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.