Mesa Air Group Reports Second Quarter Fiscal 2022 Results

Mesa Air Group, Inc. (NASDAQ: MESA) today reported second quarter fiscal 2022 financial and operating results.

Financial Summary Q2:

Pre-tax loss of $55.2 million, net loss of $42.8 million or $(1.19) per diluted share.
Adjusted net loss1 of $10.3 million or $(0.29) per diluted share.
Adjusted net loss excludes a $39.5 million (pre-tax) non-cash charge related to 12 CRJ aircraft held for sale.

Quarter Highlights:

Mesa took delivery of its third 737-400F freighter aircraft in the quarter.
Added an additional E175 flight simulator.

Fiscal Year Q2 Results:

Mesa’s Q2 FY22 results reflect a net loss of $42.8 million, or $(1.19) per diluted share, compared to net income of $5.7 million, or $0.14 per diluted share for Q2 FY21. Mesa’s Q2 FY22 adjusted pre-tax loss1 was $13.1 million versus an adjusted pre-tax income1 of $12.1 million in Q2 FY21. The year over year decrease in adjusted pre-tax income of $25.2 million was primarily due to lower block hours and the impact of the PSP program.

Jonathan Ornstein, Chairman and CEO, said, “While demand for our product remains strong, our financial results this quarter reflect the ongoing challenge of heightened pilot attrition. In January, our operational and financial performance was significantly impacted by Covid-related higher pilot absence rates which have since subsided. We remain focused on taking steps to address pilot attrition, including increased hiring, simulator capacity, and training capabilities, which has been exacerbated by the industry wide pilot shortage.”

Fiscal Q2 details:

Total operating revenues in Q2 2022 were $123.2 million, an increase of $25.9 million (26.7%) from $97.3 million for Q2 2021. Contract revenue increased $30.3 million. This was due to the return to normal rates from our partners which were temporarily reduced last year related to the PSP program. These were partially offset by a reduction in block hours. Mesa’s Q2 2022 results include, per GAAP, the recognition of $0.8 million of previously deferred revenue, versus the deferral of $4.9 million of revenue in Q2 2021. The remaining deferred revenue balance will be recognized as flights are completed over the remaining terms of the contracts.

Mesa’s Adjusted EBITDA1 for Q2 2022 was $15.8 million, compared to $41.5 million in Q2 2021, and Adjusted EBITDAR1 was $25.2 million for Q2 2022, compared to $51.5 million in Q2 2021.

Operationally, the Company ran a controllable completion factor of 96.8% for American and 96.7% for United during Q2 2022. This is compared to a controllable completion factor of 99.8% for American and 100.0% for United during Q2 2021. This excludes cancellations due to weather and air traffic control. As Covid-related cancellations declined, our controllable completion factors for both American and United were both 99.9% for the month of March.

With respect to a total completion factor that includes all cancellations, Mesa reported a total completion factor of 93.5% for American and 93.7% for United during Q2 2022. This is compared to a total completion factor of 95.0% for American and 94.2% for United during Q2 2021.

1 See Reconciliation of non-GAAP financial measures

Liquidity and Capital Resources:

Mesa ended the quarter at $75.9 million in unrestricted cash and equivalents. As of March 31, 2022, the Company had $652.0 million in total debt secured primarily with aircraft and engines.

Fleet:

For the three months ended March 31, 2022, 47% of the Company’s total revenue was derived from our contracts with United, 46% from American, 1% from DHL, and 6% from leases of aircraft to a third party.

Below is our current and future fleet plan by partner and fleet type for FY22:

Fleet Plan (FY22)	Q1 (Dec '21)	Q2 (Mar '22)	Q3 (Jun '22)	Q4 (Sep '22)
	Actual	Actual	Forecast	Forecast
E-175 – UA	80	80	80	80
CRJ-900 – AA	40	40	40	40
737-400F – DHL	2	3	3	3
Sub-total	122	123	123	123
CRJ-700 Leased	17	18	20	20
CRJ-700 to be Leased
to Third party	3	2	-	-
CRJs Spares/Parked	25	13	13	13
CRJs Held for Sale	-	12	12	12
Total Fleet	167	168	168	168

Mesa Air Group will host a conference call with analysts on May 9th at 4:30 pm EDT. The conference call number is 888-469-2054 (Passcode: Phoenix (7463649)). The conference call can also be accessed live via the web by visiting https://investor.mesa-air.com.

A recorded version will be available on Mesa's website approximately two hours after the call for approximately 14 days.

1Reconciliation 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 six months ended March 31, 2022 and March 31, 2021. 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 or loss. Additionally, these calculations may not be comparable with similarly titled measures of other companies.

