Sky Harbour Group Corp

Previous wording

One of our largest expenses is the lease payments under our ground leases. For the three months ended March 31, 2024 and 2023, our operating lease expense for ground leases was $1.2 million and $0.9 million, respectively. As we enter into new ground leases at new airport sites, our payments to airport landlords will continue to increase into the future. If airport landlords increase the per acre cost of the ground lease of our target campuses, the operating margins at potential target developments may be impacted negatively.

Current wording

One of our largest expenses is the lease payments under our ground leases. For the six months ended June 30, 2024 and 2023, our operating lease expense for ground leases was $3.5 million and $1.8 million, respectively. We elect to expense rather than capitalize ground lease expense incurred at hangar campus sites under development and will incur expense under U.S. GAAP regardless of whether our ground leases defer cash rent payments until completion of construction. As we enter into new ground leases at new airport sites, our ground lease expense and associated cash payments to airport landlords will ultimately continue to increase into the future. If airport landlords increase the per acre cost of the ground lease of our target campuses, the operating margins at potential target developments may be impacted negatively.

Previous wording

We previously raised equity capital, along with potential future debt and further equity issuances, including the Private Placement Purchase Agreement entered into on November 1, 2023, seeLiquidity and Capital Resources — Private Placement and Securities Purchase Agreement** ****below, to begin to fund additional airport campuses and reach up to 20 airport campuses over the next several years. We also have the ability to access the capital markets through our ATM Facility and through our effective shelf registration statement on Form S-3. On average, each future campus is anticipated to be composed of at least 100,000 rentable square feet and is expected to cost approximately $55 million per campus, with 60% or more to be funded with additional private activity bonds or other indebtedness. All future hangar campus projects are discretionary and require us to identify the appropriate airports with the target hangar demand economics, secure required ground leases and permits, and complete future construction at such sites.

Current wording

We previously raised equity capital, along with potential future debt and further equity issuances, including the Private Placement Purchase Agreement entered into on November 1, 2023, seeLiquidity and Capital Resources — Private Placement and Securities Purchase Agreement** ****below, to begin to fund additional airport campuses and reach up to 20 airport campuses over the next several years. We also have the ability to access the capital markets through our ATM Facility and through our effective shelf registration statement on Form S-3. On average, each future campus is anticipated to be composed of at least 200,000 rentable square feet and is expected to cost approximately $55 million per campus, with 60% or more to be funded with additional private activity bonds or other indebtedness. All future hangar campus projects are discretionary and require us to identify the appropriate airports with the target hangar demand economics, secure required ground leases and permits, and complete future construction at such sites.

Previous wording

The cumulative 20 airport site business plan is estimated to cost approximately $1.2 billion, with approximately 65% to 75% anticipated from long-term private activity bonds and the balance with equity or equity linked financing. Our ability to raise additional equity and/or debt financing will be subject to a number of risks, including our ability to obtain financing upon reasonable terms, if at all, costs of construction, delays in constructing new facilities, operating results, and other risk factors. In the event that we are unable to obtain additional financing, we may be required to raise additional equity capital, creating additional dilution to existing stockholders. There can be no assurance that we would be successful in raising such additional equity capital on favorable terms, if at all. Even if we can obtain such additional equity financing if needed, there can be no assurance that we would be successful in raising such additional financing on favorable terms, if at all.

Current wording

The cumulative 20 airport site business plan is estimated to cost approximately $1.2 billion, with approximately 65% to 75% anticipated from private activity bonds and the balance with equity or equity linked financing. Our ability to raise additional equity and/or debt financing will be subject to a number of risks, including our ability to obtain financing upon reasonable terms, if at all, costs of construction, delays in constructing new facilities, operating results, and other risk factors. In the event that we are unable to obtain additional financing, we may be required to raise additional equity capital, creating additional dilution to existing stockholders. There can be no assurance that we would be successful in raising such additional equity capital on favorable terms, if at all. Even if we can obtain such additional equity financing if needed, there can be no assurance that we would be successful in raising such additional financing on favorable terms, if at all.

