Sky Harbour Group Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 14, 2024

Key Takeaways

  • Sky Harbor reported higher Q1 revenues with flat operating expenses, resulting in positive cash flow from operations and an expectation to remain cash flow positive as new campuses open.
  • The 4th campus in San Jose opened on April 1 and is already ~60% leased after six weeks, with higher revenue per square foot and projected to add $1M–$1.5M of consolidated cash flow at full occupancy.
  • The company is on track to sign three new ground leases in H2 2024 and six in 2025, focusing on Tier 1 airports to maximize revenue capture, while its development pipeline has tripled and is scaling toward nine projects by 2025.
  • Sky Harbor maintains strong liquidity with $160M in cash and U.S. Treasuries, permanent fixed-rate bonds with the first maturity eight years away, and forecasts operational cash flow covering upcoming interest service without additional capital.
  • Management has engaged outside counsel to pursue legal claims related to flood design cost overruns in Phoenix and Denver, expecting some recovery but not full reimbursement of additional capital outlays.
AI Generated. May Contain Errors.
Earnings Conference Call
Sky Harbour Group Q1 2024
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good afternoon. My name is John, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Sky Harbour 2024 first quarter earnings call and webinar. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply submit a question online using the webcast URL posted on our website. Thank you. I would now like to turn the call over to Mr. Francisco Gonzalez, Chief Financial Officer. You may begin your conference.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thank you, John. Francisco Gonzalez, CFO of Sky Harbour. Hello and welcome to the 2024 first quarter investor conference call and webcast for the Sky Harbour Group Corporation. We have also invited our bondholder investors in our borrowing subsidiary, Sky Harbour Capital, to join and participate on this call. Before we begin, I've been asked by counsel to note that on today's call, the company will address certain factors that may impact this and next year's earnings. Some of the information that will be discussed today contains forward-looking statements. These statements are based on management assumptions, which may or may not come true, and you should refer to the language on slides 1 and 2 of this presentation, as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

All forward-looking statements are made as of today, and we assume no obligation to update any such statements. So now, let's get started. The team with us this afternoon, you know from our prior webcasts, Tal Keinan, our CEO and Chairman of the Board; Will Whitesell, our COO; Mike Schmitt, our Chief Accounting Officer; Tim Herr, our Treasurer; and Tori Petro, our Accounting Manager. We have a few slides we will want to review with you before we open it to questions. These slides have been filed a few minutes ago in Form 10-Q with the SEC, and also for Sky Harbour Capital with MSRB EMMA. We will also be available on our website shortly. As the operator stated, you may submit written questions during the webcast, during the Q&A platform, and we will address them shortly after our prepared remarks. Let's get started.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

This is a summary of the financial results of our wholly owned subsidiary, Sky Harbour Capital, and its operating subsidiaries that form the Obligated Group in the context of the trend of the past three years for selected metrics. As you may see, we continue on the path of construction activity and expect that to accelerate in the coming quarters, as Will will discuss shortly. Revenues moved higher in Q1, and we expect them to continue to move higher in Q2 now that the three campuses are fully leased. Operating expenses remain relatively flat, leading to a positive cash flow from operations, as you may see in the lower right-hand chart. We expect to remain cash flow positive going forward at the operating level. We expect this trend to continue and to accelerate in the first half of next year when Denver, Phoenix, and Dallas campuses open. Next slide.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

On a consolidated basis, the results in Q1 track similar results as Sky Harbour Capital, except for SG&A, which is mainly a parent company and reflects the impact of non-cash employee stock and cash-based compensation expenses. The next step function in revenues on a consolidated basis is expected to occur in Q2, the current quarter, with the opening last April, last month, of our new campus at the San José Mineta International Airport. We expect Sky Harbour Capital, on a consolidated basis, to reach cash flow positive in the summer of 2025 as we reach sufficient scale to cover our holding company expenses. Let us turn to Tal Keinan, our CEO, for an update on site acquisition.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Thanks, Francisco. So, as people I think are becoming accustomed to, we think of our activities in four silos: site acquisition, development, leasing, operations. Site acquisition, as you can see, this is the major hurdle in our business. You know, we it's not that our work is done when we acquire a site, but I think most of the value of our growth is captured at the point of site acquisition. This chart shows revenue capture historically and what we projected going forward as well on the basis of airports times square footage of hangar that we see fitting on the airport in question times revenue per square foot that airplanes at that airport are currently paying. Of course, our objective is to capture higher revenue per square foot than is currently available at those airports, but that's what this chart shows.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

I, I would say we, we are on track to meet our projections, perhaps exceed them, this year. I'm gonna hand it over to Will to talk about development.

