Sky Harbour Group (SKYH) Q2 2026 earnings call transcript

Thank you operator and good afternoon everybody. And welcome to the 26 second quarter investor conference call and webcast for the Sky Harbor Group Corporation. We have also invited our boardholder investors and lenders in our bar and sub series Sky Harbor Capital. Sky Harbor Capital 2 and Sky Harbor Capital 3 to join and participate on this call as well.

Before we begin, I have been asked by council 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 contained for word-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 one on two of these presentations as well as our SEC filings for the description of the factors that may cause actual results to differ from our forward-looking statements.

Both forward-looking statements are made up 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 Canyon. Our treasurer team, her chief accounting officer, Mike Schmidt, accounting manager, Tori Pedro, and our assistant treasurer, Andreas Frank.

We have a few slides we want to review with you before we open it to questions. We starting on this webcast today will be limited to those from the research analyst community that have us on the 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. So we decided to change to this structure. Obviously, we welcome any and only investor questions afterwards through our investor email at investors at the group. And we'll make an effort to respond from this.

We just filed a few minutes ago, the R10Q with the SEC and our second quarter financials for Sky Harbor Capital.

Related to the Series 2021 bonds and for the Sky Harbor Capital 3 related to the Series 2026 bonds with MSR BMA. We also just filed a prospective supplement to our existing job registration program. Let's get started then. We will go to the slide with our recent results. At the end of the second quarter, on a consolidated basis, assets on the construction and complete construction reach 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 and Sky Harbor continues to accelerate and these columns will continue to grow at an ever higher incremental rate. Few two revenues experience an increase of 50% over a year ago and 13% sequentially, given the new campus openings in the last past year and increases in occupancy and rental rates.

Operating expenses in Q2 continue 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 to the in the past year, which are not a constructor or in operations. As in the prior quarter, a significant amount of the increase in op-x is related to the signing of new ground leases at the end of last year. And with that expense more than half, more than half is non cash accruals of new ground leases into the future.

We look forward to benefiting from the operating leverage for our faces to with Miami Opaloka, which has now been open for four months. And later this year, with the opening of Addison phase two, they expect gross profit margin expansion with these two phases to with the same people and field trucks serving basically a doubling of those respective anger campuses.

We strive to keep SGNA in check as we grow, keeping frugality front and center in our expense and cost management initiatives cash flow provided by operating activities, which positive territory of roughly half a million dollars. Reaching a significant milestone in the company's history. Going forward, equity proceeds, they will only go to new product projects and not to fund current operating expenses like in the past.

Next slide, please. This is a summary called the financial results of our wholly owned sub series caror capital and its operating sub series that formed the obligation group. Assets under construction are still growing as we completed Opaloka phase two in Q two, and will soon stabilize with the completion of Addison phase two at the year end, which, as many of you know, is the last project of the obligation group first vintage of campuses that were financed by the series 2021 bonds.

Revenues are the obligation group increased 79% year over year, and 22% sequentially. We expect continuous step function increases in revenues in Q three and Q four, with the continued new leasing of phase two in Opaloka. And then Q one and Q two of two thousand twenty seven after the opening of Addison phase two. As I mentioned before, we expect a marked increase in gross profit and even damaging expansion with those added revenues and limited increase in operating expenses, giving the ability to use the same personnel equipment with expanded campuses that double in size.

Cash flow from operations reach almost $3 million in the quarter and increase from 2.2 million a year ago. These constitutes 10 consecutive quarters of positive cash flow from operations, providing ample and growing debt service coverage for bondholders and bank facility lenders.

Let me pass it on to Mike Smith for discussion of our adjusted EBITDA calculation, something we did a few quarters ago, but it's important to refresh, given importance of this adjustment to our EBITDA. Mike.

Thank you, Francisco. As with prior quarter, I'd like to take this opportunity to provide additional context regarding elements of our reported results. We've provided a reconciliation from our gap net income results for the quarter image 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 and or compasses that are not yet operational. Stock compensation expense in 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 June 26.

