SkyHarbour(SKYH) - 2024 4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4, consolidated revenues increased by 13% sequentially over Q3, with full-year revenues doubling compared to 2023 [8] - Operating expenses in Q4 rose due to hiring for new campuses and non-cash accruals for ground lease expenses, which amounted to over $1.4 million [9][11] - The company expects to reach cash flow break-even on a consolidated basis in Q4 of this year [12] Business Line Data and Key Metrics Changes - The wholly-owned Scarborough Capital subsidiary's revenues were flat from Q3 to Q4, but a significant increase in revenues is expected in Q2, Q3, and Q4 of this year as new campuses ramp up [15] - Adjusted EBITDA is now being reported as a key business metric, providing insights into operating performance and debt service capabilities [19][20] Market Data and Key Metrics Changes - The company reported strong liquidity with approximately$127 million in cash and U.S. Treasury bills, excluding 32 million used for acquisitions [27] - The long bond trading has shown positive trends, with ongoing interest from bondholders [28] Company Strategy and Development Direction - The company aims to secure investment-grade ratings for existing bonds and expects future debt service coverage ratios to exceed previous forecasts [29] - The focus for 2025 is on acquiring the best revenue-producing airfields in the country, with a strong emphasis on quality and speed in construction [62][64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the potential for significant acceleration in ground lease signings, with the pace of site acquisitions growing exponentially [70] - The company is not rushing to implement additional revenue streams, focusing instead on securing marquee airport sites and optimizing offerings for residents [74] Other Important Information - The company has begun the process of seeking investment-grade ratings for its existing bonds, which is expected to positively impact future financing [29][92] - The introduction of RapidBuilt is aimed at increasing the quality and speed of development, with potential opportunities to expand to clients outside of Sky Harbor in the future [95][96] Q&A Session Summary Question: Potential for 50 campuses in three to five years - Management indicated that if guidance is met, they would be halfway to this goal by the end of the year, with an exponential growth in site acquisition wins [70] Question: Expectations on price per square foot for new locations - Most new locations are expected to be greenfields, with additional revenue streams not prioritized at this time [75] Question: Campus development progress in 2026 - Management anticipates continuing at least the same pace as 2025, with a potential range of six or more airports [78] Question: Step-up in rents and existing tenant leases - Management noted that the step-up from the second lease to the third is expected to be less dramatic, with inflation being a guiding factor for future leases [80][82] Question: Funding gap for square footage in development - The company is deliberate in its capital raising plan, aiming to maintain a 12 to 18-month capital cushion ahead of deployment [86] Question: Update on raising 150 million - The company is in the process of a feasibility study and has received interest from institutional investors regarding potential debt financing [92] Question: Interest rate expectations for upcoming bond issuance - Current market conditions suggest new issuances may come at a slightly higher yield than existing bonds, with efforts to secure investment-grade ratings expected to positively influence this [102] Question: Impact of tariffs on procurement - Management confirmed that while there have been increases in steel prices due to tariffs, they had preemptively placed large orders to mitigate impacts [120]