DALLAS, TX -- March 31st, 2025 -- Sky Harbour Group Corp. (NYSE: SKYH): Stonegate Capital Partners updates their coverage on Sky Harbour Group Corp. (NYSE: SKYH). Sky Harbour demonstrated robust growth and resilience throughout FY24, successfully navigating economic conditions such as inflation and elevated interest rates while significantly expanding its aviation infrastructure portfolio. Key milestones include the completion of major construction initiatives, the acquisition of existing facilities, maintaining solid occupancy rates across its operational campuses, and announcing the SH-37 hangar product—a proprietary large-hangar model catering to modern business jets—strengthening its competitive position in premium aviation infrastructure.
Company Updates:
Occupancy and Revenue Performance: For FY24, SKYH delivered consolidated revenues of $14.8M, a 95% year-over-year increase from FY23. In the quarter, SKYH generated revenues of $4.6M, up from $4.1M in 3Q24, a sequential increase of ~13.0% primarily driven by lease initiations at the new San José facility, optimization at existing campuses, and three weeks of operations from the newly acquired Camarillo campus. The occupancy rate across operational campuses remained robust, with notable increases expected in Q2-Q4 FY25 from facilities in Phoenix and Dallas, and an upcoming opening in Denver.
New Leases and Upcoming Construction: Sky Harbour significantly expanded its leased footprint, now operating campuses at multiple strategic locations, including a newly executed lease at Seattle's Boeing Field (BFI), adding approximately 90,000 rentable sq ft. Construction and development projects remain firmly on track, with recent openings in Phoenix Deer Valley Airport (DVT) and Addison Dallas Airport (ADS), and completion expected soon at Denver Centennial Airport (APA). Notably, the portfolio's total leasable space reached approximately 580,000 sq ft, with over 2.1 million sq ft currently under construction or development, projecting additional annual revenue potential of approximately $37.6 million upon completion.
Margins and Profitability: Gross margins improved to 14.5% in 4Q24, up from 10.2% sequentially and from 11.1% in the fourth quarter of the prior year. Operating income decreased to $(5.4)M from $(4.9)M in 4Q23, primarily due to increased ground lease expenses and higher salaries, wages, and benefits associated with increased headcount. EBITDA was relatively flat sequentially at $(4.6M), as the Company works through the new leases and upcoming constructions mentioned above. We expect EBITDA to gradually improve and turn positive in FY26.
Balance Sheet Strength: Sky Harbour maintained a strong balance sheet position, with total assets of $556.6M and liquidity, including cash and U.S. Treasuries, totaling ~$127.0M at year-end FY24. In December, SKYH completed its second PIPE equity placement, raising $75.0M from new and existing investors, significantly strengthening liquidity going into FY25. Additionally, the Company successfully complied with the Debt Service Coverage tests required by its bond indenture, highlighting sound fiscal management. SKYH is pursuing an investment-grade rating for its bonds, which we believe may be completed in FY25.
Valuation: We use a Discounted Cash Flow Analysis to guide our valuation of SKYH. Our DCF analysis produces a valuation range of $15.36 to $23.80 with a mid-point of $18.83. This analysis relies on a range of discount rates between 8.75% and 9.25% with a midpoint of 9.00% and accounts SKYH's debt being assumable, which has an estimated blended interest rate of 4.25%.
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