Sky Harbour Group Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 12, 2026

Key Takeaways

  • Positive Sentiment: Q2 revenue rose 50% year over year and 13% sequentially, driven by new campus openings, higher occupancy, and rent increases. Operating cash flow turned positive at approximately $0.5 million, which management described as a company milestone.
  • Positive Sentiment: Sky Harbour Capital revenue increased 79% year over year, while operating cash flow reached nearly $3 million for the quarter and marked the subsidiary’s 10th consecutive quarter of positive cash flow. Management expects operating leverage from Opa-locka Phase II and Addison Phase II to expand gross profit and EBITDA margins.
  • Positive Sentiment: Management reaffirmed year-end guidance for an annualized revenue run rate of $42 million to $46 million and adjusted EBITDA of $4 million to $6 million. It expects further gains from Opa-locka leasing, higher occupancy at Denver and Phoenix, and upcoming Bradley and Addison Phase II openings.
  • Neutral Sentiment: Liquidity totaled more than $207 million in cash and U.S. Treasuries, plus approximately $130 million of available construction financing; the company also completed a $40 million common-stock placement. Management said potential public-warrant exercises could provide another roughly $94 million, but the equity issuance diluted existing shareholders.
  • Negative Sentiment: Adjusted EBITDA remained negative at approximately $0.9 million in Q2, while operating expenses continued to rise due partly to campus headcount and non-cash ground-lease accruals. Leasing has been slower than expected at Denver Centennial, and management acknowledged potential construction-inflation headwinds despite current costs of about $242 per square foot.
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Earnings Conference Call
Sky Harbour Group Q2 2026
00:00 / 00:00

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Operator

Thank you. I would now like to turn the call over to Francisco Gonzalez, CFO. Please go ahead.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thank you, operator, and good afternoon, everybody, and welcome to the 2026 second quarter investor conference call and webcast for the Sky Harbour Group Corporation. We have also invited our bondholder investors and lenders in our borrowing sub-series, Sky Harbour Capital, Sky Harbour Capital II, and Sky Harbour Capital III, to join and participate on this call as well. Before we begin, I have 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 contain forward-looking statements.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

These statements are based on management assumptions which may or may not come true, and you should refer to the language on slides one and two 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. All forward-looking statements are made as of today, and we assume no obligation to update any such statements. Now let's get started. The team with us this afternoon you know from our prior webcasts, our CEO and Chair of the Board, Tal Keinan, our Treasurer, Tim Herr, our Chief Accounting Officer, Mike Schmitt, Accounting Manager, Tori Petro, and our Assistant Treasurer, Andreas Frank. We have a few slides we want to review with you before we open it to questions.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

We're starting on this webcast today will be limited to those from the research analyst community that have us under coverage. We decided that, as you may have remembered in the past, we have run out of time usually, and not all of the questions get addressed. We decided to change to this structure. Obviously, we welcome any and all investor questions afterwards through our investor email at investors@skyharborgroup. I will make an effort to respond promptly. We just filed a few minutes ago our 10-Q with the SEC and our second quarter financials for Sky Harbour Capital related to the Series 2021 bonds, and for the Sky Harbour Capital III, related to the Series 2026 bonds with MSRB EMMA. We also just filed a prospectus supplement to our existing shop registration program. Let's get started then. If we could go to the slide with our recent results.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

At the end of the second quarter, on a consolidated basis, assets under construction and completed construction reached over $393 million. That is a $65 million increase year-to-date and the highest in six months in our corporate history. What this means is that the pace of investment and new construction at Sky Harbour continues to accelerate, and these columns will continue to grow at an ever higher incremental rate. Q2 revenues experienced an increase of 50% over a year ago and 13% sequentially, given the new campus openings in the past year and increases in occupancy and rental rates. Operating expenses in Q2 continued to increase in tandem with new campus openings, impacted in particular by increases in campus headcount and in non-cash expense accruals of new ground leases entering in the past year, which are not yet constructed or in operations.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

As in the prior quarter, a significant amount of the increase in OPEX is related to the signing of new ground leases at the end of last year. With that expense, more than half is non-cash accruals of new ground leases payments into the future. We look forward to benefiting from the operating leverage for our phases II with Miami-Opa Locka, which has now been open for four months, and later this year with the opening of Addison phase II. We expect gross profit margin expansion with these two phases II with the same people and field trucks serving basically a doubling of those respective hangar campuses. We strive to keep SG&A in check as we grow, keeping frugality front and center in our expense and cost management initiatives.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Cash flow provided by operating activities reached positive territory of roughly half a million dollars, reaching a significant milestone in the company's history. Going forward, equity proceeds will only go to new project CapEx and not to fund current operating expenses like in the past. Next slide, please. This is a summary of the financial results of our wholly owned subsidiary, Sky Harbour Capital, and its operating sub-series that form the obligated group. Assets under construction are still growing as we completed Opa-locka phase II in Q2 and will soon stabilize with the completion of Addison phase II at year-end, which, as many of you know, is the last project of the obligated group first vintage of campuses that were financed by the Series 2021 bonds. Revenues of the obligated group increased 79% year-over-year and 22% sequentially.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

We expect continued step function increases in revenues in Q3 and Q4 with the continued new leasing of phase II in Opa-locka and then Q1 and Q2 of 2027 after the opening of Addison phase II. As I mentioned before, we expect a marked increase in gross profit and EBITDA margin expansion with those added revenues and limited increase in operating expenses, given the ability to use the same personnel and equipment with expanded campuses that double in size. Cash flow from operations reached almost $3 million in the quarter and increased from $2.2 million a year ago. This constitutes 10 consecutive quarters of positive cash flow from operations, providing ample and growing debt service coverage for our bondholders and bank facility lenders. Let me pass it on to Mike Schmitt for a discussion of our adjusted EBITDA calculation.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Something we did a few quarters ago, but it is important to refresh given the importance of this adjustment to our EBITDA. Mike?

