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Mesa Air Group Inc.$3.69$.133.65%

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 Mesa Air Group Announces Fourth Quarter and Fiscal Year 2018 Results
   Monday, December 03, 2018 6:40:00 PM ET

PHOENIX, Dec. 03, 2018 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported fourth quarter and Fiscal Year 2018 financial and operating results.

Highlights for Fourth Quarter and Fiscal Year 2018 (ending September 30, 2018)

Mesa’s Q4 2018 results reflect net income of $19.4 million, or $0.65 per diluted share, compared to net income of $5.5 million, or $0.23 per diluted share for Q4 2017.  Mesa’s Q4 2018 income before taxes was $26.6 million, compared to $10.2 million for Q4 2017.  In addition, Mesa’s EBITDA1 for Q4 2018 was $59.3 million, compared to $38.5 million in Q4 2017 and EBITDAR1 was $73.6 million, compared to $56.7 million in Q4 2017.

Mesa reported net income of $33.3 million, or $1.32 per diluted share for the 2018 fiscal year, compared to net income of $32.8 million, or $1.40 per diluted share for the 2017 fiscal year. Excluding special items for both periods adjusted net income1 was $31.0 million for the 2018 fiscal year compared to $32.8 million for the 2017 fiscal year. Mesa reported income before taxes of $15.8 million for the 2018 fiscal year compared to $53.7 million in the 2017 fiscal year. Excluding special items for both periods adjusted income before taxes1 was $42.0 million compared to $53.7 million in the 2017 fiscal year. In addition, Adjusted EBITDA1 was $163.8 million, compared to $160.8 million in the 2017 fiscal year.  Similarly, Adjusted EBITDAR1 was $232.7 million, compared to $233.4 million in the 2017 fiscal year.

Mesa operated 112,475 block hours during the fourth quarter, an increase of 9.3% from Q3 2018 of 102,939 and an increase of 14.9% from Q2 2018 of 97,853.

“In spite of industry challenges, there were a number of positive developments in the quarter, most notably the progress we have made increasing the utilization of our aircraft through a combination of strong hiring and declining attrition among our pilots, reduced training backlog, and improved utilization of existing resources,” stated Jonathan Ornstein, Chairman and Chief Executive Officer of Mesa Air Group. “We appreciate the hard work and dedication of all of our employees for their very important and meaningful contribution to our improving operational capabilities.”

Mike Lotz, President and Chief Financial Officer continued, “On August 14, 2018, we successfully completed our IPO. Including the partial exercise of the underwriters’ option to purchase additional shares, we raised approximately $112 million and subsequently paid down $25.6 million outstanding on our revolving credit facility, reducing annual interest expense by $1.2 million per year. We are currently negotiating the purchase of ten additional aircraft currently on lease to us and hope to complete the transaction by the end of March 2019. In addition, we are finalizing negotiations to refinance our high-cost debt primarily associated with spare engine purchases by the end of this year. This is expected to result in a further reduction of interest expense going forward,” said Lotz.

__________
1 See Reconciliation of non-GAAP financial measures

Outlook

The Company is providing the following guidance for the fourth quarter of FY 2018:

Fleet, Block Hours, Engine Expense - Actual and Forecast for Q1 FY 2019

 FY '18 Q2 FY '18 Q3 FY '18 Q4 FY '19 Q1
 Qtr Ended Qtr Ended Qtr Ended Qtr Ended
 Mar '18 Jun '18 Sep '18 Dec '18
Fleet Count(Actual) (Actual) (Actual) (Forecast)
E-175 58  58  60  60
CRJ-900 64  64  64  64
CRJ-700 20  20  20  20
CRJ-200 1  1  1  1
Total 143  143  145  145
        
Production       
Block Hours 97,853  102,939  112,475  114,650
Block Hours per day per Aircraft 7.7  8.0  8.5  8.7
        
        
Non Pass-Through Engine Expense$10.8 $8.5 $2.4 $8.5
        

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 table below reflects supplemental financial data and reconciliations to GAAP financial statements for the three months and twelve months ended September 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 September 30, 2018
       Net Income
 Income  Income Tax Net per Diluted
 Before Taxes  Expense Income Share
Income26,646  7,251 19,395 $0.65
        
Interest Expense15,274       
Interest Income(85)      
Depreciation and Amortization17,420       
EBITDA59,255       
        
Aircraft Rent14,334       
EBITDAR73,589       
        
Weighted-average Shares Outstanding  
        
   Three months ended
September 30, 2018
  
   Basic Diluted  
GAAP weighted-average common shares outstanding2 18,663 29,675  
       

 

__________
2 As of 9/30/18 we had 23,902,903 common shares and 10,614,990 warrants outstanding for total diluted shares outstanding of 34,517,893.

 Twelve months ended September 30, 2018
 Income
Before Taxes
  Income Tax
Expense
(Benefit)
  Net
Income
  Net Income
per Diluted
Share

 
Income15,829  (17,426) 33,255  $1.32 
        
FY18 Adjustments (1) (2)26,193  28,455  (2,262) $(0.09)
        
Non-GAAP Income42,022  11,029  30,994  $1.23 
        
Interest Expense56,867       
Interest Income(114)      
Depreciation and Amortization65,031       
Adjusted EBITDA163,806       
        
Aircraft Rent68,892       
Adjusted EBITDAR232,698       
        
        
Weighted-average Shares Outstanding  
        
   Twelve months ended September 30, 2018  
   Basic Diluted  
GAAP weighted-average common shares outstanding2  13,516 25,171  
        

2018 fiscal year special items:

  1. Includes one-time non-cash adjustments 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 at the S-1 filing date and $15.1 million related to the acquisition of nine CRJ-900 aircraft previously leased in Lease termination expense.

