 1 inputs) or amortized cost, with unrealized losses primarily due to interest rate changes, not credit risk - Investments in U.S. Treasury securities are classified as available-for-sale (fair value) or held-to-maturity (restricted, amortized cost)4748 - Unrealized losses on investments are primarily due to changes in interest rates, not credit impairments48 Investments and Restricted Investments (Fair Value, in thousands) | Investment Type | June 30, 2025 (Fair Value, in thousands) | December 31, 2024 (Fair Value, in thousands) | | :------------------------------ | :--------------------------------------- | :----------------------------------------- | | Investments, available for sale | $30,999 | $18,987 | | Restricted investments, held-to-maturity | $11,329 | $13,548 | Note 4. Cost of Construction and Constructed Assets This note details the Company's constructed assets and costs of construction. Constructed assets, net, significantly increased due to completed projects, while costs of construction decreased as projects moved from development to operational status. Depreciation expense also rose substantially year-over-year - Constructed assets, net, increased to $211,393 thousand as of June 30, 2025, from $110,302 thousand as of December 31, 202450 - Cost of construction decreased to $84,102 thousand as of June 30, 2025, from $144,900 thousand as of December 31, 202450 - Depreciation expense for constructed assets for the six months ended June 30, 2025, totaled $1,988 thousand, up from $898 thousand in the prior year50 Note 5. Long-lived Assets and Lease Intangible Assets This note provides a breakdown of long-lived assets and lease intangible assets. Long-lived assets, net, increased, primarily due to purchase deposits and construction in progress. Lease intangible assets, net, saw a slight decrease, with associated amortization expense - Long-lived assets, net, increased to $19,016 thousand as of June 30, 2025, from $14,732 thousand as of December 31, 202451 - Purchase deposits and construction in progress within long-lived assets increased from $2,380 thousand to $5,520 thousand51 - Lease intangible assets, net, decreased slightly to $2,857 thousand as of June 30, 2025, from $3,005 thousand as of December 31, 202452 - Amortization expense for lease intangible assets for the six months ended June 30, 2025, totaled $148 thousand52 Note 6. Supplemental Balance Sheet and Cash Flow Information This note provides supplemental details on accounts payable, accrued expenses, other liabilities, and non-cash investing and financing activities. It also reconciles cash and restricted cash - Accounts payable, accrued expenses, and other liabilities increased to $29,485 thousand as of June 30, 2025, from $27,655 thousand as of December 31, 2024, primarily due to increased costs of construction53 - Accrued costs of construction, including capitalized interest, were $13,758 thousand for the six months ended June 30, 2025, down from $17,815 thousand in the prior year54 - Right-of-use assets obtained in exchange for operating lease liabilities were $20,238 thousand for the six months ended June 30, 2025, a decrease from $55,177 thousand in the prior year54 - Interest paid for the six months ended June 30, 2025, was $3,742 thousand, slightly down from $3,851 thousand in the prior year54 - Cash and restricted cash at the end of the period was $32,105 thousand, a significant decrease from $122,304 thousand in the prior year54 Note 7. Leases This note details the Company's operating and finance leases, primarily ground leases at airports. Operating lease expenses significantly increased year-over-year due to new ground leases. The Company has entered into new ground lease agreements at Hillsboro Airport (HIO) and New York Stewart International Airport (SWF) in April 2025, expanding its portfolio - Total operating lease expense for the six months ended June 30, 2025, was $6,865 thousand, up 88% from $3,650 thousand in the prior year55 - Ground lease expenses increased by 86% to $6,472 thousand for the six months ended June 30, 2025, driven by new ground leases at SLC, CMA, SWF, and HIO55185 - The Company executed new ground lease agreements at Hillsboro Airport (HIO) and New York Stewart International Airport (SWF) in April 2025, covering approximately 13 and 16 acres, respectively5960 - The weighted average remaining lease term for all operating leases is 44.8 years as of June 30, 202561 Future Minimum Lease Payments (in thousands) | Year Ending December 31, | Operating Leases (in thousands) | Finance Leases (in thousands) | | :----------------------- | :------------------------------ | :---------------------------- | | 2025 (remainder of year) | $3,231 | $12 | | 2026 | $7,143 | $17 | | 2027 | $8,504 | $2 | | 2028 | $9,701 | $0 | | 2029 | $10,249 | $0 | | Thereafter | $580,613 | $0 | | Total lease payments | $619,441 | $31 | - Future minimum lease payments from tenants (as lessor) total $62,595 thousand, with $8,597 thousand due in the remainder of 202564 Note 8. Bonds payable, Loans payable, and Interest This note details the Company's Series 2021 Bonds, loans payable, and finance lease liabilities. The Series 2021 Bonds, totaling $166.3 million, are secured by leasehold interests and revenues of the Obligated Group. The Company's total bonds payable, net, remained stable, while loans payable and finance leases decreased. Capitalized interest significantly reduced reported interest expense - Series 2021 Bonds have a principal amount of $166.3 million, with interest rates ranging from 4.00% to 4.25% and maturities from 2036 to 20546567 - The fair value of Series 2021-1 Bonds was approximately $138.8 million as of June 30, 2025, down from $143.8 million as of December 31, 202469 - Total Bonds payable, net, was $162,719 thousand as of June 30, 2025, slightly up from $162,621 thousand as of December 31, 202470 - Total loans payable and finance leases decreased to $6,664 thousand as of June 30, 2025, from $7,535 thousand as of December 31, 202471 - Capitalized interest for the six months ended June 30, 2025, was $3,568 thousand, significantly reducing interest expense to $271 thousand from $3,839 thousand incurred72 Note 9. Warrants This note describes the Company's outstanding Public, Private, and PIPE Warrants, which are classified as derivative liabilities and re-measured at fair value each reporting period. The Company recorded significant unrealized gains on warrants due to changes in fair value - As of June 30, 2025, 15,798,155 Warrants remain outstanding, with an exercise price of $11.50 per share and an expiration date of January 25, 20277675 - The aggregate fair value of outstanding Warrants decreased to approximately $26.8 million as of June 30, 2025, from $46.1 million as of December 31, 202477 - The Company recorded unrealized gains of approximately $21.8 million for the three months ended June 30, 2025, and $19.3 million for the six months ended June 30, 2025, due to changes in fair value77 - No Warrants were exercised during the three and six months ended June 30, 2025, compared to 253,703 Warrants exercised in the prior year period76 Note 10. Equity This note details the Company's common equity structure, including Class A and Class B Common Stock, and its At-the-Market (ATM) Facility. It also explains the non-controlling interests held by LLC Interests in Sky - As of June 30, 2025, there were 33,835,373 shares of Class A Common Stock and 42,046,356 shares of Class B Common Stock outstanding79 - Class A and Class B Common Stock holders vote together, with Class A holders entitled to dividends and Class B holders only to stock dividends of Class B shares80 - The Company has an At-the-Market (ATM) Facility allowing it to sell up to $100 million of Class A Common Stock through B. Riley Securities, Inc81 - During the six months ended June 30, 2025, the Company sold 20,472 shares of Class A Common Stock under the ATM Facility at a weighted-average price of $13.7081 - Non-controlling interests represent the 55.4% ownership of Sky Common Units by LLC Interests, which can be exchanged for Class A Common Shares83 Note 11. Equity Compensation This note outlines the Company's equity compensation plans, including Restricted Stock Units (RSUs), Non-qualified Stock Options (NSOs), and Sky Incentive Units. The Company recognized increased stock compensation expense for RSUs and NSOs during the period - Stock compensation expense for RSU awards increased to $2.1 million for the six months ended June 30, 2025, from $1.9 million in the prior year85 - As of June 30, 2025, 1,096,754 unvested RSUs are outstanding, with $10.3 million in unrecognized compensation costs85 - Stock compensation expense for NSO awards increased to $0.4 million for the six months ended June 30, 2025, from $0.1 million in the prior year87 - Unrecognized compensation costs for unvested NSOs totaled $7.6 million as of June 30, 202587 - Equity-based compensation expense for Sky Incentive Units was $75 thousand for the six months ended June 30, 2025, with no unrecognized compensation expense remaining88 Note 12. Earnings (loss) per Share This note details the calculation of basic and diluted earnings per share for Class A Common Stock. The Company reported positive basic and diluted EPS for the current six-month period, a significant improvement from a loss in the prior year, driven by higher net income and the dilutive effect of various securities - Basic EPS for Class A Common Stock was $0.33 for the six months ended June 30, 