This is driven by continued improvement of results that are operating campuses where revenues continue to increase as operating expenses remain relatively flat. Adjusted EBITDA is supplemental in nature and is not calculated in accordance with GAP. Our definition of EBITDA and other non-GAP measures can be found in the management discussion and analysis section of our report. Thank you.

And with that, I would like to pass it up.

Thanks, Mike. All right. Leasing update. I'm not going to go through all of the cells on this chart. Let me just highlight a couple of things. First, take a look at APA 1 that's Denver Centennial Phase 1. One of the things that should jump on this chart is our relatively low economic occupancy. So leasing has been slow in Denver.

That's just the state of affairs. Not all of these lease up at the same time. Some take longer, longer than others. I will point to examples like Miami and Nashville. Miami took almost a year and a half to lease up phase one and Nashville. Don't give it longer than that. Both of those are very, very robust cash line campuses today. So we're not concerned about it. We wish we could move faster on this, but that is a state of affairs to other cells that would jump out. I think are the average rents per square foot in DVT 1 that's Phoenix and Addison 1 that is Dallas ADS 1.

So a couple of things to point out here. This sort of obscures the reality. And 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.

Just to get to full occupancy as quickly as possible. Get the cash flowing, get the debt service, 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 a target or actually in all three of these cases above target levels to give you a sense in Dallas.

Our our multi your tenants are paying rents in the 40s and 50s per square foot. So the ambition is as we proceed here, and we're pretty close to take Dallas as an example, pretty close to 100% least at Dallas. Is as these short term leases come to terms start cycling back and replacing them with real long term residents at the rates that we're looking for. So that explains those those numbers.

Yeah, if we had done the same thing, I think we didn't exactly do this in Nashville and Miami or Houston at the beginning. But Nashville is one that started even with long term leases in the 20s. And you see over a relatively short time that comes up and grows into pretty robust.

So again, we expect that trend to continue on those. The last thing I'll call everyone's attention to on this slide is the release update lower left hand corner. Just a reminder to people of what that metric is is in the last 12 months. We have had a hundred thousand three hundred sixty square feet of hanger leases come to term expire and get renewed.

In nearly all those cases, it's the same resident who's 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 the few points down from last quarter. The main reason for that is that we a lot of these leases are now not the second turn, but the third turn of the lease.

Where we 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.

Next slide is site acquisition. Again, more or less speaks for itself. And I've said on these calls how I think this company should be valued, which is look at the total. Rentable square footage of hanger that the company has secured underground lease not not developed yet, but secured underground lease, which is that four million number on the right.

Multiply that times the sky harbor equivalent rent. And, you know, again, everyone can make their own rent projections on that. As you'll see, we've beaten sky harbor equivalent rent on all of the existing campuses. 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 underground lease. And again, I'll emphasize this. You know, certainly I'm on the next, you know, 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 don't think we should do it that way. But fundamentally, that is where the value gets created is when the ground lease is signed.

So, and then to take that number, you can put whatever multiple you want on that or cap rate. And then discounted for all of the risks that we're all familiar with, right? There is development risk, construction risk, there's lease up risk operating rent, all of that stuff exists. So, you know, it is appropriate to discount those. And obviously, it's got the time it takes to actually build these campuses.

But as you'll see, our focus is increasingly on tier one airports. And we have another slide on that. So I'm 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've heard this from a number of people. This is something that we thought of ourselves as this was happening. As you'll notice, there is a lot of expansion going on in California.

Just as there's been quite a bit of capital flight among the most wealthy residents of California. We're seeing that firsthand because those people are signing up in our Miami, Nashville, Dallas campuses. We've 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. Look at the rents that we're getting in California, you know, other than the New York market. It's probably the best market in the country. That's both the area and Southern California.