Previous wording

Operating expenses increased approximately $0.3 million, or 16%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase in operated expense is primarily reflective of increased ground lease expense, which increased approximately $0.3 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase in ground lease expense was driven by new ground leases signed at PWK, BDL, and POU during the three months ended December 31, 2023, and at SJC and ORL during the three months ended March 31, 2024. Salaries, wages, and benefits associated with our campus personnel increased by approximately $0.1 million, primarily driven by a headcount increase associated with the anticipated commencement of operations at our SJC hangar campus. Other operating expenses decreased by approximately $0.1 million, primarily driven by decreased utility expenses associated with operations at our OPF and BNA hangar campuses due to higher occupancy levels.

Current wording

Operating expenses increased approximately $1.6 million, or 95%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase in operated expense is primarily reflective of increased ground lease expense, which increased approximately $1.3 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase in ground lease expense was driven primarily by a full quarter of expense associated with the ground lease signed at SJC during the three months ended March 31, 2024. The increase in ground lease expense was also driven by the ground leases signed at PWK, BDL, and POU during the three months ended December 31, 2023, ORL during the three months ended March 31, 2024, and IAD during the three months ended June 30, 2024. Salaries, wages, and benefits associated with our campus personnel increased by approximately $0.2 million, primarily driven by a headcount increase associated with the commencement of operations at our SJC hangar campus. Other operating expenses increased by approximately $0.1 million, primarily driven by increased utility, insurance, and other start-up expenses associated with the commencement of operations at our SJC hangar campus.

Previous wording

For the three months ended March 31, 2024, and 2023, general and administrative expenses were approximately $4.9 million and $3.5 million, respectively. The approximately $1.4 million, or 38%, increase was primarily due to an approximately $1.3 million increase in salaries, wages, and other benefits, driven by an increase in corporate headcount and expense recognized associated with our equity compensation programs. Headcount and compensation expenses increased approximately $0.7 million, non-cash equity compensation expense increased approximately $0.6 million, and professional fees increased approximately $0.1 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This increase in professional fees was partially attributable to the recognition of approximately $0.1 million of expense associated with the B. Riley Termination.

Current wording

For the three months ended June 30, 2024, and 2023, general and administrative expenses were approximately $4.6 million and $3.7 million, respectively. The approximately $0.9 million, or 23%, increase was primarily due to an approximately $0.9 million increase in salaries, wages, and other benefits, driven by an increase in corporate headcount and expense recognized associated with our equity compensation programs. Headcount and compensation expenses increased approximately $0.4 million and non-cash equity compensation expense increased approximately $0.5 million.

Previous wording

Other expense increased from approximately $4.1 million to approximately $16.0 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This increase was primarily due to an approximately $12.0 million difference in the mark-to-market adjustment of the outstanding warrants at March 31, 2024 as compared to March 31, 2023.

Current wording

Other income increased from approximately $2.6 million to approximately $9.1 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This increase was primarily due to an approximately $5.6 million difference in the mark-to-market adjustment of the outstanding warrants at June 30, 2024 as compared to June 30, 2023. The increase was also partially due to an approximately $1.0 million increase in other income, primarily due to interest earned on our investments in U.S. Treasuries classified as available for sale.

Previous wording

Revenues for the three months ended March 31, 2024 were approximately $2.4 million, compared to approximately $1.1 million for the three months ended March 31, 2023. The $1.3 million, or 117%, increase was primarily the result of the cumulative impact of certain additional tenant leases in place at our BNA and OPF hangar campuses as compared to the three months ended March 31, 2023. The increase in occupancy at our OPF and BNA hangar campuses for the three months ended March 31, 2024 as compared to March 31, 2023 resulted in increased fixed rental revenues of approximately $1.1 million. Revenue associated with our delivery of aircraft fuel increased approximately $0.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Revenues for the six months ended June 30, 2024 were approximately $6.0 million, compared to approximately $2.8 million for the six months ended June 30, 2023. The $3.2 million, or 112%, increase was primarily the result of the commencement of operations at our SJC hangar campus and the cumulative impact of certain additional tenant leases in place at our BNA and OPF hangar campuses as compared to the six months ended June 30, 2023. The commencement of operations at our SJC hangar campus together with the increase in occupancy at our OPF and BNA hangar campuses for the six months ended June 30, 2024 as compared to June 30, 2023 resulted in increased rental revenues of approximately $2.6 million. Revenue associated with our delivery of aircraft fuel increased approximately $0.6 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Previous wording

