PHOENIX--(BUSINESS WIRE)--Aug. 27, 2018-- Mesa Air Group, Inc. (NASDAQ: MESA) today reported third quarter Fiscal Year 2018 financial results.

Highlights for Third Quarter (ending June 30, 2018)

Mesa’s third quarter results reflect a GAAP loss before taxes of ($14.6) million, which includes $26.2 million of non-cash one-time expenses* related to the termination of nine leased aircraft, subsequently purchased, and the revaluation of the Company’s common stock in connection with filing the S-1** registration statement associated with the recent IPO. Excluding these two items, Mesa earned $11.6 million pre-tax*. The range set forth in the Company’s S-1 was $10.2 million to $11.2 million. In addition, Adjusted EBITDA* was $41.7 million compared to the range set forth in the S-1 of $40.3 million to $41.3 million. Similarly, Adjusted EBITDAR* was $59.7 million compared to the range of $58.2 to $59.2 million.

During the third fiscal quarter Mesa refinanced six CRJ-900 aircraft with $27.5 million of debt resulting in net proceeds of $10.4 million after transaction related fees. The Company also purchased nine previously leased CRJ-900 aircraft for $76.5 million. Mesa financed the purchase with $69.6 million of new debt and proceeds from the refinancing. As stated in the S-1, these transactions are expected to increase pre-tax earnings by approximately $4.5 million per year.

During the third quarter Mesa added 101 pilots allowing the Company to operate 102,939 block hours, an increase of 5.2% from the second quarter of 97,853 and up 5.4% from the first quarter of 97,705.

“We are delighted to return Mesa to the public market and welcome our newest shareholders to the company,” said Jonathan Ornstein, Chairman and Chief Executive Officer of Mesa Air Group. “We would also like to thank our pre-IPO shareholders, airline partners, stakeholders, and employees for their support over the last seven years while we operated as a private company.”

“There were a number of positive developments in the quarter, most notably the progress we have made increasing the utilization of our aircraft through a combination of strong hiring and declining attrition among our pilots, reduced training backlog, and improved utilization of existing resources,” stated Ornstein. “We appreciate the hard work and dedication of all of our employees for their very important and meaningful contribution to our improving operational capabilities.”

Mike Lotz, President and Chief Financial Officer continued, “On August 14, 2018, we successfully completed our IPO which raised approximately $104 million and subsequently paid down $25.6 million outstanding on our revolving credit facility, reducing annual interest expense by $1.2 million per year. We are currently negotiating the purchase of ten additional currently leased aircraft and hope to complete the transaction by the end of our fiscal year. In addition, we have entered negotiations to refinance our high-cost debt primarily associated with spare engine purchases by the end of the calendar year. This is expected to result in a further reduction of interest expense going forward,” said Lotz.

* See Reconciliation of non-GAAP financial measures

** The Company filed a Form S-1 Registration Statement (File no. 333-226173) in connection with its IPO, which was declared effective by the Securities and Exchange Commission on August 9, 2018.This filing included a low and high range of preliminary third quarter financial results.

Outlook

The Company is providing the following guidance for the fourth quarter of FY 2018:

Fleet, Block Hours, Engine Expense - Actual and Forecast for Q4 FY 2018
				FY '18 Q1				FY '18 Q2				FY '18 Q3						FY '18 Q4
				Qtr Ended				Qtr Ended				Qtr Ended						Qtr Ended
				Dec '17				Mar '18				Jun '18						Sep '18
Fleet Count				(Actual)				(Actual)				(Actual)						(Forecast)
E-175				56				58				58						60
CRJ-900				64				64				64						64
CRJ-700				20				20				20						20
CRJ-200				1				1				1						1
Total				141				143				143						145
Production
Block Hours				97,705				97,853				102,939						112,000
Block Hours per day per Aircraft				7.6				7.7				8.0						8.5
Non Pass-Through Engine Expense				$17.2				$10.8				$8.5						$3.0

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 table below reflects supplemental financial data and reconciliations to GAAP financial statements for the three months 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, 2018
									Income Tax										Net Income						Net Income per
				(Loss) Income					Expense					Net					per Diluted						Pro Forma Diluted
				Before Taxes					(Benefit)					Income					Share						IPO Shares
GAAP Income				(14,630	)				(3,495	)				(11,135	)				$	(0.89	)				$	(0.49	)
Q3 FY18 Adjustments (1)				26,193					7,934					18,259					$	0.76					$	0.53
Non-GAAP Income				11,563					4,439					7,124					$	0.30					$	0.21
Interest Expense				14,118
Depreciation and Amortization				16,013
Adjusted EBITDA				41,694
Aircraft Rent				17,975
Adjusted EBITDAR				59,669
Weighted-average Shares Outstanding
									Three months ended June 30, 2018
									Basic					Diluted
GAAP weighted-average common shares outstanding									12,462					12,462
Non-GAAP weighted-average common shares outstanding (2)									12,462					24,041
Non-GAAP weighted-average common shares outstanding including pro forma shares issued upon IPO (3)									22,744					34,323

