Sky Harbour Group Corporation (SKYH) Q1 2026 Earnings Report, Transcript and Summary

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sky Harbour 2026 First Quarter Earnings Call and Webinar. [Operator Instructions] I would now like to turn the call over to Francisco Gonzalez, CFO. Please go ahead.

Thank you, Kate, and hello, and welcome to the 2026 First Quarter Investor Conference Call and Webcast for the Sky Harbour Group Corporation. We have also invited our bondholder investors and lenders in our parent subsidiaries, Sky Harbour Capital, Sky Harbour Capital II, and Sky Harbour Capital III 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. 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 webcast, our CEO and Chair of the Board, Tal Keinan; our Treasurer, Tim Herr; our Chief Accounting Officer, Mike Schmitt; our Accounting Manager, Tori Petro; and our Assistant Treasurer, Andreas Frank. We have a few slides we will want to review with you before we open it to questions. These were filed with the SEC an hour ago in Form 8-K, along with our 10-Q and will also be available on our website later this evening. And we also filed our First Quarter Sky Harbour Capital Obligated Group financials with MSRB/EMMA an hour ago. As Kate mentioned, you may have submitted written questions during the webcast during the Q4 platform -- using the Q4 platform, and we will address them shortly after our prepared remarks. Let's get started. At the end of the first quarter on a consolidated basis, assets under construction and completed construction reached over $352 million. That is a $75 million increase from a year ago. Let me highlight that the pace of investment and new construction at Sky Harbour is accelerating, and this column will continue to grow at a higher rate. Revenues experienced an increase of 56% year-over-year and 8% sequentially, given the new campus openings during the past year and increases in occupancy and rental rates. Operating expenses in Q1 continue to increase in tandem with new campus openings, impacted in particular by increases in campus headcount and the cash and noncash expense accruals from new ground leases entering into the past year, which are not yet in construction or in operations. More than half of the increase in OpEx in quarter-over-quarter or quarter sequentially is related to the signing of these new ground leases at the end of the year. And within that expense, more than half of that is noncash accruals, payments that will be made in the future. We look forward to benefiting from the operating leverage of our Phases 2, both in Miami Opa Locka, we just opened and in early 2027 with the opening of Addison Phase 2. We expect gross profit margin expansion with these 2 Phases 2 with the same people and fuel trucks basically serving a doubling of hangar campuses. In terms of SG&A, we strive to keep this in check as we grow, keeping frugality front and center in our expense and cost management initiatives. Cash flow used in operations moved higher than last quarter of 2025, which usually happens in each of our first quarters, given the seasonality of our cash performance, bonuses paid to our employees in February, the annual increases in base salaries that occur as of January 1, and also some minor items related to 401(k) corporate matches, Social Security employer contributions, and the like, that they all tend to be concentrated in Q1. If you look historically, that pattern has been the case in terms of Q1 -- prior Q1 quarters in prior years. Also, the figure in Q4 had the nonrecurring benefit of the $5.9 million upfront payment we received by one tenant in terms of a lease renegotiation in Miami. On a normalized basis, as we have disclosed previously, we have reached cash flow breakeven at the operating level. More on this when we talk about our guidance for 2026 shortly. Next slide, please. This slide is a summary of the financial results of our wholly owned subsidiary, Sky Harbour Capital, and its operating projects that form the Obligated Group. Assets under construction are still growing as we complete Opa Locka Phase 2 and will only stabilize once we complete Addison Phase 2 at the end of the year. This will constitute the last projects of the Obligated Group's first vintage of campuses that were financed primarily by the 2021 series bonds. Revenues at the Obligated Group in Q1 increased 76% year-over-year and 15% sequentially. We expect another step function increase in revenues in Q2 and Q3 of this year following the opening of Phase 2 in Opa Locka and then in Q1 and Q2 of 2027 after the opening of Phase 2 in Addison. As I mentioned earlier, we expect a significant increase in the Obligated Group's gross profit and EBITDA margins, given the additional revenues of these 2 phases with limited increases in operating costs given the ability to use the same personnel and equipment with an expanded campus doubling the size, both in Dallas and in Miami. Cash flow from operations at the Obligated Group reached $2.9 million, almost tripling of the same amount -- I'm sorry, of $1 million a year ago and a 14% increase from the prior quarter after adjusting for the nonrecurring $5.9 million influx in the prior quarter with the prepaid rent that we discussed also earlier. So at this point, let me pass it on to Tal to provide our leasing and development update. Tal?