1Reconciliation of GAAP versus Non-GAAP Disclosures(In thousands, except for per diluted share) (Unaudited)

	Three Months Ended March 31, 2022										Three Months Ended March 31, 2021
	Income (Loss) Before Taxes			Income Tax (Expense)/ Benefit		Net Income (Loss)		Net Income (Loss) per Diluted Share			Income Before Taxes			Income Tax (Expense)/ Benefit		Net Income	Net Income per Diluted Share
GAAP Income (Loss)	$	(55,165	)	12,382		(42,783	)	$	(1.19	)	$	7,579		(1,890	)	5,689	$	0.14
Adjustments (1) (2) (3)		39,843		(9,097	)	30,746		$	0.85			4,508		(1,124	)	3,384	$	0.09
Loss on Investments, Net (4)		2,261		(522	)	1,739		$	0.05
Adjusted Income (Loss)		(13,061	)	2,763		(10,298	)	$	(0.29	)		12,087		(3,014	)	9,073	$	0.23

Interest Expense		8,120										8,755
Interest Income		(42	)									(79	)
Depreciation and Amortization		20,747										20,705
Adjusted EBITDA		15,764										41,468

Aircraft Rent		9,434										9,992
Adjusted EBITDAR	$	25,198									$	51,460

(1) Includes adjustment for lease termination expense of $4.5 million for the three months ended March 31, 2021 related to the purchase of a CRJ-900 aircraft, which was previously leased from Bombardier Capital.(2) Includes adjustment for impairment charges of $39.5 million for the three months ended March 31, 2022 related to certain of the Company's aircraft which are classified as held for sale.(3) Includes adjustment for operating lease right of use asset impairment charges of $0.4 million during the three months ended March 31, 2022 related to the abandonment of one of the Company's leased facilities.(4) Includes losses resulting from changes in the fair value of the Company's investments in equity securities of $2.3 million for the three months ended March 31, 2022.


	Six Months Ended March 31, 2022										Six Months Ended March 31, 2021
	Income (Loss) Before Taxes			Income Tax (Expense)/ Benefit		Net Income (Loss)		Net Income (Loss) per Diluted Share			Income Before Taxes			Income Tax (Expense)/ Benefit		Net Income	Net Income per Diluted Share
GAAP Income (Loss)	$	(73,551	)	16,494		(57,057	)	$	(1.58	)	$	26,518		(6,711	)	19,807	$	0.52
Adjustments (1)(2)(3)(4)		39,843		(9,097	)	30,746		$	0.85			3,558		(900	)	2,658	$	0.07
Loss on Investments, Net (5)		8,723		(1,992	)	6,731		$	0.19
Adjusted Income (Loss)		(24,985	)	5,405		(19,580	)	$	(0.54	)		30,076		(7,611	)	22,465	$	0.59

Interest Expense		16,050										17,837
Interest Income		(93	)									(205	)
Depreciation and Amortization		41,775										41,175
Adjusted EBITDA		32,747										88,883

Aircraft Rent		19,020										20,040
Adjusted EBITDAR	$	51,767									$	108,923

(1) Includes adjustment for gain on extinguishment of debt of $1.0 million related to repayment of the Company’s aircraft debts during the six months ended March 31, 2021.(2) Includes adjustment for lease termination expense of $4.5 million for the six months ended March 31, 2021 related to the purchase of a CRJ-900 aircraft, which was previously leased from Bombardier Capital.(3) Includes adjustment for impairment charges of $39.5 million for the six months ended March 31, 2022 related to certain of the Company's aircraft which are classified as held for sale.(4) Includes adjustment for operating lease right of use asset impairment charges of $0.4 million during the six months ended March 31, 2022 related to the abandonment of one of the Company's leased facilities.(5) Includes losses resulting from changes in the fair value of the Company's investments in equity securities of $8.7 million for the six months ended March 31, 2022.

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 110 cities in 40 states, the District of Columbia, the Bahamas, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. As of March 31, 2022, Mesa operated a fleet of 168 aircraft with approximately 349 daily departures and 2,800 employees. Mesa operates all of its flights as either American Eagle, United Express, or DHL Express flights pursuant to the terms of capacity purchase agreements entered into with American Airlines, Inc., United Airlines, Inc., and DHL.

Forward-Looking Statements

Certain statements contained in this press release that are not historical facts contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to the “safe harbor” created by those sections. Forward-looking statements can be identified by the use of words such as “estimate,” “anticipate,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “seek,” “approximate” or “plan,” or the negative of these words and phrases or similar words or phrases. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. For more information on risk factors for Mesa Air Group, Inc.’s business, please refer to the periodic reports the Company files with the Securities and Exchange Commission from time to time. Many of the risks identified in the periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the COVID-19 pandemic. These forward-looking statements herein speak only as of the date of this press release and should not be relied upon as predictions of future events. Mesa Air Group, Inc. expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein, to reflect any change in Mesa Air Group, Inc.’s expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except as required by law.