But if you look at the trend as well, most of the people who have left, you know, and it's well over a trillion dollars of wealth that's left in the last 12 months. Most of those people return with the frequency that justifies keeping permanent hanger space. And a lot of our residents in California exactly fit that bill. That people who are no longer down in California, but visit enough that they keep hanger space with us.

The second is, we actually, we put it on the slide, is, you know, of that trillion plus of wealth that's left California in the last year.

The vast majority of that is 10 people. Okay, 10 people constitute the majority of that of that slide. And in the same period, 37 new billionaires have been minted in California, primarily Northern California, not only. And 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's 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 the net basis is leaving California. So expect even more emphasis on California side acquisition in the coming quarters. We have very, very high conviction on that market.

Okay, our development update. So this is one of the areas where the rubber is meeting the road. We 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. 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 born out. So we are on track on both on budget and on time with all of the developments in this plan. And you can see some pictures on the right from the campus is going to vote. Bottom right is Bradley Connecticut that is the nearest term.

We've got Dallas Addison. Sorry, we have Salt Lake City, which is going to be delivered early next year. And 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 Harbor right now. And with that, let me turn it back to Francisco to talk about liquidity.

Thank you, Tom. We have closed the quarter with significant liquidity with over $207 million in cash and US Treasuries and about 130 million still available from GP Morgan committed construction loan. As I mentioned, you know, those red bars in the power slide, you know, our pace of capital expenditure is accelerating. Very important to know that. These amounts that you send this slide into the liquidity exclude the fresh 40 million in cash proceeds we received earlier today at the holding company as part of a raised direct equity placement that settled today.

Next slide, please. As in the past, from time to time, we have received reverse increase of investors interested in coming to our company. 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 up 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 these placement.

In equity issuance was very cost effective raised to direct placement from our shelf registration. We have now a cumulative surpass 300 million in equity investment by our shareholders in the company. We decided to take this funds now as a practical measure as we are waiting for the potential exercise for public wants at the end of next January. As many of you know, if fully exercise public wants will yield around 94 million in primary process for the company. We see the current rates combined with the potential for an additional 94 million in January, as covering all our equity needs at the company fully for your future.

And maybe indefinitely, as we are weight increasing operating cash flow to be available in the future to invest in more projects. Next slide, please.

Just want to take a second to a rate to rate our guidance for the end of the year that we introduced back in May. On revenues, we have reaffirmed that we expect to finish the year with an analyzed run rate of revenues between 42 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 2 at Opaloka as approaches full occupancy and increased occupancy at DVT and APA. Similarly, we reaffirmed that a Josephine bid that will end up year at an analyzed run rate of between 4 to 6 million up from an analyzed run rate of still negative in Q2. Let me now pass it back to Tal for our discussion on the highlights and next steps in the four pillars of our business model.

Tal?

One. Sorry, I think we're muted. I'm going to start that again. Yeah. 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 1 airports, right? If you can expand on the Tier 1 airport, you know, put 300, 400,000 square feet on a Tier 1 airport, that is worth a lot more than three smaller sites on a Tier 2 or a Tier 1 airport for that matter. Obviously, the revenue per square foot is higher, but also your optics.

You're operating margin goes up, right? Because two phases, and we're seeing this right now, you know, 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 1 airport. On the development side, so you watched all of the steps we've taken to scale up the vertical integration all the way to the general contracting.

Now it's time to prove it out empirically. As I mentioned a couple slides ago, we are on schedule on budget that all of the airports in the pipeline right now. So continue watching that. And then prototyping. So the third version of our prototype has been gone through third party testing now. It's approved. It's ready to go. And the first airport at which that will launch is Fort Worth, which breaks around later this year in Q4. We'll show you pictures of that more functional cost less per square foot to put up. It's a better hanger and for a cheaper. So that's obviously what we're striving to do here. On the leasing side, so we made the point about those larger footprints that we're trying to see at the Tier 1 airport.