Depreciation increased approximately $0.2 million, or 40%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase reflects a full quarter of depreciation associated with our OPF hangar campus, which opened during the three months ended March 31, 2023. The increase was also partially driven by the placement of additional ground support equipment into service throughout 2023 and 2024 and a quarter of depreciation related to Rapidbuilt, which was acquired during the three months ended June 30, 2023.

Current wording

Depreciation increased approximately $0.3 million, or 30%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase reflects a full six months of depreciation associated with our OPF hangar campus, which opened during the six months ended June 30, 2023. The increase was also partially driven by the placement of additional ground support equipment into service throughout 2023 and 2024 and a full six months of depreciation related to Rapidbuilt, which was acquired during the six months ended June 30, 2023.

Previous wording

We believe that we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional private activity bonds and other debt and the issuance of additional equity securities. We also have the ability to utilize our $100 ATM Facility or otherwise utilize our registration statement on Form S-3 to access the capital markets. However, as we have recently become a publicly-traded company, we cannot assure you that we will have access to these sources of capital or that, even if such sources of capital are available, that these sources of capital will be available on favorable terms. Our ability to incur additional debt will depend on multiple factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that are or may be imposed by future lenders. Our ability to access the equity and debt capital markets will depend on multiple factors as well, including general market conditions for real estate companies, our degree of leverage, the trading price of our common stock and debt and market perceptions about our Company.

Current wording

We believe that we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional private activity bonds and other debt and the issuance of additional equity securities. We also have the ability to utilize our $100 million ATM Facility or otherwise utilize our registration statement on Form S-3 to access the capital markets. However, as we have recently become a publicly-traded company, we cannot assure you that we will have access to these sources of capital or that, even if such sources of capital are available, that these sources of capital will be available on favorable terms. Our ability to incur additional debt will depend on multiple factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that are or may be imposed by future lenders. Our ability to access the equity and debt capital markets will depend on multiple factors as well, including general market conditions for real estate companies, our degree of leverage, the trading price of our common stock and debt and market perceptions about our Company.

Previous wording

On March 27, 2024, we entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley Securities, Inc. (“B. Riley”) with respect to an “at the market” offering program (the “ATM Facility”), under which we may, from time to time, at our sole discretion, issue and sell through B. Riley, acting as sales agent, up to $100 million of shares of Class A Common Stock. Pursuant to the ATM Agreement, we may sell the shares through B. Riley by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act. B. Riley will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon instructions from us, including any price or size limits or other customary parameters or conditions we may impose. We will pay B. Riley a commission of 3.0% of the gross sales price per share sold under the ATM Agreement.

Current wording

On March 27, 2024, we entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley Securities, Inc. (“B. Riley”) with respect to an “at the market” offering program (the “ATM Facility”), under which we may, from time to time, at our sole discretion, issue and sell through B. Riley, acting as sales agent, up to $100 million of shares of Class A Common Stock. Pursuant to the ATM Agreement, we may sell the shares through B. Riley by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act. B. Riley will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon instructions from us, including any price or size limits or other customary parameters or conditions we may impose. We will pay B. Riley a commission of 3.0% of the gross sales price per share sold under the ATM Agreement, subject to certain reductions. During the three and six months ended June 30, 2024, we sold 7,407 shares of Class A Common Stock under the ATM Facility at a weighted-average sales price of $12.42.

Previous wording

We are not obligated to sell any shares under the ATM Agreement. The offering of shares pursuant to the ATM Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through B. Riley, of all of the shares subject to the ATM Agreement and (ii) termination of the ATM Agreement in accordance with its terms. We have made no sales under the ATM Facility to date and will only do so when our stock price is at prices our board of directors deems appropriate.

