MESA Mesa Air Group Inc

Mesa Air Group, Inc. (NASDAQ: MESA) today reported first quarter Fiscal Year 2019 financial and operating results.

Highlights for First Quarter Fiscal Year 2019 (ending December 31, 2018)

• Net Income of $19.1 million or $0.55 per diluted share
• Pre-tax income of $25.0 million compared to $0.8 million for Q1 FY 2018
• Block hours up 17.7% compared to Q1 FY ’18
• Revenue up by 8.2% compared to Q1 FY ‘18

Mesa’s Q1 2019 results reflect net income of $19.1 million, or $0.55 per diluted share, compared to net income of $22.6 million (which included a $22.4 million favorable tax adjustment related to the Tax Cuts and Jobs Act), or $0.96 per diluted share (pre-IPO) for Q1 2018. Excluding special items adjusted net income1 was $19.1 million for Q1 2019 compared to $0.2 million for Q1 2018. Mesa’s Q1 2019 income before taxes was $25.0 million, compared to $0.8 million for Q1 2018. In addition, Mesa’s EBITDA1 for Q1 2019 was $58.2 million, compared to $30.9 million in Q1 2018 and EBITDAR1 was $72.3 million, compared to $49.2 million in Q1 2018.

Mesa operated 115,000 block hours during Q1 2019, an increase of 17.7% from Q1 2018 of 97,705 and an increase of 2.2% from Q4 2018 of 102,939. Operationally we ran a 98.0% total completion factor and a 99.5% adjusted completion factor which excludes weather and other uncontrollable cancellations.

“We continue to work hard to successfully execute our plan of increased block hours, improved operational performance and profitability,” stated Jonathan Ornstein, Chairman and Chief Executive Officer. “Our pilot hiring remains strong and we continue to hire significantly above current attrition levels. We appreciate the hard work and dedication of all of our employees, and their meaningful contributions to our improving operational capabilities.”

Mike Lotz, President and Chief Financial Officer continued, “On January 29, 2019 the company closed on a $91.2 million five-year term loan at LIBOR +3.1%. The proceeds were used to pay down existing debt at LIBOR +7.25% plus yield enhancement of 1.5%. We also signed a term sheet (subject to final approvals and documentation) with GECAS for the purchase of ten (10) leased CRJ-700 aircraft currently operating at United. Upon completion of the transaction we have reduced the number of leased aircraft with third parties to 18.” 

____________________________________________________1 See Reconciliation of non-GAAP financial measures

Outlook

The Company is providing the following guidance for the second quarter of FY 2019:

Fleet, Block Hours, Engine Expenses – Actual and Forecast for Q2 FY 2019 (unaudited)

			FY '18 Q2			FY '18 Q3			FY '18 Q4			FY '19 Q1			FY '19 Q2
			Qtr Ended			Qtr Ended			Qtr Ended			Qtr Ended			Qtr Ended
			Mar '18			Jun '18			Sep '18			Dec '18			Mar '19
Fleet Count			(Actual)			(Actual)			(Actual)			(Actual)			(Forecast)
E-175			58			58			60			60			60
CRJ-900			64			64			64			64			64
CRJ-700			20			20			20			20			20
CRJ-200			1			1			1			1			1
Total			143			143			145			145			145
Production
Block Hours			97,853			102,939			112,475			115,000			112,105
Block Hours per day per Aircraft			7.7			8.0			8.5			8.7			8.7
Non Pass-Through Engine Expense		$	10.8		$	8.5		$	2.4		$	2.6		$	8.9

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 ended December 31, 2018 and the three months ended December 31, 2017. 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 December 31, 2018

Net Income

Income

Income Tax

Net

per Diluted

Before Taxes

Expense

Income

Share

Income

25,030

5,949

19,081

$

0.55

Interest Expense

14,842

Interest Income

(156

)

Depreciation and Amortization

18,491

EBITDA

58,207

Aircraft Rent

14,119

EBITDAR

72,326

Weighted-average Shares Outstanding

Three months endedDecember 31, 2018

Basic

Diluted

GAAP weighted-average common shares outstanding

23,903

34,821

(In thousands, except for per diluted share)

