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Mesa Air Group Reports First Quarter Fiscal 2021 Results

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Mesa Air Group, Inc.
·12 min read
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PHOENIX, Feb. 09, 2021 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported first quarter fiscal 2021 financial and operating results.

Highlights for the quarter:

  • $18.9 million in pretax income and positive cash flow

  • Signed 5-year extension with American Airlines for 40 aircraft

  • Received $195 million loan under the CARES Act

  • Launched cargo operations for DHL with two 737-400F aircraft

  • Placed 12 new E-175 aircraft into service with United Airlines

  • Continued improvement in operational performance

  • No furloughs despite expiration of Payroll Support Program (PSP)

Mesa's Q1 2021 results reflect net income of $14.1 million, or $0.39 per diluted share, compared to net income of $10.8 million, or $0.31 per diluted share for Q1 2020. Mesa's Q1 2021 pre-tax income was $18.9 million, compared to $10.8 million for Q1 2020. Mesa's Q1 2021 adjusted pre-tax income1 was $18.0 million, compared to $14.3 million for Q1 2020. Mesa Q1 2021 results include, per GAAP, the deferral of $5.2 million of revenue, all of which was billed and paid by American and United during the quarter and will be recognized over the remaining terms of the contracts. The primary reason for the $3.7 million increase in adjusted pre-tax income from Q1 2020 to Q1 2021 was $11.3 million of benefit from the Payroll Support Program (“PSP”) under the CARES Act offset by the $5.2 million of deferred revenue and the impact of a 26% reduction in Contract Revenue related to reduced flying as a result of COVID-19.

Additionally, Mesa's Adjusted EBITDA1 for Q1 2021 was $47.4 million, compared to $47.4 million in Q1 2020, and Adjusted EBITDAR1 was $57.5 million, compared to $58.8 million in Q1 2020.

1 See Reconciliation of non-GAAP financial measures

“While 2020 has been a challenging year for the industry, we were pleased to remain profitable and cash flow positive throughout the pandemic. In addition, we implemented a number of important strategic initiatives with our partners at American, United, and DHL. Lastly and importantly, we avoided employee furloughs despite the expiration of the PSP program,” said Jonathan Ornstein, Mesa’s Chairman and CEO. Brad Rich, Chief Operating Officer added, “Working closely with our partners and front-line employees, we added more regional aircraft, launched our 737 cargo operation, and improved overall reliability in our key contractual operational performance metrics.”

December quarter details:

Contract Revenue decreased by $44.6 million or 26% to $127.2 million in Q1 2021 as compared to Q1 2020 primarily as a result of the reduced block hours as a result of COVID-19. Contract Revenue increased by $29.8 million or 31% as compared to our prior quarter primarily as a result of increased block hours. Total operating expense decreased by $33.5 million, or 21.3%, to $123.4 million in Q1 2021 as compared to Q1 2020. The primary reason for the decrease was a $15.7 million lower flight operations expense due to reduced flying as a result of COVID-19 and $11.3 million benefit received through the PSP under the CARES Act. The Company recognized the benefit received through the PSP under the CARES Act as an offset to payroll expenses in Flight Operations, Maintenance and General and Administrative expense.

Fleet:

All of our operating revenue in the three months ended December 31, 2020 was derived from operations associated with our American and United Capacity Purchase Agreements and DHL Flight Services Agreement. For the three months ended December 31, 2020, 53% of our aircraft in scheduled service were operated for United, 46% for American and 1% was operated for DHL.

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

Fleet Plan

Fiscal Year 2020

Fiscal Year 2021

Q3 (Jun '20)

Q4 (Sep '20)

Q1 (Dec '20)

Q2 (Mar '21)

Q3 (Jun '21)

Q4 (Sep '21)

Actual

Actual

Actual

Forecast

Forecast

Forecast

E-175 - UA

60

60

72

76

80

80

CRJ-700 - UA

20

20

8

0

0

0

CRJ-900 - AA

55

54

54

45

45

45

737-400F - DHL

0

0

2

2

2

2

Sub-total

135

134

136

123

127

127

Leased / Spares Support

CRJ-700 to be leased to Third Party

0

0

12

20

20

20

CRJ-900 Spares Support

9

10

10

19

18

18

CRJ-200 Spares Support

1

1

1

1

1

1

Total

145

145

159

163

166

166

Liquidity and Capital Resources:

Mesa ended the quarter at $181 million in unrestricted cash and equivalents compared to $99 million in Q4 FY2020. During the quarter, Mesa received $195 million from the U.S. Treasury as a five-year secured loan under the CARES Act. In November 2020, Mesa extinguished $164 million of aircraft debt utilizing $82 million of cash on hand and $82 million from United Airlines which was a prepayment under the Capacity Purchase Agreement. At the end of Q1 2021, the United prepayment balance was $48 million and was subsequently reduced to zero at the end of January 2021. In February 2021, the Company was granted $49 million in financial assistance by the U.S. Treasury under the Payroll Support Program Extension (“PSP2”) and received the first installment of $24 million in February 2021 with the balance expected to be received by the end of March. The Company is not required to issue any warrants or to repay any of the $49 million received under the PSP2 program. The PSP2 payments are conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through March 31, 2021 as well as prohibitions on share repurchases and dividends through March 31, 2022 and certain limitations on executive compensation.