Mike Schmitt
Mike Schmitt
Chief Accounting Officer at Sky Harbour Group Corporation

Thank you, Francisco. As with the prior quarter, I would like to take this opportunity to provide additional context regarding elements of our reported results. We have provided a reconciliation from our GAAP net income results for the quarter ended June 30, 2026. We believe this measure is important due to the impact of non-cash items within our reported results. Particularly, the non-cash operating expenses at our campuses that are not yet operational, stock compensation expense, and gains and losses arising from marking our liability classified warrants to market. As seen in the diagram, adjusted EBITDA improved to approximately negative $0.9 million in Q2 2026. This is driven by continued improvement of results at our operating campuses where revenues continue to increase as operating expenses remained relatively flat. Adjusted EBITDA is supplemental in nature and is not calculated in accordance with GAAP.

Mike Schmitt
Mike Schmitt
Chief Accounting Officer at Sky Harbour Group Corporation

Our definition of EBITDA and other non-GAAP measures can be found in the Management Discussion and Analysis section of our Form 10-Q. With that, I would like to pass to Tal.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Thanks, Mike. All right. Leasing update. I am not going to go through all of the cells on this chart. Let me just highlight a couple things. First, take a look at APA1. That is Denver Centennial phase I. One of the things that should jump out at you on this chart is our relatively low economic occupancy. Leasing has been slow in Denver. That is just the state of affairs. Not all of these lease up at the same time. Some take longer than others. I will point to examples like Miami and Nashville. Miami took almost a year and a half to lease up phase I, and Nashville took even longer than that. Both of those are very robust cash flowing campuses today. We are not concerned about it. We wish we could move faster on this, but that is the state of affairs.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Two other cells that would jump out, I think, are the average rents per square foot in DVT1, that is Phoenix, and ADS1, that is Dallas. A couple things to point out here. This sort of obscures the reality. I think if people have been paying attention on the last couple of calls will note, our leasing strategy on specifically these three airports includes offering short-term leases at introductory rates just to get to full occupancy as quickly as possible, get the cash flowing, get the debt serviced, and then go back and revisit. Again, these are short-term leases. Go back and revisit. The longer term leases, of which all of these campuses have longer term leases, we do sign at target or, actually in all three of these cases, above target levels.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

To give you a sense, in Dallas, our multi-year tenants are paying rents in the $40 and $50 per square foot. The ambition is as we proceed here, and we're pretty close to, take Dallas as an example, pretty close to 100% leased at Dallas, is as these short-term leases come to term, start cycling back and replacing them with real long-term residents at the rates that we're looking for. That explains those numbers. If we had done the same thing, I think we didn't exactly do this in Nashville and Miami or in Houston at the beginning. But Nashville is one that started even with long-term leases in the $20. You see over a relatively short time, that comes up and grows into pretty robust rates. Again, we expect that trend to continue on those.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

The last thing I'll call everyone's attention to on this slide is the re-lease update, lower left-hand corner. Just a reminder to people of what that metric is in the last 12 months, we have had 100,360 square feet of hangar leases come to term, expire, and get renewed. In nearly all those cases, it's the same resident who is renewing, and the average step-up from the last year of the first lease term to the first year of the second lease term is 19%. You'll notice that's a few points down from last quarter. The main reason for that is that a lot of these leases are now not the second turn, but the third turn of the lease, where we've expected and will continue to expect a bit of a smaller bump on that one. We're closer to what we would call the actual market rates.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Next slide is site acquisition. Again, more or less speaks for itself. I've said on these calls how I think this company should be valued, which is look at the total rentable square footage of hangar that the company has secured under ground lease, not developed yet, but secured under ground lease, which is that 4 million number on the right. Multiply that times the Sky Harbour equivalent rent. Again, everyone can make their own rent projections on that. As you'll see, we've beaten Sky Harbour equivalent rent on all of the existing campuses. So we think that's a pretty good conservative number to use. That gives you a top-line revenue number. We'll talk a little bit about operating margins in a few slides. But that is your available revenue capture, which is currently under ground lease.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

I will emphasize this, certainly on the next at least year of quarterly earnings calls, is the entry ticket to this entire business is the ground lease. That is the most important move. At the extreme, this could be a site acquisition company that hands off construction and operations to somebody else. We do not think we should do it that way, but fundamentally, that is where the value gets created, is when the ground lease is signed. Then take that number, you can put whatever multiple you want on that or cap rate, and then discount it for all of the risks that we are all familiar with, right? There is development risk, construction risk, there is lease-up risk, there is operating risk. All that stuff exists. So, it is appropriate to discount those, and obviously discount them for the time it takes to actually build these campuses.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