Will Whitesell
Will Whitesell
COO at Sky Harbour Group Corporation

Thanks, Tal. This Gantt chart represents a high-level summary of our development and construction pipeline as we see it today. Behind each one of these fields and phases, there's a significant amount of detail that represents both the planning and execution approach of each one of the fields to deliver the assets. This Gantt chart will continue to be detailed and new fields added as our pipeline grows. This represents a threefold increase in projects from 2023/24 moving into 2025. Our first quarter focus has been on determining the structural remediation plan of the three fields discussed in our previous call. The second quarter has been driven around defining our processes to scale up the operation to move towards nine projects in 2025. The third and fourth quarter will be driving the process to scale the operation, find inefficiencies, delivering projects faster, and at scale.

Will Whitesell
Will Whitesell
COO at Sky Harbour Group Corporation

As a summary, these are the three major fields that we spoke about in our previous call that represented the areas, each field that needed to be remediated with the structural fixes. These projects, per our last call, are proceeding according to our plan, as we move forward at this date.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Okay. It's Tal Keinan again. Our leasing update, so as we discussed at our last earnings call, the first three airports are functionally fully leased. I will say we're targeting effective occupancy that is higher than 100% on those campuses. I think we did discuss this in the last earnings call, and there was a question about it, in that we have both in Nashville and Miami what we call semi-private hangars, where we have more than one tenant in the hangar, in which case the lease contracts are defined by aircraft square footage rather than hangar square footage, and which is really the convention in our industry. That's how FBOs charge aircraft rent, which allows you to get to about 120% occupancy in a standard hangar. So we do think there's actually more squeeze out of Nashville and Miami.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

As Francisco alluded to at the beginning, we opened our fourth campus in San José, California, on April 1st. I think the two things to note on San José is, number one, we're coming up on 60% leased. I guess we're about six weeks in to San José, so the leasing pace has been good. And our revenue per square foot is a lot higher, and I'll come back to that on the summary slide, where I think it's important to understand when we look at that revenue capture chart that we looked at a couple of slides ago, we are orienting the company, you know, really in the next 24-36 months towards targeting the best airports in the country.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

As I think people have appreciated here, there's kind of a finite range within which development cost and OpEx, which is really the denominator of yield on cost, there's a finite range within which those two factors vary. That's the denominator. The action is really in the numerator, right? We are a real estate business fundamentally, and it's about location. As in, as you can see, you capture significantly higher yields on what we call Tier 1 airports. San José is the first Tier 1 airport in the Sky Harbour portfolio, and most of our site acquisition focus, over the next 24-36 months is Tier 1 airports.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Next slide is airport operations, where there's not much material to report here, just to say that the objective that we set on the board level for 2024 is to really demonstrate that we're in a year where we're really building a brand for the first time for Sky Harbour. And part of that is demonstrating a clear differentiation between the Sky Harbour offering and that of legacy aircraft-basing solutions. It's a very resident-centric model. As people on the call know, we don't have transient business at all at Sky Harbour. It's all the residents, and we have a really, I would say, almost maniacal focus on catering to those residents in the most special way possible. What does that mean? Number one, efficiency. We're demonstrating, and we hope to continue demonstrating, the shortest time to wheels up in aviation.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

If you know your corporation or you as an individual have made the very large investment of owning a business aircraft, we think efficiency and spontaneity is a very big piece of the value driven there. We have an interruption, and yeah, we're good. So that shortest time to wheels up, I think is what it's all about for many of the residents that are in our resident community. Second is personalization. You know, we have small line crews on every campus. Both pilots and aircraft owners are on a first-name basis with everybody that touches their aircraft, and we're able to provide you know some very tailored service to these residents, which I think is becoming increasingly appreciated. And, of course, privacy.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

