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

August, 08 2019 04:30 PM Mesa Air Group Inc.

PHOENIX, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported third quarter Fiscal Year 2019 financial and operating results.

Highlights for Third Quarter Fiscal Year 2019 (ending June 30, 2019)

Net Income of $3.0 million or $0.09 per diluted share
Adjusted Net Income¹ of $10.4 million or $0.30 per diluted share
Pre-tax income of $3.9 million compared to ($14.6) million for Q3 FY 2018
Adjusted Pre-tax income¹ of $13.4 million compared to $11.6 million for Q3 FY 2018
Block hours up 10.8% compared to Q3 FY 2018 and 14.3% compared to YTD FY 2018
Contract Revenue up by 6.5% compared to Q3 FY 2018 and 8.4% compared to YTD FY 2018
Purchased and financed 10 CRJ-700 aircraft previously leased from GECAS

Mesa’s Q3 2019 results reflect net income of $3.0 million, or $0.09 per diluted share, compared to net income of ($11.1) million, or ($0.48) per diluted share for Q3 2018. Excluding special items, which includes $9.5 million of non-cash one-time expense related to the termination of ten leased aircraft subsequently purchased, adjusted net income¹ was $10.4 million for Q3 2019, compared to $8.8 million for Q3 2018. Mesa’s Q3 2019 pre-tax income was $3.9 million, compared to ($14.6) million for Q3 2018. Excluding special items, adjusted pre-tax income¹ was $13.4 million for Q3 2019, compared to $11.6 million for Q3 2018. In addition, Mesa’s Adjusted EBITDA¹ for Q3 2019 was $45.9 million, compared to $41.7 million in Q3 2018 and Adjusted EBITDAR¹ was $58.8 million, compared to $59.7 million in Q3 2018.

On June 14, 2019 the company finalized the purchase of 10 CRJ-700 aircraft, previously leased from GECAS, for $70.0 million and financed the entire purchase price of $70.0 million with a four-year term loan.

Mesa operated 114,042 block hours during Q3 2019, an increase of 10.8% from Q3 2018 of 102,939. Operationally, we ran a 99.4% controllable completion factor and a 95.9% total completion factor, which includes weather and other uncontrollable cancellations.

During the quarter, we experienced significant operational challenges in our American operation, with one aircraft unavailable following a ground damage incident and two aircraft unavailable due to extended c-check turn times caused by Bombardier labor shortages. These three aircraft were unavailable for nearly all of Q3, which resulted in us operating with an insufficient number of spare aircraft. These events, combined with an industry-wide avionics failure impacting CRJ-900 aircraft, resulted in us failing to meet the new performance criteria, and American elected to remove two aircraft from the capacity purchase agreement effective November 2, 2019.

“Q3 presented a number of short term operational challenges. Although our operational performance did not meet our expectations, I believe our employees achieved far better results than anticipated given the lack of spare aircraft. We expect by the end of August to have the full fleet available.” said Brad Rich, Executive Vice President and Chief Operating Officer. “During the quarter we implemented a number of initiatives that improved operational performance and, unfortunately, this short-term lack of spare aircraft negated our efforts.”

Mike Lotz, President and Chief Financial Officer continued, “Our Q3 FY 2019 year to date diluted EPS of $1.01 and adjusted diluted EPS¹ of $1.30 compares favorably to Q3 FY 2018 year to date diluted EPS of $0.58 and adjusted diluted EPS¹ of $0.52. The decrease in financial performance for Q3 FY 2019 versus Q2 FY 2019 was primarily driven by the timing of heavy maintenance events, an increase in pilot and pilot training expense based on the expectation that we will require additional pilots going forward as well as an uptick in line maintenance expense. During the quarter we also finalized the purchase and financing of 10 CRJ-700 aircraft, reducing the total number of leased aircraft with third parties to 18.”

“I would like to thank our people for their performance in light of the obstacles we faced. Despite this quarter’s challenges, we believe we remain well positioned to take advantage of future opportunities. For the first three quarters of fiscal year 2019 we increased block hours by 14.3%, contract revenue by $40 million and decreased total operating expense per block hour by 17.7% compared to the same period last year,” stated Jonathan Ornstein, Chairman and Chief Executive Officer. “We continue to make significant investments primarily in pilot training and our maintenance capabilities.”