But as you will see, our focus is increasingly on tier one airports. We have another slide on that, so I am not going to get deeper into that now. Next slide. One thing that I want to highlight and maybe just head off some concerns, and we have heard this from a number of people, and this is something that we thought of ourselves as this was happening, is you will notice there is a lot of expansion going on in California. Just as there has been quite a bit of capital flight among the most wealthy residents of California. We are seeing that firsthand because those people are signing up in our Miami, Nashville, Dallas campuses. We have got a lot of wealthy California refugees, so to speak, in those campuses. The reason that we continue to invest in California and grow it, the first part is self-evident.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Look at the rents that we are getting in California. Other than the New York market, it is probably the best market in the country. That is both Bay Area and Southern California. But if you look at the trend as well, most of the people who have left, and it is well over $1 trillion of wealth that has left in the last 12 months.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Most of those people return with a frequency that justifies keeping permanent hangar space, and a lot of our residents in California exactly fit that bill. They are people who are no longer domiciled in California, but visit enough that they keep hangar space with us. The second is, and we put it on the slide, is of that $1+ trillion of wealth that has left California in the last year, the vast majority of that is 10 people. Okay? 10 people constitute the majority of that flight.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

In the same period, 37 new billionaires have been minted in California, primarily Northern California, not only. I think the insight that will, I think, be intuitive to everyone on this call, the average number of aircraft owned by somebody with, let us say, $2 billion, is not significantly lower than the average number of aircraft owned by somebody with $80 billion. So our market in California continues growing even as wealth on a net basis is leaving California. So expect even more emphasis on California site acquisition in the coming quarters. We have very high conviction on that market. Okay. Our development update. So, this is one of the areas where, as I said, the rubber is meeting the road. We have spent a lot of time talking about our gear-up on the development and construction side of the business. A lot of increase in capacity.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

The vertical integration being completed. Our entry into general contracting, building our own campuses. All of that was put in place to achieve scale, and right now, that's where that's being borne out. We are on track both on budget and on time with all of the developments in this plan. You can see some pictures on the right from the campuses that are going to go open soon. Bottom right is Bradley, Connecticut. That is the nearest term. We've got Dallas, Addison. Actually, we don't have pictures of that, sorry. We have Salt Lake City, which is going to be delivered early next year. We'll talk a little bit about construction costs as we go, but again, this should give people a sense of just how much is under development at Sky Harbour right now.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

With that, let me turn it back to Francisco to talk about liquidity.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thank you, Tal. We have closed the quarter with significant liquidity, with over $207 million in cash and US Treasuries, and about $130 million still available from JPMorgan committed construction loan. As Tal mentioned, those red bars in the prior slide, our pace of CapEx expenditure is accelerating. Very important to know that. These amounts that you see in this slide in terms of liquidity exclude the fresh $40 million cash proceeds we received earlier today at the holding company as part of a registered direct equity placement that settled today. Next slide, please. As in the past, from time to time, we have received reverse inquiries of investors interested in going to our company.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Discussions for the past couple of weeks with two particular investors who have strategic value to us, especially from a leasing standpoint, have resulted in a $40 million straight common issuance at $10 per share. A roughly discount of 4.6% to the last 30 days volume weighted average price of $10.49 through this past Monday, when we executed the stock purchase agreement for this placement. This equity issuance was very cost effective, raised through direct placement from our shelf registration. We have now a cumulative surpassed $300 million in equity investments by our shareholders in the company. We decided to take these funds now as a practical measure as we await for the potential exercise of our public warrants at the end of next January. As many of you know, a fully exercised public warrants will yield around $94 million in primary proceeds for the company.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

We see the current raise combined with the potential for an additional $94 million in January as covering all our equity needs at the company for the foreseeable future, and maybe indefinitely as we await increasing operating cash flow to be available in the future to reinvest in more projects. Next slide, please. Just want to take a second to reiterate our guidance for the end of the year that we introduced back in May. On revenues, we reaffirm that we expect to finish the year with an annualized run rate of revenues between $42 million and $46 million, up from the $39.4 million run rate in this past quarter. This increase will be driven by the incremental revenues of phase II at OPF as it approaches full occupancy and increased occupancy at DVT and APA.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Similarly, we reaffirm that adjusted EBITDA will end up the year at an annualized run rate of between $4 million to $6 million, up from an annualized run rate of still negative in Q2. Let me now pass it back to Tal for a discussion on the highlights and next steps in the four pillars of our business model. Tal?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Report with one. Oh, I'm sorry. I think we were muted. I'm going to start that again.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yeah.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Yep. Thank you. Thanks, Francisco. On the site acquisition side, the theme of the last quarter and going forward, will continue to be big plays at tier one airports. If you can expand on a tier one airport, put 300,000, 400,000 square feet on a tier one airport, that is worth a lot more than three smaller sites on a tier two, or a tier one airport for that matter. Obviously, the revenue per square foot is higher, but also your OpEx, your operating margin goes up. Because two phases, and we're seeing this right now very clearly in Miami, two phases cost almost the same to operate as one phase. But your revenue goes up, in this case, nearly doubles. So look out for that theme at the tier one airports. On the development side.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