Thanks, Francisco. So the slide is self-explanatory, and it's the same format we've been using in the last few earnings calls. So I think I'm just going to highlight a few specific rubrics here for people's attention. Starting with the campuses that are in initial lease-up. We'll speak specifically about Opa Locka, Miami Phase 2 in a later slide, I think our -- what I'd just call attention to is Denver, APA Phase 1, where we're only 44% leased at this point. Sometimes they go a little bit slower than others. This one has definitely lagged a bit. But again, that's -- I think Nashville looked quite similar 6 months after it opened. So we don't really attach that much significance to it. Obviously, we wish everything moved a little bit faster. And then on the left side, you can see the economic occupancy, which now on all but one campus is, at 100% or above. What's the upper limit of that? I'm going to have to go on a limb and say San Jose is probably somewhere near the upper limit of that. We might find a few more creative ways to increase occupancy beyond 130%, but that -- it's probably not going to go much beyond that. However, what I really want to point out is the lower left-hand corner of the slide, that re-lease update. So in the last 12 months, we have re-leased about 119,000 square feet of hangar, meaning leases that have come to term and either been renewed by the existing resident or taken over by a new resident. The average escalation between one lease and the next is 23%. By the way, that's up from 22% in the last quarter. All of this is on top of the annual escalators, the contractual escalators that feature in all of our leases, which escalate at CPI with a floor of 4%. Anyone who is running a model for Sky Harbour knows that your inflation assumption is one of the most sensitive inputs in the entire model. Again, I don't want to make a claim here that we'll always be getting 23% escalations. But the -- for the time being, at least, I think what we're seeing is more or less what we forecast a couple of years ago on these calls, which is that hangar inflation has nothing to do with CPI. We are on the island of Manhattan from a real estate perspective. You just cannot build new airports. And we think that this scarcity is what -- I think is one of the key components of driving the value on a macro level in this company going forward. Next slide. A little bit of kind of forecast versus actual. So again, things that I'll point out. You've got 2 rows here of third-party forecast for revenue per square foot on different campuses. What we're showing right now is whatever is gray is going to be within the range of those forecasts. Whatever is green is going to be above both forecasts. Whatever is red is going to be below both forecast. So what you see at first blush might look like a mixed bag. To us, it does not because that high range, if you look -- we've got high, average, and low. The high range in the campuses that are in lease-up, okay? So look at DVT, APA, and ADS, the high range are the long-term leases, okay? And I think as people might remember, our strategy on initial lease-up, this is before we move to the pre-leasing strategy, which we'll get to soon, has been to get these campuses to 100% as quickly as possible. So if somebody wants to come in on a 6-month lease at some very low introductory rate, we're fine with that. We want to start actually negotiating in earnest with our long-term tenants on the basis of 100% occupancy or higher. So rather than let these hangars ride empty for the months that it takes to get to 100% and surpass it, we rent them out like this, which skews your averages. So all of those higher -- the green numbers on those lease-up campuses are long-term leases. That's what that looks like. And then another thing I'll call everyone's attention to is if you look at the legacy campuses, what we call the stabilized campuses. So BNA, that's Nashville, OPF 1, that's Miami Phase 1, even Camarillo, CMA, at the end, what you'll see is the lows are the first leases that we signed. In fact, if you take BNA, that might actually be the very first lease we signed at BNA. And the highs tend to be the last leases that we signed, which, again, I think corroborates the trend that we're talking about, that 23% re-lease rate. As time goes by, these leases go up, which is why we're getting a lot of demand from new residents, especially long-term residents, to maximize the term of their leases because there's an increasing appreciation that this inflation trend is here to stay in business of aviation. Okay. Next slide. A little bit about pre-leasing. So Miami Phase 2 is the first campus that we've -- the first campus on which we've applied this pre-leasing strategy, where we're going out and offering people certain incentives to sign leases before we even open the doors, which has resulted in what we consider pretty significant success. We're 68% leased in Miami Phase 2 the day we opened the doors. That means we're leaving some money on the table, no question. We think all things considered, this is probably the right way for us to continue. A few things that we learned from Opa Locka Phase 2, I'm starting at the top of the slide. Number one, this is the first, at least partial, trial of the Ascend integrated construction program that we have in place. We're using the prototype hangar. It's a derivative of the SH37s, the SH34 hangar. We're using Stratus construction. That steel that you see in the picture is our Stratus Steel. We're using Ascend construction management. What we don't have yet here is, number one, our GMP was priced before we implemented the program, before Ascend came in. So that budget construction cost is what it is. And number two, we're using a third-party general contractor in Miami. But other than that, this is the Ascend integrated construction program. We're very happy to demonstrate an on-time, on-budget delivery. The next thing I think it's worth understanding is -- you'll see this in some of the upcoming slides. Same campus expansion can be a lot more valuable than putting a new dot on the map in that we know the market -- we'll take Miami in this case as sort of the first example of this. We know the market and even more importantly, the market knows us, okay? It's not like we're getting more speculative when we increase the size, and you'll see when we talk about Stewart and Dallas, that's exactly what we're doing. It's just that we know the battle space a lot better. And again, our counter-parties know us better. There's a lot of pent-up demand in Miami. There's about to be a lot of pent-up demand in Dallas. Once people experience the Sky Harbour model, the churn is extremely low. People tend not to leave us. Most of those 23% markups are to existing residents, who just understand that there is a market. This is what people are paying now. If I want to stay, that's what we have to pay. And so the churn has been extremely low. So look out for a lot more of that going forward, and we'll show as we -- I don't know if people have already seen our press release, but the guidance that we're putting forward is based a lot more on that, meaning more dots on the map is not really what we're going after, and I'll explain more in the coming slides. Next slide. Okay. So a few things that jump out on site acquisition. You'll start, conspicuously to perhaps some of you up in Seattle, a dot has been removed. So you might remember, we had a 1-year