SEC Filing | Mesa Air Group

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mesa-10q_20210630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-38626

MESA AIR GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada		85-0302351
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

410 North 44th Street, Suite 700 Phoenix, Arizona 85008		85008
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (602) 685-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value		MESA		Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2021, the registrant had 35,891,029 shares of common stock, no par value per share, issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements	2

Condensed Consolidated Balance Sheets	2

Condensed Consolidated Statements of Operations and Comprehensive Income	3

Condensed Consolidated Statements of Stockholders' Equity	4

Condensed Consolidated Statements of Cash Flows	6

Notes to Condensed Consolidated Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3. Quantitative and Qualitative Disclosures About Market Risk	37

Item 4. Controls and Procedures	38

PART II – OTHER INFORMATION	40

Item 1. Legal Proceedings	40

Item 1A. Risk Factors	40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3. Defaults Upon Senior Securities	40

Item 4. Mine Safety Disclosures	40

Item 5. Other Information	40

Item 6. Exhibits	40

SIGNATURES	42

Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects", "intends," "plans," "predicts," "will," "would," “should,” "could," "can," "may," and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 under the heading "Risk Factors." Unless otherwise stated, references to particular years, quarters, months, or periods refer to our fiscal years ended September 30 and the associated quarters, months, and periods of those fiscal years. Each of the terms the "Company," "Mesa Airlines," "Mesa," "we," "us" and "our" as used herein refers collectively to Mesa Air Group, Inc. and its wholly owned subsidiaries, unless otherwise stated. We do not assume any obligation to revise or update any forward-looking statements.

The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

▪

public health epidemics or pandemics such as COVID-19;

▪

the severity, magnitude, and duration of the COVID-19 pandemic, including impacts of the pandemic and of business’ and governments’ responses to the pandemic on our operations and personnel, and on demand for air travel;

▪

the supply and retention of qualified airline pilots and mechanics;

▪

the volatility of pilot and mechanic attrition;

▪

dependence on, and changes to, or non-renewal of, our capacity purchase and flight services agreements;

▪

increases in our labor costs;

▪

reduced utilization (the percentage derived from dividing (i) the number of block hours actually flown during a given month under a particular capacity purchase agreement by (ii) the maximum number of block hours that could be flown during such month under the particular capacity purchase agreement) under our capacity purchase agreements;

▪

the direct operation of regional jets by our major partners;

▪

the financial strength of our major partners and their ability to successfully manage their businesses through the unprecedented decline in air travel attributable to the COVID-19 pandemic or any other public health epidemic;

▪

limitations on our ability to expand regional flying within the flight systems of our major partners' and those of other major airlines;

▪

our significant amount of debt and other contractual obligations;

▪

our compliance with ongoing financial covenants under our credit facilities; and

▪

our ability to keep costs low and execute our growth strategies.

Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports we have filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

Part I – Financial Information

Item 1. Financial Statements

MESA AIR GROUP, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts) (Unaudited)

	June 30,		September 30,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	180,398	$	99,395
Restricted cash		3,352		3,446
Receivables, net		4,947		13,712
Expendable parts and supplies, net		24,707		22,971
Prepaid expenses and other current assets		8,956		16,067
Total current assets		222,360		155,591

Property and equipment, net		1,164,193		1,212,415
Intangible assets, net		7,102		8,032
Lease and equipment deposits		8,149		1,899
Operating lease right-of-use assets		97,894		123,251
Other assets		25,315		742
Total assets	$	1,525,013	$	1,501,930

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance leases	$	107,728	$	189,268
Current portion of deferred revenue		6,486		9,389
Current maturities of operating leases		37,058		43,932
Accounts payable		52,835		53,229
Accrued compensation		12,432		12,030
Other accrued expenses		59,452		45,478
Total current liabilities		275,991		353,326
Noncurrent liabilities:
Long-term debt and finance leases, excluding current portion		585,761		542,456
Noncurrent operating lease liabilities		35,007		62,531
Deferred credits		4,147		5,705
Deferred income taxes		72,305		64,275
Deferred revenue, net of current portion		29,265		14,369
Other noncurrent liabilities		27,870		1,409
Total noncurrent liabilities		754,355		690,745
Total liabilities		1,030,346		1,044,071
Commitments and contingencies (Note 14)
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; 35,891,029 (2021) and 35,526,918 (2020) shares issued and outstanding, 4,899,497 (2021) and 0 (2020) warrants issued and outstanding		255,497		242,772
Retained earnings		239,170		215,087
Total stockholders' equity		494,667		457,859
Total liabilities and stockholders' equity	$	1,525,013	$	1,501,930