2025, compared to $(0.54) in the prior year91 - Diluted EPS for Class A Common Stock was $0.07 for the six months ended June 30, 2025, compared to $(0.54) in the prior year91 - Diluted weighted average shares outstanding increased to 77,768 thousand for the six months ended June 30, 2025, from 24,504 thousand in the prior year, primarily due to the effect of dilutive exchange of Class B Common Stock and Warrants91 Earnings (Loss) Per Share Highlights (in thousands, except per share data) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------------- | :--------------------------- | :--------------------------- | :------------- | | Basic net income (loss) attributable to SHG shareholders (in thousands) | $11,077 | $(13,178) | N/A | | Diluted net income (loss) attributable to SHG shareholders (in thousands) | $5,230 | $(13,178) | N/A | | Basic weighted average shares of Class A Common Stock outstanding (in thousands) | 33,747 | 24,504 | +37.3% | | Diluted weighted average shares outstanding (in thousands) | 77,768 | 24,504 | +217.4% | | Basic EPS | $0.33 | $(0.54) | N/A | | Diluted EPS | $0.07 | $(0.54) | N/A | Note 13. Accumulated Other Comprehensive Income This note provides a summary of the components of accumulated other comprehensive income, primarily consisting of unrealized gains on available-for-sale securities - Balance of accumulated other comprehensive income as of June 30, 2025, was $70 thousand, up from $53 thousand as of December 31, 202492 - Other comprehensive income before reclassifications was $70 thousand for the six months ended June 30, 2025, compared to $462 thousand in the prior year92 Note 14. Segment Information The Company operates as a single consolidated reportable segment, deriving revenue from leasing aircraft hangars and ancillary services within the United States. The CEO acts as the Chief Operating Decision Maker (CODM), assessing performance based on net income (loss) and allocating resources on a consolidated basis - The Company has one consolidated reportable segment, focused on leasing home-basing aircraft hangars and ancillary services93 - All revenue is derived entirely within the United States93 - The CODM (CEO) uses net income (loss) to assess performance and allocate resources94 Note 15. Commitments and Contingencies This note outlines the Company's significant commitments, primarily related to ground lease covenants requiring construction of hangar facilities and minimum capital improvements at various airport sites. Failure to meet these timelines or spending requirements could lead to lease termination or financial penalties - Ground leases require construction of hangar facilities within specified periods and minimum capital expenditures at various sites (e.g., DVT Phase II, ORL, SLC, TTN, SWF)95969899100101 - For the SWF Lease, failure to expend $60 million in capital improvements within 36 months could result in the difference being payable to SWF101 - The Company has construction contracts for APA Phase I, DVT Phase I, ADS Phase I, and OPF Phase II projects, which can be terminated or suspended without penalty102 - The Company is involved in various legal proceedings and claims in the ordinary course of business, not expected to materially affect financial condition103 Note 16. Related Party Transactions This note details several related party transactions, including a revolving line of credit with a company controlled by a former owner, aircraft use agreements with Echo Echo, LLC (related to the Founder and CEO), and construction services from a General Contractor where the Company's head of construction holds a financial interest - The Company has a $3.0 million revolving line of credit with a company controlled by a former owner of acquired subsidiaries, with $1.1 million loaned as of June 30, 2025105106 - Agreements with Echo Echo, LLC (related to the Founder and CEO) for aircraft use resulted in $325 thousand in pursuit and marketing expenses for the six months ended June 30, 2025, up from $87 thousand in the prior year107108109 - The Company incurred $5.7 million in construction costs from a General Contractor for the APA Phase I project, where the Company's head of construction and president of Ascend Aviation Services holds a financial interest111 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition, results of operations, and future outlook. It highlights the Company's business model in aviation infrastructure, recent operational and financial performance, key factors influencing future results, critical accounting policies, and liquidity and capital resources Cautionary Note Regarding Forward-Looking Statements This section warns readers that the report contains forward-looking statements based on current expectations, which