lease at Boeing Field in Seattle. We allowed that lease to lapse. We were not happy enough with the terms of the long-term lease that was put in front of us. And add to that some macro trends on wealth flight from Washington State made us say, "Listen, let's allow that lease to lapse." We can be on the fence for a little while. There are other opportunities, other avenues of attack at Boeing Field. We still like the airport a lot, but we don't think that that's the right entry point. So we will hopefully come back to that at some point, but it's not going to be right now. And then just to help people understand what we're looking at, and we've had a lot of questions about this over the last quarter or so is tiering, okay? What do we mean when we say Tier 1, which I'm glad we got the questions because kind of for us, it was a little bit less structured internally. So we put some pretty rigid criteria down. I think that's going to work really well. What we call a Tier 1 airport is an airport that's going to deliver us $50 per square foot or better. That's Sky Harbour's internal underwriting. That's not what any third-party is telling us. That's our internal underwriting. But again, if you can compare it to what we showed in some of the previous slides, we tend to undershoot on what we attribute to a field, meaning we're making more per square foot on the field than even we forecast. So we think it's a pretty solid number. It's the same methodology we've always used internally. Tier 2 is airports where we think we're going to be making $30 to $50 per square foot in revenue. And then Tier 3 is below $30 per square foot. Just to be clear, Tier 2 is good. It's great. Like look at Miami, look at Nashville, these are healthy, double-digit, unlevered yield on cost airports and they're Tier 2 airports. So that works really well. Tier 1 is great, obviously, right? Your denominator and yield on cost is relatively static. It varies within a pretty tight range. Your denominator primarily being development costs. But your numerator, right, we're in the real estate business. It's really about location. There are jurisdictions where you're going to get a lot more per square foot even for the same product that you put out. And then Tier 3, Tier 3 can actually work pretty often, but it's not our focus right now. I think it will be down the road. As our construction costs -- which we'll talk about soon, as our construction costs continue to come down as Francisco and the finance team get our cost of capital down over time, many, many more airports in the country become viable and those Tier 3 airports are becoming interesting, right? There are plenty of scenarios where we can generate those double-digit unlevered yields on cost even in Tier 3 airports. We're just not doing that right now because there are juicer targets in front of us. A couple of things to point out. The green dots are currently open and operating airports. The flags represent the tiers. One of the things that you'll see is on the yellow dots, meaning the airports that are in development, not operating yet, there is a much, much higher incidence of Tier 1 airports. And this is exactly what we've been telling you from the beginning. We started out with a relatively arbitrary portfolio of airports. We knew we wanted to stay out of the New York market because we knew we'd make some big mistakes that we did in our early days. But once we became comfortable that the model is working and it is established, we could build these things at the cost that we thought we could build them, we could lease them at the rates that we thought we could lease them, we started expanding to the Tier 1 markets. So as you can see, we actually tabulated it here. 48% of the rentable square footage that is currently fully funded and in the construction pipeline, either under construction or in preconstruction right now, 48% of that square footage is in Tier 1 markets. If you express that in dollars, it would be obviously a much, much higher level, right, because your dollar per square foot is higher. We didn't want to get into that. It's a tough calculation and that starts getting close to guidance. So we didn't want to put it out there, but you can kind of back into the math yourself. That will be increasingly the story, at least for the next 2 years, meaning our major focus is on Tier 1 airports and some Tier 2 airports. Occasionally, there's going to be a Tier 3 that just lines up very easily, and we'll jump on that. But our primary focus, for at least the 2 years ahead, is Tier 1 airports. The only thing I think that bears a little explanation in this is Miami having the red and blue flag. To be clear, Miami Phase 1 is still solidly within Tier 2 territory. We've got a lot of legacy leases. Again, the latest leases signed in Miami Phase 1 are coming into Tier 1 territory. But on average, we're still Tier 2. But our second phase in Miami is a solid Tier 1. And we think that entire kind of corridor in South Florida will continue accelerating on that same path. I think that's all I had on this slide. Next slide, please. Okay. So a little bit about development. We call it projected fully funded construction pipeline. Projected because the sequence might shift a bit as conditions change. Again, sometimes we want to put an airport with those. We think there's a great leasing opportunity, move it up a little bit in the chain. But largely, this is what it's going to look like. A few things that should jump out at kind of some of the more astute observers of Sky Harbour. Number one, revenue run rate step-ups are not linear. They're a step function, okay? That's how this company works. it almost doesn't matter what's going on month by month or quarter-by-quarter. It matters what's going on project by project. Bradley is going to get delivered in Q4. Addison I is going to get delivered by the beginning of Q1. That's when you have your big step-ups. Again, we are re-leasing in the interim, right? There are Nashville hangars that are going for 23% higher than they were going for before, but your big quantum step-ups are every time a project gets delivered. The -- what you're seeing here as well, it shows the importance why we've invested so much over the last 18 months in the Ascend integrated construction program. What you're seeing on this chart is an order of magnitude increase in the square footage as being parallel processed at this company. We've never had this much -- anywhere near this amount of construction underway in parallel. Let's hope it keeps up, but it's all going smoothly, on schedule, on budget, and that is really a testament to the Ascend team. Just as a reminder, what that includes is prototyping, in-house architecture and engineering, in-house manufacturing, and increasingly in-house general contracting. That's what that program constitutes. You can see also when that revenue really starts to fire, right, which you'll see a big, big bulge in revenues coming on in 2027, okay, which should be clear to anyone who's watching how this company grows. And we're not going to make huge forecast for the years ahead. Just understand that the intention is to do another order of magnitude leap in the volume of parallel processing going forward. It's all a matter of getting these top-tier airports into the portfolio, getting them financed and now unleashing the Ascend team on those projects. I think that's all I had on this slide. Let me hand it back to Francisco.

