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Mesa Air Group Inc.$3.69$.133.65%

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 Mesa Air Group Reports Fourth Quarter and Full-Year Fiscal 2019 Results
   Wednesday, December 11, 2019 4:01:00 PM ET

PHOENIX, Dec. 11, 2019 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported fourth quarter and full-year fiscal 2019 financial and operating results.

Highlights

  • Q4 EPS of $0.35 and Adjusted EPS1 of $0.36
  • Fiscal Year 2019 EPS of $1.36 and Adjusted EPS1 of $1.64
  • Extended our $35 million secured credit facility for three years
  • Year over Year Increases:
    — Pre-tax income up 301% from $15.8 million to $63.3 million
    — 
    Net income up 43% from $33.3 million to $47.6 million
    — Adjusted Pre-tax Income1 up 78% from $43.0 million to $76.4 million
    — 
    Adjusted EBITDA1 up 27% from $164.8 million to $208.7 million
    — 
    Adjusted EBITDAR1 up  12% from $233.7 million to $260.9 million
    — 
    Block hours up 11.0% due to increased utilization
    — Contract Revenue up 7% from $639.3 million to $682.8 million

Recent Update

  • Signed CPA with United Airlines for 20 E175s, 12-year term, replacing 20 CRJ-700s to be leased
  • Extended term on 42 E175s for an additional five years

Fourth Quarter

Mesa’s Q4 2019 results reflect net income of $12.2 million, or $0.35 per diluted share, compared to net income of $19.4 million, or $0.65 per diluted share for Q4 2018.  Mesa’s Q4 2019 pre-tax income was $17.1 million, compared to $26.6 million for Q4 2018.  In addition, Mesa’s Adjusted EBITDA1 for Q4 2019 was $50.8 million, compared to $59.3 million in Q4 2018 and Adjusted EBITDAR1 was $61.9 million, compared to $73.6 million in Q4 2018. Mesa operated 115,175 block hours during Q4 2019, an increase of 2.4% from Q4 2018 of 112,475. Operationally, the Company ran a 99.0% controllable completion factor, which was the same as Q4 2018, and a 96.9% total completion factor, which includes weather and other uncontrollable cancellations, compared to 97.6% in Q4 2018.

Full Year

Mesa reported net income of $47.6 million, or $1.36 per diluted share for the 2019 fiscal year, compared to net income of $33.3 million, or $1.32 per diluted share for the 2018 fiscal year.  Excluding special items for both periods adjusted net income1 was $57.5 million or $1.64 per diluted share for the 2019 fiscal year compared to $30.4 million or $1.20 per diluted share for the 2018 fiscal year. Mesa’s fiscal year 2019 pre-tax income was $63.3 million, compared to $15.8 million for the 2018 fiscal year.  Excluding special items, adjusted pre-tax income1 was $76.4 million for fiscal year 2019, compared to $43.0 million for the 2018 fiscal year. In addition, Mesa’s Adjusted EBITDA1 was $208.7 million in fiscal year 2019, compared to $164.8 million in the 2018 fiscal year and Adjusted EBITDAR1 was $260.9 million in fiscal year 2019, compared to $233.7 million in the 2018 fiscal year. Operationally, we ran a 99.4% controllable completion factor compared to 99.2% in 2018 and a 97.0% total completion factor, which includes weather and other uncontrollable cancellations, compared to 97.7% in 2018.

On December 3, 2019, the company announced it will be adding 20 new Embraer E175 LL aircraft to its United Express fleet. The aircraft will be owned and financed by Mesa and be covered under a 12-year capacity purchase agreement. Deliveries are scheduled to begin May 2020 and expected to be completed by the end of 2020. In addition to the new aircraft, the contract for 42 existing E175s, which are owned by United, has been extended an additional five years. The 18 Mesa-owned E175s are contracted through 2028. As part of the deal, Mesa will lease its 20 CRJ-700 aircraft to another United Express carrier.

