Mesa Air Group Reports Fourth Quarter and Full-Year Fiscal 2020 Profit December 9, 2020


PHOENIX, Dec. 09, 2020 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported fourth quarter and full-year fiscal 2020 financial and operating results.

Fiscal 2020 Q4 Highlights

  • EPS of $0.32, Full Year $0.78
  • Year-end cash increased by $34.5 million to $99.4 million

Recent Updates

  • Amended capacity purchase agreement with American to operate 40 CRJ-900s for a five-year term
  • Commenced cargo operations for DHL with two Boeing 737-400F  
  • Added 10 new E175 aircraft to our United fleet in November and December
  • Entered into a $195 million loan under the CARES Act with the U.S. Treasury

Mesa’s Q4 2020 results reflect net income of $11.4 million, or $0.32 per diluted share, compared to net income of $12.2 million, or $0.35 per diluted share for Q4 2019. Mesa Q4 2020 results include, per GAAP, the deferral of $7.8 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. Mesa’s Adjusted EBITDA1 for Q4 2020 was $44.6 million, compared to $50.8 million in Q4 2019, and Adjusted EBITDAR1 was $54.2 million for Q4 2020, compared to $61.9 million in Q4 2019. For Q4 2020 revenue was $108.0 million, a reduction of $79.8 million (42%) from $187.8 for Q4 2019 primarily due to the reduced flying as a result of COVID-19. During the quarter Mesa recognized $40.8 million as an offset to wages and salaries related to the previously announced Payroll Support Program Agreement (“PSP”), which required Mesa to retain all of its employees.

Operationally, the Company ran a 99.8% controllable completion factor, compared to 99.0% in Q4 2019, and a total completion factor of 98.2%, which primarily includes weather, close-in capacity reductions driven by reduced demand, and other uncontrollable cancellations, compared to 96.9% in Q4 2019.

Full Year

Mesa reported net income of $27.5 million, or $0.78 per diluted share for the 2020 fiscal year, compared to net income of $47.6 million, or $1.36 per diluted share for the 2019 fiscal year. Excluding special items for both periods, adjusted net income1 was $27.5 million or $0.78 per diluted share for the 2020 fiscal year, compared to $57.5 million or $1.64 per diluted share for the 2019 fiscal year. Mesa fiscal 2020 results include, per GAAP, the deferral of $23.8 million of revenue, all of which was billed and paid by American and United during the year and will be recognized over the remaining terms of the contracts. Mesa’s Adjusted EBITDA1 was $163.3 million in fiscal year 2020, compared to $208.7 million in fiscal year 2019 and Adjusted EBITDAR was $212.1 million in fiscal year 2020, compared to $260.9 million in fiscal year 2019. For fiscal year 2020, revenue was $545.1 million, a reduction of $178.3 million (25%) from $723.4 million for fiscal year 2019, primarily due to the reduced flying as a result of COVID-19. During the year, Mesa recognized $83.8 million as an offset to wages and salaries related to the previously announced Payroll Support Program Agreement (“PSP”), which required Mesa to retain all of its employees as of April 20, 2020.

_______________
1 See Reconciliation of non-GAAP financial measures

Operationally, we ran a 99.9% controllable completion factor compared to 99.4% in 2019 and a 94.8% total completion factor, which includes weather, close-in capacity reductions driven by reduced demand, and other uncontrollable cancellations and flights, compared to 97.0% in 2019.

“Our industry was among the hardest hit by COVID-19 and the global impact that followed,” said Jonathan Ornstein, Chairman and Chief Executive Officer. “Despite a significant reduction in flying, we were able to find creative ways to reduce costs, operate profitably, generate positive cash-flow, and protect our employees from involuntary furloughs. We also entered the cargo market through our new agreement with DHL - diversifying our revenue sources and creating new opportunities for our company. I can’t thank our hardworking employees enough, their dedication and professionalism truly went above and beyond this year.”

Mike Lotz, President and Chief Financial Officer, continued, “Given the impact of the pandemic, our financial performance exceeded our early expectations. We also improved our liquidity and closed on a $195 million five-year loan under the CARES Act.”

“Despite the global pandemic, our employees showed up day after day to safely and efficiently keep our operation moving,” said Brad Rich, Executive Vice President and Chief Operating Officer. Our operational performance coupled with our low-cost model helped Mesa extend our relationship with American; flying 40 CRJ-900 aircraft for a five-year term. We also took delivery of 10 of our 20 new E175 aircraft for United and added two 737-400F cargo aircraft to our fleet operating for DHL.”

We are providing the following Block Hour and Pass-Through Maintenance Expense Guidance going forward:

BLOCK HOURSQ1Q2Q3Q4
FY2020 Actuals115,562108,30531,62257,622
FY2021 Guidance68,00073,000**


PASS THROUGH MTCQ1Q2Q3Q4Total
FY2020 Actuals7.49.1(2.5)9.323.3
FY2021 Guidance15.013.07.05.040.0

*to be provided in subsequent quarters

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, 2020 and the three and twelve months ended September 30, 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 (unaudited)
(In thousands, except for per diluted share)

  Three months ended September 30, 2020
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
Income
  Net Income
per
Diluted Share
GAAP Income $14,545  $(3,170) $11,375  $0.32
                
Interest Expense  9,452            
Interest Income  (10)           
Depreciation and Amortization  20,640            
EBITDA  44,627            
                
Aircraft Rent  9,606            
EBITDAR  54,233            
                


  Three months ended September 30, 2019
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
Income
  Net Income
per
Diluted Share
GAAP Income $17,059  $(4,815) $12,244  $0.35
FY19 Adjustments (1)(3)     487   487    
Adjusted Income $17,059  $(4,328) $12,731  $0.36
                