Thank you, Tal. We have been focused on creating a fortress of liquidity at Sky Harbour, now with $368 million of available resources following our debt -- our 2 debt transactions, the $200 million bank facility through JPMorgan last September and the $150 million that are taxes and bond issuance that closed in the middle of this past February. Of this amount, $187 million in cash and U.S. treasuries sitting on our balance sheet. We continue to cash manage our cash management strategy led by our treasurer Tim Herr of rolling out these funds in short-term treasuries, pending their use in construction. We also have drawn only $19 million of the JPMorgan facility so far and have $181 million left of committed available capacity in that facility. In terms of capital formation, we now have a significant runway ahead of us and are fully funded, as Tal mentioned, to double in size without additional capital. As we always have mentioned before, we'll continue to be deliberate and conservative on raising capital way in advance for the time that we needed and at the lowest cost of capital possible. Next slide. For the past 4 years since going public, we have been asked by all of you, investors and analysts alike, to provide formal guidance of our expected results. We have avoided doing so until today, given our early-stage nature of our business and the variability of our outlook driven by past capital formation availability and project cadence and so on. As Tal mentioned, now that we have everything in place, we have the capital funding in place, the development and construction and manufacturing teams locked and loaded to execute on our plan, the visibility of our results is more predictable and clear. Unfortunately, I cannot give guidance, but for this year, which is, again, similarly that looking historically at our results or the current quarter's results or the subsequent quarters, it is really -- I don't want to say meaningless, but in terms of grasping, really, the cash flow generation potential of this platform. It is, as Tal mentioned, in 2027 and really 2028 calendar years, which we were able to show the results of all these projects that are now in development or construction. Having said that, we are going to provide today formal guidance in terms of revenues. We expect to finish this year, 2026, with an annualized run rate of revenues between $42 million and $46 million. Again, annualized run rate of revenues between $42 million and $46 million and that's up from $35 million annualized run rate this quarter that we just filed today for this year. This increase will be driven by the incremental revenues of the Phase 2 at Opa Locka that opened this week and the increased occupancy at DVT and APA. Similarly, we're introducing guidance for an estimated adjusted EBITDA that we expect to end the year at an annualized run rate of between $4 million to $6 million, up from the annualized run rate of negative $6 million in Q1. This guidance, as you may notice, is slightly lower than what is shown in some of our analyst models for 2 reasons. First, it is guidance, which we intend to meet or exceed. And second, it does not include any revenues or EBITDA from the Bradley and ADS 2 campuses that will open at the end of the year, which, from a timing perspective, those future revenues and EBITDA are not reflected in our guidance. Let me now pass it back to Tal for some final comments regarding highlights and next steps of our 4 pillars of our business model, site acquisition, development construction, leasing and operations.