Forward Guidance:

The Company is providing the following guidance for FY2021:

Outlook FY 2021

($ amounts in millions)

Fiscal Year 2020

Fiscal Year 2021

Q3 (Jun '20)

Q4 (Sep '20)

Q1 (Dec '20)

Q2 (Mar '21)

Q3 (Jun '21)

Q4 (Sep '21)

Actual

Actual

Actual

Forecast

Forecast

Forecast

Block Hours

31,622

57,622

69,247

76,000

85,000

89,000

Pass Through Maintenance

($2.5)

$9.3

$19.7

$13.0

$12.0

$5.0

Non-Pass Through Engine and C Check

$2.8

$8.1

$8.3

$14.0

$14.0

$11.0

Deferred Revenue

$16.0

$7.8

$5.2

$3.7

$1.5

$0.2

Mesa Air Group will host a conference call with analysts on Monday, February 9 at 4:30 pm ET/1:30 pm PT. 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/mmc/p/ieyn2zi2. A recorded version will be available on Mesa's website approximately two hours after the call for approximately 14 days.

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 months ended December 31, 2020 and the three months ended December 31, 2019. 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
(In thousands, except for per diluted share) (Unaudited)

Three months ended December 31, 2020

Income Before
Taxes

Income Tax
(Expense)/Benefit

Net
Income

Net Income
per
Diluted Share

GAAP Income

$

18,939

$

(4,821

)

$

14,118

$

0.39

FY21 Adjustments (1)

(950

)

(950

)

Adjusted Income

17,989

(4,821

)

13,168

$

0.36

Interest Expense

9,082

Interest Income

(126

)

Depreciation and Amortization

20,470

Adjusted EBITDA

47,415

Aircraft Rent

10,048

Adjusted EBITDAR

57,463


Three months ended December 31, 2019

Income Before
Taxes

Income Tax
(Expense)/Benefit

Net
Income

Net Income
per
Diluted Share

GAAP Income

$

14,320

$

(3,535

)

$

10,785

$

0.31

Adjusted Income

$

14,320

$

(3,535

)

$

10,785

$

0.31

Interest Expense

12,628

Interest Income

(58

)

Depreciation and Amortization

20,552

EBITDA

47,442

Aircraft Rent

11,329

EBITDAR

58,771

1) Includes adjustment for gain on extinguishment of debt

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa" or the "Company") is a holding company whose principal subsidiary, Mesa Airlines, Inc. ("Mesa Airlines"), operates as a regional air carrier providing scheduled flight service to 116 cities in 42 states, the District of Columbia, the Bahamas, and Mexico as well as Cargo services out of Cincinnati/Northern Kentucky International Airport. As of December 31, 2020, Mesa operated a fleet of 159 aircraft with approximately 420 daily departures and 3,200 employees. Mesa operates all of its flights as either American Eagle, United Express, or DHL Express flights pursuant to the terms of the capacity purchase agreements entered into with American Airlines, Inc. (“American”) and United Airlines, Inc. (“United”) and flight services agreement with DHL (“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 Ended
December 31,

2020

2019

Operating revenues:

Contract revenue

$

127,158

$

171,800

Pass-through and other

23,213

12,236

Total operating revenues

150,371

184,036

Operating expenses:

Flight operations

36,964

52,644

Fuel

390

169

Maintenance

52,864

58,095

Aircraft rent

10,048

11,329

Aircraft and traffic servicing

901

1,064

General and administrative

13,073

12,996

Depreciation and amortization

20,470

20,552

CARES Act Grant Recognition

(11,311

)

Total operating expenses

123,399

156,849

Operating income

26,972

27,187

Other (expenses) income, net:

Interest expense

(9,082

)

(12,628

)

Interest income

126

58

Other (expense) income, net

923

(297

)

Total other (expense), net

(8,033

)

(12,867

)

Income before taxes

18,939

14,320

Income tax expense

4,821

3,535

Net income

$

14,118

$

10,785

Net income per share attributable to common shareholders

Basic

$

0.40

$

0.31

Diluted

$

0.39

$

0.31

Weighted-average common shares outstanding

Basic

35,531

35,023

Diluted

36,647

35,182


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

December 31,
2020

September 30,
2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

181,300

$

99,395

Restricted cash

3,634

3,446

Receivables, net

15,412

13,712

Expendable parts and supplies, net

22,760

22,971

Prepaid expenses and other current assets

12,897

16,067

Total current assets

236,003

155,591

Property and equipment, net

1,194,061

1,212,415

Intangibles, net

7,722

8,032

Lease and equipment deposits

1,851

1,899

Operating Lease right-of-use assets

114,666

123,251

Other Assets

514

742

TOTAL ASSETS

$

1,554,817

$

1,501,930

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and financing leases

$

99,745

$

189,268

Current portion of deferred revenue

51,253

9,389

Current maturities of operating leases

44,712

43,932

Accounts payable

47,576

53,229

Accrued compensation

7,029

12,030

Other accrued expenses

37,581

45,478

Total current liabilities

287,896

353,326

NONCURRENT LIABILITIES:

Long-term debt and financing leases - excluding current portion

624,116

542,456

Noncurrent operating lease liabilities

53,570

62,531

Deferred credits

5,176

5,705

Deferred income taxes

69,111

64,275

Deferred revenue, net of current portion

26,504

14,369

Other noncurrent liabilities

4,147

1,409

Total noncurrent liabilities

782,624

690,745

Total liabilities

1,070,520

1,044,071

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; 35,532,162 (2021) and 35,526,918 (2020) shares issued
and outstanding, and 4,899,497 (2021) and 3,600,953 (2019) warrants
issued and outstanding

255,092

242,772

Retained earnings

229,205

215,087

Total stockholders' equity

484,297

457,859

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,554,817

$

1,501,930

Operating Highlights (unaudited)

Three months ended

December 31

2020

2019

Change

Available Seat Miles (thousands)

1,670,943

2,735,386

-38.9

%

Block Hours

69,247

115,562

-40.1

%

Departures

35,344

62,725

-43.7

%

Average Stage Length (miles)

637

573

11.2

%

Passengers

1,829,714

3,697,138

-50.5

%

Source: Mesa Air Group, Inc.

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