¹ See Reconciliation of non-GAAP financial measures

Outlook

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

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

FY '18 Q4

FY '19 Q1

FY '19 Q2

FY '19 Q3

FY '19 Q4

Qtr Ended

Sep '18

Dec '18

Mar '19

Jun '19

Sep '19

Fleet Count

Partner

(Actual)

(Forecast)

E-175

United

CRJ-900

American

CRJ-700

United

Total CPA

144

142

Non-CPA

CRJ-900

Unassigned

—

CRJ-200

Unassigned

Total Fleet

145

Production

Block Hours

112,475

115,000

112,030

114,042

116,600

Block Hours per day per Aircraft

8.5

8.7

8.6

8.8

8.9

Non Pass-Through Engine Expense

2.4

2.6

5.6

9.5

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 and nine months ended June 30, 2019 and the three and nine months ended June 30, 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 June 30, 2019



Income Before Taxes


Income Tax (Expense)/Benefit


Net Income


Net Income per Diluted Share

GAAP Income


3,863



(856
)


3,007


$
0.09

FY19 Adjustments (1)


9,540



(2,114
)


7,426





Adjusted Income


13,403



(2,970
)


10,433


$
0.30


















Interest Expense


13,496













Interest Income


(733
)












Depreciation and Amortization


19,761













Adjusted EBITDA


45,927






























Aircraft Rent


12,875













Adjusted EBITDAR


58,802



Three months ended June 30, 2018



Income Before Taxes


Income Tax (Expense)/Benefit


Net Income


Net Income per Diluted Share

GAAP Income/(Loss)


(14,630
)


3,495



(11,135
)

$
(0.48
)
FY18 Adjustments (2)(3)


26,193



(6,257
)


19,936





Adjusted Income


11,563



(2,762
)


8,801


$
0.37


















Interest Expense


14,118













Interest Income


(11
)












Depreciation and Amortization


16,013













Adjusted EBITDA


41,683






























Aircraft Rent


17,975













Adjusted EBITDAR


59,658

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



Nine months ended June 30, 2019




















Income Before Taxes


Income Tax (Expense)/Benefit


Net income


Net Income per Diluted Share

GAAP Income


46,228



(10,891
)


35,337


$
1.01

FY19 Adjustments (1)(4)


13,156



(2,915
)


10,240





Adjusted Income


59,384



(13,805
)


45,577


$
1.30


















Interest Expense


42,110













Interest Income


(1,188
)












Depreciation and Amortization


57,528













Adjusted EBITDA


157,834






























Aircraft Rent


41,104













Adjusted EBITDAR


198,938



Nine months ended June 30, 2018




















Income Before Taxes


Income Tax (Expense)/Benefit


Net income


Net Income per Diluted Share

GAAP Income/(Loss)


(10,815
)


24,676



13,861


$
0.58

FY18 Adjustments (2)(3)(5)(6)


27,165



(28,640
)


(1,475
)




Adjusted Income


16,350



(3,964
)


12,386


$
0.52


















Interest Expense


41,592













Interest Income


(30
)












Depreciation and Amortization


47,611













Adjusted EBITDA


105,523






























Aircraft Rent


54,557













Adjusted EBITDAR


160,080

Adjustments:

1) Includes lease termination expense of $9.5 million related to the acquisition of ten CRJ-700 aircraft previously leased during the three months ended June 30, 2019

2) Includes lease termination expense of $15.1 million related to the acquisition of nine CRJ-900 aircraft previously leased during the three months ended June 30, 2018

3) Includes an adjustment of $11.1 million in General and Administrative expense related to an increase in accrued compensation as a result of the increase in the fair value of the Company’s common stock during the three months ended June 30, 2018

4) Includes adjustment for loss on extinguishment of debt of $3.6 million related to repayment of the Company’s Spare Engine Facility during the nine months ended June 30, 2019

5) Includes adjustment for $1.0 million of financing fees written off during the nine months ended June 30, 2018

6) 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, August 9 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 138 cities in 42 states, the District of Columbia, Canada, Mexico, Cuba, and the Bahamas. As of July 31, 2019, Mesa operated a fleet of 145 aircraft with approximately 761 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 fourth quarter of fiscal 2019 and (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods. 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 June 30,