Thanks, Francisco. So on site acquisition Stewart expansion, I think people might remember because the Port Authority announced it in Q4, but we only executed it in Q1, we doubled the -- our footprint at Stewart International Airport in New York, Tier 1 market, hundreds of thousands of square feet of hangar. We're actually considering at this point going straight to developing the entire project rather than doing it in phases. That's our level of conviction in the demand and market uptake in the New York market, but we'll report on that soon enough. 2026 in site acquisition, again, it's not anymore just about putting more dots on the map. It's more than that, about rentable square footage, even more than that, about revenue per square foot. And then ultimately, what it's really about is NOI per square foot, and we're choosing our targets on that basis. On development, we talked about Miami Phase 2, which is delivered and the Ascend platform in action. Bradley, Connecticut, Dallas Addison Phase 2, Salt Lake City, Hudson Valley Regional, all of those are under construction. We're in the ground on schedule and for the time being, and let's hope it stays this way on budget as well. And we have additional airports like Dallas International, Trenton, New Jersey, Orlando that are in development right now, pre-construction. Cost per square foot, last time we reported, was $253. Our current GMPs that are out on projects that have not yet been delivered. This is what's out there, is $244.37. We're not done. We're fighting to keep getting that cost per square foot down. Reminder to everyone that not only does that improve our unit economics, it dramatically expands our total addressable market, right? Those Tier 3 airports start getting very attractive as your cost per square foot continues going down. So that fight is nowhere near over for us. On leasing, again, we discussed the Miami Phase 2, this occupancy optimization program. So again, I think a lot of you are familiar with how we run that. It's primarily a geometric optimization when you have semi-private hangars, an aircraft that is -- occupies 10,000 square feet, meaning length times wingspan is 10,000 square feet, doesn't actually occupy that entire rectangle. This is a convention in the industry that we didn't invent. This has been here for a long time. The corners of that rectangle remain vacant, and you could put other aircraft in those corners. We don't get them too close. We're trying to keep things very safe in Sky Harbour hangars, but we have been able to get, as you've seen, to far beyond 100% occupancy. We're now beginning to introduce temporal occupancy programs, right? So some may have noticed the Opa Locka Phase 2, there was one lease that was actually below $50 a foot. That aircraft is in Miami on a seasonal basis, right? That space is available to lease to other prospective residents at specific parts of the year. And so that's, again, something that will, over time, increase occupancy. We have treated that as -- the revenue per square foot we're getting for that aircraft, we don't discount in any sort of way. But functionally, if you're putting it in your model, understand that, that square footage will be leased to somebody else as well. But again, that's the small piece. The big piece, as we discussed, is re-lease revenue step-ups, right? Every time a lease comes to term, we get a very, very healthy escalation in revenues. On the operations side, we discussed the OpEx efficiency program. We'll share interim results in one of the upcoming earnings calls. It's a little bit early to do that, but that is underway. And we've begun a quarterly survey of Sky Harbour residents, which has gotten a very gratifying participation and the vast majority of our residents participate in that. And what we use it mainly to do is figure out where we can improve, both in the physical product that we put down and in the service offering, but we also, obviously, look for people's overall satisfaction kind of ratings relative to alternatives in the industry. And all of our residents are familiar with all of the alternatives in the industry. And there, we're -- I don't think it could be any better. And -- although we will continue trying to make it better. And a few testimonials on the bottom of the page. Let's move on to the last slide. Okay. So looking ahead, like I said, we feel like the model is increasingly established. We're happy with, really, all parts of the model. Obviously, we're refining everything, but we're happy with where we're going. It's now much more of a rinse and repeat exercise. The focus is on scale. That's across the board. So on site acquisition, it's not a number of dots on the map anymore. It's maximized NOI capture, right? That's square footage, Sky Harbour equivalent rent and OpEx. Those are the inputs to that. The same field expansion is going to be a theme, getting everybody ready for that. That's going to be a big part of what's going forward. What we saw in Miami, we think is something that could be replicated in a lot of markets where we can expand. The fact that you know the market and the market knows you very well, gives you a massive head start in leasing. And you can see also the rates are significantly improved. On the development side, again, we've seen this in different charts. I won't go through them all. But to be clear, we're going to be at over 1 million square feet in development by the end of this year. And that, again, will only accelerate in the years ahead. And then the -- lastly, that cost per square foot, again, that fight is not over. There are major architecture and engineering initiatives in progress right now. I think there's a real opportunity there. And as soon as we have -- again, we'll be reporting this on every earnings call, we'll see that $244 a foot number, hopefully continue coming down. On the leasing side, again, I won't go through all of the numbers. What I will focus on is that last bullet, team growth. So we are in the process of onboarding additional team members. I think what's worked for us at Sky Harbour traditionally is recruiting out of the military. We've continued with that. But as you can see, we have a -- really, the rubber hits the road in a very big way starting in 2027. So we've got a massive leasing challenge. Because we're pre-leasing now like we did in Miami Phase 2, that challenge is now. So the team has to grow right now, and that is underway. And then lastly, operations. Again, the defensive side of operations where we don't want to be too innovative here is just absolutely bulletproof safety, bulletproof security, and the highest efficiency, the shortest time to wheels up in business aviation. What we consider offense is continue working with our residents, in some cases, very intimately to constantly improve both the physical offering and the service offering and create this virtuous circle of value creation. And with that, I think we can move on to questions.