are subject to risks and uncertainties that could cause actual results to differ materially. It emphasizes that these statements are not guarantees of future performance and the Company undertakes no obligation to update them - The report contains forward-looking statements identified by terms like "believes," "estimates," "anticipates," "expects," "intends," "plans," "may," "will," "potential," "projects," "predicts," "continue," or "should"114 - Actual results may differ materially due to various factors, including macroeconomic conditions, limited operating history, construction costs, regulatory changes, and competitive factors115118 - Forward-looking statements are not guarantees of future performance and the Company undertakes no obligation to update them, except as required by law116 Overview and Background Sky Harbour Group Corporation is an aviation infrastructure development company building a nationwide network of home-basing hangar campuses for business aircraft. The Company aims to address the growing demand for hangar space, especially for larger private jets, by developing scalable, real estate-centric solutions with long-term rental agreements - The Company develops, leases, and manages general aviation hangars across the U.S., targeting airfields with high hangar demand117 - The U.S. business aviation fleet's physical footprint grew by 61% between 2010 and 2023, with a 102% increase in larger private jets, leading to a significant hangar supply shortage119 - The Company's business model focuses on capturing this market opportunity by developing prototype hangar designs, achieving economies of scale, and securing long-term ground leases122123124 - As of June 30, 2025, the Company has 17 ground leases across various U.S. airports, with expiration years ranging from 2026 to 2097126 Properties in Operation as of June 30, 2025 | Facility | Hangars | Rentable Square Footage | % of Total Rentable Square Footage | Occupancy at June 30, 2025 | | :--------------- | :------ | :---------------------- | :--------------------------------- | :------------------------- | | SGR | 7 | 66,080 | 7.5% | 100.0% | | BNA | 10 | 149,069 | 16.7% | 88.9% | | OPF Phase I | 12 | 160,092 | 17.9% | 100.0% | | DVT Phase I | 8 | 134,270 | 15.0% | 25.0% | | ADS Phase I | 6 | 120,836 | 13.5% | 26.5% | | SJC Renovation | 1 | 50,431 | 5.7% | 100.0% | | CMA | 4 | 121,931 | 13.7% | 77.6% | | BFI | 4 | 89,609 | 10.0% | 50.5% | | Total/Weighted Average | 52 | 892,318 | 100.0% | 68.9% | Properties in Development as of June 30, 2025 | Facility | Status | Projected Construction Start | Projected Completion Date | Estimated Total Project Cost ($mm) | Hangars | Rentable Square Footage | | :--------------- | :------------- | :--------------------------- | :------------------------ | :--------------------------------- | :------ | :---------------------- | | ADS Phase II | In Development | Q2 2025 | Q3 2026 | 24.6 - 28.5 | 4 | 108,320 | | APA Phase I | In Construction | Q4 2022 | Q3 2025 | 48.4 - 48.6 | 9 | 132,000 | | APA Phase II | Predevelopment | Q3 2026 | Q4 2027 | 30.4 - 33.6 | 3 | 60,945 | | BDL Phase I | In Development | Q3 2025 | Q4 2026 | 40.0 - 42.1 | 3 | 107,360 | | DVT Phase II | Predevelopment | Q2 2026 | Q2 2027 | 34.6 - 38.6 | 6 | 132,732 | | HIO Phase I | In Development | Q3 2026 | Q4 2027 | 39.9 - 44.1 | 3 | 128,640 | | HIO Phase II | In Development | Q4 2027 | Q4 2029 | 20.0 - 22.1 | 2 | 64,480 | | IAD Phase I | In Development | Q2 2026 | Q3 2027 | 55.0 - 60.8 | 4 | 171,520 | | IAD Phase II | Predevelopment | Q3 2031 | Q4 2032 | 44.7 - 49.4 | 4 | 171,520 | | OPF Phase II | In Construction | Q1 2025 | Q2 2026 | 39.3 - 39.6 | 3 | 111,720 | | ORL Phase I | In Development | Q1 2026 | Q2 2027 | 39.5 - 43.6 | 3 | 133,640 | | ORL Phase II | Predevelopment | Q4 2034 | Q1 2036 | 35.2 - 39.0 | 3 | 128,640 | | POU Phase I | In Development | Q2 2026 | Q3 2027 | 38.8 - 42.8 | 2 | 85,760 | | POU Phase II | Predevelopment | Q1 2027 | Q2 2028 | 18.3 - 20.3 | 1 | 42,880 | | PWK Phase I | In Development | Q2 2026 | Q3 2027 | 53.6 - 59.2 | 4 | 171,520 | | PWK Phase II | Predevelopment | TBD | TBD | TBD | TBD | TBD | | SJC Phase II | In Development | Q2 2027 | Q1 2028 | 11.8 - 13.0 | 1 | 28,000 | | SLC | In Development | Q1 2026 | Q1 2027 | 59.2 - 65.5 | 4 | 171,520 | | SWF | In Development | TBD | TBD | TBD | TBD | TBD | | TTN | In Development | Q2 2026 | Q3 2027 | 40.1 - 44.3 | 3 | 128,640 | | Total | | | | 673.4 - 735.1 | 62 | 2,079,837 | Recent Developments In April 2025, the Company expanded its portfolio by entering into new long-term ground lease agreements at Hillsboro Airport (HIO) and New York Stewart International Airport (SWF), covering approximately 13 and 16 acres, respectively, with initial terms of 35 and 