I think one of the values of basing in Sky Harbour is there is no public terminal to walk through. Our residents' privacy is protected on an absolute basis. And then last on the list, but first in our minds and our approach to operations is safety, where there's, you know, absolutely no compromises. So that means pursuing and hiring the best ground crews in the business and having an absolutely rigorous training and testing regimen for our ground crews. With that, let me hand it back to Francisco to talk a little bit about our liquidity position and our long-term permanent debt.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thank you, Tal. We continue to enjoy strong liquidity as we roll our cash in 1- to 3-month US Treasury bills and notes pending their use in construction. In the meantime, we continue to earn more in our cash than the interest expense of our bonds. At quarter end, we had close to $160 million in cash and US Treasuries. Our debt, as you all know, is permanent fixed-rate bonds with a first maturity 8 years away and capitalized interest through the July payment of next year. The recurring cash flows from operations that we expect at the Obligated Group in 2025 will amply cover the expected net service of $5.6 million next year without having to touch the $4 million ramp-up reserve we put in place just in case at the time of the bond issuance. Next slide. One more comment on our bonds.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Our longest 30-year maturity due in 2054 traded recently to yield 5.75, a level commensurate with strong double B ratings and a testament of the great quality and demand for our bonds. As you all know, we have met funding gaps at the Obligated Group with new equity and feel very comfortable to project that after stabilization, the future debt service coverage ratios will exceed those that were forecasted at the time of the bond issuance many years ago. We continue on a path to seek investment-grade ratings next year as campuses ramp up with cash flow generation. We add additional airfields to the portfolio in a de-risked way, and we use interim financings in order to protect the current bondholders of the Obligated Group.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

If we need to make adjustments to our covenants in order to achieve triple B ratings, we will consider those seriously, given our goal to deliver this milestone in the fall of next year. Next slide. This slide we have shown before, but wanted to reiterate that we continue to receive funding proposals of equity and debt to meet our growth capital needs, but we are being disciplined on our consideration of these. We seek growth capital that is traded accredited to our bondholders and earnings cash flow accredited to our equity stockholders. We have not sold any shares under our ATM program. Our conservative balance sheet on liquidity allows to be delivered. We are fully funded for the first 10 airports and can reach cash flow break-even without any additional capital raise.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Of course, if we can accelerate growth with the right new funding, we will take advantage of opportunities as these arise. Back to Tal for a brief review of our areas of focus in the next 12 months.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Thanks, Francisco. So, our radar sweep looking forward is as follows. Site acquisition, as I said earlier, it's now about maximizing revenue capture. That means the most square footage on the best airfields in the country. Our site acquisition team has grown significantly. It'll continue to grow. We've got many, many airfields in the call it gestation process that will hopefully yield ground leases at those airports. But again, Tier 1 airports is the focus. Development, we're moving to standardization and structuring ourselves for scale. That means very high run rate, parallel processing of many, many fields across the country. At a time, Will and his growing team have done a lot of work to gear us up for really running this company at scale. You know, we feel we're in a position where our unit economics are increasingly borne out.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

We're comfortable with them, especially as we move to these higher revenue airfields like the airfields in the New York area, for example. It's the development side of the business is really about coming to develop at scale. On the leasing side, as I mentioned earlier, this is the year where we want to generate brand awareness. You know, we've been a very local story in each location that we're in, so far. It's time for us to become a national story, both in terms of the number of campuses that we have coming online, and also just recognition of the value that we bring to airport sponsors themselves, right? Increasingly, we're feeling pulled from the airport sponsors and that we have a differentiated offering that serves the business aviation community differently from what's been available up until now.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Then operations, again, it's maniacal focus on the resident, who has very, very particular needs that we feel we're meeting differently than any available offering to date. And again, the kind of measurable metric that we want to focus on here is time to wheels up. And you know, in addition to that, there are a bunch of unquantifiables that we know are important, like personalization and keeping that safety standard at the top of the industry. With that, I think we can take it to questions.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yes, this concludes our prepared remarks. We now look forward to your questions. Operator, please go ahead with the cue.