You have watched all the steps we have taken to scale up the vertical integration all the way to the general contracting. Now it is time to prove it out empirically. As I mentioned a couple of slides ago, we are on schedule, on budget at all of the airports in the pipeline right now. Continue watching that. Then prototyping. The third version of our prototype has gone through third-party testing now. It is approved, it is ready to go, and the first airport at which that will launch is Fort Worth, which breaks ground later this year in Q4. We will show you pictures of that. More functional, costs less per square foot to put up. It is a better hangar and for cheaper. That is obviously what we are striving to do here. On the leasing side.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

We made the point about those larger footprints that we are trying to see at the tier one airports. The occupancy optimization program. As we have discussed, especially in the newer campuses, you will see this at Opa-locka phase II, where we are working to achieve significantly greater than 100% occupancy on these campuses. San Jose is the first airport that we have really, I think, maximized that. We already talked about the re-lease rates. Operations, you will continue to see operating margins improve if we do this right. That program is in place and already saving us OpEx dollars. Then perhaps most importantly of all is the resident experience itself, which, yes, you need the physical asset in order to deliver it. But fundamentally, what our customers actually experience is the service. Consistently, we keep going out with resident surveys.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

We are being ranked by far as the number one home base solution in business aviation. You can see that empirically in that we charge a lot more than any other solution and still have waiting lists at all of the stabilized campuses. We will continue working on that. That is increasingly, I think, the key differentiator in the HBO business model. Next slide. Looking forward. Look for more of the same on site acquisition, meaning tier one airports, tier one geographies, and more same-field expansions to the extent that we can do those. On the development side, if you look what is happening over the next two quarters, we are going from a little over 600,000 square feet now under construction, to over 1,200 square. A little over 600,000 square feet now under construction to over 1.2 million square feet under construction by year-end.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

This is the scale-up that we are talking about. Watch our schedules, watch our budget versus actual. That is what we are going to be trying to deliver on. At the same time, as we grow and continue to refine the prototype, look for that cost per square foot to continue going lower. On the leasing side, just to give people a sense of what we hope to achieve in revenues. Let us start with, I guess, it is the smaller component, but 65,000 square feet of lease that will come to term by the end of 2026 and will need to be re-leased, and we will be looking for big step-ups on those. 161,000 square feet that are currently in lease-up at places like Dallas and Denver.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Then we have, this is the big number, that 218,000 sq ft that is currently under construction, but will be slated for lease-up by the end of 2026. So a big lift for the leasing team. We have an expanded team. We continue with our tried-and-true practice of bringing in military veterans, and our leasing team has expanded, I think, exclusively now with military veterans. We talked about pre-leasing on the last call, which had good results in Opa-locka phase II. We have Bradley, Connecticut coming up in Q3, Q4. The proof will be in the pudding. Watch to see how that campus opens in terms of occupancy. Then lastly, operations. So we speak every time about starting with defense. Safety, security, and efficiency come before everything else. We spoke a little bit on the last slide about innovation, working with the residents.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

The last point that I want to mention, and people have asked about this a little bit because the network has grown to a point where it's starting to make sense, which is people using multiple Sky Harbour campuses. So we just rolled out a program called SkyKey, which gives Sky Harbour network access to some of our top residents. Those are our guinea pigs, where they get the full Sky Harbour service, exactly as they're accustomed to, with all of the privacy and the security that entails, wherever they go within the Sky Harbour network. So that's a new revenue driver in the business. I don't think we've captured much revenue yet. We just rolled it out, but look for that to start contributing to our revenues going forward, and contributing, I think, to the value to residents of the Sky Harbour offering.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

With that, I think we are ready for questions.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yes, operator, please go ahead with the queue from our research coverage analyst. Again, reminder for everybody else to submit questions through investors@skyharbor.group, and we'll answer those promptly in the coming hours and day. Operator.

Operator

At this time, I would like to remind everyone, in order to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Michael Diana with Maxim Group. Please go ahead. Michael Diana, your line is open.

Michael Diana
Michael Diana
Analyst at Maxim Group

Actually, I didn't signal for a question.

Operator

Your next question comes from the line of Tom Catherwood with BTIG. You may go ahead.

Tom Catherwood
Tom Catherwood
Analyst at BTIG

Great. Thank you. Good afternoon, everybody. Lots and lots to talk about here. Tal, maybe starting with you. So appreciated all the detail that you gave on leasing at the operating properties. And you quickly touched on the pre-leasing, but it seems like you made some significant progress there in 2Q, especially with the second phase in San Jose, which I think is fully wrapped up now before you even started construction. Can you talk a little bit more about pre-leasing progress, both there, maybe at Dulles as well? And then as you're rolling out that program, are you utilizing the kind of introductory rate strategy that you've done at ADS and DVT and APA, or are you using a different approach?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Thanks for the question. Thanks for the coverage, Tom. Look, I think what's maybe conspicuous about pre-leasing at San Jose, which is different from Bradley and Dulles, it's much more like Miami phase II, is that when you have a phase I in operation in a market, we're I think maybe just now becoming a national brand in business aviation. What we've been to date is a collection of local brands in every geography. If you own an airplane in Miami, you're trying to get into Sky Harbour. There's a waiting list at Sky Harbour, Miami. In other locations, we're just not as known. Again, we think that's beginning to change now. There is more of a national recognition of where we're coming. But it is definitely easier. There's so much pent-up demand in the phase II markets that pre-leasing goes a lot easier.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

