MESA - Mesa Air Group Announces Second Quarter Fiscal Year 2019 Results

May, 09 2019 08:00 PM Mesa Air Group Inc.

PHOENIX, May 09, 2019 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported second quarter Fiscal Year 2019 financial and operating results.

Highlights for Second Quarter Fiscal Year 2019 (ending March 31, 2019)

Net Income of $13.2 million or $0.38 per diluted share
Adjusted Net Income¹ of $16.0 million or $0.46 per diluted share
Pre-tax income of $17.3 million compared to $3.0 million for Q2 FY 2018
Adjusted Pre-tax income¹ of $21.0 million compared to $3.0 million for Q2 FY 2018
Block hours up 14.5% compared to Q2 FY 2018
Contract Revenue up by 8.5% compared to Q2 FY 2018
Extinguished existing and issued new spare engine debt at lower interest rates

Mesa’s Q2 2019 results reflect net income of $13.2 million, or $0.38 per diluted share, compared to net income of $2.4 million, or $0.10 per diluted share for Q2 2018. Excluding special items, adjusted net income¹ was $16.0 million for Q2 2019, or $0.46 per diluted share, compared to $2.4 million, or $0.10 per diluted share for Q2 2018. Mesa’s Q2 2019 pre-tax income was $17.3 million, compared to $3.0 million for Q2 2018. Excluding special items, adjusted pre-tax income was $21.0 million for Q2 2019, compared to $3.0 million for Q2 2018. In addition, Mesa’s Adjusted EBITDA¹ for Q2 2019 was $53.7 million, compared to $32.0 million in Q2 2018 and Adjusted EBITDAR¹ was $67.8 million, compared to $50.3 million in Q2 2018. On January 29, 2019 the company closed on a $91.2 million five-year term loan at LIBOR +3.1%. The proceeds were used to pay down existing debt at LIBOR +7.25% plus yield enhancement of 1.5%.

Mesa operated 112,030 block hours during Q2 2019, an increase of 14.5% from Q2 2018 of 97,853. Operationally, we ran a 99.6% controllable completion factor and a 97.4% total completion factor, which includes weather and other uncontrollable cancellations.

“We continue to execute our plan of increased block hours, which contributed to our nearly six-fold increase in pre-tax earnings year-over-year,” stated Jonathan Ornstein, Chairman and Chief Executive Officer. “We continue to make significant investments primarily in pilot training and our maintenance capabilities.”

Mike Lotz, President and Chief Financial Officer, continued, “Our Q2 year to date diluted EPS of $0.92 and adjusted diluted EPS¹ of $1.00 is consistent with our plan. The decrease in diluted EPS for Q2 versus Q1 is primarily driven by the timing of heavy maintenance events. During the Quarter we finalized our purchase agreement with GECAS for ten (10) leased CRJ-700 aircraft currently operating at United and expect to finalize the financing this quarter. Upon completion of the transaction we will have reduced the number of leased aircraft with third parties to 18."

“I am delighted to have joined Mesa and believe the company has positioned itself to be a leading U.S. regional airline, given its cost structure and improving operational performance, as evidenced by our improvement in controllable completion factor from 98.8% in Q2 2018 to 99.6% in Q2 2019,” said Brad Rich, Mesa’s recently appointed Executive Vice President and Chief Operating Officer. Rich previously served as Senior Vice President of United Express Operations for United Airlines and prior to that was President of SkyWest, Inc. “I look forward to working with our partners at United and American.”

¹ See Reconciliation of non-GAAP financial measures

Outlook

The Company is providing the following guidance for the third quarter of FY 2019:

Fleet, Block Hours, Engine Expenses – Actual and Forecast (unaudited)

FY '18 Q3

FY '18 Q4

FY '19 Q1

FY '19 Q2

FY '19 Q3

Qtr Ended

Jun '18

Sep '18

Dec '18

Mar '19

Jun '19

Fleet Count

(Actual)

(Forecast)

E-175

CRJ-900

CRJ-700

Total CPA

142

144

142

Non-CPA

CRJ-900

CRJ-200

Total Fleet

143

145

Production

Block Hours

102,939

112,475

115,000

112,030

115,203

Block Hours per day per Aircraft

8.0

8.5

8.7

8.6

8.9

Non Pass-Through Engine Expense

8.5

2.4

2.6

5.6

8.7

Reconciliation of non-GAAP financial measures

Although these financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), certain non-GAAP financial measures may provide investors with useful information regarding the underlying business trends and performance of Mesa’s ongoing operations and may be useful for period-over-period comparisons of such operations. The tables below reflect supplemental financial data and reconciliations to GAAP financial statements for the three months ended March 31, 2019 and the three months ended March 31, 2018. Readers should consider these non-GAAP measures in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some, but not all items that may affect the Company’s net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies.