Nine Months Ended June 30,



2019


2018


2019


2018

Operating revenues:
















Contract revenue

$
170,366


$
159,916


$
510,586


$
470,820

Pass-through and other


9,858



11,823



24,941



33,243

Total operating revenues


180,224



171,739



535,527



504,063


















Operating expenses:
















Flight operations


53,025



51,795



155,636



155,602

Fuel


211



151



433



349

Maintenance


54,322



48,290



139,504



154,046

Aircraft rent


12,875



17,975



41,104



54,557

Aircraft and traffic servicing


978



848



2,977



2,592

General and administrative


12,435



22,066



38,121



43,333

Depreciation and amortization


19,761



16,013



57,528



47,611

Lease termination


9,540



15,109



9,540



15,109

Total operating expenses


163,147



172,247



444,843



473,199

Operating income (loss)


17,077



(508
)


90,684



30,864


















Other (expenses) income, net:
















Interest expense


(13,496
)


(14,118
)


(42,110
)


(41,592
)
Interest income


733



11



1,188



30

Loss on extinguishment of debt


—



—



(3,616
)


—

Other income (expense)


(451
)


(15
)


82



(117
)
Total other (expense), net


(13,214
)


(14,122
)


(44,456
)


(41,679
)

















Income (loss) before taxes


3,863



(14,630
)


46,228



(10,815
)
Income tax expense (benefit)


856



(3,495
)


10,891



(24,676
)
Net income (loss)

$
3,007


$
(11,135
)

$
35,337


$
13,861


















Net income (loss) per share attributable to common shareholders
















Basic

$
0.09


$
(0.48
)

$
1.02


$
0.59

Diluted

$
0.09


$
(0.48
)

$
1.01


$
0.58


















Weighted-average common shares outstanding
















Basic


34,835



23,336



34,683



23,298

Diluted


35,112



23,336



35,051



23,772

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



June 30, 2019


September 30, 2018

ASSETS

















CURRENT ASSETS:








Cash and cash equivalents

$
79,909


$
103,311

Marketable securities


—



19,921

Restricted cash


3,647



3,823

Receivables - less allowance for doubtful accounts


7,902



14,290

Expendable parts and supplies - less obsolescence allowance


20,268



15,658

Prepaid expenses and other current assets


46,425



40,914

Total current assets


158,151



197,917










PROPERTY AND EQUIPMENT, NET


1,286,022



1,250,829

INTANGIBLES, NET


9,984



11,341

LEASE AND EQUIPMENT DEPOSITS


1,977



2,598

OTHER ASSETS


9,849



9,703

TOTAL


1,465,983



1,472,388










LIABILITIES AND STOCKHOLDERS’ EQUITY
















CURRENT LIABILITIES:








Current portion of debt and capital leases

$
163,623


$
155,170

Accounts payable


33,585



54,307

Accrued compensation


14,492



12,208

Other accrued expenses


34,152



29,696

Total current liabilities


245,852



251,381










NONCURRENT LIABILITIES:








Long-term debt and capital leases - excluding current portion


717,546



760,177

Deferred credits


13,401



15,393

Deferred income taxes


50,695



39,797

Other noncurrent liabilities


25,755



31,173

Total noncurrent liabilities


807,397



846,540

Total liabilities


1,053,249



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


237,613



234,683

Retained earnings


175,121



139,784

Total stockholders' equity


412,734



374,467

TOTAL

$
1,465,983


$
1,472,388

Operating Highlights (unaudited)



Three months ended


Nine months ended



June 30


June 30



2019


2018


Change


2019


2018


Change

Available Seat Miles (thousands)


2,724,961



2,440,278



11.7%



8,088,146



7,061,658



14.5%

Block Hours


114,042



102,939



10.8%



341,071



298,498



14.3%

Departures


61,798



57,782



7.0%



182,557



164,825



10.8%

Average Stage Length (miles)


580



555



4.5%



582



563



3.2%

Passengers


3,770,683



3,490,710



8.0%



10,874,745



9,823,231



10.7%

Source: Mesa Air Group, Inc.

Mesa Air Group, Inc.
Investor Relations
Brian Gillman
Investor.Relations@mesa-air.com
(602) 685-4010

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

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