Mesa Air Group Reports Fourth Quarter and Full-Year Fiscal 2019 Results

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 Count	Partner		(Actual)				(Forecast)				(Forecast)				(Forecast)				(Forecast)					(Forecast)
E-175	United			60				60				60				62				68					80
CRJ-900	American			62				60				59				59				59					59
CRJ-700	United			20				20				20				18				12					-
Total CPA				142				140				139				139				139					139
Non-CPA
CRJ-700	Leased			-				-				-				2				8					20
CRJ-900	Unassigned			2				4				5				5				5					5
CRJ-200	Unassigned			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

Source: Mesa Air Group, Inc.