The occupancy optimization program, as we've discussed, especially in the newer campuses, you'll see this at Obelaca Phase 2, where we're working to achieve significantly greater than 100% occupancy on these campuses. Then Jose is the first airport that we really maximize that. We already talked about the release rates. Operations will continue to see operating margins improve if we do this right. That program is in place and already saving us off X dollars.

And 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. And consistently, we keep going out with resident surveys.

We are being ranked by far as the number one home base solution in business aviation. You can see that empirically that we charge a lot more than any other solution and still have waiting list at all of the stabilized campuses. So we will continue working on that.

That is increasingly, I think the key differentiator in the HBO business model. Next slide. Looking forward. So look for more of the same on site acquisition. We meaning tier one airports tier one geographies and more same field expansions to the extent that we can we can do those on the development side. So if you look what's happening over the next two quarters, we're going from a little over 600,000 square feet now under construction to over 1200 square. Sorry. One point.

Little over 600,000 square feet now under construction to over 1.2 million square feet under construction by year end. So this is the scale up that we're talking about, you know, watch our schedules, watch our budget versus actual that's what we're going to be trying to deliver on. And 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. So let's start with it. I guess it's a smaller component, but 65,000 square feet that of lease that will come to term by the end of 2026 and we'll need to be released and we'll be looking for big step ups on those. 161,000 square feet that are currently in lease up right that places like Dallas and and Denver.

And then we have this is a big number of that 218,000 square feet that is currently under construction, but will be slated for lease up by the end of 2026. So a big list 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 is expanded. I think exclusively now with military veterans.

And we talked about pre leasing on the last call, which had good results in Opelaka phase two. We have Bradley Connecticut coming up in Q3, Q4. The proof will be on the pudding. Watch to see how how that campus opens in terms of occupancy.

And then lastly operations. So we, you know, we speak every time about starting with defense right safety security and efficiency come before everything else. We spoke a little bit on the last slide about innovation working with the residents.

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 Harbor campuses. So we just rolled out a program called Sky Key, which gives Sky Harbor network access to some of our top residents.

That's, you know, called those are guinea pigs where they get the full Sky Harbor service exactly as they're accustomed to with all of the privacy and the security that that entails wherever they go within the Sky Harbor network. 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, to the value to residents of the Sky Harbor offering.

With that, I think we are ready for questions. Yes, operator, please. If you know, go ahead with the queue from our research. And again, reminder for everybody else to submit questions through investors as Sky Harbor. The group and we'll answer those probably in the coming hours and day.

Thanks for the question. Thanks for the coverage, Tom. So, look, I think what's, you know, maybe conspicuous about preleasing at San Jose, which is different from Bradley and Dulles. It's much more like Miami Phase 2, is that when you have a Phase 1 in operation in a market, you know, 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 Harbor, right? There's a waiting list of Sky Harbor in Miami.

In other locations, we're just not as known. Again, we think that's beginning to change now. There's a little more of a national recognition of where we're coming. But it is definitely either the so much pent-up demands in the Phase 2 markets that preleasing goes a lot easier. San Jose 2, I mean, I should say, for all three of those airports, there is no introductory rate.

If you think about it, you know, I keep going back to Miami Phase 1, where we opened up 12 new hangers, whatever that was, 160,000 square feet of hanger simultaneously.

More hanger 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, you know, there's 12 hangers and 12 vacancies. There's a lot of leverage in that negotiation on the part of the 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. It does not want to be, you know, the person who volunteered to pay more than their neighbors are paying. When you pre-lease, we're seeing that the main concern is really FOMO.

And as we get closer to fully leased, and as you see the rates climbing up, right, 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. So 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 no, it's going to be gotten by the way, we have, you know, sorry to say some angry people who did not get space in San Jose phase two. And if you gave us a phase three there, we would grab it.

Now, appreciate those answers. Maybe sticking with that kind of last comment, 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.

And 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?