  2. 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. Consequently, we have recorded a decrease related to our net deferred tax liabilities of $22.0 million.  The Company has also estimated an increase to its valuation allowance of $0.5 million due to the rate change.  We have recorded a corresponding net adjustment to deferred income tax benefit of $21.5 million for the period ending September 30, 2018

Mesa Air Group will host a conference call with analysts on Tuesday, December 4 at 11:00am EST/9:00am MST. The conference call number is 888-323-9808 (Passcode: Phoenix). The conference call can also be accessed live via the web by visiting https://edge.media-server.com/m6/p/3y279bbm . 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 is a regional air carrier providing scheduled passenger service to 121 cities in 39 states, the District of Columbia, Canada, Mexico, Cuba and The Bahamas. As of November 30, 2018, Mesa operated a fleet of 145 aircraft with approximately 648 daily departures and 3,412 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 first quarter of fiscal 2019, (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods, (iii) the Company’s expectations regarding completing the purchase of ten additional GECAS leased aircraft by the end of this year, and (iv) the refinancing of high-cost debt associated with spare engines by the end of this year and the impact thereof on the Company’s future interest expense. 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 September 30,Twelve Months Ended September 30,
 2018  201720182017
Operating revenues:      
Contract revenue$168,444  $151,577 $639,264 $618,698 
Pass-through and other 9,088   5,717  42,331  24,878 
Total operating revenues 177,532   157,294  681,595  643,576 
       
Operating expenses:      
Flight operations 53,463   45,215  209,065  155,516 
Fuel 149   152  498  766 
Maintenance 39,118   46,488  193,164  210,729 
Aircraft rent 14,334   18,217  68,892  72,551 
Aircraft and traffic servicing 950   918  3,541  3,676 
General and administrative 10,314   7,786  53,647  38,996 
Depreciation and amortization 17,420   15,828  65,031  61,048 
Lease termination   -       -  15,109    - 
Total operating expenses 135,748   134,604  608,947  543,282 
Operating income 41,784   22,690  72,648  100,294 
       
Other (expenses) income, net:      
Interest expense (15,274)  (12,451) (56,867) (46,110)
Interest income 85   9  114  32 
Other income (expense) 51   (67) (66) (514)
Total other (expense), net (15,138)  (12,509) (56,819) (46,592)
       
Income before taxes 26,646   10,181  15,829  53,702 
Income tax (benefit) expense 7,251   4,698  (17,426) 20,874 
Net income$19,395  $5,483 $33,255 $32,828 
       
Net income per share attributable to common shareholders      
Basic$1.04  $0.49 $2.46 $3.01 
Diluted$0.65  $0.23 $1.32 $1.40 
       
Weighted-average common shares outstanding      
Basic 18,663   11,117  13,516  10,919 
Diluted 29,675   23,459  25,171  23,386 
       
MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)
        
    September 30,  September 30,
    2018  2017
ASSETS       
Current assets:       
Cash and cash equivalents   $103,311  $56,788
Marketable Securities    19,921   -
Restricted cash    3,823   3,559
Receivables, net    14,290   8,853
Expendable parts and supplies, net    15,658   15,114
Prepaid expenses and other current assets    40,914   61,525
Total current assets    197,917   145,839
        
Property and equipment, net    1,250,829   1,192,448
Intangibles, net    11,341   11,724
Lease and equipment deposits    2,598   1,945
Other assets    9,703   5,693
Total assets   $1,472,388  $1,357,649
        
LIABILITIES AND STOCKHOLDERS’ EQUITY       
Current liabilities:       
Current portion of long-term debt   $155,170  $140,466
Accounts payable    54,307   44,738
Accrued compensation    12,208   9,080
Other accrued expenses    29,696   23,929
Total current liabilities    251,381   218,213
        
Long-term debt, excluding current portion    760,177   803,874
Deferred credits    15,393   17,189
Deferred income taxes    39,797   56,436
Other noncurrent liabilities    31,173   39,713
Total noncurrent liabilities    846,540   917,212
Total liabilities    1,097,921   1,135,425
        
        
Stockholders' equity:       
Common stock    234,683   114,456
Retained earnings    139,784   107,768
Total stockholders' equity    374,467   222,224
Total liabilities and stockholders' equity   $1,472,388  $1,357,649
        

Operating Highlights (unaudited)

 Three months ended September 30
 2018 2017 Change
Available Seat Miles - ASMs (thousands)2,652,219 2,258,060 17.5%
Block Hours112,475 95,109 18.3%
Departures63,153 55,517 13.8%
Average Stage Length (miles)552 535 3.2%
Passengers3,733,543 3,248,072 14.9%
      
 Twelve months ended September 30
 2018 2017 Change
Available Seat Miles - ASMs (thousands)9,713,877 9,471,914 2.6%
Block Hours410,974 395,084 4.0%
Departures227,978 221,990 2.7%
Average Stage Length (miles)560 561 -0.2%
Passengers13,556,774 13,005,844 4.2%
       

Source: Mesa Air Group, Inc.

Mesa Air Group, Inc.

Investor Relations
Brian Gillman
Investor.Relations@mesa-air.com
(602) 685-4010

Media
Jack Hellie
media@mesa-air.com
602-685-4393

Mesa Air Group Logo (black background).png

Source: Mesa Air Group, Inc.


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