San Jose too, I should say for all three of those airports, there is no introductory rate. If you think about it, I keep going back to Miami phase I, where we opened up 12 new hangars, whatever that was, 160,000 sq ft of hangar simultaneously. More hangar than never been put on a market at once, as far as we know, ever. I don't think we quite appreciated what that glut would do with a sophisticated customer base who understands that there's 12 hangars and 12 vacancies. There's a lot of leverage in that negotiation on the part of the resident. The main concern of a chief pilot or flight department negotiating a lease on an existing campus like Miami, at that time, was overpaying. He does not want to be the person who volunteered to pay more than their neighbors are paying.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

When you pre-lease, we're seeing that the main concern is really FOMO. As we get closer to fully leased and as you see the rates climbing up. The first leases are signed, they're not introductory rates, but they're lower rates than the last leases are signed. That becomes the primary concern. When you have a year before you open up, or in the case of San Jose, even more than a year before you open up, there are a lot of people who want to lock in that space and know it's going to be gone. By the way, we have, I'm sorry to say, some angry people who did not get space in San Jose phase II, and if you gave us a phase III there, we would grab it.

Tom Catherwood
Tom Catherwood
Analyst at BTIG

Yeah. Appreciate those answers. Maybe sticking with that last comment and what you had said about site selection and this focus on top airports and top markets. You've talked in the past about how airports and municipalities are limited in their ability to push ground rents, but are you seeing airports looking for other avenues to extract higher economics? Maybe it's more required CapEx spending or infrastructure spending or fuel purchases. Because you have a sense of what it takes to do these now, does that give you an advantage over others that might be competing when it comes to site procurement?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

It's a good question. I don't think there's any one-size-fits-all answer. What I will say, a rule of thumb that can be applied pretty broadly is, and just speaks to, there are certain airports where the total CapEx is what's important. There are certain airports where there are other items that are important. What seems to be fairly common, though, is that our interests are aligned with the airports, and our interests are aligned with base residents in that geography. When you show up in Atlanta, there is a hangar deficit, and the FBO model doesn't really address that deficit because remember, the FBOs make their money outdoors from fueling. You're not allowed to fuel indoors, inside a hangar for regulatory fire code reasons. Their revenue is produced outdoors. They want as much outdoor space as possible.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Get the transient traffic in, get them fueled, and get them out as quickly as possible. That is the business model. For the municipality or county that wants to maximize hangar space, they're not really getting everything they want out of the FBOs. We come in and show them from the beginning, we make our money from rent. Our money is made indoors, not outdoors. Our interests are aligned with you. We want to maximize our hangar footprint. As you, I think, know, our campus layouts have very little ramp and a lot of hangar. They look very different from an FBO's campus layout. That is a winning proposition for a lot of airports. Take another is that repositioning, particularly in heavily trafficked markets, New York being primary among them, but also in Southern California, Northern California, increasingly South Florida, Dallas area. There is simply no room.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

You cannot get hangar space at Teterboro. Most of the New York, for example, Manhattan aircraft owners who operate out of Teterboro, their departures and arrivals with passengers are to Teterboro. The airplane doesn't live at Teterboro. It lives at Bradley, Connecticut, or Trenton, New Jersey. In those situations, there's a lot of pressure to reduce repositioning flights. Here's when I talk about that triple alignment of interest. From the aircraft owner's perspective, those repositioning flights are expensive. That's fuel. That's pilot hours. They're logistically cumbersome. If you're flying far, you're flying to Eastern Europe or Asia from New York, when your day began with a repositioning flight and a fueling and hold on the ground at Teterboro, your pilots will run out of duty hours. We have people who fly with double cruises. Those are very logistically cumbersome to do that repositioning.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

From the airport's perspective and the local government's perspective, that's environmental impact. That's airplanes flying empty and no passengers. That's noise impact. Those flights are straight and low and loud. They're typically conducted under VFR when the weather permits. You're just going straight. You want to get there as quickly as you can. It's wear and tear on the airport infrastructure. Think about it, four operations for every round trip rather than two operations for every round trip, and it's taxing on the air traffic control system. Coming and saying, "Look, when we come to your airport, we're actually going to reduce repositioning," that is a big deal, right? Again, from the FBO's perspective, and I'm not trying to knock the FBOs, great business model, and they're great partners to us as well, but you should understand, they are a hotel. Fundamentally, that movement drives fuel sales.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

That is their incentive. We are incentivized very, very differently. I hope that answered your question. That is an example of how interests can align between us and the airports.

Tom Catherwood
Tom Catherwood
Analyst at BTIG

Yep. That is perfect. Thank you for all that insight, Tal. That is it for me, and appreciate all the answers.

Operator

Your next question comes from the line of Timothy D'Agostino with B. Riley Securities. You may go ahead.