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(In thousands, except per share amounts) (Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2021			2020			2021			2020
Operating revenues:
Contract revenue	$	109,654		$	71,648		$	318,524		$	409,228
Pass-through and other revenue		15,503			1,451			54,284			27,802
Total operating revenues		125,157			73,099			372,808			437,030

Operating expenses:
Flight operations		41,314			29,664			115,681			135,199
Fuel		234			146			822			504
Maintenance		51,986			22,591			156,623			145,021
Aircraft rent		9,648			15,582			29,688			39,196
Aircraft and traffic servicing		682			538			2,326			2,938
General and administrative		12,087			11,737			36,324			39,233
Depreciation and amortization		20,933			20,635			62,108			61,656
Lease termination		—			—			4,508			—
Government grant recognition		(26,101	)		(43,018	)		(93,379	)		(43,018	)
Total operating expenses		110,783			57,875			314,701			380,729
Operating income		14,374			15,224			58,107			56,301
Other (expense) income, net:
Interest expense		(8,627	)		(10,368	)		(26,464	)		(34,668	)
Interest income		82			1			287			95
Other (expense) income, net		(28	)		79			389			720
Total other (expense), net		(8,573	)		(10,288	)		(25,788	)		(33,853	)
Income before taxes		5,801			4,936			32,319			22,448
Income tax expense		1,525			1,517			8,236			6,359
Net income and comprehensive income	$	4,276		$	3,419		$	24,083		$	16,089
Net income per share attributable to
common shareholders
Basic	$	0.12		$	0.10		$	0.68		$	0.46
Diluted	$	0.11		$	0.10		$	0.62		$	0.46
Weighted-average common shares outstanding
Basic		35,769			35,299			35,642			35,154
Diluted		39,513			35,299			38,811			35,248

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands, except share amounts) (Unaudited)

	Nine Months Ended June 30, 2020
							Common
							Stock and
							Additional
	Number of			Number of			Paid-In			Retained
	Shares			Warrants			Capital			Earnings		Total
Balance at September 30, 2019		31,413,287			3,600,953		$	238,504		$	187,364	$	425,868

Adoption of ASU 2018-09 Stock compensation- income taxes		—			—			—			259		259
Stock compensation expense		—			—			1,320			—		1,320
Repurchased shares and warrants		(5,558	)		—			(41	)		—		(41	)
Warrants converted to common stock		1,612,481			(1,612,481	)		—			—		—
Restricted shares issued		18,916			—			—			—		—
Net income		—			—			—			10,785		10,785
Balance at December 31, 2019		33,039,126			1,988,472		$	239,783		$	198,408	$	438,191

Stock compensation expense		—			—			1,193			—		1,193
Repurchased shares and warrants		(18,244	)		—			(160	)		—		(160	)
Warrants converted to common stock		1,988,472			(1,988,472	)		—			—		—
Restricted shares issued		141,614			—			—			—		—
Employee share purchases		43,934			—			243			—		243
Net income		—			—			—			1,885		1,885
Balance at March 31, 2020		35,194,902			—		$	241,059		$	200,293	$	441,352

Stock compensation expense		—			—			1,020			—		1,020
Repurchased shares and warrants		(88,785	)		—			(297	)		—		(297	)
Restricted shares issued		308,167			—			—			—		—
Net income		—			—			—			3,419		3,419
Balance at June 30, 2020		35,414,284			—		$	241,782		$	203,712	$	445,494

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands, except share amounts) (Unaudited)

Nine Months Ended June 30, 2021

Common

Stock and

Additional

Number of

Paid-In

Retained

Warrants

Capital

Earnings

Total

Balance at September 30, 2020

35,526,918

—

242,772

215,087

457,859