30 years, plus extension options - In April 2025, the Company entered into a ground lease agreement (HIO Lease) at Hillsboro Airport (HIO) for approximately 13 acres, with an initial term of 35 years and a 10-year extension option133 - Also in April 2025, the Company entered into a ground lease agreement (SWF Lease) at New York Stewart International Airport (SWF) for approximately 16 acres, with an initial term of 30 years and three options for an additional 15 years134135 Factors That May Influence Future Results of Operations Future results are influenced by airfield and tenant portfolio growth, construction material and labor costs, and market interest rates. The Company's ability to attract tenants, secure new ground leases, mitigate rising construction costs (e.g., through vertical integration and GMP contracts), and manage borrowing costs are critical - Future success depends on attracting and retaining tenants, which is influenced by tenant preferences, economic conditions, fuel prices, and competition136 - Expansion through new ground leases is integral but faces challenges like negotiating favorable terms and competition137 - Construction costs are influenced by material prices (e.g., steel tariffs) and labor; the Company uses GMP contracts and vertical integration (acquired a metal building manufacturer) to mitigate these138139 - A significant design defect in prototype hangar buildings required retrofitting for DVT Phase I, APA Phase I, and ADS Phase I, incurring $26-$28 million in additional costs and 3-5 months delay139 - The Company plans to incorporate a larger hangar prototype for future projects, expecting cost savings through economies of scale, but construction cost estimates are subject to variability141 - Rising interest rates and credit spreads could increase future borrowing costs, impacting economic performance. The Company plans to issue additional debt and may use hedging strategies143 - The Company's 20-airport site business plan is estimated to cost $1.2 billion, with 65-75% funded by private activity bonds and the balance by equity146 Key Business Metrics The Company monitors key metrics including Revenue (rental and fuel), Operating Expenses (ground lease, campus operating, compensation), Operating Income (Loss), Net Income (Loss), and Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure used to evaluate operating performance and debt service ability, excluding non-cash items - Revenue: Primarily from rents and fees from lease and service agreements; growth depends on attracting and retaining tenants148 - Operating Expenses: Significant expenses include ground lease payments, which are expensed even during development, and are expected to increase with new leases149 - Adjusted EBITDA: A non-GAAP measure defined as net income before depreciation, interest expense/income, non-cash stock-based compensation, non-cash gains/losses on warrants, non-cash operating lease expense/income, income taxes, and other non-cash expenses152 - Adjusted EBITDA is used to evaluate operating performance, analyze debt service ability, and facilitate company-to-company comparisons152 Critical Accounting Policies and Estimates This section reiterates the critical accounting policies and estimates, including the use of estimates, cost of construction, leases, and revenue recognition, which require significant management judgment and can materially affect reported financial amounts - Use of Estimates: Requires management to make assumptions affecting reported assets, liabilities, and expenses, including impairment analyses, useful lives, fair value of financial instruments (warrants), ROU assets, and operating lease liabilities156 - Cost of Construction: Costs are capitalized once a capital project is probable, including direct construction costs, professional fees, and allocated internal salaries and interest costs157 - Leases: Accounts for leases under ASC Topic 842, recognizing ROU assets and lease liabilities for operating leases over 12 months. The Company expenses ground lease costs rather than capitalizing implicit interest158 - Revenue Recognition: Rental revenue from hangar facilities is recognized on a straight-line basis for fixed payments and in the same period as expenses are incurred for variable payments (tenant reimbursements)160 Results of Operations Analyzes the company's financial performance over specific periods, detailing revenue, expenses, and profitability drivers Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 The Company experienced significant revenue growth and a shift to net income for the three months ended June 30, 2025, compared to the prior year. This was driven by increased occupancy at existing campuses and the acquisition of CMA, alongside a