MESA AIR GROUP, INC.Condensed Consolidated Statements of Operations(In thousands, except per share amounts) (Unaudited)

	Three Months EndedMarch 31,						Six Months EndedMarch 31,
		2022			2021			2022			2021
Operating revenues:
Contract revenue	$	111,988		$	81,712		$	248,882		$	208,870
Pass-through and other revenue		11,225			15,568			22,088			38,781
Total operating revenues		123,213			97,280			270,970			247,651

Operating expenses:
Flight operations		42,410			37,403			90,008			74,367
Maintenance		47,357			51,773			106,338			104,637
Aircraft rent		9,434			9,992			19,020			20,040
General and administrative		7,860			11,164			20,438			24,237
Depreciation and amortization		20,747			20,705			41,775			41,175
Lease termination		—			4,508			—			4,508
Impairment of assets held for sale		39,475			—			39,475			—
Other operating expenses		685			941			2,657			2,232
Government grant recognition		—			(55,967	)		—			(67,278	)
Total operating expenses		167,968			80,519			319,711			203,918
Operating income (loss)		(44,755	)		16,761			(48,741	)		43,733

Other income (expense), net:
Interest expense		(8,120	)		(8,755	)		(16,050	)		(17,837	)
Interest income		42			79			93			205
Loss on investments, net		(2,261	)		—			(8,723	)		—
Other income (expense), net		(71	)		(506	)		(130	)		417
Total other (expense), net		(10,410	)		(9,182	)		(24,810	)		(17,215	)

Income (loss) before taxes		(55,165	)		7,579			(73,551	)		26,518
Income tax expense (benefit)		(12,382	)		1,890			(16,494	)		6,711
Net income (loss)	$	(42,783	)	$	5,689		$	(57,057	)	$	19,807

Net income (loss) per share attributable to common shareholders
Basic	$	(1.19	)	$	0.16		$	(1.58	)	$	0.56
Diluted	$	(1.19	)	$	0.14		$	(1.58	)	$	0.52

Weighted-average common shares outstanding
Basic		36,048			35,628			36,005			35,579
Diluted		36,048			39,432			36,005			38,382

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

	March 31, 2022		September 30, 2021
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	75,896	$	120,517
Restricted cash		3,351		3,350
Receivables, net		6,849		3,167
Expendable parts and supplies, net		26,255		24,467
Prepaid expenses and other current assets		7,608		6,885
Total current assets		119,959		158,386

Property and equipment, net		1,064,349		1,151,891
Intangible assets, net		6,281		6,792
Lease and equipment deposits		8,371		6,808
Operating lease right-of-use assets		79,706		93,100
Deferred heavy maintenance, net		5,289		3,499
Assets held for sale		36,528		—
Other assets		32,873		36,121
TOTAL ASSETS	$	1,353,356	$	1,456,597

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt and finance leases	$	111,671	$	111,710
Current portion of deferred revenue		2,675		6,298
Current maturities of operating leases		16,601		32,652
Accounts payable		76,733		61,476
Accrued compensation		10,285		12,399
Other accrued expenses		31,406		33,657
Total current liabilities		249,371		258,192

NONCURRENT LIABILITIES:
Long-term debt and finance leases, excluding current portion		521,457		539,700
Noncurrent operating lease liabilities		29,936		33,991
Deferred credits		3,508		3,934
Deferred income taxes		53,281		69,940
Deferred revenue, net of current portion		26,868		28,202
Other noncurrent liabilities		36,394		34,591
Total noncurrent liabilities		671,444		710,358
Total liabilities		920,815		968,550

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, 125,000,000shares authorized; 36,126,724 (2022) and 35,958,759 (2021) shares issuedand outstanding, and 4,899,497 (2022) and 4,899,497 (2021) warrantsissued and outstanding		257,923		256,372
Retained earnings		174,618		231,675
Total stockholders' equity		432,541		488,047
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,353,356	$	1,456,597

MESA AIR GROUP, INC.Operating Highlights (unaudited)

	Three months ended
	March 31
	2022	2021	Change
Available Seat Miles (thousands)	1,616,896	1,771,498	-8.7%
Block Hours	65,613	73,942	-11.3%
Average Stage Length (miles)	671	690	-2.8%
Departures	31,983	35,270	-9.3%
Passengers	1,921,635	1,684,043	14.1%
Controllable Completion Factor*
American	96.76%	99.83%	-3.1%
United	96.71%	99.99%	-3.3%
Total Completion Factor**
American	93.51%	95.01%	-1.6%
United	93.74%	94.22%	-0.5%