I mean, it's a good question. The, I don't think there's any one size fits all answer. What I will say kind of a rule of thumb that can be applied pretty broadly is, you know, I mean, to, by the way, there are certain airports where the total CapEx is what's important. There are certain airports where, you know, there are other, you know, other items of the port. 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.

Right? So when you show up in Atlanta, there is a hanger deficit. And the FBO model doesn't really address that deficit because, remember, the FBOs make their money outdoors from fueling. You're not a lot of fuel indoors inside a hanger for, you know, regular fire code reasons. So their revenue is produced outdoors. They want as much outdoor space as possible, right? Get the, you know, transient traffic in, get them fueled and get them out as quickly as possible. That is the business model.

So for the municipality or county that wants to maximize hanger 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 hanger footprint. And as you, you know, I think, no, our campus layouts have very little ramped and a lot of hanger. They look very different from an FBOs campus layout.

That is a winning proposition for a lot of airports. You know, take another is that repositioning, you know, particularly in heavily traffic markets, New York being that may have primary among them, but also in Southern California and Northern California, increasingly South Florida, Dallas area.

You, there is simply no room. You cannot get hanger space at Teterboro. So most of the New York, for example, Manhattan aircraft owners who operate out of Teterboro. It lives in Bradley, Connecticut, or Trenton, New Jersey.

In those situations, there's a lot of pressure to reduce repositioning flights, right? And here's what I'm talking about, kind of that triple alignment of interest. For the aircraft owners perspective, those repositioning flights are expensive.

That's fuel. That's, you know, pilot hours. They're logistically cumbersome. You know, if you're flying far, you know, you're flying to, you know, 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, right? So we have people who fly with double cruises. There's a very logistically cumbersome to do that repositioning. From the airport's perspective and the local, you know, local government's perspective, that's environmental impact. That's airplanes flying empty and no passengers. That's noise impact, right? Those flights are straight and low and loud, right? 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, right? 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. So come in and say, look, when we come to your airport, we're actually going to reduce repositioning. That is a big deal, right? And again, from the FBO's perspective, and I'm not trying to knock the FBO's. 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. That is their incentive. We're incentivized very, very differently. So that's an answer to your question.

That's an example of how interests can align between us and the airport. That's perfect. Thank you for all that insight, Paul. That's it for me. And I appreciate all the answers.

Yeah. Thank you. Thank you, Tim. So I think your instinct is probably right, right? On those three campuses where we're doing the introductory rate strategy. Yeah, I think it's reasonable to accept to expect a bigger bump up on that first release. You're right. And where we're, you know, those introductory rates can be very low on some of those campuses. It's really about just not not flying empty.

You know, while we do this, you know, kind of the real lease up. And then on those pre lease campuses where we're actually getting, you know, above target rents before we even open the doors, probably less of a bump on the pre lease. So, you know, we've avoided trying to make predictions on inflation rates on airports. You know, we, you know, as I think, you know, I think they're going to be completely.

Divorce from CPI. There's just no land to develop on airports and the fleet just keeps growing. There's nowhere to put these aircraft. So we think inflation is based in, but we're not, we're not getting out numbers. We figure the best we can do is just publish this release rate, remind everybody that all of our leases feature a 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're building a model for the company, you're one of your most sensitive inputs is going to be your assumption on inflation rates going forward in hanger rents. So again, we're not, we're not making any predictions on that, but we want to provide you with as many tools as possible.

So you can.

Yeah, good question and again, thank you for your coverage. So, you know, this is a recurrent type of number of course, you know, in the next two quarters. And we're going to continue, but I think for increased revenues, as I mentioned earlier, from the finance, you know, the leasing of, or the finishing leasing of, of phase two, and then continuing leasing at APA and DBT.

Now, in Q one of 27, you're going to see the very strong effect of adding the opening of Bradley and the opening of DDS Dallas two, and that will make that number jump a step function into the positive. A, you know, and from then never, never look at negative number, hopefully again. But so between now and then a, it's probably going to be trending higher, because again, of the continuing leasing of existing facilities, but it will not be on to Q one Q two of next year that it propels a and never looks back on the back of the opening of Bradley and.

Okay, great. Thanks for the commentary and congrats getting the quarter. Thank you.

Yes, let me, let me put some comments and then also Mike, if you want to jump in as well. And so 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 Q three. I wish somebody way, let me take the opportunity to say that we will be starting to get guidance for two thousand twenty seven in the next quarter.

A webcast for Q three. Now, in the context of adjusted EBITDA, you know, we're coming into this coming month with a lot of momentum of the leasing of a local phase two and a very, very attractive rate. And also remember that that is a phase that has a lot of operating leverage, because we're basically operating with the same staff, because it's an expansion extension. It's a phase two, and that it does wonders for gross profit. 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 that we outline. I don't know, Michael, if you have anything to add.

Francis, do you hit on the two main things that I was going to touch on, particularly the operating leverage? You know, as these revenues start to come in. Opex is not moving increasing in tandem and it's essentially very creative to adjust the D, but I think it would be crucial to achieving the guidance as we expect.

Got it.

I'm sorry. Can you repeat the question? Yeah, just, you know, an update on current construction cost per square foot and just, you know, how much opportunity you think remains with the vertical integration and that's just any of the prototype integration that you guys have done.

You know, Ryan, you're kind of overdue, I think, for resetting a target. You know, when we're up above 300, we set to 250 as a target. We're at two by 242 right now.

We do think there's a lot more juice to squeeze, but we haven't actually set a target yet. You know, what you'll see is that we're, you know, we're using.

I think we should provide some photographs when we actually break ground on the version three of our prototype in four words, but you're going to see, you know, new and different construction materials, some different construction techniques.

The layout of the hanger is going to look very similar. The outside actually looks a lot better. I think it's aesthetically a lot more pleasing.

National procurement, right? So we're no longer purchasing, you know, things like fixtures and lighting and electrical components. Campus by campus, we're now, you know, buying 10 airports ahead. So those numbers haven't really manifested yet. They're not complete at least in that 242. So look for more to come.

I'm glad you raised the point. I think maybe on the next next call, we have to set another target.

Yeah, let me add to that. If I may. So 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 at about eight and moving probably to 10 different campuses at the same time. The common quarters are going to provide a lot of data, a lot of volume and accounts of scale to really, you know, turn what is right now projection into hard numbers for us to share with our investor base and with you guys and so on. Nothing pleases to be more to hear that our manufacturing facility in Texas is a two, you know, two and almost two and a half a type of shifts.

And, you know, we don't go to three because, you know, people have to take something off, but, but it is that type of becomes a scale with volume that's going to be one of the key drivers of our taking, keeping a maintaining construction cost overall low.

Hi, girl. Yeah, thank you. Yes, that's standard going forward. Opalaka phase two was the first first campus we did with that. You'll see Bradley as next and then Dallas phase two is the one after that and that's all like city. We're working on all of those as you know, we see no reason to change it. I think, you know, we might fiddle with the pre leasing goals. Like right now we're saying 50, you know, half to two thirds least.

By opening that that's what we're targeting. You know, 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 logging yourself in. And the rates do, you know, creep up as you as you advance with the leasing of the campus. So we might adjust the the total ambition of how much you want to get released over time. Again, we might not, but yes, look for that to be standard in all the campuses.

So, you know, as we discussed on the last call, we've we're not actually counting those in terms of number of ground leases anymore. It's it's square footage. How much square footage of hanger? Are we are we able to put in? And again, ultimately, after everyone's accustomed to that metric, we're going to move to what is the real metric is? What is the actual N. O. I. that you can capture from an airport? Really? That's that's what you should be going after.

Because I think everyone would agree if we if we had, you know, five airports, each with a hundred thousand square feet of hanger. But you could achieve that with a single airport with five hundred thousand square feet of hanger in a tier one location. That's obviously preferable, right? You're going to have lower off. Pop X 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.