Operator, please go ahead with the queue for the questions.

[Operator Instructions] Your first question comes from Ryan Meyers with Lake Street Capital Markets. How are lease-up and pricing trends progressing at the newer campuses? And what evidence today best demonstrates the operating leverage in the model?

Okay. That second question is interesting. Thanks, Ryan, for that. So I think the lease-up and pricing trends, you may have logged just before we went through the presentation. So my understanding is the presentation probably answered your question there. What evidence best demonstrates the operating leverage in the model? It's an interesting question. Look, first of all, time has been our friend here in that our major capital investment is upfront, right? This is a high CapEx, low OpEx business. Once you lock in a price per square foot or a cost per square foot on a campus, that's it forever. However, the revenue that's associated with that, that numerator in your yield on cost has been growing at really gratifying rates, much higher than we thought. That's maybe one piece of evidence that I think demonstrates the operating leverage and go around the table here if anyone else has a good example of that. I like the question.

Your next question comes from Michael Thompson with BTIG. During the 4Q '25 call, you mentioned prioritizing site acquisition targets based on those with the highest NOI generation potential. How many locations would be on the top tier of your wish list? And how many of these are you actively pursuing ground leases on?

Okay. So by top tier, what we're calling Tier 1, meaning airports with $50 and up a foot rent. So we, for competitive reasons, don't provide any kind of list or even number of airports there. What I will say, you can see on the map that we showed, the site acquisition map, more or less where those airports tend to be concentrated. How many are we going after? All of them. Every airport that's in that space is something that we're going after. And the last thing I think that's worth saying about that is we feel that the number of airports that are crossing into Tier 1 territory is going up, right? So I think a good example of that is Opa Locka, where Phase 1 is still solidly in Tier 2. Phase 2 is solidly in Tier 1.

Your next question comes from Dave Storms with Stonegate Capital Partners. Based on your properties in development table on Page 25 of the 10-Q, it is estimated that your rentable square feet per hangar is expected to grow by 8,000 feet over the next 3 years. Can you break out this growth between growing our square footage versus increased occupancy efficiency? Also, marketing expense took a step up this quarter. Can you speak to what this looks like on the ground and what the expectations are here?

Can you reread the second part of that question? We didn't hear that.

Also, marketing expense took a step up this quarter. Can you speak to what this looks like on the ground and what the expectations are here?

Okay. Thanks you. All right. So if I understand correctly, the first part of the question is about growing rentable square footage while also increasing occupancy efficiency. So we don't see a tension there, right? The demand is there. In most of the airports that we're at, we need to get very creative about accommodating new residents, right? Once you get deep into that above 100% occupancy category, it becomes a little bit tricky fitting in new residents. So fundamentally, if we could be growing square footage at a faster rate, we would be. We think it's totally [ foolproof ]. So I don't think there's really a tension between those. And then the question about marketing expense, what does it look like on the ground? Well, look, we -- first of all, we have more and more people in leasing, and we need even more to pursue that. We don't advertise -- I don't know if this is where you're going with the question. I think I would say most of our marketing is really existing residents bringing in friends and colleagues and advocating for us. I think that's -- I hope that answers the question about marketing.