Timothy D'Agostino
Timothy D'Agostino
Analyst at B. Riley Securities

Yeah. Hi, thanks for taking the questions today. Just on the release, understanding the commentary of you kind of expect that to tick down over time. It sounded like, obviously, it was 23% last quarter, 19% this quarter. I guess, how should we think about that revenue escalation, maybe over the next two, three years, given new campuses will come online, those leases will be reassigned, and as well, at ADS and APA, where you are dropping the lease lower to fill the hangar, obviously, that next lease would have a pretty meaningful escalator, I would assume. Just trying to understand how we should think about that going forward because it seems like with new campuses coming online, the churn there could push that maybe higher. Just trying to get your thoughts on that. Thank you.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Yeah, thank you. Thank you, Tim. I think your instinct is probably right. On those three campuses where we are doing the introductory rate strategy, yeah, I think it is reasonable to expect a bigger bump up on that first re-lease. You are right, those introductory rates can be very low on some of those campuses. It is really about just not flying empty while we do the re-lease up. Then on those pre-lease campuses where we are actually getting above-target rents before we even open the doors, probably less of a bump on the pre-lease. We have avoided trying to make predictions on inflation rates on airports. As I think you know, I think they are going to be completely divorced from CPI. There is just no land to develop on airports, and the fleet just keeps growing. There is nowhere to put these aircraft.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

We think inflation is baked in, but we are not giving out numbers. We figure the best we can do is just publish this re-lease rate, remind everybody that all of our leases feature annual escalators of CPI with a floor of 4%, and then let people come to their own conclusions about what the inflation rate should be. Because again, if you are building a model for a company, one of your most sensitive inputs is going to be your assumption on inflation rates going forward in hangar rents. Again, we are not making any predictions on that, but we want to provide you with as many tools as possible so you can.

Timothy D'Agostino
Timothy D'Agostino
Analyst at B. Riley Securities

Okay, great. Thanks for the answer there. If I could just ask a second one, just on the $0.5 million of net cash provided by operating activities, obviously, this is first quarter of positive operating cash flow in the company's history. Was there anything in the quarter that stands out as maybe a one-time non-recurring item that would have pushed that positive? Should we think about that cash number being positive going forward? Or, as new campuses open up, it could tick back to negative? Thank you.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yeah. Good question. Again, thank you for your coverage. This is a recurrent type of number. Of course, in the next two quarters, we are going to continue benefiting from increased revenues, as I mentioned earlier, from the leasing, or the finished leasing of Opa-locka phase II, and then continued leasing at APA and DVT. In Q1 of 2027, you are going to see the very strong effect of adding the opening of Bradley and the opening of ADS Dallas 2, and that will make that number jump a step function into the positive, and from then, never look at a negative number, hopefully, again.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Between now and then, it is probably going to be trending higher because again, of the continued leasing of the existing facilities, but it will not be until Q1, Q2 of next year that it propels and never looks back on the back of the opening of Bradley and Addison 2.

Timothy D'Agostino
Timothy D'Agostino
Analyst at B. Riley Securities

Okay, great. Thanks for the commentary, and congrats again on the quarter.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thank you.

Operator

Your next question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead.

Ryan Meyers
Analyst at Lake Street Capital Markets

Hey, guys. Thanks for taking my questions. First one from me, with the unchanged guide and the roughly $1 million EBITDA loss here in the quarter, can you just walk us through sort of the key drivers required to reach the $4 million-$6 million annualized run rate by the year-end on adjusted EBITDA?

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yes. Let me put some comments, and then also Mike, if you want to jump in as well. On revenues, obviously, we're trending nicely to meet or exceed, but let's see right now, meet the guidance we provided. And obviously, we'll look at the guidance again in November at the time of our Q3. I wish time, by the way, let me take the opportunity to state that we will be starting to give guidance for 2027 in the next quarter, a webcast for Q3. In the context of adjusted EBITDA, we're coming into these coming months with a lot of momentum of the leasing of Opa-locka phase II at a very, very attractive rate. And also remember that is a phase that has a lot of operating leverage because we're basically operating with the same staff because it's an extension. It's a phase II.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

That does wonders for gross profits. So you don't need too much to move from the current run rate into the run rate in our guidance to meet the targets that we outlined. I don't know, Michael, if you have anything to add.

Mike Schmitt
Mike Schmitt
Chief Accounting Officer at Sky Harbour Group Corporation

Francisco, you hit on the two main things that I was going to touch on, particularly the operating leverage. As these revenues start to come in, OpEx is not moving, increasing in tandem, and it's essentially very accretive to adjusted EBITDA, and I think would be crucial to achieving the guidance as we expect.

Ryan Meyers
Analyst at Lake Street Capital Markets

Got it. No, that's great to hear. Lastly for me, you guys noted the development team continues to lower costs. So where does current construction cost per square foot stand, and how much further opportunity do you think remains through just vertical integration and then just any prototype improvements that you guys have seen?

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Do you want to take that, and then maybe I'll add to that?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

I'm sorry, can you repeat the question?