“We made meaningful progress across the board this year, from pilot hiring and training to our maintenance resources,” said Jonathan Ornstein, Chairman and Chief Executive Officer. “After safety, performance remains our top priority for both our American Eagle and United Express operations in 2020. We continue to invest in staying ahead of the pilot and mechanic hiring curve which we believe, in addition to our industry leading cost structure, contributed to United awarding Mesa with a long term contract for 20 new E175s. We appreciate all of our employees and thank them for their professionalism and dedication each day.”

Mike Lotz, President and Chief Financial Officer, continued, “Year over year we have made significant improvement in earnings, primarily a result of double-digit block hour growth with effectively the same fleet count. During the year, we purchased and financed ten CRJ-700 aircraft previously leased reducing the number of leased aircraft from third parties to 18. We also extended our $35 million secured credit facility for three additional years at lower interest rates.” 

“Our employees delivered improved operating results this year compared to last year while flying 11 percent more block hours,” said Brad Rich, Executive Vice President and Chief Operating Officer. “Although we faced a number of operational challenges this year, some of which were out of our control, we see continued improvement across our American and United operations.  In light of our current performance, we expect the balance of 2020 to show further year over year operational improvement as a result of new initiatives. Since gaining access to additional spare aircraft in our American fleet, the November controllable completion factor was 99.7% and, through the first 10 days of December, we have not had a controllable cancel.”

______________________________

1 See Reconciliation of non-GAAP financial measures

Outlook

The Company is providing the following guidance for Fiscal Year 2020 and 2021:

EPS, Block Hours, Scheduled Heavy Engine and Airframe Maintenance, Pass-through Maintenance Expense – Actual and Forecast (unaudited)

Fully diluted EPS 
  Low  High 
FY 2020 $1.50  $1.80 
FY 2021 $1.90  $2.30 


 


Block Hours 
  Q1  Q2  Q3  Q4  Total 
FY 2019 Actual  115,000   112,030   114,042   115,175   456,247 
FY 2020 Guidance                    
Low  114,500   109,000   112,000   115,500   451,000 
High  117,000   111,000   114,000   118,000   460,000 
                     
Scheduled Heavy Engine and Airframe Maintenance 
  Q1  Q2  Q3  Q4  Total 
FY 2019 Actual $4.1  $10.3  $13.9  $12.5  $40.8 
FY 2020 Guidance                    
Low $15.5  $15.5  $7.0  $7.0  $45.0 
High $20.5  $20.5  $8.0  $8.0  $57.0 
                     
Pass-through Maintenance Expense 
  Q1  Q2  Q3  Q4  Total 
FY 2019 Actual $4.0  $2.3  $5.2  $7.8  $19.3 
FY 2020 Guidance $7.0  $8.0  $8.0  $9.0  $32.0 


Fleet Count 
                           
   FY '19 Q4  FY '20 Q1  FY '20 Q2  FY '20 Q3  FY '20 Q4   FY '21 
   Qtr Ended  Qtr Ended  Qtr Ended  Qtr Ended  Qtr Ended   FY Ended 
   Sep '19  Dec '20  Mar '20  Jun '20  Sep '20   Sep '21 
Fleet CountPartner (Actual)  (Forecast)  (Forecast)  (Forecast)  (Forecast)   (Forecast) 
E-175United  60   60   60   62   68    80 
CRJ-900American  62   60   59   59   59    59 
CRJ-700United  20   20   20   18   12     
Total CPA   142   140   139   139   139    139 
Non-CPA                          
CRJ-700Leased           2   8    20 
CRJ-900Unassigned  2   4   5   5   5    5 
CRJ-200Unassigned  1   1   1   1   1    1 
Total Fleet   145   145   145   147   153    165 

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 twelve months ended September 30, 2019 and the three 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, 2019 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
Income
  Net Income
per
Diluted Share
 
GAAP Income  17,059   (4,816)  12,243  $0.35 
FY19 Adjustments (7)     487   487     
Adjusted Income  17,059   (4,329)  12,730  $0.36 
                 
Interest Expense  13,607             
Interest Income  (313)            
Depreciation and Amortization  20,465             
Adjusted EBITDA  50,818             
                 
Aircraft Rent  11,103             
Adjusted EBITDAR  61,921             


  Three months ended September 30, 2018 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
Income
  Net Income
per
Diluted Share
 
GAAP Income/(Loss)  26,646   (7,251)  19,395  $0.65 
FY18 Adjustments (7)     (819)  (819)    
Adjusted Income  26,646   (8,070)  18,576  $0.62 
                 
Interest Expense  15,274             
Interest Income  (85)            
Depreciation and Amortization  17,420             
Adjusted EBITDA  59,255             
                 
Aircraft Rent  14,334             
Adjusted EBITDAR  73,589             
                 

Reconciliation of GAAP versus Non-GAAP Disclosures (unaudited)
(In thousands, except for per diluted share)

  Twelve months ended September 30, 2019 
                 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
income
  Net Income
per
Diluted Share
 
GAAP Income  63,286   (15,706)  47,580  $1.36 
FY19 Adjustments (1)(4)  13,156   (3,265)  9,891     
Adjusted Income  76,442   (18,971)  57,471  $1.64 
                 
Interest Expense  55,717             
Interest Income  (1,501)            
Depreciation and Amortization  77,994             
Adjusted EBITDA  208,652             
                 
Aircraft Rent  52,206             
Adjusted EBITDAR  260,858             


  Twelve months ended September 30, 2018 
                 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
income
  Net Income
per
Diluted Share
 
GAAP Income/(Loss)  15,829   17,426   33,255  $1.32 
FY18 Adjustments (2)(3)(5)(6)  27,165   (29,996)  (2,831)    
Adjusted Income  42,994   (12,570)  30,424  $1.20 
                 
Interest Expense  56,867             
Interest Income  (114)            
Depreciation and Amortization  65,031             
Adjusted EBITDA  164,778             
                 
Aircraft Rent  68,892             
Adjusted EBITDAR  233,670             

Adjustments:

  1. Includes lease termination expense of $9.5 million related to the acquisition of ten CRJ-700 aircraft previously leased during the fiscal year ended September 30, 2019
  2. Includes lease termination expense of $15.1 million related to the acquisition of nine CRJ-900 aircraft previously leased during the fiscal year ended September 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 fiscal year ended September 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 fiscal year ended September 30, 2019
  5. Includes adjustment for $1.0 million of financing fees written off during the fiscal year ended September 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
  7. Includes adjustment for tax expense resulting from changes in various State income tax rates that were enacted throughout the year

Mesa Air Group will host a conference call with analysts on Wednesday, December 11 at 4:30pm EDT/2:30pm MST. 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, Inc. is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 147 cities in 47 states, the District of Columbia, Canada, Mexico, Cuba and the Bahamas. As of November 30th, 2019, Mesa operated a fleet of 145 aircraft with approximately 749 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 fully diluted EPS forecast of Mesa for fiscal 2020 and fiscal 2021, (ii) the block hours, scheduled heavy engine and airframe maintenance, and pass-through maintenance expense forecast of Mesa for the four quarters of fiscal 2020, (iii) the fleet forecast for the four quarters of fiscal 2020 and year ended fiscal 2021, (iv) our ability to stay ahead of the pilot and mechanic hiring curve, and (v) continued improvement in operational performance for the balance of fiscal 2020 as a result of new initiatives. 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,
 
  2019  2018  2019  2018 
Operating revenues:                
Contract revenue $172,248  $168,444  $682,834  $639,264 
Pass-through and other  15,582   9,088   40,523   42,331 
Total operating revenues  187,830   177,532   723,357   681,595 
                 