Your next question comes from John. What are annual rent escalators in the leases? And is the 23% re-lease up compared to the initial rent or the rent accounting for annual rent increases?

Okay. So the annual increases in our standard tenant leases are CPI, consumer price index, with a floor of 4%. And it's actually a very good, nuanced question. That 23% step-up between leases is after the 4% escalators, meaning if a 3-year lease ends, it will have escalated twice by the time it ends. The 23% increase is after those escalations, right? So if your lease ended December 31, the new lease starts January 1, it's 23% on average higher than it was on December 31.

Your next question from Mike. What's the tenant retention rate for the portfolio?

Tenant retention rate. I don't know that we've actually ever compiled those statistics. I would say the vast majority of our residents whose leases come to term are the next resident, right? That's really -- but I don't think we actually have those numbers. Let's talk about that a little bit.

As we grow and time passes, we're going to be providing a lot of statistics on vintages and our various vintages of phases and so on and so forth. I think it's still too early. But as Tal mentioned, again, the renewals are mostly with our existing tenants. Obviously, there's a back-and-forth that starts several months before their term ends. And then they know that, obviously, there's people out there that we could replace them with at higher rents, and that creates tension for that increase in rates for that renewal. Next question.

Your next question from C.K. Can you speak about your recent Investor Relations initiatives and conversations you're having with potential investors or partners?

I'm not sure which initiatives you're referring to specifically.

So let me just mention the following. From now after having completed the 2 debt financings, we have increased our activities in terms of outreach to investors, existing and potential. We are attending more conferences going forward. Tim and I are going to be next week at the B. Riley Conference in Marina del Rey, California. Then a couple of weeks later, we're going to be at the RBC Conference here in New York and so on and so forth. And we're going to be more active, you will see both in person and in virtual conferences going forward in terms of our outreach to investors. Next question.

Your next question from Steve. What's your G&A expectations as you grow the company?

Yes. Listen, one of the most important things at Sky Harbour, as you know, is that -- as most of you know, is our ability to have operating leverage and not just as we move from Phase I to a Phase II, but in general, in terms of the scale of the company. We are looking to -- yes, we're increasing the lease team, the leasing team, but we look to, basically, after those people are onboarded to basically limit the amount of SG&A that will grow at this company. And then as we scale, we'll be able to basically generate a significant EBITDA expansion on the back of that fixed -- very fixed SG&A expense. Next question.

Your next question from Jack. What are annual rent escalators in the leases? And is the 23% re-leased up compared to the initial rent or the rent accounting for annual rent increases?

Yes, I think we answered that one already. Next question.

I'd now like to hand over the call to Francisco Gonzalez.

Operator, I think there are more questions here still.

Yes, we just had a repeat of a question, but let's see if -- I think there are others now.

Your next question from C.K. I noticed you issued some shares using your ATM facility. Why was this needed given the robust liquidity you have? Do you expect this to continue?

Thanks for the question. As some of you may be aware, we entered into a facility with Yorkville Securities late December, early January. And that facility also -- as part of the facility or separate the facility, we also added them to our ATM program that is also run with B. Riley. And we -- basically, in Q1, we test-drove Yorkville as an ATM agent on a few days during the quarter. Next question.

Can you -- this is the next question. Can you provide details on economic occupancy that is 103% for campuses open for more than 6 months? How high can economic occupancy go?

Yes. Okay. I addressed this a little bit during the presentation. Look, San Jose is probably somewhere near the limit. We're at 132% in San Jose. We never want to -- and remember, you can only exceed 100% on a semi-private hangar. A fully private hangar, it is what it is, right? You take the entire square footage of the hangar irrespective of the square footage of aircraft that's actually in the hangar. So it's only semi-private hangars that we're doing it with. We never wanted to get crowded. We never wanted to get too busy in these hangars. So I think San Jose is probably approaching the top of that range. Maybe if we introduce some temporal like we're talking about those seasonal residents like we have in Miami, we can go a little bit higher than that. But I don't think it's going much higher. One of the things that we're seeing, though, and this is maybe combines two of these questions, here is a trend of people going from semi private to fully private hangars, right? Once they experience it and understand exactly what the service offering is, we do see people saying, "All right, I'm willing to spring for a fully private hangar." And that -- those are happening, of course, at significantly higher rents. So that trend is going on. We're always going to, I think, keep some sort of a balance between private and semi-private hangars.

Your next question comes from Joe. Can you talk about the competitive landscape? Have there been additional competitors entering the market?