We you know, we're kind of migrated on guidance to really a bottom line. What are we projecting in revenue? What are we projecting in EBITDA? But, you know, we we announce these airports as they come. Sometimes the cities and counties and often before we do. So I think I'm guessing everyone ought to call this, you know, to work some of those.

But we haven't actually put out guidance on that.

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 is a slow one.

Yeah, you're exactly right, Maximus. The sugar land is 100% private, right? We have and 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 Lisa in Nashville.

So sugar land had been completely leased up long term. At that point, it is private. It can't go above 100% were kept 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 one, but maybe phase two does have semi private. Again, we have people taking full.

34 hangers in Miami phase two. So they are there. There's one case of a fully private hanger. That's just a large, a large tenant.

But most of Miami phase two is semi private. So we should see significantly more of Miami. Thank you.

Yeah, it's possible, you know, again, you're the proof will be in the pudding again. So yeah, I'd say on the next earnings call look to see where Opalaca phase two stands.

By the way, we're treating Opalaca really as one campus now. So because, you know, it is one campus, but also we've actually done some shifts. All right, we took people into phase two and then actually ended up moving them to phase one moving phase one people to phase two. We've done a little bit of shuffling in Miami, but look, look to see, you know, are we at 100% or higher by the next earnings call in Opalaca.

And then the next data point will be Bradley.

Yeah, thanks for the question Joe. We, we remain aggressive. We remain creative and we remain patient because, and I think the last one for patients and persistence is probably the most important of all, all three of those. You know, if you're following, you'll 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. The, the, that's the bad news. The good news is that we started, you know, process on dozens and dozens of airports. Five or six years ago. So, you know, 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, you know, a lot of people on the call are aware of these. So, no, if anything, we're accelerating on the, on the set acquisition side. No, no plan to slow that down.

Yes, let me take that on the maximum. And so some of you may be aware. The, at the time of the feedback, there is a shareholder, a shareholders agreement in place that any investor.

That or anytime there's a transaction that the company does or investor. As far as the shoulder agreement, Institute process. You know, we all kind of like coordinate. And give notices to all the, those negative investors and so on and 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 close today.

We went around and ask all our quote unquote legacy investors. And, you know, send the capital to West. And, uh, if they had an interest in selling shares, a part of this process. And, um, two lessons in the capital said no. And then Bosom said that they will, if there was an opportunity, they would like to sell 300,000 shares.

So, uh, proud to his 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, um, a sold by Bosom in a separate transaction. Two hours to those investors and those were those stock purchase agreements. We're executed. Also during the day today, and those transactions, we understand again, they're between Bosom and certain investors, not us, but they were coordinated through us. Um, but I think the highlights here to take away from that. Again, I don't want to speak for Bosom. People should reach out to them directly. By the way, we're going to be attending their annual shareholders conference next week.

In Omaha, we have not done so in four years now or three years now. And, um, so we're looking forward to be there. Uh, but I think the two takeaways are one that all our shareholders at this juncture have, you know, reaffirmed their interest in contributing long term investors of Sky Harbor.

Thank you operator and thank you everybody for participating before you go. Let me just give a, um, an announcement that that came in our CEO is going to be scheduled to participate a tomorrow. Um, Thursday at 320 Eastern time. In the cloud cloud playmen countdown show in Fox business. So those of you guys who, uh, you know, follow some, uh, usability tells, um, first meet mass media appearance. Again, that's claiming countdown around 320 Eastern time.

And Fox business channel tomorrow, Thursday, a, you know, please training to see, uh, talking and, uh, you know, it'd be answering questions from, from this claim. Uh, and with that, we have, um, concluded our, um, our conference here. Uh, and again, please a look for additional information in our website at the group and reach out with additional questions directly to host investors at Sky Harbor. So again, thank you again for your participation. And with this, we have included our webcast operator.