Operating expenses:                
Flight operations  55,243   53,463   210,879   209,065 
Fuel  155   149   588   498 
Maintenance  57,010   39,118   196,514   193,164 
Aircraft rent  11,103   14,334   52,206   68,892 
Aircraft and traffic servicing  994   950   3,972   3,541 
General and administrative  12,406   10,314   50,527   53,647 
Depreciation and amortization  20,465   17,420   77,994   65,031 
Lease termination        9,540   15,109 
Total operating expenses  157,376   135,748   602,220   608,947 
Operating income (loss)  30,454   41,784   121,137   72,648 
                 
Other (expenses) income, net:                
Interest expense  (13,607)  (15,274)  (55,717)  (56,867)
Interest income  313   85   1,501   114 
Loss on extinguishment of debt        (3,616)   
Other income (expense)  (101)  51   (19)  (66)
Total other (expense), net  (13,395)  (15,138)  (57,851)  (56,819)
                 
Income (loss) before taxes  17,059   26,646   63,286   15,829 
Income tax expense (benefit)  4,816   7,251   15,706   (17,426)
Net income (loss) $12,243  $19,395  $47,580  $33,255 
                 
Net income (loss) per share attributable to common shareholders                
Basic $0.35  $0.66  $1.37  $1.34 
Diluted $0.35  $0.65  $1.36  $1.32 
                 
Weighted-average common shares outstanding                
Basic  35,003   29,359   34,764   24,826 
Diluted  35,067   29,904   35,064   25,257 
                 

MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands, except shares) (Unaudited)

  September 30,
2019
  September 30,
2018
 
ASSETS       
         
CURRENT ASSETS:        
Cash and cash equivalents $68,855  $103,311 
Marketable securities     19,921 
Restricted cash  3,646   3,823 
Receivables - less allowance for doubtful accounts  23,080   14,290 
Expendable parts and supplies - less obsolescence allowance  21,337   15,658 
Prepaid expenses and other current assets  40,923   40,914 
Total current assets  157,841   197,917 
         
PROPERTY AND EQUIPMENT, NET  1,273,585   1,250,829 
INTANGIBLES, NET  9,532   11,341 
LEASE AND EQUIPMENT DEPOSITS  2,167   2,598 
OTHER ASSETS  8,792   9,703 
TOTAL  1,451,917   1,472,388 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY       
         
CURRENT LIABILITIES:        
Current portion of debt and capital leases $165,900  $155,170 
Accounts payable  49,930   54,307 
Accrued compensation  11,988   12,208 
Other accrued expenses  28,888   29,696 
Total current liabilities  256,706   251,381 
         
NONCURRENT LIABILITIES:        
Long-term debt and capital leases - excluding current portion  677,423   760,177 
Deferred credits  12,134   15,393 
Deferred income taxes  55,303   39,797 
Other noncurrent liabilities  24,483   31,173 
Total noncurrent liabilities  769,343   846,540 
Total liabilities  1,026,049   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; 31,413,287 (2019) and 23,902,903 (2018) shares issued and outstanding, and 3,600,953 (2019) and 10,614,990 (2018) warrants issued and outstanding  238,505   234,683 
Retained earnings  187,363   139,784 
Total stockholders' equity  425,868   374,467 
TOTAL $1,451,917  $1,472,388 
         

Operating Highlights (unaudited)

  Three months ended  Twelve months ended 
  September 30  September 30 
  2019  2018  Change  2019  2018  Change 
Available Seat Miles (thousands)  2,775,477   2,652,219   4.6%  10,863,623   9,713,877   11.8%
Block Hours  115,175   112,475   2.4%  456,247   410,974   11.0%
Departures  64,077   63,153   1.5%  246,634   227,978   8.2%
Average Stage Length (miles)  569   552   3.1%  579   560   3.4%
Passengers  3,789,696   3,733,543   1.5%  14,664,441   13,556,774   8.2%
                         

Source: Mesa Air Group, Inc.

Mesa Air Group, Inc.
Investor Relations
Brian Gillman
Investor.Relations@mesa-air.com
(602) 685-4010

Mesa Air Group Logo (black background).png

Source: Mesa Air Group, Inc.


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