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 |
Income |
26,646 |
|
|
7,251 |
|
19,395 |
|
$ |
0.65 |
|
|
|
|
|
|
|
|
Interest Expense |
15,274 |
|
|
|
|
|
|
|
Interest Income |
(85 |
) |
|
|
|
|
|
|
Depreciation and
Amortization |
17,420 |
|
|
|
|
|
|
|
EBITDA |
59,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft Rent |
14,334 |
|
|
|
|
|
|
|
EBITDAR |
73,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
IncomeBefore Taxes |
|
|
Income TaxExpense(Benefit) |
|
|
NetIncome |
|
|
Net Incomeper DilutedShare |
|
Income |
15,829 |
|
|
(17,426 |
) |
|
33,255 |
|
|
$ |
1.32 |
|
|
|
|
|
|
|
|
|
FY18 Adjustments (1)
(2) |
26,193 |
|
|
28,455 |
|
|
(2,262 |
) |
|
$ |
(0.09 |
) |
|
|
|
|
|
|
|
|
Non-GAAP Income |
42,022 |
|
|
11,029 |
|
|
30,994 |
|
|
$ |
1.23 |
|
|
|
|
|
|
|
|
|
Interest Expense |
56,867 |
|
|
|
|
|
|
|
Interest Income |
(114 |
) |
|
|
|
|
|
|
Depreciation and
Amortization |
65,031 |
|
|
|
|
|
|
|
Adjusted EBITDA |
163,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft Rent |
68,892 |
|
|
|
|
|
|
|
Adjusted EBITDAR |
232,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
- 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.
- 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 |
|
|
2017 |
2018 |
2017 |
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 Hours |
112,475 |
|
95,109 |
|
18.3 |
% |
Departures |
63,153 |
|
55,517 |
|
13.8 |
% |
Average Stage Length
(miles) |
552 |
|
535 |
|
3.2 |
% |
Passengers |
3,733,543 |
|
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 Hours |
410,974 |
|
395,084 |
|
4.0 |
% |
Departures |
227,978 |
|
221,990 |
|
2.7 |
% |
Average Stage Length
(miles) |
560 |
|
561 |
|
-0.2 |
% |
Passengers |
13,556,774 |
|
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
MediaJack Helliemedia@mesa-air.com602-685-4393
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