So we still haven't seen anyone who does exactly what we do. The FBO companies, Signature and Atlantic, we cooperate with as much as we compete with. And it's kind of, as I said, the Venn diagram has just not that much overlap between what we do to the extent that one of them actually refers residents to us sometimes, which has been great. So we haven't seen that. We have seen people come and acquire hangar assets. That is going on. Again, I think many of the people on the call understand we don't acquire assets because we think the economics of acquiring raw land and building them, especially when you get to this scale, are just so much better than acquiring them. We just don't want to be on that side of the trade. So we like where we are there.

Your next question from Mr. [indiscernible]. On an occupied square feet basis, OpEx per square feet is running around $15 for the Obligated Group. Why should future properties be any different?

Yes. Thanks for the question. One of the things we mentioned, the 2 remaining campuses at the Obligated Group is this Opa Locka Phase 2 that just opened this week and then ADS 2 in Dallas that will open at the end of the year. If we expect these campuses to run basically the same personnel, the same fuel trucks, and then just a marginal increase in OpEx expenses. So that will allow us to really expand the operating margin, the gross profit and EBITDA margin of the Obligated Group as those 2 campuses come into being. And similarly, as we finish leasing both Phoenix and Denver, we will also see the expansion in the gross profit margin of the Obligated Group.

Yes. I'll say in addition, first, you're welcome to e-mail your numbers if that's not the numbers that we come up with. We'll be happy to look at your logic. And if it's worth putting out a clarification, we'll happily do that. But we're not at $15 a square foot. What I can say is when we started this, there was a very deliberate decision to over equip, overstaff all of our campuses, right? What we wanted to do was create, by far, the best service offering in business aviation. And then with the scalpel, we will go back and make it efficient. So we're exactly -- that's what that OpEx efficiency program is about is how do we become more efficient on OpEx without touching the magic, without compromising the service level we have. So that's ongoing. And again, we'll start putting out numbers on that as we go forward. But welcome to e-mail your numbers to us, and we'll have a look at how you got to that.

Your next question from Dave. The conflict in the Middle East has impacted fuel prices. Do you anticipate this impact being immaterial, providing a tailwind or creating headwinds for fuel revenue on the income statement?

Yes. I'd say probably immaterial. I don't think it helps. It doesn't hurt. Remember, we -- what drives our business is the existence of aircraft square footage. We really don't care how much you fly. As long as you exist, you've got to be housed somewhere. The FBO model is a little bit different where they do -- I mean fuel is the major source of revenue for the FBO industry. I think even in the FBO industry, you haven't seen an incredibly material impact. I mean this is obviously a very economically resilient cut of the population. If they have to get somewhere, they're going to get there. If they cost them a bit more on fuel to do it, that's -- so be it. Now if this remains protracted, maybe that changes a little bit on the FBO side. From our perspective, again, unless this becomes a permanent, higher than $100 barrel oil and aviation just kind of falls out of favor over time, I suppose that could happen, but I don't foresee it.

Your next question from Pete. What are the 2026 guidance assumptions to achieve revenues of $42 million to $46 million and adjusted EBITDA of $4 million to $6 million?

Yes. Thanks for the question. Yes, our main assumptions is that Opa Locka Phase 2 that just opened this week, it will continue to move from the 68% owner occupancy towards 100% occupancy. So we're not -- and we're not including revenues beyond that 100% occupancy, which obviously -- and then we also are including in the assumptions that both Denver and Phoenix will continue the trajectory towards 100% occupancy as well by the end of the year. And again, as I mentioned in the prepared remarks, we are not including there the contributions from Bradley or Addison 2. And one last comment, just to reiterate what I said earlier, that we in finance are -- if the lawyers allowed us to give '27 and '28 guidance, we'll provide that because this company and with all the projects that we have broken ground on and are about to break ground, shown in the picture, are going to be in construction in the next 1.5 years. It's really 2027 revenues and '28 revenues and EBITDA that really are the things that people need to be focused on and not what happens in '26. Obviously, trajectory matters and keeping these guidances and these milestones makes sense. But in terms of the cash flow potential of this platform, it's really -- is going to be shown in '27 and '28 both on the back of the scaling of all these projects and the resulting cash flows. And I think with that -- go ahead.

I'd now like to turn the call over to Francisco Gonzalez for closing remarks.

Thank you, operator. It's clear that there were more questions in the queue and that we run out of time. Please reach out to us through investors@skyharbour.group, and we'll be happy to answer them either via e-mail or with a follow-up call. Also additional information is available on our website at www.skyharbour.group. And again, we want to thank you for your participation this afternoon. We have concluded our webcast, operator. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.