substantial unrealized gain on warrants. Operating expenses also rose due to expansion and new ground leases - Total revenue increased by $2.97 million (82%) to $6,588 thousand165 - Rental revenue increased by $2.05 million (65%)166 - Fuel revenue increased by $0.92 million (207%)167 - Net income was $14,356 thousand, a significant increase from $4,163 thousand in the prior year165 - Operating loss increased by $2.57 million (52%) to $(7,528) thousand165 - Total expenses increased by $5.54 million (65%) to $14,116 thousand, driven by campus operating expenses (+122%), fuel expenses (+1026%), and ground lease expenses (+59%)165168169170 - Unrealized gain on warrants was $(21,801) thousand, a $13.58 million difference compared to $(8,219) thousand in the prior year, significantly impacting net income165176 Results of Operations (Three Months Ended June 30, 2025 vs. 2024, in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Rental revenue | $5,225 | $3,174 | $2,051 | 65% | | Fuel revenue | $1,363 | $444 | $919 | 207% | | Total revenue | $6,588 | $3,618 | $2,970 | 82% | | Campus operating expenses | $2,226 | $1,004 | $1,222 | 122% | | Fuel expenses | $923 | $82 | $841 | 1026% | | Ground lease expenses | $3,568 | $2,253 | $1,315 | 59% | | Depreciation and amortization | $1,479 | $642 | $837 | 130% | | Pursuit and marketing expenses | $585 | $373 | $212 | 57% | | Employee compensation and benefits | $4,294 | $3,415 | $879 | 26% | | General and administrative expenses | $1,041 | $807 | $234 | 29% | | Total expenses | $14,116 | $8,576 | $5,540 | 65% | | Operating loss | $(7,528) | $(4,958) | $(2,570) | -52% | | Unrealized gain on warrants | $(21,801) | $(8,219) | $(13,582) | -165% | | Net income (loss) | $14,356 | $4,163 | $10,193 | 245% | Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 For the six months ended June 30, 2025, the Company saw substantial revenue growth and a significant turnaround from a net loss to net income compared to the prior year. This improvement was primarily driven by increased operational activity, the acquisition of CMA, and a large unrealized gain on warrants, despite rising operating expenses due to expansion - Total revenue increased by $6.16 million (102%) to $12,180 thousand179 - Rental revenue increased by $4.37 million (82%)180 - Fuel revenue increased by $1.78 million (251%)181 - Net income was $5,230 thousand, a significant improvement from a net loss of $(17,036) thousand in the prior year179 - Operating loss increased by $4.17 million (41%) to $(14,352) thousand179 - Total expenses increased by $10.33 million (64%) to $26,532 thousand, driven by campus operating expenses (+130%), fuel expenses (+969%), and ground lease expenses (+86%)179182183184 - Unrealized gain on warrants was $(19,274) thousand, a $27.24 million difference compared to an unrealized loss of $7,969 thousand in the prior year, significantly impacting net income179190 Results of Operations (Six Months Ended June 30, 2025 vs. 2024, in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Rental revenue | $9,685 | $5,312 | $4,373 | 82% | | Fuel revenue | $2,495 | $710 | $1,785 | 251% | | Total revenue | $12,180 | $6,022 | $6,158 | 102% | | Campus operating expenses | $4,109 | $1,783 | $2,326 | 130% | | Fuel expenses | $1,657 | $155 | $1,502 | 969% | | Ground lease expenses | $6,472 | $3,484 | $2,988 | 86% | | Depreciation and amortization | $2,578 | $1,271 | $1,307 | 103% | | Pursuit and marketing expenses | $1,165 | $727 | $438 | 58% | | Employee compensation and benefits | $8,533 | $7,006 | $1,527 | 22% | | General and administrative expenses | $2,018 | $1,778 | $240 | 13% | | Total expenses | $26,532 | $16,204 | $10,328 | 64% | | Operating loss | $(14,352) | $(10,182) | $(4,170) | -41% | | Unrealized loss on warrants | $(19,274) | $7,969 | $(27,243) | -342% | | Net income (loss) | $5,230 | $(17,036) | $22,266 | N/A | Non-GAAP Financial Measures This section defines Adjusted EBITDA as a non-GAAP financial measure used by management to evaluate operating performance and facilitate comparisons. It excludes various non-cash items and is presented as a supplemental measure, not a substitute for GAAP - Adjusted EBITDA is a non-GAAP financial measure used to evaluate operating and financial performance191 - It is defined as net income before depreciation, interest expense/income, non-cash stock-based compensation, non-cash gains/losses on warrants, non-cash operating lease expense/income, income taxes, and other non-cash expenses191 - Adjusted EBITDA for the six months ended June 30, 2025, was $(6,330) thousand, compared to $(4,847) thousand in the prior year193 Adjusted EBITDA Reconciliation (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) | $14,356 | $4,163 | $5,230 | $(17,037) | | Depreciation and amortization | $1,479 | $642 | $2,578 | $1,271 | | Interest expense | $133 | $187 | $271 | $381 | | Other income | $(216) | $(1,089) | $(579) | $(1,496) | | Changes in fair value of warrant liabilities | $(21,801) | $(8,219) | $(19,274) | $7,969 | | Equity-based compensation | $1,323 | $1,076 | $2,561 | $2,108 | | Non-cash operating lease expense | $1,867 | $1,141 | $3,348 | $1,940 | | Non-cash operating lease income | $(157) | $36 | $(465) | $17 | | Adjusted EBITDA | $(3,016) | $(2,063) | $(6,330) | $(4,847) | Liquidity and Capital Resources This section discusses the Company's liquidity, primary cash sources (equity/debt issuance, rental payments), and long-term requirements (lease payments, construction costs, debt repayment). It details recent private placements, the At-the-Market (ATM) Facility, Private Activity Bonds, and cash flow activities, highlighting a significant decrease in cash and restricted cash Overview The Company's liquidity is supported by potential equity and debt issuances, and rental payments, to meet ongoing commitments like debt repayment, construction funding, and operating expenses. While the Company believes it has access to capital, it acknowledges risks related to market conditions and favorable terms - Primary sources of cash include potential equity and debt securities issuance and rental payments from tenants194 - Long-term liquidity requirements include ground lease payments, principal and interest on borrowings, construction costs, and operations194 - Total cash, restricted cash, investments, and restricted investments decreased to $74,561 thousand as of June 30, 2025, from $127,162 thousand as of December 31, 2024197 Cash, Restricted Cash, Investments, and Restricted Investments (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :---------------------------------------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $8,610 | $42,442 | -$33,832 | | Restricted cash | $23,495 | $51,917 | -$28,422 | | Investments | $30,999 | $18,987 | +$12,012 | | Restricted investments | $11,457 | $13,816 | -$2,359 | | Total cash, restricted cash, investments, and restricted investments | $74,561 | $127,162 | -$52,501 | 2024 Private Placement and Securities Purchase Agreement In September and October 2024, the Company completed a private placement, issuing 7,911,580 shares of Class A Common Stock for an aggregate purchase price of approximately $75.2 million - On September 16, 2024, the Company entered into the 2024 Purchase Agreement198 - Issued 7,911,580 shares of Class A Common Stock for an aggregate purchase price of approximately $75.2 million through two closings in October and December 2024198 2023 Private Placement and Securities Purchase Agreement In November 2023, the Company completed a private placement, issuing 8,893,846 shares of Class A Common Stock and warrants to purchase 1,541,600 shares, raising approximately $57.8 million - On November 1, 2023, the Company entered into the 2023 Purchase Agreement199 - Issued 8,893,846 shares of Class A Common Stock and warrants to purchase 1,541,600 shares of Class A Common Stock199200 - The aggregate PIPE financing totaled approximately $57.8 million200 At-the-Market Facility The Company has an At-the-Market (ATM) Facility allowing it to sell up to $100 million of Class A Common Stock. During the six months ended June 30, 2025, it sold a limited number of shares, retaining significant remaining capacity - The ATM Agreement, established March 27, 2024, allows the Company to sell up to $100 million of Class A Common Stock201 - During the six months ended June 30, 2025, 20,472 shares of Class A Common Stock were sold at a weighted-average price of $13.70201 - Approximately $98.6 million in remaining capacity under the ATM Facility201 Private Activity Bonds In September 2021, SHC issued $166.3 million in Senior Special Facility Revenue Bonds (PABs) to finance or refinance construction of aviation facilities at five initial airport locations. These bonds are collateralized by the property and revenues of SHC subsidiaries - SHC issued $166.3 million of Senior Special Facility Revenue Bonds (PABs) on September 14, 2021203 - PABs are comprised of three maturities with interest rates from 4.00% to 4.25%, due between 2036 and 2054203 - Proceeds are used to finance construction at SGR, OPF, BNA, APA, and DVT sites, fund debt service, and establish a Debt Service Reserve Fund203 Debt Covenants The PABs include financial and non-financial covenants, such as a debt service coverage ratio of at least 1.25. The Company was in compliance with all debt covenants as of June 30, 2025 - PABs contain financial and non-financial covenants, including a debt service coverage ratio of at least 1.25204205 - The Company was in