Interest Expense  13,607            
Interest Income  (313)           
Depreciation and Amortization  20,465            
EBITDA  50,818            
                
Aircraft Rent  11,103            
EBITDAR  61,921            
                


  Twelve months ended September 30, 2020
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
income
  Net Income
per
Diluted Share
GAAP Income $36,995  $(9,531) $27,464  $0.78
                
Interest Expense  44,120            
Interest Income  (105)           
Depreciation and Amortization  82,296            
Adjusted EBITDA  163,306            
                
Aircraft Rent  48,802            
Adjusted EBITDAR  212,108            
                


  Twelve months ended September 30, 2019
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
income
  Net Income
per
Diluted Share
GAAP Income/(Loss) $63,286  $(15,706) $47,580  $1.36
FY19 Adjustments (1) (2) (3)  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            
                

Adjustments for three months and twelve months ended September 30, 2019:

1) Includes lease termination expense of $9.5 million related to the acquisition of ten CRJ-700 aircraft previously leased during the three months ended September 30, 2019
2) Includes adjustment for loss on extinguishment of debt of $3.6 million related to repayment of the Company’s Spare Engine Facility during the nine months ended June 30, 2019
3) 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 9 at 4:30pm ET/2:30pm MT. 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/i83np4c5. 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 104 cities in 39 states, the District of Columbia, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. As of November 30th, 2020, Mesa has a fleet of 157 aircraft with approximately 384 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 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.
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts) (Unaudited)

  Three Months Ended
September 30,
  Twelve Months Ended
September 30,
 
  2020  2019  2020  2019 
Operating revenues:                
Contract revenue $97,361  $172,248  $506,590  $682,834 
Pass-through and other  10,678   15,582   38,480   40,523 
Total operating revenues  108,039   187,830   545,070   723,357 
                 
Operating expenses:                
Flight operations  34,043   55,243   169,242   210,879 
Fuel  168   155   672   588 
Maintenance  47,102   57,010   192,123   196,514 
Aircraft rent  9,606   11,102   48,802   52,206 
Aircraft and traffic servicing  418   995   3,356   3,972 
General and administrative  13,014   12,406   52,246   50,527 
Depreciation and amortization  20,640   20,466   82,296   77,994 
Lease termination           9,540 
CARES Act Grant Recognition  (40,816)     (83,834)   
Total operating expenses  84,175   157,377   464,903   602,220 
Operating income  23,864   30,453   80,167   121,137 
                 
Other (expenses) income, net:                
Interest expense  (9,452)  (13,607)  (44,120)  (55,717)
Interest income  10   313   105   1,501 
Loss on extinguishment of debt           (3,616)
Other (expense) income, net  123   (101)  843   (19)
Total other (expense), net  (9,319)  (13,395)  (43,172)  (57,851)
                 
Income before taxes  14,545   17,058   36,995   63,286 
Income tax expense  3,170   4,815   9,531   15,706 
Net income and comprehensive income $11,375  $12,243  $27,464  $47,580 
                 
Net income per share attributable to common shareholders                
Basic $0.32  $0.35  $0.78  $1.37 
Diluted $0.32  $0.35  $0.78  $1.36 
                 
Weighted-average common shares outstanding                
Basic  35,486   35,003   35,237   34,764 
Diluted  35,486   35,067   35,308   35,064 
                 

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

  September 30,
2020
  September 30,
2019
 
ASSETS       
         
CURRENT ASSETS:        
Cash and cash equivalents $99,395  $68,855 
Restricted cash  3,446   3,646 
Receivables, net  13,712   23,080 
Expendable parts and supplies, net  22,971   21,337 
Prepaid expenses and other current assets  16,067   40,923 
Total current assets  155,591   157,841 
         
Property and equipment, net  1,212,415   1,273,585 
Intangibles, net  8,032   9,532 
Lease and equipment deposits  1,899   2,167 
Operating Lease right-of-use assets  123,251    
Other Assets  742   8,792 
TOTAL ASSETS $1,501,930  $1,451,917 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY       
         
CURRENT LIABILITIES:        
Current portion of long-term debt and financing leases $189,268  $165,900 
Current maturities of operating leases  43,932    
Accounts payable  53,229   49,930 
Accrued compensation  12,030   11,988 
Other accrued expenses  54,867   28,888 
Total current liabilities  350,490   256,706 
         
NONCURRENT LIABILITIES:        
Long-term debt and financing leases - excluding current portion  542,456   677,423 
Noncurrent operating lease liabilities  62,531    
Deferred credits  5,705   12,134 
Deferred income taxes  64,275   55,303 
Deferred revenue, net of current portion  14,369    
Other noncurrent liabilities  1,409   24,483 
Total noncurrent liabilities  691,694   769,343 
Total liabilities  1,042,184   1,026,049 
         
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; 35,194,902 (2020) and 31,413,287 (2019) shares issued and outstanding, and 0 (2020) and 3,600,953 (2019) warrants issued and outstanding  242,772   238,504 
Retained earnings  215,087   187,364 
Total stockholders' equity  457,859   425,868 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,501,930  $1,451,917 
         

Operating Highlights (unaudited)

  Three months ended 
  September 30 
  2020  2019  Change 
Available Seat Miles (thousands)  1,450,478   2,775,477   (47.7)%
Block Hours  57,622   115,175   (50.0)%
Departures  30,524   64,077   (52.4)%
Average Stage Length (miles)  624   569   9.7%
Passengers  1,415,817   3,789,696   (62.6)%
             

Source: Mesa Air Group, Inc.

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