				Three months ended December 31, 2017
																						Net Income
				Income						Income Tax						Net						per Diluted
				Before Taxes						Expense						Income						Share
Income				835						(21,789	)					22,624						$	0.96
FY18 Adjustments (1)				0						22,438						(22,438	)					$	(0.95	)
Non-GAAP Income				835						(649	)					186						$	0.01
Interest Expense				14,131
Interest Income				(9	)
Depreciation and Amortization				15,932
EBITDA				30,889
Aircraft Rent				18,263
EBITDAR				49,152
Weighted-average Shares Outstanding
										Three months endedDecember 31, 2017
										Basic						Diluted
GAAP weighted-average common shares outstanding										11,294						23,559

Three months ended December 31, 2017 special items:

1

)

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 Tuesday, February 5 at 10:00am EST/8:00am 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/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 Air Group is the commercial aviation holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 125 cities in 41 states, the District of Columbia, Canada, Mexico, Cuba, and the Bahamas. As of January 31, 2019, Mesa operated a fleet of 145 aircraft with approximately 623 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 second quarter of fiscal 2019, (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods, and (iii) the Company’s expectations regarding completing the purchase of ten additional GECAS leased aircraft by mid-year 2019. 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 December 31,
	2018						2017
Operating revenues:
Contract revenue	$	170,449					$	154,389
Pass-through and other		7,707						10,295
Total operating revenues		178,156						164,684
Operating expenses:
Flight operations		53,245						49,160
Fuel		121						68
Maintenance		39,802						54,347
Aircraft rent		14,119						18,263
Aircraft and traffic servicing		934						961
General and administrative		12,214						10,930
Depreciation and amortization		18,491						15,932
Total operating expenses		138,926						149,661
Operating income		39,230						15,023
Other (expenses) income, net:
Interest expense		(14,842	)					(14,131	)
Interest income		156						9
Other income (expense)		486						(66	)
Total other (expense), net		(14,200	)					(14,188	)
Income before taxes		25,030						835
Income tax expense (benefit)		5,949						(21,789	)
Net income	$	19,081					$	22,624
Net income per share attributable to common shareholders
Basic	$	0.80					$	2.00
Diluted	$	0.55					$	0.96
Weighted-average common shares outstanding
Basic		23,903						11,294
Diluted		34,821						23,559

MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)
	December 31,			September 30,
	2018			2018
ASSETS
Current assets:
Cash and cash equivalents	$	88,600	$	103,311
Marketable Securities		14,974		19,921
Restricted cash		3,644		3,823
Receivables, net		6,015		14,290
Expendable parts and supplies, net		17,402		15,658
Prepaid expenses and other current assets		43,018		40,914
Total current assets		173,653		197,917
Property and equipment, net		1,247,784		1,250,829
Intangibles, net		10,889		11,341
Lease and equipment deposits		1,838		2,598
Other assets		9,798		9,703
Total assets	$	1,443,962	$	1,472,388
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	149,842	$	155,170
Accounts payable		40,439		54,307
Accrued compensation		9,920		12,208
Other accrued expenses		31,017		29,696
Total current liabilities		231,218		251,381
Long-term debt, excluding current portion		727,839		760,177
Deferred credits		14,412		15,393
Deferred income taxes		45,750		39,797
Other noncurrent liabilities		29,584		31,173
Total noncurrent liabilities		817,585		846,540
Total liabilities		1,048,803		1,097,921
Stockholders' equity:
Common stock		236,294		234,683
Retained earnings		158,865		139,784
Total stockholders' equity		395,159		374,467
Total liabilities and stockholders' equity	$	1,443,962	$	1,472,388

Operating Highlights (unaudited)
	Three months ended December 31
	2018		2017		Change
Available Seat Miles - ASMs (thousands)	2,708,899		2,308,312		17.4	%
Block Hours	115,000		97,705		17.7	%
Departures	61,534		55,364		11.1	%
Average Stage Length (miles)	578		548		5.5	%
Passengers	3,620,115		3,311,007		9.3	%

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