Ryan Meyers
Analyst at Lake Street Capital Markets

Yeah, just an update on current construction cost per square foot and just how much opportunity you think remains with the vertical integration and then just any of the prototype integration that you guys have done.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Ryan, we're kind of overdue, I think, for resetting a target. When we're up above 300, we set 250 as a target. We're at about 242 right now. We do think there's a lot more juice to squeeze. We haven't actually set a target yet. What you'll see is we're using. I think we should provide some photographs when we actually break ground on the version three of our prototype in Fort Worth. You're going to see new and different construction materials, some different construction techniques. The layout of the hangar is going to look very similar. The outside actually looks a lot better. I think it's aesthetically a lot more pleasing. National procurement. We're no longer purchasing things like fixtures and lighting and electrical components campus by campus. We're now buying 10 airports ahead. Those numbers haven't really manifested yet.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

They're not complete, at least, in that 242. Look for more to come. On the other side, we could have some macro headwinds on just construction inflation that we're going to have to battle. I'm glad you raised the point. I think maybe on the next call, we're going to have to set another target.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yeah. Let me add to that, if I may. As you saw from the chart that Tal covered earlier, showing that now we're entering a couple of quarters where we're going to be in construction in about eight and moving probably to 10 different campuses at the same time. The coming quarters are going to provide a lot of data, a lot of volume and economies of scale to really turn what is right now a projection into hard numbers for us to share with our investor base and with you guys, and so on. Nothing pleases me more to hear that our manufacturing facility in Texas is at two and almost two and a half type of shifts, and we don't go to three because people have to take someday off.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

It is that type of economies of scale with volume that's going to be one of the key drivers of our keeping and maintaining construction costs overall low.

Ryan Meyers
Analyst at Lake Street Capital Markets

Got it. No, that's helpful. Thanks, guys.

Operator

Your next question comes from the line of Gaurav Mehta with Alliance Global Partners. Please go ahead.

Gaurav Mehta
Gaurav Mehta
Analyst at Alliance Global Partners

Yeah, thank you. I wanted to ask you on your pre-leasing going forward, what should we think about how you would approach pre-leasing? Is it going to be a standard offering across the new construction, or would you be selective where you implement pre-leasing?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Hi, Gaurav. Yeah, thank you. Yes. That's standard going forward. Opa-locka phase II was the first campus we did with that. You'll see Bradley as next, and then Dallas phase II is the one after that, and then Salt Lake City. We're working on all of those, as you know. We see no reason to change it. I think we might fiddle with the pre-leasing goals. Like right now we're saying 50, half to 2/3 leased by opening. That's what we're targeting. Obviously, you're leaving a little bit of money on the table when you do it like that because these are long-term leases. This is very different from Dallas, Phoenix, and Denver. So you are locking yourself in. And the rates do creep up as you advance with the leasing of a campus.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

We might adjust the total ambition of how much we want to get pre-leased over time. Again, we might not. But yes, look for that to be standard in all the campuses.

Gaurav Mehta
Gaurav Mehta
Analyst at Alliance Global Partners

All right. Thanks for those details. Second question on the ground leases. How many new ground leases are you guys looking to add this year?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

As we discussed on the last call, we're not actually counting those in terms of number of ground leases anymore. It's square footage. How much square footage of hangar are we able to put in? Again, ultimately, after everyone's accustomed to that metric, we're going to move to what is the real metric. It is, what is the actual NOI that you can capture from an airport? Really, that's what you should be going after. Because I think everyone would agree, if we had five airports, each with 100,000 sq ft of hangar, but you could achieve that with a single airport with 500,000 sq ft of hangar in a tier one location, that's obviously preferable. You're going to have lower OPEX and easier lease-up. It's got a lot of advantages to do it that way. We haven't actually put out a square foot target.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

We've kind of migrated on guidance to really the bottom line. What are we projecting in revenue? What are we projecting in EBITDA? But we announce these airports as they come. Sometimes the cities and counties announce them before we do. I'm guessing everyone on the call is aware of some of those. But we haven't actually put out guidance on that.

Gaurav Mehta
Gaurav Mehta
Analyst at Alliance Global Partners

All right. Then lastly, in your prepared remarks, you mentioned something around leasing being slow in Denver. I was wondering if that's in line with what you guys thought or has that been a surprise?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

It's been a surprise. It's been a disappointment. We wanted to be moving faster in Denver, and it's just, again, some of them are fast, some of them are slow. Denver's a slow one.

Gaurav Mehta
Gaurav Mehta
Analyst at Alliance Global Partners

All right. Thank you. That's all I had.

Operator

Your next question comes from the line of Dave Storms with Stonegate Capital Partners. Please go ahead.

Maximus Alexander-Nino
Analyst at Stonegate Capital Partners

Hello. This is Maximus. I will be asking questions for Dave Storms today. Wanted to start off on SGR and OPF. Economic occupancy has not been running above reported occupancy. Is that mainly a function of the private versus semi-private hangar mix, or is there something else about those campuses that limits how much you can optimize occupancy? Thank you.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Yeah. You are exactly right, Maximus. Sugar Land is 100% private. Right? I do not know if you were following us at the time, but the whole notion of semi-private kind of occurred to us later on, actually toward the end of lease-up in Nashville. Sugar Land had been completely leased up long-term at that point. It is private. It cannot go above 100%. We are capped there. Miami is similar in that the first round of leases were all private. We have a little bit of semi-private going on in Miami phase I, but Miami phase II does have semi-private. Again, we have people taking full SH34 hangars in Miami phase II. There is one case of a fully private hangar that is just a large tenant. But most of Miami phase II is semi-private. So we should see significantly more in Miami.