Third fiscal quarter special items:

					1)			Includes one-time non-GAAP adjustments 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 due to the S-1 filing and $15.1 million related to the acquisition of nine CRJ-900 aircraft previously leased
					2)			Weighted-average diluted shares outstanding adjusted for anti-dilutive effect
					3)			Weighted-average pro forma shares outstanding including the impact of 9,630,000 shares issued upon IPO and 651,824 net shares issued under the Company’s 2018 Equity Incentive Plan upon IPO

Mesa Air Group will host a conference call with analysts on Tuesday, August 28 at 11:15am EST/8:15am PST. The conference call number is 888-989-9719 (Passcode: Phoenix). The conference call can also be accessed live via the web by visiting https://edge.media-server.com/m6/p/wkyrq2n9. 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 is a regional air carrier providing scheduled passenger service to 115 cities in 38 states, the District of Columbia, Canada, Mexico, Cuba and The Bahamas. As of June 30, 2018, Mesa operated a fleet of 145 aircraft with approximately 600 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 2018, (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods, (iii) the expectation that refinancing of six CRJ-900 aircraft and the purchase of nine leased CRJ-900 aircraft is expected to increase pre-tax earnings in future periods, (iv) the Company’s expectations regarding completing the purchase of ten additional GECAS leased aircraft by the end of fiscal 2018, and (v) the refinancing of high-cost debt associated with spare engines by the end of fiscal 2018 and the impact thereof on the Company’s future interest expense.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,
				2018						2017						2018						2017
Operating revenues:
Contract revenue				$	159,916					$	157,410					$	470,820					$	467,121
Pass-through and other					11,823						9,542						33,243						19,161
Total operating revenues					171,739						166,952						504,063						486,282
Operating expenses:
Flight operations					51,795						37,953						155,602						110,302
Fuel					151						214						349						614
Maintenance					48,290						46,817						154,046						164,239
Aircraft rent					17,975						18,274						54,557						54,334
Aircraft and traffic servicing					848						1,178						2,592						2,758
General and administrative					22,066						10,534						43,333						31,210
Depreciation and amortization					16,013						15,620						47,611						45,220
Lease termination					15,109						-						15,109						-
Total operating expenses					172,247						130,590						473,199						408,677
Operating (loss) income					(508	)					36,362						30,864						77,605
Other (expenses) income, net:
Interest expense					(14,118	)					(11,819	)					(41,592	)					(33,659	)
Interest income					11						8						30						23
Other expense					(15	)					(53	)					(117	)					(447	)
Total other (expense), net					(14,122	)					(11,864	)					(41,679	)					(34,083	)
(Loss) income before taxes					(14,630	)					24,498						(10,815	)					43,522
Income tax (benefit) expense					(3,495	)					9,065						(24,676	)					16,175
Net (loss) income				$	(11,135	)				$	15,433					$	13,861					$	27,347
Net (loss) income per share attributable to common shareholders
Basic				$	(0.89	)				$	1.40					$	1.18					$	2.52
Diluted				$	(0.89	)				$	0.66					$	0.58					$	1.18
Weighted-average common shares outstanding
Basic					12,462						10,993						11,782						10,852
Diluted					12,462						23,223						24,052						23,242

MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)
									June 30,							September 30,
									2018							2017
ASSETS
Current assets:
Cash and cash equivalents									$	41,731						$	56,788
Restricted cash										3,823							3,559
Receivables, net										21,596							8,853
Expendable parts and supplies, net										15,716							15,114
Prepaid expenses and other current assets										39,502							61,525
Total current assets										122,368							145,839
Property and equipment, net										1,239,548							1,192,448
Intangibles, net										11,437							11,724
Lease and equipment deposits										4,618							1,945
Other assets										11,611							5,693
Total assets									$	1,389,582						$	1,357,649
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt									$	149,936						$	140,466
Accounts payable										44,654							44,738
Accrued compensation										23,638							9,080
Other accrued expenses										28,649							23,929
Total current liabilities										246,877							218,213
Long-term debt, excluding current portion										828,487							803,874
Deferred credits										14,657							17,189
Deferred income taxes										33,632							56,436
Other noncurrent liabilities										33,306							39,713
Total noncurrent liabilities										910,082							917,212
Total liabilities										1,156,959							1,135,425
Commitments and contingencies (Note 13 and Note 14)
Stockholders' equity:
Common stock										112,732							114,456
Retained earnings										119,891							107,768
Total stockholders' equity										232,623							222,224
Total liabilities and stockholders' equity									$	1,389,582						$	1,357,649

Operating Highlights (unaudited)
						Three months ended June 30
						2018						2017						Change
Available Seat Miles - ASMs (thousands)						2,440,276						2,384,960						2.3	%
Block Hours						102,939						100,671						2.3	%
Departures						57,782						57,054						1.3	%
Average Stage Length (miles)						555						550						0.9	%
Passengers						3,490,710						3,364,121						3.8	%

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Source: Mesa Air Group, Inc.

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