SEC Filing | Mesa Air Group

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mesa-10q_20220331.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 March 31, 2022

☐	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 April 28, 2022, the registrant had 36,131,745 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 (Loss)	3

Condensed Consolidated Statements of Stockholders' Equity	4

Condensed Consolidated Statements of Cash Flows	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3. Quantitative and Qualitative Disclosures About Market Risk	35

Item 4. Controls and Procedures	36

PART II – OTHER INFORMATION	37

Item 1. Legal Proceedings	37

Item 1A. Risk Factors	37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3. Defaults Upon Senior Securities	37

Item 4. Mine Safety Disclosures	37

Item 5. Other Information	37

Item 6. Exhibits	37

SIGNATURES	39

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 (the “Exchange Act”). 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 Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 filed with the Securities and Exchange Commission on December 10, 2021. 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;

▪

failure to meet certain operational performance targets in our capacity purchase and flight services agreements, which could result in termination of those 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)

	March 31,		September 30,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	75,896	$	120,517
Restricted cash		3,351		3,350
Receivables, net		6,849		3,167
Expendable parts and supplies, net		26,255		24,467
Prepaid expenses and other current assets		7,608		6,885
Total current assets		119,959		158,386

Property and equipment, net		1,064,349		1,151,891
Intangible assets, net		6,281		6,792
Lease and equipment deposits		8,371		6,808
Operating lease right-of-use assets		79,706		93,100
Deferred heavy maintenance, net		5,289		3,499
Assets held for sale		36,528		—
Other assets		32,873		36,121
Total assets	$	1,353,356	$	1,456,597

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance leases	$	111,671	$	111,710
Current portion of deferred revenue		2,675		6,298
Current maturities of operating leases		16,601		32,652
Accounts payable		76,733		61,476
Accrued compensation		10,285		12,399
Other accrued expenses		31,406		33,657
Total current liabilities		249,371		258,192
Noncurrent liabilities:
Long-term debt and finance leases, excluding current portion		521,457		539,700
Noncurrent operating lease liabilities		29,936		33,991
Deferred credits		3,508		3,934
Deferred income taxes		53,281		69,940
Deferred revenue, net of current portion		26,868		28,202
Other noncurrent liabilities		36,394		34,591
Total noncurrent liabilities		671,444		710,358
Total liabilities		920,815		968,550
Commitments and contingencies (Note 16)
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; 36,126,724 (2022) and 35,958,759 (2021) shares issued and outstanding, 4,899,497 (2022) and 4,899,497 (2021) warrants issued and outstanding		257,923		256,372
Retained earnings		174,618		231,675
Total stockholders' equity		432,541		488,047
Total liabilities and stockholders' equity	$	1,353,356	$	1,456,597

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

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

	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
Operating revenues:
Contract revenue	$	111,988		$	81,712		$	248,882		$	208,870
Pass-through and other revenue		11,225			15,568			22,088			38,781
Total operating revenues		123,213			97,280			270,970			247,651

Operating expenses:
Flight operations		42,410			37,403			90,008			74,367
Maintenance		47,357			51,773			106,338			104,637
Aircraft rent		9,434			9,992			19,020			20,040
General and administrative		7,860			11,164			20,438			24,237
Depreciation and amortization		20,747			20,705			41,775			41,175
Lease termination		—			4,508			—			4,508
Impairment of assets held for sale		39,475			—			39,475			—
Other operating expenses		685			941			2,657			2,232
Government grant recognition		—			(55,967	)		—			(67,278	)
Total operating expenses		167,968			80,519			319,711			203,918
Operating income (loss)		(44,755	)		16,761			(48,741	)		43,733
Other income (expense), net:
Interest expense		(8,120	)		(8,755	)		(16,050	)		(17,837	)
Interest income		42			79			93			205
Loss on investments, net		(2,261	)		—			(8,723	)		—
Other income (expense), net		(71	)		(506	)		(130	)		417
Total other expense, net		(10,410	)		(9,182	)		(24,810	)		(17,215	)
Income (loss) before taxes		(55,165	)		7,579			(73,551	)		26,518
Income tax expense (benefit)		(12,382	)		1,890			(16,494	)		6,711
Net income (loss) and comprehensive income (loss)	$	(42,783	)	$	5,689		$	(57,057	)	$	19,807
Net income (loss) per share attributable to
common shareholders
Basic	$	(1.19	)	$	0.16		$	(1.58	)	$	0.56
Diluted	$	(1.19	)	$	0.14		$	(1.58	)	$	0.52
Weighted-average common shares outstanding
Basic		36,048			35,628			36,005			35,579
Diluted		36,048			39,432			36,005			38,382

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)

	Six Months Ended March 31, 2021
						Common
						Stock and
						Additional
	Number of			Number of		Paid-In			Retained
	Shares			Warrants		Capital			Earnings		Total
Balance at September 30, 2020		35,526,918			—	$	242,772		$	215,087	$	457,859

Stock compensation expense		—			—		850			—		850
Repurchased shares		(2,256	)		—		(19	)		—		(19	)
Restricted shares issued		7,500			—		—			—		—
Issuance of warrants, net of issuance costs		—			4,899,497		11,489			—		11,489
Net income		—			—		—			14,118		14,118
Balance at December 31, 2020		35,532,162			4,899,497	$	255,092		$	229,205	$	484,297

Stock compensation expense		—			—		808			—		808
Repurchased shares		(14,680	)		—		(157	)		—		(157	)
Restricted shares issued		124,609			—		—			—		—
Employee share purchases		58,070			—		207			—		207
Net income		—			—		—			5,689		5,689
Balance at March 31, 2021		35,700,161			4,899,497	$	255,950		$	234,894	$	490,844

	Six Months Ended March 31, 2022
						Common
						Stock and
						Additional
	Number of			Number of		Paid-In			Retained
	Shares			Warrants		Capital			Earnings			Total
Balance at September 30, 2021		35,958,759			4,899,497	$	256,372		$	231,675		$	488,047

Stock compensation expense		—			—		716			—			716
Repurchased shares		(2,275	)		—		(15	)		—			(15	)
Restricted shares issued		7,500			—		—			—			—
Net loss		—			—		—			(14,274	)		(14,274	)
Balance at December 31, 2021		35,963,984			4,899,497	$	257,073		$	217,401		$	474,474

Stock compensation expense		—			—		671			—			671
Repurchased shares		(13,421	)		—		(60	)		—			(60	)
Restricted shares issued		122,594			—		—			—			—
Employee share purchases		53,567			—		239			—			239
Net loss		—			—		—			(42,783	)		(42,783	)
Balance at March 31, 2022		36,126,724			4,899,497	$	257,923		$	174,618		$	432,541

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	Six Months Ended March 31,
	2022	2021
Cash flows from operating activities: