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CST: 22/08/2019 18:27:46   

Mesa Air Group Announces Third Quarter Fiscal Year 2019 Results

14 Days ago

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

 

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