SkyHarbour(US:SKYH)2025-11-12 21:04Business Aircraft Market - The cumulative square footage of the U.S. business aircraft fleet increased by 61% from 2010 to 2023, with a 102% increase in larger private jets over the same period [133]. - A forecast predicts up to 8,500 new business jet deliveries worth over $285 billion between 2025 and 2034, with over two-thirds expected to be larger private jets [133]. - The physical footprint of the U.S. business aviation fleet grew by almost 36 million square feet in the past fourteen years, highlighting the demand for hangar space [133]. Company Operations and Strategy - The company operates a portfolio of ground leases across various U.S. airports, with a total rentable square footage of 1,024,318 square feet as of September 30, 2025 [144]. - The occupancy rate across the company's properties in operation is 71.3% as of September 30, 2025 [144]. - The company expects to realize economies of scale in construction through a prototype hangar design, enhancing capital efficiency and mitigating refinance risk [137]. - The company targets high-end tenants in markets with a shortage of private and FBO hangar space, addressing the imbalance between supply and demand [136]. - The company has long-term ground leases at key airports, with lease expirations extending as far as 2097 [140]. - The company is developing home basing hangar campuses to capitalize on existing hangar supply constraints at major U.S. airports [136]. Financial Performance - Rental revenue for Q3 2025 was approximately $5.7 million, a 61% increase from $3.5 million in Q3 2024, driven by operations at CMA and increased occupancy at multiple hangar campuses [179]. - Fuel revenue for Q3 2025 reached approximately $1.6 million, a 193% increase from $0.5 million in Q3 2024, primarily due to fuel sales at the CMA hangar campus [180]. - Total revenue for Q3 2025 was approximately $7.3 million, up $3.2 million or 78% from $4.1 million in Q3 2024 [178]. - Total expenses for Q3 2025 increased by $6.0 million, or 67%, to approximately $15.0 million from $9.0 million in Q3 2024 [178]. - Operating loss for Q3 2025 was approximately $7.7 million, compared to a loss of $4.9 million in Q3 2024, reflecting increased operating expenses [178]. Cost Management - The anticipated retrofitting costs for design defects in hangar buildings are estimated to be between $26 million and $28 million, extending construction timelines by three to five months for affected projects [153]. - Construction material costs, particularly for steel and concrete, are subject to inflationary pressures and tariffs, impacting overall project costs [152]. - The company aims to mitigate inflationary pressures and reduce construction costs through shared savings clauses in contracts with general contractors [155]. Capital and Financing - A Credit Agreement was entered into in September 2025, providing a term loan facility of up to $200 million, with the potential to increase to $300 million [147]. - The company plans to access capital markets through various agreements and facilities to fund additional airport campuses [159]. - The company has the ability to fund up to $50 million in new projects outside the original five locations, contingent on approvals and consultant reports [158]. Cash Flow and Liquidity - As of September 30, 2025, total cash, restricted cash, investments, and restricted investments amounted to approximately $47.9 million, a decrease from $127.2 million as of December 31, 2024 [209]. - Net cash used in operating activities was approximately $6.9 million for the nine months ended September 30, 2025, compared to $6.6 million for the same period in 2024 [227]. - Net cash used in investing activities was approximately $44.3 million for the nine months ended September 30, 2025, a decrease of $52.7 million compared to the same period in 2024 [229]. - Net cash used in financing activities was approximately $6.7 million for the nine months ended September 30, 2025, compared to a net cash provided of $0.2 million for the same period in 2024 [231]. Employee and Operational Expenses - Employee compensation and benefits expenses rose by approximately $1.9 million, or 61%, to $5.0 million in Q3 2025, driven by increased headcount and equity compensation [186]. - Ground lease expenses increased by approximately $1.0 million, or 42%, to approximately $3.5 million in Q3 2025, influenced by new ground leases signed and those assumed from the CMA transaction [183]. - Depreciation and amortization expenses increased by approximately $1.1 million, or 175%, for Q3 2025, primarily due to the acquisition of CMA and the commencement of operations at new campuses [184]. - Campus operating expenses rose by approximately $1.0 million, or 87%, to approximately $2.1 million in Q3 2025, driven by increased personnel costs and operational expenses [181]. Debt and Compliance - The company is required to maintain a debt service coverage ratio of at least 1.25 for each applicable test period, commencing with the quarter ending December 31, 2024 [219]. - As of September 30, 2025, the company was in compliance with all debt covenants [221].