Operator

Thank you. At this time, I would like to remind everyone, in order to ask a question, please submit it online using the webcast URL. We'll pause for just a moment to compile the Q&A roster. Thank you. First question comes from Philip Bristow. The question reads as follows. I read that Sky is potentially pursuing legal action for the additional cost for Phoenix and Denver. Can you discuss any potential recovery for the additional capital outlay for those locations? Thank you.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thank you, Philip. It's Francisco. First of all, thank you for your question and for your, you know, following Sky Harbour these past few years as an investor. Yes, so we have engaged counsel, outside counsel, to pursue claims against those parties that, you know, were related to these flood designs that now we have addressed. And, you know, the outcome of that, it's too early to tell. You know, we know that some of the parties have obviously insurance behind them. So, you know, more on this in the near future. You know, we do expect some recovery, but unfortunately, it's not going to be a full recovery of the increased costs that we have endured.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

But we are going to fully pursue our, you know, our legal remedies, under the contracts and laws in diverse jurisdictions that we were impacted, Texas, you know, Denver, and so on. Next question.

Operator

Again, if you would like to ask a question, please submit it online using the webcast URL. The next question comes from Philip Bristow. Can you comment on the non-rental revenues that you mentioned on March 27th? What is the potential for that segment over the next five years as a percentage of the overall revenue and margins? Thanks.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Yep. Okay. This is Tal. We're seeing actually two questions, two similar questions on this, so we'll, we'll address Alan Jackson as well, on this same one. So let me start with this. The focus of the company right now is on growth, putting more dots on the map and better dots on the map, right? So we're, we're actually devoting relatively little bandwidth to the additional revenue streams. The idea being we will circle back when, when we own these. Remember, there's a very deep moat around us once, once we establish ourselves at an airport. So we think there's a lot of time to come back and address these, these revenue streams. I can tell you what we have in place right now, as everyone here knows, there, there are fueling revenues everywhere but, but Houston, which supplement our rental revenues.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

There are now aircraft detailing revenues as well. Remember, like fuel, we're really coupon clippers here, right? We never own the fuel. We don't provide the detailing services. We facilitate a third party providing those services, and we take a cut of the revenues. And that will be the model for most, if not all, of the dozen or so additional revenue streams that we're looking to put in place. But I'll say again, the focus right now primarily is on growth, putting more dots on the map. Once you own those, you can come back and push those beachheads to, you know, bring in additional revenues.

Operator

The next question comes from Greg Gibas. Do you think you can achieve over 100% occupancy at other campuses, or is it more of a one-off?

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Yeah, Greg, thanks for that question. No, that, that's definitely something that we'll do, everywhere going forward. I, I don't remember if we discussed this in the last, last call, but our prototype hangar has evolved on the basis of the 2021 edition of the NFPA 409 fire code for aviation hangars. So we're going from a floor layout of just under 12,000 sq ft to a floor layout of about 34,000 sq ft. That 34,000 sq ft hangar can be demised in a way that provides two fully private bays that are the equivalent of our current hangars, right? We could do that. Or leave them undemised, which leaves you a much more stackable format, right? You can you can achieve higher revenue density in that 34,000 sq ft format than you can in the 12,000 sq ft format.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Not only is it applicable to other campuses, I expect actually occupancy to be higher on the future campuses than on the current campuses.

Operator

Next question comes from the line of Christine Thomas. What is the current trend in construction per sq ft cost? Are there benefits to scale as you add hangars to a bigger installed base?

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thanks for the question, Christine. Currently in the market right now, we see construction costs on most of our campuses between $240 sq ft to just north of $300 sq ft. I would say that some of the inflationary pressures, meaning escalation as we look at projects in our pipeline that are 12 months out, is starting to settle down a little bit from what was anywhere to 6%-10% to a more normal range of 3%-5% on a per annum basis. I'm sorry. I don't know where that.