Current wording

We are not obligated to sell any shares under the ATM Agreement. The offering of shares pursuant to the ATM Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through B. Riley, of all of the shares subject to the ATM Agreement and (ii) termination of the ATM Agreement in accordance with its terms. We have made limited sales under the ATM Facility to date and will only do so when our stock price is at prices our board of directors deems appropriate.

Previous wording

Funds to meet interest payments for the next three years on the Series 2021 PABs are held in reserve as restricted cash and restricted investments.

Current wording

Funds to meet interest payments through the first half of 2025 on the Series 2021 PABs are held in reserve as restricted cash and restricted investments.

Previous wording

The following table summarizes our sources and uses of cash for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following table summarizes our sources and uses of cash for the six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

Net cash used in operating activities was approximately $4.4 million for the three months ended March 31, 2024, as compared to cash used in operating activities of approximately $4.6 million for the same period in 2023. The $0.1 million decrease in cash used in operating activities was primarily attributable to an approximately $0.6 million decrease in net loss, net of non-cash adjustments. The decrease in net loss, net of non-cash adjustments was primarily driven by an increase in rental revenue. The decrease was offset by an approximately $0.5 million unfavorable change in the Company's working capital position, which was primarily driven by the timing of vendor payments and tenant receipts.

Current wording

Net cash used in operating activities was approximately $5.5 million for the six months ended June 30, 2024, as compared to cash used in operating activities of approximately $5.7 million for the same period in 2023. The $0.2 million decrease in cash used in operating activities was primarily attributable to an approximately $2.1 million decrease in net loss, net of non-cash adjustments. The decrease in net loss, net of non-cash adjustments was primarily driven by an increase in rental revenue and the impact of increases in non-cash operating lease expense and equity-based compensation expense. The decrease was offset by an approximately $1.9 million unfavorable change in the Company's working capital position, which was primarily driven by the timing of vendor payments and tenant receipts.

Previous wording

Net cash provided by investing activities was approximately $33.9 million for the three months ended March 31, 2024, as compared to cash provided by investing activities of approximately $36.3 million for the same period in 2023. The decrease of approximately $2.4 million of cash provided by investing activities was driven primarily by an increase of approximately $95.8 million of available for sale U.S. Treasury purchases, offset by increases of approximately $64.3 million and $27.9 million in proceeds received from the Company's available for sale and held-to-maturity investments, respectively. The decrease was further driven by an approximately $0.1 million increase in capital expenditures.

Current wording

Net cash provided by investing activities was approximately $54.4 million for the six months ended June 30, 2024, as compared to cash used in investing activities of approximately $16.4 million for the same period in 2023. The increase of approximately $70.8 million of cash provided by investing activities was driven primarily by increases of approximately $142.3 million and $18.0 million in proceeds received from the Company's available for sale and held-to-maturity investments, respectively, and approximately $53.0 million and $6.1 million of decreases in purchase of held-to-maturity investments and capital expenditures, respectively. The increase was offset by an increase of approximately $148.8 million of available for sale U.S. Treasury purchases for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Previous wording

Net cash provided by financing activities was approximately $0.3 million for the three months ended March 31, 2024, as compared to net cash provided by financing activities of $0 for the same period in 2023. The approximately $0.3 million increase in net cash provided by financing activities was primarily driven by $1.5 million of proceeds received from the exercise of Warrants during the three months ended March 31, 2024, offset by approximately $0.7 million and $0.4 million of payments associated with vested equity awards and loan principal payments, respectively.

Current wording

Net cash provided by financing activities was approximately $1.0 million for the six months ended June 30, 2024, as compared to net cash used in financing activities of nearly $0 for the same period in 2023. The approximately $1.0 million increase in net cash provided by financing activities was primarily driven by $2.9 million of proceeds received from the exercise of Warrants during the six months ended June 30, 2024, offset by increases of approximately $0.9 million and $0.9 million in payments associated with vested equity awards and loan principal payments, respectively.