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				Qtr Ended				Qtr Ended				Qtr Ended				Qtr Ended
			Sep '18				Dec '18				Mar '19				Jun '19				Sep '19
Fleet Count	Partner		(Actual)				(Actual)				(Actual)				(Actual)				(Forecast)
E-175	United			60				60				60				60				60
CRJ-900	American			64				64				64				62				62
CRJ-700	United			20				20				20				20				20
Total CPA				144				144				144				142				142
Non-CPA
CRJ-900	Unassigned			—				—				—				2				2
CRJ-200	Unassigned			1				1				1				1				1
Total Fleet				145				145				145				145				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

 

Source: Mesa Air Group, Inc.