Operator

The next question comes from the line of Matthew Howlett. Are you still on pace to sign 3 ground leases in 2H24 and 6 in 2025? If so, will all be Tier 1 locations?

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Yeah, thanks, Matt. This is Tal. Yes, we're on pace. Again, our ambition is actually to exceed guidance. We'll see. We won't be bashful as these leases come in. In terms of targeting, you know, we have over 100 airports that are in process that we're targeting. We will definitely take what comes. The focus is on the highest, you know, the top, you know, Tier 1 airports where we see the highest revenues. You know, that said, you know, you, you're familiar with the unit economics even on the rest of the airports. They're all attractive, and again, to the extent that the, you know, capital won't be a constraint going forward, we see no need to turn down, or, you know, other business.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

So it's kind of full steam ahead right now. But I think you'll notice a significant skew towards, yeah, the best airports in the country. That is where 80% of the focus is today.

Operator

Please wait for a moment while we compile the Q&A roster. Thank you. The next question comes from Peyton Skiles. Guidance on full occupancy at SJC.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Do we have a question? Yeah. We good? Yeah, all right. Thanks, thank you for the question, Peyton. We actually currently have the entire hangar under LOI. You know, how much of that is actually going to materialize as a full lease we'll know in the coming, I'd say, month or so. Our internal target is midsummer to have that hangar full. Right now, it looks like we might be on pace to beat that. The entire hangar, actually, we're about 105% occupancy in the hangar is under LOI currently. If we can convert that into leases, you know, we should know that next 3 or 4 weeks.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Let me add, Francisco. San José, already at the current level, is cash accretive. And, obviously, as it gets fully leased, it will contribute, you know, north of $1.5 million of incremental cash flow, on a consolidated basis. So, we're looking forward to it reaching full occupancy in the coming, you know, weeks and months.

Operator

Question comes from Christine Thomas. Why does an airport sponsor chose Sky Harbour over other providers? How many other providers generally compete for each airport?

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Yeah, thanks, thanks for the question, Christine. It's Tal. So I, I think it depends on, on the airport. It depends on the situation. You know, one of the things that we've learned over the years, doing this is, is no two airports are alike. You know, we, we, at the beginning, I think, tried to find template solutions to getting onto airports. That's, that's not really how it works. I'll give you an example, though, of, of an advantage. If you if you take an airport that's served today by two or three FBOs, and remember, the main business of the FBOs is, is, is fueling. And on certain airports, it's really dominated by transient fueling versus base tenants.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Unless those FBOs are operating at full capacity, can't expand, can't add, you know, personnel or equipment to handle more volume, then adding an additional FBO primarily cannibalizes the business of the existing FBOs, which is, you know, not necessarily good for the airport, and it hurts their tenants. And there is a, you know, responsibility of the airport sponsor toward its existing tenants. Whereas adding a Sky Harbour base to an airport doesn't cut into the transient fueling business at all for the FBOs, and brings incremental hangar capacity to those airports. What is that good for? You know, I think on the weaker side, it's an economic development boost to the airport sponsor jurisdiction. On the maybe stronger side is ad valorem tax receipts for that jurisdiction, right?

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Many states in the country charge an ad valorem tax on aircraft, which can be considerable. Having those aircraft based at the airport is a direct driver of tax revenue, which makes really eclipses all other revenue sources for airport sponsors, right? I mean, rent, you know, fuel flowage fees and other sources of revenue are going to fall way short in most jurisdictions that have ad valorem tax. They're going to fall way short of ad valorem tax receipts. And look, there are a lot of other reasons that airport sponsors might be interested in a Sky Harbour. Again, I don't think there's one sweeping statement we can make about that, but maybe take that as an example of, you know, of the types of considerations an airport sponsor might have.

Operator

The next question comes from the line of Matthew Howlett. Are you still on pace to sign 3 ground leases in 2024 and 6 in 2025? If so, will all be Tier 1 locations?

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Yes, sir. I think we already addressed that question, so maybe we can skip to the next.