Reconciliation of GAAP versus Non-GAAP Disclosures (unaudited)
(In thousands, except for per diluted share)



Three months ended March 31, 2019



Income Before Taxes


Income Tax Expense


Net Income


Net Income per Diluted Share

GAAP Income


17,335



(4,086
)


13,249


$
0.38

FY19 Adjustments (1)


3,616



(852
)


2,763





Adjusted Income


20,951



(4,938
)


16,012


$
0.46


















Interest Expense


13,772













Interest Income


(299
)












Depreciation and Amortization


19,276













Adjusted EBITDA


53,700






























Aircraft Rent


14,110













Adjusted EBITDAR


67,810



Three months ended March 31, 2018



Income Before Taxes


Income Tax Expense


Net Income


Net Income per Diluted Share

GAAP Income


2,980



(608
)


2,372


$
0.10

FY18 Adjustments


-



-



-





Adjusted Income


2,980



(608
)


2,372


$
0.10


















Interest Expense


13,343













Interest Income


(10
)












Depreciation and Amortization


15,666













Adjusted EBITDA


31,979






























Aircraft Rent


18,319













Adjusted EBITDAR


50,298

Reconciliation of GAAP versus Non-GAAP Disclosures (unaudited)
(In thousands, except for per diluted share)



Six months ended March 31, 2019




















Income Before Taxes


Income Tax Expense


Net income


Net Income per Diluted Share

GAAP Income


42,365



(10,035
)


32,330


$
0.92

FY19 Adjustments (1)


3,616



(852
)


2,763





Adjusted Income


45,981



(10,887
)


35,093


$
1.00


















Interest Expense


28,614













Interest Income


(455
)












Depreciation and Amortization


37,767













Adjusted EBITDA


111,907






























Aircraft Rent


28,229













Adjusted EBITDAR


140,136



Six months ended March 31, 2018




















Income Before Taxes


Income Tax Expense


Net income


Net Income per Diluted Share

GAAP Income


3,815



21,181



24,996


$
1.06

FY18 Adjustments (2)


-



(22,438
)


(22,438
)




Adjusted Income


3,815



(1,257
)


2,558


$
0.11


















Interest Expense


27,474













Interest Income


(19
)












Depreciation and Amortization


31,598













Adjusted EBITDA


62,868






























Aircraft Rent


36,582













Adjusted EBITDAR


99,450

Adjustments for three months and six months ended March 31, 2019 and 2018:

Includes adjustment for loss on extinguishment of debt of $3.6 million related to repayment of the Company’s Spare Engine Facility.
Includes adjustment for tax benefit resulting from the Tax Cuts and Jobs Act enacted during Q1 2018. The Act reduces the corporate tax rate to 21 percent, effective January 1, 2018.

Mesa Air Group will host a conference call with analysts on Friday, May 10 at 1:00pm EDT/10:00am PDT. The conference call number is 888-469-2054 (Passcode: Phoenix). The conference call can also be accessed live via the web by visiting https://edge.media-server.com/m6/p/ndxbvumn. A recorded version will be available on Mesa’s website approximately two hours after the call for approximately 14 days.

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group is the commercial aviation holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 121 cities in 39 states, the District of Columbia, Canada, Mexico, Cuba, and the Bahamas. As of April 30, 2019, Mesa operated a fleet of 145 aircraft with approximately 601 daily departures and 3,400 employees. Mesa operates all of its flights as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements entered into with American Airlines, Inc. and United Airlines, Inc.