Maximus Alexander-Nino
Analyst at Stonegate Capital Partners

Thank you. I appreciate that color. I wanted to move forward with pre-leasing. Historically, kind of just based off our math, it has taken roughly three quarters for a new campus to reach full lease-up. With pre-leasing, can you see that accelerating maybe closer to two quarters or even shorter on average?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Yeah. It is possible. Again, the proof will be in the pudding again. So, yeah, I would say on the next earnings call, look to see where Opa-locka phase II stands. By the way, we are treating Opa-locka really as one campus now because, A, it is one campus, but also we have actually done some shifts. Right? We took people into phase II and then actually ended up moving them to phase I, moving phase I people to phase II. We have done a little bit of shuffling in Miami. But look to see, are we at 100% or higher by the next earnings call in Opa-locka? And then the next data point will be Bradley.

Maximus Alexander-Nino
Analyst at Stonegate Capital Partners

Great. Thank you for answering my questions.

Operator

Your final question comes from the line of Joe Gomes with Noble Capital Markets. Please go ahead.

Joe Gomes
Joe Gomes
Analyst at Noble Capital Markets

Good afternoon. Thanks for taking my questions. As you are moving more and more into the tier one, are you seeing the competitive environment start to tighten up there? Given the dearth of airport land, how does that play into the old land grabs, so to speak, strategy? Are you trying to be maybe a little more aggressive in trying to get land at various airports? Are you still trying to more focus on the ones that you currently have in-hand?

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

Yeah. Thanks for the question, Joe. We remain aggressive. We remain creative, and we remain patient. I think the last one, patience and persistence, is probably the most important of all three of those. If you are following, you will see all of these wins have been the result of multi-year efforts, in some cases five, six years working on an airport. We haven't figured out a way to really accelerate that. Maybe that already is accelerated. That's the bad news. The good news is that we started a process on dozens and dozens of airports five or six years ago. So, some of those are starting to pop now. Again, there are things that we haven't exactly announced yet, but are out there, and I think a lot of people on the call are aware of. These are all the result of multiple years of effort on those airports.

Tal Keinan
Tal Keinan
Chairman of the Board and CEO at Sky Harbour Group Corporation

So no, if anything, we're accelerating on the set acquisition side. No plan to slow that down.

Joe Gomes
Joe Gomes
Analyst at Noble Capital Markets

Okay, thanks. Then just maybe you could clarify something here, on your presentation on talking about the registered direct placement. You talked about that and then kind of had a last point there that you acquired or certain investors acquired 360,000 shares from Boston Omaha. Maybe just give a little more color on that. Who approached whom? What was all that transaction about?

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Yes. Let me take that on, Dave Maximus. Some of you may be aware, at the time of the de-SPAC, there is a shareholders' agreement in place that any investor, or anytime there's a transaction that the company does or any investor, as part of the shareholder agreement, institutes a process. We all kind of coordinate and give notices to all those legacy investors and so on, so forth. So on that spirit, although we were not required on that spirit, when we were approached a couple of weeks ago to do the primary issuance that we just announced and closed today, we went around and asked all our "legacy investors", Center Capital, Due West, and Boston Omaha, if they had an interest in selling shares as part of this process.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Due West and Center Capital said no, then Boston Omaha said that if there was an opportunity, they would like to sell 300,000 shares. So, prior to this process and conversations with a couple of investors that were also in discussions with us, we were successful in, not 300,000, but 360,000 being sold by Boston Omaha in a separate transaction to ours to those investors. Those stock purchase agreements were executed also during the day to day. Those transactions, we understand, again, they're between Boston Omaha and certain investors, not us, but they were coordinated through us. But I think the highlights here to take away from that, again, I don't want to speak for Boston Omaha. People should reach out to them directly. By the way, we're going to be attending their annual shareholders' conference next week in Omaha.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

We have not done so in four years now, or three years now. We are looking forward to be there. I think the two takeaways are, one, that all our shareholders at this juncture have reaffirmed their interest in continuing being long-term investors of Sky Harbour, and that the Boston Omaha appetite to sell right now at this moment was just 360,000 shares and so on, so forth. Those who have been following our stock, that this is their first sale in a year and a half, and obviously of a very significantly low amount of shares. They have reaffirmed their interest of being long-term investors of Sky Harbour.

Joe Gomes
Joe Gomes
Analyst at Noble Capital Markets

Okay. Great for that color. Thank you for taking my questions.

Operator

There are no further questions at this time. I would like to turn it back over to Francisco Gonzalez, CFO, for closing remarks.

Francisco Gonzalez
Francisco Gonzalez
CFO at Sky Harbour Group Corporation

Thank you, operator, and thank you, everybody, for participating. Before you go, let me just give an announcement that Tal Keinan, our CEO, is going to be scheduled to participate tomorrow, Thursday, at 3:20 P.M. Eastern Time in The Claman Countdown show in Fox Business. Those of you guys who follow, this will be Tal's first mass media appearance. Again, that's The Claman Countdown around 3:20 P.M. Eastern Time on Fox Business Channel tomorrow, Thursday. Please tune in to see Tal Keinan be answering questions from Liz Claman. With that, we have concluded our conference here. Again, please look for additional information in our website at www.skyharbor.group, and reach out with additional questions directly to us at investors@skyharbor.group. Again, thank you again for your participation. With this, we have concluded our webcast, operator.

Operator

Ladies and gentlemen, this concludes today's call. You may now disconnect.

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