Operator

The next question comes from the line of Alan Jackson. As you begin to establish the national brand, do you anticipate more competition emerging? Does Sky Harbour have a first-mover advantage as compared to future competitors that can insulate the company from potential rent reductions?

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

Yeah, Alan, it's Tal. I think the short answer is yes, right? We expect competition to come into our space. You know, right now, nobody else is doing this. The unit economics are clear to everybody on the call. We do expect competition to come in. And we also do think that there is a first-mover advantage here. And I think it comes in a few different forms. One example would be on the site acquisition side, where, you know, today, Sky Harbour is in process, like I said, in a very, very large number of airports across the country. No two airports are alike. We sought and failed to find a template solution to site acquisition. It's much more art than science.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

and we have what we think is the best team in the country doing this today. We do think that that's something that's going to be difficult to emulate. In addition, again, I think many, many on the call will appreciate Sky Harbour is structured in all aspects of the business for this specific mission. And, you know, although it's not, you know, that this is not some high-tech company with a patent protecting it, there are a lot of moving parts of the business, right? From the way we finance ourselves to the way we staff ourselves to our methodologies, this is not copy-paste from, you know, from any other industry. So we do see real benefit to being the first mover in this space. That said, you know, we don't expect to be alone in this space forever.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

I mean, that will happen.

Operator

Question comes from Peyton Skill. What is the dollar per gallon difference between fueling with Sky H and fueling at a neighboring FBO?

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

It's Tal. We so I think two things that we share in common with the FBOs. Number one is we bundle rent and fuel. We encourage our prospective residents to look at total basing cost in order to kind of make, make an apples-to-apples decision. We make the vast, vast majority of our revenue from rent. The FBOs make the vast majority of their revenues from fuel, but they are bundled. And the second is that we, we negotiate with individual tenants, right? Again, we're, we're not you know, we, we don't have thousands of, of, of residents. And we are talking about, you know, major corporations or very high-net-worth individuals as, as tenants. Everybody is on some negotiated rate, right? We have tenants that prefer a lower rent and a higher fuel margin. We have, you know, tenants who prefer the opposite.

Tal Keinan
Tal Keinan
CEO at Sky Harbour Group Corporation

So I don't think there's any, I don't think we can say a specific spread on dollars per gallon between Sky Harbour and an FBO. I think we could just say, in general, our rents are much higher than an FBO's rents. Our fuel prices are lower than an FBO's fuel prices.

Operator

The next question comes from Matthew Howlett. Can you give us an update on the warrants? How should investors think about them? They can be a significant source of capital to the company. You can call them when the stock is $18 for a certain period of time.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yes. Thanks, Matt, for the question. Yes, you know, as many of you know, we inherited the warrants at the time of the De-SPAC. And then also, we provided some warrants in our last pipe, that are, you know, within the same CUSIP and the ratio. So they all basically came together in the same trading. You know, we get this question a lot. You know, yes, they have been a source of capital already. I think we mentioned in the last webcast that we have gotten about $3 million of you know proceeds from the exercise of warrants. And, obviously, something that we will continue to welcome.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yes, you're right in your question that, as per the terms of the—I think this is pretty standard—for VISPAC warrants, that they have a—we see it as a cap at $18, at which time the company can, basically, you know, force a call, exercise of, of the warrants. You know, we, we have no, currently, any plans to, to do anything with the warrants. You know, we continue to monitor them, and so on. And we see them as a way for people who are interested in, in, in, in our stock to also take a, a long position on, on, on the company. But again, from our perspective, you know, we, we probably let the market, kind of like they take that.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

We see, you know, as people decide to exercise them now and into the future, as a source of capital, but obviously at the margin. Now, as time goes by and our stock performs, yes, there'll come a time where, as we get closer to expiration, warrant holders will then have the opportunity to exercise. And then given the amount of warrants we have outstanding, it will be a material amount of proceeds coming to the company at that time.

Executives
    • Francisco Gonzalez
      Francisco Gonzalez
      CFO
    • Tal Keinan
      Tal Keinan
      CEO
    • Will Whitesell
      Will Whitesell
      COO
Powered by Quartr