Forward-Looking Statements

This news release contains forward looking statements, including, but not limited to, (i) the fleet and block hours forecast of Mesa for the third quarter of fiscal 2019, (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods, and (iii) the Company’s expectations regarding completing the purchase of ten GECAS leased aircraft. These forward-looking statements are based on Mesa’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond Mesa’s control. Any forward-looking statement in this release speaks only as of the date of this release. Mesa undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

MESA AIR GROUP, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) (Unaudited)



Three Months Ended March 31,


Six Months Ended March 31,



2019


2018


2019


2018

Operating revenues:
















Contract revenue

$
169,771


$
156,515


$
340,220


$
310,904

Pass-through and other


7,376



11,125



15,083



21,420

Total operating revenues


177,147



167,640



355,303



332,324


















Operating expenses:
















Flight operations


49,366



54,647



102,611



103,807

Fuel


101



130



222



198

Maintenance


45,380



51,409



85,182



105,756

Aircraft rent


14,110



18,319



28,229



36,582

Aircraft and traffic servicing


1,065



783



1,999



1,744

General and administrative


13,472



10,337



25,686



21,267

Depreciation and amortization


19,276



15,666



37,767



31,598

Total operating expenses


142,770



151,291



281,696



300,952

Operating income


34,377



16,349



73,607



31,372


















Other (expenses) income, net:
















Interest expense


(13,772
)


(13,343
)


(28,614
)


(27,474
)
Interest income


299



10



455



19

Loss on extinguishment of debt


(3,616
)


-



(3,616
)


-

Other income (expense)


47



(36
)


533



(102
)
Total other (expense), net


(17,042
)


(13,369
)


(31,242
)


(27,557
)

















Income before taxes


17,335



2,980



42,365



3,815

Income tax expense (benefit)


4,086



608



10,035



(21,181
)
Net income

$
13,249


$
2,372


$
32,330


$
24,996


















Net income per share attributable to common shareholders
















Basic

$
0.38


$
0.10


$
0.93


$
1.07

Diluted

$
0.38


$
0.10


$
0.92


$
1.06


















Weighted-average common shares outstanding
















Basic


34,699



23,282



34,607



23,279

Diluted


34,962



23,570



35,041



23,530

MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)



March 31, 2019


September 30, 2018

ASSETS
















CURRENT ASSETS:








Cash and cash equivalents

$
77,743


$
103,311

Marketable securities


-



19,921

Restricted cash


3,646



3,823

Receivables - less allowance for doubtful accounts


12,071



14,290

Expendable parts and supplies - less obsolescence allowance


19,229



15,658

Prepaid expenses and other current assets


47,451



40,914

Total current assets


160,140



197,917










PROPERTY AND EQUIPMENT, NET


1,237,615



1,250,829

INTANGIBLES, NET


10,437



11,341

LEASE AND EQUIPMENT DEPOSITS


6,916



2,598

OTHER ASSETS


10,178



9,703

TOTAL

$
1,425,286


$
1,472,388










LIABILITIES AND STOCKHOLDERS’ EQUITY
















CURRENT LIABILITIES:








Current portion of debt and capital leases

$
147,114


$
155,170

Accounts payable


40,527



54,307

Accrued compensation


11,675



12,208

Other accrued expenses


27,344



29,696

Total current liabilities


226,660



251,381










NONCURRENT LIABILITIES:








Long-term debt and capital leases - excluding current portion


696,856



760,177

Deferred credits


14,680



15,393

Deferred income taxes


49,836



39,797

Other noncurrent liabilities


27,969



31,173

Total noncurrent liabilities


789,341



846,540

Total liabilities


1,016,001



1,097,921










STOCKHOLDERS' EQUITY:








Preferred stock of no par value, 5,000,000 shares authorized; no shares issued and outstanding


—



—

Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 27,969,475 (2019) and 23,902,903 (2018) shares issued and outstanding, and 6,780,297 (2019) and 10,614,990 (2018) warrants issued and outstanding


237,171



234,683

Retained earnings


172,114



139,784

Total stockholders' equity


409,285



374,467

TOTAL

$
1,425,286


$
1,472,388

Operating Highlights (unaudited)



Three months ended


Six months ended



March 31


March 31



2019


2018


Change


2019


2018


Change

Available Seat Miles (thousands)


2,654,286



2,313,068



14.8
%


5,363,185



4,621,380



16.1
%
Block Hours


112,030



97,853



14.5
%


227,030



195,559



16.1
%
Departures


59,225



51,679



14.6
%


120,759



107,043



12.8
%
Average Stage Length (miles)


589



588



0.2
%


583



567



2.8
%
Passengers


3,483,947



3,021,514



15.3
%


7,104,062



6,332,521



12.2
%

Mesa Air Group, Inc.

Investor Relations
Brian Gillman
Investor.Relations@mesa-air.com
(602) 685-4010

Media
Jack Hellie
media@mesa-air.com
(602) 685-4393

Company Name:	Mesa Air Group Inc.
Stock Symbol:	MESA
Market:	NASDAQ
Website:	mesa-air.com

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