compliance with all debt covenants as of June 30, 2025205 Lease Commitments The Company has significant future minimum lease payments under operating and finance leases, totaling $619.4 million for operating leases and $31 thousand for finance leases as of June 30, 2025, with the majority of operating lease payments due after 2029 - Total future minimum operating lease payments are $619,441 thousand206 - Total future minimum finance lease payments are $31 thousand206 - The majority of operating lease payments ($580,613 thousand) are due thereafter (beyond 2029)206 Future Minimum Lease Payments (in thousands) | Year Ending December 31, | Operating Leases (in thousands) | Finance Leases (in thousands) | | :----------------------- | :------------------------------ | :---------------------------- | | 2025 (remainder of year) | $3,231 | $12 | | 2026 | $7,143 | $17 | | 2027 | $8,504 | $2 | | 2028 | $9,701 | $0 | | 2029 | $10,249 | $0 | | Thereafter | $580,613 | $0 | | Total lease payments | $619,441 | $31 | Off-Balance Sheet Arrangements The Company does not maintain any off-balance sheet arrangements - The Company does not maintain any off-balance sheet arrangements207 Cash Flows The Company experienced a significant decrease in cash and restricted cash, primarily due to increased cash used in investing activities (payments for construction, purchases of investments) and a decrease in proceeds from held-to-maturity investments, alongside increased cash used in operating and financing activities - Net cash used in operating activities increased to $(5,994) thousand for the six months ended June 30, 2025, from $(5,472) thousand in the prior year209211 - Net cash used in investing activities was $(54,803) thousand, a decrease of $109.3 million compared to cash provided of $54,535 thousand in the prior year209213 - Net cash used in financing activities was $(1,457) thousand, compared to cash provided of $975 thousand in the prior year, primarily due to a decrease in warrant exercise proceeds209215 - Cash and restricted cash at the end of the period decreased to $32,105 thousand from $122,304 thousand209 Cash Flow Summary (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------- | | Cash and restricted cash at beginning of period | $94,359 | $72,266 | +$22,093 | | Net cash used in operating activities | $(5,994) | $(5,472) | -$522 | | Net cash (used in) provided by investing activities | $(54,803) | $54,535 | -$109,338 | | Net cash (used in) provided by financing activities | $(1,457) | $975 | -$2,432 | | Cash and restricted cash at end of period | $32,105 | $122,304 | -$90,199 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Sky Harbour Group Corporation is not required to provide specific quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide information under this item216 Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025, concluding they are effective. There have been no material changes in internal control over financial reporting during the period - CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025218 - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025219 PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The Company is not currently a party to any material legal proceedings - The Company is not currently a party to any material legal proceedings222 Item 1A. Risk Factors There have been no material changes to the Company's risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes in risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024223 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, there were no unregistered sales of the Company's securities that were not previously reported in a Current Report on Form 8-K - No unregistered sales of equity securities occurred during the three months ended June 30, 2025, that were not previously reported224 Item 3. Defaults Upon Senior Securities This item is not applicable to the Company - Not applicable225 Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable226 Item 5. Other Information During the three months ended June 30, 2025, no director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025227 Item 6. Exhibits This section lists the exhibits filed or furnished with the report, including certifications, XBRL documents, and previously incorporated by reference documents - Includes certifications of CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2)229 - Includes Inline XBRL Instance Document and Taxonomy Extension Documents229 Signatures The report is duly signed on behalf of Sky Harbour Group Corporation by its Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer as of August 12, 2025 - Signed by Tal Keinan (CEO), Francisco Gonzalez (CFO), and Michael W. Schmitt (CAO) on August 12, 2025232